SHAREHOLDERS AGREEMENT
----------------------
THIS AGREEMENT dated as of this 23rd day of April, 2004.
BETWEEN:
MITEL NETWORKS CORPORATION, a corporation incorporated
under the laws of Canada (the "CORPORATION")
-and-
EDGESTONE CAPITAL EQUITY FUND II-B GP, INC., as agent
for EdgeStone Capital Equity Fund II-A, L.P. and its
parallel investors, and EDGESTONE CAPITAL EQUITY FUND
II NOMINEE, INC., as nominee for EdgeStone Capital
Equity Fund II-A, L.P. and its parallel investors
(collectively "EDGESTONE")
-and-
MITEL SYSTEMS CORPORATION, a corporation incorporated
under the laws of Canada ("SYSTEMS")
-and-
MITEL KNOWLEDGE CORPORATION, a corporation incorporated
under the laws of Canada ("KNOWLEDGE")
-and-
ZARLINK SEMICONDUCTOR INC., a corporation incorporated
under the laws of Canada ("ZARLINK")
-and-
POWER TECHNOLOGY INVESTMENT CORPORATION, a corporation
incorporated under the laws of Canada ("PTIC")
-and-
XXXXXX XXXXXX CORPORATION, a corporation incorporated
under the laws of Xxxxxxxxxxxx ("XXX")
-xxx-
XXXXXXX X. XXXXXXXX, an individual residing in the City
of Ottawa, Province of Ontario ("XXXXXXXX")
-and-
and any other Persons who become party to this
Agreement by entering into an Assumption Agreement
RECITALS:
A. Prior to or contemporaneously with the execution and delivery of this
Agreement: (i) the Corporation and EdgeStone have entered into a
subscription agreement (the "SUBSCRIPTION AGREEMENT") in connection
with the issuance and sale to EdgeStone of Series A Shares (as defined
herein); and (ii) WCC and PTIC received Series B Shares (as defined
herein) on the exchange of certain Common Shares of the Corporation.
B. The Series A Shares and Series B Shares referred to above are being
issued by the Corporation prior to or contemporaneously with the
execution and delivery of this Agreement such that the capitalization
of the Corporation immediately upon execution of this Agreement is as
described in Schedule A.
C. The parties to this Agreement wish to provide for certain rights of
the Shareholders of the Corporation upon, among other things, the
issuance of new securities by the Corporation and any proposed
transfer of securities by such shareholders to another person or
entity.
NOW THEREFORE the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS, PRINCIPLES OF INTERPRETATION AND REPRESENTATIONS
AND WARRANTIES
1.1 DEFINITIONS
Whenever used in this Agreement, the words and terms defined in Appendix 1
shall have the meanings set out therein.
1.2 CERTAIN RULES OF INTERPRETATION
In this Agreement:
(a) CURRENCY - Unless otherwise specified, all references to money
amounts are to lawful currency of Canada.
(b) GOVERNING LAW - This Agreement is a contract made under and shall
be construed, interpreted and enforced in accordance with the
laws of the Province of Ontario and the federal laws of Canada
applicable in the Province of Ontario (excluding any conflict of
law rule or principle of such laws that might refer such
interpretation or enforcement to the laws of another
jurisdiction). Subject to the provisions of Section 11.7, any
action, suit or proceeding arising out of or relating to this
Agreement shall be brought in the courts of the Province of
Ontario and each of the Parties hereby irrevocably submits to the
non-exclusive jurisdiction of such courts.
(c) HEADINGS - Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
(d) NUMBER AND GENDER - Unless the context otherwise requires, words
importing the singular include the plural and vice versa and
words importing gender include all genders.
(e) STATUTORY REFERENCES - A reference to a statute includes all
regulations made pursuant to such statute and, unless otherwise
specified, the provisions of any statute or regulation which
amends, supplements or supersedes any such statute or any such
regulation.
(f) TIME PERIODS - Unless otherwise specified, time periods within or
following which any payment is to be made or act is to be done
shall be calculated by excluding the day on which the period
commences and including the day on which the period ends and by
extending the period to the next Business Day following if the
last day of the period is not a Business Day.
(g) BUSINESS DAYS - If any payment is required to be made or other
action is required to be taken pursuant to this Agreement on a
day which is not a Business Day, then such payment or action
shall be made or taken on the next Business Day.
(h) INCLUDING - Where the word "including" or "includes" is used in
this Agreement, it means "including (or includes) without
limitation".
(i) NO STRICT CONSTRUCTION - The language used in this Agreement is
the language chosen by the Parties to express their mutual
intent, and no rule of strict construction shall be applied
against any Party.
(j) SEVERABILITY - If, in any jurisdiction, any provision of this
Agreement or its application to any Party or circumstance is
restricted, prohibited or unenforceable, such provision shall, as
to such jurisdiction, be ineffective only to the extent of such
restriction, prohibition or unenforceability without invalidating
the remaining provisions of this Agreement and without affecting
the validity or enforceability of such provision in any other
jurisdiction or without affecting its application to other
Parties or circumstances.
1.3 ENTIRE AGREEMENT
This Agreement, including the schedules annexed hereto, and the Other
Agreements constitute the entire agreement between the Parties and set out
all the covenants, promises, warranties, representations, conditions,
understandings and agreements between the Parties with respect to the
subject matter of this Agreement and supersede all prior understandings,
agreements, negotiations and discussions, whether oral or written,
including, without limitation, those contained in any term sheet between
the Corporation and EdgeStone. There are no covenants, promises,
representations, warranties, terms, conditions, undertakings,
understandings or other agreements, oral or written, express, implied or
collateral, between the Parties in connection with the subject matter of
this Agreement other than as expressly set forth or referred to in this
Agreement or the Other Agreements.
1.4 SCOPE OF THE AGREEMENT
The Shareholders agree that in the event of any inconsistency or
conflict between the terms of this Agreement and the articles, by-laws or
resolutions of the Corporation or any Subsidiary, the provisions of this
Agreement shall prevail. In this regard, the Shareholders agree more
particularly to vote their shares to ensure that the constating documents
of the Corporation and any Subsidiaries are not amended to include
provisions that are or could be inconsistent with the provisions hereof.
1.5 COVENANT BY CONTROLLING SHAREHOLDERS
Each Controlling Shareholder hereby agrees to take such actions as may
be necessary to cause each of his or its Controlled Shareholders to fully
and faithfully perform and discharge its obligations under this Agreement
and to comply with the terms and conditions of this Agreement; provided
that the foregoing shall not constitute a guarantee of payment of any
amount payable hereunder.
1.6 DISSENT AND OTHER RIGHTS
With respect to any matter provided for in Sections 6.4, 6.8 and
Article 7 of this Agreement, each of the Shareholders hereby expressly
waive and agree that they shall not exercise any applicable rights to
dissent, appraisal, any oppression remedy, or other similar rights.
1.7 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each of the Shareholders hereby severally, but not jointly, represents
and warrants with respect to itself that, as at the date hereof:
(a) it is: (i) the beneficial owner of the securities in the capital
of the Corporation referred to in Schedule A as being held by it;
or, (ii) in the case of EdgeStone, EdgeStone holds the securities
in the capital of the Corporation referred in Schedule A as
nominee for and on behalf of EdgeStone Capital Equity Fund II-A,
L.P. and the parallel investors listed on Schedule D;
(b) except as may be contemplated in this Agreement or in any of the
Other Agreements, such securities are free and clear of all
Liens;
(c) it has the full power, authority and legal right to execute and
deliver this Agreement and to perform the terms and provisions
hereof;
(d) if other than an individual, it has taken all necessary corporate
action to authorize the execution, delivery and performance of
this Agreement;
(e) this Agreement has been duly executed and delivered by it, and
constitutes a legal, valid and binding obligation of it,
enforceable against it in accordance with the terms hereof,
subject to the effect of:
(i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally; and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(f) the execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder and compliance
with the terms, conditions and provisions hereof, will not, as
applicable, conflict with or result in a breach of any of the
terms, conditions or provisions of (i) its charter documents or
by-laws; (ii) any law, rule or regulation having the force of
law; (iii) any indenture, mortgage, lease, agreement or
instrument binding or affecting it or its properties; or (iv) any
judgment, injunction, determination or award which is binding on
it or its properties;
(g) no authorization, consent, approval, licence or exemption from
any Governmental Body is required by it which has not been
obtained in connection with the execution and delivery by it of,
and the performance by it of its obligations under, this
Agreement; and
(h) it is not a party to any agreement which is inconsistent with its
rights and obligations hereunder or otherwise conflicts with the
provisions of this Agreement.
1.8 REPRESENTATIONS AND WARRANTIES OF XXXXXXXX
Xxxxxxxx hereby represents and warrants, on the date hereof, that:
(a) Xxxxxxxx Controls each of Systems, Knowledge and WCC;
(b) Xxxxxxxx has the full power, authority and legal right to execute
and deliver this Agreement and to perform the terms and
provisions hereof;
(c) this Agreement has been duly executed and delivered by Xxxxxxxx,
and constitutes a legal, valid and binding obligation of
Xxxxxxxx, enforceable against him in accordance with the terms
hereof, subject to the effect of:
(i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally; and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(d) the execution and delivery by him of this Agreement and the
performance by Xxxxxxxx of his obligations hereunder and
compliance with the terms, conditions and provisions hereof, will
not, as applicable, conflict with or result in a breach of any of
the terms, conditions or provisions of: (i) any law, rule or
regulation having the force of law; (ii) any indenture, mortgage,
lease, agreement or instrument binding or affecting Xxxxxxxx or
his properties; or (iv) any judgment, injunction, determination
or award which is binding on Xxxxxxxx or his properties;
(e) no authorization, consent, approval, licence or exemption from
any Governmental Body is required by Xxxxxxxx which has not been
obtained in connection with the execution and delivery by him of,
and the performance by him of his obligations under, this
Agreement; and
(f) Xxxxxxxx is not a party to any agreement which is inconsistent
with his rights and obligations hereunder or otherwise conflicts
with the provisions of this Agreement.
1.9 SCHEDULES
The Appendices and Schedules to this Agreement, as listed below, are an
integral part of this Agreement:
Appendix 1 - Definitions
Appendix 2 - Certain Matters Requiring EdgeStone Approval
Appendix 3 - Determination of Fair Market Value
Schedule A - Capitalization Table
Schedule B - Articles of Amendment
Schedule C - Assumption Agreement
Schedule D - Parallel Investors of EdgeStone
ARTICLE 2
MANAGEMENT OF CORPORATION
2.1 AGREEMENT RESPECTING VOTING
For so long as this Agreement remains in effect, each Shareholder
agrees to vote any and all Shares held by it from time to time so as to
elect and maintain in office the EdgeStone Nominees as members of the
Corporation's board of directors (the "BOARD OF DIRECTORS"), and to cause
the Corporation to act in compliance with all of the provisions of this
Agreement and in particular to vote to approve any Transfer which is
permitted and otherwise made in compliance with this Agreement. It is
acknowledged and agreed that no Shareholder shall be bound to vote in
respect of any matter in the same manner as its nominee director voted in
respect of such matter in his or her capacity as a director on the Board of
Directors.
2.2 EDGESTONE NOMINEES ON THE BOARD OF DIRECTORS
The Board of Directors will be composed of eight members, and shall
include two directors nominated by EdgeStone (each, an "EDGESTONE
NOMINEE"), one of whom may, at EdgeStone's option, be an independent
director acceptable to the Corporation. Accordingly, each of the
Shareholders agrees to act and vote from time to time so that on any
election of directors by the Shareholders of the Corporation the EdgeStone
Nominees to the Board of Directors are elected in accordance with this
Section 2.2. In the event that EdgeStone requests that an EdgeStone Nominee
be removed as a director of the Corporation, then each of the Shareholders
agrees to act and vote for such removal in accordance with this Section
2.2.
Each EdgeStone Nominee shall be an individual who is not disqualified
under applicable law from acting as a director.
2.3 NOTICE OF DIRECTORS MEETINGS
Notice of directors meetings shall be given, in writing, in accordance
with the by-laws of the Corporation, and such notice shall also contain a
statement as to the nature of the business proposed to be transacted at
such meeting. Such notice shall be accompanied by all relevant
documentation or information required for directors to make an informed
decision regarding the business to be transacted.
2.4 EXPENSES OF DIRECTORS
The Corporation shall reimburse all directors for all reasonable
out-of-pocket expenses incurred in attending meetings of the Board of
Directors or of any committee of the Board of Directors.
2.5 BOARD COMMITTEES
The Board of Directors shall maintain a standing committee to be known
as the "AUDIT COMMITTEE" and a standing committee to be known as the
"COMPENSATION COMMITTEE". At the option of EdgeStone, at least one of the
members of the Audit Committee, at least one of the members of the
Compensation Committee, and at least one member of any other committee of
the Board of Directors, shall be an EdgeStone Nominee.
2.6 DIRECTORS' LIABILITY INSURANCE
The Corporation will maintain directors' liability insurance for each
of the directors of the Corporation with coverage acceptable to the Board
of Directors. The Corporation will not assign, transfer, dispose of,
surrender, borrow upon or in any way encumber such insurance.
2.7 BOARD OBSERVER
EdgeStone shall be entitled, at any time and from time to time, to
designate an observer representative to attend meetings of the Board of
Directors and meetings of any committee of the Board of Directors (the
"OBSERVER"), provided the Observer agrees to be bound by the
confidentiality obligations set forth in Section 10.1. The Observer shall
have no right to vote as a director of the Corporation with respect to any
matter and shall not be included in any determination as to whether a
quorum for any particular meeting exists. The minutes of each meeting of
the Board of Directors or any such committee at which the Observer is
present shall record that the Observer was present and acting in the
capacity as an observer and not as a director. The Corporation shall pay
the Observer's reasonable out-of-pocket expenses incurred to attend any
meeting of the Board of Directors or any committee of the Board of
Directors.
2.8 CERTAIN MATTERS REQUIRING EDGESTONE APPROVAL
Provided that members of the EdgeStone Group hold, in the aggregate,
at least 5,000,000 Common Shares (calculated on an as-if converted to
Common Shares basis) (subject to appropriate adjustment for share
dividends, share splits, recapitalizations, combinations and the like),
notwithstanding any other provision of this Agreement, in addition to any
other approvals that may be required by law or pursuant to the articles,
by-laws or other constating documents of the Corporation or any of the
Subsidiaries, without the prior written consent of EdgeStone, neither the
Corporation nor any of the Subsidiaries shall at any time take or agree or
commit to take any action referred to in Appendix 2. It is acknowledged by
the Parties that the provisions referenced in Appendix 2 are for
EdgeStone's benefit and may be amended or waived by the mutual agreement of
the Corporation and EdgeStone at any time.
2.9 ANNUAL BUDGET
At least 30 days prior to the Corporation's fiscal year-end, the
Corporation shall submit the Annual Budget to the Board of Directors for
approval and thereafter from time to time as appropriate, any restatements
or updates or deviations thereto to the extent they contain items or
amounts not consistent with the normal course operations of the Business
and previously approved budgets. To the extent that the approval of
EdgeStone is required for any Annual Budget or restatements, updates or
deviations thereto pursuant to Section 2.8, such materials shall also be
submitted to EdgeStone contemporaneously with the submission of same to the
Board of Directors.
2.10 REPORTING
(a) MONTHLY. An internally-prepared summary of monthly consolidated
financial results of the Corporation shall be prepared and
delivered to EdgeStone within 15 Business Days after the end of
each fiscal month.
(b) ADDITIONAL INFORMATION PROVIDED TO SENIOR LENDERS. The
Corporation shall provide to EdgeStone simultaneously with
furnishing such information to any Person as required under the
Debt Obligations of the Corporation and the Subsidiaries: (i)
copies of all other financial statements, reports or projections
with respect to the Corporation or any of the Subsidiaries
required to be delivered to the lenders on a periodic basis; and
(ii) copies of all material information, documents, studies,
reviews, reports or assessments relating to the Business or the
assets of the Corporation or any Subsidiary provided by the
Corporation or any Subsidiary from time to time to any Person
pursuant to or as required under the Debt Obligations, if, in the
case of (i) or (ii) above, such documentation is broader in scope
or delivered on a more frequent basis than the Corporation
provides to the Board of Directors or is required to provide
under this Section 2.10(a).
2.11 ACCESS
The Corporation shall, and the Corporation shall cause each of the
Subsidiaries to, at any and all reasonable times on reasonable notice and
during business hours on any Business Day and in such manner as is not
reasonably likely to adversely affect the operation of the Business, permit
EdgeStone and its authorized representatives to examine all of the books of
account, records, reports, documents, papers and data of the Corporation
and any of the Subsidiaries, whether in ordinary or machine language, and
to make copies and take extracts, and to discuss the Business, affairs,
finances and accounts of the Corporation and the Subsidiaries with the
Corporation's executive officers, senior financial officers, accountants
and other advisors. The Corporation shall authorize its accountants and
other financial advisors to so discuss the finances and affairs of the
Corporation and the Subsidiaries, and agrees to furnish EdgeStone and each
of its authorized representatives with any information reasonably requested
regarding the Business, or the affairs, finances and accounts of the
Corporation or the Subsidiaries. The Corporation shall bear the costs to
the Corporation and any Subsidiary of compliance with this Section 2.11. In
no event shall the Corporation be required to disclose information that it
is prohibited from disclosing by contract or otherwise by law.
ARTICLE 3
COVENANTS IN FAVOUR OF EDGESTONE
Without limiting any other covenants and provisions hereof, and except
to the extent the following covenants and provisions of this Article 3 are
waived in any instance by EdgeStone, the Corporation covenants and agrees
that it shall perform and observe the following covenants and provisions,
and shall cause each of the Subsidiaries to perform and observe such
covenants and provisions. For greater certainty, the covenants in this
Article 3 are for the exclusive benefit of EdgeStone.
3.1 TAXES
The Corporation shall pay and discharge, and cause each Subsidiary to
pay and discharge, all taxes, assessments and governmental charges or
levies imposed upon it or upon its income, profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or
charge upon any properties of the Corporation or any Subsidiary; provided,
however, that neither the Corporation nor any Subsidiary shall be required
to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by appropriate proceedings if the Corporation
or the Subsidiary shall have set aside on its books sufficient reserves, if
any, with respect thereto.
3.2 COMPLIANCE WITH LAWS
The Corporation shall comply with, and cause each Subsidiary to comply
with, the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance would have a
Material Adverse Effect.
3.3 FINANCINGS
The Corporation shall inform EdgeStone of any negotiations, offers or
contracts relating to possible financings of any nature for the
Corporation, whether initiated by the Corporation or any other Person,
except for: (i) arrangements with trade creditors, and (ii) utilization by
the Corporation or any Subsidiary of commercial lending arrangements with
financial institutions.
3.4 DEBT OBLIGATIONS
The Corporation shall pay, and cause each Subsidiary to pay, when due,
or in conformity with customary trade terms, all lease obligations, all
trade debt, and all other indebtedness incident to the operations of the
Corporation or each Subsidiary, except such as are being contested in good
faith and by proper proceedings if the Corporation or the Subsidiary shall
have set aside on its books sufficient reserves, if any, with respect
thereto. The Corporation shall at all times comply with, and cause each
Subsidiary to comply with the, the conditions, provisions and, without
limitation, all financial covenants and/or margin requirements provided for
in any and all operating and term credit facilities, loans and advances
made by any of their respective creditors.
3.5 NOTIFICATION OF BREACH
The Corporation shall advise EdgeStone forthwith of any breach or
non-compliance by the Corporation of or with any of its covenants in
Section 2.8 or Article 3 of this Agreement.
ARTICLE 4
PRE-EMPTIVE RIGHTS
4.1 EXERCISE OF PRE-EMPTIVE RIGHTS
(a) In the event that the Corporation proposes to undertake an
issuance of New Securities (in a single transaction or a series
of related transactions), it shall give to each Principal
Shareholder (as such term is defined below) written notice of its
intention to issue New Securities (the "PRE-EMPTIVE RIGHT
NOTICE"), describing the amount and the type of New Securities
and the price and the proposed closing date, upon which the
Corporation proposes to issue the New Securities. For the
purposes of this Section 4.1, the term "PRINCIPAL SHAREHOLDERS"
means each Shareholder who is a Shareholder on the date hereof
together with each other Shareholder who, together with its
Affiliates (or in the case of EdgeStone, the other members of the
EdgeStone Group), holds not less than five percent (5%) of the
Common Shares then outstanding (calculated on an as-if converted
to Common Shares basis).
(b) Each Principal Shareholder shall have 15 Business Days from the
date of receipt of any such Pre-Emptive Right Notice (the
"PRE-EMPTIVE RIGHT ACCEPTANCE PERIOD") to agree in writing (i) to
purchase up to its Pro Rata Share (as nearly as may be determined
without division into fractions) of the New Securities (which for
the purpose of this Article 4 shall be calculated based on
holdings on the day immediately prior to the date of delivery by
the Corporation of the Pre-Emptive Right Notice) for the price
and on the other terms specified in the Pre-Emptive Right Notice
and (ii) purchase more than its Pro Rata Share (if available) up
to a specified maximum of the New Securities. Such right to
purchase its Pro Rata Share of New Securities and, if desired,
more than its Pro Rata Share shall be exercised by a Principal
Shareholder by giving written notice (an "ACCEPTANCE NOTICE") to
the Corporation of such intention and stating therein the maximum
number of New Securities it is willing to purchase (which number
may be greater or less than its Pro Rata Share). If a Principal
Shareholder fails to deliver such notice to the Corporation
within the Pre-Emptive Right Acceptance Period, it shall be
deemed to have declined to exercise its right to purchase any New
Securities. If any Principal Shareholder does not give an
Acceptance Notice within the Pre-Emptive Right Acceptance Period
or specifies in its Acceptance Notice a number of Shares less
than its Pro Rata Share, the resulting unaccepted New Securities
shall be deemed to have been offered by the Corporation to such
of the Principal Shareholders who specified in their respective
Acceptance Notices a desire to acquire a number of the New
Securities greater than their Pro Rata Share, and each such
Principal Shareholder is, subject to the maximum number of the
New Securities specified in its Acceptance Notice, entitled to
acquire its Pro Rata Share (calculated relative to each of the
Principal Shareholders wishing to purchase more than its Pro Rata
Share) of the unaccepted New Securities based upon the number of
Shares (calculated on an as-if converted to Common Shares basis)
beneficially owned by such Principal Shareholders (calculated
based on holdings on the day immediately prior to the delivery of
the Pre-Emptive Right Notice), as between themselves, or in such
other proportion as such Principal Shareholders may agree in
writing.
(c) The Corporation shall, from time to time, when requested to do
so, advise each of the Principal Shareholders promptly of the
names of the other Principal Shareholders who have accepted the
Corporation's offer as contained in a Pre-Emptive Right Notice
and the number of New Securities in respect of which each such
Principal Shareholder has accepted such offer.
(d) Any New Securities not accepted by the Principal Shareholders
pursuant to Section 4.1(b) may be offered and sold by the
Corporation to third parties for a period not to exceed 60
Business Days following the end of the Pre-Emptive Right
Acceptance Period at the same or higher price and upon non-price
terms not materially more favorable to the purchasers thereof
than as specified in the Pre-Emptive Right Notice. In the event
that the Corporation has not issued and sold such New Securities
within such 60 Business Day period, then the Corporation shall
not thereafter issue or sell any New Securities without again
first offering such New Securities to the Principal Shareholders
pursuant to this Article 4. If the Corporation offers any New
Securities not taken up by Principal Shareholders pursuant to
Section 4.1(b), the Corporation shall promptly notify the
Principal Shareholders upon entering into one or more binding
purchase agreement(s) during the 60 Business Day period referred
to herein, including as to (i) the number of New Securities, if
any, that the Corporation will issue (specifying respective
numbers to be purchased by the Principal Shareholders on the one
hand (if any) and by other Person(s) on the other hand), (ii) the
material terms of such issuance(s) and (iii) the name(s) of the
purchaser(s) of any New Securities to be issued (other than the
Principal Shareholders).
(e) All sales of New Securities pursuant to this Section 4.1 shall be
consummated contemporaneously at the offices of the Corporation
as soon as is reasonably practicable on such date as the Board of
Directors and the persons purchasing New Securities pursuant to
this Section 4.1 may reasonably determine, but in no event later
than the later of (i) 60 Business Days following the end of the
Pre-Emptive Right Acceptance Period; or (ii) the fifth Business
Day following the expiration or termination of all waiting
periods under any competition or anti-combines legislation
applicable to such issuance. The delivery of certificates or
other instruments evidencing such New Securities shall be made by
the Corporation on such date against payment of the purchase
price therefor.
(f) The Corporation may issue New Securities without complying with
the provisions of this Section 4.1 if the New Securities are
Permitted Additional Securities.
4.2 FUTURE SHARES AND OPTIONS
The Corporation agrees that, as a condition precedent to the grant or
issuance of any securities (including Convertible Securities) to a Person
that, giving effect to such grant or issuance, would hold in excess of five
percent (5%) of the outstanding Common Shares (calculated on as-if
converted to Common Shares basis), including pursuant to the Additional
Investment, whether now authorized or not, it will require that the holder
of such securities sign an Assumption Agreement if required by EdgeStone or
the Corporation, and if the purchaser is a corporation, such agreement will
also be signed by any Person who is a Controlling Shareholder of such
corporation; provided, however, that if any such grant or issuance is
pursuant to the exercise or conversion of any Convertible Security granted
or issued prior to the date of this Agreement, the Corporation shall only
be required to use its commercially reasonable efforts to comply with the
foregoing covenant.
ARTICLE 5
RESTRICTIONS ON TRANSFER OF SHARES
5.1 GENERAL PROHIBITION ON TRANSFER
No Shares or Convertible Securities now or in the future held by a
Shareholder or any interest therein may be dealt with or Transferred except
as contemplated in this Agreement. A purported Transfer of any Shares or
Convertible Securities in violation of this Agreement shall not be valid.
Any Shareholder that purports to Transfer any Shares or Convertible
Securities in violation of this Agreement agrees to donate and hereby
donates to the Corporation all dividends and distributions paid or made on
any Shares or Convertible Securities so Transferred during the period of
the prohibited Transfer. The provisions of the immediately preceding
sentence are in addition to, and not in lieu of, any other remedies to
enforce the provisions of this Agreement.
Any permitted Transfer made in compliance with this Agreement shall
require the approval of the Board of Directors which shall be provided in
accordance with the provisions of Section 2.1.
5.2 PERMITTED TRANSFERS
Each Shareholder may Transfer any Shares or Convertible Securities
held by it, pursuant to and in accordance with Article 5 or Article 6 and
in the case of the following Transfers, without being subject to the
requirements of Sections 6.1, 6.2 and 6.3:
(a) to a Permitted Transferee;
(b) in the case of Shares held by a Permitted Transferee of the
Shareholder, back to the Shareholder;
(c) to any Person with the prior written consent of the Board and an
Investors Majority; or
(d) to the Corporation pursuant to: (i) the redemption rights under
the Articles of Amendment; or (iii) any put right in this
Agreement.
5.3 UPSTREAM TRANSFERS BY XXXXXXXX ENTITIES
Xxxxxxxx hereby agrees that he shall not Transfer any securities or
other interests in any Xxxxxxxx Entity or permit the grant or issuance of
any securities or other interests in any Xxxxxxxx Entity, and each Xxxxxxxx
Entity hereby agrees that it shall not permit any Transfer, grant or
issuance of any of its securities or other interests, if, as a result of
such Transfer, grant or issuance, Xxxxxxxx or the Xxxxxxxx Group would
cease to Control the Xxxxxxxx Entity, or, if after giving effect to such
Transfer, grant or issuance, Xxxxxxxx or the Xxxxxxxx Group would not be
able to cause the Xxxxxxxx Entity to fully and faithfully perform and
discharge its obligations under this Agreement and comply with the terms
and conditions of this Agreement.
5.4 NO REGISTRATION UNLESS TRANSFEREE IS BOUND
Other than transfers pursuant to Section 5.5, if a Shareholder
purports to Transfer any Shares or Convertible Securities, no Transfer
shall be made or be effective, no application shall be made to the
Corporation or to the Corporation's transfer agent to register the
Transfer, and the Corporation shall not register the Transfer on its
securities register, until the proposed transferee (and, in the case of a
transferee that is not a natural person, other than a public corporation
and other than in the case of a Transfer by EdgeStone), the Persons who
Control the proposed transferee enter into, or in the case of Convertible
Securities, agree upon the acquisition of any Shares to enter into, an
Assumption Agreement.
5.5 TRANSFERS TO AN AFFILIATE
If a Shareholder purports to Transfer Shares to a Permitted Transferee
or pursuant to Section 5.2(b) or 5.2(c), no Transfer shall be made or
effective, no application shall be made to the Corporation or the
Corporation's transfer agent to register the Transfer, and the Corporation
shall not register the Transfer on its securities register until, the
Shareholder and the transferee have executed and delivered an Assumption
Agreement and such other documents as may be reasonably requested by the
Corporation, in which the Shareholder and the transferee: (i) represent and
warrant that the transferee qualifies as a Permitted Transferee or
otherwise qualifies as a recipient of a Transfer pursuant to 5.2(b) or
5.2(c); (ii) agree that each shall ensure that the transferee shall
continue to so qualify at all times and that, other than in the case of a
Transfer by EdgeStone to a Person listed in the definition of "EdgeStone
Group", if the transferee is a corporation, the shareholder(s) of that
transferee and the shareholder(s) of each of its direct and indirect
shareholders who are not natural persons agree that no shares in that
transferee shall be Transferred, other than a Transfer between members of
the Xxxxxxxx Group, without first Transferring (or causing to be
Transferred) the Shares held back to the Shareholder; and (iii) agree that
the transferring Shareholder shall continue to be bound by all the
provisions of this Agreement.
5.6 CONTINUING OBLIGATIONS OF TRANSFEROR
In the event of any Transfer of Shares to a Permitted Transferee or
pursuant to Section 5.2(b) or 5.2(c), the transferor shall, at all times
after such Transfer: (i) be jointly and severally liable with the
transferee for the observance and performance of the covenants and
obligations of the transferee under this Agreement; and (ii) indemnify the
other Parties against any loss, damage or expense incurred as a result of
the failure of the transferee to comply with the provisions of this
Agreement.
5.7 SHAREHOLDERS TO FACILITATE PERMITTED TRANSFERS
Each Party to this Agreement shall facilitate any Transfer of Shares
in accordance with this Agreement on a timely basis, including promptly
providing any required consents.
5.8 CORPORATION TO FACILITATE PERMITTED TRANSFERS
The Corporation shall facilitate any Transfer of Shares in accordance
with this Agreement on a timely basis, including promptly providing such
assistance as the transferring Shareholder may reasonably request to
facilitate such Transfer, subject to the provisions of Section 10.1. In no
event shall the Corporation be required to disclose information that it is
prohibited from disclosing by contract or otherwise by law.
5.9 PLEDGE OF SHARES
No Shareholder shall, directly or indirectly, pledge or otherwise
grant or allow a Lien to exist in respect of any Shares held by that
Shareholder, without the prior written consent of the Corporation and
EdgeStone, such consent not to be unreasonably withheld or delayed.
5.10 EDGESTONE GROUP
The Parties acknowledge and agree that EdgeStone acts as a nominee and
holds its Shares and Convertible Securities, and shall be permitted to hold
any Shares or Convertible Securities that it may hereafter acquire, as bare
trustee for EdgeStone Capital Equity Fund II-A L.P. and its parallel
investors listed on Schedule D annexed hereto. The Parties hereby agree
that Schedule D may be amended from time to time to add the name of any
Person for whom EdgeStone purchases Shares or Convertible Securities as
nominee pursuant to the EdgeStone Purchase Option. In such capacity,
EdgeStone shall cause the Shares registered in its name to be voted in the
manner contemplated herein. EdgeStone represents and warrants that it has
the authority to bind all the parallel investors and other Persons from
time to time listed on Schedule D annexed hereto to the terms of this
Agreement.
Notwithstanding anything to the contrary in this Agreement, the
following rights and privileges of EdgeStone in this Agreement shall also
apply and enure to the benefit of, and be exercisable by, (i) for so long
as EdgeStone or any other member of the EdgeStone Group is a Shareholder,
each member of the EdgeStone Group who from time to time holds any Shares
or Convertible Securities, and (ii) at the option of EdgeStone, any
transferee or transferees of any Shares or Convertible Securities held by
EdgeStone (subject to compliance by EdgeStone with Section 6.1, 6.2 and
6.3, if applicable, with respect to the Transfer of such Shares or
Convertible Securities to such transferee):
(a) the reporting and access rights of EdgeStone in Sections 2.10 and
2.11;
(b) the rights respecting the purchase and sale of Shares and
Convertible Securities in Sections 4.1, 6.1, 6.2 and 6.3;
(c) the right to require the Corporation to purchase its Shares or
Convertible Securities as part of any put initiated by EdgeStone
pursuant to Section 6.8 of this Agreement; and
(d) the benefit of the terms and provisions of Sections 6.4, 6.10 and
Article 7.
The rights and entitlements in (a)-(d) above are hereby accepted by
EdgeStone as agent and trustee of the Persons referred to in clause (i) or
(ii) above to the extent such Persons become holders of Shares or
Convertible Securities, and each of the parties to this Agreement agrees
that EdgeStone may enforce such rights and entitlements in favour of such
Persons.
The rights and privileges of EdgeStone pursuant to Section 2.2 and
Section 2.8 and the covenants in favour of EdgeStone in Article 3 may, at
the option of EdgeStone, be assigned in whole but not in part by EdgeStone
to a Person who acquires its Shares or Convertible Securities in accordance
with the terms of this Agreement, and the benefit of such covenants shall
be applicable, mutatis mutandis, to such assignee.
5.11 SALES TO A DIRECT COMPETITOR
Notwithstanding any provision to the contrary, no Shareholder may
Transfer any Shares to a direct competitor of the Business, unless such
Transfer is approved by the Corporation.
This Section 5.11 shall not apply to a Transfer of Shares pursuant to
a transaction to which Section 6.4 or Article 7 applies.
ARTICLE 6
RIGHTS OF FIRST REFUSAL, TAG-ALONG, DRAG-ALONG AND PUT RIGHTS
6.1 TRANSFER NOTICE
In the event that any Shareholder (the "TRANSFERRING SHAREHOLDER")
receives from any Person, acting as principal and dealing at arm's length
with the Shareholder (the "THIRD PARTY OFFEROR"), a bona fide written offer
to purchase (other than pursuant to a Transfer permitted by Section 5.2)
Shares or Convertible Securities held by the Transferring Shareholder (the
"THIRD PARTY OFFER"), which the Transferring Shareholder wishes to accept
(subject to compliance with Section 6.2 and 6.3), the Transferring
Shareholder will give notice (the "TRANSFER NOTICE") to the Corporation and
to each of the Shareholders (other than any Shareholder that is also a
Transferring Shareholder) (the "OTHER SHAREHOLDERS") setting forth:
(a) the identity of the Third Party Offeror;
(b) if the Third Party Offeror is a corporation, the names of the
principal shareholders, directors and officers of the Third Party
Offeror;
(c) the number and classes of Shares or Convertible Securities
proposed to be sold by the Transferring Shareholder (the
"OFFEROR'S SECURITIES");
(d) the price of and terms of payment for the Offeror's Securities;
and
(e) a summary of any other material terms for such sale including the
proposed closing date.
The Transfer Notice shall contain an offer to sell the Offeror's Securities
to the Other Shareholders at the price and on the terms set forth in the
Transfer Notice. The Transfer Notice shall include a full and complete copy
of the written offer delivered by the Third Party Offeror. In all
circumstances the proposed consideration for any Offeror's Securities must
be in cash and/or Marketable Securities. The offer contained in the
Transfer Notice shall be irrevocable except with the consent of the Other
Shareholders and shall be open for acceptance for a period of 20 Business
Days after the date upon which the Transfer Notice was received by the
Other Shareholders (the "ACCEPTANCE PERIOD").
All Transfer Notices and Drag-Along Notices given under this Article 6
must be given concurrently to all Other Shareholders and the Corporation.
6.2 RIGHTS OF FIRST REFUSAL
Upon receipt of a Transfer Notice and subject to all of the provisions
of this Section 6.2, the Other Shareholders shall have the following rights
and options:
(a) Each of the Other Shareholders shall have the right to purchase
up to its Pro Rata Share of the Offeror's Securities at the price
and on the terms and conditions contained in the Transfer Notice.
(b) Within the Acceptance Period, each of the Other Shareholders may
give to the Transferring Shareholder a notice in writing (an
"ACCEPTANCE NOTICE") accepting the offer contained in the
Transfer Notice and specifying the maximum number of the
Offeror's Securities it wishes to acquire (which number may be
greater than or less than its Pro Rata Share). Each of the Other
Shareholders shall have the right to purchase up to its Pro Rata
Share of the Offeror's Securities (which for purposes of this
Section 6.2 shall be calculated based on holdings on the day
immediately prior to the delivery of the Transfer Notice), as
nearly as may be determined without division into fractions and,
if available, a number of the Offeror's Securities greater than
its Pro Rata Share up to a stated maximum. Any Other Shareholder
who does not give an Acceptance Notice within the Acceptance
Period shall be deemed to have declined to purchase any of the
Offeror's Securities. If any Other Shareholder does not give an
Acceptance Notice within the Acceptance Period or specifies in
its Acceptance Notice a number of Shares less than its Pro Rata
Share, the resulting unaccepted Offeror's Securities shall be
deemed to have been offered by the Transferring Shareholder to
such of the Other Shareholders who specified in their respective
Acceptance Notices a desire to acquire a number of the Offeror's
Securities greater than their Pro Rata Share, and each such Other
Shareholder is, subject to the maximum number of the Offeror's
Securities specified in its Acceptance Notice, entitled to
acquire its Pro Rata Share (calculated relative to each of the
other Shareholders wishing to purchase more than its Pro Rata
Share) of the unaccepted Offeror's Securities based upon the
number of Shares (calculated on an as-if converted to Common
Shares basis) beneficially owned by such Other Shareholders
(calculated based on holdings on the day immediately prior to the
delivery of the Transfer Notice), as between themselves, or in
such other proportion as such Other Shareholders may agree in
writing. If the Other Shareholders, or any of them, give
Acceptance Notices within the Acceptance Period confirming their
agreement to purchase all of the Offeror's Securities, the sale
of the Offeror's Securities to such Other Shareholders shall be
completed within 15 Business Days of the expiry of the Acceptance
Period.
(c) If the Other Shareholders do not give notice of acceptance prior
to the expiry of the Acceptance Period which would result in the
purchase of all, but not less than all, of the Offeror's
Securities, the Transferring Shareholder will, notwithstanding
any notices of acceptance of the Offeror's Securities, subject to
the provisions of Section 6.3, have the right to sell the
Offeror's Securities to the Third Party Offeror for a period of
60 Business Days from the expiration of the Acceptance Period for
a price not less than that provided for in the Transfer Notice
and on terms and conditions not materially more favourable than
those set out in the Transfer Notice, provided that such Third
Party Offeror first executes and delivers to the Corporation an
Assumption Agreement. If such Transfer is not consummated within
such 60 Business Day period, the Transferring Shareholder will
not Transfer any of the Offeror's Securities without again
complying with all of the provisions of Section 6.1 and Section
6.2.
(d) Any Transfer entered into in connection with this Section 6.2
shall not provide a Collateral Benefit to any Shareholder or any
Affiliate or Related Party thereof.
(e) For greater certainty, no rights shall arise under this Article 6
in respect of any purchases by Other Shareholders pursuant to the
exercise of rights under this section.
(f) The provisions of Sections 6.1 and 6.2 shall not apply to the
Transfer of any Shares pursuant to the provisions of Section 6.3,
6.4 or Article 7 and which are exercised in accordance with the
terms thereof.
(g) Each Other Shareholder may assign its right to exercise its right
of first refusal under this 6.2, in whole or in part, to any of
its Affiliates, or, in the case of EdgeStone or any member of the
Xxxxxxxx Group, to any member or members of the EdgeStone Group
or the Xxxxxxxx Group, as the case may be, provided such member
or members (and Controlling Persons) have first entered into an
Assumption Agreement.
6.3 TAG-ALONG RIGHTS
Upon receipt of a Transfer Notice, any Other Shareholder(s) may elect
to participate in the proposed Transfer by delivering written notice to the
Corporation and Transferring Shareholder within the Acceptance Period. Each
of the Other Shareholders so electing will be entitled to sell in the
contemplated Transfer, the same proportion (on an as-if-converted to Common
Shares basis) of the Shares and Convertible Securities held by each such
Other Shareholder, respectively, as the proportion of the Transferring
Shareholder's total holdings which the Transferring Shareholder proposes to
sell pursuant to the Transfer Notice (on an as-if-converted to Common
Shares basis), on the same terms (other than price) set forth in the
Transfer Notice, and at a price determined as follows:
(a) if the Transferring Shareholder is proposing to sell Common
Shares within two (2) years of the date hereof:
(i) any Common Shares to be sold by an Other Shareholder shall
be sold at the same price per share as the Common Shares
proposed to be sold by the Transferring Shareholder, as
set forth in the Transfer Notice;
(ii) any Preferred Shares to be sold by an Other Shareholder
shall be sold at a price per share calculated as follows:
(A) if the sale price per Share of the Common Shares is
at least two (2) times the Issue Price, any Preferred
Shares shall be sold at the same sale price per
Common Share, multiplied by the number of Common
Shares into which the Preferred Shares are then
convertible;
(B) if the sale price per Share of the Common Shares is
less than two (2) times the Issue Price, any
Preferred Shares shall be sold at the same sale price
per Common Share plus the lesser of (i) an amount
equal to the Issue Price; and (ii) the difference
between the sale price per Share of the Common Shares
and two (2) times the Issue Price, such result to be
multiplied by the number of Common Shares into which
the Preferred Shares are then convertible;
(iii) any Convertible Securities to be sold by an Other
Shareholder shall be sold at a price per Convertible
Security equal to: (A.) the value of the Common Shares
underlying such Convertible Securities, where such Common
Shares are valued at the same price per share as the
Common Shares proposed to be sold by the Transferring
Shareholder, as set forth in the Transfer Notice, less
(B.) any amount payable by the holder of the Convertible
Securities on the exercise or conversion thereof;
(b) if the Transferring Shareholder is proposing to sell Common
Shares on or after two (2) years from the date hereof:
(i) any Common Shares to be sold by an Other Shareholder shall
be sold at the same price per share as the Common Shares
proposed to be sold by the Transferring Shareholder, as
set forth in the Transfer Notice;
(ii) any Preferred Shares to be sold by an Other Shareholder
shall be sold at a price per share equal to the sum of (A)
an amount for each Common Share (other than Additional
Common Shares) then issuable on the conversion of the
Preferred Shares equal to the same price per share as the
Common Shares proposed to be sold by the Transferring
Shareholder; and (B) the Issue Price;
(iii) any Convertible Securities to be sold by an Other
Shareholder shall be sold at a price per Convertible
Security equal to: (A.) the value of the Common Shares
underlying such Convertible Securities, where such Common
Shares are valued at the same price per share as the
Common Shares proposed to be sold by the Transferring
Shareholder, as set forth in the Transfer Notice, less
(B.) any amount payable by the holder of the Convertible
Securities on the exercise or conversion thereof;
(c) if the Transferring Shareholder is proposing to sell Preferred
Shares:
(i) any Common Shares to be sold by an Other Shareholder shall
be valued at a price per share equal to X minus Y (subject
to appropriate adjustment to reflect changes in the
Conversion Value) (the "NOTIONAL COMMON SHARE VALUE"),
where X is equal to the same price per share as the
Preferred Shares proposed to be sold by the Transferring
Shareholder, as set forth in the Transfer Notice, and Y is
equal to the Issue Price;
(ii) any Preferred Shares to be sold by an Other Shareholder
shall be sold at the same price per share as the Preferred
Shares proposed to be sold by the Transferring
Shareholder, as set forth in the Transfer Notice; and
(iii) any Convertible Securities (other than Preferred Shares)
to be sold by an Other Shareholder shall be sold at a
price per Convertible Security equal to: (A.) the Notional
Common Share Value of the Common Shares underlying such
Convertible Securities, less (B.) any amount payable by
the holder of the Convertible Securities on the exercise
or conversion thereof.
(d) if the Transferring Shareholder is proposing to sell Convertible
Securities (other than Preferred Shares), only Shareholders
holding the same type of Convertible Securities with identical
provisions (other than the number of underlying securities in
respect of which the Convertible Securities are exercisable) as
the Convertible Securities which are the subject of the Transfer
Notice may exercise Tag-Along Rights, and any such Convertible
Securities shall be sold at the same price for each of the
Convertible Securities (based on a unit basis) proposed to be
sold by the Transferring Shareholder, as set forth in the
Transfer Notice. The Shareholders shall have no right to exercise
Tag-Along Rights pursuant to this Section 6.3 in respect of
Common Shares, Preferred Shares or other Convertible Securities
which are not identical to the Convertible Securities which are
the subject of the Transfer Notice.
For greater certainty, no rights shall arise under this Section 6.3 as
a result of any purchases in accordance with the exercise of rights of
first refusal under Section 6.2 nor shall the provisions of Sections 6.1
and 6.3 apply to the Transfer of any Shares to which the provisions of
Section 6.4 or Article 7 apply and which are exercised in accordance with
the terms thereof.
Notwithstanding the foregoing:
(i) if any transaction or series of transactions contemplated
by this Section 6.3 would result in a Change of Control
Event, the Shareholders shall not complete the proposed
transaction unless the aggregate consideration payable by
the Third Party Offeror pursuant to this Section 6.3 is
allocated in accordance with the Articles of Amendment as
if it were a "CHANGE OF CONTROL EVENT" thereunder;
(ii) if any transaction or series of transactions contemplated
by this Section 6.3 would constitute a Partial Sale Event,
the Transferring Shareholder shall not complete the
proposed transaction unless the Corporation has fulfilled
its obligations under the Articles to redeem all Preferred
Shares in respect of which a redemption request has been
made pursuant to the Articles of Amendment upon the
happening of a Partial Sale Event.
Any purchase and sale agreement entered into in conjunction with this
Section 6.3 shall:
(a) contain only several (not joint and several) representations,
warranties and covenants from any holder of Shares with recourse
limited to that Shareholder's pro rata portion of the aggregate
purchase price to all Shareholders;
(b) contain a limitation on the liability each Shareholder assumes,
with respect to all indemnities, if any, provided to the Offeree,
to that Shareholder's pro rata portion of the aggregate purchase
price to all Shareholders;
(c) not require the Shareholders that participate in the transaction
pursuant to this Section 6.3 to provide representations or
warranties or covenants related to the Corporation but shall
require them to provide typical title, ownership and authority to
sell representations. Notwithstanding the foregoing, the
Shareholders shall be subject to indemnity obligations to the
Transferring Shareholder by reason of any breach of
representations and warranties relating to the Corporation
subject to the limitations set forth in clause (b) above;
(d) not provide a Collateral Benefit to any Shareholder or any
Affiliate or Related Party thereof (other than the right to
receive the purchase price calculated in accordance with the
provisions above); and
(e) be conditional upon completion of the purchase by the Third Party
Offeror of the Shares held by the Transferring Shareholder which
are subject to the Transfer Notice.
Any Shareholder not giving notice within the Acceptance Period under
this Section 6.3 shall be deemed to have declined to exercise its tag-along
rights under this Section 6.3
If any of the Other Shareholders exercises its rights hereunder, the
purchase and sale of the Shares and Convertible Securities of the
Corporation to the Third Party Offeror pursuant to the Transfer Notice
shall be completed at the same time as the purchase and sale of the
Offeror's Securities and as part of the same closing.
To the extent that the Other Shareholders do not exercise their rights
hereunder, the Transferring Shareholder shall be entitled to sell the
Shares specified in the Transfer Notice in accordance with the terms
thereof for a period of 60 Business Days after the expiry of the Acceptance
Period. If the sale is not completed within such 60 Business Day period,
the provisions of Article 6 shall again apply to any proposed sale of
Shares and so on from time to time.
6.4 DRAG-ALONG RIGHTS
(a) If any Shareholder receives from a third party (the "THIRD
PARTY") acting as principal and dealing at arm's length with the
Transferring Shareholder, a bona fide written offer (the "THIRD
PARTY OFFER") to purchase all (but not less than all) of the
Shares (which transaction may include, without limitation, an
offer pursuant to a merger, amalgamation, consolidation or
similar transaction), and the Third Party Offer is accepted by
Shareholders holding at least fifty percent (50%) of the votes
attached to the outstanding Shares held by parties to this
Agreement (calculated on an as-if-converted to Common Shares
basis) (which Shareholders must include EdgeStone unless the
Third Party Offer is a Qualifying Offer) (the "ACCEPTING
SHAREHOLDERS"), the Accepting Shareholders shall be entitled to
obtain from the Third Party an offer (a "DRAG-ALONG OFFER") to
purchase all of the Shares of the Corporation held by the
Shareholders other than the Accepting Shareholders (the "FORCED
SHAREHOLDERS") on the same terms and conditions as contained in
the Third Party Offer, subject to the provisions of Section
6.4(b). If the consideration in respect of the Drag-Along Offer
includes consideration other than cash or cash equivalents, the
Drag-Along Offer shall, if necessary, include a valuation
prepared in accordance with Section 6.5. The Drag-Along Offer
shall be irrevocable. For the purposes of this Agreement, a
"QUALIFYING OFFER" is a Third Party Offer: (i) received before
April 22, 2006; and (ii) pursuant to which the holders of the
Series A Shares purchased by EdgeStone pursuant to the
Subscription Agreement (including any Series A Shares purchased
pursuant to the EdgeStone Purchase Option) would be entitled to
receive aggregate proceeds, payable in cash, equal to not less
than two (2) times the aggregate amount of the Issue Price for
each Series A Share held by such Persons.
(b) The Drag-Along Offer shall:
(i) not provide a Collateral Benefit to any Shareholder or any
Affiliate or Related Party thereof (other than, to the
extent that proceeds are distributed in accordance with
the Articles of Amendment, in the case of any holder of
Preferred Shares, the right of such holder to receive the
Series A Liquidation Preference per Share or the Series B
Liquidation Preference per Share, as applicable);
(ii) require each of the Shareholders to provide such
representations, warranties and indemnities as are
reasonably requested by the Third Party; and
(iii) provide that each such Shareholder's liability for
representations, warranties and indemnities provided to
the Third Party shall be limited to such Shareholder's
share of the proceeds received from the transaction.
(c) The Forced Shareholders shall be obliged to accept the Drag-Along
Offer (or otherwise take all necessary action to cause the
Corporation to consummate the proposed transaction, as
applicable) within 3 Business Days of receipt or such other
period agreeable to the Accepting Shareholders. The acceptance of
the Drag-Along Offer shall be made in writing and a copy of the
acceptance (or of the accepted Drag-Along Offer) shall be
delivered to the Accepting Shareholders within such 3 Business
Day period.
(d) If any of the Forced Shareholders do not deliver an acceptance of
the Drag-Along Offer within the 3 Business Day period referred to
above, the Secretary of the Corporation (the "DRAG-ALONG OFFER
ATTORNEY") shall be entitled to accept the Drag-Along Offer on
behalf of such Forced Shareholders and to deliver the acceptance
to the Third Party and, for such purpose, each of the Forced
Shareholders hereby appoints the Drag-Along Offer Attorney as its
attorney, on the terms set forth in Section 11.2, with full power
of substitution, in the name of the Forced Shareholder to accept
the Drag-Along Offer and to execute and deliver all documents and
instruments to give effect to such acceptance and to establish a
binding contract of purchase and sale between the Forced
Shareholder and the Third Party with respect to all of the Shares
and other securities held by the Forced Shareholder and to
execute and deliver all deeds, transfers, assignments and
assurances necessary to effectively Transfer such Shares to the
Third Party. Each of the Shareholders agrees that it will perform
the agreement resulting from acceptance of the Drag-Along Offer
in accordance with its terms and will ratify and confirm all that
the Drag-Along Offer Attorney may do or cause to be done pursuant
to the foregoing. Notwithstanding that certificates or
instruments evidencing the Shares may not have been delivered by
any Forced Shareholder to the Third Party, upon completion of the
Third Party's obligations under the Third Party Offer:
(i) the purchase of Shares from the Forced Shareholder shall
be deemed to have been fully completed and the records of
the Corporation may be amended accordingly;
(ii) all right, title, benefit and interest, both at law and in
equity, in and to the Shares shall be conclusively deemed
to have been transferred and assigned to and become vested
in the Third Party; and
(iii) all right, title, benefit and interest of such Forced
Shareholder and of any other Person (other than the Third
Party) having an interest in such Shares, legal or
equitable, in any capacity whatsoever shall cease.
(e) The purchase and sale of Shares in accordance with the provisions
of the Drag-Along Offer shall be completed at the same time as
the completion of the purchase and sale of Shares and/or
securities between the Accepting Shareholders and the Third Party
in accordance with the Third Party Offer and as part of the same
closing within 60 Business Days after expiry of the 3 Business
Day period referred to in Section 6.4(c).
(f) If, at any time, the Corporation receives a Third Party Offer to
purchase all or substantially all of the assets of the
Corporation (a "DRAG-ALONG ASSET SALE") which has been approved
by the Accepting Shareholders, the Shareholders hereby agree to
cast such votes and sign such resolutions and other instruments
as may be necessary or desirable to be obtained from them, in
their capacity as shareholders of the Corporation, in order to
evidence their approval of and to permit such transaction(s) of
purchase and sale. For greater certainty, the distribution of
proceeds under any such Drag-Along Asset Sale shall be made in
accordance with the Articles of Amendment. If any Shareholder
does not comply with the requirements set out in this Section
6.4(f) within 3 Business Days of being requested to do so by the
Corporation, the Secretary of the Corporation (the "DRAG-ALONG
ASSET SALE ATTORNEY") shall be entitled to execute and deliver
such documentation and cast any such votes on behalf of such
Shareholder and, for such purpose, each of the Shareholders
hereby appoints the Drag-Along Asset Sale Attorney as its
attorney, on the terms set forth in Section 11.2, in the name of
the Shareholder, to execute and deliver instruments and cast
votes, all as aforesaid. The Drag-Along Asset Sale Attorney shall
have the authority, for and on behalf of the Corporation, to
receive and distribute the proceeds of the Drag-Along Asset Sale
in accordance with the Articles of Amendment, and the Corporation
and each of the Shareholders hereby ratify and confirm all that
the Drag-Along Asset Sale Attorney may do or cause or done
pursuant to the foregoing.
(g) In the event that a Drag-Along Offer is made in connection with a
Third Party Offer and the Shares held by the Accepting
Shareholders and the Forced Shareholders constitute less than all
of the Shares of the Corporation, the Corporation agrees to take
all steps necessary to facilitate the Third Party's compulsory
acquisition pursuant to Part XVII of the CBCA of all Shares of
the Corporation not already purchased by the Third Party.
6.5 VALUATION OF NON-CASH CONSIDERATION
Any valuation of non-cash consideration included in a Third Party
Offer will be, in the case of: (i) Marketable Securities, calculated based
on the weighted average closing price of those securities on the exchange
or market on which the securities are primarily traded for the twenty
trading days ended at the close of business on the day prior to delivery of
the applicable notice, and (ii) other non-cash consideration, the fair
market value thereof as determined in good faith by the Board of Directors,
provided, that, if any Shareholder objects to any such determination within
ten (10) days of receiving notice thereof, such fair market value will be
determined by an independent investment banking or business valuation firm
mutually agreeable to the Board of Directors and an Investors Majority (the
costs of which shall be borne by the Corporation).
6.6 ZARLINK PUT RIGHTS
(a) Subject to Section 6.10, if, on or prior to September 1, 2006
(the "2006 PUT DATE"), the Corporation has not completed an
Initial Public Offering, Zarlink shall have the right,
exercisable for a period of ninety (90) days after the 2006 Put
Date (the "ZARLINK PUT PERIOD"), but not the obligation, to send
a notice (the "ZARLINK PUT NOTICE") to the Corporation requiring
the Corporation to purchase all or any portion of the 10,000,000
Common Shares (subject to appropriate adjustment for share
dividends, share splits, capital reorganization, combinations and
the like) (the "ZARLINK PURCHASED Securities") held on the date
of this Agreement by Zarlink, upon and subject to the terms and
conditions set out in this Section 6.6.
(b) The purchase price for the Zarlink Purchased Securities shall be
$2.85 per Common Share (subject to appropriate adjustment for
share dividends, share splits, capital reorganization,
combinations and the like) payable in full in cash or by
certified cheque without withholding, deduction or set-off in any
manner whatsoever (other than any withholding required or
expressly permitted by applicable tax law).
(c) Subject to Section 6.10, the transaction of purchase and sale in
respect of the Zarlink Purchased Securities shall take place as
soon as reasonably practicable but in no event later than ninety
(90) days after the delivery of the Zarlink Put Notice.
(d) If Zarlink fails to deliver a Zarlink Put Notice within the
Zarlink Put Period, its rights pursuant to this Section 6.6 shall
terminate and be of no further force or effect.
6.7 PTIC PUT RIGHT
(a) Subject to Section 6.10, if, on or prior to the 2006 Put Date,
the Corporation has not completed an Initial Public Offering,
PTIC shall have the right, exercisable for a period of ninety
(90) days after the 2006 Put Date (the "PTIC PUT PERIOD"), but
not the obligation, to send a notice (the "PTIC PUT NOTICE") to
the Corporation requiring the Corporation to purchase all or any
portion of the 16,000,000 Series B Shares (subject to appropriate
adjustment for share dividends, share splits, capital
reorganizations, combinations or the like) held on the date of
this Agreement by PTIC, or the Common Shares issued on the
conversion thereof (the "PTIC PURCHASED SECURITIES"), upon and
subject to the terms and conditions set out in this Section 6.7.
(b) The purchase price for each of the PTIC Purchased Securities
shall be:
(i) for each Series B Share comprised in the PTIC Purchased
Securities, $1.00 (subject to appropriate adjustment for
share dividends, share splits, capital reorganizations,
combinations and the like);
(ii) for each Common Share comprised in the PTIC Purchased
Securities that has been issued on the conversion of a
Series B Share, a price per Common Share equal to $1.00
divided by the number of Common Shares issued upon the
conversion of such Series B Share (all subject to
appropriate adjustment for share dividends, share splits,
capital reorganizations, combinations and the like); and
(iii) an amount equal to interest on the aggregate amount
payable pursuant to clause (i) and (ii) above accrued at a
rate of 7% per annum commencing on August 31, 2001 until
the date of delivery to the Corporation of the PTIC Put
Notice and compounded semi-annually.
In no event shall the aggregate amount payable to PTIC pursuant
to clause (i) and (ii) above for all of the Shares issued or
issuable to PTIC on the date hereof exceed $16,000,000. The
purchase price for the PTIC Purchased Securities shall be payable
in full in cash or by certified cheque without withholding,
deduction or set-off in any manner whatsoever (other than any
withholding required or expressly permitted by applicable tax
law).
(c) Subject to Section 6.10, the transaction of purchase and sale in
respect of the PTIC Purchased Securities shall take place as soon
as reasonably practicable but in no event later than ninety (90)
days after the delivery of the PTIC Put Notice.
(d) If PTIC fails to deliver a PTIC Put Notice within the PTIC Put
Period, its rights pursuant to this Section 6.7 shall terminate
and be of no further force or effect.
6.8 EDGESTONE PREFERENTIAL PUT RIGHT
(a) Upon the occurrence of an EdgeStone Put Event, EdgeStone shall
have the right, but not the obligation, exercisable at any time
and from time to time after the EdgeStone Put Event but in no
event later than ninety (90) days after the earlier of (i) the
delivery of the PTIC Put Notice; and (ii) the delivery of the
Zarlink Put Notice by sending a notice to the Corporation (the
"EDGESTONE PREFERENTIAL PUT NOTICE"), to require the Corporation
to purchase all but not less than all of the Series A Shares then
held by EdgeStone or any other Person referred to in Section 5.10
(the "EDGESTONE PREFERENTIAL PURCHASED SECURITIES"), upon and
subject to the terms and conditions set out in this Section 6.8.
(b) The purchase price for the EdgeStone Preferential Purchased
Securities shall be the sum of: (a.) $1.00 per share (subject to
appropriate adjustment for share dividends, share splits, capital
reorganizations, combinations and the like) plus an amount equal
to the amount of any dividends declared but unpaid on such
shares, which aggregate amount shall be payable in cash or by
certified cheque; plus (b.) the issuance of that number of
fully-paid and non-assessable Common Shares equal to the number
of Common Shares (other than Additional Common Shares) then
issuable on the conversion of the EdgeStone Preferential
Purchased Securities. The purchase price shall be paid in full
without withholding, deduction or set-off in any manner
whatsoever (other than any withholding required or expressly
permitted by applicable tax law).
(c) The transaction of purchase and sale in respect of the EdgeStone
Preferential Purchased Securities shall take place as soon as
reasonably practicable but in any event no event later than
ninety (90) days after the date of delivery to the Corporation of
the EdgeStone Preferential Put Notice (the "PREFERENTIAL PUT
OUTSIDE DATE"). To the extent that any cash portion of the
purchase price is not fully paid on or before the Preferential
Put Outside Date, the Corporation shall pay interest on such
portion of the unpaid purchase price from the Preferential Put
Outside Date to the date of payment in full of the purchase price
at a rate equal to the Prime Rate in effect on the Preferential
Put Outside Date, calculated but not compounded daily.
(d) Notwithstanding any other term or provision of this Section 6.8,
the put rights under this Section 6.8 shall only apply with
respect to: (i) Series A Shares issued on the Closing; (ii)
Series A Shares issued pursuant to the EdgeStone Purchase Option;
and (iii) any Series A Shares issued as result of any share
dividends, share splits, capital reorganizations, combinations or
the like affecting the shares referred to in clause (i) or (ii)
above.
6.9 EDGESTONE COMMON PUT RIGHTS
(a) Following the purchase of the EdgeStone Preferential Purchased
Securities contemplated by Section 6.8 hereof, then at any time
after the first to occur of a Partial Sale Event or the
Redemption Trigger Date, EdgeStone shall have the right, but not
the obligation, exercisable at any time and from time to time
within ninety (90) days after EdgeStone receives notice in
writing of the happening of such event by sending a notice to the
Corporation (the "EDGESTONE COMMON PUT NOTICE"), to require the
Corporation to purchase all or any portion of the Common Shares
or Convertible Securities then held by EdgeStone or any other
Person referred to in Section 5.10 (the "EDGESTONE COMMON
PURCHASED SECURITIES"), upon and subject to the terms and
conditions set out in this Section 6.9. With respect to each
exercise of its rights in this Section 6.9, the date on which
EdgeStone delivers an EdgeStone Common Put Notice to the
Corporation in connection with such exercise is referred to
herein as the "EDGESTONE VALUATION DATE".
(b) The purchase price for the EdgeStone Common Purchased Securities
shall be:
(i) for each Common Share, the Fair Market Value of such
Common Share on the applicable EdgeStone Valuation Date,
as determined in accordance with Appendix 3; and
(ii) for each Convertible Security, (A.) the Fair Market Value
of the Common Shares underlying such Convertible
Securities on the EdgeStone Valuation Date, as determined
in accordance with Appendix 3, less (B.) any amount
payable by the holder on the exercise or conversion of
such Convertible Securities.
The purchase price shall be paid in full in cash or by certified
cheque without withholding, deduction or set-off in any manner
whatsoever (other than any withholding required or expressly
permitted by applicable tax law).
(c) The transaction of purchase and sale in respect of the EdgeStone
Common Purchased Securities shall take place as soon as
reasonably practicable but in no event later than ninety (90)
days after the applicable EdgeStone Valuation Date (the "COMMON
PUT OUTSIDE DATE"). To the extent that any cash portion of the
purchase price is not fully paid on or before the Common Put
Outside Date, the Corporation shall pay interest on such portion
of the unpaid purchase price from the Common Put Outside Date to
the date of payment in full of the purchase price at a rate equal
to the Prime Rate in effect on the Common Put Outside Date,
calculated daily but not compounded.
(d) EdgeStone's exercise of the put rights pursuant to this Section
6.9, or its failure to deliver an EdgeStone Common Put Notice in
any instance, does not limit any subsequent exercise of, or
otherwise derogate from, EdgeStone's put rights pursuant this
Section 6.9.
(e) Notwithstanding any other term or provision of this Section 6.9,
the put rights under this Section 6.9 shall only apply with
respect to: (i) Common Shares issued on the conversion of the
Series A Shares issued on the Closing; (ii) Common Shares issued
on the conversion of the Series A Shares issued pursuant to the
EdgeStone Purchase Option; (iii) the EdgeStone Warrants and any
Common Shares issued on the exercise thereof; and (iv) any Common
Shares issued as result of any share dividends, share splits,
capital reorganization, combinations or the like affecting the
shares referred to in clause (i), (ii) or (iii) above.
6.10 PRIORITIES AS BETWEEN ZARLINK, PTIC AND EDGESTONE
Any Put Notice delivered to the Corporation by Zarlink, PTIC or
EdgeStone (the "PUTTING SHAREHOLDERS") shall be delivered concurrently to
each of the other Putting Shareholder(s) who, at the applicable time, has
an exercisable put right pursuant to Section 6.6, 6.7 or 6.8 of this
Agreement (the "OTHER PUTTING SHAREHOLDERS"). The twenty (20) Business Day
period commencing on the date the first Putting Shareholder delivers its
Put Notice (the "FIRST PUT NOTICE") to the Other Putting Shareholders is
referred to herein as the "STANDSTILL PERIOD". The following priorities
shall apply to the repurchase of securities, and payment by the Corporation
of any amounts in respect thereof, pursuant to the First Put Notice and any
Put Notice delivered during the Standstill Period:
(a) in priority to any repurchase by the Corporation of the Zarlink
Purchased Securities or the PTIC Purchased Securities, or any
payment to Zarlink pursuant to Section 6.6 or PTIC pursuant to
Section 6.7 in respect thereof in the event that EdgeStone has
delivered the EdgeStone Preferential Put Notice: (i) the
Corporation shall repurchase all of the EdgeStone Preferential
Purchased Securities, and pay the purchase price therefor to the
holders thereof, all in accordance with the provisions of Section
6.8; and (ii) the Corporation shall pay any and all taxes
properly payable by the Corporation in respect of the repurchase
of such EdgeStone Preferential Purchased Securities; and
(b) as soon as reasonably practicable after payment of the amounts
required to paid pursuant to clause (a) above (but in any event
no later than thirty (30) days after the payment of such
amounts): (i) the Zarlink Purchased Securities (in the event that
Zarlink has delivered the Zarlink Put Notice) and the PTIC
Purchased Securities (in the event that PTIC has delivered the
PTIC Put Notice) shall be repurchased, and the purchase price
thereof shall be paid, pro rata on a pari passu basis as between
Zarlink and PTIC in accordance with the provisions of Section 6.6
and 6.7, respectively; and (ii) the Corporation shall pay any and
all taxes properly payable by the Corporation in respect of the
repurchase of the Zarlink Purchased Securities and/or the PTIC
Purchased Securities.
After expiry of the Standstill Period, any Shares put to the
Corporation pursuant to Section 6.6, 6.7 or 6.8 shall be purchased by the
Corporation in the order in which the Put Notices in respect thereof are
delivered to the Corporation.
6.11 INCORPORATION OF NEWCO
In the event that the put rights contemplated by Section 6.6, Section
6.7, Section 6.8 or Section 6.9 are exercised by one or more of Zarlink,
PTIC and EdgeStone, respectively, the Corporation shall have the right to
satisfy its obligations to pay the purchase price under such put rights by
arranging for a third party ("Newco"),which may be a sister corporation of
the Corporation, to pay the purchase price for the Zarlink Purchased
Securities, the PTIC Purchased Securities or the EdgeStone Preferential
Purchased Securities, as the case may be. Upon payment by Newco of the
purchase price for the Zarlink Purchased Securities, the PTIC Purchased
Securities or the EdgeStone Preferential Purchased Securities, as the case
may be, the Corporation shall have no further obligations to Zarlink under
Section 6.6, to PTIC under Section 6.7 or to EdgeStone under Section 6.8,
as the case may be.
In addition, the Corporation and Shareholders agree to negotiate in
good faith to consider alternative structures to satisfy the put rights in
a tax efficient manner.
6.12 COVENANTS TO FACILITATE PUT/REDEMPTION
Within 10 days of receipt of an EdgeStone Preferential Put Notice, an
EdgeStone Common Put Notice or a redemption request under the Articles of
Amendment, the Corporation shall notify EdgeStone as to whether or not (i)
it requires external financing or lender or other third party consent to
complete the purchase or redemption of the EdgeStone Preferential Purchased
Securities, the EdgeStone Common Purchased Securities or the Shares in
respect of which a redemption request was sent pursuant to the Articles of
Amendment, as applicable and if it anticipates applicable statutory
solvency or liquidity provisions may restrict the Corporation's ability to
implement the purchase or redemption, as applicable, or (ii) the applicable
purchase or redemption price will be fully satisfied from the Corporation's
existing cash or other resources without the need for any third party
consent and without triggering any applicable statutory solvency
restriction. If the Corporation notifies EdgeStone such external financing
or third party consent is required or it anticipates applicable statutory
solvency or liquidity provisions may restrict the Corporation's ability to
implement the purchase or redemption, as applicable (a "NOTICE OF REQUIRED
FINANCING/CONSENT"), the Corporation shall:
(a) in good faith use its reasonable efforts to diligently obtain
such financing and/or consents on a timely basis;
(b) use reasonable efforts to take such actions as may be necessary
to ensure no statutory solvency restrictions will apply to
restrict the purchase or redemption;
(c) if appropriate, retain an investment bankers or others to assist
with any required financing; and
(d) provided that EdgeStone is then a Shareholder, keep EdgeStone and
all other parties regularly informed on its progress in obtaining
such financing and/or third party consent including meeting with
representatives of EdgeStone or the other Parties to this
Agreement if requested to do so.
ARTICLE 7
EXIT RIGHT
7.1 EXIT RIGHT
(a) In the event that:
(i) EdgeStone has exercised its rights under Section 6.9 and,
giving effect to such exercise, EdgeStone would cease to
hold any Shares or Convertible Securities (other than
EdgeStone Warrants), if the Corporation has not paid to
EdgeStone in full the purchase price for the EdgeStone
Common Purchased Securities as contemplated in Section 6.9
within: (x) 90 days following the EdgeStone Valuation
Date; or (y) if the Corporation has given a Notice of
Required Financing/Consent, 150 days following the
EdgeStone Valuation Date; or
(ii) on the occurrence of an event triggering a redemption
right under the Articles of Amendment, EdgeStone elects to
require the Corporation to redeem all of its Series A
Shares, if the Corporation has not paid to EdgeStone the
amounts required to be paid upon such event as set out in
the Articles of Amendment within: (x) 90 days, or (y) if
the Corporation has given a Notice of Required
Financing/Consent, 150 days following after receipt by the
Corporation of the request for redemption,
then, provided that the Redemption Trigger Date has passed and
provided that EdgeStone has not ceased to be a Shareholder,
EdgeStone shall be entitled, at any time thereafter and in its
sole discretion, to give written notice (an "EXIT NOTICE") to the
Corporation and each of the Shareholders stating that EdgeStone
wishes to cause a Sale Transaction to occur.
(b) Upon delivery of an Exit Notice by EdgeStone to the Corporation
and the Shareholders:
(i) the Corporation and Shareholders will cooperate as
necessary or reasonably desirable on a timely basis to
seek bona fide offers from third parties on such terms as
EdgeStone may specify for the completion of the Sale
Transaction;
(ii) EdgeStone shall have the full power and authority to
effect a Sale Transaction including seeking the advice of,
canvassing and/or retaining (at the expense of the
Corporation) one or more investment dealers in connection
with providing advice generally as to how best to achieve
a Sale Transaction; and
(iii) EdgeStone shall also have the power and authority to
solicit offers for a Sale Transaction which it determines
in its sole discretion to be acceptable.
(c) Upon receipt by the Corporation or EdgeStone of any offer in
respect of a Sale Transaction acceptable to EdgeStone from a
Person at arm's length to EdgeStone (an "OFFER"), the Corporation
will provide a copy of the Offer to EdgeStone and the other
Shareholders, or, if the Offer is received by EdgeStone,
EdgeStone shall provide a copy to the Corporation and the other
Shareholders. If the Offer is delivered to the Corporation,
EdgeStone shall have a period of 30 days from receipt of the
Offer to indicate whether or not it approves of the Offer by
providing written notice to the Corporation and the other
Shareholders.
(d) If EdgeStone approves an Offer, the Corporation and each of the
Shareholders agree to take all actions necessary to effect the
sale of the Corporation pursuant to the Offer and to immediately
cause the liquidation and distribution of any resulting proceeds
to the Shareholders in accordance with its articles and by-laws
or pursuant to the Offer, including giving effect to the value of
the liquidation preference contained in the share conditions
relating to the Series A Shares and Series B Shares, and all
applicable laws.
(e) Each Shareholder other than EdgeStone hereby constitutes and
appoints EdgeStone, on the terms set forth in Section 11.2, with
full power of substitution, as the attorney for such Shareholder
and in such Shareholder's name, place and stead and for such
Shareholder's use and benefit, to sign, execute, certify,
acknowledge, swear to, file, deliver and record any and all
agreements, certificates, instruments and other documents which
EdgeStone may deem necessary, desirable, or appropriate for the
purposes of effecting the rights conferred by this Article 7
other than those relating to tax as the same may be amended,
modified or supplemented from time to time provided that the
representations, warranties and indemnities given by such
Shareholder shall be limited to typical title, ownership and
authority to sell representations.
(f) Each of the Shareholders hereby waives any and all claims such
Shareholder may have against any of the other Shareholders (and
any of their Affiliates and their respective partners, members,
directors, officers, employees, representatives or agents), or
against any member of the Board of Directors of the Corporation,
that such Shareholder or director of the Corporation has acted
improperly or breached any duty owed to such Shareholder, to any
other Shareholder of the Corporation, or to the Corporation or
otherwise, by virtue of (A) such other Shareholder voting its
Shares to approve any transaction contemplated by this Article 7
or to elect a Board of Directors of the Corporation reasonably
believed by such other Shareholder to be in favour of such
transaction or (B) such director voting to approve or otherwise
consenting to such transaction.
(g) As used in this Article 7, a "SALE TRANSACTION" shall mean: (i) a
merger, amalgamation, consolidation or other business combination
or refinancing of the Corporation or any Subsidiary; (ii) a sale
or other disposition of all, or substantially all of the capital
stock of the Corporation or any Subsidiary; (iii) a sale, lease,
exchange, Transfer or other disposition (including, without
limitation, by merger, consolidation or otherwise) of all or
substantially all of the assets of the Corporation or any
Subsidiary; (iv) a public offering under applicable securities
legislation (whether or not an Initial Public Offering); (vi) a
share buy-back or a recapitalization of the Corporation; or (v)
any other transaction that EdgeStone deems advisable in order to
maximize shareholder value; provided that, in no event, shall a
Collateral Benefit be obtained by holders of Series A Shares.
The provisions of this Article 7 will continue to apply until an Offer is
approved by EdgeStone and a transaction in respect thereof is completed or
the amount due to EdgeStone is paid.
7.2 CORPORATION AND OTHER SHAREHOLDERS TO FACILITATE EXIT
The Corporation shall facilitate any Sale Transaction pursuant hereto
on a timely basis, including, subject to the provisions of Section 10.1,
promptly setting up and maintaining a comprehensive data room, providing
access to such employees, customers and suppliers as any potential
purchaser, underwriter or agent may reasonably request, preparing and
amending comprehensive and appropriate disclosure documents on a timely
basis, providing any necessary consents and approvals, executing and
delivering a purchase and sale agreement, transition services agreement and
other documentation required by the purchaser on a commercially reasonable
basis, including typical representations, warranties and covenants in the
context of the Offer. The Shareholders shall act to facilitate any Sale
Transaction pursuant hereto on a timely basis, including by providing any
necessary consents or approvals, executing and delivering a purchase and
sale agreement and other documentation required by the intended purchaser
on a commercially reasonable basis, including, subject to Section 7.1(e),
typical representations, warranties and covenants in the context of the
Offer, and voting all Shares held, or which that party is entitled to vote,
in favour of the Offer.
ARTICLE 8
CLOSING PROCEDURES
If a purchase and sale of any Shares and/or securities of the
Corporation is made pursuant to this Agreement, the following shall apply:
8.1 PAYMENT OF PURCHASE PRICE AND DELIVERY OF CERTIFICATES
Payments on account of the purchase price shall be made by negotiable
cheque, certified by a Canadian chartered bank or trust company or by wire
transfer of funds to an account of a Canadian chartered bank or by official
bank draft drawn on a Canadian chartered bank against receipt by the
purchaser of the share certificate or certificates representing the Shares
or securities being purchased, duly endorsed for transfer in blank.
8.2 TITLE
The acceptance by the vendor of payment (including an agreement to
pay) for the Shares and/or securities being purchased and sold shall
constitute a representation and warranty by the vendor that the vendor has
good and marketable title to the Shares and/or securities, free and clear
of any Lien except as contemplated in this Agreement. In addition, the
vendor shall deliver to the purchaser all documents, instruments and do all
acts and things as the purchaser may reasonably request, whether before or
after completion of the transaction, to vest title in the purchaser.
8.3 FAILURE TO COMPLETE SALE
If, at the time of closing, the vendor does not complete the sale for
any reason, other than due to the breach of the purchasing party, the
purchaser shall have the right to deposit (including by post-dated cheque)
the purchase price for the Shares to be purchased and sold for the account
of the vendor in an account with the bankers of the Corporation and that
deposit shall constitute valid and effective payment of the purchase price
to the vendor. Thereafter, the purchaser shall have the right to execute
and deliver any deeds, stock transfers, assignments, releases and other
documents as may, in the reasonable opinion of the purchaser, be necessary
or desirable to complete the transaction. If payment of the purchase price
is so deposited, then from and after the date of deposit, notwithstanding
that certificates or instruments evidencing the Shares and/or securities
may not have been delivered to the purchaser:
(a) the purchase shall be deemed to have been fully completed and the
records of the Corporation may be amended accordingly;
(b) all right, title, benefit and interest, both at law and in
equity, in and to the subject Shares and/or securities shall be
conclusively deemed to have been transferred and assigned to and
become vested in the purchaser; and
(c) all right, title, benefit and interest of the vendor and of any
other Person (other than the purchaser) having any interest in
the subject Shares and/or securities, legal or equitable, in any
capacity whatsoever, shall cease.
8.4 PURCHASER APPOINTED AS ATTORNEY
Each Shareholder hereby appoints, on the terms set forth in Section
11.2, in case the Shareholder is a vendor of Shares and/or securities under
this Agreement who fails to do anything duly required in connection with a
sale by that vendor, each other Shareholder who may from time to time be a
purchaser of any such Shares and/or securities, as the vendor's attorney,
with full power of substitution, in the name of the vendor but on behalf of
and at the expense of the purchaser, to execute and deliver all deeds,
transfers, assignments and assurances necessary to effectively Transfer the
interest being sold to the purchaser or its nominees.
8.5 TAXES
At the time of the sale, the vendor shall provide to the purchaser
either:
(a) a statutory declaration that the vendor is not a non-resident of
Canada for purposes of the Income Tax Act (Canada); or
(b) a certificate from Canada Revenue Agency under Section 116 of
that Act with a certificate limit at least equal to the proceeds
payable to such vendor,
provided that if the vendor delivers no declaration or certificate, the
purchaser shall be entitled to deduct from the purchase price payable to
the vendor an amount equal to the amount of tax for which the purchaser may
be liable under the Income Tax Act (Canada) (or any applicable comparable
legislation).
8.6 DELIVERIES ON CLOSING
If, after completion of the transaction of purchase and sale, the
vendor will not own any Shares or other securities of the Corporation, the
vendor shall deliver or cause its nominees to deliver, at the time of
completion of the sale, a written resignation from all positions on the
Board of Directors and from any offices and employment with the
Corporation, as reasonably requested by the Corporation.
8.7 GOVERNMENTAL APPROVALS
If any Governmental Approval is required in respect of a purchase of
Shares and/or securities of the Corporation by a Third Party (a
"PURCHASER") under any provision of this Agreement, then, notwithstanding
anything contained in this Agreement, the time period specified in this
Agreement for the closing of such transaction shall be extended for an
additional 30 Business Days to permit the purchaser to obtain the necessary
Governmental Approval. Any such application for Governmental Approval shall
be the sole responsibility of the purchaser who shall also be responsible
for all costs and expenses incurred in connection therewith. The Other
Shareholders and the Corporation shall use reasonable efforts to cooperate
with the purchaser in any application for Governmental Approval and
EdgeStone shall be provided with the opportunity to provide input into and
shall be consulted in respect of any submission made in respect of any such
Governmental Approval.
ARTICLE 9
SHARE CERTIFICATES
9.1 RESTRICTIVE LEGENDS
In addition to any other legend otherwise prescribed by law or
contract, for so long as this Agreement remains in effect, the certificates
representing any shares of capital stock or other securities of the
Corporation held by any Shareholder will bear restrictive legends in
substantially the following form:
"The securities represented by this share certificate
are subject to certain restrictions with respect to the
voting and the transfer of such securities set forth in
a Shareholders' Agreement dated as of April 23, 2004 by
and among the issuer of such securities and the
registered holder of this share certificate (or such
holder's predecessor-in-interest) and certain others. A
copy of such Shareholders' Agreement is on file and may
be inspected by the registered holder of this
certificate at the registered office of the issuer."
ARTICLE 10
CONFIDENTIALITY COVENANTS
10.1 CONFIDENTIALITY
(a) No Party will, at any time or under any circumstances, without
the consent of the Board of Directors, directly or indirectly
communicate or disclose to any Person (other than the other
Parties and employees, agents, advisors and representatives of
such Person or Parties) or make use of (except in connection with
its interest in the Corporation) any confidential knowledge or
information howsoever acquired by such Party relating to or
concerning the customers, products, technology, trade secrets,
systems or operations, or other confidential information
regarding the property, business and affairs, of the Corporation,
except:
(i) information that is or becomes generally available to the
public (other than by disclosure by such Party or its
employees, agents, advisors or representatives contrary to
this Section);
(ii) information that is reasonably required to be disclosed by
a Party to protect its interests in connection with any
valuation or legal proceeding under this Agreement;
(iii) information that is required to be disclosed by law or by
the applicable regulations or policies of any regulatory
agency of competent jurisdiction or any stock exchange; or
(iv) by a Shareholder, in connection with a proposed Transfer
of its Shares and/or Convertible Securities in the
Corporation, but only if such Shareholder obtains a prior
written covenant of confidentiality in form acceptable to
the Corporation, acting reasonably, from the Person to
whom it proposes to disclose such information.
(b) Notwithstanding Section 10.1(a), EdgeStone and any member of the
EdgeStone Group may:
(i) disclose confidential information to members of the
EdgeStone Group provided such members have agreed to be
subject to certain confidentiality provisions as
contemplated in the constating documents of EdgeStone
Capital Equity Fund II-A, L.P.;
(ii) disclose confidential information to EdgeStone's advisory
committee or investment committee;
(iii) report confidential information regarding EdgeStone's
investment in the Corporation, regarding the Corporation's
financial statements, other financial information
regarding the Corporation that the Corporation has
provided to non-shareholder parties, that EdgeStone is
otherwise required to report to members of the EdgeStone
Group in connection with its investment in the Corporation
and as otherwise agreed between the Corporation and
EdgeStone (save and except where such use or disclosure
would have a Material Adverse Effect on the Business of
the Corporation);
(iv) in connection with its right to sell Shares in accordance
with the provisions of this Agreement or otherwise effect
a transaction as contemplated in Article 7, to disclose
confidential information to the potential purchaser in
respect of such proposed sale or transaction, provided the
potential purchaser agrees to be bound by the
confidentiality obligations set out in this Section 10.1,
as well as a covenant of the potential purchaser not to
use or allow the use for any purpose of the confidential
information or notes, summaries or other material derived
from the review of the confidential information, except to
determine whether to purchase Shares from EdgeStone or
otherwise acquire the Corporation; and
(v) any nominee of EdgeStone on the Board of Directors or any
Observer may discuss the Business of the Corporation and
any Subsidiary, including confidential information, with
the investment committee, officers, directors, partners,
employees and advisors of EdgeStone and its Affiliates.
(c) Each of the Parties acknowledges that disclosure of any
confidential information regarding the Corporation in
contravention of this Section may cause significant harm to the
Corporation and the Subsidiaries and that remedies at law may be
inadequate to protect against a breach of this Section.
Accordingly, each of the Parties acknowledges that the
Corporation is entitled, in addition to any other relief
available to it, to the granting of injunctive relief without
proof of actual damages or the requirement to establish the
inadequacy of any of the other remedies available to it. Each of
the Parties covenants not to assert any defence in proceedings
regarding the granting of an injunction or specific performance
based on the availability to the Corporation of any other remedy.
10.2 ACKNOWLEDGEMENT
The covenants contained in Section 10.1 are given by the Shareholders
(each, a "COVENANTOR") acknowledging that each of them has specific
knowledge of the affairs of the Corporation and the Subsidiaries and that
the other Shareholders would not have entered into or permitted the
Corporation to enter into the transactions contemplated in this Agreement
or in the Other Agreements without the Covenantors having provided such
covenants.
10.3 REASONABLE OBLIGATIONS NOT EXHAUSTIVE
Each Shareholder acknowledges that the obligations contained in this
Article 10 are not in substitution for any obligations which the
Shareholder may now or hereafter owe to the Corporation, any of the
Subsidiaries or any other Shareholder and which exists apart from this
Article and do not replace any rights of the Corporation, any of the
Subsidiaries or any Shareholder with respect to any such obligation.
Each of the Shareholders hereby agrees that, without in any way
derogating from any other covenants provided by him, all the restrictions
in this Article 10 are reasonable and valid and all defences to the strict
enforcement thereof by the Corporation and/or the other Shareholders are
hereby waived.
10.4 SURVIVAL
Notwithstanding any other term or provision hereof (including, without
limitation, Section 11.3), the provisions of this Article 10 shall survive
the termination of this Agreement.
ARTICLE 11
GENERAL
11.1 ALL SECURITIES SUBJECT TO AGREEMENT
Each of the Shareholders agrees that it shall be bound by the terms of
this Agreement with respect to all Shares and securities in the capital of
the Corporation held by it from time to time.
11.2 TERMS OF POWER OF ATTORNEY
If any Shareholder is deemed to appoint an attorney pursuant to
Section 6.4(d), 6.4(f), 7.1(e) or 8.4 of this Agreement, such appointment,
being coupled with an interest, is irrevocable by the Shareholder and shall
not be revoked by the insolvency or bankruptcy of the Shareholder. Any such
Shareholder hereby authorizes its attorney appointed pursuant to Section
6.4(d), 6.4(f), 7.1(e) or 8.4 to take any action necessary or advisable in
connection with Section 6.4(d), 6.4(f), 7.1(e) or 8.4, respectively, hereby
giving such attorney full power and authority to do and perform each and
every act or thing whatsoever required or advisable to be done in
connection with the foregoing as fully as such Shareholder might or could
do so personally, and hereby ratifying and confirming all that such
attorney shall lawfully do or cause to be done by virtue thereof. Any such
power of attorney is not intended to be a continuing power of attorney
within the meaning of and governed by the Substitute Decisions Act
(Ontario), or any similar power of attorney under equivalent legislation in
any of the provinces or territories of Canada (a "CPOA"). The execution of
this Agreement shall not terminate any CPOA granted by a Shareholder
previously and any such power of attorney shall not be terminated by the
execution by a Shareholder in the future of a CPOA, and each Shareholder
hereby agrees not to take any action that results in the termination of any
such power of attorney.
11.3 TERM
Except as otherwise expressly provided in this Agreement, this
Agreement shall come into force and effect as of the date of this Agreement
and shall continue in force in accordance with the terms hereof. Subject to
Section 11.4, this Agreement shall terminate upon: (i) the completion of an
Initial Public Offering; or (ii) the written agreement of all of the
Parties hereto; provided that, except as contemplated by Section 5.10, the
rights of a Shareholder under this Agreement shall cease earlier on that
date as of which such Shareholder ceases to own any Shares or securities in
the capital of the Corporation.
11.4 TERMINATION NOT TO EFFECT RIGHTS OR OBLIGATIONS
A termination of this Agreement or any provision of this Agreement
shall not affect or prejudice any rights or obligations which have accrued
or arisen under this Agreement prior to the time of termination, and such
rights and obligations shall survive the termination of this Agreement.
11.5 TIME OF THE ESSENCE
Time shall be of the essence of this Agreement and of every part
hereof, and no extension or variation of this Agreement shall operate as a
waiver of this provision.
11.6 FURTHER ASSURANCES
Each of the Shareholders covenants and agrees to vote (or cause to be
voted) its Shares in the capital of the Corporation, and to take all other
necessary or desirable action within its control and to the extent
permitted by law so as to give full effect to the provisions of this
Agreement; provided that no Shareholder shall be obligated to waive any of
its rights hereunder or in respect of its Shares or agree to any reduction
in the stated capital of its Shares.
11.7 ARBITRATION
Subject to Section 11.13, all disputes arising out of or in connection
with this Agreement, or in respect of any legal relationship associated
with or derived from this Agreement, shall be arbitrated and finally
resolved pursuant to the Arbitration Act, 1991 (Ontario). Such arbitration
shall be conducted by a single arbitrator. The arbitrator shall be
appointed by agreement between the parties or, failing agreement, such
arbitrator shall be appointed in accordance with Section 10 of the
Arbitration Act, 1991 (Ontario). The place of arbitration shall be the City
of Ottawa in the Province of Ontario unless the dispute involves EdgeStone,
in which circumstance it may elect as part of the process of selecting the
arbitrator that the place of arbitration shall be the City of Toronto in
the Province of Ontario. The language of the arbitration shall be English.
Any notice or other document, including a notice commencing arbitration,
may be served by sending it to the addressee by facsimile in accordance
with Section 11.8 hereof. The decision arrived at by the arbitrator,
howsoever constituted, shall be final and binding and no appeal shall lie
therefrom.
11.8 NOTICES
All notices, requests, payments, instructions or other documents to be
given hereunder will be in writing or by written telecommunication, and
will be deemed to have been duly given if (i) delivered personally
(effective upon delivery), (ii) mailed by certified mail, return receipt
requested, postage prepaid (effective five Business Days after dispatch),
(iii) sent by a reputable, established courier service that guarantees next
Business Day delivery (effective the next Business Day), or sent by air
mail or by commercial express overseas air courier, with receipt
acknowledged in writing by the recipient (effective upon the date of such
acknowledgement), or (iv) sent by telecopier followed within 24 hours by
confirmation by one of the foregoing methods (effective upon receipt of the
telecopy in complete, readable form), addressed as follows (or to such
other address as the recipient party may have furnished to the sending
party for the purpose pursuant to this Section 11.8):
if to the Corporation to:
Mitel Networks Corporation
000 Xxxxxx Xxxxx
Xxxxxx, XX
X0X 0X0
Attention: Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
--------------
Mitel Networks Corporation
000 Xxxxxx Xxxxx
Xxxxxx, XX
X0X 0X0
Attention: Chief Financial Officer, and VP Finance
Fax: (000) 000-0000
And with a copy to:
------------------
Mitel Networks Corporation
000 Xxxxxx Xxxxx
Xxxxxx, XX
X0X 0X0
Attention: Corporate Legal Counsel
Fax: (000) 000-0000
And with a copy to:
------------------
Osler, Xxxxxx & Xxxxxxxx XXX
Xxxxx 0000
00 X'Xxxxxx Xxxxxx
Xxxxxx, XX
X0X 0X0
Attention: J. Xxxxx Xxxxxx
Fax: (000) 000-0000
if to EdgeStone:
EdgeStone Capital Equity Fund II Nominee, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx
Fax: (000) 000-0000
Fax: (000) 000-0000
if to Zarlink:
Zarlink Semiconductor Inc.
000 Xxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxx, Xxxxxxx X0X 0X0
Attention: Mr. Xxx XxXxxxxx
Fax: (000) 000-0000
if to Systems, Knowledge, WCC or Xxxxxxxx:
c/o Xxxxxx Xxxxxx International Corporation
000 Xxxxxxx Xxxxx
Xxxxx X, Xxxxx 000
Xxxxxx, Xxxxxxx X0X 0X0
Attn: Dr. T.H. Xxxxxxxx and Xxxx Xxxxxxxx
Fax: (000) 000-0000
if to PTIC:
Power Technology Investment Corporation
751, Square Victoria
Xxxxxxxx, Xxxxxx X0X 0X0
Attn: Mr. Xxxxx Xxxxx
Fax: (000) 000-0000
11.9 WAIVERS, AMENDMENTS
Except as otherwise expressly provided in this Agreement, (i) no
amendment or waiver of this Agreement shall be binding unless executed in
writing by the Party to be bound thereby, and (ii) no waiver of any
provision of this Agreement shall constitute or be deemed to constitute a
waiver of any other provision nor shall any such waiver constitute a
continuing waiver; provided, however, that any amendment or waiver of this
Agreement or any provision thereof shall be binding on all Parties, and
each Party shall sign an instrument evidencing same, if such amendment or
waiver has been consented to in writing (whether signed in one or more
counterparts) by the Corporation and holders of not less than sixty-six and
two-thirds percent (66 2/3%) of the outstanding Shares which are subject to
this Agreement (on an as-if converted to Common Shares basis), which
holders must:
(a) in all circumstances include EdgeStone;
(b) in the event of an amendment or waiver affecting Section 6.6 or
6.10 include Zarlink;
(c) in the event of an amendment or waiver affecting Section 6.7 or
6.10 include PTIC; and
(d) in the event of an amendment or waiver affecting any Shareholder
in a manner that is materially and adversely different from the
manner in which such amendment or waiver affects the other
Shareholders, include the Shareholder who is differently
affected.
11.10 COUNTERPARTS
This agreement may be executed in several counterparts, each of which
so executed shall be deemed to be an original and such counterparts
together shall be but one and the same instrument. Each Party agrees that
the delivery of this Agreement by facsimile shall have the same force and
effect as delivery of original signatures.
11.11 SUCCESSORS AND ASSIGNS
Except as provided in Section 5.10 or as otherwise specifically
permitted herein, neither this Agreement nor any of the rights of any of
the Shareholders may be assigned without the prior written consent of the
other parties to this Agreement. Except as otherwise provided herein, this
Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, other
personal representatives, successors and permitted assigns and transferees
of Shares or Convertible Securities.
11.12 APPLICATION OF THIS AGREEMENT
The terms of this Agreement shall apply mutatis mutandis to any
securities of the Corporation resulting from the conversion,
reclassification, redesignation, subdivision or consolidation or other
change of the Shares.
11.13 EQUITABLE RELIEF
Each of the parties acknowledges that any breach by such Party of his,
her, or its obligations under this Agreement would cause substantial and
irreparable damage to one or more of the other parties and that money
damages would be an inadequate remedy therefor. Accordingly, each Party
agrees that the other parties or any of them will be entitled to an
injunction, specific performance, and/or other equitable relief to prevent
the breach of such obligations.
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
IN WITNESS WHEREOF, each of the parties has executed this Shareholders
Agreement on and as of the date first above written.
MITEL NETWORKS CORPORATION
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: CFO
MITEL SYSTEMS CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxx
Title: Officer
MITEL KNOWLEDGE CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxx
Title: Officer
EDGESTONE CAPITAL EQUITY FUND II-B GP, INC.,
AS AGENT FOR EDGESTONE CAPITAL EQUITY FUND
II-A, L.P. AND ITS PARALLEL INVESTORS
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Officer
EDGESTONE CAPITAL EQUITY FUND II NOMINEE,
INC., AS NOMINEE FOR EDGESTONE CAPITAL EQUITY
FUND II-A, L.P. AND ITS PARALLEL INVESTORS
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Officer
ZARLINK SEMICONDUCTOR INC.
By: /s/ Xxxxxx XxXxxxxx
------------------------------------
Name: Xxxxxx XxXxxxxx
Title: Sr. VP & General Counsel
POWER TECHNOLOGY INVESTMENT CORPORATION
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Executive Vice President Finance
XXXXXX XXXXXX CORPORATION
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
Title: Officer
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
)
/s/ X. Xxxxxxx ) /s/ Xxxxxxx X. Xxxxxxxx
------------------------------- ) --------------------------------------
X. XXXXXXX XX. XXXXXXX X. XXXXXXXX
APPENDIX 1
DEFINITIONS
"2006 PUT DATE" has the meaning set forth in Section 6.6(a);
"ACCEPTANCE NOTICE" has the meaning set out in Section 6.2(b);
"ACCEPTANCE PERIOD" has the meaning set out in Section 6.1;
"ACCEPTING SHAREHOLDERS" has the meaning set out in Section 6.4;
"ACT" means the Canada Business Corporations Act;
"ADDITIONAL COMMON SHARES" has the meaning set forth in the Articles of
Amendment;
"ADDITIONAL INVESTMENT" means the issue and sale by the Corporation of: (i)
up to five million (5,000,000) additional Series A Shares at a price per
Series A Share of not less than $1.00 and otherwise on terms no more
favourable and within the time frame contemplated in the Subscription
Agreement; and (ii) any Series A Shares issuable to EdgeStone on account of
the exercise of the EdgeStone Purchase Option;
"AFFILIATE" of a Person means any Person that would be deemed to be an
"affiliated entity" of such first-mentioned Person under Rule 45-501
promulgated under the Securities Act (Ontario) as it exists on the date of
this Agreement;
"ANNUAL BUDGET" means the annual budget and business plan of the
Corporation, including a detailed operating budget and a capital budget and
the sources of financing thereof, with detailed supporting assumptions;
"ARM'S LENGTH" has the meaning ascribed to such term for the purposes of
the Income Tax Act (Canada);
"ARTICLES OF AMENDMENT" means the articles of amendment of the Corporation
creating the Preferred Shares attached as Schedule B hereto;
"AS-IF CONVERTED TO COMMON SHARES BASIS" means, at any time and from time
to time, assuming the conversion or exchange of all outstanding Preferred
Shares and all other securities of the Corporation convertible or
exchangeable into Common Shares which are fully-vested and exercisable,
convertible or exchangeable on the date of the calculation at the
respective Conversion Rate or conversion prices or exchange rates, as the
case may be, applicable at such time including, without limitation, the
exercise of the EdgeStone Warrants which are exercisable on the date of the
calculation for the number of Common Shares issuable thereunder;
"ASSOCIATE" has the meaning ascribed thereto in the Act;
"ASSUMPTION AGREEMENT" means the assumption agreement substantially in the
form attached hereto as Schedule C;
"AUDIT COMMITTEE" has the meaning set out in Section 2.5;
"BOARD OF DIRECTORS" has the meaning set out in Section 2.1;
"BUSINESS" means the business of developing, selling, licensing,
distributing, servicing and maintaining, as applicable, enterprise and
customer premises business communications solutions and services, including
advanced voice over internet protocol, video and data communications
platforms, desktop phones, Internet appliances and client and server
software applications and code (including applications for customer
relationship management and mobility, messaging and multimedia
collaboration);
"BUSINESS DAY" means any day, other than a Saturday or Sunday, on which
chartered banks in Ottawa, Ontario are open for commercial banking business
during normal banking hours;
"CHANGE OF CONTROL EVENT" means:
(a) (A) an amalgamation of the Corporation with other corporation
(other than with a Subsidiary of the Corporation), (B) a
statutory arrangement involving the Corporation or (C) any other
transaction involving the shares of the Corporation, whether by a
single transaction or series of transactions, pursuant to which
(i) any person, together with his or its Affiliates hereafter
acquires the direct or indirect "beneficial ownership" (as
defined in the Act of all of the issued and outstanding
shares in the capital of the Corporation; and
(ii) the nature of the transaction (or series of transactions)
is such that the consideration (whether in the form of
cash, securities or other property) in connection with
such transaction (or series of transactions) would be
received by the shareholders of the Corporation, and not
by the Corporation
provided, however, that the Series A Majority Holders shall have
the right, on behalf of all Series A Holders, to waive the
treatment of any of such event as a "CHANGE OF CONTROL EVENT"
(provided that any such waiver must be in writing signed by the
Series A Majority Holders and shall only be effective as to the
particular event in respect of which the waiver is executed).
"CLOSING" means the issuance and sale of the Series A Shares by the
Corporation to EdgeStone on the date of this Agreement;
"COLLATERAL BENEFIT" means any agreement, commitment or understanding with
a Shareholder that has the effect of providing to that Shareholder (or
anyone acting not at arm's length to that Shareholder), directly or
indirectly, consideration of greater value than that offered to other
Shareholders, excluding consideration paid or to be paid to a Shareholder
(or anyone not at arm's length with a Shareholder) for goods and/or
services rendered or provided or to be rendered or provided by that
Shareholder (or anyone not at arm's length with that Shareholder) where the
amount of such consideration is not more than that which would be
negotiated between arm's length parties on market terms, provided, for
greater certainty, that the following shall be deemed not to constitute a
Collateral Benefit: (i) any preference pursuant to Section 6.10 of this
Agreement; (ii) any payment of the Series A Liquidation Preference per
Share in favour of the holders of the Series A Shares in accordance with
the Articles of Amendment; (iii) any payment of the Series B Liquidation
Preference per Share in favour of the holders of the Series B Shares in
accordance with the Articles of Amendment; and (iv) any management fees,
merchant banking commissions or similar fees or charges paid to EdgeStone
for services performed for the Corporation;
"COMMON SHARE OFFERING" means the offering, issuance and sale by the
Corporation of Common Shares for an aggregate purchase price of not more
than $10,000,000 on the terms set forth and within the time frame
contemplated in the Subscription Agreement;
"COMMON SHARES" means the common shares in the capital of the Corporation,
including the common shares currently issued and any common shares that may
be issued after the date hereof;
"COMPENSATION COMMITTEE" has the meaning set out in Section 2.5;
"CONTROLLING SHAREHOLDER" means any Person who is party to this Agreement
and who Controls a Shareholder (and shall, for greater certainty, includes
Xxxxxxxx as the Controlling Shareholder of the Xxxxxxxx Entities);
"CONTROL" means, with respect to any Person at any time,
(a) holding, as owner or other beneficiary, other than solely as the
beneficiary of an unrealized security interest, directly or
indirectly through one or more intermediaries: (A.) more than
fifty percent (50%) of the voting securities of that Person; or
(B.) securities of that Person carrying votes sufficient to elect
or appoint the majority of individuals who are responsible for
the supervision or management of that Person; or
(b) the exercise of de facto control of that Person whether direct or
indirect and whether through the ownership of securities, by
contract or trust or otherwise;
and the terms "Controls", "Controlling" and "Controlled" have corresponding
meanings;
"CONTROLLED SHAREHOLDER" means any Shareholder that is Controlled by a
Controlling Shareholder who is a party to this Agreement;
"CONVERSION VALUE" has the meaning set forth in the Articles of Amendment;
"CONVERTIBLE SECURITY" means any option, warrant, right or other security,
other than Shares, which entitles the holder to acquire from the issuer
thereof another security or to convert or exercise such security into
another security in the capital of such issuer and includes the EdgeStone
Warrants;
"COVENANTOR" has the meaning set out in Section 10.2;
"DEBT OBLIGATIONS" has the meaning set out in Appendix 2;
"DRAG-ALONG OFFER" has the meaning set out in Section 6.4;
"EDGESTONE GROUP" means:
(a) any Affiliate of EdgeStone;
(b) any other Person, provided that EdgeStone or any Affiliate
thereof has the exclusive right to exercise all rights of
EdgeStone transferred hereunder on behalf of such Person;
(c) any Person whose funds are managed by EdgeStone or an Affiliate
of EdgeStone;
(d) upon the termination or dissolution of any limited partnership or
other entity that is a Person referred to in clause (b), (A) the
beneficial holders of interests in such Person, and (B) any other
Person referred to in clause (b), whether or not, in either case,
an Affiliate described in clause (a) has the exclusive right to
exercise the rights of EdgeStone transferred hereunder on behalf
of such beneficial holder or Persons; and
(e) EdgeStone Capital Equity Fund II-A, L.P. and/or any Person which
agrees to invest with it on a parallel or co-investment basis
(and the respective partners thereof, if any) in the manner
contemplated in the constating documents of EdgeStone Capital
Equity Fund II-A, L.P.
"EDGESTONE LIQUIDATION ENTITLEMENT" means, in respect of each Share held by
a member of the EdgeStone Group, an amount equal to the sum of:
(a) the Series A Liquidation Preference per Share; and
(b) the Series A Participation Amount per Share;
"EDGESTONE NOMINEE" means a director of the Corporation nominated by
EdgeStone pursuant to Section 2.2;
"EDGESTONE PURCHASE OPTION" means the option of EdgeStone to purchase
Series A Shares with an aggregate purchase price of up $5,000,000 pursuant
to Section 3.2 of the Subscription Agreement;
"EDGESTONE COMMON PURCHASED SECURITIES" has the meaning set out in Section
6.9(a);
"EDGESTONE PREFERENTIAL PURCHASED SECURITIES" has the meaning set out in
Section 6.8(a); "EDGESTONE PUT EVENT" means the occurrence of:
(a) the delivery by Zarlink to the Corporation of the Zarlink Put
Notice;
(b) the delivery by PTIC to the Corporation of the PTIC Put Notice;
"EDGESTONE COMMON PUT NOTICE" has the meaning set out in Section 6.9(a);
"EDGESTONE PREFERENTIAL PUT NOTICE" has the meaning set out in Section
6.8(a);
"EDGESTONE VALUATION DATE" has the meaning set out in Section 6.9(a);
"EDGESTONE WARRANTS" means the Series 1 Warrants and Series 2 Warrants to
purchase Common Shares granted by the Corporation to EdgeStone on the date
hereof, and any additional warrants granted on the exercise of the
EdgeStone Purchase Option;
"EXIT NOTICE" has the meaning set out in Section 7.1(a);
"FORCED SHAREHOLDERS" has the meaning set out in Section 6.4(a);
"GOVERNMENTAL APPROVAL" means the consent of any Governmental Body which
may be required at any time and from time to time to ensure that the
purchase of all or any part of the Shares and/or securities of the
Corporation held by a Shareholder is not in contravention of any law,
regulation or published policy of, or administered by, such Governmental
Body or which may be required in order to ensure that, notwithstanding the
purchase of such shares of all or any part of the Shares or securities held
by the Shareholders, the holding or continued holding by the Corporation or
any Subsidiary of any franchise, licence, permit or other permission or
authority required to carry on its respective business is unaffected;
"GOVERNMENTAL BODY" means any body of a state or government, any
international body or body assembling several states or provinces, any
body, board, commission, office or other authority, instituted or
constituted by a state or a government, by a law or otherwise, any public
or private body, board, commission, office exercising governmental or
quasi-governmental functions or regulatory or autoregulatory functions on
behalf of a state or another governmental body or otherwise having
jurisdiction, as well as any body, office, commission, board, arbitration
or judicial tribunal, quasi-judicial or administrative tribunal, either
national, provincial or governmental, foreign or international, as well as
any court or common law tribunal;
"INITIAL PUBLIC OFFERING" means the initial public offering of Common
Shares or other securities in the capital of the Corporation or the
securities in the capital of a Successor Corporation or any other
transaction, as a result of which (in either case) the shares of the
Corporation or the Successor Corporation are listed and posted for trading,
traded or quoted on one or more of the Toronto Stock Exchange, the New York
Stock Exchange or the NASDAQ National Market System (provided, that, any
filing of a registration statement or similar instrument with the SEC under
the U.S. Exchange Act in fulfillment of the Corporation's existing
obligations as a foreign private issuer shall be deemed not to constitute
an Initial Public Offering for the purposes of this Agreement);
"INVESTORS MAJORITY" means the holders of not less than fifty percent (50%)
of the Shares held by all of the Shareholders, calculated on an as-if
converted to Common Shares basis, which holders must include EdgeStone;
"ISSUE PRICE" has the meaning set forth in Schedule "A" or "B" of the
Articles of Amendment as the context requires;
"LIEN" means any and all liens, claims, mortgages, hypothecs, security
interests, charges, encumbrances, and restrictions on transfer of any kind,
except, in the case of references to securities, any of the same arising
under applicable corporate or securities laws solely by reason of the fact
that such securities were issued pursuant to exemptions from registration
or prospectus requirements under such securities laws or otherwise arising
pursuant to this Agreement or the Registration Rights Agreement;
"MARKETABLE SECURITIES" means equity securities of an issuer which are
listed on an established nationally recognized exchange in Canada or the
United States, which: (i) do not represent in excess of 10% of the relevant
issuer's outstanding securities of the same class or a class into which
such securities are immediately convertible or exchangeable without cost to
the holder; (ii) have a Public Float of at least $150 million; (iii) have
had average daily trading volumes for the 10 trading days prior to
distribution of at least $5,000,000; and (iv) are not subject to any
statutory, regulatory, contractual or other hold period or resale
restriction other than a restriction requiring the filing of a notice only
(without requiring any approval);
"MATERIAL ADVERSE EFFECT" means, with reference to the Corporation or any
of the Subsidiaries, a material adverse effect on the condition (financial
or otherwise), operations, business, assets, or prospects of the
Corporation and the Subsidiaries taken as a whole, other than any such
Material Adverse Effect resulting from industry-wide conditions affecting
the industry in which the Corporation and the Subsidiaries carry on
business or conditions affecting the economy in general;
"XXXXXXXX ENTITY" means Systems, Knowledge and WCC so long as it is a
Shareholder and any other Shareholder that is or may be under the Control
of Xxxxxxxx from time to time;
"XXXXXXXX GROUP" means
(a) Xx. Xxxxxxx X. Xxxxxxxx, his spouse or former spouse, any lineal
descendant of Xx. Xxxxxxx X. Xxxxxxxx, any spouse or former
spouse of any such lineal descendant, and their respective legal
personal representatives;
(b) the trustee or trustees of any trust (including without
limitation a testamentary trust) for the exclusive benefit of any
one or more members of the Xxxxxxxx Group;
(c) any corporation all of the issued and outstanding shares of which
are beneficially owned by any one or more members of the Xxxxxxxx
Group;
(d) any partnership all of the partnership interests in which are
beneficially owned by any one or more members of the Xxxxxxxx
Group; and
(e) any charitable foundation Controlled by any one or more members
of the Xxxxxxxx Group,
and, for this purpose, a trustee or trustees referred to in
clause (b) above shall be deemed to beneficially own any shares
or partnership interests held by them.
"NEW SECURITIES" shall mean any Shares or other equity securities of the
Corporation, whether now authorized or not, and includes any Convertible
Securities;
"NOTICE OF REQUIRED FINANCING/CONSENT" has the meaning set out in Section
6.12;
"OBSERVER" has the meaning set out in Section 2.7;
"OFFER" has the meaning set out in Section 7.1(c);
"OFFEROR'S SECURITIES" has the meaning set out in Section 6.1;
"OTHER AGREEMENTS" means the Registration Rights Agreement, and with
respect to EdgeStone, the Subscription Agreement and all of the agreements,
instruments, certificates, and other documents, including the EdgeStone
Warrants, executed and delivered by or on behalf of the Corporation or
EdgeStone or any of their respective Affiliates at the Closing or otherwise
in connection with the Subscription Agreement and the transactions
contemplated herein or therein;
"PARTIAL SALE EVENT" means
(a) (A) an amalgamation of the Corporation with another corporation
(other than with a Subsidiary of the Corporation), (B) a
statutory arrangement involving the Corporation, (C) the sale,
exchange or other disposition of outstanding shares of the
Corporation, or (D) any other transaction involving the
Corporation (other than a public offering of securities of the
Corporation), whether by a single transaction or series of
transactions, pursuant to which, in the case of (A), (B), (C) or
(D) above, any Person, together with his or its Affiliates (other
than members of the Xxxxxxxx Group), hereafter acquires the
direct or indirect "beneficial ownership" (as defined in the Act)
of securities of the Corporation representing more than 50% but
less than all of the issued and outstanding shares in the capital
of the Corporation; or
(b) any event, whether by a single transaction or a series of
transactions, that results in Xx. Xxxxxxx X. Xxxxxxxx and/or
Persons Controlled by Xx. Xxxxxxx X. Xxxxxxxx holding in the
aggregate less than 100,000,000 of the issued and outstanding
shares in the capital of the Corporation (subject to appropriate
adjustments for stock dividends, stock splits, stock
consolidations, capital reorganizations and the like occurring
after the date hereof), calculated on an as-if-converted to
Common Shares basis.
"PARTY" or "PARTIES" means one or more of the Corporation, the
Shareholders, Xxxxxxxx and any other Person who becomes a party to this
Agreement by virtue of a Transfer of Shares or Convertible Securities or
otherwise;
"PERMITTED ADDITIONAL SECURITIES" means:
(a) any Common Shares issued or issuable upon conversion of any
Preferred Shares currently outstanding or that may hereafter be
issued in accordance with the provisions of Section 2.8;
(b) any option to purchase Common Shares granted under the Stock
Option Plan and/or Common Shares allotted for issuance, issued or
issuable pursuant to the Stock Option Plan, and any Common Shares
or Convertible Securities allotted for issuance, issued or
issuable to employees, officers, directors or consultants of the
Corporation in accordance with any other stock option plan, stock
purchase plan or other stock compensation program of the
Corporation approved by the Board of Directors;
(c) any Common Shares issued on exercise of the EdgeStone Warrants;
(d) any equity securities issued pursuant to the Additional
Investment including Common Shares issuable upon conversion or
exercise of any Convertible Securities issued pursuant to the
Additional Investment;
(e) any Additional Common Shares;
(f) any Common Shares issued pursuant to the Common Share Offering;
(g) any equity securities issued pursuant to a Qualified IPO;
(h) any Common Shares or Convertible Securities issued in connection
with an acquisition of assets or a business; provided, that: (i)
the cost of such acquisition is less than $10,000,000; (ii) any
such transaction is approved by the Board of Directors; and (iii)
the maximum aggregate number of Common Shares (including Common
Shares issuable on the conversion or exercise of Convertible
Securities) that may be issued pursuant to this clause (h) shall
not exceed five percent (5%) of the aggregate number of Common
Shares issued and outstanding on the date hereof, all calculated
on an as-if Converted to Common Shares basis;
(i) any Common Shares or Convertible Securities issued to or in
connection with any of the following (i) licensors of technology
to the Corporation; (ii) lending or leasing institutions in
connection with obtaining debt financing; or (iii) any other
technology licensing, equipment leasing or other commercial
arrangements of a non-equity financing nature; provided, that:
(A) any such transaction or transactions is approved by the Board
of Directors; and (B) the maximum aggregate number of Common
Shares (including Common Shares issuable on the conversion or
exercise of Convertible Securities) that may be issued pursuant
to this clause (i) shall not exceed five percent (5%) of the
aggregate number of Common Shares issued and outstanding on the
date hereof, all calculated on an as-if Converted to Common
Shares basis;
(j) any equity securities issued to bona fide consultants or
professional advisors of the Corporation as part of the
consideration for services received by the Corporation from such
consultants or professional advisors;
(k) any equity securities issued in respect of subdivisions,
consolidations, stock dividends or capital reorganizations
approved in accordance with Section 2.8;
(l) any warrants to acquire Common Shares issued to TPC pursuant to
the TPC Agreement, and any issuance of Common Shares pursuant to
the exercise of such warrants; and
(m) any equity securities issued to CIBC World Markets Inc. as
compensation for acting as lead agent, or any sub-agent thereof,
with respect to the transactions contemplated by this Agreement
and the Other Agreements and any Common Shares or Convertible
Securities issuable upon conversion thereof;
"PERMITTED TRANSFEREE" of any Person means:
(a) in the case of a Person who is a natural person: (A) the spouse
of such Person; (B) any lineal descendant of such Person or a
spouse of any such descendant; (C) a trust (including, without
limitation, a testamentary trust) solely for the benefit of one
or more of such Person, the spouse of such Person or any lineal
descendant of such Person or a spouse of any such descendant; (D)
any self-directed RRSP controlled by such Person; or (E) a
corporation of which all of the outstanding shares of each class
of shares of such corporation are beneficially owned, or in the
case of Xxxxxxxx (if Xxxxxxxx hereafter becomes a direct
Shareholder) Controlled, directly or indirectly, in any manner
(including, without limitation, through intermediary corporations
or trusts), by one or more of such Person, the spouse of such
Person, any lineal descendant of such Person or a spouse of any
such descendant or such trust; and includes the legal personal
representative(s) of such Person or any Person referred to in
(A);
(b) in the case of a corporation: (A) any shareholder of such
corporation, if such shareholder either alone or together with
one or more Permitted Transferees of such shareholder
beneficially owns, or in the case of Xxxxxxxx (if Xxxxxxxx
hereafter becomes a direct Shareholder) Controlled, directly or
indirectly, in any manner (including, without limitation, through
intermediary corporations or trusts), all of the outstanding
shares of each class of shares in the capital of such
corporation; (B) any Permitted Transferee of such shareholder; or
(C) an Affiliate, all of the shares of which are owned by such
corporation and/or any Permitted Transferee (other than under
this subclause (b)) of such corporation;
(c) in the case of a Person which is a trustee: (A) any beneficiary
of such trust; (B) another trustee, provided that the class of
beneficiaries is limited to Permitted Transferees of the
beneficiaries of the original trust; or (C) any Permitted
Transferee of such beneficiary;
(d) in the case of a Person which is an estate of a deceased Person,
a Permitted Transferee of such deceased person determined
pursuant to this definition as if such Person were not deceased
or a legal personal representative of such Person holding on
behalf of such Permitted Transferees;
(e) in the case of EdgeStone, any member of the EdgeStone Group; and
(f) in the case of any member of the Xxxxxxxx Group, includes any
other member of the Xxxxxxxx Group.
"PERSON" includes any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural Person in his capacity
as trustee, executor, administrator, or other legal representative;
"PRE-EMPTIVE RIGHT NOTICE" has the meaning set out in Section 4.1(a);
"PREFERRED SHARES" means the Series A Shares and the Series B Shares;
"PRIME RATE" means the prime rate of interest charged by the Corporation's
principal banker to its most credit-worthy customers from time to time;
"PRO RATA SHARE" in respect of a given Shareholder or other Person having
rights or entitlements pursuant to Section 5.10, means that Shareholders'
or other Person's proportionate share of all outstanding Shares held by all
such Shareholders or other Persons on an as-if converted to Common Shares
basis and for greater certainty, in the case of EdgeStone, its Pro Rata
Share shall include the maximum number of Shares issuable upon exercise of
the EdgeStone Warrants which are exercisable on the date of the
calculation;
"PTIC PURCHASED SECURITIES" has the meaning set out in Section 6.7(a);
"PTIC PUT NOTICE" has the meaning set out in Section 6.7(a);
"PUBLIC FLOAT" means, in respect of a class of securities, the market value
of the securities of such class, excluding securities that are beneficially
owned, directly or indirectly, or over which control or direction is
exercised by persons or companies that alone or together with their
respective Associates and Affiliates, beneficially own or exercise control
or direction over more than 10% of the issued and outstanding securities of
such class, provided that securities that would be excluded because a
portfolio manager of a pension fund, mutual fund or non-redeemable
investment fund exercises control or direction over them need only be
excluded if the portfolio manager is an Affiliate of the issuer of those
securities;
"PUT NOTICE" means a Zarlink Put Notice, a PTIC Put Notice or an EdgeStone
Put Notice;
"QUALIFIED IPO" has the meaning set forth in the Articles of Amendment;
"QUALIFYING OFFER" has the meaning set forth in Section 6.4(a);
"REDEMPTION TRIGGER DATE" has the meaning set out in the Articles of
Amendment;
"REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement
entered into between the Corporation and each of the other Parties hereto
(other than Xxxxxxxx) on the date hereof;
"RELATED PARTY" means with respect to any individual Shareholder, the
Person to whom that Shareholder is legally married at the relevant time and
the child or grandchild or other direct lineal descendants of that
Shareholder, a trust any of the beneficiaries of which are any one or more
of the foregoing, and where the context permits, upon the death of a
Related Party, includes his or her legal personal representative and/or a
corporation of which any one or more of the foregoing are the legal and
beneficial owners of all the outstanding shares (including options,
warrants or other rights to acquire shares) of that corporation;
"SALE TRANSACTION" has the meaning set out in Section 7.1(g);
"SERIES A LIQUIDATION PREFERENCE PER SHARE" means the amount per share to
be distributed to the holders of the Series A Shares pursuant to Section
4.1(a)(i) or (ii) of Schedule "A" to the Articles of Amendment;
"SERIES A PARTICIPATION AMOUNT PER SHARE" means the amount per share to be
distributed to the holders of the Series A Shares pursuant to Section
4.1(a)(iii) of Schedule "A" to the Articles of Amendment;
"SERIES A SHARES" means the Class A Convertible Preferred Shares, Series 1
in the capital of the Corporation, including the Class A Convertible
Preferred Shares, Series 1 currently issued and any Class A Convertible
Preferred Shares, Series 1 that may be issued after the date hereof;
"SERIES B LIQUIDATION PREFERENCE PER SHARE" means the amount per share to
be distributed to the holders of the Series B Shares pursuant to Section
4.1(a)(i) or (ii) of Schedule "B" to the Articles of Amendment;
"SERIES B PARTICIPATION AMOUNT PER SHARE" means the amount per share to be
distributed to the holders of Series B Shares pursuant to Section
4.1(a)(iii) of Schedule "B" to the Articles of Amendment;
"SERIES B SHARES" means the Class B Convertible Preferred Shares, Series 1
in the capital of the Corporation, including the Class B Convertible
Preferred Shares, Series 1 currently issued and any Class B Convertible
Preferred Shares, Series 1 that may be issued after the date hereof;
"SHARES" means, collectively, the Common Shares and the Preferred Shares;
"SHAREHOLDERS" means, collectively, EdgeStone, Systems, Knowledge, Zarlink,
PTIC and WCC together with such other Persons who may becomes a party to
this Agreement as a shareholder of the Corporation, and "SHAREHOLDER" means
each of such Persons individually;
"STOCK OPTION PLAN" means the stock option plan of the Corporation, as
amended from time to time in accordance with the provisions of this
Agreement;
"SUBSCRIPTION AGREEMENT" has the meaning set out in the Recitals to this
Agreement;
"SUBSIDIARY" means: (i) any corporation, at least a majority of whose
outstanding Voting Shares is owned, directly or indirectly, by the
Corporation or by one or more of its subsidiaries, or by the Corporation
and by one or more of its subsidiaries; (ii) any general partnership, at
least a majority of whose outstanding partnership interests shall at the
time be owned by the Corporation, or by one or more of its subsidiaries, or
by the Corporation and one or more of its subsidiaries; and (iii) any
limited partnership of which the Corporation or any of its subsidiaries is
a general partner;
"SUCCESSOR CORPORATION" has the meaning specified in Section 1.4 of the
Registration Rights Agreement;
"THIRD PARTY" has the meaning set out in Section 6.4;
"THIRD PARTY OFFER" has the meaning set out in Section 6.4;
"THIRD PARTY OFFEROR" has the meaning as set out in Section 6.1;
"TPC" means Her Majesty the Queen in Right of Canada, as represented by the
Minister of Industry;
"TPC AGREEMENT" means TPC Agreement No. 720-481443 dated October 10, 2003
between the Corporation, TPC, March Networks Corporation and Mitel
Knowledge Corporation;
"TRANSFER" (whether used as a noun or a verb) refers to any sale, pledge,
assignment, encumbrance, gift, or other disposition or transfer of Shares
or Convertible Securities (including without limitation the Preferred
Shares), or any legal or beneficial interest therein, including any tender
or transfer in connection with any merger, recapitalization,
reclassification, or tender or exchange offer (for all or any part of the
Corporation's equity securities), whether or not the person making any such
Transfer votes for or against any transaction involving any such Transfer,
and includes any agreement to effect any such transaction;
"TRANSFER NOTICE" has the meaning set out in Section 6.1;
"TRANSFERRING SHAREHOLDER" has the meaning set out in Section 6.1;
"VALUATOR" has the meaning set out in Appendix 3;
"VOTING SHARES" means shares, interests, participations or other
equivalents in the equity interests (however designated), including
Preferred Shares, of a person having ordinary voting power for the election
of the majority of the directors (or the equivalent) of such person, other
than shares, interests, participations or other equivalents having such
power only by reason of contingency;
"ZARLINK PURCHASED SECURITIES" has the meaning set out in Section 6.6(a); and
"ZARLINK PUT NOTICE" has the meaning set out in Section 6.6(a).
