Exhibit 1
Execution Copy
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ACQUISITION AGREEMENT
by and among
AMERICA ONLINE, INC.,
IAN ACQUISITION ULC
and
INFOINTERACTIVE INC.
dated as of May 18, 2001
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TABLE OF CONTENTS
Page
ARTICLE 1 - INTERPRETATION...................................................1
Section 1.1 Definitions...............................................1
Section 1.2 Other Definitions.........................................5
Section 1.3 Construction..............................................7
Section 1.4 Currency..................................................7
ARTICLE 2 - THE ARRANGEMENT..................................................8
Section 2.1 The Arrangement...........................................8
Section 2.2 Closing...................................................9
Section 2.3 Parent's Discretion to Change Structure...................9
Section 2.4 Funding of the Consideration..............................9
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................10
Section 3.1 Organization and Qualification; Subsidiaries.............10
Section 3.2 Capitalization...........................................10
Section 3.3 Authority; Enforceability................................12
Section 3.4 No Conflict, Required Filings and Consents...............13
Section 3.5 Material Agreements......................................14
Section 3.6 Compliance...............................................15
Section 3.7 Securities Reports; Financial Statements.................16
Section 3.8 Absence of Certain Changes or Events.....................16
Section 3.9 No Undisclosed Liabilities...............................17
Section 3.10 Absence of Litigation....................................17
Section 3.11 Employee Benefits........................................17
Section 3.12 Employment and Labor Matters.............................19
Section 3.13 Absence of Restrictions on Business Activities...........20
Section 3.14 Title to Assets; Leases..................................21
Section 3.15 Taxes....................................................21
Section 3.16 Environmental Matters....................................23
Section 3.17 Intellectual Property....................................25
Section 3.18 Insurance................................................27
Section 3.19 Brokers..................................................28
Section 3.20 Certain Business Practices...............................28
Section 3.21 Interested Party Transactions............................28
Section 3.22 No Restrictions on the Arrangement; Takeover Statutes....29
Section 3.23 Determinations by the Board of Directors.................29
Section 3.24 Information Supplied.....................................29
Section 3.25 Required Votes...........................................29
Section 3.26 U.S. Securities Laws.....................................30
Section 3.27 Security.................................................30
Section 3.28 Disclosure...............................................30
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ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR...........30
Section 4.1 Organization and Qualification...........................30
Section 4.2 Authority; Enforceability................................31
Section 4.3 No Conflict; Required Filings and Consents...............31
Section 4.4 Ownership of Shares of the Company.......................31
ARTICLE 5 - CONDITIONS PRECEDENT............................................32
Section 5.1 Conditions to Obligations of Parent and Acquiror.........32
Section 5.2 Conditions to Obligations of the Company.................34
ARTICLE 6 - CONDUCT OF THE BUSINESS.........................................35
Section 6.1 Conduct of the Company's Business........................35
ARTICLE 7 - ADDITIONAL COVENANTS............................................38
Section 7.1 Competing Proposal.......................................38
Section 7.2 Preparation of Circular..................................41
Section 7.3 Company Securityholders Meeting..........................41
Section 7.4 Access to Information; Confidentiality;
Public Announcemen.....................................42
Section 7.5 Reasonable Best Efforts; Further Assurances..............43
Section 7.6 Notification of Certain Matters..........................45
Section 7.7 Takeover Laws............................................46
Section 7.8 Shareholder Agreements...................................46
Section 7.9 Continuing Employee Agreements...........................46
Section 7.10 Founders Agreements......................................46
Section 7.11 Release Agreements.......................................46
Section 7.12 Securityholders Claims...................................46
Section 7.13 338 Election.............................................47
Section 7.14 Common Shares Listing....................................47
Section 7.15 Indemnification and Related Matters......................47
ARTICLE 8 - AMENDMENT AND TERMINATION.......................................48
Section 8.1 Termination..............................................48
Section 8.2 Effect of Termination....................................49
Section 8.3 Fees and Expenses........................................50
Section 8.4 Amendment................................................50
Section 8.5 Waiver...................................................50
ARTICLE 9 - GENERAL PROVISIONS..............................................50
Section 9.1 Notices..................................................50
Section 9.2 Company and Parent Disclosure Schedules..................51
Section 9.3 Severability.............................................52
Section 9.4 Entire Agreement.........................................52
Section 9.5 Assignment...............................................52
Section 9.6 Parties in Interest......................................52
Section 9.7 Failure or Indulgence Not Waiver; Remedies Cumulative....52
Section 9.8 Governing Law; Enforcement...............................52
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Section 9.9 No Third-Party Beneficiaries.............................53
Section 9.10 Counterparts.............................................53
EXHIBITS
Exhibit A Plan of Arrangement
Exhibit B Release Agreement
Exhibit C Legal Opinion
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is made as of May 18, 2001 (this
"Agreement") by and among InfoInterActive Inc., a corporation incorporated
under the Business Corporations Act (Alberta) (the "Company"), America Online,
Inc., a Delaware corporation (the "Parent"), and IAN Acquisition ULC, a Nova
Scotia unlimited liability company (the "Acquiror").
WHEREAS, Parent desires to acquire all of the outstanding Common
Shares (as hereinafter defined) of the Company on and subject to the terms
hereinafter described;
WHEREAS, Acquiror is a wholly-owned indirect subsidiary of Parent,
and subject to the terms and conditions of this Agreement, shall acquire all
of the outstanding Common Shares of the Company pursuant to the Plan of
Arrangement (as hereinafter defined);
WHEREAS, as a condition to the willingness of, and an inducement to,
Parent and Acquiror to enter into this Agreement, contemporaneously with the
execution and delivery of this Agreement, the Designated Shareholders (as
hereinafter defined) owning certain Common Shares have each agreed, among
other things, to vote in favor of the Arrangement (as hereinafter defined), in
accordance with their respective Shareholder Agreements, each dated as of the
date hereof (the "Shareholder Agreements"), by and among Parent, Acquiror and
each of the Designated Shareholders;
WHEREAS, as a condition to the willingness of, and an inducement to,
Parent and Acquiror to enter into this Agreement, all the individuals
identified in Section 5.1(h) of the Parent Disclosure Schedule have entered
into employee agreements or offer letters with Parent, which include Parent's
standard Confidentiality, Non-Competition and Proprietary Rights Agreement
(each, a "Continuing Employee Agreement");
NOW, THEREFORE, in consideration of the premises and the covenants
and agreement herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE 1 - INTERPRETATION
Section 1.1 Definitions. As used in this Agreement, the following
terms have the following meanings:
"Act" means the Business Corporations Act (Alberta), as amended.
"Affiliate" means any person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, such person, including but not limited, with respect to the
Company, any person in which the Company (either alone, or through or
together with any other Affiliate) has, directly or indirectly, an
interest of 10% or more.
"Applicable Securities Legislation" means the securities Laws of all
provinces of Canada having jurisdiction over the Company, the Arrangement
and the other transactions contemplated herein, and the applicable
securities Laws of the United States.
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"Approvals" means any and all franchises, grants, authorizations,
licenses, permits, easements, consents, waivers, qualifications,
certificates, Orders and other approvals.
"Arrangement" means the proposed arrangement involving the Company, its
Securityholders and Acquiror pursuant to the Act and on the terms and
subject to the conditions set forth in this Agreement and the Plan of
Arrangement.
"Arrangement Court" means the Court of Queen's Bench of Alberta.
"Business Day" means a day other than a Saturday, Sunday or statutory
holiday in Canada or the United States.
"Certificates" has the meaning given thereto in the Plan of Arrangement.
"Circular" means a management circular of the Company to be sent by the
Company to its Securityholders in connection with the Company
Securityholders Meeting.
"Common Shares" means the Common Shares, without par value, of the
Company.
"Company Disclosure Schedule" means the Company Disclosure Schedule dated
as of the date hereof and delivered by the Company to Parent and Acquiror
in connection with this Agreement.
"Company Securityholders Meeting" means a special meeting of the
Securityholders to consider the approval and adoption of this Agreement
and the Arrangement.
"Consideration" has the meaning given thereto in the Plan of Arrangement.
"Court" means any court or arbitration tribunal of Canada or the United
States, any state, province or locality, or any other country, and any
political subdivision or agency of any of the foregoing.
"Designated Shareholders" means each of Intel Corporation, ADC
Communications Corporation (including its Subsidiary, ADC ESD, Inc.),
Aliant Inc., Xxxxxxx XxXxxxxx, Xxxxxxxx Xxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxx Xxxxxx, Garnet Xxxxxxxxxxx, Xxxx Xxxxxxx, Xxxxxxx X.X. Xxxxx,
Xxxxxx Xxxxxx, Xxxx Xxx Xxxxxx, Xxx Xxxxxxx, Xxxxxx Xxxx, Xxxx Xxxxxxxx,
Xxxx Xxxxx, and Xxxxx Xxxxxxx.
"Disclosure Documents" means the Company's Annual Information Form dated
May 18, 2000, Management Proxy Circular dated March 9, 2001, Annual
Report for the year ended December 31, 2000, and all press releases and
material change reports filed by the Company after the above date of such
Annual Information Form and before the date hereof.
"Dissenting Shares" has the meaning given thereto in the Plan of
Arrangement.
"Final Order" means the final order of the Arrangement Court approving
the Arrangement, as such order may be amended by the Arrangement Court
prior to the Effective Date.
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"Governmental Authority" means any governmental agency or authority of
Canada or the United States, any domestic state, province or locality, or
any foreign country, and any political subdivision or agency thereof, and
includes any authority having governmental or quasi-governmental powers,
including any administrative agency or commission.
"Interim Order" means the interim order of the Arrangement Court in
relation to the Arrangement, as such order may be amended by the
Arrangement Court prior to the Effective Date.
"Knowledge" means (i) in the case of an individual, knowledge of a
particular fact or other matter if (A) such individual is actually aware
of such fact or other matter, or (B) a prudent individual could be
expected to discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonable investigation concerning
the existence of such fact or other matter, and (ii) in the case of a
person (other than an individual), such person will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or has at any time served, as a director, officer, partner,
executor, or trustee of such person (or in any similar capacity) has, or
at any time had, Knowledge (as contemplated by clause (i) above) of such
fact or other matter.
"Law" means all codes, laws, statutes, ordinances, rules and regulations
of any Governmental Agency including all decisions of Courts having the
effect of Law in each such jurisdiction.
"Legislation" means the Act and the Applicable Securities Legislation.
"Lien" means any mortgage, pledge, security interest, attachment,
encumbrance, lien (statutory or otherwise), license, claim, option,
conditional sale agreement, right of first refusal, first offer,
termination, participation or purchase or charge of any kind (including
any agreement to give any of the foregoing); provided, however, that the
term "Lien" shall not include (i) statutory liens for Taxes (as defined),
which are not yet due and payable or are being contested in good faith by
appropriate proceedings, (ii) statutory or common law liens to secure
landlords, lessors or renters under leases or rental agreements confined
to the premises rented, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment
insurance, old age pension or other social security programs mandated
under applicable Laws, and (iv) statutory or common law liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for
labor, materials or supplies and other like liens.
"Litigation" means any claim, suit, action, arbitration, cause of action,
claim, complaint, criminal prosecution, investigation, demand letter, or
proceeding, whether at law or at equity, before or by any Court or
Governmental Authority.
"Material Adverse Effect" means any fact, event, change, development,
circumstance, condition or effect, however or whenever arising, that, (i)
when such term is used in relation to the Company, (A) is materially
adverse to the business, condition (financial or otherwise), results of
operations, assets, liabilities, properties or prospects of the Company
and its Subsidiaries, taken as a whole, or (B) would materially impair or
delay the ability of the Company to perform its obligations hereunder,
including the
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consummation of the Arrangement, or (ii) when such term is used in
relation to Parent or Acquiror, would materially impair or delay the
ability of Parent or Acquiror to perform its obligations hereunder,
including the consummation of the Arrangement; provided that a Material
Adverse Effect shall not include any fact, event, change, development
circumstance or effect resulting from (1) any customer of the Company
exercising rights under its existing contract relating to a change of
control, (2) any change in the trading price of the Common Shares of the
Company, (3) any write-down or other change in the status of the
receivable identified in Section 1.1MAE(3) of the Company Disclosure
Schedule, so long as the Company has not taken any action to settle,
alter or otherwise change the terms of such receivable or the obligations
to which it relates without the prior written consent of Parent, (4) the
failure of the Company to enter into the anticipated new contracts set
forth in Section 1.1MAE(4) of the Company Disclosure Schedule and any
decline in the anticipated revenues of the Company caused thereby
following and as a result of the public announcement of the Arrangement,
(5) any delay in payment, refusal to pay, or repudiation by customers of
the existing or future accounts receivable of the Company that was caused
solely by the public announcement of the Arrangement; provided that the
Company did not permit, facilitate or encourage such delay, refusal or
repudiation (other than by executing this Agreement, announcing such
execution and the Arrangement and fulfilling its obligations as set forth
herein) or otherwise take any action to impair such account receivable,
and (6) any change in the general economic, financial, currency exchange,
or securities market conditions in Canada, the United States or
elsewhere.
"Operating Agreement" means the Memorandum of Agreement, dated as of date
hereof, together with the exhibits and schedules thereto, between the
Company and Parent.
"Options" means the options to purchase Common Shares granted under the
Stock Option Plans or any other agreement or plan pursuant to which
rights to purchase authorized but unissued Common Shares have been
granted as of the date hereof, but excluding the Warrants.
"Order" means any judgment, order, writ, injunction, ruling or decree of,
or any settlement under the jurisdiction of, any Court or Governmental
Authority.
"Parent Disclosure Schedule" means the Parent Disclosure Schedule dated
as of the date hereof and delivered by Parent and Acquiror to the Company
in connection with this Agreement.
"Parent Holding Company" means AOL Time Warner Inc., a Delaware
corporation and the parent company of Parent.
"Paying Agent" has the meaning given thereto in the Plan of Arrangement.
"Plan of Arrangement" means a plan of arrangement in the form of Exhibit
A as prepared in accordance with the Act, as such plan of arrangement is
amended by the parties hereto pursuant to this Agreement or the Plan of
Arrangement or, in a manner acceptable to Parent and the Company, by the
Arrangement Court in the Final Order.
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"Related Agreements" means, collectively, each Shareholder Agreement and
the Operating Agreement.
"Securityholders" means the shareholders of the Company and the holders
of the Options and Warrants.
"Stock Option Plans" means the Company's February 10, 1999 Amended and
Restated Stock Option Plan and January 3, 2000 Stock Option Plan, as
amended as of the date hereof.
"Subsidiaries" means, with respect to any person, (i) a corporation a
majority of whose capital stock with the general voting power under
ordinary circumstances to vote in the election of directors of such
corporation (irrespective of whether or not, at the time, any other class
or classes of securities shall have, or might have, voting power by
reason of the happening of any contingency) is at the time beneficially
owned by such person, by one or more Subsidiaries of such person or by
such person and one or more Subsidiaries thereof or (ii) any other
person, including a joint venture, a general or limited partnership or a
limited liability company, in which such person, one or more Subsidiaries
thereof or such person and one or more Subsidiaries thereof, directly or
indirectly, beneficially own at least a majority ownership interest
entitled to vote in the election of directors, managers or trustees
thereof (or other persons performing such functions) or act as the
general partner, managing member or similar controlling entity of such
other person.
"Warrants" means the Company's Common Share Purchase Warrants issued and
certified under the Warrant Indenture, dated as of September 3, 1999,
between the Company and Montreal Trust Company of Canada.
Section 1.2 Other Definitions. The following terms are defined in
the Sections indicated:
Defined Term Section
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Acquiror Recitals
Agreement Recitals
Articles of Arrangement 2.1(d)
Balance Sheet 3.15(b)
Benefit Affiliate 3.11(a)
Canadian Securities Commissions Approvals 3.4(b)
Closing 2.2
Closing Date 2.2
Code 3.11(c)
Company Recitals
Company Financial Advisors 3.19
Company Representatives 7.1(a)
Company's D&O Insurance 7.15(b)
Competing Proposal 7.1(a)
Confidentiality Agreement 7.4(b)
Continuing Employee Agreement Recitals
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Defined Term Section
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Effective Date 2.1(e)
Effective Time 2.1(e)
Employee Options 3.2(a)
Employee Plans 3.11(a)
Environmental Laws 3.16(c)(i)
Environmental Permits 3.16(c)(ii)
Environmental Report 3.16(c)(iii)
ERISA 3.11(c)
Exchange Act 3.26
First Preferred Shares 3.2(a)
Founders Agreement 5.1(j)
GAAP 3.7(b)
Indemnified Party 7.15(a)
Infringe 3.17(f)
Infringement 3.17(f)
Intellectual Property 3.17(j)(i)
Investment Canada Act 3.4(b)
License Agreements 3.17(c)
Material Agreements 3.5(a)
Material Subsidiary 7.1(c)
Materials of Environmental Concern 3.16(c)(iv)
Maximum Premium 7.15(b)
Minimum Condition 2.3
Necessary Approvals 3.1(a)
Non-Plan Options 3.2(a)
Offer 2.3
Offer Conditions 2.3
Parent Recitals
Parent Representatives 7.4(a)
Preferred Shares 3.2(a)
Real Property 3.14(b)
Release Agreements 5.1(k)
Required Securityholder Approval 3.25
Restricted Originals 5.1(n)
Second Preferred Shares 3.2(a)
SEC 3.26
Securities Act 3.26
Securities Reports 3.7(a)
Shareholder Agreements Recitals
Software 3.17(j)(ii)
Stock-Based Rights 3.2(c)
Superior Proposal 7.1(c)
Systems 3.5(a)(xi)
Tax 3.15
Tax Act 3.15(l)
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Defined Term Section
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Tax Returns 3.15
Taxes 3.15
Termination Fee 8.3(b)
TSE Approval 3.4(b)
Section 1.3 Construction. In this Agreement unless otherwise
expressly stated or the context otherwise requires:
(a) references to "herein", "hereby", "hereunder", "hereof", and
similar expressions are references to this Agreement as a whole and not
to any particular article, section, subsection, clause, schedule or
exhibit;
(b) references to an "article", "section", "subsection", "clause",
"schedule" or "exhibit" are references to an article, section,
subsection, clause, schedule or exhibit of or to this Agreement;
(c) words importing the singular shall include the plural and vice
versa, and words importing a gender shall include the masculine, feminine
and neuter genders,
(d) references to a "person" shall include individuals,
corporations, partnerships, associations, syndicates, organizations,
Governmental Authorities, limited liability companies, unlimited
liability companies, trusts, joint ventures, and any other entity or
group of any nature;
(e) the headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement;
(f) references to this Agreement shall include the Company
Disclosure Schedule, the Parent Disclosure Schedule, any other schedules
and exhibits hereto, and all amendments hereto or thereto;
(g) the words "include", "includes", "including" shall be deemed in
each case to be followed by the words "without limitation", and shall not
be construed as limiting a general term or statement to the specific or
similar items or matters thereafter set forth; and
(h) a reference to a statute or code includes every regulation
pursuant thereto; all amendments to the statute or code or to any such
regulation in force from time to time, and any statute, code or
regulation which supplements, or supersedes such statute, code or
regulation.
Section 1.4 Currency. All references to currency herein are to
United States dollars unless otherwise specified.
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ARTICLE 2 - THE ARRANGEMENT
Section 2.1 The Arrangement.
(a) As soon as practicable but in any event not later than twelve
days after the date hereof, the Company shall apply to the Arrangement
Court pursuant to Section 186 of the Act for an Interim Order in form and
substance reasonably satisfactory to Acquiror, providing for, among other
things, the calling and holding of the Company Securityholders Meeting
for the purpose of considering and approving the Arrangement in
accordance with Section 7.3.
(b) The petition for the application to the Arrangement Court
referred to in clause (a) shall request that the Interim Order provide:
(i) for the class of persons to whom notice is to be provided
in respect of the Arrangement and the Company Securityholders
Meeting and for the manner in which such notice is to be provided;
(ii) that the requisite approval for the Arrangement shall be
two-thirds of the votes cast by Securityholders present in person or
by proxy at the Company Securityholders Meeting (such that each
holder of Common Shares is entitled to one vote for each Common
Share held and, if applicable, each holder of Options or Warrants is
entitled to one vote for each Common Share such holder would have
received on a valid exercise or conversion of such Options or
Warrants, all voting together as a single class);
(iii) that, in all other respects, the terms, restrictions and
conditions of the articles of incorporation and by-laws of the
Company, including quorum requirements and all other matters, shall
apply in respect of the Company Securityholders Meeting; and
(iv) for the grant of the dissent rights as contemplated in the
Plan of Arrangement.
(c) As promptly as practicable after the receipt of approval of the
Securityholders, the Company shall apply to the Arrangement Court for a
Final Order, in form and substance reasonably satisfactory to Acquiror.
(d) The Arrangement shall be on terms as set forth in the Plan of
Arrangement attached hereto as Exhibit A, and the articles of arrangement
(the "Articles of Arrangement") shall implement the Plan of Arrangement.
(e) As promptly as practicable after the satisfaction or, to the
extent permitted hereunder, the waiver of the conditions set forth in
Article 5, the parties hereto shall cause the Arrangement to be
consummated by the filing of the Articles of Arrangement and any other
necessary documents prepared in accordance with the provisions of this
Agreement and the Act with the Registrar of Corporations in accordance
with the Act, and at 12:01 a.m. (Alberta time) (the "Effective Time") on
the date immediately
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following the date of filing such Articles of Arrangement, as specified
in the Articles of Arrangement (the "Effective Date"), the Arrangement
and the other transactions contemplated in the Plan of Arrangement shall
occur as set forth therein.
Section 2.2 Closing. Unless this Agreement shall have been
terminated and the transactions contemplated by this Agreement abandoned
pursuant to the provisions of Article 8 and subject to the provisions of
Article 5, the consummation of the Arrangement (the "Closing") will take place
at 10:00 am (New York time) on a date (the "Closing Date") to be mutually
agreed upon by the parties hereto, which date shall not be later than three
Business Days after all the conditions set forth in Article 5 are satisfied
(or properly waived), unless another time and/or date is agreed by the parties
hereto. The Closing shall take place at Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or such other place as the parties hereto
shall otherwise agree.
Section 2.3 Parent's Discretion to Change Structure. With the
consent of the Company, or, if any Competing Proposal or intention to make a
Competing Proposal is publicly disclosed, without the consent of the Company,
the Parent and/or any Subsidiary of Parent shall be entitled to commence a
cash tender offer by way of circular take-over bid (the "Offer") in accordance
with the Legislation at an offer price not less than the Consideration per
Common Share, and the Company shall enter into a customary support agreement
therefor. The Offer shall be subject to customary conditions as reasonably
determined by Parent, including but not limited to the condition that the
Common Shares tendered represent at least the higher of 66-2/3% of all
outstanding Common Shares or a majority of all the Common Shares not owned by
Parent and Acquiror and their Affiliates as required by applicable Law, in
either case, on a fully diluted basis (the "Minimum Condition"), and those
conditions contained in Section 5.1 (as modified as necessary to reflect a
tender offer) (the "Offer Conditions"). Acquiror shall be entitled, in its
sole discretion, to modify the terms of the Offer or to extend the Offer,
except that, without the prior written consent of the Company, Acquiror shall
not (i) reduce the offer price therefor, (ii) change the form of consideration
payable in the Offer or (iii) waive the Minimum Condition; provided, however,
that this sentence shall not apply to an Offer commenced if any Competing
Proposal or intention to make a Competing Proposal is publicly disclosed. Upon
satisfaction or waiver of the conditions to the Offer, the Parent (or its
Subsidiary, if applicable) will take up and pay for all Common Shares validly
tendered (and not withdrawn) to the Offer. The Board of Directors of the
Company shall announce their recommendation that the Company's shareholders
accept the Offer and tender their Common Shares thereunder, prepare a circular
of the Board of Directors, file such circular in all jurisdictions where the
same is required to be filed by it, and mail such circular to the Company's
shareholders, together with the circular prepared by Parent or its Affiliate,
all in accordance with the Legislation; provided that if Acquiror takes such
actions described in clauses (i), (ii) and (iii) above, the Board of Directors
may change its recommendation in accordance with Section 7.1(c). Other terms
shall be substantially the same terms as set forth in this Agreement, and the
parties agree to execute an appropriate amendment to this Agreement in order
to reflect such change in structure.
Section 2.4 Funding of the Consideration. Prior to the Effective
Date, Parent shall, or shall cause a wholly owned Subsidiary of Parent, to
subscribe for common shares of Acquiror and pay to Acquiror an amount in cash
equal to the Consideration representing the aggregate subscription price
therefor.
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquiror that as
of the date hereof:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized and validly existing
under its jurisdiction of incorporation and has all the requisite
corporate power and authority, and is in possession of all Approvals
necessary ("Necessary Approvals"), to own, lease and operate its
properties and to carry on its business as it is now conducted, except
for such Approvals, the failure of the Company to be in possession of
which could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. The Company is duly qualified or
licensed as a foreign corporation to do business in each jurisdiction
where the character of the properties owned, leased or operated by it or
the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Each Subsidiary of the Company is a legal entity, duly organized
and validly existing under the Laws of its jurisdiction of incorporation
or organization and has all the requisite power and authority, and is in
possession of all Approvals necessary, to own, lease and operate its
properties and to carry on its business as it is now conducted, except
for such Approvals, the failure of such Subsidiary to be in possession of
which could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Each Subsidiary of the Company is duly
qualified or licensed as a foreign corporation to do business in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification
or licensing necessary, except where the failure to be so qualified could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(c) Section 3.1(c) of the Company Disclosure Schedule sets forth, as
of the date hereof, a true and complete list of all of the Company's
directly and indirectly owned Subsidiaries, together with the
jurisdiction of incorporation or organization of the Company and each
Subsidiary, the jurisdictions in which the Company and such Subsidiary is
qualified or licensed to do business as a foreign corporation, and the
percentage of each Subsidiary's outstanding capital stock or similar
interest owned by the Company or another Subsidiary of the Company.
Except as set forth in Section 3.1(c) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries owns any capital stock or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, directly or indirectly, any capital stock or similar
interest in, any person.
Section 3.2 Capitalization.
(a) The authorized capital of the Company consists only of an
unlimited number of Common Shares, an unlimited number of First Preferred
Shares ("First Preferred Shares"), and an unlimited number of Second
Preferred Shares ("Second Preferred Shares" and together with the First
Preferred Shares, the "Preferred Shares"). As of May
-10-
18, 2001, (i) 19,817,671 Common Shares were issued and outstanding; (ii)
no shares of First Preferred Shares were issued or outstanding; (iii) no
shares of Second Preferred Shares were issued or outstanding; (iv) no
shares of capital stock of the Company were held in the treasury of the
Company or held by any Subsidiary of the Company; (v) 1,193,752 Common
Shares were duly reserved for future issuance pursuant to Options issued
and outstanding under the Stock Option Plans (the "Employee Options") and
a total of 559,313 Employee Options for 559,313 Common Shares are vested
and not exercised; (vi) there are no Options not issued under the Stock
Option Plans (the "Non-Plan Options"), and (vii) 868,404 Common Shares
were duly reserved for future issuance pursuant to the Warrants. Except
as set forth above or as permitted to be issued hereunder, no share of
capital stock of the Company is outstanding. All outstanding shares of
capital stock of the Company are duly authorized, validly issued, fully
paid and non-assessable, have been issued in compliance with the
Legislation, and are not subject to, and were not issued in violation of,
any purchase option, call option, right of first refusal, preemptive
right, subscription right or any similar right. Except as set forth
above, there is no other capital stock or any other voting securities
(including but not limited to debt securities with voting rights on any
matter on which shareholders of the Company may vote) of the Company
issued or outstanding. Section 3.2(a) of the Company Disclosure Schedule
sets forth a correct and complete list of each outstanding option,
warrant or other right to purchase Common Shares or other capital stock
of the Company, if any, together with the number of shares of Common
Shares or any other capital stock of the Company subject to such option,
warrant or right, the extent to which such option, warrant or right is
vested and/or exercisable, the date of grant or issuance, the exercise
price (and, in the case of Options, whether such option is a
non-qualified stock option or an incentive stock option), and the
expiration date of each such option, warrant and right, and the total
number of such options, warrants and rights. All of such options,
warrants and rights have been issued in compliance with the Legislation
and are not subject to, and were not issued in violation of, any purchase
option, call option, right of first refusal, preemptive right,
subscription right or any similar right. Except as described in Section
3.2(a) of the Company Disclosure Schedule and except for the Shareholder
Agreements, there is outstanding no option, warrant, right or other
security convertible into or exchangeable for any capital stock or such
other voting securities of the Company. No capital stock of the Company
is owned by any of the Company's Subsidiaries.
(b) Section 3.2(b) of the Company Disclosure Schedule sets forth the
number of authorized and outstanding shares of capital stock or similar
interests, and ownership thereof, of each of the Company's Subsidiaries.
All outstanding shares of capital stock or similar interests of each of
the Company's Subsidiaries have been duly authorized, validly issued,
fully paid and non-assessable, are not subject to, and were not issued in
violation of, any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right, and are owned,
of record and beneficially, by the Company or one of its direct or
indirect Subsidiaries, free and clear of all Liens. There are no
restrictions of any kind which prevent the payment of dividends by any of
the Company's Subsidiaries, and neither the Company nor any of its
Subsidiaries is subject to any obligation or requirement to provide funds
for or to make any investment (in the form of a loan or capital
contribution or otherwise) to or in any person.
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(c) Except as described above and in Sections 3.2(a), 3.2(b) and
3.2(c) of the Company Disclosure Schedule, there are no outstanding
securities (whether or not convertible or exchangeable), options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind (contingent or otherwise) to which the Company
or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, any shares of capital
stock or other voting securities of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. There is
no outstanding contractual obligation of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock (or options or warrants to acquire any such shares) of the
Company or its Subsidiaries. There are no stock-appreciation rights,
stock-based performance units, "phantom" stock rights or other
agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any person is or may be entitled to receive
any payment or other value based on the revenues, earnings or financial
performance, stock price performance or other attribute of the Company or
any of its Subsidiaries or assets or calculated in accordance therewith
(other than ordinary course payments or commissions to sales
representatives of the Company based upon revenues generated by them
without augmentation as a result of the transactions contemplated hereby)
(collectively, "Stock-Based Rights") or, except as disclosed in Section
3.2(c) of the Company Disclosure Schedule, to cause the Company or any of
its Subsidiaries to file a registration statement, listing application or
other filing under the Applicable Securities Legislation, or which
otherwise relate to the registration or listing of any securities of the
Company. Except as set forth in the Shareholder Agreements, there are no
voting trusts, proxies or other agreements, commitments or understandings
of any character to which the Company or any of its Subsidiaries or, to
the Knowledge of the Company, any of the shareholders of the Company is a
party or by which any of them is bound with respect to the issuance,
holding, acquisition, voting or disposition of any shares of capital
stock or similar interests of the Company or any of its Subsidiaries.
Section 3.3 Authority; Enforceability. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and each Related Agreement to which it is a party and each instrument required
to be executed and delivered by it at the Closing, and to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement and each Related Agreement to which it is a party, the
performance of its obligations hereunder and thereunder, and the consummation
by the Company of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all corporate action and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or any Related Agreement to which it is a party or to consummate the
transactions contemplated herein or therein (other than, with respect to the
Arrangement, the approval of the Arrangement by Securityholders representing
the requisite number of Common Shares in accordance with applicable Law and
the Company's Articles of Incorporation and By-laws). Each of this Agreement
and Related Agreements to which it is a party has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and
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delivery thereof by Parent and Acquiror, constitutes a legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms.
Section 3.4 No Conflict, Required Filings and Consents.
(a) Except as disclosed in Section 3.4(a) of the Company Disclosure
Schedule or in Section 3.4(b) hereof, the execution and delivery by the
Company of this Agreement, the Related Agreements to which it is a party
or any instrument required by this Agreement to be executed and delivered
by the Company or any of its Subsidiaries at the Closing do not, and the
performance of this Agreement, the Related Agreement to which it is a
party or any instrument required by this Agreement to be executed and
delivered by the Company or any of its Subsidiaries at the Closing, shall
not, (i) conflict with or violate the Articles of Incorporation or
By-laws of the Company or equivalent organizational documents of any of
its Subsidiaries, (ii) conflict with or violate any Law or Order in each
case applicable to the Company or any of its Subsidiaries or by which its
or any of their respective properties or assets is bound or affected, or
(iii) result in any breach or violation of or constitute a default (or an
event that with notice or lapse of time or both would become a default)
under, or impair the Company's or any of its Subsidiaries' rights or
alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or its or
any of their respective properties or assets is bound or affected, except
in the case of clause (iii) above, for any such breaches, violations,
defaults or other occurrences that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery by the Company of this Agreement, the
Related Agreements to which it is a party or any instrument required by
this Agreement to be executed and delivered by the Company or any of its
Subsidiaries at the Closing do not, and the performance of this
Agreement, any Related Agreement to which it is a party and any
instrument required by this Agreement to be executed and delivered by the
Company or any of its Subsidiaries at the Closing, shall not, require the
Company or any of its Subsidiaries to obtain any Approval of any person
or Approval of, observe any waiting period imposed by, or make any filing
with or notification to, any Governmental Authority, domestic or foreign,
except for (A) compliance with the Investment Canada Act, as amended (the
"Investment Canada Act"), (B) compliance with the Legislation, (C) the
receipt by the Company of Approval of the transactions contemplated
hereby from the Toronto Stock Exchange (the "TSE Approval"), (D) unless
an applicable exemption is available, the receipt of required Approvals
of the transactions contemplated hereby from the securities commissions
of the various Canadian provinces ("Canadian Securities Commission
Approvals"), (E) receipt of the Interim Order and the Final Order, (F)
receipt of the Required Securityholder Approval and (G) as disclosed in
Section 3.4(b) of the Company Disclosure Schedule.
-13-
Section 3.5 Material Agreements.
(a) Section 3.5(a) of the Company Disclosure Schedule sets forth a
true and complete list, and if oral, an accurate and complete summary, of
all material contracts, agreements or other commitments to which the
Company or any of its Subsidiaries is a party or by which any of them or
their properties or assets are bound as of the date hereof (collectively,
including those entered into after the date hereof, "Material
Agreements"), including but not limited to the following agreements:
(i) employment contracts with officers of the Company and other
contracts with current or former officers, directors or shareholders
of the Company, and all severance, change in control (except
pursuant to the Stock Option Plans) or similar contracts with any
current or former shareholders, directors, officers, employees or
agents of the Company that will result in any obligation (absolute
or contingent) of the Company or any of its Subsidiaries to make any
payment to any current or former shareholders, directors, officers,
employees or agents of the Company or which purport to amend the
terms of any Option, in each case following either the consummation
of the transactions contemplated hereby, termination of employment
(or the relevant relationship), or both;
(ii) labor contracts;
(iii) contracts involving annual revenues, expenditures or
liabilities in excess of $250,000 per annum which are not cancelable
(without material penalty, cost or other liability) within 60 days;
(iv) promissory notes, loans, agreements, indentures, evidences
of indebtedness or other instruments and contracts providing for the
borrowing or lending of money, whether as borrower, lender or
guarantor, in each case, relating to indebtedness or obligations in
excess of $100,000;
(v) contracts containing a covenant limiting the freedom of the
Company or any of its Subsidiaries (or which purport to limit the
freedom of Parent or its Affiliates) to engage in any line of
business or compete with any person or operate at any location in
the world;
(vi) joint venture or partnership agreements or joint
development, distribution or similar agreements pursuant to which
any third party is entitled or obligated to develop or distribute
any products on behalf of the Company or any of its Subsidiaries or
pursuant to which the Company or any of its Subsidiaries is entitled
or obligated to develop or distribute any products on behalf of any
third party;
(vii) contracts for the acquisition, directly or indirectly (by
amalgamation, plan of arrangement, merger, consolidation or
otherwise) of material assets (whether tangible or intangible) or
the capital stock of another person;
-14-
(viii) contracts involving the issuance or repurchase of any
capital stock of the Company or any of its Subsidiaries (including
newly formed Subsidiaries), other than, with respect to the issuance
of Common Shares, the options or warrants listed in Sections 3.2(a)
or 3.2(b) of the Company Disclosure Schedule;
(ix) contracts under which the Company or any of its
Subsidiaries has granted or received exclusive rights;
(x) any interest rate swaps, caps, floors or option agreements
or any other interest rate risk management arrangement or foreign
exchange contracts;
(xi) any contracts concerning material Intellectual Property or
Software, servers, systems, sites, circuits, networks and other
computer and telecom assets and equipment ("Systems"), including but
not limited to application service provider, internet call manager
provider, service deployment or similar contracts; and
(xii) any contracts providing for the payment of any money by
the Company upon the consummation of the Arrangement or other change
of control of the Company, and the amounts that would become due
thereunder.
(b) True and complete copies of all Material Agreements have been
delivered to Parent by the Company. Section 3.5(b) of the Company
Disclosure Schedule sets forth a true and complete list of all contracts
that would purport to bind Parent or any of its Affiliates (other than
the Company or its Subsidiaries) following the consummation of the
Arrangement.
(c) Except as disclosed in Section 3.5(c) of the Company Disclosure
Schedule, other than Material Agreements that have terminated or expired
in accordance with their terms, each Material Agreement is in full force
and effect, is a valid and binding obligation of the Company or such
Subsidiary and of each other party thereto and is enforceable, in
accordance with its terms, against the Company or such Subsidiary and
against each other party thereto, and such Material Agreements will
continue to be valid, binding and enforceable in accordance with their
respective terms and in full force and effect immediately following the
consummation of the transactions contemplated hereby, with no material
alteration or acceleration or increase in fees or liabilities. Neither
the Company nor any of its Subsidiaries is or alleged to be and, to the
best Knowledge of the Company, no other party is or alleged to be in
default under, or in breach or violation of, any Material Agreement and,
to the best Knowledge of the Company, no event has occurred which, with
the giving of notice or passage of time or both, would constitute such a
default, breach or violation. The designation or definition of Material
Agreements for purposes of this Section 3.5 and the disclosures made
pursuant thereto will not be construed or utilized to expand, limit or
define the terms "material" and "Material Adverse Effect" as otherwise
referenced and used in this Agreement.
Section 3.6 Compliance. The Company and each of its Subsidiaries are
in compliance with, and are not in default or violation of, (i) the Articles
of Incorporation and By-laws of the Company or the equivalent organizational
documents of such Subsidiary, (ii) any
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Law or Order or by which any of their respective assets or properties are
bound or affected and (iii) the terms of all notes, bonds, mortgages,
indentures, contracts, permits, franchises and other instruments or
obligations to which any of them are a party or by which any of them or any of
their respective assets or properties are bound or affected, except, in the
case of clause (iii), for any such failures of compliance, defaults and
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company and its Subsidiaries
are in compliance with the terms of all Necessary Approvals, except where the
failure to so comply could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Except as set forth in Section
3.6 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received notice of any revocation or modification of any
Approval from any Governmental Authority that is material to the Company or
any of its Subsidiaries.
Section 3.7 Securities Reports; Financial Statements.
(a) The Company has filed all forms, reports, schedules, statements
and documents required to be filed by Applicable Securities Legislation
since December 31, 1999 (the "Securities Reports"), and all the
Securities Reports have been filed in all material respects on a timely
basis and delivered to Parent. The Securities Reports were prepared in
accordance, and complied as of their respective filing dates in all
material respects, with the requirements of the Applicable Securities
Legislation and did not at the time they were filed (or if amended or
superseded by a filing prior to the date hereof, then on the date of such
filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's Subsidiaries
has filed, or is obligated to file, any other forms, reports, schedules,
statements or other documents pursuant to Applicable Securities
Legislation.
(b) Each of the audited and unaudited consolidated financial
statements (including, in each case, any related notes thereto) contained
in the Securities Reports (i) complied in all material respects with
applicable accounting requirements and Applicable Securities Legislation
with respect thereto, (ii) were prepared in accordance with generally
accepted accounting principles as recommended in the handbook of the
Canadian Institute of Chartered Accountants applied on a consistent basis
throughout the periods involved ("GAAP"), and (iii) fairly present the
consolidated financial position of the Company and its Subsidiaries as at
the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements included in the Securities Reports
were or are subject to normal and recurring year-end adjustments that
have not been and are not expected to be material to the Company.
Section 3.8 Absence of Certain Changes or Events.
(a) Except as described in Section 3.8(a) of the Company Disclosure
Schedule, since December 31, 2000, the Company and its Subsidiaries have
conducted their businesses only in the ordinary and usual course and in a
manner consistent with past
-16-
practice, and, since such date, there has not been any change,
development, circumstance, condition, event, occurrence, damage,
destruction or loss that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Except as described in Section 3.8(b) of the Company Disclosure
Schedule, during the period from December 31, 2000 to the date hereof,
(i) there has not been any change by the Company in its accounting
methods, principles or practices, any revaluation by the Company of any
of its assets, including, writing down the value of inventory or writing
off notes or accounts receivable, and (ii) there has not been any action
or event, and neither the Company nor any of its Subsidiaries has agreed
in writing or otherwise to take any action, that would have required the
consent of Parent pursuant to Section 6.1 had such action or event
occurred or been taken after the date hereof and prior to the Effective
Date.
Section 3.9 No Undisclosed Liabilities. Neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
absolute, accrued, fixed, contingent or otherwise), and there is no existing
fact, condition or circumstance which could reasonably be expected to result
in such liabilities or obligations, except liabilities or obligations (i)
reflected in the Securities Reports filed and publicly available prior to the
date hereof, (ii) disclosed in Section 3.9 of the Company Disclosure Schedule,
or (iii) incurred in the ordinary course of business which are not material to
the Company.
Section 3.10 Absence of Litigation. Except as described in Section
3.10 of the Company Disclosure Schedule or expressly described in the
Securities Reports filed and publicly available prior to the date hereof,
there is no Litigation pending on behalf of or against or, to the best
Knowledge of the Company, threatened against the Company, any of its
Subsidiaries, or any of their respective properties or rights or which
questions or challenges the validity of this Agreement or any action taken or
to be taken by the Company or any of its Subsidiaries pursuant to this
Agreement or in connection with the transactions contemplated hereby, before
or subject to any Court or Governmental Authority. Neither the Company nor any
of its Subsidiaries is subject to any outstanding Litigation or Order. The
Company has no Knowledge of any valid basis for any such Litigation.
Section 3.11 Employee Benefits.
(a) Section 3.11(a) of the Company Disclosure Schedule describes all
employee benefit plans, including without limitation, and all bonus,
stock option, stock purchase, stock appreciation rights, incentive,
deferred compensation, retirement or supplemental retirement, severance,
golden parachute, vacation, cafeteria, dependent care, medical care,
employee assistance program, education or tuition assistance programs,
insurance and other similar fringe or employee benefit plans, programs or
arrangements, and any employment or executive compensation or severance
agreements, written or otherwise, for the benefit of, or relating to, any
present or former employee or director of the Company or any of its
Subsidiaries, which is or has been entered into, contributed to,
established by, participated in and/or maintained by the Company, any
trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with the Company (a
"Benefit Affiliate") or any Subsidiary of the
-17-
Company, whether or not such plan is terminated (together, the "Employee
Plans"). The Company has provided to Parent correct and complete copies
of (where applicable) (i) all plan documents, summary plan descriptions,
summaries of material modifications, amendments, and resolutions related
to such plans, (ii) the three most recent returns with any taxing
authority, (iii) the most recent audited financial statement and
actuarial valuation, and (iv) all related agreements, insurance contracts
and other contracts which implement each such Employee Plan. There are no
restrictions on the ability of the sponsor of each Employee Plan (which
is currently the Company or a Subsidiary of the Company) to amend or
terminate any Employee Plan, and each Employee Plan may be transferred by
the Company or any of its Subsidiaries to Parent or Acquiror, as the case
may be.
(b) There are no claims pending (other than routine claims for
benefits) or threatened against any Employee Plan or against the assets
of any Employee Plan, nor are there any current or threatened Liens on
the assets of any Employee Plan; all Employee Plans conform to, and in
their operation and administration are in all material respects in
compliance with, the terms thereof and requirements prescribed by any and
all applicable Laws, Orders, and regulations of Governmental Authorities
currently in effect with respect thereto; the Company and each of its
Subsidiaries and Benefit Affiliates have performed in all material
respects all obligations required to be performed by them under each
Employee Plan and are not in default under or violation of, and have no
Knowledge of any default or violation by any other Person with respect
to, any of the Employee Plans; each Employee Plan intended to qualify
under any applicable Law or Order of a Governmental Authority is so
qualified, and nothing has occurred which may be expected to cause the
loss of such qualification or exemption; all contributions required to be
made to any Employee Plan pursuant to any applicable Law or Order of a
Governmental Authority, the terms of the Employee Plan or any collective
bargaining agreement, have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Employee
Plan for the current plan years; and the transactions contemplated herein
will not directly or indirectly result in an increase of benefits,
acceleration of vesting or acceleration of timing for payment of any
benefit to any participant or beneficiary, except as disclosed in Section
3.11(b) of the Company Disclosure Schedule.
(c) No Employee Plan is subject to the U.S. Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the U.S. Internal
Revenue Code of 1986, as amended (the "Code").
(d) Except as disclosed in Section 3.11(d) of the Company Disclosure
Schedule, no Employee Plan or written or oral agreement exists which
obligates the Company to provide health care coverage, medical, surgical,
hospitalization, death or similar benefits (whether or not insured) to
any employee or former employee of the Company or any of its Subsidiaries
following such employee's or former employee's termination of employment
with the Company or any Subsidiary, other than such benefits required by
applicable Law.
-18-
(e) Section 3.2(a) of the Company Disclosure Schedule sets forth a
true and complete list of each current or former employee, officer,
director, consultant and investor of the Company or any of its
Subsidiaries who holds, as of the date hereof, any option, warrant or
other right to purchase Common Shares or other capital stock of the
Company, if any, together with the number of shares of Common Shares or
any other capital stock of the Company, if any, subject to such option,
warrant or right, the date of grant or issuance of such option, warrant
or right, the extent to which such option, warrant or right is vested
and/or exercisable, the exercise price of such option, warrant or right,
the expiration date of each such option, warrant and right, and the total
number of such options, warrants and rights. True and complete copies of
each agreement (including all amendments and modifications thereto)
between the Company and each holder of such options, warrants and rights
relating to the same have been furnished to Parent, and no Option
disclosed in Section 3.2(a) of the Company Disclosure Schedule has been
modified, amended or cancelled except as disclosed in Section 3.11(e) of
the Company Disclosure Schedule.
(f) Except as set forth in Section 3.11(f) of the Company Disclosure
Schedule, no event has occurred and no condition exists that would
subject the Company or any of its Subsidiaries, either directly or by
reason of its affiliation with any Benefit Affiliate, to any Tax, fine,
Lien, penalty or other liability imposed by any applicable Law or Order
of a Governmental Authority.
Section 3.12 Employment and Labor Matters.
(a) Section 3.12(a) of the Company Disclosure Schedule identifies
(i) all directors and officers of the Company and each of its
Subsidiaries and (ii) all employees and consultants employed or engaged
by the Company with an annual base salary or compensation rate of $50,000
or higher, and for each individual identified in clauses (i) and (ii),
sets forth each such individual's rate of pay or annual compensation, job
title and date of hire and the number of Common Shares and Options (or
other options, warrants or similar rights to acquire Common Shares)
beneficially owned or held by such individual. Except as set forth in
Section 3.12(a) of the Company Disclosure Schedule, there is no
employment, consulting, collective bargaining, severance pay,
continuation pay, termination or indemnification agreements or other
similar contract of any nature (whether in writing or not) between the
Company or any Subsidiary of the Company and any current or former
shareholder, officer, director, employee, consultant, labor organization
or other representative of any of the Company's or its Subsidiary's
employees, nor is any such contract presently being negotiated. Except as
set forth in Section 3.12(a) of the Company Disclosure Schedule, no
individual will accrue or receive additional benefits, service or
accelerated rights to payments under any Employee Plan or any of the
agreements set forth in Section 3.12(a) of the Company Disclosure
Schedule, including the right to receive any parachute payment, or become
entitled to severance, termination allowance or similar payments as a
result of the transaction contemplated hereby that could result in the
payment of any such benefits or payments. Neither the Company nor any
Subsidiary of the Company is delinquent in payments to any of its
employees or consultants for any wages, salaries, commissions, bonuses,
benefits or other compensation for any services or otherwise arising
under any policy, practice, agreement,
-19-
plan, program or Law. Except as set forth in Section 3.12(a) of the
Company Disclosure Schedule, neither the Company nor any Subsidiary of
the Company is liable for any severance pay or other payments to any
employee or former employee arising from the termination of employment,
nor will the Company or any Subsidiary of the Company have any liability
under any benefit or severance policy, practice, agreement, plan, or
program which exists or arises, or may be deemed to exist or arise, under
any applicable Law or otherwise, as a result of or in connection with the
transactions contemplated herein or as a result of the termination by the
Company or any Subsidiary of any persons employed by the Company or any
Subsidiary on or prior to the Effective Date. None of the Company's or
any of its Subsidiary's employment policies or practices is currently
being audited or investigated by any Governmental Authority or Court.
There is no pending or, to the Knowledge of the Company, threatened
Litigation, unfair labor practice charge, or other charge or inquiry
against the Company or any Subsidiary of the Company brought by or on
behalf of any employee, prospective employee, former employee, retiree,
labor organization or other representative of the Company's or its
Subsidiary's employee, or other individual or any Governmental Authority
with respect to employment practices brought by or before any Court or
Governmental Authority.
(b) Except as set forth in Section 3.12(b) of the Company Disclosure
Schedule, there are no controversies pending or threatened, between the
Company or any of its Subsidiaries and any of their respective employees;
neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable
to persons employed by the Company or its Subsidiaries nor are there any
activities or proceedings of any labor union to organize any such
employees of the Company or any of its Subsidiaries; during the past five
years there have been no strikes, slowdowns, work stoppages, disputes,
lockouts, or threats thereof, by or with respect to any employees of the
Company or any of its Subsidiaries. Neither the Company nor any
Subsidiary is a party to, or otherwise bound by, any consent decree with,
or citation or other Order by, any Governmental Authority relating to
employees or employment practices. The Company and each of its
Subsidiaries are in compliance in all material respects with all
applicable Laws, contracts, and policies relating to employment,
employment practices, wages, hours, and terms and conditions of
employment, any collective bargaining agreement, by Law or otherwise.
Section 3.13 Absence of Restrictions on Business Activities. Except
as set forth in Section 3.13 of the Company Disclosure Schedule, there is no
contract, agreement or other commitment or Order binding upon the Company or
any of its Subsidiaries or any of their assets or properties which has had or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of the Company or any of its Subsidiaries or
the conduct of business by the Company or any of its Subsidiaries as currently
conducted or as proposed to be conducted by the Company or any of its
Subsidiaries. Except as set forth in Section 3.13 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is subject to any
non-competition, non-solicitation or similar restriction on their respective
businesses.
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Section 3.14 Title to Assets; Leases.
(a) Except as described in Section 3.14(a) of the Company Disclosure
Schedule, the Company and each of its Subsidiaries has good and
marketable title to all of their real or personal properties (whether
owned or leased) and assets, free and clear of all Liens.
(b) Section 3.14(b) of the Company Disclosure Schedule contains a
list of all of the real property and interests in real property owned by
the Company or any of its Subsidiaries and all leases of real property to
which the Company or any of its Subsidiaries is a party or by which any
of them holds a leasehold interest (collectively, "Real Property").
Except as set forth in Section 3.14(b) of the Company Disclosure
Schedule, (i) each Real Property lease to which the Company or any of its
Subsidiaries is a party is in full force and effect in accordance with
its terms, (ii) all rents and additional rents due to date from the
Company or a Subsidiary of the Company on each such lease have been paid,
(iii) neither the Company nor any Subsidiary of the Company has received
written notice that it is in material default thereunder, and (iv) there
exists no default by the Company or any Subsidiary of the Company under
such lease. There are no leases, subleases, licenses, concessions or any
other agreements or commitments to which the Company or a Subsidiary of
the Company is a party granting to any person other than the Company or a
Subsidiary of the Company any right to possession, use occupancy or
enjoyment of any of the Real Property or any portion thereof. None of the
Company nor any of its Subsidiaries is obligated under or bound by any
option, right or first refusal, purchase contract, or other contract to
sell or otherwise dispose of any Real Property or any other interest in
any Real Property.
Section 3.15 Taxes. For purposes of this Agreement, "Tax" or
"Taxes" shall mean taxes, imposts, levies, and governmental impositions of any
kind payable to any federal, provincial, state or local taxing authority of
any country or jurisdiction (or any subdivision of the foregoing), including
those on or measured by or referred to as income, franchise, profits, gross
receipts, goods and services, capital ad valorem, advance corporation, custom
duties, alternative or add-on minimum, estimated, environmental, disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer
and gains (whether capital or otherwise) taxes, and interest, penalties and
additions to tax imposed with respect thereto; and "Tax Returns" shall mean
returns, reports and information statements, including any schedule or
attachment thereto, with respect to Taxes required to be filed with any
governmental or taxing authority or agency of any country or jurisdiction,
including consolidated, combined and unitary tax returns. Except as set forth
in Section 3.15 of the Company Disclosure Schedule (with paragraph references
corresponding to those below):
(a) All Tax Returns required to be filed by or on behalf of the
Company, each of its Subsidiaries, and each affiliated, combined,
consolidated or unitary group of which the Company or any of its
Subsidiaries is a member have been timely filed, and all such Tax Returns
are true, complete and correct in all material respects.
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(b) All material Taxes payable by or with respect to the Company and
each of its Subsidiaries (whether or not shown on any Tax Return) have
been timely paid, and adequate reserves (other than a reserve for
deferred Taxes established to reflect timing differences between book and
Tax treatment) are provided on the Company's most recent balance sheet
contained in the Disclosure Documents (the "Balance Sheet") for any
material Taxes not yet due. All assessments for Taxes due and owing by or
with respect to the Company and each of its Subsidiaries with respect to
completed and settled examinations or concluded Litigation have been
paid.
(c) No action, suit, proceeding, investigation, claim or audit has
formally commenced and no written notice has been given that such audit
or other proceeding is pending or threatened with respect to the Company
or any of its Subsidiaries or any group of corporations of which any of
the Company and its Subsidiaries has been a member in respect of any
Taxes, and all deficiencies proposed as a result of such actions, suits,
proceedings, investigations, claims or audits have been paid, reserved
against or settled.
(d) No claim has been made by a taxing authority in a jurisdiction
where the Company or any of its Subsidiaries does not file Tax Returns
that such Company or Subsidiary is or may be subject to Tax in such
jurisdiction. None of the Company or its Subsidiaries is subject to Tax
by the United States or any Governmental Authority thereof or therein.
(e) Neither the Company nor any of its Subsidiaries has requested,
or been granted any waiver of any statute of limitations with respect to,
or any extension of a period for the assessment of, any Tax. No extension
or waiver of time within which to file any Tax Return of, or applicable
to, the Company or any of its Subsidiaries has been granted or requested
which has not since expired.
(f) Neither the Company nor any of its Subsidiaries has been a
member of an affiliated, consolidated, combined or unitary group (other
than a group the common parent of which is the Company), and neither the
Company nor any of its Subsidiaries is a party to any Tax allocation or
sharing agreement or is liable for the Taxes of any other person, as
transferee or successor, by contract, or otherwise.
(g) The Company and its Subsidiaries have not made any payments, are
not obligated to make any payments, and are not a party to any agreements
that under any circumstances could obligate any of them to make any
payments, that will not be deductible in computing their income for Tax
purposes.
(h) No Tax is required to be withheld as a result of the transfers
or any of the transactions contemplated by this Agreement or the Plan of
Arrangement, or the payment of the Termination Fee contemplated in
Section 8.3 hereof.
(i) The Company and each of its Subsidiaries have complied with all
applicable Laws relating to the payment and withholding of Taxes and
have, within the time and in the manner required by applicable law,
withheld from employee wages and paid over to
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the proper Governmental Authorities all amounts required to be so
withheld and paid over under all applicable Laws.
(j) None of the Company and its Subsidiaries will be required to
include any material amount in taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of a change in
the method of accounting for a taxable period ending prior to the Closing
Date, any agreement with any taxing authority entered into prior to the
Closing Date, any sale reported on the installment method that occurred
prior to the Closing Date, or any taxable income attributable to any
amount that is economically accrued prior to the Closing Date.
(k) There are no liens for Taxes on any of the properties or assets
of the Company or any Subsidiary other than for Taxes not yet due and
payable.
(l) The paid-up capital, as determined under the Income Tax Act
(Canada), as amended (the "Tax Act") of the Company's issued and
outstanding share capital is equal to its stated capital determined under
applicable corporate Law.
(m) The Company and its Subsidiaries have not disposed of anything
to a person with whom any of them were dealing at arm's length for
proceeds less than the fair market value thereof.
(n) The Company and its Subsidiaries have not discontinued carrying
on any business in respect of which any non-capital losses were incurred.
(o) Neither the Company, its Subsidiaries, nor their respective
directors, officers or employees have any Knowledge of any contingent Tax
liabilities or any grounds which would prompt a reassessment.
(p) There are no circumstances existing which could result in the
application to the Company or its Subsidiaries of either Section 78 or
Sections 80 to 80.4 (inclusive) of the Tax Act.
(q) Sections 80 to 80.4 (inclusive) of the Tax Act have never
applied to the Company or its Subsidiaries.
(r) Neither the Company nor its Subsidiaries is, or has ever been, a
"controlled foreign corporation" within the meaning of Section 957 of the
Code.
Section 3.16 Environmental Matters.
(a) Except as described on Section 3.16 of the Company Disclosure
Schedule, and except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect: (i) the Company
and each of its Subsidiaries complies and have complied, during all
applicable statute of limitations periods, with all applicable
Environmental Laws, and possess and comply, and have possessed and
complied during all applicable statute of limitations periods, with all
Environmental Permits; (ii) to the Knowledge of the Company, there are
and have been no Materials of Environmental
-23-
Concern or other conditions at any property owned, operated, or otherwise
used by the Company now or in the past, or at any other location
(including without limitation any facility to which Materials of
Environmental Concern from the Company or any of its Subsidiaries), that
are in circumstances that could reasonably be expected to give rise to
any liability of the Company or any of its Subsidiaries, or result in
costs to the Company or any of its Subsidiaries arising out of any
Environmental Law; (iii) no Litigation (including, to the Knowledge of
the Company, any notice of violation or alleged violation), under any
Environmental Law or with respect to any Materials of Environmental
Concern to which the Company or any of its Subsidiaries is, or to the
Knowledge of the Company will be, named as a party, or affecting their
business, is pending or, to the Knowledge of the Company, threatened; nor
is the Company or any of its Subsidiaries the subject of any
investigation or the recipient of any request for information in
connection with any such Litigation or potential Litigation; (iv) there
are no Orders or agreements under any Environmental Law or with respect
to any Materials of Environmental Concern to which the Company or any of
its Subsidiaries is a party or affecting their business; (v) to the
Knowledge of the Company, there are no events, conditions, circumstances,
practices, plans, or legal requirements (in effect or reasonably
anticipated), that could be expected to prevent the Company from, or
materially increase the burden on the Company of: (A) complying with
applicable Environmental Laws or (B) obtaining, renewing, or complying
with all Environmental Permits; and (vi) to the Knowledge of the Company,
each of the foregoing representations and warranties is true and correct
with respect to any entity for which the Company or any of its
Subsidiaries has assumed or retained liability, whether by contract or
operation of Law.
(b) The Company has furnished to Parent true and complete copies of
all Environmental Reports in the possession or control of the Company or
any of its Subsidiaries.
(c) For purposes of this Agreement, the terms below are defined as
follows:
(i) "Environmental Laws" shall mean any and all Laws, Orders,
guidelines, codes, or other legally enforceable requirement
(including, without limitation, common law) of any foreign
government, Canada, the United States, or any state, local,
municipal or other Governmental Authority, regulating, relating to
or imposing liability or standards of conduct concerning the
protection of the environment or of human health, or employee health
and safety.
(ii) "Environmental Permits" shall mean any and all permits,
licenses, registrations, notifications, exemptions and any other
Approvals required of the Company under any Environmental Law.
(iii) "Environmental Report" shall mean any report, study,
assessment, audit, or other similar document that addresses any
issue of actual or potential noncompliance with, actual or potential
liability under or cost arising out of, or actual or potential
impact on business in connection with, any Environmental Law or any
proposed or anticipated change in or addition to Environmental Law,
that
-24-
may in any way affect the Company or any entity for which it may be
liable or any Subsidiary of the Company.
(iv) "Materials of Environmental Concern" shall mean any
gasoline or petroleum (including crude oil or any fraction thereof)
or petroleum products, polychlorinated biphenyls, urea-formaldehyde
insulation, asbestos, pollutants, contaminants, radioactivity, and
any other substances of any kind, whether or not any such substance
is defined as hazardous or toxic under any Environmental Law, that
is regulated pursuant to or could give rise to liability under any
Environmental Law.
Section 3.17 Intellectual Property.
(a) Section 3.17(a) of the Company Disclosure Schedule sets forth,
for the Intellectual Property owned by the Company or its Subsidiaries, a
complete and accurate list of all Canadian, United States and foreign
patent, copyright, trademark, service xxxx, trade dress, domain name and
other registrations, and applications, indicating for each, the
applicable jurisdiction, registration number (or application number), and
date issued or filed, and all material unregistered Intellectual
Property.
(b) All registered Intellectual Property of the Company and its
Subsidiaries is currently in compliance in all material respects with all
legal requirements (including timely filings, proofs and payments of
fees), to the Knowledge of the Company, is valid and enforceable, and is
not subject to any filings, fees or other actions falling due within 90
days after the Effective Date. No registered Intellectual Property of the
Company or its Subsidiaries has been or is now involved in any
cancellation, dispute or Litigation, and, to the Knowledge of the Company
and its Subsidiaries, no such action is threatened. No patent of the
Company or its Subsidiaries has been or is now involved in any
interference, reissue, re-examination or opposition proceeding.
(c) Section 3.17(c) of the Company Disclosure Schedule sets forth a
complete and accurate list of all licenses, sublicenses, consent, royalty
or other agreements concerning Intellectual Property to which the Company
or any Subsidiary is a party or by which any of their assets are bound
(other than (i) contracts, agreements or other commitments disclosed
pursuant to Section 3.5 and (ii) generally commercially available,
non-custom, off-the-shelf software application programs having a retail
acquisition price of less than $10,000) (collectively, "License
Agreements"). All of the Company's License Agreements are valid and
binding obligations of Company or its Subsidiaries that are parties
thereto, enforceable in accordance with their terms, and there exists no
event or condition which will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement, except for violations, breaches, or defaults which could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(d) The Company and its Subsidiaries own or have the valid right to
use all of the Intellectual Property used in the conduct of the Company's
and each of its Subsidiaries' business as currently conducted or
contemplated to be conducted and for the ownership,
-25-
maintenance and operation of the Company's and its Subsidiaries'
properties and assets. No royalties, honoraria or other fees are payable
by the Company or its Subsidiaries to any third parties for the use of or
right to use any Intellectual Property, except as set forth in Section
3.17(d) of the Company Disclosure Schedule.
(e) The Company and its Subsidiaries exclusively own, free and clear
of all Liens or obligations to license, all their owned Intellectual
Property, and the Company and its Subsidiaries have executed all
necessary agreements and performed all necessary investigations and
inquiries to make the foregoing statement. The Company and its
Subsidiaries have a valid, enforceable and, subject to obtaining required
consents, transferable right to use all their licensed Intellectual
Property. Except as disclosed in Section 3.17(e) of the Company
Disclosure Schedule, the Company and its Subsidiaries have the right to
use all owned and licensed Intellectual Property in all jurisdictions.
(f) The Company and each of its Subsidiaries have taken all
reasonable steps to maintain, police and protect the Intellectual
Property which it owns, including the proper policing activities and the
execution of appropriate confidentiality agreements and assignments of
Intellectual Property and releases. Except as disclosed in Section
3.17(f) of the Company Disclosure Schedule, (i) the conduct of the
Company's and its Subsidiaries' business, or any aspect thereof, as
currently conducted or planned to be conducted have not and do not
infringe or otherwise impair or conflict ("Infringe", and such an
infringement, impairment or conflict, an "Infringement") in any material
respect with any Intellectual Property rights of any third party, and the
Intellectual Property rights of the Company and its Subsidiaries is not
being Infringed by any third party, and (ii) there is no Litigation or
Order, any offer to license in connection with an alleged prior
Infringement or any notice of any Litigation or Order, pending or
outstanding, to the Knowledge of the Company, threatened or imminent,
that seeks to limit or challenge or that concerns the ownership, use,
validity or enforceability of any Intellectual Property of the Company
and its Subsidiaries, and, to the Knowledge of the Company, there is no
valid basis for the same.
(g) Except as set forth in Section 3.17(g) of the Company Disclosure
Schedule, the consummation of the transactions contemplated hereby will
not result in the alteration, loss or impairment of the validity,
enforceability or the Company's or any of its Subsidiaries' right to own
or use any of the Intellectual Property, nor will such transactions
require the Approval of any Governmental Authority or third party in
respect of any Intellectual Property.
(h) Section 3.17(h) of the Company Disclosure Schedule lists all
Software (i) (other than generally commercially available, non-custom,
off-the-shelf software application programs having a retail acquisition
price of less than $10,000) which are owned, licensed to or by the
Company or any of its Subsidiaries, leased to or by the Company or any of
its Subsidiaries, or otherwise used by the Company or any of its
Subsidiaries, and identifies which Software is owned, licensed, leased or
otherwise used, as the case may be and (ii) which are sold, licensed,
leased or otherwise distributed by the Company or any of its Subsidiaries
to any third party, and identifies which Software is sold, licensed,
leased, or otherwise distributed as the case may be. All Software owned
by
-26-
the Company or any of its Subsidiaries, and all Software licensed from
third parties by the Company or any of its Subsidiaries, (i) is free from
any material defect, bug, virus, or programming, design or documentation
error, (ii) operates and runs in a reasonable and efficient business
manner, and (iii) conforms in all material respects to the specifications
and purposes thereof. There is no License Agreement that licenses the
source code of the Company's Software to any person other than to
Witchity Capital Corporation Ltd., a Bermuda corporation.
(i) The Company and its Subsidiaries have taken all reasonable steps
to protect the Company's and its Subsidiaries' rights in their
confidential information and trade secrets. Without limiting the
foregoing, the Company and its Subsidiaries require each employee,
consultant and contractor to execute and each employee, consultant and
contractor has executed, appropriate agreements that are substantially
consistent with the Company's standard forms thereof (true and complete
copies of which have been delivered to Parent). Except under
confidentiality obligations, there has been no material disclosure of any
of the Company's or its Subsidiaries' confidential information or trade
secrets to any third party.
(j) For purposes of this Agreement, the terms below are defined as
follows:
(i) "Intellectual Property" means all Canadian, United States
and other foreign intellectual property, including without
limitation all worldwide trademarks, service marks, trade names,
URLs and Internet domain names, designs, slogans, logos, trade
dress, together with all goodwill related to the foregoing;
worldwide patents, copyrights and copyrightable works (including
Systems, Internet site content and Software (as defined below)),
technology, trade secrets and other confidential information,
customer lists, know-how, processes, formulae, algorithms, models,
user interfaces, inventions, advertising and promotional materials,
and all registrations, applications, recordings, renewals,
continuations, continuations-in-part, divisions, reissues,
reexaminations, foreign counterparts, and other legal protections
and rights related to the foregoing.
(ii) "Software" means any and all (A) computer programs,
including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code, (B)
databases and compilations, including any and all data and
collections of data, whether machine readable, on paper or
otherwise, (C) descriptions, flow-charts and other work product used
to design, plan, organize and develop any of the foregoing, (D) the
technology supporting, and the contents and audiovisual displays of
any Internet site(s) operated by or on behalf of the Company or any
of its Subsidiaries, and (E) all documentation and other works of
authorship, including user manuals and training materials, relating
to any of the foregoing.
Section 3.18 Insurance. Section 3.18 of the Company Disclosure
Schedule sets forth a true and complete list of all material insurance
policies and fidelity bonds covering the assets, Intellectual Property,
business, equipment, properties, operations, employees, officers and directors
of the Company and its Subsidiaries. All such policies are in full force and
effect and
-27-
are valid, outstanding and enforceable policies. There is no claim by the
Company or any of its Subsidiaries pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums payable under all such
policies and bonds have been paid and the Company and its Subsidiaries are
otherwise in full compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage),
and the Company shall, and shall cause its Subsidiaries to, maintain in full
force and effect all such insurance during the period from the date hereof
through the Closing Date. Such policies of insurance and bonds are of the type
and in amounts customarily carried by Persons conducting businesses similar to
those of the Company and its Subsidiaries , are reasonable in light of the
assets of the Company and its Subsidiaries, are sufficient for compliance with
all requirements of Law and of all contracts, agreements or understandings to
which the Company or any of its Subsidiaries is a party and provide adequate
insurance coverage for the assets and operations of the Company and its
Subsidiaries. To the Knowledge of the Company, there is not any threatened
termination of or material premium increase with respect to any of such
policies or bonds.
Section 3.19 Brokers. No broker, financial advisor, finder or
investment banker or other person is entitled to any broker's, financial
advisor's, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company, except for Broadview International LLC (the "Company
Financial Advisors"). Section 3.19 of the Company Disclosure Schedule sets
forth, and the Company has heretofore furnished to Parent a true and complete
copy of, all agreements between the Company and the Company Financial Advisors
pursuant to which such person would be entitled to any payment relating to the
transactions contemplated hereunder.
Section 3.20 Certain Business Practices. As of the date hereof,
neither the Company nor any of its Subsidiaries nor any director, officer,
employee or agent of the Company or any of its Subsidiaries has (i) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
payments relating to political activity, (ii) made any unlawful payment to any
government official or employee or to any political party or campaign or
violated any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or the Corruption of Public Officials Act of Canada, or (iv) made any
other unlawful payment. The books, records and accounts of the Company and its
Subsidiaries accurately and completely reflect the business and affairs of the
Company and its Subsidiaries, have been maintained in accordance with sound
business practice, and have not been falsified by any person in charge of such
books, records or accounts.
Section 3.21 Interested Party Transactions. Except as disclosed in
Section 3.21 of the Company Disclosure Schedule, (i) there are no existing,
and since January 1, 1999 there has been no contract, transaction,
indebtedness or other arrangement, or any related series thereof, between the
Company and any of its Subsidiaries, on the one hand, and any of the
directors, officers, shareholders or other Affiliates of the Company and its
Subsidiaries, or any of their respective Affiliates or family members, on the
other (except for amounts due as normal salaries and bonuses, consulting and
professional fees and in reimbursement of ordinary expenses), and (ii) at the
Closing, all such contracts, transactions, indebtedness and other arrangements
shall be terminated (except for amounts due as normal salaries and bonuses and
in reimbursement of ordinary expenses).
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Section 3.22 No Restrictions on the Arrangement; Takeover Statutes.
No Legislation or other takeover statute or similar Law, or rule or regulation
of a securities exchange, and no provision of the Articles of Incorporation or
By-laws, or other organizational documents or governing instruments of the
Company or any of its Subsidiaries or any Material Agreement to which any of
them is a party (a) would or would purport to impose restrictions which might
adversely affect or delay the consummation of the transactions contemplated by
this Agreement or the Related Agreements, or (b) as a result of the
consummation of the transactions contemplated by this Agreement or the Related
Agreements or the acquisition of securities of the Company or Acquiror by
Parent or Acquiror (i) would or would purport to restrict or impair the
ability of Parent to vote or otherwise exercise the rights of a shareholder
with respect to securities of the Company or any of its Subsidiaries that may
be acquired or controlled by Parent or (ii) would or would purport to entitle
any person to acquire securities of Parent, the Company or any of its
Subsidiaries.
Section 3.23 Determinations by the Board of Directors.
(a) The Board of Directors of the Company (upon advice received from
counsel to the Company) has unanimously:
(i) resolved that the Arrangement is fair to, and in the best
interests of, its Securityholders;
(ii) approved the Arrangement and this Agreement; and
(iii) recommended that its Securityholders vote in favor of the
Arrangement.
(b) After reasonable inquiry, the Board of Directors of the Company
has been advised and believes that each Named Executive Officer (as
defined in the Company's management proxy circular dated March 9, 2001)
who is employed by the Company on the date hereof intends to vote in
favor of the Arrangement.
Section 3.24 Information Supplied. None of the information
contained in the Circular will, at the date it is first mailed to the
Company's Securityholders at the time of the Company Securityholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Circular will comply as to form in all material respects
with the requirements of the Applicable Securities Legislation and any other
applicable Law, except that no representation is made by the Company with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Acquiror for inclusion or incorporation by
reference therein.
Section 3.25 Required Votes. Except if otherwise stipulated in the
Interim Order or otherwise by the Arrangement Court: (i) the only vote of
holders of any class or series of capital stock of the Company or holders of
any options, warrants or other rights to acquire such capital stock or the
holders of any other securities of the Company necessary to approve and adopt
this Agreement and the Arrangement is the approval and adoption of this
Agreement and the Arrangement and to consummate the transactions contemplated
hereby by the affirmative
-29-
vote of the holders of at least 66-2/3% of sum of the outstanding Common
Shares and the Common Shares for which the Options (whether exercisable or
not) and Warrants are exercisable, voting together as a single class, who vote
at the Company Securityholders Meeting (the "Required Securityholder
Approval"), and (ii) no vote of the holders of any class or series of capital
stock of the Company, holders of any options, warrants or other rights to
acquire such capital stock or holders of any other securities of the Company,
or any other minority vote, is necessary to approve any Related Agreement or
any transaction contemplated hereby. The Company has no reason to believe that
the required approvals of its Securityholders will be other than as set forth
in clause (i) above.
Section 3.26 U.S. Securities Laws. The Company is a "foreign
private issuer" as that term is defined in Rule 405 of the U.S. Securities Act
of 1933, as amended (the "Securities Act"). No filing of any kind is required
to be made by the Company pursuant to the Securities Act or the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and no
Approval must be received from the U.S. Securities and Exchange Commission
(the "SEC"), in connection with the Arrangement or the Offer; provided that in
the case of the Arrangement, the Company must file the Circular and any
amendment or supplement thereto with the SEC under cover of a Form 6-K, and,
in the case of the Offer, the Company must either file with the SEC a Schedule
14D-9F and a written irrevocable consent and power of attorney on Form F-X or
file with the SEC the circular of the Board of Directors contemplated in
Section 2.3 under cover of a Form CB (and file Form F-X with the SEC in
connection therewith).
Section 3.27 Security. The Company and its Subsidiaries take all
reasonable actions to maintain, protect and police the integrity and security
of their Systems, including the protection and policing against all
unauthorized use or modification of, access to, or "hacking" into the Systems,
or the introduction into the Systems of viruses or other unauthorized,
damaging or corrupting elements.
Section 3.28 Disclosure. No representation or warranty contained in
this Agreement or any statement or information contained in the Company
Disclosure Schedule or any other schedule, exhibit, certificate, written
statement, document or instrument delivered pursuant to this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to be disclosed in order to make the statements contained
herein and therein not misleading or necessary in order to fully and fairly
provide the information required to be provided hereby or thereby.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUIROR
Parent and Acquiror, jointly and severally, hereby represent and
warrant to the Company as follows:
Section 4.1 Organization and Qualification. Each of Parent and
Acquiror is a corporation duly organized and validly existing under the Laws
of their respective jurisdictions of incorporation. Parent has all the
requisite corporate power and authority, and is in possession of all Approvals
necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
qualified and existing or to have such power, authority and Approvals could
not, individually or in the aggregate, reasonably be
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expected to have a Material Adverse Effect. As of the date hereof, all of the
issued and outstanding capital stock of Acquiror are indirectly owned by
Parent through one or more Subsidiaries wholly-owned by Parent.
Section 4.2 Authority; Enforceability. Each of Parent and Acquiror
has all necessary corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and delivered by
it at the Closing, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby (except for the
approval of the Board of Directors of Parent Holding Company with respect to
the treatment of Employee Options). The execution and delivery by each of
Parent and Acquiror of this Agreement and each instrument required hereby to
be executed and delivered by Parent and Acquiror at the Closing and the
performance of their respective obligations hereunder and thereunder have been
duly and validly authorized by each of Parent and Acquiror, and no other
corporate proceedings on the part of Parent or Acquiror are necessary to
authorize the consummation of the transactions contemplated hereby (except for
the approval of the Board of Directors of Parent Holding Company with respect
to the treatment of Employee Options). This Agreement has been duly executed
and delivered by each of Parent and Acquiror and, assuming due authorization,
execution and delivery hereof by the Company, constitutes a legal, valid and
binding obligation of each of Parent and Acquiror, enforceable against each of
Parent and Acquiror in accordance with its terms.
Section 4.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery by Parent and Acquiror of this
Agreement do not, and the performance of this Agreement by Parent or
Acquiror shall not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of Parent or the Articles of Incorporation or
Bylaws of Acquiror, or (ii) conflict with or violate any Law or Order in
each case applicable to Parent or Acquiror or by which its or any of
their respective properties is bound or affected, except in the case of
clause (ii) above, for any such conflicts or violations that could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) The execution and delivery by Parent and Acquiror of this
Agreement do not, and the performance by Parent and Acquiror of this
Agreement shall not, require Parent or Acquiror to obtain the Approval
of, observe any waiting period imposed by, or make any filing with or
notification to, any Governmental Authority, domestic or foreign, except
for (A) compliance with the Investment Canada Act, (B) compliance with
the Legislation, (C) the receipt of the TSE Approval, (D) the receipt of
the Canadian Securities Commission Approvals, (E) the receipt of the
Interim Order and the Final Order, or (f) as disclosed in Section 3.4(b)
of the Company Disclosure Schedule.
Section 4.4 Ownership of Shares of the Company. Neither the Parent
nor any of its Subsidiaries (including Acquiror) owns any Common Shares of the
Company.
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ARTICLE 5 - CONDITIONS PRECEDENT
Section 5.1 Conditions to Obligations of Parent and Acquiror. The
respective obligations of Parent and Acquiror to consummate the Arrangement
shall be subject to the satisfaction of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in this Agreement and the Related
Agreements that are qualified as to materiality or Material Adverse
Effect shall be true and correct, and those not so qualified shall be
true and correct in all material respects, as of the date hereof and as
of the Closing Date, with the same force and effect as if made on and as
of the Closing Date (other than representations and warranties which
expressly address matters only as of a particular date, in which case
such representations and warranties qualified as to materiality or
Material Adverse Effect shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as
of such particular date); and Parent and Acquiror shall have received a
certificate to such effect signed by the Chief Executive Officer and
Chief Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement and the Related Agreements to be performed or
complied with by it on or prior to the Closing; and Parent and Acquiror
shall have received a certificate to such effect signed by the Chief
Executive Officer and Chief Financial Officer of the Company.
(c) Approvals. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that those Approvals of
Governmental Authorities and other third parties set forth in Section
3.4(b) of this Agreement or Section 3.4(b) of the Company Disclosure
Schedule (or not described in such section of the Company Disclosure
Schedule but required to be so described, including but not limited to
those of any stock exchanges or other Governmental Authorities required
for the consummation of the Arrangement), including but not limited to
the receipt of the TSE Approval, Canadian Securities Commissions
Approvals and the Final Order, have been obtained. The Interim Order, the
Final Order and the Plan of Arrangement shall each be in a form
consistent with the provisions of this Agreement unless otherwise
consented to by Parent, which consent shall not be unreasonably withheld.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order
(whether temporary, preliminary or permanent) issued by any Court or
Governmental Authority of competent jurisdiction or other legal restraint
or prohibition shall be in effect which prevents the consummation of the
Arrangement on substantially the same terms and conferring on Parent
substantially all the rights and benefits as contemplated herein, nor
shall any proceeding brought by any Governmental Authority, domestic or
foreign, seeking any of the foregoing be pending; and there shall not be
any action taken, or any Law or Order enacted, entered, enforced or
deemed applicable to the Arrangement, which makes the consummation of the
Arrangement on substantially the same terms and conferring on Parent
substantially all the rights and benefits as contemplated herein illegal,
nor shall any proceeding
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brought by any Governmental Authority, domestic or foreign, seeking any
of the foregoing be pending. In addition, no Law or Order shall have been
proposed, enacted, promulgated or applied:
(i) to cease the business of the Company or Parent or to
enjoin, prohibit or impose material limitations or conditions on the
consummation of the Arrangement or on the right of Parent or
Acquiror to own or exercise full rights of ownership of the common
shares of the Company following the Arrangement; or
(ii) which, if the Arrangement were consummated, would require
Parent, the Company or any of their respective Subsidiaries to
dispose of a material asset, impose material limitations or
conditions on the business or operations of Parent, the Company and
their respective Subsidiaries, or impose material fines or penalties
on Parent, the Company or any of their respective Subsidiaries.
(e) Material Adverse Effect. There shall not exist or have occurred
a Material Adverse Effect, or any condition, event, circumstance or
development which could reasonably be expected to result in a Material
Adverse Effect.
(f) Securityholder Approval. This Agreement and the Arrangement
shall have been approved and adopted by the requisite vote of the
Securityholders of the Company in accordance with the Interim Order, the
Legislation and the Company's Articles of Incorporation and By-laws.
(g) Related Agreements. Each Related Agreement shall be in full
force and effect and shall not have been breached or repudiated by any
party thereto, and the actions required to be taken thereunder by the
parties thereto prior to the Closing shall have been taken.
(h) Principal Continuing Employee Agreements. Continuing Employee
Agreements between the Company, on the one hand, and on the other hand,
Xxxxxxx XxXxxxxx and at least seven of the other individuals identified
in Section 5.1(h) of the Parent Disclosure Schedule shall be in full
force and effect and shall not have been breached or repudiated by any
party thereto.
(i) Other Continuing Employee Agreements. Continuing Employee
Agreements between the Company and at least 80% of the Company's
full-time engineering staff identified in Section 5.1(i) of the Parent
Disclosure Schedule, in form and substance reasonably acceptable to
Parent, shall have been duly executed and delivered to Parent, shall be
in full force and effect and shall not have been breached or repudiated
by any party thereto.
(j) Founders Agreements. Each officer and shareholder of the Company
identified in Section 5.1(j) of the Parent Disclosure Schedule shall have
duly executed and delivered an agreement, in form and substance
reasonably acceptable to Parent (which agreements shall each be in full
force and effect and shall not have been breached or repudiated by any
party thereto), pursuant to which each such person shall have agreed
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not to compete with Parent or the business of the Company as it exists as
of Closing (or, if later, the latest date of employment by the Company or
Parent) and/or as contemplated at such date to be conducted in the
future, as determined in Parent's reasonable discretion, for a period
that is not shorter than the greater of (x) three years from the Closing
or (y) one year from termination of his or her employment with the
Company or Parent (the "Founders Agreement").
(k) Release Agreement. Each person identified in Section 5.1(k) of
the Parent Disclosure Schedule shall have duly executed and delivered to
Parent a full, unconditional and general release in the form attached
hereto as Exhibit B (a "Release Agreement") (which releases shall each be
in full force and effect and shall not have been breached or repudiated
by any party thereto) to any and all claims arising prior to the Closing
that such person may have against the Company or Parent or their
respective Affiliates.
(l) Legal Opinion. Parent and Acquiror shall have received an
opinion, dated the date of the Closing Date, from outside legal counsel
to the Company in the form attached hereto as Exhibit C.
(m) Dissenting Shares. The number of Dissenting Shares shall not
represent in the aggregate more than 10% of the total number of
outstanding Common Shares on a fully-diluted basis.
(n) Corporate Records. Parent shall have received all original
corporate seals, stock ledgers, Articles of Incorporation and By-laws (or
similar organizational documents) of the Company and its Subsidiaries and
other filings with Governmental Authorities (including but not limited to
filings to do business in foreign jurisdictions), including all original
stock certificates or similar evidence of ownership of the common stock
or other equity interests held by the Company, directly or indirectly, of
all its Subsidiaries. All original minute books of all shareholders,
Board of Directors and committee meetings of the Company and its
Subsidiaries ("Restricted Originals") shall be kept together in a safe
location identified to Parent at the headquarters of the Company, and
Parent shall have received true and complete copies of the Restricted
Originals.
Section 5.2 Conditions to Obligations of the Company. The
obligation of the Company to consummate the Arrangement shall be subject to
the satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Acquiror contained in this Agreement and the
Related Agreements that are qualified as to materiality or Material
Adverse Effect shall be true and correct, and those not so qualified
shall be true and correct in all material respects, as of the date hereof
and as of the Closing Date, with the same force and effect as if made on
and as of the Closing Date (other than representations and warranties
which expressly address matters only as of a particular date, in which
case such representations and warranties qualified as to materiality or
Material Adverse Effect shall be true and correct, and those not so
qualified shall be true and correct in all material respects, on and as
of such particular date); and
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the Company shall have received a certificate to such effect signed by an
officer of Parent and Acquiror.
(b) Agreements and Covenants. Parent and Acquiror shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement and the Related Agreements to be
performed or complied with by them on or prior to the Closing; and the
Company shall have received a certificate to such effect signed by an
officer of Parent and Acquiror.
(c) Securityholder Approval. This Agreement and the Arrangement
shall have been approved and adopted by the requisite vote of the
Securityholders of the Company in accordance with the Interim Order, the
Legislation and the Company's Articles of Incorporation and By-laws.
(d) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order
(whether temporary, preliminary or permanent) issued by any Court or
Governmental Authority of competent jurisdiction or other legal restraint
or prohibition shall be in effect which prevents the consummation of the
Arrangement on substantially the same terms as contemplated herein, nor
shall any proceeding brought by any Governmental Authority, domestic or
foreign, seeking any of the foregoing be pending; and there shall not be
any action taken, or any Law or Order enacted, entered, enforced or
deemed applicable to the Arrangement, which makes the consummation of the
Arrangement on substantially the same terms as contemplated herein
illegal, nor shall any proceeding brought by any Governmental Authority,
domestic or foreign, seeking any of the foregoing be pending. In
addition, no Law or Order shall have been proposed, enacted, promulgated
or applied to cease the business of the Company or Parent or to enjoin or
prohibit the consummation of the Arrangement.
(e) Approvals. The Company shall have received the Final Order, the
TSE Approval, and any necessary Canadian Securities Commissions
Approvals.
ARTICLE 6 - CONDUCT OF THE BUSINESS
Section 6.1 Conduct of the Company's Business. The Company
covenants and agrees that, between the date hereof and the Effective Date,
except as expressly required or permitted by this Agreement or unless Parent
shall otherwise agree in writing in advance, the Company shall conduct and
shall cause the businesses of each of its Subsidiaries to be conducted only
in, and the Company and its Subsidiaries shall not take any action except in,
the ordinary course of business and in a manner consistent with past practice
and in compliance with applicable Laws. The Company shall use its best efforts
to preserve intact the business organization and assets of the Company and
each of its Subsidiaries, and to operate, and cause each of its Subsidiaries,
and unless reasonably requested otherwise by Parent, shall operate, according
to plans and budgets provided to Parent, to keep available the services of the
present officers, employees and consultants of the Company and each of its
Subsidiaries, to maintain in effect Material Agreements and to preserve the
present relationships of the Company and each of its Subsidiaries with
advertisers, sponsors, customers, licensors, licensees, suppliers and other
persons with which the Company or any of its Subsidiaries has business
relations. By way of amplification and not limitation, neither the Company nor
any of its Subsidiaries shall, between
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the date hereof and the Effective Date, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Articles of Incorporation or
By-laws of the Company or equivalent organizational document of any of
its Subsidiaries, reduce the stated capital of the Company, or alter
through amalgamation, plan of arrangement, merger, consolidation,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of the Company or any of its
Subsidiaries;
(b) issue, grant, sell, transfer, deliver, pledge, promise, dispose
of or encumber, or alter or modify the terms of rights or obligations
under, any shares of capital stock of any class, or any options,
warrants, convertible or exchangeable securities or other rights of any
kind to acquire any shares of capital stock or any other ownership
interest or Stock-Based Rights of the Company or any of its Subsidiaries
(except for the issuance of Common Shares issuable pursuant to Options or
Warrants outstanding on the date hereof and in accordance with the terms
thereof in effect as of the date hereof); adopt, ratify or effectuate a
shareholders' rights plan or agreement; or redeem, purchase or otherwise
acquire, directly or indirectly, any of the capital stock of the Company
or interest in or securities of any Subsidiary;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock (except that a wholly owned
Subsidiary of the Company may declare and pay a dividend to its parent);
split, combine or reclassify any of its capital stock, or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for, shares of its capital stock; or amend the terms
of, repurchase, redeem or otherwise acquire, or permit any Subsidiary to
repurchase, redeem or otherwise acquire, any of its securities or any
securities of its Subsidiaries; or propose to do any of the foregoing;
(d) sell, transfer, deliver, lease, license, sublicense, mortgage,
pledge, encumber or otherwise dispose of (in whole or in part), or
create, incur, assume or cause to be subjected to any Lien on, any of the
assets of the Company or any of its Subsidiaries (including any
Intellectual Property), except for (i) the sale of goods or licenses of
Intellectual Property involving annual revenue, payments or liabilities
of less than $100,000 or having a term of less than 60 days, (ii)
dispositions of other immaterial assets, in either case, in the ordinary
course of business and in a manner consistent with past practice, and
(iii) as disclosed in Section 6.1(d) of the Company Disclosure Schedule;
provided that any licensing of, or any creation, incurrence, assumption
or subjection of any Lien on, any Intellectual Property shall not be
permitted by clauses (i) or (ii);
(e) acquire (by amalgamation, plan of arrangement, merger,
consolidation, acquisition of stock or assets or otherwise) or organize
any corporation, limited liability company, unlimited liability company,
partnership, joint venture, trust or other entity or person or any
business organization or division thereof; incur or modify any
indebtedness for borrowed money or issue any debt securities or any
warrants or rights to acquire any debt security or assume, guarantee or
endorse or otherwise become responsible for, the
-36-
obligations of any person, or make any loans, advances or enter into any
similar financial commitments;
(f) make any capital expenditures which are, in the aggregate, in
excess of $100,000 for the Company and its Subsidiaries taken as a whole;
(g) hire or terminate any employee or consultant, except in the
ordinary course of business consistent with past practice; except as
disclosed in Section 6.1(g) of the Company Disclosure Schedule, modify
the compensation or fringe benefits (including, without limitation,
bonus) payable or to become payable to its officers or employees, or loan
or advance any money or other asset or property to, or grant any bonus,
severance or termination pay to, or enter into or amend any employment or
severance agreement with, any director, officer or other employee or
consultant of the Company or any of its Subsidiaries, or establish,
adopt, enter into, terminate or amend any Employee Plan or any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
stock purchase, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers, employees or consultants;
(h) change any accounting policies or procedures (including
procedures with respect to reserves, revenue recognition, payments of
accounts payable and collection of accounts receivable) unless required
by a change in applicable Law or GAAP used by it;
(i) other than as disclosed in Section 6.1(i) of the Company
Disclosure Schedule, (A) enter into any agreement that would be a
Material Agreement; (B) modify, amend in any material respect, transfer
or terminate any Material Agreement or waive, release or assign any
rights or claims thereto or thereunder; (C) enter into or extend any
lease with respect to Real Property with any third party; (D) modify,
amend or transfer in any way or terminate any License Agreement,
standstill or confidentiality agreement with any third party, or waive,
release or assign any rights or claims thereto or thereunder; or (E)
enter into, modify or amend any contract to provide exclusive rights or
obligations;
(j) make any material Tax election or change any material election
relating to Taxes already made other than an election in the ordinary
course of business consistent with the past practices of the Company or
settle or compromise any federal, state, provincial, local or foreign
income Tax liability or agree to an extension of a statute of
limitations;
(k) pay, discharge, satisfy or settle any Litigation or waive,
assign or release any material rights or claims except, in the case of
Litigation, any Litigation which settlement would not: (A) impose any
injunctive or similar Order on the Company or any of its Subsidiaries or
restrict in any way the business of the Company or any of its
Subsidiaries or (B) exceed $50,000 in cost, liability or value to the
Company or any of its Subsidiaries. The Company and its Subsidiaries
shall not pay, discharge or satisfy any liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
except in the ordinary course of business consistent with past practice
in an amount or value not exceeding $100,000 in the aggregate;
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(l) engage in, enter into or modify or amend any contract,
agreement, or other commitment (including any indebtedness) or other
transaction with, directly or indirectly, any of the directors, officers,
shareholders or Affiliates of the Company or any of its Subsidiaries, or
any of their respective Affiliates or family members;
(m) fail to maintain in full force and effect all self-insurance and
insurance, as the case may be, currently in effect;
(n) commence any proceeding for any voluntary liquidation,
dissolution, or winding up of the Company or any of its material
Subsidiaries, including but not limited to initiating any bankruptcy
proceedings on its or any of its Subsidiary's behalf;
(o) take any action which would result in the Company or any of its
Subsidiaries becoming liable for Tax under Part VI.1 of the Tax Act;
(p) take any action that accelerates the utilization of any net
operating losses of the Company or its Subsidiaries; or
(q) authorize, recommend, propose or announce an intention to do any
of the foregoing, or agree or enter into or amend any contract, agreement
or commitment to do any of the foregoing or any other action that would
or could reasonably be expected to result in any conditions to the
Arrangement set forth in Article 5 not being satisfied or that would
materially impair the ability of the Company, Parent or the Acquiror to
consummate the Arrangement in accordance with the terms hereof or
materially delay such consummation.
ARTICLE 7 - ADDITIONAL COVENANTS
Section 7.1 Competing Proposal.
(a) From the date hereof until the earlier of the Effective Date or
the termination of this Agreement in accordance with its terms, the
Company shall not, nor shall it permit any of its Affiliates or
Subsidiaries to, nor shall it authorize or permit any of its or their
respective directors, officers, employees, advisors, representatives or
agents (collectively, the "Company Representatives"), to directly or
indirectly, (i) solicit, facilitate, initiate, entertain, encourage or
take any action to solicit, facilitate, initiate, entertain or encourage,
any inquiries or communications regarding or the making of any proposal
or offer that constitutes or may constitute a Competing Proposal (as
defined herein) or (ii) participate or engage in any discussions or
negotiations with, or provide any information to or take any other action
with the intent to facilitate the efforts of, any person concerning any
possible Competing Proposal or any inquiry or communication which might
reasonably be expected to result in a Competing Proposal. For purposes of
this Agreement, the term "Competing Proposal" shall mean any inquiry,
proposal or offer from any person (other than Parent, Acquiror or any of
their Affiliates) relating to (i) any take-over bid, amalgamation, plan
of arrangement, merger, consolidation, reorganization or other direct or
indirect business combination, recapitalization, liquidation, winding-up
of, or similar transaction, involving the Company or any Material
Subsidiary (as defined herein), (ii) the issuance or acquisition of
shares of capital stock or other equity securities
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of the Company or any Material Subsidiary representing 15% or more of the
outstanding capital stock or voting power of the Company or such Material
Subsidiary, (iii) any tender, exchange offer or other offer or bid that
if consummated would result in any person, together with all Affiliates
thereof, beneficially owning shares of capital stock or other equity
securities of the Company or any Material Subsidiary representing 15% or
more of the outstanding capital stock or voting power of the Company or
such Material Subsidiary, (iv) the sale, lease, exchange, license
(whether exclusive or not), or other disposition of a substantial portion
of the Intellectual Property or a substantial portion of the business or
other assets of the Company or any Material Subsidiary, or (v) any other
transaction, the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the consummation of
the transactions contemplated hereby or which would reasonably be
expected to diminish significantly the benefits to Parent or its
Affiliates of the transactions contemplated hereby. The Company shall
immediately cease and cause to be terminated, and shall cause its
Subsidiaries and all Company Representatives to immediately terminate and
cause to be terminated, all existing discussions or negotiations with any
persons conducted heretofore with respect to, or that could reasonably be
expected to lead to, a Competing Proposal. The Company shall promptly
notify each Company Representative of its obligations under this Section
7.1. Without limiting the foregoing, it is agreed that any violation of
the restrictions set forth above by any Affiliate or Subsidiary of the
Company or any Company Representative, whether or not such person is
purporting to act on behalf of the Company, shall be deemed to be a
breach of this Section 7.1(a) by the Company.
(b) Notwithstanding the foregoing, the Company may participate in
discussions or negotiations with, or furnish information with respect to
the Company pursuant to a confidentiality agreement containing a
customary standstill and with terms no less favorable to the Company than
those in effect between the Company and Parent to, any person if and only
if (x) such person has submitted an unsolicited bona fide written
Competing Proposal to the Company's Board of Directors in respect of
which adequate financing arrangements have been made, (y) neither the
Company nor any of the Company Representatives shall have violated
Section 7.1(a), and (z) the Board of Directors of the Company (i)
determines by a majority vote in its good faith judgment, after
consultation with outside counsel, that taking such action is required to
satisfy the fiduciary duties of such Board under applicable Law and (ii)
determines by a majority vote in its good faith judgment, after
consultation with its financial advisors, that such Competing Proposal is
likely to lead to a Superior Proposal, and (iii) provides prior written
notice to Parent of its decision to so participate or furnish.
(c) Except as set forth in the following sentence, neither the Board
of Directors of the Company nor any committee thereof shall (1) approve
or recommend, or propose to approve or recommend, any Competing Proposal,
(2) withdraw or modify or propose to withdraw or modify in a manner
adverse to Parent or Acquiror its approval or recommendation of the
Arrangement, this Agreement or the transactions contemplated hereby, (3)
upon a request by Parent to reaffirm its approval or recommendation of
this Agreement or the Arrangement, fail to do so within three Business
Days after such request is made (either publicly or privately) or to
reject any Competing Proposal, (4) approve, enter, or permit or cause the
Company or any Material Subsidiary to enter, into
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any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Competing Proposal, or (5) resolve
or announce its intention to do any of the foregoing. The immediately
preceding sentence notwithstanding, in the event that prior to the
Company Securityholders Meeting, without violation of Section 7.1(a), the
Board of Directors of the Company receives a Superior Proposal (as
defined herein), the Board of Directors of the Company may (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to
Parent or Acquiror its approval or recommendation of the Arrangement,
this Agreement or the transactions contemplated hereby, (ii) fail to
reaffirm its approval or recommendation of this Agreement or the
Arrangement or to reject any Competing Proposal within two Business Days
after a request by Parent to do so, or (iii) resolve or announce its
intention to do any of the actions set forth in the preceding clauses (i)
or (ii), if (x) the Board of Directors of the Company determines by a
majority vote of directors in their good faith judgment, after
consultation with outside counsel, that taking such action is required to
satisfy the fiduciary duties of such Board under applicable Law, (y) the
Company furnishes Parent three Business Days' prior written notice of the
taking of such action (which notice shall include a description of the
material terms and conditions of the Superior Proposal and identify the
person making the same) and, during such period, negotiates in good faith
with Parent, and (z) prior to the expiration of such three Business Day
period, Parent has not offered to increase the Consideration payable in
the Arrangement (or the Offer, if one has commenced) to the consideration
offered in such Superior Proposal. For purposes of this Agreement, (A)
"Material Subsidiary" means any Subsidiary of the Company whose
consolidated revenues, net income or assets constitute 10% or more of the
revenues, net income or assets of the Company and its Subsidiaries taken
as a whole, and (B) the term "Superior Proposal" means any bona fide
proposal, for which adequate financing arrangements have been made, to
effect an amalgamation, plan of arrangement, merger, consolidation or
takeover bid for all of the capital stock of the Company or any of its
Material Subsidiaries or a sale of all or substantially all of the assets
of the Company or any of its Material Subsidiaries, in either case, which
is on terms which the Board of Directors of the Company determines by a
majority vote of its directors in their good faith judgment (based on the
written advice of the Company's financial advisor) that the consideration
provided in such Superior Proposal likely exceeds the value of the
Consideration provided for in the Arrangement (or any revised proposal
made by Parent), after taking into account all relevant factors,
including any conditions to such Superior Proposal, the form of
consideration contemplated by such Superior Proposal, the timing of the
closing thereof, the risk of nonconsummation, the ability of the person
making the Superior Proposal to finance the transactions contemplated
thereby and any required filings or Approvals. Nothing in this Section
7.1 shall permit the Company to terminate this Agreement or affect any
other obligation of the Company under this Agreement.
(d) In addition to the other obligations of the Company set forth in
this Section 7.1, the Company shall immediately advise Parent orally and
in writing of any request for information with respect to any Competing
Proposal, or any inquiry with respect to or which could result in a
Competing Proposal, the material terms and conditions of such request,
Competing Proposal or inquiry, and the identity of the person making the
same. The Company shall inform Parent on a prompt and current basis of
the status and content of any discussions regarding any Competing
Proposal with a third party and as promptly
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as practicable of any change in the price, structure or form of the
consideration or material terms of and conditions regarding any Competing
Proposal or of any other developments or circumstances which could
reasonably be expected to culminate in the taking of any of the actions
referred to in Section 7.1(c).
Section 7.2 Preparation of Circular.
(a) The Company shall have prepared and shall deliver to Parent
within five days following the date hereof, a draft Circular, and,
subject to receipt of the Interim Order and any necessary Canadian
Securities Commissions Approvals, shall cause the Circular to be mailed
to its Securityholders and filed in all jurisdictions where required at
the earliest practicable date but in any event not later than 14 days
following the date hereof. Subject to Section 7.1(c), the Company shall
use all reasonable efforts to obtain the necessary approval and adoption
of the Arrangement and this Agreement by its Securityholders. Unless the
Company shall have taken action permitted by the second sentence of
Section 7.1(c), and unless required by Applicable Securities Legislation,
the Company shall not mail to its Securityholders the Circular or any
amendment or supplement thereto without Parent's prior consent, which
consent shall not be unreasonably withheld or delayed. The Company shall
allow Parent's full participation in the preparation of the Circular and
any amendment or supplement thereto, shall consult with Parent and its
advisors concerning any comments from any Governmental Authority with
respect thereto, and notwithstanding the foregoing, unless the Company
shall have taken action permitted by the second sentence of Section
7.1(c), and unless required by Applicable Securities Legislation, shall
not file or mail to its Securityholders the Circular or any amendment or
supplement thereto without Parent's prior consent.
(b) The Circular shall include the recommendation of the Board of
Directors of the Company in favor of the approval and adoption of this
Agreement and the Arrangement, except to the extent that the Company
shall have withdrawn or modified its recommendation of this Agreement or
the Arrangement as permitted by Section 7.1(c).
(c) Each party hereto agrees to furnish all information concerning
itself as may be reasonably required to prepare the Circular or to make
any other filings required by applicable Law. Each party hereto agrees to
correct any information provided by it for use in the Circular that has
become false or misleading in any material respect.
(d) The Company shall mail the Circular together with documents to
effect the exchange of Common Shares and Employee Options as the Paying
Agent or Acquiror shall deem reasonably necessary, which may include (i)
a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Paying Agent and shall be in a
form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for effecting the transfer and/or cancellation of the
Certificates in exchange for the consideration specified in the Plan of
Arrangement.
Section 7.3 Company Securityholders Meeting. The Company shall
promptly after the date hereof take all action necessary in accordance with
the Interim Order, the Legislation and its Articles of Incorporation and
By-laws to duly call, give notice of and (unless
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Parent requests otherwise) hold the Company Securityholders Meeting at the
soonest practicable date and shall consult with Parent in connection
therewith. Once the Company Securityholders Meeting has been called and
noticed, the Company shall not postpone or adjourn (other than for the absence
of a quorum and then only to a future date specified by Parent) the Company
Securityholders Meeting without the prior written consent of Parent. The Board
of Directors of the Company has approved the Arrangement and the other
transactions contemplated hereby and recommended that the Arrangement and the
other transactions contemplated hereby be approved and authorized by the
Securityholders of the Company and, subject to Section 7.1(c), shall continue
to recommend that the Arrangement and the transactions contemplated hereby be
approved and authorized by the shareholders of the Company and include in the
Circular a copy of such recommendations; provided, however, that the Board of
Directors of the Company shall submit the Arrangement for a vote to the
Securityholders of the Company whether or not the Board of Directors of the
Company at any time subsequent to making such declaration takes any action
permitted by Section 7.1(c). The Company shall solicit from its
Securityholders proxies in favor of the Arrangement and shall take all other
action necessary or advisable to secure the vote or consent of its
Securityholders to approve and adopt this Agreement and the Arrangement;
provided that if Section 7.1(c) applies, then in lieu of the Company's
foregoing obligation to solicit such proxies, the Company shall provide
reasonable assistance to Parent and Acquiror in their solicitation of proxies
from the Company's Securityholders in favor of the Arrangement, including
providing lists of Securityholders and other information concerning it and its
Securityholders as may be required in order to prepare and mail such documents
and for Parent to make other contacts in connection therewith; provided,
further, that the Company warrants and covenants that no such information
furnished by it in connection with such proxy solicitation will contain any
untrue statement of a material fact or omit to state a material fact required
to be stated in any such document or necessary in order to make any
information in any such document not misleading in light of the circumstances
in which it is furnished. Without limiting the generality of the foregoing,
(i) the Company agrees that its obligation to duly call, give notice of,
convene and hold the Company Securityholders Meeting as required by this
Section 7.3, shall not be affected by the withdrawal, amendment or
modification of the Board of Directors' recommendation of approval and
adoption of this Agreement and the transactions contemplated hereby, and (ii)
the Company agrees that its obligations under this Section 7.3 shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Competing Proposal.
Section 7.4 Access to Information; Confidentiality; Public
Announcements.
(a) Upon reasonable notice, the Company shall (and shall cause each
of its Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives and agents of Parent (collectively
"Parent Representatives"), full access, during the period prior to the
Effective Date, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each
of its Subsidiaries to) furnish promptly to the Parent (i) a copy of each
report, schedule, registration statement and other document filed or
received by it pursuant to the Legislation during such period and (ii)
all information concerning its business, properties, books, contracts,
commitments, record and personnel as Parent may reasonably request. The
Company shall (and shall cause each of its Subsidiaries to) make
available to the other party the appropriate individuals for discussion
of such entity's business, properties
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and personnel as Parent or Parent Representatives may reasonably request.
No investigation pursuant to this Section shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
(b) Parent shall keep all information obtained pursuant to clause
(a) above confidential in accordance with the terms of the Confidential
Non-Disclosure Agreement, dated July 6, 2000 (the "Confidentiality
Agreement"), between Parent and the Company. Anything contained in the
Confidentiality Agreement to the contrary notwithstanding, the Company
and Parent hereby agree that each such party may issue press release(s)
or make other public announcements in accordance with clause (c) below.
(c) Parent and the Company shall consult with and obtain the
approval of the other party before issuing any press release or other
public announcement with respect to the Arrangement or this Agreement and
shall not issue any such press release prior to such consultation and
approval, except as may be required by applicable Law pursuant to the
written request of any national securities exchange, national automated
quotation system, a Canadian Securities Administrator or a stock exchange
upon which the Company's shares are listed, in which case the party
proposing to issue such press release or make such public announcement
shall use its best efforts to consult in good faith with the other party
before issuing any such press release or making any such public
announcement.
Section 7.5 Reasonable Best Efforts; Further Assurances.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each party hereto shall use its reasonable best efforts to
take, or cause to be taken, all actions, and do, or cause to be done, and
to assist and cooperate with the other party or parties in doing, all
things necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the Arrangement and the other
transactions contemplated hereby and by the Related Agreements. The
Company and Parent shall each use its reasonable best efforts to (i) as
promptly as practicable, obtain all Approvals necessary to consummate the
Arrangement and the other transactions herein and each party hereto shall
make all filings under applicable Law required in connection with the
authorization, execution and delivery of this Agreement and the
consummation by each of them of the transactions contemplated hereby and
thereby, including the Arrangement (in connection with which Parent and
the Company will cooperate with each other in connection with the making
of all such filings, including providing copies of all such documents to
the non-filing party and its advisors prior to filings and, if requested,
will accept all reasonable additions, deletions or changes suggested in
connection therewith); (ii) furnish all information required for any
application or other filing to be made pursuant to the Legislation or any
other Law or any applicable regulations of any Governmental Authority
(including all information required to be included in the Circular) in
connection with the transactions contemplated by this Agreement and the
Related Agreements; and (iii) lift, rescind or mitigate the effects of
any injunction or other Order adversely affecting the ability of any
party hereto to consummate the transactions contemplated hereby and
thereby and to prevent, with respect to any threatened or such injunction
or other Order, the issuance or entry thereof, provided,
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however, that neither Parent nor any of its Affiliates shall be under any
obligation to (x) make proposals, execute or carry out agreements or
submit to Orders providing for the sale or other disposition or holding
separate (through the establishment of a trust or otherwise) of any
assets or categories of assets of Parent, any of its Affiliates,
including its Subsidiaries, the Company or the holding separate of the
common shares of the Company or imposing or seeking to impose any
limitation on the ability of Parent or any of its Affiliates, including
its Subsidiaries, to conduct their business or own such assets or to
acquire, hold or exercise full rights of ownership of common shares of
the Company, or (y) otherwise take any step to avoid or eliminate any
impediment which may be asserted under any applicable Law governing
competition, monopolies or restrictive trade practices which, in the
reasonable judgment of Parent, might result in a limitation of the
benefit expected to be derived by Parent as a result of the transactions
contemplated hereby or might adversely affect the Company, Parent or any
of their respective Affiliates, including Subsidiaries. Neither party
hereto will take any action which results in any of the representations
or warranties made by such party pursuant to Articles 3 or 4, as the case
may be, becoming untrue or inaccurate in any material respect.
(b) The parties hereto shall use their reasonable best efforts to
satisfy or cause to be satisfied all of the conditions precedent that are
set forth in Article 5, as applicable to each of them, and to cause the
transactions contemplated by this Agreement to be consummated. Each party
hereto, at the reasonable request of another party hereto, shall execute
and deliver such other instruments and do and perform such other acts and
things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
(c) The Company and Parent shall cooperate with one another:
(i) in connection with the preparation of the Circular;
(ii) in connection with the preparation of any filing required
by the Legislation;
(iii) in determining whether any action by or in respect of, or
filing with, any Governmental Authority or other third party, is
required, or any Approvals are required to be obtained from parties
in connection with the consummation of the transactions contemplated
hereby;
(iv) in seeking any Approvals or making any filings, including
furnishing information required in connection therewith or with the
Circular, and seeking timely to obtain any such Approvals, or making
any filings; and
(v) in order to facilitate the achievement of the benefits
reasonably anticipated from Arrangement.
(d) The Company shall use its reasonable best efforts to cause its
Affiliates and other persons to transfer and assign all rights necessary
for the Company to continue to conduct its business consistent with
historical operations and as currently conducted, pursuant to
documentation and in a manner reasonably acceptable to Parent.
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(e) If any minority or class vote or any other vote other than the
Required Securityholder Approval is required at the Company
Securityholder Meeting pursuant to the Interim Order, Final Order or the
Legislation, then the Company shall use its reasonable best efforts to
obtain the vote or written consent of such person or persons from whom
such a vote is required and, if and as directed by Parent, shall use
reasonable best efforts to obtain the written agreement from such person
or persons to terminate and cancel his or their Options and Warrants.
(f) The Company shall prepare any filings or documents necessary to
effect, on the Effective Date and immediately after the Arrangement, a
continuance of the Company to Nova Scotia and an amalgamation of the
Company, its wholly-owned Nova Scotia Subsidiary and a wholly-owed Nova
Scotia Subsidiary of Acquiror, in form and substance satisfactory to
Parent and Acquiror, and shall otherwise cooperate with Parent and
Acquiror in effecting the foregoing continuance and amalgamation.
Section 7.6 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of the occurrence, or non-occurrence,
of any event the occurrence, or non-occurrence, of which results in any
representation or warranty contained in this Agreement being untrue or
inaccurate in any material respect (or, in the case of any representation
or warranty qualified by its terms by materiality or Material Adverse
Effect, being untrue or inaccurate in any respect) and any failure of the
Company, Parent or Acquiror, as the case may be, to comply with or
satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that
the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
(b) Each of the Company and Parent shall give prompt notice to the
other of (i) any notice or other communication from any person alleging
that the Approval of such person is or may be required in connection with
the Arrangement or the Related Agreements, (ii) any notice or other
communication from any Governmental Authority in connection with the
Arrangement or the Related Agreements, (iii) any Litigation, relating to
or involving or otherwise affecting the Company or its Subsidiaries or
Parent that relates to the Arrangement or the Related Agreements, (iv)
the occurrence of a default or event that, with notice or lapse of time
or both, will become a default under any Material Agreement of the
Company, and (v) any fact, event, change, development, circumstance,
condition or effect that could reasonably be expected to have a Material
Adverse Effect on the Company or Parent or is likely to delay or impede
the ability of either Parent or the Company to consummate the
transactions contemplated by this Agreement or the Related Agreements or
to fulfill their respective obligations set forth herein or therein.
(c) The Company shall give (or shall cause its Subsidiaries to give)
any notices to third persons, and use, and cause its Subsidiaries to use,
their respective reasonable best efforts to obtain any consents from
third persons (i) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, (ii) otherwise required
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under any contracts in connection with the consummation of the
transactions contemplated hereby or (iii) required to prevent a Material
Adverse Effect on the Company from occurring. If the Company shall fail
to obtain any such consent from a third person, the Company shall use its
reasonable best efforts, and will take any such actions reasonably
requested by Parent, to limit the adverse effect upon the Company, its
Subsidiaries, and their businesses resulting, or which would result after
the Closing, from the failure to obtain such consent.
Section 7.7 Takeover Laws. If any form of anti-takeover statute,
other Laws, charter provision or contract is or shall become applicable to the
Arrangement or the other transactions contemplated hereby or by the Related
Agreements, the Company and the Board of Directors of the Company shall grant
such Approvals and take such actions as are necessary under such Laws and
provisions so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to eliminate or minimize the effects of such Law,
provision or contract on the transactions contemplated hereby or thereby.
Section 7.8 Shareholder Agreements. The Company acknowledges and
agrees to be bound by and comply with the provisions of each Shareholder
Agreement as if a party thereto with respect to stop transfer orders and
limits on the voting and transfers of Common Shares subject to such
Shareholder Agreement, and agrees to notify the transfer agent for any Common
Shares and provide such documentation and do such other things as may be
necessary to effectuate the provisions of each Shareholder Agreement.
Section 7.9 Continuing Employee Agreements. The Company shall use
its reasonable best efforts, on behalf of itself and of Parent, (a) to cause
each of the persons identified in Section 5.1(i) of the Parent Disclosure
Schedule to execute and deliver to Parent, and (b) to cause each of the
persons identified in Sections 5.1(h) and 5.1(i) of the Parent Disclosure
Schedule to comply with the terms of, a Continuing Employee Agreement. Parent
shall use its reasonable best efforts to assist the Company in satisfying the
foregoing covenant, including reasonably responding to Company requests in
connection with its efforts to retain such persons; provided, however, that
Parent shall not be obligated to pay or promise any monies or additional
compensation or any other benefit pursuant to this Section 7.9.
Section 7.10 Founders Agreements. The Company shall use its
reasonable best efforts, on behalf of itself and of Parent, to cause each of
the persons identified in Section 5.1(j) of the Parent Disclosure Schedule to
execute and deliver to Parent, and to comply with, a Founders Agreement.
Section 7.11 Release Agreements. The Company shall use its
reasonable best efforts, on behalf of itself and of Parent and its Affiliates,
to cause each of the persons identified in Section 5.1(k) of the Parent
Disclosure Schedule to execute and deliver, and to comply with, a Release
Agreement.
Section 7.12 Securityholders Claims. The Company shall not settle
or compromise any claim brought by any present, former or purported holder of
any securities of the Company in connection with the transactions contemplated
by this Agreement prior to the Effective Time without the prior written
consent of Parent.
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Section 7.13 338 Election.
(a) At the option of Parent, elections under Section 338 of the Code
shall be made for the Company and/or its Subsidiaries that are non-U.S.
corporations.
(b) The parties agree to allocate the "adjusted grossed-up basis"
(as defined in Treasury Regulation Section 1.338-5) of the Company and
its Subsidiaries for all Tax purposes as shown on an allocation schedule
as prepared by Parent in accordance with Section 338 of the Code and the
Treasury Regulations promulgated thereunder. To facilitate the
allocations described in the preceding sentence, the Company shall cause
its employees and accountants to develop the data needed to compute the
allocations, and shall provide to Parent all materials reasonably
requested by Parent or its representatives to facilitate their
confirmation of the data.
Section 7.14 Common Shares Listing. The Company shall ensure that
its Common Shares remain listed on The Toronto Stock Exchange from the date
hereof to, and including, the Effective Date.
Section 7.15 Indemnification and Related Matters.
(a) All rights to indemnification existing in favor of the present
or former directors and officers of the Company (as such) or any of the
Subsidiaries of the Company or present or former directors and officers
(as such) of the Company or any of the Subsidiaries of the Company
serving or who served at the Company's or any of the Subsidiaries of the
Company request as a director, officer, employee, agent or representative
of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise (each such present or former director or
officer of the Company or any of the Subsidiaries of the Company, an
"Indemnified Party"), as provided by the Act, contract or in the
Company's charter or bylaws or similar documents of any of the
Subsidiaries of the Company in each case as in effect as of the date
hereof with respect to matters occurring prior to the Effective Date,
shall survive and shall continue in full force and effect and without
modification for a period of not less than the statutes of limitations
applicable to such matters.
(b) Parent shall cause to be maintained for a period of six years
from the Effective Date the Company's current directors and officers
insurance policy (the "Company's D&O Insurance") to the extent that it
provides coverage for events occurring prior to the Effective Date for
all persons who are directors and officers of the Company on the date of
this Agreement, so long as the total premium therefor would not be in
excess of US$146,875, in the aggregate (the "Maximum Premium"). Upon
request by Parent, the Company shall use its reasonable best efforts to
extend coverage under the Company's D&O Insurance by obtaining a six-year
"tail" policy (provided, that the lump sum payment to purchase such
coverage does not exceed the Maximum Premium) to be effective from and
after the Effective Date and such "tail" policy shall satisfy Parent's
obligations under this Section 7.15(b). Parent's obligations under this
Section 7.15(b) shall also be satisfied if Parent's directors and
officers insurance provides (or is amended to provide) substantially
similar coverage for events occurring prior to the Effective Date for
persons who are directors and officers of the Company on the date of this
Agreement.
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If the Company's existing directors and officers insurance expires, is
terminated or cancelled during such six-year period or a "tail" policy
cannot be purchased on the terms set forth above and Parent cannot or
determines not to satisfy its obligations under this Section 7.15(b)
pursuant to the preceding sentence, Parent shall use its reasonable best
efforts to cause to be obtained as much directors and officers insurance
as can be obtained for the remainder of such period for a total premium
not in excess of the Maximum Premium.
(c) This Section 7.15, which shall survive the consummation of this
Agreement and the Arrangement, is intended to benefit each person
entitled to indemnification hereunder.
ARTICLE 8 - AMENDMENT AND TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the
Arrangement contemplated hereby may be abandoned at any time prior to the
Effective Date, notwithstanding approval thereof by the Securityholders of the
Company:
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company if the Arrangement shall not
have been consummated on or before October 18, 2001; provided, however,
that if the Arrangement shall not have been consummated due to the
decision of the Arrangement Court to require a class or minority vote or
to implement a Final Order materially different from the Plan of
Arrangement in the form attached hereto as Exhibit A, then such date
shall be extended to December 18, 2001; and provided, further, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose wilful failure to fulfill any material
obligation under this Agreement has been the cause of, or resulted in,
the failure of the Arrangement to have been consummated on or before such
date;
(c) By either Parent or the Company, if a Court or Governmental
Authority shall have issued an Order or taken any other action, in each
case which has become final and non-appealable and which restrains,
enjoins or otherwise prohibits the Arrangement;
(d) By either Parent or the Company, if, at the Company
Securityholders Meeting (including any adjournment or postponement
thereof), the requisite vote of the Securityholders of the Company to
adopt this Agreement and to approve the Arrangement shall not have been
obtained;
(e) By Parent, if the Board of Directors of the Company or any
committee thereof shall have (i) approved or recommended, or proposed to
approve or recommend, any Competing Proposal other than the Arrangement,
(ii) failed to present and recommend the approval and adoption of the
Arrangement, this Agreement or the transactions contemplated hereby, to
the Securityholders of the Company, or withdrawn or modified, or proposed
to withdraw or modify, in a manner adverse to Parent or Acquiror, its
recommendation or approval of the Arrangement, this Agreement or the
transactions contemplated hereby, (iii) upon a request by Parent to
publicly reaffirm the approval and
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recommendation of the Arrangement, this Agreement and the transactions
contemplated hereby, failed to do so within two Business Days after such
request is made, (iv) entered, or caused the Company or any Material
Subsidiary to enter, into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Competing
Proposal, (v) taken any other action which constitutes a material breach
of Section 7.1, or (vi) resolved or announced its intention to do any of
the foregoing;
(f) By Parent, if neither Parent nor Acquiror is in material breach
of its obligations under this Agreement, and if (i) at any time that any
of the representations and warranties of the Company herein become untrue
or inaccurate such that Section 5.1(a) would not be satisfied (treating
such time as if it were the Effective Date for purposes of this Section
8.1(f)) or (ii) there has been a breach on the part of the Company of any
of its covenants or agreements contained in this Agreement such that
Section 5.1(b) would not be satisfied (treating such time as if it were
the Effective Date for purposes of this Section 8.1(f)), and, in both
case (i) and case (ii), such breach (if curable) has not been cured
within 15 days after notice to the Company;
(g) By the Company, if it is not in material breach of its
obligations under this Agreement, and if (i) at any time that any of the
representations and warranties of Parent or Acquiror herein become untrue
or inaccurate such that Section 5.2(a) would not be satisfied (treating
such time as if it were the Effective Date for purposes of this Section
8.1(g)) or (ii) there has been a breach on the part of Parent or Acquiror
of any of their respective covenants or agreements contained in this
Agreement such that Section 5.2(b) would not be satisfied (treating such
time as if it were the Effective Date for purposes of this Section
8.1(g)), and such breach (if curable) has not been cured within 15 days
after notice to Parent;
(h) By Parent, if any Designated Shareholder shall have breached or
failed to perform in any material respect any representation, warranty,
covenant or agreement contained in its Shareholder Agreement, that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or materially impede the ability of the parties
to consummate the Arrangement as contemplated herein; or
(i) By Parent, if the number of Dissenting Shares shall represent in
the aggregate more than 10% of the total number of outstanding Common
Shares on a fully-diluted basis.
Section 8.2 Effect of Termination. Except as provided in this
Section 8.2 or in Section 8.3, in the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement (other than this Section 8.2
and Sections 2.3, 7.4(b), 7.4(c), and 8.3 and Article 9, which shall survive
such termination) will forthwith become void, and there will be no liability
on the part of Parent, Acquiror or the Company or any of their respective
officers or directors to the other and all rights and obligations of any party
hereto will cease, except that nothing herein will relieve any party from
liability for any breach, prior to termination of this Agreement in accordance
with its terms, of any representation, warranty, covenant or agreement
contained in this Agreement.
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Section 8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Arrangement is consummated.
(b) In the event that Parent terminates this Agreement pursuant to
Section 8.1(d) (provided that with respect to Section 8.1(d), at the time
of such termination, a Competing Proposal has been publicly announced or
is generally known by the Company's shareholders and either (x) a
Competing Proposal is consummated within twelve months or (y) the Company
enters into an agreement with a third party for a Competing Proposal
within 12 months from the date of such termination), or Section 8.1(e),
then the Company shall pay to Parent, simultaneously with such
termination of this Agreement (or at the time the Company enters into an
agreement for a Competing Proposal in the event the Termination Fee
becomes payable pursuant to clause (y) above), a fee in cash equal to
$1,410,000 (the "Termination Fee"), which shall be payable by wire
transfer of immediately available funds to an account specified by
Parent.
(c) In the event that Parent terminates this Agreement pursuant to
Section 8.1(f), then the Company shall pay to Parent, simultaneously with
such termination of this Agreement, a fee in cash equal to $846,000,
which shall be payable by wire transfer of immediately available funds to
an account specified by Parent.
(d) Nothing in this Section 8.3 shall be deemed to be exclusive of
any other rights or remedies any party may have hereunder or under any
Related Agreement or at law or in equity for any breach of this Agreement
or any of the Related Agreements.
Section 8.4 Amendment. This Agreement may be amended by an
instrument in writing signed by all of the parties hereto, at any time before
or after the approval of the matters presented in connection with the
Arrangement by the shareholders of the Company, but, after any such approval,
no amendment shall be made which, by Law or in accordance with the rules of
any stock exchange or automated quotation service on which Common Shares are
listed or traded, would require further approval by such shareholders.
Section 8.5 Waiver. At any time prior to the Effective Date, any
party hereto may extend the time for the performance of any of the covenants,
obligations or other acts required hereunder, waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE 9 - GENERAL PROVISIONS
Section 9.1 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered personally or sent by nationally recognized overnight courier or by
registered or certified mail, postage prepaid, return receipt requested, or by
electronic mail, with a copy thereof to be delivered or sent as provided above
or by facsimile or telecopier, as follows:
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(a) If to Parent or Acquiror:
America Online, Inc.
00000 XXX Xxx
Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Senior Vice President for Business Affairs
With copies to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
(b) If to the Company:
InfoInterActive Inc.
0000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxx
Xxxx Xxxxxx X0X 0X0
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx XxXxxxxx
With copies to:
Xxxxxxx Xxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
000 - 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X-0X0
Tel.: (000)000-0000
Fax: (000)000-0000
Attn: Xxxxxx X. Xxxxxxxxxxx, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (i) in the case of
personal delivery, nationally recognized overnight courier or registered or
certified mail, on the date of such delivery and (ii) in the case of facsimile
or telecopier or electronic mail, upon confirmed receipt.
Section 9.2 Company and Parent Disclosure Schedules. The Company
Disclosure Schedule and the Parent Disclosure Schedule shall each be divided
into sections corresponding to the sections of this Agreement. Disclosure of
any fact or item in any section of a party's Disclosure Schedule (unless
expressly referenced with specificity therein) shall not,
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even if the existence of the fact or item or its contents be relevant to any
other section of such Disclosure Schedule, be deemed to be disclosed with
respect to such other section.
Section 9.3 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 9.4 Entire Agreement. This Agreement and the Related
Agreements (including all exhibits and schedules thereto) and other documents
and instruments delivered in connection herewith constitute the entire
agreement and supersede all prior agreements and undertakings (other than the
Confidentiality Agreement), both written and oral, among the parties, or any
of them, with respect to the subject matter hereof and thereof.
Section 9.5 Assignment. This Agreement may not and shall not be
assigned by operation of Law or otherwise, except that Parent and Acquiror may
assign all or any of their rights hereunder to any Affiliate; provided that no
such assignment shall relieve the assigning party of its obligations
hereunder. Any assignment in violation of this Agreement shall be void.
Section 9.6 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
Section 9.7 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor will any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
to, and not exclusive of, any rights or remedies otherwise available.
Section 9.8 Governing Law; Enforcement. This Agreement and the
rights and duties of the parties hereunder shall be governed by, and construed
in accordance with, the Law of the State of New York. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or any Related Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement or any Related Agreement and to enforce specifically the
terms and provisions of this Agreement or any Related Agreement in any Federal
court sitting in the Southern District of New York, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto, (a) consents to submit itself to the exclusive
personal jurisdiction of any Federal court sitting in the Southern District of
New York in the event any dispute arises out
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of this Agreement or any Related Agreement or any transaction contemplated
hereby or thereby, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court, (c) agrees that it will not bring any action relating to this Agreement
or any Related Agreement or any transaction contemplated hereby or thereby in
any court other than any Federal court sitting in the Southern District of New
York and (d) waives any right to trial by jury with respect to any action
related to or arising out of this Agreement or Related Agreement or any
transaction contemplated hereby or thereby.
Section 9.9 No Third-Party Beneficiaries. Except as specifically
set forth herein, nothing in this Agreement, express or implied, is intended
to confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Acquiror and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
AMERICA ONLINE, INC.
By: /s/ Xxxxx Xxxxxxxx
________________________________________
Name: Xxxxx Xxxxxxxx
Title: Senior Vice President
IAN ACQUISITION ULC
By: /s/ Xxxxx X. Xxxxxxx
________________________________________
Name: Xxxxx X. Xxxxxxx
Title: President
INFOINTERACTIVE INC.
By: /s/ Xxxx XxXxxxxx
________________________________________
Name: Xxxx XxXxxxxx
Title: Chairman & CEO
