Exhibit 2.17
MITEL NETWORKS CORPORATION
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CLASS A CONVERTIBLE PREFERRED SHARE
SUBSCRIPTION AGREEMENT
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April 23, 2004
Portions of this document marked with "***" are subject to a pending
Confidential Treatment Request filed with the Secretary of the Securities and
Exchange Commission and have been filed separately with the Securities and
Exchange Commission.
TABLE OF CONTENTS
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MITEL NETWORKS CORPORATION............................................... 1
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION................... 2
1.1 DEFINITIONS..................................................... 2
1.2 INTELLECTUAL PROPERTY DEFINITIONS............................... 10
1.3 CERTAIN RULES OF INTERPRETATION................................. 12
1.4 KNOWLEDGE....................................................... 13
1.5 ENTIRE AGREEMENT................................................ 13
1.6 SCHEDULES....................................................... 14
1.7 EXHIBITS........................................................ 14
ARTICLE 2 SHARE AND WARRANT SUBSCRIPTION................................. 14
2.1 SUBSCRIPTION AND ISSUANCE OF PURCHASED SHARES AND EDGESTONE
WARRANTS..................................................... 14
2.2 PURCHASE PRICE.................................................. 15
2.3 CLOSING......................................................... 15
2.4 CLOSING DELIVERIES.............................................. 15
2.5 CLOSING CONDITIONS IN FAVOUR OF EDGESTONE....................... 16
2.6 CLOSING CONDITIONS IN FAVOUR OF THE CORPORATION................. 19
ARTICLE 3 ADDITIONAL EQUITY INVESTMENT................................... 21
3.1 ADDITIONAL INVESTMENT........................................... 21
3.2 EDGESTONE OPTION................................................ 21
3.3 ADJUSTMENTS..................................................... 22
3.4 ADDITIONAL COMMON SHARES........................................ 22
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.............. 22
4.1 INCORPORATION AND ORGANIZATION.................................. 23
4.2 CORPORATE RECORDS............................................... 23
4.3 SUBSIDIARIES.................................................... 23
4.4 QUALIFICATION IN FOREIGN JURISDICTIONS.......................... 24
4.5 AUTHORIZED, ISSUED AND OUTSTANDING CAPITAL...................... 24
4.6 LAWFUL ISSUANCE................................................. 26
4.7 CORPORATE AUTHORIZATION......................................... 26
4.8 NO GOVERNMENTAL OR THIRD PARTY CONSENTS......................... 27
4.9 FINANCIAL STATEMENTS - ABSENCE OF CERTAIN CHANGES............... 27
4.10 INVENTORY VALUATION............................................. 29
4.11 ACCOUNTS RECEIVABLE............................................. 29
4.12 ACCOUNTS PAYABLE................................................ 30
4.13 INDEBTEDNESS.................................................... 30
4.14 ABSENCE OF UNDISCLOSED LIABILITIES.............................. 30
4.15 CASH AND CASH EQUIVALENTS....................................... 30
4.16 TAX MATTERS..................................................... 31
4.17 REAL PROPERTY................................................... 32
4.18 PERSONAL PROPERTY............................................... 33
4.19 HEALTH, SAFETY AND ENVIRONMENTAL MATTERS........................ 34
4.20 EMPLOYMENT CONTRACTS............................................ 34
4.21 EMPLOYEE PLANS.................................................. 36
4.22 UNIONS.......................................................... 38
4.23 MATERIAL CONTRACTS.............................................. 38
4.24 CUSTOMERS, LICENSORS AND SUPPLIERS.............................. 40
4.25 DESCRIPTION OF BUSINESS INTELLECTUAL PROPERTY................... 41
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TABLE OF CONTENTS
(continued)
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4.26 INTELLECTUAL PROPERTY RIGHTS.................................... 41
4.27 LITIGATION...................................................... 46
4.28 INSURANCE....................................................... 46
4.29 INSIDERS AND CONFLICTS OF INTEREST.............................. 47
4.30 BROKERS......................................................... 48
4.31 NO SALE AGREEMENTS.............................................. 48
4.32 PAYMENT OF BRECONRIDGE NOTE..................................... 48
4.33 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.................... 48
4.34 PUBLIC DISCLOSURES.............................................. 49
4.35 COMPLIANCE WITH SECURITIES LAW.................................. 49
4.36 FULL ACCESS..................................................... 50
4.37 DISCLOSURE...................................................... 50
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR................. 50
5.1 REPRESENTATIONS AND WARRANTIES OF INVESTOR...................... 50
5.2 INVESTOR ACKNOWLEDGEMENTS....................................... 52
5.3 RELIANCE UPON REPRESENTATIONS AND WARRANTIES.................... 54
ARTICLE 6 REGISTRATION AND TRANSFER OF SECURITIES........................ 54
6.1 TRANSFER AND EXCHANGE OF PURCHASED SHARES AND
EDGESTONE WARRANTS............................................ 54
6.2 REPLACEMENT OF CERTIFICATES..................................... 54
ARTICLE 7 COVENANTS OF THE CORPORATION................................... 55
7.1 POST-CLOSING COVENANTS.......................................... 55
ARTICLE 8 LEAD WORK FEE AND EXPENSES..................................... 56
8.1 PAYMENT OF LEAD WORK FEE........................................ 56
8.2 REIMBURSEMENT OF EXPENSES....................................... 56
8.3 BROKER FEES..................................................... 56
ARTICLE 9 INDEMNIFICATION................................................ 57
9.1 NON-MERGER AND EXCLUSIVE REMEDY................................. 57
9.2 GENERAL INDEMNIFICATION......................................... 57
9.3 AGENCY FOR REPRESENTATIVES...................................... 58
9.4 TIME LIMITATIONS................................................ 58
9.5 LIMITATIONS AS TO AMOUNT........................................ 59
9.6 NOTICE OF THIRD PARTY CLAIMS.................................... 59
9.7 DEFENCE OF THIRD PARTY CLAIMS................................... 59
9.8 ASSISTANCE FOR THIRD PARTY CLAIMS............................... 60
9.9 SETTLEMENT OF THIRD PARTY CLAIMS................................ 60
9.10 DIRECT CLAIMS................................................... 60
9.11 FAILURE TO GIVE TIMELY NOTICE................................... 61
9.12 REDUCTIONS AND SUBROGATION...................................... 61
9.13 TAX EFFECT...................................................... 61
9.14 ADDITIONAL RULES AND PROCEDURES................................. 61
ARTICLE 10 GENERAL....................................................... 62
10.1 AMENDMENTS...................................................... 62
10.2 WAIVER.......................................................... 62
10.3 SUCCESSORS AND ASSIGNS.......................................... 62
10.4 NOTICES......................................................... 62
10.5 BINDING EFFECT AND BENEFITS..................................... 64
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TABLE OF CONTENTS
(continued)
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10.6 FURTHER ASSURANCES.............................................. 64
10.7 ARBITRATION..................................................... 64
10.8 EQUITABLE RELIEF................................................ 65
10.9 CONFIDENTIALITY................................................. 65
10.10 PUBLICITY....................................................... 65
10.11 COUNTERPARTS.................................................... 65
10.12 LANGUAGE........................................................ 65
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CLASS A CONVERTIBLE PREFERRED SHARE SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made this 23rd day of April, 2004,
BETWEEN:
MITEL NETWORKS CORPORATION, a corporation incorporated under the laws of
Canada (the "Corporation")
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EDGESTONE CAPITAL EQUITY FUND II-B GP, INC., as agent for EdgeStone Capital
Equity Fund II-A, L.P. and its parallel investors (as listed on Schedule
D), and EDGESTONE CAPITAL EQUITY FUND II NOMINEE, INC., as nominee for
EdgeStone Capital Equity Fund II-A, L.P. and its parallel investors (as
listed on Schedule D) (collectively "EdgeStone" or the "Investor")
RECITALS:
A. The authorized capital of the Corporation consists of an unlimited number
of Common Shares.
B. The issued capital of the Corporation consists of 141,317,207 Common Shares
and no other shares.
C. Prior to Closing, the Corporation shall file articles of amendment (the
"Articles of Amendment") to create: (i) an unlimited number of Class A
Convertible Preferred Shares, issuable in series, of which one series shall
be designated as Class A Convertible Preferred Shares, Series 1; and (ii)
an unlimited number of Class B Convertible Preferred Shares, issuable in
series, of which one series shall be designated as Class B Convertible
Preferred Shares, Series 1.
D. In conjunction with the Closing and after the filing of the Articles of
Amendment: (i) the Common Shares of the Corporation held by WCC and PTIC
(as such terms are defined below) shall be exchanged for Class B
Convertible Preferred Shares, Series 1; and (ii) the Common Shares of the
Corporation held by each of the Converted Debenture Holders (as such term
is defined below) that has executed a Debenture Holder Consent (as such
term is defined below) shall be converted into Class B Convertible
Preferred Shares, Series 1, on the basis hereinafter provided.
E. The Corporation wishes to issue and sell an aggregate of 20,000,000 Class A
Convertible Preferred Shares, Series 1 in the capital of the Corporation to
EdgeStone and EdgeStone wishes to purchase such shares upon the terms and
conditions set forth in this Agreement (the "Investment").
F. As the lead investor by virtue of the Investment, the Corporation wishes to
also issue to EdgeStone the EdgeStone Warrants on the basis hereinafter
provided.
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G. Immediately upon completion of the transactions referred to or otherwise
contemplated by this Agreement and the Other Agreements, including the
completion of the Investment and the issuance of the Class B Convertible
Preferred Shares, Series 1 described above (but excluding the issuance of
securities in relation to the Additional Investment, and the Common Share
offering contemplated in Section 3.4), the issued and outstanding capital
of the Corporation shall be as set out in Schedule A.
THEREFORE the parties agree as follows:
Article 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 Definitions
Whenever used in this Agreement (including the Recitals hereto), the following
words and terms shall have the meanings set out below:
"Act" means the Canada Business Corporations Act;
"Additional Investment" has the meaning ascribed thereto in Section 3.1(a);
"Affiliate" of a Person means any Person that would be deemed to be an
"affiliated entity" of such first mentioned Person under Rule 45-501
promulgated under the Securities Act (Ontario) as it exists on the date of
this Agreement;
"Affiliated Group" includes any combined, consolidated, or unitary group,
as defined under any applicable United States, Canadian, state, provincial,
local, or foreign income tax law;
"Aggregate Purchase Price" means the sum of the Share Purchase Price and
the Warrant Purchase Price;
"Agreement" means this Class A Convertible Preferred Share Subscription
Agreement, including all schedules and exhibits and all amendments or
restatements as permitted, and references to "Article" or "Section" mean
the specified Article or Section of this Agreement;
"Annual Budget" has the meaning ascribed to such term in the Shareholders
Agreement;
"Articles of Amendment" has the meaning ascribed thereto in the Recitals
hereto;
"Arm's Length" has the meaning ascribed to such term for the purposes of
the Income Tax Act (Canada);
"August 2002 Debentures" means the mandatory convertible debentures issued
by the Corporation in August 2002 evidencing indebtedness of the
Corporation to the holders thereof in the aggregate principal amount of
$10,089,003;
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"August 2002 Debenture Shares" means an aggregate of 5,445,775 Common
Shares issued on or about October 31, 2003 upon the conversion of the
August 2002 Debentures;
"Business" means the business of developing, selling, licensing,
distributing, servicing and maintaining, as applicable, enterprise and
customer premises business communications solutions and services, including
advanced voice, video and data communications platforms over internet
protocol, desktop phones, Internet appliances and client and server
software applications and code (including applications for customer
relationship management and mobility, messaging and multimedia
collaboration);
"Business Day" means any day, other than a Saturday or Sunday, on which
chartered banks in Ottawa, Ontario are open for commercial banking business
during normal banking hours;
"Canadian Securities Laws" means the securities legislation, regulations,
rules and published policy statements, blanket orders and blanket rulings
and other regulatory instruments of the Securities Authorities of the
Province of Ontario;
"Claim" means any act, omission or state of facts, and any Legal
Proceeding, assessment, judgment, settlement or compromise relating
thereto, which may give rise to a right to indemnification under Article 9;
"Closing" means the completion of the subscription for the Purchased Shares
and EdgeStone Warrants by the Investor as contemplated in this Agreement;
"Closing Date" means April 23, 2004 or such earlier or later date as the
Corporation and the Investor may agree in writing;
"Code" means the United States Internal Revenue Code of 1986, as amended;
"Collective Agreement" means any collective agreement, letter of
understanding, letter of intent or other written communication with any
labour union or employee association that governs the terms and conditions
of employment of any employees of the Corporation or any Subsidiary,
including the collective agreements listed in Section 4.22 of the
Disclosure Schedule;
"Common Shares" means the common shares in the capital of the Corporation;
"Contract" means any written, oral, implied or other agreement, contract,
understanding, arrangement, instrument, note, guarantee, indemnity,
representation, warranty, deed, assignment, power of attorney, certificate,
commitment, option, covenant, assurance or undertaking of any nature. For
the purposes of any disclosure required under Section 4.23, the term
"Contracts" shall not include any Contracts as between the Corporation and
its Subsidiaries;
"Converted Debenture Holders" means the holders of the August 2002
Debenture Shares;
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"Converted Shares" means the Common Shares issued or issuable upon the
conversion of the Series A Shares;
"Debenture Holder Consent" means the consent and notice of conversion to be
executed by Converted Debenture Holders, substantially in the form attached
as Exhibit F-1;
"Disclosure Schedule" means the schedule of exceptions to the
representations and warranties of the Corporation, attached as Schedule B;
"EdgeStone Group" means:
(a) any Affiliate of EdgeStone;
(b) any other Person, provided that EdgeStone or any Affiliate
thereof has the exclusive right to exercise all rights of
EdgeStone transferred hereunder on behalf of such Person;
(c) any Person whose funds are managed by EdgeStone or an Affiliate
of EdgeStone;
(d) upon the termination or dissolution of any limited partnership or
other entity that is a Person referred to in clause (b), (A) the
beneficial holders of interests in such Person, and (B) any other
Person referred to in clause (b), whether or not, in either case,
an Affiliate described in clause (a) has the exclusive right to
exercise the rights of EdgeStone transferred hereunder on behalf
of such beneficial holder or Persons; and
(e) EdgeStone Capital Equity Fund II-A, L.P. and/or any Person which
agrees to invest with it on a parallel or co-investment basis
(and the respective partners thereof, if any) in the manner
contemplated in the constating documents of EdgeStone Capital
Equity Fund II-A, L.P.
"EdgeStone Purchase Option" has the meaning ascribed thereto in Section
3.2(a);
"EdgeStone Warrants" means the Series 1 Warrants and the Series 2 Warrants;
"Employee Plans" means all plans, arrangements, agreements, programs,
policies, practices or undertakings, whether or not in writing, with
respect to some or all of the current or former directors, officers,
employees, independent contractors, agents or other service providers of
the Corporation or any of the Subsidiaries which provide for or relate to:
(a) bonus, profit sharing or deferred profit sharing, performance
compensation, deferred or incentive compensation, share
compensation, share purchase or share option purchase, share
appreciation rights, phantom stock, employee loans, or any
compensation in addition to salary,
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(b) retirement or retirement savings, including, without limitation,
registered or unregistered pension plans, pensions, supplemental
pensions, registered retirement savings plans and retirement
compensation arrangements, or
(c) insured or self-insured benefits for or relating to income
continuation or other benefits during absence from work
(including short term disability, long term disability and
workers compensation), vacation, sick pay, hospitalization,
health, welfare, legal costs or expenses, medical or dental
treatments or expenses, life insurance, accident, death or
survivor's benefits, supplementary employment insurance, day
care, tuition or professional commitments or expenses or similar
employment benefits;
"Encumbrance" means any mortgage, hypothec, lien, charge, pledge, security
interest, right of set-off, or other type of encumbrance whether fixed or
floating, on any asset or assets, whether real, personal or mixed, tangible
or intangible, or pledge or hypothecation of any such assets or any
conditional sales agreement or any other title retention agreement relating
to any such assets, option, right of pre-emption, privilege, or any
obligation to assign, license or sub-license any asset including the
Business IP (as defined in Section 1.2), or any action, claim, right to
salvage, execution or demand of any nature whatsoever, howsoever created or
arising, or any Contract to create any of the foregoing;
"Environmental Laws" means, collectively, any and all federal, provincial,
state, local or foreign statutes, regulations, ordinances, orders, and
decrees relating to public health and safety, or the environment;
"Equity Fund" means EdgeStone Capital Equity Fund II-A, L.P.;
"ERISA" means the United States Employment Retirement Income Security Act
of 1974, as amended;
"ERISA Affiliate" means any entity that, together with the Corporation,
would be treated as a single employer under section 414 of the Code;
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended;
"Existing Shareholders Agreement" means the Amended and Restated
Shareholders Agreement made as of August 31, 2001 between the Corporation,
Mitel Systems Corporation, Zarlink and PTIC;
"Expenses" has the meaning ascribed thereto in Section 8.2(a);
"Financial Statement Date" has the meaning ascribed thereto in Section 4.9;
"Financial Statements" has the meaning ascribed to such term in Section
4.9;
"Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, bureau, official, minister,
Crown corporation, court, board, tribunal, dispute settlement panel or body
or other law, rule or regulation-making
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entity: (a) having or purporting to have jurisdiction on behalf of any
nation, province, state or other geographic or political subdivision
thereof; or (b) exercising, or entitled or purporting to exercise any
administrative, executive, judicial, legislative, policy, regulatory or
taxing authority or power;
"Hazardous Substance" means any pollutant, contaminant, toxic substance,
methane gas, oil, or hazardous materials or other chemicals or substances
regulated by any Environmental Laws;
"Indebtedness" means:
(a) all indebtedness for borrowed money, whether current or
long-term, or secured or unsecured,
(b) all indebtedness for the deferred purchase price of property or
services represented by a note or security agreement,
(c) all indebtedness created or arising under any conditional sale or
other title retention agreement (even though the rights and
remedies of the seller or lender under such agreement in the
event of default may be limited to repossession or sale of such
property),
(d) all indebtedness secured by a purchase money security interest or
other Lien to secure all or part of the purchase price of
property subject to such interest or Lien,
(e) all obligations under leases that have been or must be, in
accordance with generally accepted accounting principles,
recorded as capital leases in respect of which the Corporation or
any Subsidiary is liable as lessee,
(f) any liability in respect of banker's acceptances or letters of
credit, and
(g) all indebtedness of any Person that is directly or indirectly
guaranteed by the Corporation or any Subsidiary or that the
Corporation or any Subsidiary has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise assured a creditor against loss;
"Insiders" has the meaning ascribed thereto in the Securities Act
(Ontario);
"Investment" has the meaning ascribed thereto in the Recitals hereto;
"Lead Work Fee" has the meaning ascribed thereto in Section 8.1;
"Leased Real Property" means real property which the Corporation or a
Subsidiary has a right to use or occupy pursuant to a lease, including
those set forth and described in Section 4.17(a) of the Disclosure
Schedule;
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"Legal Proceeding" means any litigation, action, suit, investigation,
inquiry, hearing, claim, complaint, grievance, arbitration proceeding,
mediation, alternative dispute resolution procedure or other proceeding
(court, administrative, regulatory or otherwise), and includes any appeal
or review of and any application for same;
"Liens" means any and all liens, claims, mortgages, hypothecs, security
interests, charges, Encumbrances, and restrictions on transfer of any kind,
except, in the case of references to securities, any of the same arising
under applicable corporate or securities laws solely by reason of the fact
that such securities were issued pursuant to exemptions from registration
or prospectus requirements under such securities laws or otherwise arising
pursuant to the Shareholders Agreement or Registration Rights Agreement;
"Loss" means any and all loss, liability, damage, cost, expense, charge,
fine, penalty or assessment (including consequential damages, but excluding
loss of profits or revenue), resulting from or arising out of any Claim,
including the costs and expenses of any Legal Proceeding in relation to any
such Claim, and any assessment, judgment, settlement or compromise relating
thereto and all interest, punitive damages, fines and penalties and
reasonable legal fees and expenses incurred in connection therewith;
"Material Adverse Effect" means, with reference to the Corporation or any
of the Subsidiaries, a material adverse effect on the condition (financial
or otherwise), operations, business, assets, or prospects of the
Corporation and the Subsidiaries taken as a whole, the Corporation's
ability to consummate the transactions hereby contemplated, or the value of
the Purchased Shares or the Converted Shares, other than any Material
Adverse Effect resulting from industry-wide conditions affecting the
industry in which the Corporation or any of the Subsidiaries carry on
business or conditions affecting the economy in general;
"Material Subsidiary" means each of Mitel Networks Limited, Mitel Networks,
Inc., Mitel Networks International Limited and Mitel Networks Overseas
Limited;
"Other Agreements" means all of the agreements, instruments, certificates,
and other documents, including the Shareholders Agreement, the Registration
Rights Agreement and the EdgeStone Warrants, executed and delivered by or
on behalf of the Corporation or EdgeStone or any of their respective
Affiliates at the Closing or otherwise in connection with this Agreement
and the transactions contemplated herein (including, without limitation,
the certificates referred to in Sections 2.4(b)(ii) and 2.4(b)(iii));
"Owned Real Property" means the real and immoveable property owned by the
Corporation or any Subsidiary, as described in Section 4.17(a) of the
Disclosure Schedule, and includes all plants, buildings, structures,
erections, improvements, appurtenances and fixtures situate thereon or
forming part thereof;
"Party" or "Parties" means a party to this Agreement;
"Permit" means any permit, license, approval, authorization, certificate,
directive, order, variance, registration, right, privilege, concession or
franchise issued, granted, conferred or otherwise created by any
Governmental Authority;
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"Permitted Transferee" has the meaning ascribed to such term in the
Shareholders Agreement;
"Person" means any individual, sole proprietorship, partnership, firm,
entity, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, government, government
regulatory authority, governmental department, agency, commission, board,
tribunal, dispute settlement panel or body, bureau or court, and where the
context requires any of the foregoing when they are acting as trustee,
executor, administrator or other legal representative;
"Purchased Shares" has the meaning ascribed thereto in Section 2.1(a);
"PTIC" means Power Technology Investment Corporation;
"PTIC Exchange and Release Agreement" means the Exchange and Release
Agreement to be entered into between the Corporation and PTIC,
substantially in the form attached hereto as Exhibit F-2;
"PTIC Shares" means an aggregate of 4,000,000 Common Shares issued to PTIC
pursuant to the PTIC Subscription Agreement;
"PTIC Subscription Agreement" means the subscription agreement between PTIC
and the Corporation dated August 31, 2001, as amended by Amendment No. 1
dated May 3, 2002;
"Real Property" means the Leased Real Property and the Owned Real Property;
"Registration Rights Agreement" means the registration rights agreement to
be entered into between the Corporation, EdgeStone and certain other
shareholders of the Corporation, substantially in the form attached hereto
as Exhibit C;
"SEC" means the United States Securities and Exchange Commission;
"Securities Act" means the United States Securities Act of 1933, as
amended;
"Securities Authorities" means the securities commissions and other
regulatory authorities administering Canadian Securities Laws;
"Senior Bank Debt" means all Indebtedness owed to the Senior Lender;
"Senior Lender" means Bank of Montreal;
"Series 1 Warrants" means warrants to purchase certain Common Shares to be
issued to EdgeStone in accordance with this Agreement, substantially in the
form annexed hereto as Exhibit D-1;
"Series 2 Warrants" means warrants to purchase certain Common Shares to be
issued to EdgeStone in accordance with this Agreement, substantially in the
form annexed hereto as Exhibit D-2;
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"Series A Shares" means the Class A Convertible Preferred Shares, Series 1
in the capital of the Corporation having substantially the rights,
privileges, restrictions and conditions set forth in Exhibit A-1;
"Series B Shares" means the Class B Convertible Preferred Shares, Series 1
in the capital of the Corporation having substantially the rights,
privileges, restrictions and conditions set forth in Exhibit A-2;
"Share Purchase Price" has the meaning ascribed thereto in Section 2.2(a);
"Shareholders Agreement" means the shareholders agreement to be entered
into by the Corporation, EdgeStone, Mitel Systems Corporation, Mitel
Knowledge Corporation, Zarlink, PTIC, WCC and ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
substantially in the form attached hereto as Exhibit B;
"Stock Option Plan" means the stock option plan of the Corporation enacted
on March 6, 2001, as amended on May 8, 2001, August 3, 2001, June 18, 2002,
September 6, 2002 and June 13, 2003;
"Subsidiaries" means: (a) any corporation at least a majority of whose
outstanding Voting Shares is owned, directly or indirectly, by the
Corporation or by one or more of its Subsidiaries, or by the Corporation
and by one or more of its Subsidiaries, and includes each of the
corporations identified in Section 4.3 of the Disclosure Schedule; (b) any
general partnership, at least a majority of whose outstanding partnership
interests shall at the time be owned by the Corporation, or by one or more
of its Subsidiaries, or by the Corporation and one or more of its
Subsidiaries; and (c) any limited partnership of which the Corporation or
any of its Subsidiaries is a general partner, and "Subsidiary" means any
one of them;
"Tax" or "Taxes" means all taxes, assessments, duties, fees, levies, or
other charges imposed by any Governmental Authority, including, without
limitation, all federal, provincial, state, local, foreign and other
income, corporation, franchise, profits, capital gains, estimated, sales,
use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, environmental, customs, duties,
imposts, real property, personal property, capital stock, unemployment,
disability, payroll, license, employee, deficiency assessments, withholding
and other taxes, assessments, charges, duties, fees, levies or other
charges of any kind whatsoever imposed by any Governmental Authority
(whether payable directly or by withholding and whether or not requiring
the filing of a Tax Return) including any interest, penalties, or additions
to tax in respect of the foregoing and shall include any liability for such
amounts as a result either of being a member of a combined, consolidated,
unitary or Affiliated Group or of a contractual obligation to indemnify any
person or other entity;
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or
required to be filed in connection with the determination, assessment, or
collection of any Tax or the administration of any laws, regulations, or
administrative requirements relating to any Tax;
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"Time of Closing" means 11:00 a.m. (Eastern standard time) on the Closing
Date;
"TPC" means Her Majesty the Queen in Right of Canada, as represented by the
Minister of Industry;
"TPC Agreement" means TPC Agreement No. 720-481443 dated October 10, 2002
between the Corporation TPC, March Networks Corporation and Mitel Knowledge
Corporation;
"U.S. Employee Plans" means each "employee benefit plan", as such term is
defined in section 3(3) of ERISA, that is maintained or contributed to by
the Corporation or any ERISA Affiliate to the extent that any such plan
benefits U.S. employees;
"Voting Shares" means shares, interests, participations or other
equivalents in the equity interests (however designated) of a Person having
ordinary voting power for the election of the directors (or the equivalent)
of such Person, other than shares, interests, participations or other
equivalents having such power only by reason of contingency;
"Warrant Purchase Price" has the meaning ascribed thereto in Section
2.2(c);
"Warrant Shares" means the Common Shares issued or issuable upon exercise
of the EdgeStone Warrants;
"WCC" means ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation;
"WCC Exchange and Release Agreement" means the Exchange and Release
Agreement to be entered into between the Corporation and WCC, substantially
in the form attached hereto as Exhibit F-3;
"WCC Note Shares" means 20,448,875 Common Shares issued to WCC upon the
conversion of certain indebtedness of the Corporation in the aggregate
principal amount of $40,897,750;
"Zarlink" means Zarlink Semiconductor Inc.; and
"Zarlink Supply Agreement" means the supply agreement entered into between
the Corporation and Zarlink dated February 16, 2001.
1.2 Intellectual Property Definitions
Whenever used in this Agreement, the following words and terms shall have the
meanings set out below:
"Business IP", "Licensed IP" and "Owned IP" shall have the respective
meanings set forth in Section 4.25 hereof;
"Commercial Software Licenses" means "shrink-wrap", "web-wrap",
"click-wrap" or other similar generic licenses for commercially available
software available to the public
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through retail dealers, and which are not, individually or in the
aggregate, material to the Business;
"Employee IP Agreement" means the agreements entered into and to be entered
into by employees and consultants of the Corporation or the Subsidiaries in
favour of the Corporation or a Subsidiary, as the case may be, relating to
proprietary information and assignment of inventions;
"Intellectual Property" or "IP" means any or all of the following and all
intellectual property and other rights in, arising out of or associated
with:
(a) all patents and utility models and applications therefor (whether
registered or not) and all provisionals, re-issuances,
continuations, continuations-in-part, divisions, revisions,
supplementary protection certificates, extensions, and
re-examinations thereof and all equivalent or similar rights
anywhere in the world in inventions and discoveries including
invention disclosures ("Patents"),
(b) all registered trade-marks, service marks, trade names, trade
dress, logos, business, corporate and product names and slogans
and registrations and applications for registration thereof
("Trade-marks");
(c) all copyrights in copyrightable works, and all other rights of
authorship, worldwide, and all applications, registrations and
renewals in connection therewith ("Copyrights"),
(d) all integrated circuit topographies, integrated circuit
topography registrations and applications therefor, and any
equivalent or similar rights in semiconductor topographies,
layouts, architectures or maskworks ("IC Topographies"),
(e) all industrial design registration and applications therefor, and
any equivalent or similar rights in any features of shape,
configuration, pattern or ornament and combination of those
features ("Industrial Designs"), and
(f) all Internet or world wide web addresses, domain names and sites
and applications and registrations therefor ("Domain Names");
"Registered IP" means all Canadian, United States, international and
foreign: (i) Patents, including applications therefor; (ii) registered
Trade-marks, applications to register Trade-marks, including intent-to-use
applications, or other registrations or applications related to Trade-marks
and Domain Name registrations; (iii) Copyrights registrations and
applications to register Copyrights; (iv) IC Topography registrations and
applications to register IC Topographies; (v) Industrial Design
registrations and applications to register Industrial Designs; and (vi) any
other Technology that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded
by, any
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▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ or foreign government or other public or private
legal authority at any time; and
"Technology" means any or all of the following: (i) works of authorship
including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, methods, techniques, processes, files, industrial
models, schematics, specifications, net lists, build lists, records and
data; (ii) inventions (whether or not patentable), improvements and
enhancements; (iii) proprietary and confidential business and technical
information, including manufacturing processes, technical data, trade
secrets, ideas, research and development and know how; (iv) databases, data
compilations and collections and technical data; and (v) all documentation
related to the foregoing, including without limitation installation
manuals, operator's manuals, system manuals, user manuals, conversion and
other materials, printout specifications, system test data and error
message listings.
1.3 Certain Rules of Interpretation
In this Agreement:
(a) Currency - Unless otherwise specified, all references to money amounts
are to lawful currency of Canada.
(b) Governing Law - This Agreement is a contract made under and shall be
construed, interpreted and enforced in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable in the
Province of Ontario (excluding any conflict of law rule or principle
of such laws that might refer such interpretation or enforcement to
the laws of another jurisdiction). Subject to the provisions of
Section 10.7, any Legal Proceeding arising out of or relating to this
Agreement shall be brought in the courts of the Province of Ontario
and each of the Parties hereby irrevocably submits to the
non-exclusive jurisdiction of such courts.
(c) Headings - Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
(d) Number and Gender - Unless the context otherwise requires, words
importing the singular include the plural and vice versa and words
importing gender include all genders.
(e) Statutory References - A reference to a statute includes all
regulations made pursuant to such statute and, unless otherwise
specified, the provisions of any statute or regulation which amends,
supplements or supersedes any such statute or any such regulation.
(f) Time - Time is of the essence in the performance of the Parties'
respective obligations under this Agreement.
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(g) Time Periods - Unless otherwise specified, time periods within or
following which any payment is to be made or act is to be done shall
be calculated by excluding the day on which the period commences and
including the day on which the period ends and by extending the period
to the next Business Day following if the last day of the period is
not a Business Day.
(h) Business Days - If any payment is required to be made or other action
is required to be taken pursuant to this Agreement on a day which is
not a Business Day, then such payment or action shall be made or taken
on the next Business Day.
(i) Including - Where the word "including" or "includes" is used in this
Agreement, it means "including (or includes) without limitation".
(j) No Strict Construction - The language used in this Agreement is the
language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party.
(k) Severability - If, in any jurisdiction, any provision of this
Agreement or its application to any Party or circumstance is
restricted, prohibited or unenforceable, such provision shall, as to
such jurisdiction, be ineffective only to the extent of such
restriction, prohibition or unenforceability without invalidating the
remaining provisions of this Agreement and without affecting the
validity or enforceability of such provision in any other jurisdiction
or without affecting its application to other Parties or
circumstances.
1.4 Knowledge
Any reference to the knowledge or awareness of the Corporation or a Subsidiary
or like terms shall mean the actual knowledge of ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ and, with respect to Sections 4.25 and 4.26
only, ▇▇▇ ▇▇▇▇▇▇, and any knowledge which any such individual could reasonably
have acquired through the exercise of due inquiry regarding the relevant matter.
1.5 Entire Agreement
This Agreement and the Other Agreements together constitute the entire agreement
between the Parties and set out all the covenants, promises, warranties,
representations, conditions, understandings and agreements between the Parties
with respect to the subject matter of this Agreement and the Other Agreements
and supersede all prior understandings, agreements, negotiations and
discussions, whether oral or written, including, without limitation, those
contained in a term sheet dated January 23, 2004 between the Corporation and
EdgeStone Capital Equity Fund II-A GP, Inc., and any amendments thereto. There
are no covenants, promises, representations, warranties, terms, conditions,
undertakings, understandings or other agreements, oral or written, express,
implied or collateral, between the Parties in connection with the subject matter
of this Agreement and the Other Agreements other than as expressly set forth or
referred to in this Agreement or the Other Agreements. No reliance is placed on
any representation, warranty, opinion, advice or assertion of fact made by any
Party hereto or its directors, officers, employees, legal counsel, accountants
or other representatives, except to the
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extent that the same has been reduced to writing and included as a term of this
Agreement or the Other Agreements or included as a term of any other document
delivered pursuant to this Agreement or the Other Agreements. Accordingly, there
shall be no liability, either in tort or contract, assessed to any Party in
relation to any such representation, warranty, opinion, advice or assertion of
fact, except to the extent that the same has been reduced to writing and
included as a term of this Agreement or the Other Agreements or included as a
term of any other document delivered by the Parties pursuant to this Agreement
or the Other Agreements.
1.6 Schedules
The Schedules to this Agreement, as listed below, are an integral part of this
Agreement:
Schedule A - Post-Closing Capitalization Table
Schedule B - Disclosure Schedule
Schedule C - Financial Statements
Schedule D - Parallel Investors
1.7 Exhibits
The Exhibits to this Agreement, as listed below, are an integral part of this
Agreement:
Exhibit A-1 - Series A Share Terms
Exhibit A-2 - Series B Share Terms
Exhibit B - Form of Shareholders Agreement
Exhibit C - Form of Registration Rights Agreement
Exhibit D-1 - Form of Series 1 Warrants
Exhibit D-2 - Form of Series 2 Warrants
Exhibit E - Form of Legal Opinion of Counsel to the Corporation
Exhibit F-1 - Form of Debenture Holder Consent
Exhibit F-2 - Form of PTIC Exchange and Release Agreement
Exhibit F-3 - Form of WCC Exchange and Release Agreement
ARTICLE 2
SHARE AND WARRANT SUBSCRIPTION
2.1 Subscription and Issuance of Purchased Shares and EdgeStone Warrants
(a) Subject to all of the terms and conditions hereof and in reliance on
the representations and warranties set forth herein, the Corporation
hereby agrees to issue and sell to EdgeStone, and EdgeStone agrees to
purchase from the Corporation an aggregate of twenty million
(20,000,000) of the Corporation's authorized but unissued Series A
Shares (the "Purchased Shares").
(b) As the lead investor by virtue of the Investment, subject to all of
the terms and conditions hereof and in reliance on the representations
and warranties set forth herein, the Corporation hereby agrees to
issue and sell to EdgeStone the EdgeStone Warrants.
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2.2 Purchase Price
(a) The purchase price for each Purchased Share shall be $1.00. The
aggregate purchase price (the "Share Purchase Price") for the
Purchased Shares equals twenty million dollars ($20,000,000).
(b) The aggregate purchase price (the "Series 1 Warrant Purchase Price")
for the Series 1 Warrants shall be one dollar ($1.00).
(c) The aggregate purchase price (the "Series 2 Warrant Purchase Price",
and together with the Series 1 Warrant Purchase Price, the "Warrant
Purchase Price") for the Series 2 Warrants shall be one dollar
($1.00).
2.3 Closing
Subject to the fulfilment of the conditions in Sections 2.5 and 2.6, the Closing
shall take place at the Time of Closing on the Closing Date at the offices of
the Corporation's legal counsel, or at such other place as the Corporation and
the Investor may agree. At the Closing, the Corporation shall issue and sell and
the Investor shall purchase the Purchased Shares and EdgeStone Warrants for the
Aggregate Purchase Price.
2.4 Closing Deliveries
(a) At the Closing:
(i) the Corporation shall deliver to the Investor one or more
certificates representing the Purchased Shares, free and clear of
all Liens, registered in the name of the Investor (or as directed
in writing by the Investor) in the Corporation's records;
(ii) the Corporation shall deliver to the Investor one or more warrant
certificates, substantially in the form attached hereto as
Exhibit D-1, representing the Series 1 Warrants, free and clear
of all Liens, and one or more warrant certificates, substantially
in the form attached hereto as Exhibit D-2, representing the
Series 2 Warrants, free and clear of all Liens; and
(iii) the Investor shall pay to the Corporation (or as it may
otherwise direct) the Aggregate Purchase Price by certified
cheque, bank draft or wire transfer of immediately available
funds.
(b) At the Closing, the Corporation shall also deliver or cause to be
delivered to the Investor each of the following, together with such
other documents as the Investor may reasonably require:
(i) a certificate of compliance issued by Industry Canada dated the
Closing Date with respect to the legal existence and good
standing of the Corporation under the laws of Canada and a
similar certificate for each
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Material Subsidiary (other than Mitel Networks Limited) dated not
more then three Business Days prior to the Closing Date issued by
the appropriate authorities with respect to its legal existence
and good standing under the laws of its respective jurisdiction;
(ii) a certificate of the Corporation's President or another
authorized senior officer of the Corporation, not in his personal
capacity, dated as of the Closing Date, in form reasonably
satisfactory to the Investor, certifying: (A) an attached true
and complete copy of the Corporation's articles of incorporation
together with all amendments thereto; (B) an attached true and
complete copy of the Corporation's current by-laws; (C) an
attached true and complete copy of the resolutions of the
Corporation's board of directors and, if necessary, shareholders,
respectively, with respect to the transactions hereby
contemplated or otherwise to be effected at the Closing; and (D)
the incumbency of the Corporation's officers;
(iii) a certificate of the Corporation's President or another
authorized senior officer of the Corporation, not in his personal
capacity, in a form reasonably satisfactory to the Investor,
certifying for and on behalf of the Corporation that the
Corporation has complied with all covenants and satisfied all
terms and conditions of this Agreement on its part to be complied
with or satisfied at or prior to the Time of Closing on the
Closing Date;
(iv) a written legal opinion of Osler, ▇▇▇▇▇▇ & Harcourt LLP dated the
Closing Date and substantially in the form attached hereto as
Exhibit E; and
(v) payment of the amounts contemplated in Sections 8.1 (Lead Work
Fee) and 8.2(a) (Expenses) to EdgeStone or as EdgeStone may
direct in writing (which payment may be satisfied by the
Corporation by the delivery of a written direction to the
Investor, as contemplated in Section 2.4(a)(iii), to pay such
amounts out of the Aggregate Purchase Price).
2.5 Closing Conditions in Favour of EdgeStone
The transactions herein contemplated, including the issue and sale of the
Purchased Shares and the EdgeStone Warrants in accordance with the terms of this
Agreement, are subject to the following terms and conditions, which are inserted
for the exclusive benefit of the Investor to be fulfilled or performed at or
prior to the Time of Closing on the Closing Date, and the Corporation shall
provide such evidence as may be requested by the Investor, acting reasonably,
that each such condition has been fulfilled (provided that such evidence is
within the power and control of the Corporation to so provide):
(a) Performance of Obligation. All of the terms, covenants and conditions
of this Agreement to be performed and/or to be complied with by the
Corporation at or prior to the Time of Closing on the Closing Date
shall have been performed or complied with.
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(b) Approvals and Consents. All approvals or consents shall have been
obtained as are required to permit the execution and delivery by the
Corporation of this Agreement and each of the Other Agreements to
which the Corporation is a party and the consummation by the
Corporation of the transactions contemplated hereby and thereby,
including:
(i) all approvals and consents of the shareholders and directors
required with respect to the filing of the Articles of Amendment;
and
(ii) the consent of Zarlink to the Articles of Amendment, as may be
required pursuant to the Zarlink Supply Agreement.
(c) Dissents. Holders of no more than two percent (2%) of the outstanding
Common Shares shall have exercised, or expressed the intent in
accordance with the Act to exercise, their right of dissent or
appraisal with respect to the Articles of Amendment.
(d) Articles of Amendment. The Series A Shares and the Series B Shares
shall have been added to the authorized capital of the Corporation
pursuant to the Articles of Amendment and the offering, issue and sale
of the Purchased Shares and the EdgeStone Warrants shall have been
authorized by all necessary corporate action of the Corporation, its
shareholders and directors, and the Corporation shall have filed the
Articles of Amendment with Industry Canada and received a Certificate
of Amendment therefor.
(e) Reservation of Converted Shares and Warrant Shares. The Converted
Shares and the Warrant Shares shall have been duly authorized and
reserved for issuance.
(f) Zarlink Supply Agreement. The Zarlink Supply Agreement shall have been
duly and validly amended, as may be required, to remove any
requirement for Zarlink to consent or otherwise agree to any changes
to the constating documents of the Corporation.
(g) Conditions with respect to Converted Debenture Holders.
(i) Holders of not less than ninety percent (90%) of the August 2002
Debenture Shares shall have executed and delivered to the
Corporation a Debenture Holder Consent (which shall provide,
among other things, that any price protection, anti-dilution or
similar rights of the Converted Debenture Holders shall be
terminated), and all of the August 2002 Debenture Shares held by
such Persons shall have been duly converted into Series B Shares
in accordance with the terms of such Debenture Holder Consents.
(ii) Each Converted Debenture Holder that has executed a Debenture
Holder Consent and who is a non-resident of Canada for the
purposes of the Income Tax Act (Canada) shall have obtained (or
the Corporation shall have obtained on behalf of such Converted
Debenture Holders) a
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certificate issued pursuant to section 116 of the Income Tax Act
(Canada) in respect of the disposition of his/her/its August 2002
Debenture Shares upon conversion of such shares into Series B
Shares containing a certificate limit at least equal to the value
of the Converted Debenture Holder's entitlement to Series B
Shares, or, if in the case of any such Converted Debenture Holder
such certificate has not been obtained, the Corporation shall
have withheld and remitted the full amount of Tax for which the
Corporation may be liable in respect of such disposition as
provided in section 116 of the Income Tax Act (Canada).
(iii) The conversion of the August 2002 Debenture Shares into Series B
Shares pursuant to the Debenture Holder Consents received by the
Corporation shall have been effected in compliance with
applicable securities laws and all notices and filings in respect
thereof due on or before the Closing Date shall have been
delivered or filed by the Corporation within the time periods and
in the manner required by applicable securities laws.
(h) Conditions with respect to WCC. The Corporation and WCC shall have
executed and delivered the WCC Exchange and Release Agreement (which
shall provide, among other things, that any price protection,
anti-dilution or similar rights of WCC shall be terminated), and the
WCC Note Shares shall have been duly exchanged for an aggregate of
40,897,750 Series B Shares in accordance with the terms of the WCC
Exchange and Release Agreement.
(i) Conditions with respect to PTIC.
(i) The Corporation and PTIC shall have executed and delivered the
PTIC Exchange and Release Agreement (which shall provide, among
other things, that any existing price protection, anti-dilution
or similar rights of PTIC shall be terminated), and the PTIC
Shares shall have been duly exchanged for an aggregate of
16,000,000 Series B Shares in accordance with the terms of the
PTIC Exchange and Release Agreement.
(ii) The PTIC Subscription Agreement shall have been duly and validly
terminated.
(j) Conditions with respect to TPC. Not less than $10,000,000 shall be
remaining available for disbursement to the Corporation for the period
up to September 30, 2004 pursuant to the TPC Agreement.
(k) Conditions with respect to Senior Lender.
(i) The Corporation's existing credit facilities with the Senior
Lender shall have been renegotiated or replaced on terms
satisfactory to EdgeStone, acting reasonably.
(ii) Neither the Corporation nor any Subsidiary shall be in breach of
or in default under any of their respective covenants in favour
of the Senior
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Lender or with respect to the Senior Bank Debt (except any such
breach or default that has been waived by the Senior Lender), nor
shall there exist any state of facts that would constitute a
breach or default but for the rectification thereof by a waiver
or letter of forbearance, and the consummation of the
transactions contemplated by this Agreement will not result in
any such breach or default.
(l) Termination of Existing Shareholders Agreement. The Existing
Shareholders Agreement shall have been validly terminated in
accordance with its terms.
(m) Shareholders Agreement. The Shareholders Agreement substantially in
the form annexed hereto as Exhibit B shall have been executed and
delivered by the Corporation and each of the other parties thereto
(other than the Investor), to the satisfaction of the Investor.
(n) Registration Rights Agreement. The Registration Rights Agreement
substantially in the form annexed hereto as Exhibit C shall have been
executed and delivered by the Corporation and each of the other
parties thereto (other than the Investor), to the satisfaction of the
Investor.
(o) No Legal Proceedings. No Legal Proceeding shall be pending or
threatened by any Person, including any Governmental Authority, to
enjoin, restrict or prohibit the purchase and issuance of the
Purchased Shares and EdgeStone Warrants contemplated herein.
(p) Exemption from Prospectus and Registration Requirements. The issuance
of the Purchased Shares and EdgeStone Warrants pursuant to this
Agreement shall be exempt from the prospectus and registration
requirements of all applicable securities laws.
(q) Other Closing Documents. The Investor shall have received each of the
certificates referred to in Section 2.4(b) and such other opinions,
agreements, certificates, affidavits, statutory declarations, and
other documentation as are customary in a transaction of this nature
and may be reasonably required by the Investor, all of which shall be
satisfactory in form and substance to counsel for the Investor, acting
reasonably.
2.6 Closing Conditions in Favour of the Corporation
The transactions herein contemplated are subject to the following terms and
conditions which are inserted for the exclusive benefit of the Corporation to be
fulfilled or performed at or prior to the Time of Closing on the Closing Date:
(a) Performance of Obligations. All of the terms, covenants and conditions
of this Agreement to be performed and/or complied with by the Investor
at or prior to the Time of Closing on the Closing Date shall have been
performed or complied with.
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(b) Approvals and Consents. The following approvals or consents shall have
been obtained by the Corporation:
(i) all approvals and consents of the shareholders required with
respect to the filing of the Articles of Amendment; and
(ii) the consent of Zarlink to the Articles of Amendment, as may be
required pursuant to the Zarlink Supply Agreement.
(c) Dissents. Holders of no more than two percent (2%) of the outstanding
Common Shares shall have exercised, or expressed the intent in
accordance with the Act to exercise, their right of dissent or
appraisal with respect to the Articles of Amendment.
(d) Conditions with respect to Converted Debenture Holders. Holders of not
less than ninety percent (90%) of the August 2002 Debenture Shares
shall have executed and delivered to the Corporation a Debenture
Holder Consent.
(e) Conditions with respect to WCC. WCC shall have executed and delivered
the WCC Exchange and Release Agreement.
(f) Conditions with respect to PTIC. PTIC shall have executed and
delivered the PTIC Exchange and Release Agreement and the PTIC
Subscription Agreement shall have been duly and validly terminated.
(g) No Legal Proceedings. No Legal Proceeding shall be pending or
threatened by any Person, including any Governmental Authority, to
enjoin, restrict or prohibit the purchase and issuance of the
Purchased Shares and EdgeStone Warrants contemplated herein.
(h) Execution of Agreements. The Investor shall have executed and
delivered the Shareholders Agreement and the Registration Rights
Agreement.
(i) Exemption from Prospectus and Registration Requirements. The issuance
of the Purchased Shares and EdgeStone Warrants pursuant to this
Agreement shall be exempt from the prospectus and registration
requirements of all applicable securities laws.
(j) Other Closing Documents. The Corporation shall have received such
agreements, certificates, affidavits, statutory declarations, and
other documentation as are customary in a transaction of this nature
and may be reasonably required by the Corporation, all of which shall
be satisfactory in form and substance to counsel for the Corporation,
acting reasonably.
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ARTICLE 3
ADDITIONAL EQUITY INVESTMENT
3.1 Additional Investment
(a) The Corporation shall have the right to issue and sell: (i) up to five
million (5,000,000) additional Series A Shares at a price per share of
not less than $1.00 and otherwise on terms no more favourable than the
terms set forth in this Agreement; and (ii) any Series A Shares
issuable upon the exercise of the EdgeStone Purchase Option pursuant
to Section 3.2 (the issuance of the Series A Shares contemplated in
clause (i) and (ii) together being referred to herein as the
"Additional Investment").
(b) The Additional Investment shall be completed, in one or more closings,
on such date or dates as may be selected by the Corporation; provided
that, the last day on which any Series A Shares may be issued or sold
pursuant to the Additional Investment shall be (A) August 31, 2004, or
(B) such later date as may be agreed to in writing by the Corporation
and EdgeStone (the applicable date in clause (A) or (B) above being
hereinafter referred to as the "Expiry Date").
(c) Notwithstanding the foregoing, the Parties acknowledge and agree that:
(i) the EdgeStone Purchase Option; (ii) the payment of the Lead Work
Fee contemplated by Section 8.1; (iii) the reimbursement of Expenses
contemplated by Section 8.2; and (iv) the entitlement to receive the
EdgeStone Warrants are entitlements exclusive to EdgeStone as the lead
investor with respect to the Investment, and shall not be extended to
purchasers pursuant to the Additional Investment (except for EdgeStone
and/or its permitted assignees on the exercise of the EdgeStone
Purchase Option, to the extent provided in this Agreement) or to any
purchasers of Common Shares as contemplated in Section 3.4.
3.2 EdgeStone Option
(a) EdgeStone or its permitted assignees, as provided herein, shall be
entitled, at any time or times on or before the Expiry Date, to
purchase from the Corporation up to an aggregate of 5,000,000
additional Series A Shares, at a purchase price of $1.00 per share
(the "EdgeStone Purchase Option").
(b) On each closing of the purchase of Series A Shares pursuant to the
exercise of the EdgeStone Purchase Option:
(i) EdgeStone or its permitted assignees, as provided herein, shall
be entitled to payment of the Lead Work Fee payable pursuant
Section 8.1 and reimbursement of Expenses as provided in Section
8.2; and
(ii) each purchaser or purchasers of Series A Shares pursuant to the
EdgeStone Purchase Option shall: (A) receive a Series 1 Warrant,
substantially in the form annexed hereto as Exhibit D-1, to
purchase certain Common Shares at a price of $1.25 per share
(subject to
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adjustment) based on the number of Series A Shares purchased on
the exercise of the EdgeStone Purchase Option; (B) receive a
Series 2 Warrant, substantially in the form annexed hereto as
Exhibit D-2, to purchase certain Common Shares for no additional
consideration on the happening of certain events; (C) receive the
benefit of all of the representations, warranties, covenants and
indemnities of the Corporation in this Agreement, which shall
apply mutatis mutandis as if such purchaser or purchasers were
the original Investor hereunder; (D) be joined as a party to the
Registration Rights Agreement as an "Investor" thereunder, in
accordance with the terms of the Registration Rights Agreement;
and (E) be joined as a party to the Shareholders Agreement as a
"Shareholder" thereunder, in accordance with the terms of the
Shareholders Agreement.
(c) The EdgeStone Purchase Option may be assigned by EdgeStone in whole or
in part to: (A) any Person that is acceptable to the Corporation,
acting reasonably; and/or (B) any member or members of the EdgeStone
Group.
3.3 Adjustments
The number and purchase price of the Series A Shares and EdgeStone Warrants (if
applicable) which are subject to issuance pursuant to the Additional Investment
shall be subject to appropriate adjustments for stock splits, consolidations,
stock dividends, and recapitalizations and the like.
3.4 Additional Common Shares
In addition to the Additional Investment, the Investor acknowledges and agrees
that the Corporation shall also have the right to issue and sell (without the
engagement of an agent or intermediary) for a period of nine months after the
Closing Date, without any further consent from EdgeStone, Common Shares with an
aggregate purchase price of up to $10,000,000 at a price per share equal to the
fair market value thereof (and for such purpose, the fair market value of the
Common Shares shall be determined by the Board of Directors). The purchasers of
such Common Shares shall be restricted to: (i) employees, officers and directors
of the Corporation or any Subsidiary; (ii) existing shareholders of the
Corporation; (iii) distributors or resellers with a business relationship with
the Corporation or any Subsidiary; (iv) high net worth individuals (other than
institutional investors); and (v) any such other Persons acceptable to EdgeStone
and the Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to the Investor as of the Time of
Closing as follows, and acknowledges that the Investor is relying on such
representations and warranties in connection with the transactions contemplated
herein:
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4.1 Incorporation and Organization
The Corporation is a corporation duly incorporated, organized and validly
subsisting under the laws of Canada, and is in good standing under such laws.
The Corporation has full corporate power, authority and capacity: (i) to own or
lease and operate its properties and assets; (ii) to carry on its Business as
presently conducted and proposed to be conducted; and (iii) to execute and
deliver this Agreement and the Other Agreements and to perform all obligations
contemplated herein or therein, including the filing of the Articles of
Amendment, the issue, sale and delivery of the Purchased Shares and EdgeStone
Warrants, the issue and delivery of any and all Converted Shares on the
conversion of the Purchased Shares and the issue and delivery of any and all
Warrant Shares on the exercise of the EdgeStone Warrants.
4.2 Corporate Records
The minute books of the Corporation and the minute books of each Material
Subsidiary are up-to-date and have been maintained in accordance with the
applicable law of their respective jurisdictions of incorporation. Such minutes
books contain all articles and by-laws and a complete and accurate record of all
resolutions and meetings and actions of directors (and committees thereof) and
shareholders of the Corporation and each Material Subsidiary since the
respective dates of incorporation of the Corporation and each Material
Subsidiary, and reflect all transactions referred to in such proceedings
accurately up until and including the Closing Date. All such meetings were duly
called and held and all such by-laws and resolutions were duly passed or
enacted. The share ledgers and registers of the Corporation and each Material
Subsidiary as at the Closing Date are complete and reflect all issuances,
transfers, repurchases and cancellations of shares in the capital of the
Corporation and each Material Subsidiary, as applicable, as at the Closing Date.
The full and complete minute books of the Corporation have been made available
to the Investor or its counsel for review.
4.3 Subsidiaries
The full corporate name, jurisdiction of incorporation and registered and
beneficial ownership of the issued and outstanding shares of each direct and
indirect Subsidiary is as set forth in Section 4.3 of the Disclosure Schedule.
Each of the Subsidiaries is duly incorporated, organized and validly subsisting
under the laws of its jurisdiction of incorporation, and, except as disclosed in
Section 4.3 of the Disclosure Schedule, is in good standing under such laws. All
of the issued and outstanding shares of each Subsidiary have been duly
authorized and are validly issued, fully-paid and non-assessable and are free
and clear of Liens. Except for the Subsidiaries and except as set forth in
Section 4.3 of the Disclosure Schedule, neither the Corporation nor any
Subsidiary is or has been a partner in any partnership, participated in a joint
venture, or owns or agreed or become bound to acquire any securities issued by,
or acquire any equity or other ownership interest in, any other business or
Person. The Material Subsidiaries are the only Subsidiaries that hold material
assets or have material liabilities or that are otherwise material to the
condition (financial or otherwise), operations, business, assets, or prospects
of the Corporation and the Subsidiaries, taken as a whole. None of the
Subsidiaries incorporated under the laws of United Kingdom are dormant (within
the meaning of section 249AA of the United Kingdom Companies Act 1985).
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4.4 Qualification in Foreign Jurisdictions
The Corporation and each Subsidiary is duly qualified to carry on the Business
and is in good standing as a foreign corporation in each jurisdiction in which
the character of its properties owned or leased or the nature of its activities
makes such qualification necessary (other than any jurisdictions in which the
failure to so qualify or be in good standing would not, either in any case or in
the aggregate, have a Material Adverse Effect).
4.5 Authorized, Issued and Outstanding Capital
(a) Immediately prior to Closing, but after giving effect to the filing of
the Articles of Amendment and to the issuance of Series B Shares to
the Converted Debenture Holders that have executed a Debenture Holder
Consent, WCC and PTIC, as contemplated in Sections 2.5(g), 2.5(h) and
2.5(i), respectively:
(i) the authorized capital of the Corporation will consist of: (A) an
unlimited number of Common Shares; (B) an unlimited number of
Class A Convertible Preferred Shares, issuable in series, of
which an unlimited number of the first series, being the Series A
Shares, shall have been created; and (C) an unlimited number of
Class B Convertible Preferred Shares, issuable in series, of
which an unlimited number of the first series, being the Series B
Shares, shall have been created; and
(ii) 111,786,713 Common Shares, no Series A Shares, 67,060,988 Series
B Shares and no other shares will be issued and outstanding, and
all of such issued and outstanding shares, and the Purchased
Shares, are or will be at the Time of Closing, duly authorized,
validly issued, fully-paid and non-assessable.
(b) Other than as set out in Section 4.5(b) of the Disclosure Schedule and
other than as contemplated in this Agreement, neither the Corporation
nor any Subsidiary is bound by, and has any obligation to grant or
enter into, any outstanding subscriptions, options, warrants, calls,
commitments, or Contracts of any character calling for it to issue,
deliver, or sell, or cause to be issued, delivered, or sold, any: (i)
shares or any other equity or other security, or (ii) securities
convertible (including convertible debt securities) into, exchangeable
for, or representing the right to subscribe for, purchase, or
otherwise acquire any shares or any other equity or other security in
the capital of the Corporation or any Subsidiary, as applicable.
(c) An aggregate of 25,000,000 Common Shares (and no other shares) have
been reserved for issuance to eligible directors, officers,
consultants and employees of the Corporation and the Subsidiaries
under the Stock Option Plan. To the date hereof, options to purchase
an aggregate of 4,519,219 Common Shares (and no other options) are
outstanding under the Stock Option Plan. Except as disclosed in
Section 4.5(c) of the Disclosure Schedule, all options vest (subject
to earlier termination on termination of service of the grantee) as to
25% of the shares subject to option on the first anniversary of the
date of grant, and thereafter at a
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rate of 25% each year for a period of three years. Except as disclosed
in Section 4.5(c) of the Disclosure Schedule, the Corporation has no
present intention to re-price or exchange options granted under the
Stock Option Plan or change its practice with respect to the vesting
of options granted thereunder, nor has it indicated to any Person any
such intention. Other than the Stock Option Plan and except as
disclosed in Section 4.5(c) of the Disclosure Schedule, neither the
Corporation nor any Subsidiary has any stock option plan, restricted
share plan, share purchase plan, stock appreciation rights, phantom
stock option plan or similar plan or arrangement providing for any
equity-based compensation for the benefit of its officers, directors,
employees, consultants or other service providers.
(d) Except as set forth in Section 4.5(d) of the Disclosure Schedule and
except as contemplated in this Agreement, neither the Corporation nor
any Subsidiary: (i) has any outstanding obligation, contingent or
otherwise, contractual or otherwise, to repurchase, redeem, or
otherwise acquire any of its shares or other equity securities or to
pay any dividend or make any distribution to its shareholders; (ii) is
a party to or bound by any Contract relating to the voting of any of
its securities or that creates a voting trust, voting agreement,
pooling agreement, drag-along, right of first refusal, pre-emptive
right or proxy, or that restricts the ability of the shareholders to
freely transfer or alienate outstanding securities of the Corporation
or any Subsidiary or securities which hereafter may be issued; (iii)
has knowledge of any Contract relating to the voting of any of its
securities or that relates to or restricts the management of the
Corporation or any Subsidiary or that creates a voting trust, voting
agreement, pooling agreement, drag-along, right of first refusal,
pre-emptive right or proxy, or that restricts the ability of the
shareholders to freely transfer, alienate, assign or encumber
outstanding securities of the Corporation or any Subsidiary or
securities which hereafter may be issued; or (iv) is a party to or
bound by any Contract under which any Person has the right to require
it (x) to effect, or to include any securities held by such Person in,
any registration under the Securities Act or any qualification by
prospectus under Canadian Securities Laws, or any similar registration
or qualification in any other jurisdiction, or (y) to distribute any
such securities to the public in Canada, the United States or any
other jurisdiction.
(e) Except as set forth in Section 4.5(e) of the Disclosure Schedule and
except as contemplated in this Agreement, there are no price
protection, price adjustment, anti-dilution or other similar rights
(either retrospective or prospective) attached to any outstanding
securities of the Corporation or any Subsidiary. On the fulfillment of
the closing conditions referred to in Sections 2.5(g), 2.5(h) and
2.5(i), except as contained in the terms of the Series A Shares and
the Series B Shares, as set forth in the Other Agreements or as
disclosed in Section 4.5(e) of the Disclosure Schedule, there will be
no price protection, price adjustment, anti-dilution or other similar
rights (either retrospective or prospective) attached to any
outstanding securities of the Corporation or any Subsidiary or any
securities of the Corporation or any Subsidiary which may hereafter be
issued.
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(f) The Corporation has duly reserved and shall continue at all times to
reserve, solely for the purpose of issuance upon conversion of the
Purchased Shares, a number of Converted Shares sufficient to cover the
conversion of all such Purchased Shares. The Converted Shares issuable
upon conversion of the Purchased Shares have been duly authorized and
reserved for issuance and, when issued upon conversion of the
Purchased Shares, shall be validly issued, fully paid and
non-assessable, and free and clear of Liens.
(g) The Corporation has duly reserved and shall continue at all times to
reserve, solely for the purpose of issuance upon exercise of the
EdgeStone Warrants, a number of Warrant Shares sufficient to cover the
exercise of all such EdgeStone Warrants. The Warrant Shares issuable
upon exercise of the EdgeStone Warrants have been duly authorized and
reserved for issuance and, when issued upon the valid exercise of the
EdgeStone Warrants, shall be validly issued, fully paid and
non-assessable, and free and clear of Liens.
4.6 Lawful Issuance
Except as disclosed in Section 4.6 of the Disclosure Schedule, all of the
outstanding shares in the capital of the Corporation and each Subsidiary and all
outstanding options, warrants and other securities of the Corporation and each
Subsidiary were offered, issued, and sold, and the Purchased Shares, the
Converted Shares, the EdgeStone Warrants and Warrant Shares have been offered
and (as and when issued) shall be issued and sold, in compliance with: (i) all
applicable pre-emptive or similar rights of all Persons (except for any
non-compliance which has been waived in writing); (ii) all applicable provisions
of applicable securities laws in Canada, the United States and the United
Kingdom in transactions exempt from the prospectus, registration or analogous
requirements of such securities laws (subject to and assuming the accuracy of
any representations and warranties made by purchasers of such securities, and
the representations of the Investor contained in Article 5 hereof to the
Corporation); and (iii) all other applicable laws. No person has any valid right
to rescind any purchase of, or any statutory rights of action with respect to,
any shares or other securities in the capital of the Corporation or any
Subsidiary, except in accordance with this Agreement.
4.7 Corporate Authorization
This Agreement and the Other Agreements, and the transactions contemplated
hereby and thereby, have been duly approved and authorized by all requisite
corporate action on the part of the Corporation, and this Agreement has been
duly executed and delivered by the Corporation and constitutes, and each of the
Other Agreements constitute, a legal, valid, and binding obligation of the
Corporation enforceable against it in accordance with its terms (subject to
bankruptcy, insolvency and other laws affecting the rights of creditors
generally and subject to the qualification that equitable remedies may only be
granted in the discretion of a court of competent jurisdiction). The execution,
delivery, and performance by the Corporation of this Agreement and the Other
Agreements in accordance with their respective terms, and the consummation by
the Corporation of the transactions contemplated hereby or thereby, will not
result (with or without the giving of notice or the lapse of time or both) in
any conflict, violation, breach, or default, or the creation of any Lien, or the
termination, acceleration, vesting, or
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modification of any right or obligation, under or in respect of: (i) the
articles or by-laws of the Corporation or any Subsidiary; (ii) any judgment,
decree, order, statute, rule, or regulation binding on or applicable to any of
them; or (iii) any Contract to which the Corporation or any Subsidiary is a
party or by which any of its assets are bound; or (iv) any Permit held by the
Corporation or any Subsidiary. There are no rights of first refusal or
pre-emptive rights, or other rights restricting the issuance of securities of
the Corporation, pursuant to the Existing Shareholders Agreement or otherwise,
that have not either been complied with or duly and validly waived with respect
to the issuance of the Purchased Shares, the Converted Shares, the EdgeStone
Warrants, the Warrant Shares and the EdgeStone Purchase Option prior to the Time
of Closing on the Closing Date.
4.8 No Governmental or Third Party Consents
Except as disclosed in Section 4.8 of the Disclosure Schedule, no consent,
approval, authorization, declaration, filing, or registration with any
Governmental Authority or other Person is required to be made or obtained by the
Corporation in connection with: (i) the execution and delivery of this Agreement
or the Other Agreements; or (ii) the performance by the Corporation of its
obligations hereunder, thereunder or under the articles of the Corporation, as
amended, except as may be required pursuant to applicable securities laws
(including Canadian Securities Laws) to report the issuance and sale of
securities issued or issuable pursuant to the transactions contemplated in this
Agreement and the Other Agreements and except for such filings required to be
made with the SEC with respect to the transactions contemplated in this
Agreement and the Other Agreements.
4.9 Financial Statements - Absence of Certain Changes
The audited annual financial statements for the year ended April 27, 2003 and
the unaudited interim financial statements for the nine month period ended
January 25, 2004, annexed hereto as Schedule C (collectively, the "Financial
Statements"), have been prepared in accordance with Canadian generally accepted
accounting principles applied on a basis consistent with that of the preceding
period and present fairly: (i) all of the assets, liabilities and financial
position of the Corporation on a consolidated basis as at April 27, 2003; and
(ii) the sales, earnings, results of operation and changes in financial position
of the Corporation on a consolidated basis for the nine month period ended
January 25, 2004. Except as otherwise described in the Financial Statements or
as disclosed in or contemplated by this Agreement or as set forth in Section 4.9
of the Disclosure Schedule, since April 27, 2003 (the "Financial Statement
Date") there has not been:
(a) other than those in the ordinary course of business, any acquisition
(by purchase, lease as lessee, license as licensee, or otherwise) or
disposition (by sale, lease as lessor, license as licensor, or
otherwise) by the Corporation or any of the Subsidiaries of any
properties or assets;
(b) to the knowledge of the Corporation, any change in the condition
(financial or otherwise), properties, assets, liabilities,
investments, revenues, expenses, income, operations, Business, or
prospects of the Corporation or any of the Subsidiaries, or in any of
its relationships with any suppliers, customers, key employees or
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other third parties with whom it has financial, commercial, or other
business relationships, other than changes in the ordinary course of
business that have not caused and cannot be reasonably expected to
cause, in any case or in the aggregate, a Material Adverse Effect;
(c) any material transaction by the Corporation or any of the Subsidiaries
with their respective Affiliates, Insiders or any other Person not at
Arm's Length with the Corporation or any Subsidiary, other than the
payment of compensation and reimbursement of reasonable employee
travel and other business expenses in accordance with existing
employment arrangements and usual past practices;
(d) any damage, destruction, or loss, whether or not covered by insurance,
that, either in any case or in the aggregate, has caused, or could
reasonably be expected to cause, a Material Adverse Effect;
(e) any declaration, setting aside, or payment of any dividend or any
other distribution (in cash, stock, and/or property or otherwise) in
respect of any shares or other securities of the Corporation or any of
the Subsidiaries;
(f) any issuance of any shares or other securities of the Corporation or
any of the Subsidiaries, or any direct or indirect redemption,
repurchase, or other acquisition by the Corporation or any of the
Subsidiaries of any of its shares or other securities (other than the
issuance of shares to optionholders upon the exercise of options
granted under the Stock Option Plan or pursuant to any other Employee
Plan and the repurchase or redemption of shares from employees
terminated involuntarily by the Corporation or any Subsidiary, as
described in Section 4.5(d) of the Disclosure Schedule);
(g) any change in the officers, directors or key employees of the
Corporation or any of the Material Subsidiaries;
(h) other than in the ordinary course of business, any increase in the
compensation or other benefits payable or to become payable by the
Corporation or any of the Subsidiaries to any of its Affiliates, or to
any of the respective officers, employees, or independent contractors
of the Corporation or any of the Subsidiaries, or any bonus, severance
or termination payments or arrangements made to or with any of such
officers, employees, or independent contractors;
(i) any forgiveness or cancellation of any material debt or claim by the
Corporation or any of the Subsidiaries or any waiver by the
Corporation or any of the Subsidiaries of any right of material value,
other than compromises of accounts receivable in the ordinary course
of business;
(j) other than in the ordinary course of business, any incurrence,
payment, discharge, or satisfaction by the Corporation or any of the
Subsidiaries of any other Indebtedness, material obligations or
material liabilities, whether absolute, accrued, contingent or
otherwise (including, without limitation, liabilities, as guarantor or
otherwise, with respect to obligations of others), other than (A)
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current liabilities to Persons other than Affiliates of the
Corporation incurred in the ordinary course of business, and (B)
current liabilities to Persons other than Affiliates of the
Corporation incurred in connection with the transactions contemplated
hereby;
(k) other than in the ordinary course of business, any incurrence,
discharge or satisfaction of any Lien: (i) by the Corporation or any
of the Subsidiaries; or (ii) on any of the shares, other securities,
properties, or assets owned or leased by the Corporation or any of the
Subsidiaries;
(l) any settlement of any Legal Proceeding threatened or pending against
the Corporation or any Subsidiary or any of their respective assets
that, either in any case or in the aggregate, has caused or could
reasonably be expected to cause a Material Adverse Effect;
(m) any change of auditor or material change with respect to any method of
management operation or accounting in respect of the Business;
(n) any conduct of business by the Corporation or any of the Subsidiaries
outside the ordinary course of business; or
(o) any Contract by or on behalf of the Corporation, or by or on behalf of
its respective Affiliates, directors, officers, employees, agents, or
representatives, whether in writing or otherwise, to do or permit any
of the things referred to in this Section 4.9.
4.10 Inventory Valuation
Except as disclosed in Section 4.10 of the Disclosure Schedule, neither the
Corporation nor any Subsidiary has material obsolete or unusable inventory as
reflected on the balance sheets forming part of the Financial Statements, or
otherwise. The finished goods, work in process, raw materials and other
materials and supplies included in such inventory are of a standard which is not
lower than the generally accepted standard prevailing in the Corporation's
industry.
4.11 Accounts Receivable
The accounts receivable reflected on the balance sheets included in the
Financial Statements and all accounts receivable arising after the Financial
Statement Date and prior to the Closing are bona fide and are, in the good faith
judgment of the Corporation, collectible in the ordinary course of business
(other than those accounts receivable which are doubtful accounts and in respect
of which a reasonable allowance not exceeding $8,000,000, consistent with past
practice, has been made), no material set-off or counterclaim has been asserted
with respect to such accounts receivable, and, to the knowledge of the
Corporation, there is no basis for any such set-off or counterclaim.
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4.12 Accounts Payable
The accounts payable reflected on the balance sheets included in the Financial
Statements and all accounts payable arising after the Financial Statement Date
and prior to the Closing are bona fide.
4.13 Indebtedness
Neither the Corporation nor any of the Subsidiaries is in default with respect
to any outstanding material Indebtedness or any Contract relating thereto, and
no such Indebtedness or Contract relating thereto purports to limit the issuance
of any securities by the Corporation or any of the Subsidiaries or its operation
of the Business. Complete and correct copies of all Contracts (including all
amendments, supplements, waivers, and consents) relating to any material
Indebtedness of the Corporation or any of the Subsidiaries have been made
available by the Corporation to the Investor or its counsel for inspection.
Except as disclosed in Section 4.13 of the Disclosure Schedule or in the
Financial Statements, neither the Corporation nor any Subsidiary has outstanding
any bonds, debentures, notes, mortgages or other indebtedness which mature more
than one year after the date of their original creation or issuance and neither
the Corporation nor any Subsidiary has agreed to create or issue any bonds,
debentures, notes, mortgages or other indebtedness which will mature more than
one year after the date of their creation or issue.
The total Indebtedness of the Corporation and the Subsidiaries, considered on a
consolidated basis, including all capital leases and revolving or short-term
credit facilities, as at the date of this Agreement is not greater than
$80,000,000.
Except for invoiced fees and disbursements and work-in-progress totaling not
more than $100,000 (all of which has been incurred on account of legal services
provided to the Corporation), neither the Corporation nor any Subsidiary has any
Indebtedness to Gowling ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP ("Gowlings"). Except for the
retainer letter between the Corporation and Gowlings dated January 21, 2002,
there is no Contract between Gowlings and the Corporation or any Subsidiary to
issue any shares or other securities to Gowlings on account of outstanding
Indebtedness or Indebtedness that may hereafter be incurred.
4.14 Absence of Undisclosed Liabilities
Other than as set forth in the Financial Statements or as disclosed in Section
4.14 of the Disclosure Schedule, or as incurred by the Corporation or the any of
the Subsidiaries in the ordinary course of business and consistent with past
practice, neither the Corporation nor any Subsidiary has any material
liabilities or obligations of any nature, whether accrued, absolute, contingent,
or otherwise (including liabilities as guarantor or otherwise with respect to
obligations of others) and whether due or to become due.
4.15 Cash and Cash Equivalents
As of the date of this Agreement, the Corporation had cash and cash equivalents
of not less than $10,000,000.
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4.16 Tax Matters
(a) Neither the Corporation nor any Subsidiary has any liability,
obligation or commitment, actual or contingent, for the payment of any
Tax, except such as have arisen since the Financial Statement Date in
the usual and ordinary course of its business. Except as disclosed in
Section 4.16(a) of the Disclosure Schedule, neither the Corporation
nor any of the Subsidiaries is in arrears with respect to any required
withholdings or installment payments of any Tax. There are no
agreements, waivers or other arrangements providing for an extension
of time with respect to the assessment or reassessment of Tax, the
filing of any Tax Return or the payment of any Tax by the Corporation
or any Subsidiary, as the case may be, under the Income Tax Act
(Canada) or any other legislation imposing Tax on the Corporation or
any Subsidiary, as the case may be.
(b) Except as disclosed in Section 4.16(b) of the Disclosure Schedule, the
Corporation and each of the Subsidiaries has filed within the times
and in the manner prescribed by law all Tax Returns required to be
filed by or with respect to the Corporation or any of the
Subsidiaries, as the case may be, and have paid all Taxes shown as
accruing therein. All such Tax Returns are correct and complete in all
material respects and the Corporation and each Subsidiary has made
complete and accurate disclosure in such Tax Returns and in all
materials accompanying such Tax Returns.
(c) Except as disclosed in Section 4.16(c) of the Disclosure Schedule, no
claim (including any claim for refunds or credits) in any Tax Return
filed by the Corporation or any Subsidiary has been refused or denied
by any relevant Tax authority. Adequate provision has been made in
accordance with Canadian generally accepted accounting principles,
and, to the knowledge of the Corporation, charges, accruals and
reserves on the books of each of the Corporation and the Subsidiaries
in respect of any liability for Taxes are sufficient, to meet any
reasonable assessment or reassessment for installments and Taxes not
yet due.
(d) Except as disclosed in Section 4.16(d) of the Disclosure Schedule,
each of the Corporation and the Subsidiaries have withheld from all
payments made to its officers, directors, employees, debtholders,
shareholders and other Persons the amount of all Taxes including but
not limited to income tax, federal or provincial pension and medical
plan contributions, unemployment insurance contributions and other
deductions required to be withheld therefrom and, where such Taxes are
due, have paid the same to the proper receiving officers or Tax
authorities.
(e) Except as disclosed in Section 4.16(e) of the Disclosure Schedule,
neither the Corporation nor any of the Subsidiaries is a party to or
bound by any Tax sharing or allocation agreement, nor does it have any
current or potential contractual obligation to indemnify any other
person with respect to Taxes.
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(f) The Corporation is eligible for investment tax credits with respect to
certain of its research and development activities within the meaning
of the Income Tax Act (Canada).
(g) With respect to the Corporation's investment tax credits, the
Corporation has complied with applicable provisions and requirements
of the Income Tax Act (Canada).
(h) Except as disclosed in Section 4.16(h) of the Disclosure Schedule,
neither the Corporation nor any of the Subsidiaries have any knowledge
of: (x) any liability for any Tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately
provided for in the Financial Statements or in its books in respect of
any such liabilities arising or accruing since the Financial Statement
Date; or (y) any investigations, audits or reassessments initiated or
to be initiated against the Corporation or a Subsidiary by any Tax
authority.
(i) The Corporation has made or obtained records or documents that meet
the requirements of paragraphs 247(4)(a) to (c) of the Income Tax Act
(Canada) with respect to transactions and arrangements between the
Corporation and any Person with whom the Corporation was not dealing
at Arm's Length.
(j) Each of the Corporation and each Subsidiary has complied with all
registration, reporting, collection and remittance requirements in
respect of Taxes. Except as disclosed in Section 4.16(j) of the
Disclosure Schedule, the Corporation and the Subsidiaries have
collected or withheld from each receipt from or in respect of any of
their past and present customers (or other persons paying amounts to
the Corporation or the Subsidiaries) the amount of all Taxes
(including goods and services tax and provincial, state and foreign
sales taxes) required to be collected and have remitted such Taxes
when due, in the form required under the appropriate legislation or
made adequate provision in the books of each of the Corporation and
the Subsidiaries for the payment of such amount to the proper
receiving Tax authorities.
4.17 Real Property
(a) Except as described and set forth in Section 4.17(a) of the Disclosure
Schedule, neither the Corporation nor any Subsidiary owns or has any
interest in, nor is the Corporation or any Subsidiary a party to or
bound by or subject to any Contract respecting the purchase or sale
of, any real or immoveable property or any right of occupancy with
respect thereto. Section 4.17(a) of the Disclosure Schedule accurately
specifies the following:
(i) with respect to each separate parcel of Owned Real Property (A)
the municipal address, (B) a brief description of buildings and
structures thereon, and (C) details of any mortgages/charges
registered such property; and
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(ii) with respect to each lease for the Leased Real Property (A) the
parties to and dates of the lease, (B) the expiry date of the
lease, (C) the location (including municipal address) of the
Leased Real Property, and (D) the rental payable and any other
material payments required under the lease.
(b) Mitel Networks Limited is the owner of the Owned Real Property. Except
as disclosed in Section 4.17(b) of the Disclosure Schedule, there are
no Contracts to sell, transfer or dispose of the Owned Real Property
or any interest therein or which would restrict the ability of Mitel
Networks Limited to transfer the Owned Real Property, and no person
has any right to occupy or use any of the Owned Real Property or any
part thereof other than the Corporation or a Subsidiary.
(c) Each lease for the Leased Real Property listed in Section 4.17(a) of
the Disclosure Schedule is valid and subsisting and in good standing,
and the Corporation or a Subsidiary is entitled to all rights and
benefits under such leases in accordance with the terms thereof and
neither the Corporation nor a Subsidiary has sublet, assigned,
licensed or otherwise conveyed any rights in such leases or the
property subject thereto to any other Person, except as set forth in
Section 4.17(c) of the Disclosure Schedule. Neither the Corporation
nor a Subsidiary nor, to the Corporation's knowledge, any other party
thereto is in breach of any of the provisions of any such lease, nor
is there any dispute between the Corporation or any Subsidiary and any
landlord or tenant under any such lease.
(d) All of the plant, buildings, structures, erections, improvements,
appurtenances and fixtures (collectively in this Section 4.17
"buildings and structures") situate on or forming part of the Real
Property are, to the knowledge of the Corporation, in good operating
condition and in a state of good maintenance and repair and are
adequate and suitable for the purposes for which they are currently
being used.
(e) To the knowledge of the Corporation, none of the buildings and
structures, or the operation or maintenance thereof, violates any
restrictive covenant or any provision of any applicable law or
encroaches on any property owned by others, or, if there is any such
violation, such violation would not result in a Material Adverse
Effect.
4.18 Personal Property
Except as disclosed in Schedule 4.18 of the Disclosure Schedule, and except with
respect to Real Property which is separately addressed in Section 4.17, each of
the Corporation and the Subsidiaries has: (i) good and sufficient title to all
of the assets and properties owned by it; (ii) good and sufficient title to the
lessee interest in all assets and properties leased by it as lessee; and (iii)
full right to hold and use all of the respective assets and properties used in
or necessary to the Business, in each case all free and clear of Liens except
applicable restrictions on assignment and/or subletting and distress rights and
except for any Liens that, in any case or in the aggregate, would not have a
Material Adverse Effect. All such assets and properties are, to the knowledge of
the Corporation, in good condition and repair, reasonable wear and tear
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excepted, and are adequate and sufficient in all material respects to carry on
the Business as presently conducted and as proposed to be conducted.
4.19 Health, Safety and Environmental Matters
(a) To the knowledge of the Corporation, the operations of the Corporation
and its Subsidiaries are not in, and have not been in, violation of
any applicable Environmental Laws, and neither the Corporation nor any
of the Subsidiaries has received any written notice alleging any such
violation.
(b) Except as disclosed in Section 4.19(b) of the Disclosure Schedule,
neither the Corporation nor any Subsidiary has received written
notice, or has knowledge of any facts that could give rise to any
notice, that it is potentially responsible for any remedial or other
corrective action or any work, repairs, construction or capital
expenditures to be made under any Environmental Law.
(c) The Corporation has no knowledge of any Hazardous Substance
originating from any adjoining or neighbouring properties which has
migrated or is suspected to be migrating onto, into or under the Real
Property.
4.20 Employment Contracts
(a) True and complete copies of all Contracts of employment or engagement
with each senior officer of the Corporation or any Subsidiary have
been made available to the Investor or its counsel, where specifically
requested. For the purposes of this clause (a), the term "senior
officer" means any senior officer of the Corporation or any Subsidiary
as such term is defined in section 1(1) of the Securities Act
(Ontario). There is no Contract of employment or engagement entered
into with any employee, director or independent contractor of the
Corporation or any Subsidiary which is not terminable on the giving of
reasonable notice in accordance with applicable law or in accordance
with the terms of the relevant Contract.
(b) The Corporation and each Subsidiary has the approximate number of
full-time employees, and has retained the services of the number of
independent contractors, set forth next to its name in Section 4.20(b)
of the Disclosure Schedule. Other than as disclosed in Section 4.20(b)
of the Disclosure Schedule, there is no current labour unrest,
threatened labour strike or other material disagreements or
difficulties with any of the Corporation's or the Subsidiaries'
employees or independent contractors. To the knowledge of the
Corporation, no senior officer or key employee of the Corporation or
any Subsidiary has stated any intention of terminating his or her
employment with or services to the Corporation or any Subsidiary, as
the case may be, nor does the Corporation or any of the Subsidiaries
have any present intention of terminating the employment of any such
person, as the case may be.
(c) Except as disclosed in Section 4.20(c) of the Disclosure Schedule, the
Corporation is not party to or bound by any Contract or policy
providing for
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severance payments, termination payments, or the acceleration of any
option or warrant held by any director, officer, employee or
consultant of the Corporation or any Subsidiary.
(d) To the knowledge of the Corporation, no present or former employee or
independent contractor of the Corporation or any Subsidiary is a party
to or has violated any term of any employment contract, consulting
agreement, non-competition or non-solicitation agreement, patent or
other proprietary information agreement or similar Contract with, or
any fiduciary duty in favour of, a former employer of such employee or
independent contractor or any other third party. Neither the
Corporation nor any Subsidiary has received any notice from any third
party alleging that such a violation has occurred. To the knowledge of
the Corporation, the continued employment or engagement by the
Corporation and the Subsidiaries of their respective present employees
and independent contractors will not result in any such violation.
(e) Except as set forth in Section 4.20(e) of the Disclosure Schedule, no
complaint, grievance, claim, work order or, to the knowledge of the
Corporation, investigation, has been filed, made, commenced or, to the
knowledge of the Corporation, threatened against the Corporation or
any of the Subsidiaries, pursuant to, nor is the Corporation or any of
its Subsidiaries in violation in any material respect of:
(i) with respect to employees in Ontario, the Ontario Human Rights
Code, the Occupational Health & Safety Act (Ontario), the
Workplace Safety and Insurance Act (Ontario), the Employment
Standards Act, 2000 (Ontario) or the Pay Equity Act (Ontario);
and
(ii) with respect to employees in the United States, all applicable
laws in the United States relating to wages, hours and collective
bargaining; and
(iii) with respect to employees in the United Kingdom, the Trade Union
and Labour Relations (Consolidation) ▇▇▇ ▇▇▇▇, the Equal Pay ▇▇▇
▇▇▇▇, the Sex Discrimination Acts 1975 and 1986, the Race
Relations ▇▇▇ ▇▇▇▇, the Employment Rights Act, the Trade Union
Reform and Employment Rights ▇▇▇ ▇▇▇▇, the Disability
Discrimination ▇▇▇ ▇▇▇▇, the Employment Relations ▇▇▇ ▇▇▇▇, the
Social Security and Housing Benefits ▇▇▇ ▇▇▇▇, the Social
Security Contributions and Benefits ▇▇▇ ▇▇▇▇, the Transfer of
Undertakings (Protection of Employment) Regulations 1981 and the
Working Time Regulations 1998.
Neither the Corporation nor any of the Subsidiaries is, to its
knowledge, engaged in any unfair labour practice. There is no work
stoppage or, to the knowledge of the Corporation, any other action,
grievance or dispute currently existing or threatened against the
Corporation or any of the Subsidiaries that could, in the good faith
judgment of the Corporation, lead to a work stoppage by the employees
of the Corporation or any of the Subsidiaries. Except as disclosed in
Section
-36-
4.20(e) of the Disclosure Schedule, there are no outstanding decisions
or settlements or pending settlements under any employment standards
legislation which place any obligation upon the Corporation or any of
the Subsidiaries to do or refrain from doing any act.
(f) Except as disclosed in Section 4.20(f) of the Disclosure Schedule, all
salary, wages, vacation pay, bonuses, commissions and employee benefit
payments have been paid or are accrued but not yet due, and all such
accruals are properly reflected in the books and records of the
Corporation or the Subsidiaries, as the case may be.
(g) Except as disclosed in the Financial Statements or as disclosed in
Section 4.20(g) of the Disclosure Schedule, since the Financial
Statement Date no payments have been made or authorized by the
Corporation to Insiders of the Corporation, except in the ordinary
course of the business of the Corporation or at the regular rates
payable to them of salary, pension, bonuses, rents or other
remuneration of any nature.
4.21 Employee Plans
(a) Section 4.21(a) of the Disclosure Schedule lists all Employee Plans
and U.S. Employee Plans to which the Corporation or any Subsidiary is
party, bound by or in respect of which either has any contingent or
actual liability. The Corporation has made available to EdgeStone or
its counsel true, correct and complete copies of all the Employee
Plans and U.S. Employee Plans as amended as of the date hereof,
together with all related material documentation, including, plan
texts, plan summaries, material correspondence, if any, to and from
regulatory authorities, funding documents and insurance contracts.
With respect to each U.S. Employee Plan, the Corporation has provided
to EdgeStone or its counsel the most recently filed Form 5500 under
the Code, if applicable.
(b) Except as disclosed in Section 4.21(b) of the Disclosure Schedule, to
the knowledge of the Corporation all of the Employee Plans are and
have been, in all material respects, established, registered,
qualified, funded, invested, contributed to and administered in
accordance with their terms and the terms of the Collective Agreements
and all applicable laws, accounting standards, rules and regulations.
(c) Except as disclosed in Section 4.21(c) of the Disclosure Schedule, all
employer payments, contributions or premiums required to be remitted
or paid to or in respect of each Employee Plan have been remitted or
paid in a timely fashion in accordance with the terms thereof, all
applicable actuarial reports and all applicable law.
(d) Except in the ordinary course of business or as disclosed in Section
4.21(d) of the Disclosure Schedule, no Employee Plan has been amended
or improved and no commitment to amend or improve any Employee Plan
has been made since the Financial Statement Date except as required by
applicable laws and no discretion has been exercised to augment
benefits.
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(e) Section 4.21(a) of the Disclosure Schedule lists all Employee Plans,
registered or unregistered, under which employees of the Corporation
or any Subsidiary accrue pension benefits or under which benefits are
provided to former employees (or to the beneficiaries or dependants of
such persons) on or after retirement or termination of employment. As
of the date hereof, the deficit under the Employee Plans listed in
Section 4.21(a) of the Disclosure Schedule does not exceed
L12,000,000 in the aggregate.
(f) Except as disclosed in Section 4.21(f) of the Disclosure Schedule, to
the knowledge of the Corporation, no fact or circumstance exists which
would adversely affect the tax-exempt status of any Employee Plan.
(g) Except as disclosed in Section 4.21(g) of the Disclosure Schedule, all
benefits under all Employee Plans are either fully insured or accrued
and fully and accurately reflected in the books and records of the
Corporation or its Subsidiaries, as applicable. Where required
pursuant to applicable law or pursuant to Employee Plans, each
Employee Plan has been fully funded or fully insured on an on-going,
solvency and annuity buy-out basis pursuant to actuarial assumptions
and methodology appropriate to the employees or former employees of
the Corporation and the Subsidiaries and the Business.
(h) Except as disclosed in Section 4.21(h) of the Disclosure Schedule, to
the knowledge of the Corporation, there exists no liability in
connection with any former benefit plan relating to the employees or
former employees of the Corporation or a Subsidiary and their
beneficiaries that has terminated and all procedures for termination
of each such former benefit plan has been properly followed in
accordance with the terms of such former benefit plan and applicable
law. In respect of employees or former employees, there is no
investigation, examination, proceeding, action, suit or claim (other
than routine claims for benefits or remuneration) pending or
threatened involving any Employee Plan and to the knowledge of the
Corporation no facts or circumstances exist which could reasonably be
expected to give rise to any such investigation, examination,
proceeding, action, suit or claim (other than routine claims for
benefits or remuneration).
(i) No non-exempt "prohibited transaction", as defined in section 406 of
ERISA or section 4975 of the Code, has occurred with respect to any
U.S. Employee Plan that could reasonably be expected to subject the
Corporation or any of its Subsidiaries to liability. Neither the
Corporation nor any of its ERISA Affiliates have ever sponsored,
maintained, or contributed to (i) an employee benefit plan subject to
the provisions of Title IV of ERISA; (ii) a "multiemployer plan," as
defined by section 3(37) of ERISA; or (iii) a "multiple employer
welfare arrangement," as defined by section 3(40) of ERISA. Each U.S.
Employee Plan which is intended to be qualified under section 401(a)
of the Code is so qualified and has been so qualified during the
period from its adoption to date, and, to the knowledge of the
Corporation, each trust forming a part thereof is exempt from tax
pursuant to section 501(a) of the Code, except as set forth in Section
4.21(b)
-38-
of the Disclosure Schedule. The Corporation has made available to
EdgeStone or its counsel copies of the most recent Internal Revenue
Service determination letters, if any, with respect to each such plan.
All U.S. Employee Plans have been maintained in compliance with its
terms and with the requirements prescribed by all applicable statutes,
orders, rules and regulations.
(j) The Corporation has designated a registered stakeholder pension scheme
in accordance with the requirements of the United Kingdom Welfare
Reform and Pensions Act 1999 (and Regulations made under it) in
relation to all of its "relevant employees" (as defined for the
purposes of that Act), and has complied with all obligations pursuant
to the United Kingdom Welfare Reform and Pensions Act 1999 (and
Regulations made under it).
4.22 Unions
A list of all Collective Agreements is contained in Section 4.22 of the
Disclosure Schedule. No Collective Agreement restricts the relocation or closing
of any part of the Business. Neither the Corporation nor any Subsidiary is, to
the knowledge of the Corporation, currently in breach of any Collective
Agreement. There are no written or oral agreements or, to the knowledge of the
Corporation, courses of conduct that modify any Collective Agreement, except to
the extent otherwise provided under applicable laws. Except as disclosed in
Section 4.22 of the Disclosure Schedule:
(a) no employee association, trade union, council of trade unions,
employee bargaining agency or affiliated bargaining agent holds
bargaining rights with respect to any of the Corporation's or any
Subsidiary's employees by way of certification, interim certification,
voluntary recognition, designation or successor rights;
(b) no labour representatives have applied to have the Corporation or any
Subsidiary declared a related employer pursuant to the Labour
Relations Act (Ontario); and
(c) there are no current or to the Corporation's knowledge threatened
attempts to organize or establish any trade unions or employee
association with respect to the Corporation or any Subsidiary.
4.23 Material Contracts
Except as disclosed in Section 4.23 of the Disclosure Schedule, neither the
Corporation nor any of the Subsidiaries is a party to or otherwise bound by: (i)
any Contract that may affect its ability to consummate the transactions
contemplated hereby or by any of the Other Agreements; (ii) any other Contract
or Contracts that are individually, or in the aggregate (in the case of a series
of related agreements or agreements with the same or related parties), material
to the Corporation (considered on a consolidated basis) or its Business,
prospects, financial condition, operations, property or affairs (other than
those purchase and sale agreements, instruments or commitments for the sale of
the products or services of the Corporation entered into in the ordinary course
of business); or (iii) any:
-39-
(a) Contract requiring it to purchase all or substantially all of its
requirements for a particular product or service from a particular
supplier or suppliers, or requiring it to supply all of a particular
customer's or customers' requirements for a certain service or
product;
(b) Contract entered into outside of the ordinary course of business
pursuant to which the Corporation or any Subsidiary has agreed to
indemnify or hold harmless any other Person from third-party claims
beyond the value of the Contract to the Corporation;
(c) employment agreement, consulting agreement or other Contract providing
for severance payments, acceleration of options or other additional
rights or benefits (whether or not optional) in the event of the sale
or other change in control of the Corporation or any Subsidiary;
(d) Contract with any current or former Affiliate, Insider or other Person
not at Arm's Length with the Corporation or any Subsidiary or with any
Person in which any such Affiliate, Insider or other Person has a
material interest;
(e) joint venture agreement;
(f) Contract with any domestic or foreign government or agency or
executive office thereof or any subcontract between the Corporation or
any Subsidiary and any third party relating to a Contract between such
third party and any domestic or foreign government or agency or
executive office thereof, in any case the loss of which may reasonably
be expected to have a Material Adverse Effect;
(g) Contract imposing non-competition or exclusive dealing obligations on
the Corporation or any Subsidiary;
(h) Contract with respect to the escrow or other deposit or availability
of any Business IP; or
(i) Contract with respect to the license, distribution, or resale of the
Business IP or joint developments related thereto (other than customer
contracts on the Corporation's standard terms entered into in the
ordinary course of business) in any case the loss of which may
reasonably be expected to have a Material Adverse Effect.
For purposes of clause (ii) above, a Contract will be considered "material"
where the loss of such Contract could reasonably be expected to result in a
Material Adverse Effect.
The Corporation has made available to the Investor or its counsel for inspection
correct and complete copies (or written summaries of the material terms of oral
agreements or understandings) of each Contract listed in Section 4.23 of the
Disclosure Schedule, each as amended to date. Each such Contract is a valid,
binding and enforceable obligation of the Corporation or a Subsidiary, as the
case may be, and to the knowledge of the Corporation, of the other party or
parties thereto, and is in full force and effect. None of such Contracts (except
for
-40-
Contracts disclosed in connection with clause (d) above) contain any obligation
of the Corporation or any Subsidiary that is contingent upon, or that
accelerates upon, the change of control of the Corporation or any Subsidiary.
Neither the Corporation nor any of the Subsidiaries, nor to the knowledge of the
Corporation, any other party thereto, is, or is (to the knowledge of the
Corporation) considered by any other party thereto to be, in breach of or
non-compliance with any term of any such Contract (nor, to the knowledge of the
Corporation, is there any basis for any of the foregoing, including, without
limitation, the entering into and performance by the Corporation of this
Agreement and the Other Agreements), except for any breaches or non-compliances
that singly or in the aggregate would not have a Material Adverse Effect.
Neither the Corporation nor any Subsidiary is party to any Contract which it
does not have the capacity to perform, including the necessary personnel,
equipment and supplies.
4.24 Customers, Licensors and Suppliers
(a) Section 4.24(a) of the Disclosure Schedule lists accurately and
completely: (i) all Contracts (the "Customer Contracts") between the
Corporation or any Subsidiary and the ten most significant customers
(including distributors) of the Corporation or the Subsidiary, as the
case may be, considered on a consolidated basis, based on annual sales
to such customer in the 24 months preceding the date of this
Agreement; and (ii) all Contracts (the "Supplier Contracts") between
the Corporation or any Subsidiary and the ten most significant
suppliers (including licensors of Licensed IP) of the Corporation or
the Subsidiary, as the case may be, considered on a consolidated
basis, based on payments to such supplier or licensor in the 24 months
preceding the date of this Agreement.
(b) Neither the Corporation nor any Subsidiary is in default or breach of
any Customer Contracts or Supplier Contract and, to the knowledge of
the Corporation, there exists no state of facts, including, without
limitation, the execution, delivery and performance of this Agreement
or the Other Agreements, which with notice or the passage of time
would result in a default or breach or, if applicable, acceleration of
any rights in the Customer Contracts or Supplier Contracts, except to
the extent any such default or breach would not, singly or in the
aggregate, be reasonably expected to have a Material Adverse Effect.
(c) Complete and accurate copies of all Customer Contracts and Supplier
Contracts have been made available to EdgeStone or its counsel by the
Corporation.
(d) During the 12 month period ended on the date hereof: (i) there has
been no cancellation of or adverse modification to any Customer
Contract or Supplier Contract except as indicated thereon (including
any material decrease to the services, supplies or materials provided
to a customer or to a customer's usage or purchase of the services or
products of the Corporation and any material increase in pricing or
any material decrease in service levels provided by a supplier); and
(ii) neither the Corporation nor any Subsidiary has received any
notice to the effect or has any reason to believe that there will be
any cancellation or adverse modification to any Customer Contract or
Supplier Contract. To the knowledge of the Corporation, there is at
present no state of facts or rate of progress
-41-
concerning any such obligations which, if it continued, would result
in a default or breach of any Customer Contract or Supplier Contract.
(e) Except as disclosed in Section 4.24(e) of the Disclosure Schedule, in
the event of the termination of, or failure of the licensor or
supplier to perform, any Supplier Contract, alternative sources of
supply for the products and services previously supplied under such
Supplier Contract are readily available on commercially reasonable
terms.
4.25 Description of Business Intellectual Property
Section 4.25 of the Disclosure Schedule contains a complete and accurate list of
all Intellectual Property and Technology that the Corporation and/or one or more
of the Subsidiaries owns, uses or has the right to use in the conduct of its
Business and that is individually or in the aggregate material to the conduct of
the Business or the loss of which could reasonably be expected to result in a
Material Adverse Effect. The listing set forth in Section 4.25 of the Disclosure
Schedule specifies, for each item, whether such listed Intellectual Property or
Technology is owned by the Corporation or one of the Subsidiaries ("Owned IP")
or whether such listed Intellectual Property or Technology is used by the
Corporation or the Subsidiaries under a Contract with another Person ("Licensed
IP"), and:
(i) in the case of the Owned IP that is Registered IP, contains a
list of all the jurisdictions in which such Intellectual Property
has been issued or registered or in which an application for such
issuance and registration has been filed (including abandoned or
rejected applications), including the respective registration or
application numbers and the names of all registered owners; and
(ii) in the case of the Licensed IP, sets forth all Contracts entered
into in connection with the Licensed IP.
The Owned IP and Licensed IP (collectively referred to herein as the "Business
IP") listed in Section 4.25 of the Disclosure Schedule constitutes all of the
Intellectual Property and Technology necessary to carry on the Business as
presently conducted and as proposed to be conducted by the Corporation and the
Subsidiaries.
True and complete copies of each Contract listed in Section 4.25 of the
Disclosure Schedule with respect to the Licensed IP have been made available to
the Investor or counsel for the Investor.
4.26 Intellectual Property Rights
(a) Except as disclosed in Section 4.26(a) or Section 4.26(g) of the
Disclosure Schedule, the Corporation or one of the Subsidiaries owns
all right, title and interest in and to the Owned IP free and clear of
any Liens and Encumbrances and, to the knowledge of the Corporation,
has sole and exclusive rights (and is not contractually obligated to
pay any compensation to any other Person in respect thereof) to the
use thereof or the material covered thereby. Except as disclosed in
Section 4.26(a) of the Disclosure Schedule, no portion of the Owned IP
was
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jointly developed or is jointly owned by any other Person. Other than
with respect to the Licensed IP and the Commercial Software Licenses,
no royalties or other amounts are required to be paid by the
Corporation or any Subsidiary in connection with the continued use or
exploitation by the Corporation or the Subsidiaries of the Business
IP.
(b) The Corporation or one of the Subsidiaries has valid and subsisting
rights to use and exploit the Licensed IP in the manner currently used
or required by the operation of the Business as currently carried on
and proposed to be carried on. Each Contract with respect to the
Licensed IP is valid and subsisting and in good standing and there is
no material default thereunder. The Corporation or one of the
Subsidiaries has the right to exploit, sell, license and sub-license
the Licensed IP incorporated in or distributed with any existing
products and/or products under development to the current and/or
proposed distributors, purchasers and end-users thereof. Alternative
sources of supply for the Licensed IP are available on commercially
reasonable terms.
(c) Except as disclosed in Section 4.26(c) of the Disclosure Schedule,
none of the Owned IP nor any service rendered by the Corporation or
any of the Subsidiaries, nor any product currently developed,
manufactured, produced, marketed, or sold by the Corporation or the
Subsidiaries:
(i) to the knowledge of the Corporation, infringes upon the Patent or
Trade-▇▇▇▇ rights of any other Person;
(ii) infringes upon the Copyright, Domain Name, IC Topography, or
Industrial Design rights of any other Person; or
(iii) to the knowledge of the Corporation, uses, is derived from or
otherwise incorporates any trade secrets or confidential
information of any other Person, without such Person's
authorization.
Except as disclosed in Section 4.26(c) of the Disclosure Schedule,
neither the Corporation or any of the Subsidiaries has ever received
any charge, complaint, claim, demand, or notice alleging any
interference, infringement, misappropriation or violation with respect
to any Business IP (including any claim that the Corporation and/or
any Subsidiary must obtain a license or refrain from using any such
Business IP), nor does the Corporation know of any valid grounds for
any bona fide claims.
(d) Except as disclosed in Section 4.26(d) of the Disclosure Schedule,
neither the Corporation nor any Subsidiary is a party to or bound by
any Contract that limits or impairs its ability to use, sell,
transfer, assign, commercially exploit or convey the Owned IP.
(e) Except as disclosed in Section 4.26(e) of the Disclosure Schedule, to
the knowledge of the Corporation the Owned IP is not subject to any
outstanding Lien, judgment, ruling, order, writ, decree, stipulation,
injunction or determination
-43-
by or with any Governmental Authority, nor is there (or has there
been) any pending or, to the knowledge of the Corporation threatened,
Legal Proceeding relating to any Owned IP or the ownership, use,
enforceability or validity thereof (including any interference,
reissue, re-examination or opposition proceeding or proceeding
contesting the rights of the Corporation to any Owned IP which is
Registered IP).
(f) To the knowledge of the Persons named in Section 1.4 hereof, there is
no unauthorized use, infringement or misappropriation of any Owned IP
by any other Person and neither the Corporation nor any of the
Subsidiaries has covenanted or agreed with any Person not to ▇▇▇ or
otherwise enforce any legal rights with respect to any of the Owned
IP.
(g) Section 4.26(g) of the Disclosure Schedule lists all Contracts entered
into by the Corporation or a Subsidiary (other than Contracts between
the Corporation or a Subsidiary and end users of their products or
services entered into in the ordinary course of business) under which
any Person has been granted a license by the Corporation or a
Subsidiary with respect to any Owned IP, and specifies for each such
Contract whether the licenses granted are exclusive or non-exclusive
in nature. Except as disclosed in Section 4.26(g) of the Disclosure
Schedule, neither the Corporation nor any Subsidiary is bound by, nor
has any obligation to enter into, any Contract (other than Contracts
entered into in the ordinary course of business) that requires the
Corporation or any Subsidiary to transfer or assign any of its rights
in the Owned IP to any other Party.
(h) The Owned IP which is Registered IP has not been used or enforced, or
failed to be used or enforced, in a manner that would result, as of
the date hereof, in the non-renewal, expiration, modification,
abandonment, cancellation or unenforceability thereof. All presently
required filing, examination and maintenance fees have been paid and
all proofs of working or use have been filed in respect to the Owned
IP which is Registered IP (excluding any abandoned or rejected
applications set out in Section 4.25(i) of the Disclosure Schedule).
The Corporation has obtained valid patent assignments from each of the
inventors of the Patents that are comprised in the Owned IP. Except as
disclosed in Section 4.26(h) of the Disclosure Schedule, to the
knowledge of the Corporation, there is no state of facts which casts
doubt on the validity or enforceability of any of the Owned IP.
(i) The Corporation and the Subsidiaries have each taken all commercially
reasonable steps (including measures to protect secrecy and
confidentiality) to protect such company's right, title and interest
in and to all Owned IP. All agents and representatives of the
Corporation and the Subsidiaries who have or have had access to
confidential or proprietary information of the Corporation and the
Subsidiaries have a legal obligation of confidentiality to the
Corporation with respect to such information.
-44-
(j) Except as disclosed in Section 4.26(j) of the Disclosure Schedule, all
of the Owned IP, other than that acquired from third parties, was
developed by full-time employees or contractors of the Corporation or
a Subsidiary during the time they were employed or engaged with the
Corporation or one of the Subsidiaries or predecessors of the
Corporation or one of the Subsidiaries as software, information
technology or hardware developers or related or supporting roles (the
"Developers"). All of the Developers and other current or former
employees or contractors of the Corporation and each of the
Subsidiaries have duly executed and delivered Employee IP Agreements
to the Corporation or a Subsidiary, as the case may be, on or before
the date of commencement of their respective employment or engagement
with the Corporation or a Subsidiary, as the case may be, pursuant to
which they: (A) have agreed to retain in confidence any confidential
or proprietary information provided or otherwise made available to
them by the Corporation or any Subsidiary (including confidential or
proprietary information of the third parties to whom the Corporation
or any Subsidiary owes a duty of confidence); (B) have granted,
assigned and transferred to the Corporation or one the Subsidiaries or
predecessors of the Corporation or one of the Subsidiaries all of
their right, title and interest in and to all Intellectual Property
and Technology developed, conceived of, reduced to practice, authored
or otherwise created by them during the course of their engagement
with the Corporation or a Subsidiary; and (C) except as disclosed in
Section 4.26(j) of the Disclosure Schedule, have irrevocably and
unconditionally waived all moral rights and other non-assignable
rights in respect of such Intellectual Property and Technology where
applicable. The Corporation is not aware of any material breach of any
of the Employee IP Agreements. No current or former employee or
contractor of the Corporation or any Subsidiary owns, or to the
knowledge of the Corporation, has claimed an interest in, any of the
Business IP. Except as disclosed in Section 4.26(j) of the Disclosure
Schedule, it will not be necessary to utilize any Intellectual
Property or Technology of any current of former employees of or
contractors to the Corporation or any Subsidiary (or any Person the
Corporation or any Subsidiary currently intends to hire or engage)
acquired prior to their employment or engagement by the Corporation or
a Subsidiary in order to carry on the Business as presently conducted,
or as anticipated to be conducted. There are no Legal Proceedings
pending, or to the knowledge of the Corporation threatened, involving
the prior employment of any of the employees or contractors of the
Corporation or any Subsidiary, or their use in connection with the
Business of the Corporation of any information, creation or technique
allegedly proprietary to any of their former employers or other
Persons.
(k) Except to obtain patent or other IP protection, any disclosure of
confidential or proprietary information by the Corporation, any of the
Subsidiaries or any of their respective employees or agents has been
pursuant to valid, binding and enforceable non-disclosure agreements,
which non-disclosure agreements have not and will not result in the
deemed acquisitions by any party of any right, title or interest, or
the deemed grant of any license, to use any of the Owned IP for any
commercial purposes. To the knowledge of the Corporation, no
disclosure of the Owned IP has been made in a manner that would
prevent the Corporation or a
-45-
Subsidiary or their respective successors in interest, if any, from
obtaining a patent in respect of any Owned IP that would, if not for
such disclosure, have been capable of being the subject matter of a
patent. In relation to each Patent application (in preparation or
filed) or Patent for an invention comprised in the Owned IP, to the
Corporation's knowledge, after due inquiry, there is no professional
opinion, such as the opinion of a patent agent or patent attorney,
whether preliminary in nature or in any other manner qualified, to the
effect that the chances of obtaining or sustaining valid patent rights
to the invention in any jurisdiction are considered to be unlikely, or
less than even, or about even, or in any other manner doubtful.
(l) Except as disclosed in Section 4.26(l) of the Disclosure Schedule, no
national, federal, provincial, state or other regulatory agency or
body has provided any funding to the Corporation or any Subsidiary
which: (i) would give such national, federal, provincial, state or
other regulatory agency or body any right, title or interest in or to
the Business IP; or (ii) limits or impairs the ability of the
Corporation or any Subsidiary to use or to sell, transfer, assign,
convey or license the Business IP outside of Canada or otherwise.
(m) Pursuant to the Zarlink Supply Agreement, one copy of the Escrowed
Intellectual Property (as defined in the Zarlink Supply Agreement) has
been placed in escrow and the Corporation is entitled to release of
the Escrowed Intellectual Property in accordance with the terms and
conditions of the escrow agreement between the Corporation, Zarlink
and Royal Trust Corporation of Canada made effective February 16,
2001. A complete copy of such escrow agreement has been made available
to the Investor or its counsel.
(n) Neither the Corporation nor any Subsidiary has used Publicly Available
Software in whole or in part in the development of any Technology
which forms part of the Owned IP in a manner that may subject such
Technology or Owned IP in whole or in part, to all or part of the
license obligations of any Publicly Available Software. "Publicly
Available Software" means any software that contains, or is derived in
any manner (in whole or in part) from, any software that is
distributed pursuant to a licensing and distribution model that
requires, as a condition of use, modification, and/or distribution of
such software, that such software or other software incorporated into,
derived from, or distributed with such software be: (A) disclosed or
distributed in source code form; (B) licensed for the purpose of
making derivative work; or (C) redistributable at no or minimal
charge. Publicly Available Software includes, without limitation,
software licensed or distributed under any of the following licenses
or distribution models similar to any of the following: (i) GNU
General Public License (GPL) or Lesser/Library GPL (LGPL); (ii) the
Artistic License (e.g. PERL); (iii) the Mozilla Public License; (iv)
the Netscape Public License; (v) the Sun Community Source License
(SCSL); (vi) the Sun Industry Source License (SISL); and (vii) the
Apache Server License.
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(o) Except as disclosed in Section 4.26(o) of the Disclosure Schedule,
neither the Corporation nor any Subsidiary has provided the source
code for the software comprised in the Owned IP to any other Person,
directly or indirectly, by license, transfer, sale, escrow, or
otherwise, except in the ordinary course of business and subject to
appropriate license or confidentiality restrictions. Neither the
Corporation nor any Subsidiary is aware that any other Person has
reverse engineered, disassembled or decompiled the software comprised
in the Owned IP to derive such source code.
(p) The Corporation and each Subsidiary has complied with all applicable
export and import laws and regulations in each jurisdiction in which
the Corporation or a Subsidiary export or import Business IP.
4.27 Litigation
Except as disclosed in Section 4.27 of the Disclosure Schedule: (i) there is no
Legal Proceeding against or involving the Corporation or any of the Subsidiaries
(whether in progress or, to the knowledge of the Corporation, threatened); (ii)
to the knowledge of the Corporation, no event has occurred which could
reasonably be expected to give rise to any Legal Proceeding, or result in
litigation; and (iii) there is no judgment, writ, decree, injunction, rule,
award or order of any court, government department, board, commission, agency,
arbitrator or similar body outstanding against the Corporation or any of the
Subsidiaries. Without limiting the generality of the foregoing, except as
disclosed in Section 4.27 of the Disclosure Schedule, there is no Legal
Proceeding involving any product liability claim in progress, pending or, to the
Corporation's knowledge, threatened against or affecting the Corporation or any
Subsidiary alleging any defect in the design or manufacture of or the materials
used in any of the products of the Corporation or any Subsidiary or breach of
any express or implied warranty. Except as disclosed in Section 4.27 of the
Disclosure Schedule, neither the Corporation nor any of the Subsidiaries is the
plaintiff or complainant in any Legal Proceeding. The Corporation is not and has
not been since the Financial Statement Date engaged in any dispute with any of
its Insiders. Except as disclosed in Section 4.27 of the Disclosure Schedule, no
shareholders of the Corporation have exercised or asserted, or to the knowledge
of the Corporation, have expressed any intent to exercise or assert, any right
of dissent or any oppression or other statutory remedy in connection with the
Articles of Amendment or the other transactions contemplated by this Agreement.
In the good faith opinion of the Corporation, the maximum aggregate potential
liability of the Corporation and any Subsidiary to all Persons included, or who
may be included, in the class of plaintiffs pursuant to the statement of claim
filed under Court File No. 03-CU-25673 does not exceed $2,800,000 (excluding
legal costs or expenses).
4.28 Insurance
Section 4.28 of the Disclosure Schedule lists the policies of theft, fire,
liability, worker's compensation, life, property and casualty, directors' and
officers', and other insurance owned or held by the Corporation or the
Subsidiaries. Such policies of insurance are of the kinds and cover such risks,
and are in such amounts and with such deductibles and exclusions, as are
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consistent with prudent business practice for owners of comparable assets and
operators of comparable businesses. To the knowledge of the Corporation, all
such policies are, and at all times since the respective dates set forth in
Section 4.28 of the Disclosure Schedule, have been, in full force and effect,
are sufficient for compliance in all material respects by the Corporation and
the Subsidiaries with all requirements of law and of all Contracts (including
Contracts relating to Indebtedness) to which the Corporation or any of the
Subsidiaries is party, and provide that they will remain in full force and
effect through the respective expiry dates set forth in Section 4.28 of the
Disclosure Schedule, and will not terminate or lapse or otherwise be affected in
any way by reason of the transactions contemplated hereby. Section 4.28 of the
Disclosure Schedule set forth and describes all material pending claims under
any of such insurance policies. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any of such insurance policies
has been received by the Corporation or a Subsidiary. To the knowledge of the
Corporation, there are no circumstances or occurrences which would or might form
the basis of a material increase in premiums for the current insurance coverage
maintained by the Corporation or a Subsidiary.
4.29 Insiders and Conflicts of Interest
(a) Except as contemplated by this Agreement, the Existing Shareholders
Agreement and the Other Agreements, there are no Contracts between the
Corporation or the Subsidiaries and any Insiders other than contracts
of employment entered into in the ordinary course and those disclosed
in Section 4.23(e) or Section 4.29(a) of the Disclosure Schedule.
(b) Except as disclosed in Section 4.29(b) of the Disclosure Schedule,
neither the Corporation nor any of the Subsidiaries has any currently
outstanding material amounts due to or from any of its Insiders.
(c) Except as set out in Section 4.29(c) of the Disclosure Schedule,
neither the Corporation nor any of the Subsidiaries owns, directly or
indirectly, any interest (except passive holdings for investment
purposes only of not more than 1% of the securities of any publicly
held and traded company) in, or is an Insider of, any Person (other
than any Subsidiary) that:
(i) is a competitor, lessor, lessee, customer, or supplier of the
Corporation or any of the Subsidiaries;
(ii) owns, directly or indirectly, any interest in any tangible or
intangible property used in or necessary to the Business; or
(iii) has any cause of action or other claim whatsoever against the
Corporation or any of the Subsidiaries, or owes any amount to the
Corporation, except for claims in the ordinary course of
business, such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements.
(d) To the knowledge of the Corporation, no director or senior officer of
the Corporation has been involved in any Legal Proceeding, offence or
disciplinary
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action that would disqualify, or could reasonably be expected to
disqualify, such person from acting as a director or officer of a
public company.
4.30 Brokers
Other than CIBC World Markets Inc. and any subagent thereof, no finder, broker,
agent, or other intermediary has acted for or on behalf of the Corporation or
any of its Affiliates in connection with the negotiation or consummation of the
transactions contemplated hereby to be completed at the Closing and, other than
commission owing to CIBC World Markets Inc. and any subagent thereof in an
amount not exceeding $1,350,000 in the aggregate and warrants to purchase a
total of 1,000,000 Common Shares at an exercise price of $1.00 per share, no fee
will be payable by the Corporation or any of its Affiliates to any such Person
in connection with such transactions.
4.31 No Sale Agreements
Except in respect of inventory to be sold in the ordinary course of business,
there are no Contracts, or any right or privilege capable of becoming an
agreement, for the purchase of the Business or any of the material assets of the
Corporation or any Subsidiary. Neither the Corporation nor any of the
Subsidiaries is currently involved in any discussions, conditions or proceedings
with respect to its sale, merger, consolidation, liquidation or reorganization.
4.32 Payment of BreconRidge Note
The promissory note issued by BreconRidge Manufacturing Solutions, Inc. to Mitel
Networks, Inc. on August 31, 2001 in the principal amount of US$511,637.13 has
been paid and satisfied in full.
4.33 Compliance with Other Instruments, Laws, Etc.
Except as disclosed in Section 4.33 of the Disclosure Schedule, the Corporation
and each of the Subsidiaries has complied with, and is in compliance with: (i)
all laws, statutes, governmental regulations, judicial or administrative
tribunal orders, judgments, writs, injunctions, decrees, and similar commands
applicable to it and its Business, and all unwaived terms and provisions of all
agreements, instruments, and commitments to which it is a party or to which it
or any of its assets or properties is subject, except for any non-compliances
that, both individually and in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect; and (ii) its articles
and by-laws, each as amended to date. Neither the Corporation nor any of the
Subsidiaries has committed, been charged with, or, to the knowledge of the
Corporation, been under investigation with respect to, any violation by the
Corporation or any of the Subsidiaries of any provision of any applicable
national, federal, state, provincial, or local law or administrative regulation,
except for any violations that, both individually or in the aggregate, do not
and could not reasonably be expected to have a Material Adverse Effect. The
Corporation and each of the Subsidiaries has complied in all material respects
with all applicable laws, statutes, governmental regulations, judicial or
administrative tribunal orders, judgments, writs, injunctions, decrees, and
similar commands, including without limitation, the Personal Information
Protection and Electronic Documents Act (Canada), regarding the Corporation's
and the Subsidiaries' collection, use and disclosure of information about
identifiable individual Persons. The Corporation and each of the Subsidiaries
has and maintains all such Permits as are necessary or
-49-
desirable: (i) for the conduct of the Business as conducted on the date hereof
and as anticipated to be conducted; (ii) in connection with the ownership or use
of its properties; or (iii) to permit the Corporation to enter into or perform
its obligations under this Agreement and the Other Agreements. All of such
Permits are in full force and effect and the Corporation and each Subsidiary is
in compliance with all of the terms and provisions thereof, except for any
non-compliance that, either individually or in the aggregate, does not and could
not reasonably be expected to have a Material Adverse Effect. No Legal
Proceeding is pending, or to the knowledge of the Corporation threatened, with
respect to the cancellation or revocation of any such Permit. True and complete
copies of all such Permits have been made available by the Corporation to the
Investor or its counsel for inspection.
4.34 Public Disclosures
No event or circumstance has occurred or exists with respect to the Corporation
or any Subsidiary or their respective businesses, properties, prospects,
operations or financial condition, which, under any applicable law, rule or
regulation, requires public disclosure or announcement by the Corporation but
which has not been so publicly announced or disclosed. The Corporation is a
"foreign private issuer" as defined Rule 3b-4 under the Exchange Act. All
documents filed by the Corporation (or its agents) with the SEC and all
materials incorporated or deemed to be incorporated by reference therein, as and
when filed, complied in all material respects with all applicable requirements
of the Exchange Act and the rules and regulations of the SEC thereunder. The
annual report of the Corporation for the Corporation's most recently completed
financial year, as filed with the SEC on Form 20-F and all other reports filed
by it with the SEC under the Exchange Act since July 31, 2003 (collectively, the
"Reports") did not at the time filed with the SEC contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading. Each of the financial statements, and other financial
information included in the Reports, has been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes thereto) and fairly present in all
material respects the financial condition, results of operations and cash flows
of the Corporation as of, and for, the periods presented. The Corporation's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal controls over financial reporting comply in all
material respects with all applicable securities laws, including, without
limitation, the provisions of the United States ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
applicable to foreign private issuers.
4.35 Compliance with Securities Law
Subject to and assuming the accuracy of the representations and warranties given
by the Investor in Article 5, the offer, issuance, and delivery of the Purchased
Shares and EdgeStone Warrants as contemplated by this Agreement is exempt from
the registration requirements of the Securities Act, and is exempt from the
prospectus, registration and/or qualification requirements, as applicable, under
any applicable states' securities laws and is exempt from the prospectus and
registration requirements under Canadian Securities Laws.
-50-
4.36 Full Access
The Investor and its representatives have had full and open access to the
management of the Corporation and to such other information as the Investor has
requested in considering its decision with respect to the Investment and has had
an opportunity to ask questions with respect to the business and affairs of the
Corporation and the Investment. The Corporation has complied in good faith with
all requests of the Investor and its representatives for documents and
information relating to the Corporation, the Subsidiaries and the Business in
connection with the transactions contemplated hereby, and has not failed to
deliver any available document or other information requested by the Investor or
its representatives in connection herewith.
4.37 Disclosure
The Corporation has disclosed to the Investor all facts known to it relating to
the Business and assets of the Corporation and the Subsidiaries which could
reasonably be expected to be material to a purchaser of the Purchased Shares,
the Converted Shares, the EdgeStone Warrants or the Warrant Shares. No
representation or warranty by the Corporation contained in this Agreement or any
agreement or instrument contemplated hereby, including the Other Agreements,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not false or misleading. To the knowledge of the
Corporation, there is no fact or circumstance relating specifically to the
Business or condition of the Corporation and the Subsidiaries, taken as a whole,
that could reasonably be expected to result in a Material Adverse Effect and
that is not disclosed in this Agreement or the Disclosure Schedule.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
5.1 Representations and Warranties of Investor
By executing this Agreement, EdgeStone acknowledges and agrees that the sale and
delivery of the Purchased Shares and EdgeStone Warrants in accordance with this
Agreement are conditional upon the sale being exempt from the prospectus filing
requirements of any applicable securities legislation, statutes, regulations,
policies and stock exchanges relating to the sale of the Purchased Shares and
EdgeStone Warrants or upon the issuance of such rulings, orders, consents or
approvals as may be required to permit the sale without the requirement of
filing a prospectus. EdgeStone, on its own behalf and on behalf of the Equity
Fund and its parallel investors (on whose behalf the Purchased Shares and
EdgeStone Warrants are being purchased hereunder) further represents, warrants
and covenants to the Corporation (and acknowledges that the Corporation and its
counsel are relying thereon) that:
(a) each of EdgeStone and the Equity Fund is resident in the Province of
Ontario;
(b) neither EdgeStone nor the Equity Fund is a "U.S. Person" (as that term
is defined in Rule 902(k) of Regulation S under the Securities Act)
and neither EdgeStone nor the Equity Fund is acquiring the Purchased
Shares and EdgeStone Warrants for the account or benefit of a U.S.
Person;
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(c) EdgeStone has obtained a ruling from the Ontario Securities Commission
dated August 30, 2002 (the "Original Ruling"), which ruling was
revoked and restated pursuant to a revocation and restatement ruling
dated November 5, 2002 (the "Restated Ruling"). Copies of the Original
Ruling and the Restated Ruling have been provided to the Corporation.
The Restated Ruling provides that, among other things, the acquisition
of portfolio securities by EdgeStone and/or the Equity Fund is not
subject to the registration and prospectus requirements set out in
sections 25 and 53 of the Securities Act (Ontario). The Purchased
Shares and EdgeStone Warrants are "portfolio securities" within the
meaning of the Restated Ruling. The Restated Ruling has not been
revoked, restated or otherwise amended and remains in full force and
effect;
(d) each of EdgeStone Capital Equity Fund II-B GP, Inc. and each parallel
investor is a resident of the Province of Ontario and is an
"accredited investor" as defined in Ontario Securities Commission Rule
45-501;
(e) EdgeStone is purchasing the Purchased Shares and EdgeStone Warrants as
agent or nominee on behalf and for the benefit of the Equity Fund and
its parallel investors and such beneficial purchasers are acquiring
the Purchased Shares and EdgeStone Warrants for investment only, and
not with a view to the resale or distribution thereof;
(f) no Person has made to the Investor any written or oral representation
(i) that any Person will resell or repurchase the Purchased Shares or
the EdgeStone Warrants, (ii) as to the future price or value of the
Purchased Shares or the EdgeStone Warrants, or (iii) as to the listing
of any securities of the Corporation on any stock exchange or other
market;
(g) EdgeStone acknowledges that the Corporation is required by law to
disclose to certain regulatory authorities the identity of the Equity
Fund and its parallel investors as the beneficial purchasers of the
Purchased Shares and EdgeStone Warrants and that it is purchasing as
agent or nominee the Purchased Shares and EdgeStone Warrants on behalf
of the Equity Fund and its parallel investors;
(h) EdgeStone is duly authorized to execute and deliver this Agreement and
all other necessary documentation in connection with the purchase of
the Purchased Shares and EdgeStone Warrants on behalf and for the
benefit of the Equity Fund and its parallel investors, and this
Agreement has been duly authorized, executed and delivered by and on
behalf of, and constitutes the legal, valid and binding agreement of,
the Equity Fund and its parallel investors (subject to bankruptcy,
insolvency and other laws affecting the rights of creditors generally
and subject to the qualification that equitable remedies may only be
granted in the discretion of a court of competent jurisdiction);
(i) EdgeStone, on its own behalf and on behalf of the Equity Fund and its
parallel investors, agrees that the above representations and
warranties will survive the completion of the issuance of the
Purchased Shares and EdgeStone Warrants and
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shall continue in full force and effect notwithstanding any subsequent
disposition by it of the Purchased Shares and EdgeStone Warrants;
(j) EdgeStone, on its own behalf and on behalf of the Equity Fund and its
parallel investors, agrees not to resell the Purchased Shares,
EdgeStone Warrants and the securities to be issued upon exercise of
the EdgeStone Warrants in the United States or to a U.S. Person except
(i) pursuant to registration under the Securities Act, (ii) only in
accordance with the provisions of Regulation S under the Securities
Act, or (iii) pursuant to an available exemption from registration
under the Securities Act; and
(k) EdgeStone, on its own behalf and on behalf of the Equity Fund and its
parallel investors, agrees not to engage in hedging transactions in
the United States with regard to the Purchased Shares and EdgeStone
Warrants unless in compliance with the Securities Act.
5.2 Investor Acknowledgements
EdgeStone, on its own behalf and on behalf of the Equity Fund and its parallel
investors (on whose behalf the Purchased Shares and EdgeStone Warrants are being
purchased hereunder) acknowledges and agrees that:
(a) the Investor has not been provided with a prospectus or registration
statement or with an offering memorandum (all as defined in or as
contemplated by the Securities Act or under Canadian Securities Laws)
or any similar document (including any document purporting to describe
the business and affairs of the Corporation that has been prepared
primarily for delivery to and review by prospective investors so as to
assist those investors to make an investment decision in respect of
securities being sold) in connection with the purchase of the
Purchased Shares and the EdgeStone Warrants pursuant to this
Agreement;
(b) the Purchased Shares and the EdgeStone Warrants have not been
registered under the Securities Act;
(c) at present there is no market through which the Purchased Shares or
the EdgeStone Warrants may be resold and there can be no assurance
that such a market will develop in the future;
(d) the resale of the Purchased Shares and the EdgeStone Warrants will be
subject to certain resale restrictions provided for in applicable
securities laws, and the holder of such securities will comply with
such resale restrictions;
(e) the certificates evidencing the Purchased Shares and the EdgeStone
Warrants received pursuant to the terms hereof will bear substantially
the following legend:
"Unless permitted under securities legislation, the holder of
this security must not trade the security before the date that is
4 months
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and a day after the later of (i) [insert the distribution date],
and (ii) the date the issuer became a reporting issuer in any
province or territory.";
(f) the certificates evidencing the EdgeStone Warrants received pursuant
to the terms hereof will bear substantially the following legend:
"This Warrant and the securities to be issued upon its exercise
have not been registered under the United States Securities Act
of 1933 (the "Securities Act"). This Warrant may not be exercised
by or on behalf of any U.S. Person unless registered under the
Securities Act or an exemption from such registration is
available."
(g) the certificates evidencing the Purchased Shares received pursuant to
the terms hereof will bear substantially the following legend:
The securities represented by this instrument have not been
registered under the Securities Act of 1933 (the "Securities
Act"). Any transfer of such securities is prohibited in the
United States or to a U.S. Person except (i) pursuant to
registration under the Securities Act, (ii) in accordance with
the provisions of Regulation S under the Securities Act, or (iii)
pursuant to an available exemption from registration under the
Securities Act."
(h) the Investor (or others for whom the Investor is contracting
hereunder): (i) has been advised to consult the Investor's own legal
advisors with respect to trading in the Purchased Shares, the
EdgeStone Warrants, the Converted Shares and the Warrant Shares with
respect to resale restrictions imposed by applicable securities laws
in the jurisdiction in which the Investor resides, (ii) acknowledges
that no representation has been made respecting the applicable hold
periods or other resale restrictions applicable to such securities,
(iii) that the Investor (or others for whom the Investor is
contracting hereunder) is solely responsible (and the Corporation is
in no way responsible) for compliance with applicable resale
restrictions, and (iv) is aware that the Investor (or others for whom
the Investor is contracting hereunder) may not be able to resell such
securities except in accordance with limited exemptions under
applicable securities laws;
(i) the Corporation's actual performance and results may differ materially
from any financial projections or forecasts provided by or on behalf
of the Corporation; and
(j) the Investor (or others for whom the Investor is contracting
hereunder) will provide the Corporation with such information and
execute such documents,
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including certificates and statutory declarations, as the Corporation
may reasonably require from time to time in order to comply with
applicable securities laws.
5.3 Reliance Upon Representations and Warranties
EdgeStone, on its own behalf and on behalf of the Equity Fund and its parallel
investors, acknowledges that the acknowledgements, representations and
warranties contained in this Agreement are made by it with the intent that they
may be relied upon by the Corporation in determining the Investor's (and others
for whom the Investor is contracting hereunder) eligibility to purchase the
Purchased Shares and EdgeStone Warrants.
ARTICLE 6
REGISTRATION AND TRANSFER OF SECURITIES
6.1 Transfer and Exchange of Purchased Shares and EdgeStone Warrants
The Corporation shall maintain at its registered office a register in which
shall be entered the names and addresses of the holders of the Corporation's
shares and the EdgeStone Warrants and the particulars of the respective shares
(and warrants) held by them and of all transfers of shares (or warrants) or
conversions of shares (or warrants). Upon surrender at such office of any
certificate representing shares (or warrants) for registration of conversion,
exchange, or transfer (subject to compliance with the applicable provisions of
this Agreement, the Shareholders Agreement, any of the Other Agreements and the
Corporation's articles), the Corporation shall issue, at its expense, one or
more new certificates, in such denomination or denominations as may be
requested, for such shares (or warrants) registered as such holder may request.
Any certificate representing shares (or warrants) surrendered for registration
of transfer shall be duly endorsed, or accompanied by a written instrument of
transfer duly executed by the holder of such certificate or his attorney duly
authorized in writing.
6.2 Replacement of Certificates
In the case of any loss, theft, destruction, or mutilation of the certificate
representing any of the Purchased Shares or EdgeStone Warrants, upon receipt of
evidence thereof reasonably satisfactory to the Corporation, and (i) in the case
of any such loss, theft, or destruction, upon delivery of an indemnity bond in
such reasonable amount as the Corporation may determine, or (ii) in the case of
any such mutilation, upon the surrender to the Corporation at its principal
office of such mutilated certificate for cancellation, the Corporation shall
execute and deliver, in lieu thereof, new certificates. Any old certificate in
lieu of which any such new certificate has been so executed and delivered by the
Corporation shall not be deemed to be outstanding for any purpose whatsoever.
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ARTICLE 7
COVENANTS OF THE CORPORATION
7.1 Post-Closing Covenants
The Corporation covenants and agrees with the Investor as follows, which
covenants and agreements shall survive the Closing:
(a) The Corporation hereby agrees that it shall use the proceeds from the
sale of the Purchased Shares and EdgeStone Warrants hereunder as
follows:
(i) to pay the Lead Work Fee, as contemplated by Section 8.1 of this
Agreement;
(ii) to pay the Expenses as contemplated by Section 8.2 of this
Agreement; and
(iii) the remainder of the proceeds of the Investment shall be
applied, with respect to the current financial year of the
Corporation, in accordance with the business plan and budget for
such year (a copy of which has been provided to EdgeStone), and
with respect to subsequent financial years, in accordance with
the Annual Budget.
(b) Neither the Corporation nor anyone acting on its behalf will hereafter
offer to sell, solicit offers to buy, or sell any securities of the
Corporation so as to subject the offer, issuance, and sale of the
Purchased Shares and EdgeStone Warrants to the registration
requirements of the Securities Act or the prospectus, registration
and/or qualification requirements, as applicable, under any applicable
state securities laws and under applicable Canadian Securities Laws.
(c) The Corporation agrees to file with the SEC in a timely manner all
reports and other documents required of the Corporation under the
Securities Act and the Exchange Act, including any reports required by
such laws to be filed with the SEC as a foreign private issuer, and to
furnish to the Investor forthwith upon request: (i) a written
statement by the Corporation that it has complied with the reporting
requirements of the Exchange Act; (ii) such other reports and
documents so filed by the Corporation as may be reasonably requested
by the Investor to make available to it any rule or regulation of the
SEC permitting the sale of any of the Purchased Shares and EdgeStone
Warrants without registration; and (iii) such other documents,
including opinions of counsel addressed to the Corporation's transfer
agent (subject to such counsel being able to render such opinion based
upon facts then-presented), as may be reasonably necessary to enable
the Investor to sell or transfer its Purchased Shares and EdgeStone
Warrants pursuant to Rule 144 under the Securities Act. The
Corporation shall disclose the issuance of the Purchased Shares and
EdgeStone Warrants with all applicable regulatory agencies in
accordance with applicable regulations.
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ARTICLE 8
LEAD WORK FEE AND EXPENSES
8.1 Payment of Lead Work Fee
At the Closing, the Corporation agrees to pay the Investor, or such other Person
as the Investor may direct, a lead work fee of three percent (3.0%) of the Share
Purchase Price (the "Lead Work Fee") in cash or other immediately available
funds. In addition, a fee equal to three percent (3.0%) of the aggregate share
purchase price for any Series A Shares issued pursuant to the exercise of the
EdgeStone Purchase Option shall also be payable to the Investor, or such other
Person as the Investor may direct, in cash or other immediately available funds,
on the closing of the issuance and sale of such Series A Shares.
8.2 Reimbursement of Expenses
(a) The Corporation shall pay or reimburse to the Investor, or such other
Person as the Investor may direct, as applicable, all reasonable: (i)
legal fees; (ii) professional fees and disbursements; and (iii) out of
pocket costs (including any applicable Taxes thereon, other than Taxes
in respect of which the Investor is entitled to obtain a refund from
the relevant Tax authority and which would result in the Investor
being reimbursed for more than its actual out-of-pocket expenses)
incurred by or for the account of the Investor (or by or for the
account of the purchaser of the Series A Shares issued pursuant to the
exercise of the EdgeStone Purchase Option, as applicable) in
connection with the transactions contemplated by this Agreement or the
closing of any Additional Investment (the "Expenses"). The Expenses
(other than Expenses incurred in connection with the closing of an
Additional Investment) shall be paid on the Closing. The Expenses
incurred in connection with the Additional Investment shall be paid on
the closing of such Additional Investment. At the request of the
Corporation, the Investor will arrange, where reasonably practicable,
for certain of the Expenses to be invoiced directly to the Corporation
by the Person to whom payment is to be made.
(b) The Investor shall use all reasonable efforts to manage the Expenses
incurred in a prudent manner and will consult with the Corporation on
the Investor's intended work plan and budget with respect to the
Expenses that may be incurred in connection with the Closing or the
closing of any Additional Investment.
8.3 Broker Fees
The Investor shall not be liable for any brokerage commission, finder's fee or
other similar payment in connection with the transactions contemplated hereby
because of any action taken by, or agreement or understanding reached by, the
Corporation or any its Affiliates or Insiders.
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ARTICLE 9
INDEMNIFICATION
9.1 Non-Merger and Exclusive Remedy
(a) The representations, warranties, covenants and other obligations of
the Corporation contained in this Agreement and each of the Other
Agreements shall not merge on the Closing and, notwithstanding the
Closing or any investigation made by the Investor or its agents with
respect thereto, shall continue in full force and effect for the
benefit of the Investor, each holder of Purchased Shares, each holder
of EdgeStone Warrants and all Permitted Transferees holding any
Purchased Shares and EdgeStone Warrants (but limited in the case of
Permitted Transferees to the amounts in respect of which the original
holder of such Purchased Shares and EdgeStone Warrants would be
entitled to indemnification under this Article 9). All claims by the
Investor, each holder of Purchased Shares, each holder of EdgeStone
Warrants and all Permitted Transferees holding any Purchased Shares
and EdgeStone Warrants in respect of such representations, warranties,
covenants and obligations shall be subject to the conditions and
limitations set forth in this Article 9 and the rights of indemnity in
this Article 9 shall be the sole and exclusive remedy of such Persons
in respect of such claims.
(b) The representations, warranties, covenants and other obligations of
EdgeStone (on its own behalf and on behalf of the Equity Fund and its
parallel investors (on whose behalf the Purchased Shares and EdgeStone
Warrants are being purchased hereunder)) which are contained in this
Agreement and each of the Other Agreements shall not merge on the
Closing and, notwithstanding the Closing or any investigation made by
the Corporation or its agents with respect thereto, shall continue in
full force and effect for the benefit of the Corporation. All claims
by the Corporation after Closing in respect of such representations,
warranties, covenants and obligations shall be subject to the
conditions and limitations set forth in this Article 9 and the rights
of indemnity in this Article 9 shall be the sole and exclusive remedy
of the Corporation in respect of such claims.
9.2 General Indemnification
Subject to the limitations in Sections 9.4 and 9.5, (i) the Corporation shall
(without duplication in respect of any Loss) indemnify, defend and save harmless
the Investor, each holder of Purchased Shares, each holder of EdgeStone Warrants
and all Permitted Transferees holding any Purchased Shares and EdgeStone
Warrants, and each of their partners, shareholders, officers, directors,
employees, agents, representatives and successors, and (ii) the Investor, each
holder of Purchased Shares, each holder of EdgeStone Warrants and all Permitted
Transferees holding any Purchased Shares and EdgeStone Warrants shall indemnify,
defend and save harmless the Corporation, and each of its shareholders,
officers, directors, employees, agents, representatives and successors (the
Person or Persons so covenanting and agreeing to indemnify another Person or
Persons being referred to in this Article 9 as the "Indemnifying Party" and the
Person or Persons to be indemnified being referred to collectively as the
"Indemnitees" and individually an "Indemnitee"), on an after-tax basis as
contemplated by Section 9.13, from and against any and
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all Losses suffered or incurred by the Indemnitee, as a direct or indirect
result of, or arising in connection with or related in any manner whatever to:
(a) any misrepresentation or breach of warranty made or given by (or in
the case of the representations and warranties in Article 5, on behalf
of) the Indemnifying Party in this Agreement or any Other Agreement;
or
(b) any failure by the Indemnifying Party to observe or perform any
covenant or obligation contained in this Agreement or any Other
Agreement.
9.3 Agency for Representatives
The Investor agrees that it accepts each indemnity in favour of the Persons
identified in clause (i) of Section 9.2, as agent and trustee of such Persons to
the extent that they become Indemnitees hereunder. The Corporation agrees that
the Investor may enforce an indemnity in favour of the Persons identified in
clause (i) of Section 9.2 on behalf of such Persons to the extent they become an
Indemnitee hereunder.
9.4 Time Limitations
(a) Subject to Section 9.4(b), the Indemnifying Party shall have no
liability to any Indemnitee for any Loss arising from any Claim
(including any Third Party Claim) relating to a breach of any
representation or warranty or of any covenant or other obligation
contained in this Agreement or any Other Agreement unless the
Indemnitee gives written notice to the Indemnifying Party specifying
in reasonable detail the factual basis of the Claim and a reasonable
estimate of the amount thereof on or before that date which is two
years after the Closing Date.
(b) Despite the provisions of Section 9.4(a), (i) notice with respect to
Claims relating to Section 4.1 (Incorporation and Organization) or
Section 4.7 (Corporate Authorization) may be given at any time after
the Closing Date without limitation as to time; and (ii) notice with
respect to Claims relating to Section 4.16 (Tax Matters) arising in or
in respect of a particular period ending on or before the Closing Date
may be given at any time after Closing and before a period of 90 days
has elapsed after the relevant Tax authorities shall no longer be
entitled to assess liability for any Taxes against the Corporation or
any of the Subsidiaries for that particular period, having regard,
without limitation, to any waivers given by the Corporation or any of
the Subsidiaries in respect of any taxation year.
(c) For greater certainty, if the Indemnitee has not given notice, in the
manner and within the time periods prescribed in Sections 9.4(a) and
9.4(b), to the Indemnifying Party of an alleged Loss arising from any
Claim relating to a breach of any representation or warranty or of any
covenant or other obligation contained in this Agreement or any Other
Agreement, the Indemnifying Party will have no financial obligation to
the Indemnitee in respect of such breach.
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(d) The Indemnitee will give any notice required pursuant to Sections
9.4(a) or 9.4(b) to the Indemnifying Party reasonably promptly after
the Indemnitee determines that it has a claim for indemnity under this
Article 9.
9.5 Limitations as to Amount
No Claims may be asserted by any Indemnitee under this Article 9 unless and
until the aggregate amount of any Losses of the Indemnitees in respect of any
and all Claims asserted pursuant to this Article 9 collectively exceeds one
hundred thousand dollars ($100,000) in which event the amount of all such Loss
including such one hundred thousand dollar ($100,000) amount may be asserted.
Notwithstanding the foregoing, the threshold for any Claims asserted based on a
breach of any representation and warranty contained in Section 4.16 hereof shall
be five hundred thousand dollars ($500,000). Notwithstanding any other provision
of this Agreement, no Claims may be asserted by any Indemnitee hereunder and in
no event shall the Indemnifying Party be required to indemnify the Indemnitees,
collectively, for Losses in an aggregate amount greater than the Share Purchase
Price plus the aggregate purchase price for any Series A Shares issued pursuant
to the EdgeStone Purchase Option.
9.6 Notice of Third Party Claims
If an Indemnitee receives notice of the commencement or assertion of any Claim
asserted against the Indemnitee that is paid or payable to, or claimed by, any
person who is not a party to this Agreement (a "Third Party Claim"), the
Indemnitee shall give the Indemnifying Party reasonably prompt written notice
thereof, but in any event no later than 30 days after receipt of such notice of
such Third Party Claim. Such notice to the Indemnifying Party shall describe the
Third Party Claim in reasonable detail and shall indicate, if reasonably
practicable, the estimated amount of the Loss that has been or may be sustained
by the Indemnitee.
9.7 Defence of Third Party Claims
The Indemnifying Party may participate in or assume the defence of any Third
Party Claim by giving notice to that effect to the Indemnitee not later than 30
days after receiving notice of that Third Party Claim (the "Notice Period"). The
Indemnifying Party's right to do so shall be subject to the rights of any
insurer or other party who has potential liability in respect of that Third
Party Claim. The Indemnifying Party shall pay all of its own expenses of
participating in or assuming such defence. The Indemnitee shall co-operate in
good faith in the defence of each Third Party Claim, even if the defence has
been assumed by the Indemnifying Party and may participate in such defence
assisted by counsel of its own choice at its own expense. If the Indemnitee has
not received notice within the Notice Period that the Indemnifying Party has
elected to assume the defence of such Third Party Claim, the Indemnitee may, at
its option, elect to settle or compromise the Third Party Claim or assume such
defence, assisted by counsel of its own choosing and the Indemnifying Party
shall be liable for any Loss relating to a breach of any representation or
warranty or of any covenant or other obligation of the Indemnifying Party (as
contemplated in Section 9.2) suffered or incurred by the Indemnitee with respect
to such Third Party Claim. If the Indemnifying Party elects to assume the
defence of a Third Party Claim under this Section 9.7, the Indemnifying Party
shall acknowledge in writing its obligation to
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indemnify the Indemnitee in accordance with the terms contained in this Article
9 in respect of that Third Party Claim.
9.8 Assistance for Third Party Claims
The Indemnifying Party and the Indemnitee shall use all reasonable efforts to
make available to the person that is undertaking and controlling the defence of
any Third Party Claim (the "Defending Party"),
(a) those employees and other persons whose assistance, testimony or
presence is necessary to assist the Defending Party in evaluating and
in defending any Third Party Claim; and
(b) all documents, records and other materials in the possession of such
party reasonably required by the Defending Party for its use in
defending any Third Party Claim,
and shall otherwise cooperate with the Defending Party. All reasonable expenses
associated with making such documents, records and materials available and for
all reasonable expenses of any employees or other persons made available by the
Indemnitee to the Indemnifying Party hereunder may be included in any Loss for
which indemnification is sought under this Article 9.
9.9 Settlement of Third Party Claims
If the Indemnifying Party elects to assume the defence of any Third Party Claim
as provided in Section 9.7, the Indemnifying Party shall not be liable for any
legal expenses subsequently incurred by the Indemnitee in connection with the
defence of such Third Party Claim following the receipt by the Indemnitee of
notice of such assumption. However, if in the opinion of the Indemnitee, acting
reasonably, there is a conflict between the interests of the Indemnifying Party
and the interests of the Indemnitee with respect to such Third Party Claim, or
if the Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party Claim within 30 days after receiving notice from the
Indemnitee that the Indemnitee believes on reasonable grounds that the
Indemnifying Party has failed to take such steps, the Indemnitee may, at its
option, elect to assume the defence of and to negotiate, settle or compromise
the Third Party Claim assisted by counsel of its own choosing and the
Indemnifying Party shall also be liable for all reasonable costs and expenses
paid or incurred in connection therewith. The Indemnifying Party shall not,
without the prior written consent of the Indemnitee, not to be unreasonably
withheld, enter into any compromise or settlement of a Third Party Claim, which
would lead to liability or create any other obligation, financial or otherwise,
on the Indemnitee.
9.10 Direct Claims
Any Claim other than a Third Party Claim (a "Direct Claim") shall be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof. The
Indemnifying Party shall then have a period of 30 days within which to respond
in writing to such Direct Claim. If the Indemnifying Party does not so respond
within such 30 day period, the Indemnifying Party shall be deemed to have
rejected such Direct Claim, and in such event the Indemnitee shall be free to
pursue such remedies as may be available to the Indemnitee.
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9.11 Failure to Give Timely Notice
Other than in respect of the time for giving notices or other limitations set
forth in Section 9.4, a failure to give timely or prompt notice as otherwise
provided in this Article 9 shall not affect the rights or obligations of any
party except and only to the extent that, as a result of such failure, any party
which was entitled to receive such notice was deprived of its right to recover
any payment under its applicable insurance coverage or was otherwise directly
and materially damaged as a result of such failure.
9.12 Reductions and Subrogation
If the amount of any Loss at any time subsequent to the making of any payment on
account of any Loss required to paid pursuant to this Article 9 (an "Indemnity
Payment") in respect of that Loss is reduced by any recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other person, the amount of
such reduction (less any costs, expenses (including taxes) or premiums incurred
in connection therewith), shall promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making a full Indemnity Payment, the Indemnifying Party
shall, to the extent of such Indemnity Payment, be subrogated to all rights of
the Indemnitee against any third party in respect of the Loss to which the
Indemnity Payment relates. Until the Indemnitee recovers full payment of its
Loss, any and all claims of the Indemnifying Party against any such third party
on account of such Indemnity Payment shall be postponed and subordinated in
right of payment to the Indemnitee's rights against such third party. Without
limiting the generality or effect of any other provision hereof, the Indemnitee
and Indemnifying Party shall duly execute upon request all instruments
reasonably necessary to evidence and perfect such postponement and
subordination.
9.13 Tax Effect
If any Indemnity Payment received by an Indemnitee would constitute taxable
income to such Indemnitee, the Indemnifying Party shall pay to the Indemnitee,
at the same time and on the same terms (as to interest and otherwise) as the
Indemnity Payment, an additional amount sufficient to place the Indemnitee in
the same after-tax position as it would have been if the Indemnity Payment had
been received tax-free.
9.14 Additional Rules and Procedures
(a) If any Third Party Claim is of a nature such that the Indemnitee is
required by applicable law to make a payment to any person (a "Third
Party") with respect to such Third Party Claim before the completion
of settlement negotiations or related Legal Proceedings, the
Indemnitee may make such payment and the Indemnifying Party shall,
forthwith after demand by the Indemnitee, reimburse the Indemnitee for
any such payment. If the amount of any liability under the Third Party
Claim in respect of which such a payment was made, as finally
determined, is less than the amount which was paid by the Indemnifying
Party to the Indemnitee, the Indemnitee shall, forthwith after receipt
of the difference from the Third Party, pay such difference to the
Indemnifying Party.
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(b) The Indemnitee and the Indemnifying Party shall co-operate fully with
each other with respect to Third Party Claims, shall keep each other
fully advised with respect thereto (including supplying copies of all
relevant documentation promptly as it becomes available) and shall
each designate a senior officer who shall keep himself informed about
and be prepared to discuss the Third Party Claim with his counterpart
and with counsel at all reasonable times.
ARTICLE 10
GENERAL
10.1 Amendments
This Agreement may be amended, supplemented, modified or terminated by the
agreement in writing of the Corporation and the Investor.
10.2 Waiver
No course of dealing between the Corporation and the Investor or any other
Person shall operate as a waiver of any right of the Corporation or the Investor
under this Agreement. No waiver of any breach or default hereunder shall be
valid unless in written form and signed by the waiving party. No failure or
other delay by any Person in exercising any right, power, or privilege hereunder
shall be or operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege.
10.3 Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the parties hereto. Subject to applicable securities
laws and the Shareholders Agreement, and except as otherwise provided in this
Agreement, EdgeStone may assign any of its rights under this Agreement or any of
the Other Agreements to any Permitted Transferee of the Purchased Shares, the
EdgeStone Warrants, the Warrant Shares or the Converted Shares and, as a
condition of such assignment, the Permitted Transferee shall assume in writing
(in form and in substance acceptable to the Corporation, acting reasonably) the
liabilities and obligations of the transferor hereunder and thereunder. The
Corporation may not assign any of its rights, or delegate any of its
obligations, under this Agreement without the prior written consent of EdgeStone
and any such purported assignment by the Corporation without the written consent
of EdgeStone shall be void and of no effect.
10.4 Notices
All notices, requests, payments, instructions or other documents to be given
hereunder shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if: (i) delivered personally (effective upon
delivery); (ii) mailed by certified mail, return receipt requested, postage
prepaid (effective five Business Days after dispatch); (iii) sent via a
reputable, established courier service that guarantees next Business Day
delivery (effective the next Business Day), or sent by air mail or by commercial
express overseas air courier, with receipt acknowledged in writing by the
recipient (effective upon the date of such acknowledgement); or
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(iv) sent by telecopier followed within 24 hours of confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), addressed as follows (or to such other address as the recipient party may
have furnished to the sending party for the purpose pursuant to this Section
10.4):
if to the Corporation:
Mitel Networks Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Mitel Networks Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: Chief Financial Officer, and VP Finance
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
And with a copy to:
Mitel Networks Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: Corporate Legal Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
And with a copy to:
Osler, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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if to EdgeStone:
c/o EdgeStone Capital Equity Fund Nominee Inc.
▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
10.5 Binding Effect and Benefits
This Agreement shall bind and enure to the benefit of the Parties hereto and
their respective successors (including any successor by reason of amalgamation
of any Party) and permitted assigns. Except as otherwise provided in this
Agreement, the provisions of this Agreement that are for the Investor's benefit
shall enure to the benefit of each holder of Purchased Shares, each holder of
EdgeStone Warrants and all Permitted Transferees holding any Purchased Shares
and EdgeStone Warrants. Nothing in this Agreement is intended to or shall confer
any rights or remedies on any Person other than the parties hereto, their
respective successors and permitted assigns.
10.6 Further Assurances
From time to time, on and after the Closing, each Party shall promptly execute
and deliver all such further instruments and assurances, and shall promptly take
all such further actions, as the other Party may reasonably request in order to
effect or confirm the transactions contemplated by this Agreement or any of the
Other Agreements and to carry out the purposes hereof and thereof.
10.7 Arbitration
Subject to the Parties entitlement to the remedies set forth in Section 10.8 to
prevent the breach of a Party's obligations under this Agreement all disputes
arising out of or in connection with this Agreement, or in respect of any legal
relationship associated with or derived from this Agreement, shall be arbitrated
and finally resolved pursuant to the Arbitration Act, 1991 (Ontario). Such
arbitration shall be conducted by a single arbitrator. The arbitrator shall be
appointed by agreement between the parties or, failing agreement, such
arbitrator shall be appointed in accordance with section 10 of the Arbitration
Act, 1991 (Ontario). The place of arbitration shall be the City of Toronto in
the Province of Ontario. The language of the arbitration shall be English. Any
notice or other document, including a notice commencing
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arbitration, may be served by sending it to the addressee by facsimile in
accordance with Section 10.4 hereof. The decision arrived at by the arbitrator,
howsoever constituted, shall be final and binding and no appeal shall lie
therefrom.
10.8 Equitable Relief
Each of the Parties acknowledges that any breach by such party of his, her, or
its obligations under this Agreement would cause substantial and irreparable
damage to the other Party and that money damages would be an inadequate remedy
therefor. Accordingly, each Party agrees that the other Party shall be entitled
to seek an injunction, specific performance, and/or other equitable relief to
prevent the breach of such obligations.
10.9 Confidentiality
The Parties each covenant and agree that they will comply with the applicable
confidentiality covenants under the Shareholders Agreement.
10.10 Publicity
Either Party shall have the right to publicize the Investment in the Corporation
as contemplated hereby by means of a "tombstone" advertisement or other
customary advertisement in newspapers and other media provided that such Party
first provides the other Party with a copy thereof and an opportunity to comment
thereon and each Party pays its own expenses in connection therewith.
10.11 Counterparts
This Agreement may be executed by the Parties in counterparts and may be
executed and delivered by facsimile and all such counterparts and facsimiles
shall together constitute one and the same agreement.
10.12 Language
Each of the undersigned hereby acknowledges that it has consented and requested
that all documents evidencing or relating in any way to the sale of the
Purchased Shares and EdgeStone Warrants hereunder be drawn up in the English
language only. Nous, soussignes, reconnaissons par les presentes avoir consenti
et demande que tous les documents faisant foi ou se rapportant de quelque
maniere a la vente des actions soient rediges en anglais seulement.
The rest of this page is intentionally left blank.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first
mentioned above.
MITEL NETWORKS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: C.F.O.
EDGESTONE CAPITAL EQUITY FUND
II-B GP, INC., as agent for EdgeStone
Capital Equity Fund II-A, L.P. and its
parallel investors
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Officer
EDGESTONE CAPITAL EQUITY FUND II
NOMINEE, INC., as nominee for EdgeStone
Capital Equity Fund II-A, L.P. and its
parallel investors
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Officer
SCHEDULE A
POST-CLOSING CAPITALIZATION TABLE
Number Issued and
Class/Series of Shares Outstanding Post-Closing Ownership % *
-------------------------- ------------------------ -------------
Common Shares 111,786,713 56.22%
Class A Convertible
Preferred Shares, Series 1 20,000,000 10.06%
Class B Convertible
Preferred Shares, Series 1 67,060,988 33.72%
TOTAL *: 198,847,701 100%
* Assumes conversion of the Series A Shares and Series B Shares into Common
Shares on a one-for-one basis. Calculation on a non-fully diluted basis.
Number of Common Shares
Other Convertible Securities Issuable upon Exercise
---------------------------- ------------------------
Employee Stock Options 4,519,219
TPC Warrants 12,986,968
CIBC World Markets Warrants 1,000,000
Series 1 Warrants See Exhibit D-1
Series 2 Warrants See Exhibit D-2
SCHEDULE "B"
DISCLOSURE SCHEDULE
This document constitutes the disclosure schedule (the "Disclosure Schedule")
referred to in the Class A Convertible Preferred Share Subscription Agreement
(the "Subscription Agreement") dated April 23, 2004 between the Corporation and
EdgeStone. Unless the context otherwise requires, words and expressions defined
in the Subscription Agreement shall have the same meanings in this Disclosure
Schedule.
Disclosure in any one section of this Disclosure Schedule shall be deemed to be
disclosure for purposes of all other Sections of this Disclosure Schedule to the
extent such actual disclosure in the one Section contains sufficient information
so as to constitute adequate disclosure for purposes of that other Section or
Sections and where such actual disclosure would be reasonably apparent to be
applicable to such other Section or Sections. Reference to any matter in any
Section shall not be deemed to an acknowledgement by the Corporation that such
matter meets or exceeds any applicable threshold of materiality or any other
relevant threshold.
In some respects, this Disclosure Schedule sets forth conditions, sets of facts
or other disclosure not strictly called for by the Subscription Agreement where
it was thought that such disclosure might be helpful. No implication shall be
drawn that any condition, set of facts or other disclosure set forth herein is
necessarily material or is otherwise required to be disclosed or that the
inclusion of such disclosure establishes or implies a standard of materiality, a
standard for what is or is not in the usual and ordinary course of business or
any other standard for disclosure set forth in the Agreement.
The following specific disclosures are made in relation to the Subscription
Agreement:
SECTION 4.3
SUBSIDIARIES
List of Subsidiaries
The full corporate name, jurisdiction of incorporation and registered and
beneficial ownership of the issued and outstanding shares of each direct and
indirect Subsidiary is as follows:
JURISDICTION
OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP OF SECURITIES
------------------ -------------- ----------------------------------
Mitel Networks Holdings Limited United Kingdom Wholly-owned by the Corporation
Mitel Networks Asia Pacific Limited Hong Kong Wholly-owned by the Corporation
Mitel Networks International Limited Barbados Wholly-owned by the Corporation
Mitel Networks Overseas Limited Barbados Wholly-owned by the Corporation
Mitel Networks Limited United Kingdom Wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
Mitel Networks SARL France Wholly-owned by Mitel Networks
Limited, which is in turn
wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
Mitel Networks Italia SRL Italy Wholly-owned by Mitel Networks
Limited, which is in turn
wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
Mitel Networks, Inc. Delaware Wholly owned by Mitel Networks
Limited, which is in turn
wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
Mitel Networks Germany GmbH Germany Wholly-owned by Mitel Networks
Limited, which is in turn
wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
Mitel Telecom Limited United Kingdom Wholly-owned by Mitel Networks
Limited, which is in turn
wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
-2-
JURISDICTION
OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP OF SECURITIES
------------------ -------------- ----------------------------------
Edict Training Limited Scotland 20% owned by ▇▇▇▇ ▇▇▇▇; 80% owned
by Mitel Networks Limited, which
is in turn wholly-owned by Mitel
Networks Holdings Limited, which
is in turn wholly-owned by the
Corporation
Mitel Financial Services Limited United Kingdom 25% owned by First Asset Finance
PLC; 75% owned by Mitel Networks
Limited, which is in turn
wholly-owned by Mitel Networks
Holdings Limited, which is in turn
wholly-owned by the Corporation
Mitel Network Solutions, Inc. Delaware Wholly-owned by Mitel Networks,
Inc., which is in turn wholly
owned by Mitel Networks Limited,
which is in turn wholly-owned by
Mitel Networks Holdings Limited,
which is in turn wholly-owned by
the Corporation
Certain corporate filings for Mitel Networks Holdings Limited, namely, annual
audited financial statements for the fiscal year ended April 27,2003, which were
due February 2004 have not yet been filed with the UK Companies House. The
Corporation expects to complete and to undertake such filings, on behalf of
Mitel Networks Holdings Limited, in the first quarter of the Corporation's next
fiscal year (FY05). As a result of having not completed such corporate filings,
Mitel Networks Holdings Limited may not be in good standing under the laws of
its jurisdiction.
Certain corporate filings for Mitel Networks Limited, namely, annual audited
financial statements for the fiscal year ended April 27, 2003, which were due
February 2004 have not yet been filed with the UK Companies House. The
Corporation expects to complete and to undertake such filings, on behalf of
Mitel Networks Limited, in the first quarter of the Corporation's next fiscal
year (FY05). As a result of having not completed such corporate filings, Mitel
Networks Limited may not be in good standing under the laws of its jurisdiction.
Partnerships, Joint Ventures, etc.
The Corporation or its Subsidiaries are a partner or participant in the
following partnerships or joint ventures, or own or have agreed to acquire
securities in the following businesses or Persons:
NAME OF JOINT VENTURE JURISDICTION OWNERSHIP OF SECURITIES
--------------------- ------------ -----------------------------
Tianchi Mitel China 50% owned by the Corporation
Telecommunications Corp
- 25% owned by Tricom
Tianchi Limited
- 21.25% owned by Tianjin
Zhonghuan Electronic
Computer Corporation
-3-
NAME OF JOINT VENTURE JURISDICTION OWNERSHIP OF SECURITIES
--------------------- ------------ -----------------------------
- 3.125% owned by Tianjin
Economic Technological
Development Area
Industrial Investment
Company
- 0.625% owned by Trianjin
Post and
Telecommunications
Administration of China
The Corporation is not a partner in a partnership.
SECTION 4.5
AUTHORIZED, ISSUED AND OUTSTANDING CAPITAL
SECTION 4.5(B): OBLIGATIONS AND OUTSTANDING CAPITAL
The Corporation has the following obligations to grant or enter into any
outstanding subscriptions, options, warrants, calls, commitments or Contracts
calling for it to issue, deliver or sell equity securities or securities
convertible into or exchangeable for equity securities:
- Options - As described in Section 4.5(c) of the Subscription Agreement
and Section 4.5(c) of this Disclosure Schedule, an aggregate of
25,000,000 Common Shares have been reserved for issuance under the
Stock Option Plan. As of the date hereof, options to purchase an
aggregate of 4,519,219 Common Shares have been granted and are
outstanding under the Stock Option Plan. Further options, which are
subject to the "6 + 1" option re-pricing program undertaken by the
Corporation, will be granted on or after July 26th, 2004, as described
in Section 4.5 (c) below.
- Warrants - Pursuant to the TPC Agreement, the Corporation is required,
as at September 30, 2002 and as at each September 30 thereafter for
every twelve month period where TPC makes a contribution payment up to
and including September 30, 2004, to issue warrants exercisable on a
one-for-one basis for Common Shares, for no additional consideration.
The number of warrants to be issued shall be equal to the amount of
contributions paid by TPC in the immediately preceding twelve month
period, divided by the fair market value of the Common Shares as at
the applicable date. To date, warrants to acquire 12,986,968 Common
Shares have been granted by the Corporation to TPC pursuant to the TPC
Agreement. The Corporation has requested a six month extension to the
TPC Agreement, to March 31, 2005.
- Warrants - In favour of CIBC World Markets Inc., as set forth in
Section 4.30 of the Subscription Agreement.
- Shares - Pursuant to a retainer letter between the Corporation and
Gowlings dated January 21, 2002 in respect of the provision of legal
services to the Corporation, the Corporation will issue common shares
to Gowlings in partial satisfaction of outstanding accounts with that
firm, up to 40% of the value of the eligible invoices billed annually,
until the parties agree otherwise.
- Certain of the agreements referred to in Section 4.5(d) of this
Disclosure Schedule include pre-emptive rights in favour of certain
existing shareholders of the Corporation, as outlined therein.
- Shares - Pursuant to an arrangement between the Corporation and Osler,
▇▇▇▇▇▇ & Harcourt LLP ("OHH") in respect of the provision of legal
services to the Corporation, the Corporation may issue Common Shares
to OHH in partial satisfaction of outstanding accounts with that firm,
up to 25% of the value of each eligible invoice capped at a dollar
amount of $200,000 per year.
-2-
SECTION 4.5(C): OPTIONS
Term and Vesting of Options
Except as disclosed below, all outstanding options under the Stock Option Plan
expire five years after the date of grant, and vest (subject to earlier
termination on termination of services of the grantee) as to 25% of the shares
subject to option on the first anniversary of the date of grant, and thereafter
at a rate of 25% each year for a period of three years.
- Options were granted on December 12, 2003 to an employee of the
Corporation (▇▇▇▇ ▇▇▇▇▇▇▇▇), whereby 25% vested immediately upon
issuance and the remaining 75% vested thereafter at a rate of 25% each
year for a period of three years commencing on the second anniversary
of the date of grant.
- Any unvested options held by any optionee who's employment or services
terminate by reason of death vest immediately and may thereafter be
exercised for a period of 365 days from the date of such death or such
other period as the "Committee" (being either the Employee
Compensation Committee appointed by the Board of Directors or the
Board of Directors) may specify.
Re-pricing ("6 + 1 Program") or Exchange of Options
On December 9, 2003, the Board of Directors approved a resolution for a
"six-plus-one" option repricing program whereby certain options (the "Old
Options") previously granted by the Corporation under the Stock Option Plan were
cancelled (subject to obtaining an election of the optionholder in each case).
The Board of Directors also determined that an equivalent number of new options
(the "New Options") will be subsequently granted under the Stock Option Plan to
each optionholder that elected to cancel their respective Old Options, provided
that, the electing optionholder continues to be otherwise eligible to receive
such New Options under the Stock Option Plan at the time of the grant of such
options.
The Corporation expects that the New Options will be granted to such eligible
participants under the Stock Option Plan on or after July 26th, 2004.
The number of Old Options cancelled and the number of New Options that are
expected to be granted at least six (6) months plus one (1) day from the closing
of the program is 10,373,302.
Other Plans
Effective May 14, 2001, the Corporation entered into the Mitel Networks
Corporation U.S. Employee Stock Purchase Plan which plan provided a means for
employees of Mitel Networks Inc. and Mitel Networks Solutions, Inc. to purchase
common shares in the Corporation for a period of one (1) year from the effective
date and in accordance with the terms provided therein. Although the plan is no
longer active for the issuance of shares, shares remain issued and outstanding
under the agreement.
-3-
SECTION 4.5(D): REDEMPTION OBLIGATIONS, SHAREHOLDER AGREEMENTS OR REGISTRATION
RIGHTS AGREEMENTS
The Corporation has the following outstanding obligations, contingent or
otherwise, contractual or otherwise, to repurchase, redeem, or otherwise acquire
any of its shares or other equity securities or to pay any dividend or make any
distribution to its shareholders:
- Pursuant to Section 5.5 of the Corporation's "Stock Option
Administration Policy and Procedure", the Corporation has made it a
practice to reinstate stock options for those employees terminated
involuntarily and rehired within six months.
- As a general practice, the Corporation accepts share subscriptions
from certain employees for the purchase of Common Shares, and agrees
to advance interest free loans to such employees to purchase such
Common Shares. The Corporation has made it a practice, although it is
not an obligation, to forgive loans for employees who are terminated
involuntarily. In such instances, the Corporation redeems the shares
not yet paid for.
The Corporation is a party to or bound by the following Contracts relating to
the voting of its securities or that creates a voting trust, voting agreement,
pooling agreement, drag-along, right of first refusal, pre-emptive right or
proxy, or that restricts the ability of shareholders to freely transfer
securities:
- the Corporation is a party to the Existing Shareholders Agreement,
which is being terminated as contemplated in the Subscription
Agreement, which contains certain "put" rights requiring the
Corporation to repurchase outstanding Common Shares held by PTIC and
Zarlink upon the occurrence of certain events.
- the PTIC Subscription Agreement, which is being terminated as
contemplated in the Subscription Agreement, contains certain "put"
rights, pre-emptive rights and other rights that may require the
Corporation to issue securities in favour of PTIC.
- the Series A Shares and Series B Shares to be issued pursuant to the
transactions contemplated in the Subscription Agreement, the Debenture
Holder Consents, the PTIC Exchange and Release Agreement and the WCC
Exchange and Release Agreement are redeemable in accordance with their
terms.
- the Shareholders Agreement to be entered into in connection with the
transactions contemplated in the Subscription Agreement includes
certain "put" rights in favour of EdgeStone, PTIC and Zarlink.
- the articles of the Corporation contain a restriction on the transfer
of shares of the Corporation without approval of the Board of
Directors.
The Corporation has knowledge of, the following Contracts relating to the voting
of any of its securities or that relates to or restricts the management of the
Corporation or any Subsidiary or that creates a voting trust, voting agreement,
pooling agreement, drag-along, right of first refusal, pre-emptive right or
proxy, or that restricts the ability of the shareholders to freely transfer or
alienate outstanding securities of the Corporation or any Subsidiary:
-4-
- the Corporation is a party to the Existing Shareholders Agreement,
which is being terminated as contemplated in the Subscription
Agreement.
- the Corporation is a party to the PTIC Subscription Agreement, which
is being terminated as contemplated in the Subscription Agreement.
- the Corporation will enter into the Shareholders Agreement, as
contemplated in the Subscription Agreement.
The Corporation is a party to or bound by the following Contracts under which
any Person has the right to require it (x) to effect, or to include any
securities held by such Person in, any registration under the Securities Act or
any qualification by prospectus under Canadian Securities Laws, or any similar
registration or qualification in any other jurisdiction, or (y) to distribute
any such securities to the public in Canada, the United States or any other
jurisdiction:
- the Corporation is a party to the Existing Shareholders Agreement,
which contains certain registration rights in favour of Mitel Systems
Corporation, Zarlink and PTIC, which is being terminated as
contemplated in the Subscription Agreement.
- the Corporation will enter into the Registration Rights Agreement as
contemplated in the Subscription Agreement.
SECTION 4.5(E): PRICE PROTECTION AND ANTI-DILUTION RIGHTS
Prior to completion of the transactions contemplated in the Subscription
Agreement, the following price protection, anti-dilution or similar rights are
applicable to any securities of the Corporation or any Subsidiary:
- the PTIC Subscription Agreement, which will be terminated as
contemplated in the Subscription Agreement, contains certain price
protection and anti-dilution protection in favour of PTIC.
- a letter from the Corporation to the Converted Debenture Holders dated
October 30, 2003 (the "Debenture Holder Letter"), offered certain
"down side price protection" to the Converted Debenture Holders in the
event that the Corporation's next private equity investment
transaction was at a price less than the CDN$2.00 at which the August
2002 Debenture Shares were issued pursuant to the conversion of the
August 2002 Debentures. This price protection will be terminated
pursuant to the execution of the Debenture Holders Consents as
contemplated in the Subscription Agreement.
- pursuant to a resolution at the meeting of the Board on October 30th,
2003, the Board resolved that the Corporation would offer certain
downside price protection to WCC in connection with the WCC Note
Shares, which price protection will be terminated pursuant to the WCC
Exchange and Release Agreement to be entered into as contemplated in
the Subscription Agreement.
- pursuant to an arrangement between the Corporation and OHH as referred
to in Section 4.5(b) of this Disclosure Schedule, the Corporation may
issue Common
-5-
Shares to OHH, in the manner described in Section 4.5(b) of this
Disclosure Schedule, and certain "price protection" rights have been
granted to OHH such that OHH will be issued additional Common Shares
if the Corporation subsequently issues Common Shares (or grants
options) at a lower price.
Upon the fulfilment of the closing conditions referred to in Sections 2.5(f),
2.5(g) and 2.5(h) of the Subscription Agreement, the only outstanding price
protection or anti-dilution rights will be as follows:
- the Series A Shares and Series B Shares to be issued pursuant to the
transactions contemplated in the Subscription Agreement, the Debenture
Holder Consents, the PTIC Exchange and Release Agreement and the WCC
Exchange and Release Agreement will contain certain "full ratchet"
anti-dilution protection in accordance with their terms, as set out in
the Articles of Amendment.
- as contemplated in the Subscription Agreement, the Corporation will
issue to Edgestone the Series 2 Warrants which will provide Edgestone
with certain antidilution protection in certain circumstances in
connection with the exercise of certain put rights under the
Shareholders Agreement.
- any Converted Debenture Holders that do not deliver Debenture Holder
Consents may continue to have the benefit of the price protection
contemplated in the Debenture Holder Letter.
- pursuant to a retainer letter between the Corporation and OHH as
referred to in Section 4.5(b) of this Disclosure Schedule, the
Corporation may issue Common Shares to OHH, in the manner described in
Section 4.5(b) of this Disclosure Schedule, and certain "price
protection" rights have been granted to OHH such that OHH will be
issued additional Common Shares if the Corporation subsequently issues
Common Shares (or grants options) at a lower price.
SCHEDULE 4.6
LAWFUL ISSUANCE OF SECURITIES
Non-Compliance with Pre-Emptive Rights, Securities Laws or Other Laws
With respect to prior issuances of securities by the Corporation to Persons
resident in jurisdictions other than Canada, the United States or the United
Kingdom, the Corporation did not make independent inquiry into whether all such
issuances fully complied with all applicable laws in such other jurisdictions.
As a result, those securities of the Corporation may not have been offered,
issued and sold in compliance with such laws.
SECTION 4.8
GOVERNMENTAL OR THIRD PARTY CONSENTS
The following consents, approvals, authorizations, declarations, filings or
registrations with any Governmental Authority or any other Person have been or
will be obtained as follows:
- shareholder approval is required to authorize the Articles of
Amendment and certain other matters in connection with the
transactions contemplated under the Subscription Agreement, and the
Articles of Amendment must be filed with Industry Canada.
- the consent of Zarlink may be required to the Articles of Amendment
pursuant to the Zarlink Supply Agreement.
- the Corporation will be required to make certain post-closing
securities filings in connection with the issuance of Series B Shares
pursuant to the Debenture Holder Consents, the PTIC Exchange and
Release Agreement and the WCC Exchange and Release Agreement.
SECTION 4.9
ABSENCE OF CERTAIN CHANGES
SECTION 4.9(B): INDEBTEDNESS
- The Corporation entered into an amended and restated credit agreement
dated April 21, 2004 between the Corporation and Bank of Montreal (as
Administrative Agent and Lead Lender) for a revolving credit facility
capped at CDN$30,000,000.
- The Corporation entered into a receivables purchase agreement between
the Corporation, Mitel Networks, Inc. and Mitel Networks Solutions,
Inc. (the "Sellers"), the Canada Trust Company in its capacity as
Trustee of Endurance Trust (the "Purchaser"), and Efficient Capital
Corporation (the "Securitization Agent"), effective April 16, 2004,
whereby the Purchaser has agreed to purchase up to USD$34,000,000 and
CDN$6,000,000 (on a revolving basis) of Canadian and US based trade
receivables from the Sellers.
- Mitel Networks Limited gave certain chattel and real property
mortgages in favour of Barclays Bank, securing certain equipment and
owned real estate located in the U.K., as further described in note 12
to the Financial Statements.
SECTION 4.9(C): MATERIAL TRANSACTION WITH INSIDERS
As described in Section 4.20(g) of this Disclosure Schedule, the WCC Note Shares
were issued to WCC upon the conversion of indebtedness of the Corporation in the
aggregate principal amount of $40,897,750. WCC is directly or indirectly
controlled by ▇▇. ▇▇▇▇▇▇▇▇.
SECTION 4.9(F): ISSUANCE OF SHARES
- The Corporation has obligations to grant or has granted/issued the
options, warrants and shares as described under Section 4.5(b) of this
Disclosure Schedule and Section 4.30 of the Subscription Agreement.
- The Corporation issued the WCC Note Shares to WCC upon the conversion
of the WCC Notes.
- The Corporation issued the August 2002 Debenture Shares to the
Converted Debenture Holders upon the conversion of the mandatory
debentures as contemplated in the Debenture Holder Letter.
SECTION 4.9(G): OFFICER, DIRECTORS AND KEY EMPLOYEE
Since the Financial Statement Date, the following changes occurred in the
position of the officers, directors and key employees of the Corporation or any
of the Material Subsidiaries:
-2-
NAME OF OFFICER DATE OF
TERMINATED/ TERMINATION/ REPLACEMENT
COMPANY NAME RESIGNED TITLE RESIGNATION OFFICER
---------------- ---------------- ------------------- ------------ ----------------
Mitel Networks ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ VP Finance & CFO 20-Jun-03 ▇▇▇▇▇ ▇▇▇▇▇▇▇
Corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ VP Legal, General 26-Sep-03 ▇▇▇▇ ▇▇▇▇▇▇▇
Counsel & Corporate (Corporate
Secretary Secretary and
General Counsel)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Treasurer 30-Oct-03 ▇▇▇▇ ▇▇▇▇▇▇▇▇
Mitel Networks, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Vice President 31-Oct-03 ▇▇▇▇▇ ▇▇▇▇▇▇▇
Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Treasurer 30-Oct-03 ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ Assistant 6-Jun-03 None
Vice President
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Corp. 26-Sep-03 None
Secretary
Mitel Telecom ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Corp. Secretary 31-Oct-03 ▇▇▇▇▇ ▇▇▇▇▇
Limited
Mitel Networks ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Corp. 26-Sep-03 None
Holdings Limited Secretary
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Treasurer 30-Oct-03 None
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Corp. Secretary 31-Oct-03 ▇▇▇▇▇ ▇▇▇▇▇
Mitel Networks ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Treasurer 30-Oct-03 None
Limited
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Corp. 26-Sep-03 None
Secretary
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Corp. Secretary 31-Oct-03 ▇▇▇▇▇ ▇▇▇▇▇
Mitel Networks ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Treasurer 30-Oct-03 ▇▇▇▇ ▇▇▇▇▇▇▇▇
Solutions, Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Assistant Corp. 26-Sep-03 None
Secretary
▇▇▇▇▇ ▇▇▇▇ Assistant 6-Jun-03 None
Vice President
Mitel Financial ▇▇▇▇▇▇▇▇ Bloohn Corp. Secretary 20-May-03 ▇▇▇▇▇ ▇▇▇▇▇
Services Limited
SECTION 4.9(H): COMPENSATION
None, other than the discontinuance of the Global Hours Reduction Program in
March 2004, as described in Section 4.21(d) of this Disclosure Schedule.
SECTION 4.10
INVENTORY VALUATION
As disclosed in note 2(g) of the Financial Statements, the Corporation provides
inventory allowances based on estimated excess and obsolete inventories. For the
financial year ended April 27, 2003, the inventory allowance was in the amount
of $27.6 million and for the nine-month period ended January 25, 2004, the
inventory allowance was in the amount of $25.4 million.
SECTION 4.13
INDEBTEDNESS
Indebtedness with at Least One Year Maturity
The Corporation or one of its Subsidiaries have incurred Indebtedness which
matures more than one year after the date of their original creation or issuance
under the following:
- amended and restated credit agreement dated April 21, 2004 between the
Corporation and Bank of Montreal (as Administrative Agent and Lead
Lender) for a revolving credit facility capped at CDN$30,000,000.
- receivables purchase agreement between the Corporation, Mitel
Networks, Inc. and Mitel Networks Solutions, Inc. (the "Sellers"), the
Canada Trust Company in its capacity as Trustee of Endurance Trust
(the "Purchaser"), and Efficient Capital Corporation (the
"Securitization Agent"), effective April 16, 2004, whereby the
Purchaser has agreed to purchase up to USD$34,000,000 and
CDN$6,000,000 (on a revolving basis) of Canadian and US based trade
receivables from the Sellers.
- certain capital leases, at interest rates varying from 9.1% to 11.4%,
payable in monthly instalments, with maturity dates ranging from 17 to
58 months, and secured by the leased assets.
- chattel and real property mortgages given by Mitel Networks Limited in
favour of Barclays Bank and securing certain equipment and owned real
estate located in the U.K., as further described in note 12 to the
Financial Statements.
- certain real property leases entered into by the Corporation or its
Subsidiaries as set forth in Section 4.17(a)(ii) of this Disclosure
Schedule.
SECTION 4.14
ABSENCE OF UNDISCLOSED LIABILITIES
U.K. Defined Benefit Plan (Family Security Plan)
As of December 31, 2003, the U.K. Defined Benefit Plan was invested in the
Deutshe Asset Management Balanced Fund. The actuary has brought a potential
funding deficit of 11,944 MGBP to Mitel Networks Limited's attention. In
arriving at the 11,944 MGBP potential deficit amount, the actuary has made a
number of assumptions, the key of which is using 7% as the annual rate of return
on the investments. As of the end of March 2004, Mitel Networks Limited had not
received the Actuarial Report.
Mitel Networks Limited is seeking an independent assessment of the U.K. Defined
Benefit Plan deficit, in order to ascertain whether or not the view of the
actuary is overly conservative. This review is being conducted by Quantum
Advisory Limited.
The Company will not be in a position to make a determination regarding the
impact of the potential deficit of 11,944 MGBP until such time as the Actuarial
Report and the independent review by Quantum Advisory limited have been received
and assessed.
SECTION 4.16
TAX MATTERS
SECTION 4.16(A): ARREARS
NONE.
SECTION 4.16(B): TAX RETURNS
NONE.
SECTION 4.16(E): CLAIMS
NONE.
SECTION 4.16(D): WITHHOLDING
None.
SECTION 4.16(E): TAX SHARING
NONE.
SECTION 4.16(H): AUDITS
The Corporation and its Subsidiaries are currently undergoing the following
audits:
AUDIT STATUS
JURISDICTION TAX TYPE ENTITY PERIOD COMMENTS
------------ -------- ------ ------ --------
Alabama Sales & Use Tax MNI 05/01 - 04/04 05/25/04 Appointment
Alabama Sales & Use Tax MNSI 05/01 - 04/04 05/25/04 Appointment
Florida Sales & Use Tax MNSI 11/00 - 10/03 invoices and exemption
certificates mailed 04/14/04
Illinois Sales & Use Tax MNI 07/00 - 03/03 audit complete, waiting for
report
Illinois Sales & Use Tax MNSI 07/00 - 03/03 audit complete, waiting for
report
Missouri Sales & Use Tax MNI 03/01 - 02/04 06/09/04 Appointment
Missouri Sales & Use Tax MNSI 03/01 - 02/04 06/09/04 Appointment
Philadelphia, Income tax MNI 1997 - 2001 discussed with agent for City
PA of Philadelphia. They are
reviewing for possible Mitel
Finance involvement.
Charlotte & Business License MNSI 2000 - 2002 Requested info sent to the
Mecklenburg auditor 01/12/04. No further
County, SC contact.
South Carolina Sales & Use Tax MNSI 08/00 - 07/03 reviewing invoices for original
equip sales date v. maintenance
contract date
South Dakota Sales & Use Tax MNI 08/00 - 07/03 processing internally
South Dakota Sales & Use Tax MNSI 08/00 - 07/03 processing internally
-2-
The Corporation is aware that the Customs and Revenue Agency is looking into the
issue of whether the TPC funding, provided to the Corporation pursuant to the
TPC Agreement, as disclosed in section 4.5 (b) of this Disclosure Schedule,
should be accounted for as government assistance rather than as an equity
investment. No formal audit or investigation is underway. The Corporation has
reviewed this matter with its taxation consultants who have advised that they
concur with the Corporation's treatment of the funding as an equity investment.
SECTION 4.16(J): COLLECTION AND REMITTANCE
None.
SECTION 4.17
REAL PROPERTY
SECTION 4.17(A)(I); OWNED REAL PROPERTY
Mitel Networks Limited owns the following real property in the United Kingdom:
DESCRIPTION OF BUILDINGS AND
MUNICIPAL ADDRESS STRUCTURES MORTGAGES/CHARGES
----------------- ---------------------------- -----------------
Mitel Business Park 286,000 sq. ft. gross residing on The Corporation granted a real
Portskewett approx. 17 acres for the use of property mortgage in favour of
Monmouthshire general office. Barclays Bank as noted in
▇▇▇▇ ▇▇▇ Section 4.13 to this Disclosure
UK Schedule.
(Caldicot)
SECTION 4.17(A)(II): LEASED REAL PROPERTY
COMMENCEMENT EXPIRY ANNUAL RENT
LEASED PROPERTY LANDLORD TENANT DATE DATE PAYABLE
--------------- ------------------- ----------- ------------------ ------------ -----------
CANADA
7330 ▇▇▇▇▇▇ GWL Realty Mitel 01-AUG-97 31-JAN-04 ***
Street S.E. Advisors Inc. Networks
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Life Mitel 01-JUL-98 30-JUN-04 ***
100 Burnaby, BC V5G Assurance Company Networks
1H3 Corporation
▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ Offices Etc, Mitel 01-MAR-01 ▇▇-▇▇▇-▇▇(▇▇ ***
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ Former Broadway Networks Days Notice)
Executive Center. Corporation
1505 Barrington Fortis Mitel 01-JAN-02 ▇▇-▇▇▇-▇▇ ***
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇, Properties Networks
▇▇ ▇▇▇ ▇▇▇ Corporation(Former Corporation
Trizic
Properties
Limited)
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Mitel 03-OCT-96 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇, ▇▇▇▇, ▇▇ Health Care Group Networks
Board of Trustees Corporation
340,350 Legget Drive, Mitel Research Mitel 27-MAR-01 31-MAR-11 ***
and ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇ Corporation Mitel 28-OCT-98 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇▇ Holdings Mitel 01-MAY-00 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇▇▇▇, ▇▇ Inc. Networks
Corporation
1111 boulevard SITQ Immobilier Mitel 26-SEP-98 31-OCT-04 ***
Dr.-Frederik-Philips lnc. Networks
Bureau 500, St Laurent Corporation
PQ H4M 2X6
USA
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ Mitel 11-JAN-99 10-JAN-06 ***
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ Partners Networks,
Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Annabel Mitel 01-MAY-02 30-APR-04 ***
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ Company Inc.
-2-
COMMENCEMENT EXPIRY ANNUAL RENT
LEASED PROPERTY LANDLORD TENANT DATE DATE PAYABLE
--------------- ------------------- ----------- ------------------ ------------ -----------
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ Mitel 01-MAY-01 31-AUG-04 ***
221, ▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Centre II, Inc. Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ Real Mitel 15-JAN-98 31-JAN-05 ***
B-9 ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Estate Company Network
Solutions,
Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ Mitel 25-SEP-00 30-SEP-04 ***
Parkway Suite 450 Investment Network
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Company, Inc Solutions,
Inc.
The ▇▇▇▇▇▇ Building The ▇▇▇▇▇▇ Mitel 01-JAN-03 31-DEC-04 ***
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Network
Suite 37 ▇▇▇▇ Ridge, Venture Solutions,
1L 60551 (Chicago) Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Capital Mitel 1-AUG-01 31-JUL-08 ***
Suite 130 Group Network
Southborough, MA Properties Solutions,
(Boston) Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ Mitel 01-DEC-Ol ▇▇-▇▇▇-▇▇ ***
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Ltd. Network
(Minneapolis) Solutions,
Inc.
▇▇▇▇-▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Mitel 01-AUG-98 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ FlexxSpace Ltd Network
28217 Solutions,
Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Mitel 16-MAY-03 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ Business Network
07071 Properties Solutions,
Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mitel 01-MAR-96 30-APR-06 ***
Parkway Mt. Laurel, NJ Property Network
08054 Limited Solutions,
Partnership Inc.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇. Nocha Group 3 LLC Mitel 01-MAR-96 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (Albany) Network
Solutions,
Inc.
▇ ▇▇▇▇ ▇▇▇▇▇▇ 15th ▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ Mitel 01-DEC-98 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ Network
10015 Solutions,
Inc.
▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Mitel New Lease Signed - 30-JUN-O9 ***
Floor New York, NY Avenue Network Commencement date (Approx)
10015 Building Co., Solutions, undetermined
L.P. Inc. (Under
construction for
tenant
improvements)
400 Air Park Drive ▇▇▇▇▇▇ Di Chario Mitel 01-JAN-01 31-DEC-06 ***
Suite 40 Town of Network
Chili, NY (Rochester) Solutions,
Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and Amsdell Mitel 01-APR-01 ▇▇-▇▇▇-▇▇ ***
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ Network Close on
U.S.A. 44130 Solutions, Expiry
(Cleaveland) Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇-▇▇▇▇ Mitel 01-JUL-99 30-JUN-04 ***
1700 ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Realty Networks,
Corporation Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, The Realty Mitel 01-AUG-99 31-JUL-04 ***
400 Herndon, VA Associates Fund Networks,
20170-5344 III, L.P. Inc.
9100 Arboretum Brandywine Mitel 01-FEB-04 31-JAN-07 ***
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ Realty Services Network
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Solutions,
Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ R K R Investments Mitel 01-NOV-02 31-OCT-04 ***
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Network
(Little Chute) Solutions,
Inc.
N19W24400Riverwood MRA-The Mitel 01-JAN-03 31-DEC-04 ***
Drive Waukesha, Management Network
Wisconsin (Milwaukee) Assoc., Inc. Solutions,
Inc.
60 West Mini-Storatge Storage Services, Mitel ***
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Inc Network
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Solutions,
Inc.
-3-
COMMENCEMENT EXPIRY ANNUAL RENT
LEASED PROPERTY LANDLORD TENANT DATE DATE PAYABLE
--------------- ------------------- ----------- ------------------ ------------ -----------
▇.▇. ▇▇▇ ▇▇▇▇▇ First Federal Mitel ***
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Corporation Networks,
Inc.
UK OFFICES
Allantoun House, BAe Pension Fund Mitel 1999 2024 ***
Linnet Way, Networks Vacated
Strathclyde Business Limited in Nov.
Park, Bellshill, 2003
Lanarkshire (Glasgow)
▇▇▇-▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Mitel 1991 2016 ***
Avenue, Slough, SL1 Networks
4PF Limited
The Gatehouse, Hogarth Grand Mitel 1980 2005 ***
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇ Metropolitan Networks
3QN Hotel Limited
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ Mitel 1990 2015 ***
Birmingham Business Business Park Networks
Park, Solihull ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇
▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Mitel 2003 2013 ***
▇▇▇▇▇▇-▇▇-▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ OJQ Limited
(Haydock)
▇▇▇▇▇▇▇ House, EDP Mitel 1995 2020 ***
Strathclyde Business Networks
Park, Bellshill, Limited
Lanarkshire(Glasgow)
▇▇▇ ▇▇▇▇▇ House, Glasgow City Mitel 2002 2014 ***
India Street, Glasgow Council Networks
Limited
Suite 1.19, 16 St Abbey Mitel Annual license Annual ***
Martins Le Grand, Business Networks license
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ Centres Limited
Suite 3N International International Mitel Annual license Annual ***
House, ▇▇▇▇▇▇▇▇ House Networks license
International Limited
Technology Park,
Blantyre, G72 OBN
INTERNATIONAL OFFICES
Centro Direzional Edilnord Mitel 2001 2007 ***
Milano Oltre, Networks
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Italia SRL
20090 Segrate, MI
(Milan, Italy)
Plusfour, Corio Mitel 2001 2006 ***
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇-▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇, Limited
2132HC(Schipol, NL)
Dubai Internet City, Dubai Mitel Renewable annually Renewable ***
Office 122/123, Technology, Networks annually
Building No. 9. PO Box Electronic Limited
500142, Dubai, UAE Commerce & Media
Free Zone
-4-
COMMENCEMENT EXPIRY ANNUAL RENT
LEASED PROPERTY LANDLORD TENANT DATE DATE PAYABLE
--------------- ------------------- ----------- ------------------ ------------ -----------
Le Quebec, ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ Mitel 2002 2011 ***
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 78280 Networks
Guyancourt(Paris, ▇▇▇▇
▇▇▇▇▇▇)
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇▇ Mitel 2003 2013 ***
▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ Limited
SECTION 4.17(B): LEASE OF OWNED REAL PROPERTY
Mitel Networks Limited has leased buildings located at the Mitel Business Park,
which property is described in Section 4.17(a)(i) of this Disclosure Schedule,
to:
- BreconRidge Manufacturing Solutions Ltd. pursuant to a lease expiring
in August 2006.
- Zarlink pursuant to a lease expiring in February 2006.
SECTION 4.17(C): SUBLETTING OR ASSIGNMENT OF LEASED REAL PROPERTY
- The Corporation has sublet buildings located at 340 and 350 Legget
Drive, which property is described in Section 4.17(a)(ii) of this
Disclosure Schedule, to BreconRidge Manufacturing Solutions
Corporation for a term expiring on August 30, 2006.
- Mitel Networks Limited has sublet the property leased to it under the
lease entered into with Grand Metropolitan Hotel, which lease is
described in Section 4.17(a)(ii) of this Disclosure Schedule, to
Continuity Company.
- Mitel Networks Limited has sublet 71.25% of its interest in the lease
entered into with Birmingham Business Park, which lease is described
in Section 4.17(a)(ii) of this Disclosure Schedule, to Kingston
Communications Ltd.
- Mitel Networks Limited has sublet the property leased to it under the
lease entered into with EDP, which lease is described in Section
4.17(a)(ii) of this Disclosure Schedule, to SBP.
SECTION 4.18
PERSONAL PROPERTY
- Security interest in favour of Bank of Montreal in connection with
certain credit facilities provided to the Corporation, as disclosed in
Section 4.13 of this Disclosure Schedule.
- Chattel mortgage given by Mitel Networks Limited in favour of
▇▇▇▇▇▇▇'▇ Bank securing certain equipment, as disclosed in Section
4.13 of this Disclosure Schedule.
SECTION 4.19
SAFETY, ZONING AN ENVIRONMENTAL MATTERS
SECTION 4.19(B): REMEDIAL ACTION
None.
SECTION 4.20
EMPLOYMENT CONTRACTS
SECTION 4.20(B): NUMBER OF EMPLOYEES AND INDEPENDENT CONTRACTORS
Full Time Employees and Independent Contractors
The Corporation and its Subsidiaries have in aggregate approximately 1829 full
time employees and 20 independent contractors.
Current Labour Unrest and Threatened Labour Strike
None.
SECTION 4.20(C): SEVERANCE OBLIGATIONS
Please see disclosure set out under Section 4.21(a) of this Disclosure Schedule.
SECTION 4.20(E): COMPLAINTS OR GRIEVANCES UNDER EMPLOYMENT LEGISLATION
None, other than the complaints grievances, claims, work orders or
investigations disclosed in Section 4.27 of this Disclosure Schedule.
Outstanding decisions or settlements refraining the Corporation from doing any
act
None.
SECTION 4.20(F): PAYMENT AND ACCRUAL OF COMPENSATION
Mitel Networks Limited may not be in compliance with the Employment Rights ▇▇▇
▇▇▇▇ and may have acted in breach of contract in connection with the hours
reduction program as disclosed in Section 4.21(d) of this Disclosure Schedule.
The extent of such liability, if any, is unknown (contingent) and, as such, has
not been accrued.
SECTION 4.20(G): PAYMENTS TO INSIDERS
Since the Financial Statement Date, the following payments have been made or
authorized by the Corporation to Insiders of the Corporation:
- 20,448,875 Common Shares (the "WCC Note Shares") were issued to WCC
upon the conversion of indebtedness of the Corporation in the
aggregate principal amount of $40,897,750. WCC is directly or
indirectly controlled by ▇▇. ▇▇▇▇▇▇▇▇.
- Payment of interest to Converted Debenture Holders (including
Converted Debenture Holders that are Insiders), calculated from the
date of conversion and added to the original investment to determine
the number of Common Shares issued to the Converted Debenture Holders.
The Corporation has withholding tax in connection with the
non-resident Converted Debenture Holders (on the
-2-
conversion of their mandatory debentures into the August 2002
Debenture Shares Common Shares).
- Payment of rent in the amount of $8,985,654, annually, to Mitel
Research Park Corporation pursuant to a lease described in Section
4.17(a)(ii) of this Disclosure Schedule.
SECTION 4.21
EMPLOYEE PLANS
SECTION 4.21(A): EMPLOYEE PLANS
The Employee Plans are as follows:
Global or Multi-regional Employee Plans
- "Stock Option Administration Policy & Procedures" - policy and
procedure for employee stock option plan (Global)
- "Sales Incentive Compensation Plan - Fiscal year 2004" - sales
incentive compensation plan for employees in US and Canada
- "Invention Disclosure Program" - description of program in place for
patent management - Note: the Invention Disclosure Program document is
provided in draft form as it has not been finalized but, in the form
provided, substantially reflects the practices of the Corporation
- "Patent Portfolio Policy" - policy for administration and maintenance
of patent portfolio
- "Layoff" - description of policy for layoffs, as amended by
Termination Agreements which were issued by the Corporation to certain
key employees, as a retention strategy, to increase entitlement upon
layoff
Employee Plans available to Canadian Employees
- "Choices & Opportunities - 2003 Employee Benefits" - information
booklet for Flexible Benefit Program
- "Member's Booklet for Mitel Networks Corporation Pension Plan for
Quebec and Ontario Members" - information booklet for Pension Plan
(DCPP and RRSP)
- "Termination of Employment" - Canada Policies - Employment --
guidelines for termination of employees
- "Compensation" - Canada Policies - Rewards, Recognition & Benefits
- additional compensation programs for employees, eg. call-in pay,
overtime, etc.
Employee Plans available to EMEA Employees
- "Schedule of Employee Benefits" - summary of benefits available to
employees
- "Your Benefits" - information booklet for benefits availably to
employees
- "Redundancy & Redeployment" - MFHR0024 - policy for the redundancy and
redeployment of permanent employees
- "Family Security Plan" - information booklet for pension program
available to employees
-2-
- "Family Security Plan - Additional Voluntary Contributions" -
information booklet for additional voluntary contributions that can be
made under the pension program
- "Out of Hours Working and Overtime Payments" - policy and procedure
for payment of overtime for eligible employees
- "Payment to Employees Moved to Higher Cost Housing Areas" - policy and
procedure for compensation payments to employees transferred at the
company's request
- "Working Time Policy" - policy and procedure for calculation and
management of working time to ensure the company complies with Working
Time Regulations, application in the UK
- "Voluntary Termination of Employment" - MFHR0006 - policy and
procedure relating to resignation
- "Sales Incentive Scheme" - policy and procedure applicable to all
employees eligible for the sales incentive scheme in EMEA
- "Bid Management Bonus Scheme" - policy and procedure for bonus scheme
applicable to employees who are responsible for bid management
- "Service Account Management Incentive Scheme" - policy and procedure
for bonus scheme applicable to employees who are responsible for
service account management
- "Micros for the Masses" - interest free loan made available to
employees to enable the purchase of home computer (no written
documentation of program available)
- "Stakeholder Plan" - pension scheme facilitated by Friend Provident
(insurance company) which enables employees to access, subject to the
employees contribution, a contribution by the Corporation equal to 6%
of the employees salary (no written documentation of program
available)
Employee Plans available to US Employees
- "Mitel Networks Corporation U.S. Employee Stock Purchase Plan" -
policy and procedure for employee stock option purchase by employees
of Mitel Networks Inc. and Mitel Networks Solutions Inc.
- "▇. ▇▇▇▇ Price Update" booklet - information on 401K plan
- "Severance Plan" - US HR Guide - Severance Pay - guidelines for
severance benefits for employees (available by internet), as amended
by Termination Agreements which were issued by the Corporation to
certain key employees, as a retention strategy, to increase
entitlement upon layoff
-3-
- "Benefits to Meet Your Needs" - information" booklet for Flexible
Benefit Program"
SECTION 4.21(B): ADMINISTRATION OF EMPLOYEE PLANS
Due to a number of recent legislative changes to "IRS ERISA Regulations and
Procedures", along with a number of changes to pension and profit-sharing plans,
Mitel Networks, Inc. filed with the Internal Revenue Service ("IRS"), on August
23, 2003, an application for "favorable determination letter", in connection
with its US Employee Plan. A "favorable determination letter" qualifies an
Employee Plan as a pension or profit-sharing plan under section 401 of the Code,
which in turn allows for a tax deduction for contributions to the plan and for
tax-deferred growth of the plan's assets for the benefit of its participants.
The IRS has responded to Mitel Networks, Inc.'s application with a request for
additional information concerning the Employee Plan. The Plan Trustees, T ▇▇▇▇
Price ("TRP"), is assisting Mitel Networks, Inc. in providing responses to the
IRS inquiries. Several points raised by the IRS require that the company amend
portions of the Employee Plan. Those amendments have been submitted to the IRS.
The Corporation is awaiting written confirmation of acceptance.
SECTION 4.21(C): REMITTANCES
As described in Section 4.14 of this Disclosure Schedule, the actuary has
brought to the attention of the Corporation that there may be a potential
funding deficit in the amount of 11,944 MGBP under the UK Defined Benefit Plan
(Family Security Plan). However, as of the end of March 2004, the Corporation
had not received the Actuarial Report disclosing details on such deficit.
As disclosed in Section 4.21(e) of the Subscription Agreement, there is a
deficit under the Employee Plans.
SECTION 4.21(D): AMENDMENTS TO EMPLOYEE PLANS
In June 2001, the Corporation introduced a global hours reduction program
("Global Hours Reduction Program") which resulted in a reduction in hours of
one-half day per week. After October 11, 2002, the Corporation introduced a
modified hours reduction program, under which the total number of hours
reduction was reduced from 10% to 6.7%. The modified hours reduction program
introduced "designated" or "alternate" days on which employees were not required
to work. The modified hours reduction program was terminated on December 30,
2002 and the Global Hours Reduction Program was re-instated. Such program was
discontinued in March 2004.
In December 2001, the Corporation introduced a pension reduction program
affecting all its employees in North America, other than those employees who are
members of the International Brotherhood of Electrical Workers and, as such,
subject to the Collective Agreement disclosed in section 4.22 of this Disclosure
Schedule. The pension reduction programs was effective December 15, 2001 in
Canada and January, 2003 in the US. Under this program, the Corporation's
contribution to its pension plan is reduced by a total of 1% of the enrolled and
affected employee's earnings. The pension reduction program is still in force.
As described in Section 4.21(b) of this Disclosure Schedule, Mitel Networks,
Inc. is in the process of amending certain portions of the Employee Plan in
order to address the points raised by the IRS.
-4-
Termination Agreements were issued by the Corporation to certain key employees,
as a retention strategy, to increase entitlement upon lay off.
SECTION 4.21(F): TAX EXEMPT STATUS OF EMPLOYEE PLANS
Please see disclosure set out in Section 4.21(b) of this Disclosure Schedule.
SECTION 4.21(G): INSURANCE AND ACCRUALS
Please see disclosure set out in Sections 4.21(b) and 4.21(c) of this Disclosure
Schedule, and Section 4.21(e) of the Subscription Agreement.
SECTION 4.21(H): BREACH
Please see disclosure set out in Section 4.27 of this Disclosure Schedule.
SECTION 4.22
UNIONS
List of Collective Agreements:
Collective Agreement with the International Brotherhood of Electrical Workers
effective until September 30, 2004 with the following amending letter
agreements:
- A letter agreement dated July 1, 2002 implemented a reduction of hours
from forty to thirty-six hours per week for the period beginning July
1, 2002 and ending September 30, 2002.
- A letter agreement dated October 15, 2002 continued the reduction of
hours by requiring that employees subject to the Collective Agreement
take a reduction in hours of a total of six (6) days during the period
beginning October 1, 2002 and ending January 31, 2003.
- A letter agreement dated August 4, 2003 extended the Collective
Agreement to September 30, 2004, and continued the reduction of hours
on a voluntary basis.
Existence of Unions and other Bargaining Agents:
The International Brotherhood of Electrical Workers represents approximately 125
American field technicians who perform installation, maintenance and systems
changes for Mitel Networks Solutions Inc., an indirect wholly-owned subsidiary
of the Corporation.
SECTION 4.23
MATERIAL CONTRACTS
SECTION 4.23(II): MATERIAL CONTRACTS
The Corporation or its Subsidiaries entered into the following Contracts that
are individually, or in the aggregate (in the case of a series of related
agreements or agreements with the same or related parties), material to the
Corporation (considered on a consolidated basis) or its Business, prospects,
financial condition, operations, property or affairs (other than those purchase
and sale agreements, instruments or commitments for the sale of the products or
services of the Corporation entered into in the ordinary course of business on
the Corporation's standard terms):
- please see disclosure of the Contracts listed under Sections 4.13 and
4.23(iii) of this Disclosure Schedule.
- lease agreement between Mitel Research Park Corporation and the
Corporation for the lease of ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, which
lease agreement is described in Section 4.17(a)(ii) of this Disclosure
Schedule.
- The Corporation is a party to a "R/3 Software End User Value License
Agreement with SAP Canada Inc.", effective February 16, 2001 and
entered into with SAP Canada Inc. This license agreement provides the
Corporation with the business process management software.
- please see disclosure of the Contracts set forth in the Financial
Statements.
- please see disclosure of the TPC Agreement set forth in Section 4.5(b)
of this Disclosure Schedule.
SECTION 4.23(III)(A): SINGLE SOURCE CONTRACTS
The Corporation has single source relationships with BreconRidge Manufacturing
Solutions Corporation and Zarlink. Single source relationships (for the supply
of component parts, for instance) are entered into by BreconRidge on the
Corporation's behalf but are temporal and contingent on varying circumstances
such as, for example, price.
SECTION 4.23(III)(C): EMPLOYMENT AGREEMENTS
Please see disclosure set out in Section 4.5(d) of this Disclosure Schedule.
SECTION 4.23(III)(D): CONTRACTS WITH AFFILIATES, INSIDERS AND NON-ARMS LENGTH
PARTIES (OTHER THAN SUBSIDIARIES)
- The Corporation is a party to the Existing Shareholders Agreement,
which is being terminated as contemplated in the Subscription
Agreement. Mitel Systems Corporation, a corporation controlled
directly or indirectly by the Corporation's chairman, ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ is a party to the Existing Shareholders Agreement.
-2-
- As contemplated in the Subscription Agreement, the Corporation will
enter into the Shareholders Agreement. Also party to the Shareholders
Agreement will be ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Mitel Systems Corporation,
Mitel Knowledge Corporation (a corporation controlled directly or
indirectly by ▇▇. ▇▇▇▇▇▇▇▇) and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation (a
corporation controlled directly or indirectly by ▇▇. ▇▇▇▇▇▇▇▇).
- As contemplated in the Subscription Agreement, the Corporation will
enter into the WCC Exchange and Release Agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇
Corporation.
- As contemplated in the Subscription Agreement, the Corporation will
enter into the Registration Rights Agreement. Also party to the
Registration Rights Agreement will be Mitel Systems Corporation, Mitel
Knowledge Corporation, Zarlink, PTIC and WCC.
- The Corporation is a party to certain of the Other Agreements.
- The Corporation is party to a lease agreement with Mitel Research Park
Corporation, a corporation controlled directly or indirectly by ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, respecting its corporate headquarters at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, which lease agreement is described in
Section 4.17(a)(ii) of this Disclosure Schedule.
- The Corporation is a party to the TPC Agreement with TPC, Mitel
Knowledge Corporation and March Networks Corporation, each (other than
TPC) being a corporation controlled by directly or indirectly ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
- The Corporation and certain of its Subsidiaries, Mitel Networks Inc.
and Mitel Networks Limited, are parties to a supply agreement with
BreconRidge Manufacturing Solutions, Inc. and BreconRidge
Manufacturing Solutions Limited dated August 31, 2001.
- The Corporation is a party to the Zarlink Supply Agreement. Zarlink is
a shareholder of the Corporation.
- The Corporation is a party to certain lease agreements, as disclosed
in Section 4.17(b) of this Disclosure Schedule, with BreconRidge
Manufacturing Solutions Corporation.
- The Corporation is a party to a non-disclosure agreement, software
license agreement and software distribution agreement with NewHeights
Software Corporation.
- The Corporation is a party to a private label purchase agreement with
Encore Networks, Inc.
- The Corporation is a party to a technology transfer and software
licenses agreement between the Corporation and March Networks
Corporation, dated May
-3-
29, 2003 (transfer of certain nurse dispatch software from March
Networks to the Corporation, and license back to March Networks).
- The Corporation is a party to a services agreement with BreconRidge
Manufacturing Solutions Corporation, BreconRidge Manufacturing
Solutions Inc. and BreconRidge Manufacturing Solutions Limited dated
August 31st, 2001.
- The Corporation is a party to certain MiSN Program Agreements (third
party developer program), entered into in the ordinary course of
business, with March Networks Corporation, Encore Neworks Inc. and
NewHeights Software Inc.
- The Corporation and its Subsidiaries, Mitel Networks Limited and Mitel
Networks International Limited, are a party to an Alliance Agreement
entered into effective September 21, 2001.
SECTION 4.23(III)(E): JOINT VENTURE AGREEMENT
- As described in Section 4.3 of this Disclosure Schedule, the
Corporation is a party to a joint venture named Tianchi Mitel
Telecommunications Corp.
SECTION 4.23(III)(F): GOVERNMENT CONTRACTS
- The Corporation entered into the TPC Agreement, as described in
Section 4.5(b) of this Disclosure Schedule.
- Mitel Networks, Inc. holds a federal supply schedule Contract No.
GS-35F-0398K with the General Services Administration ("GSA") that
governs the terms and conditions of sales to federal and state
government entities that procure goods and services under through the
GSA.
SECTION 4.23(III)(G): EXCLUSIVE DEALINGS
- The Corporation is a party to a Distribution Agreement with Digital
Telecom Company effective November 1st, 1990 pursuant to which the
Corporation appointed Digital Telecom Company as the exclusive
distributor in Egypt.
- The Corporation is a party to a Distribution Agreement with Sprint
Products Group, Inc. ("SPG") effective January 23, 2004 pursuant to
which the Corporation appointed SPG as the exclusive distributor of
certain brand VoIP key systems in the United States and its
territories (U.S. Virgin Islands, Puerto Rico and Guam).
SECTION 4.23(III)(H): ESCROW AGREEMENTS
- The Corporation is a party to an escrow agreement with Zarlink and
Royal Trust (Escrow Agent), in favour of the Corporation whereby
Zarlink has escrowed certain of its VoIP and Hybrid products used by
the Corporation in its products.
-4-
- Mitel Networks Limited is a party to an escrow agreement with Marks &
▇▇▇▇▇▇▇ in the U.K., and NCC Escrow International Ltd., in favour of
Marks & ▇▇▇▇▇▇▇ for the escrow of certain of the Corporation's product
source code.
SECTION 4.24
CUSTOMERS, LICENSORS AND SUPPLIERS
SECTION 4.24(A): CUSTOMER CONTRACTS AND SUPPLIER CONTRACTS
(i) Contracts between the Corporation or any Subsidiary and the ten most
significant customers (including distributors):
***
(ii) Contracts between the Corporation and any Subsidiary and the ten most
significant suppliers (including licensors of Licensed IP):
***
SECTION 4.24(E): ALTERNATIVE SOURCES OF SUPPLY
***
SECTION 4.25
DESCRIPTION OF BUSINESS INTELLECTUAL PROPERTY
The following is a list of the Intellectual Property and Technology that the
Corporation owns, uses or has the right to use in the conduct of its Business
and that is individually or in the aggregate material to the conduct of the
Business or the loss of which could reasonably be expected to result in a
Material Adverse Effect. There is no Intellectual Property and Technology
registered in the name of the Subsidiaries.
OWNED IP
INDUSTRIAL DESIGN PATENTS REFERENCE NUMBER JURISDICTION
------------------------- ---------------- ----------------------
Plastic Door 394 Canada, US, UK
Telephone Attendant Console (Superconsole 2000) 494 Canada, US, UK
Mouse Controller 514 Canada, France, US, UK
5303 Conference Phone 538 Canada, France, US, UK
Mitel 5230 IP Appliance 553 Canada, France,
Germany, UK
TRADEMARKS REFERENCE NUMBER JURISDICTION
---------- ---------------- ----------------------
M & design 217,058 Canada
Mitel and M design 433,249 Canada
COPYRIGHT REFERENCE NUMBER JURISDICTION
--------- ---------------- ----------------------
SX-2000 PBX Software LIGHTWARE 28 - MS2008 CR0027 US
SX-2000 PBX Software LIGHTWARE 27- MS2007 CR0028 US
SX-2000 PBX Software LIGHTWARE 26 - MS2006 CR0029 US
SX-2000 PBX Software LIGHTWARE 29 - MS2009 CR0031 US
SX-2000 PBX Software LIGHTWARE 30 - MS2010 CR0040 US
SX-2000 for Windows NT CR0041 US
SX-200 PBX Software LIGHTWARE 17 - G1007 CR0043 US
SX-200 PBX Software LIGHTWARE 18 - G1010 CR0044 US
SX-200 PBX Software LIGHTWARE 19 - G1012 CR0045 US
SX-2000 PBX Software LIGHTWARE 31 - MS2011 CR0046 US
MITEL NETWORKS 3200 ICP System Software -
IPERA 2000 System Software CR0047 US
DOMAIN NAMES REGISTRAR
▇▇▇▇▇.▇▇▇ ▇▇▇.▇▇▇▇▇▇▇▇.▇▇
PATENTS
STATUS TITLE COUNTRY PATENT #
------ ----- ------- --------
Application Filed
Voice Custom Control of Activities Canada AB
Voice Custom Control of Activities UK 2322517
Voice Custom Control of Activities US AB
Agent-Based Web Search Engine Canada blank
-2-
Agent-Based Web Search Engine Germany blank
Agent-Based Web Search Engine UK blank
Agent-Based Web Search Engine US Abandoned
Spatial Audio for Virtual Meeting Places Canada blank
Spatial Audio for Virtual Meeting Places UK 2349055A
Spatial Audio for Virtual Meeting Places US blank
Communications System and Method Canada blank
Communications System and Method Germany blank
Communications System and Method UK blank
Communications System and Method UK 2337176
Communications System and Method US blank
Circuit to Improve Transducer Separation in Handsfree Canada ab
Telephone
Circuit to Improve Transducer Separation in Handsfree UK blank
Telephone
Circuit to Improve Transducer Separation in Handsfree US blank
Telephone
Method of Selecting Between Multiple Clock Drive Sources for Canada blank
a Backplane Clock Signal
Method of Selecting Between Multiple Clock Drive Sources for UK blank
a Backplane Clock Signal
Method of Selecting Between Multiple Clock Drive Sources for US 6163850
a Backplane Clock Signal
▇▇▇▇▇ Digital Switching System Canada blank
▇▇▇▇▇ Digital Switching System UK blank
▇▇▇▇▇ Digital Switching System US blank
Echo cancelling/suppression for handsets Canada blank
Echo cancelling/suppression for handsets UK blank
Echo cancelling/suppression for handsets US blank
Locating Network Echos Canada blank
Locating Network Echos UK blank
Locating Network Echos US blank
Adaptive Buffer Management for Voice Over Packet Based
Networks Canada blank
Adaptive Buffer Management for Voice Over Packet Based
Networks US blank
Features Based On Network Congestion Canada blank
Features Based On Network Congestion UK 2,354,133A
Features Based On Network Congestion US blank
Marker Packet Method Measuring Audio Signal to Packet Delays Canada blank
Marker Packet Method Measuring Audio Signal to Packet Delays UK blank
Multiperson Phone Canada blank
Multiperson Phone UK AB
Multiperson Phone US AB
Improvement of the Full Duplex Speakerphone Start-up Canada blank
Sequence using Default LEC Coefficients
Improvement of the Full Duplex Speakerphone Start-up UK blank
Sequence using Default LEC Coefficients
Improvement of the Full Duplex Speakerphone Start-up US assigned to Zarlink Sept 24/03
Sequence using Default LEC Coefficients
Hardware Implementation of the Real Time Protocol Packet Canada AB
Jitter Calculation as Given in RFC 1889.
Hardware Implementation of the Real Time Protocol Packet Germany blank
Jitter Calculation as Given in RFC 1889.
Hardware Implementation of the Real Time Protocol Packet UK blank
Jitter Calculation as Given in RFC 1889.
Hardware Implementation of the Real Time Protocol Packet US Assigned to Zarlink Sept 24/03
Jitter Calculation as Given in ▇▇▇ ▇▇▇▇.
QuickPick Canada blank
QuickPick UK 2347581
QuickPick US blank
Extensible dial by name for messaging via telephone access Canada Abandon
to electronic distribution lists
Extensible dial by name for messaging via telephone access UK blank
to electronic distribution lists
-3-
Extensible dial by name for messaging via telephone access US Abandon
to electronic distribution lists
Communications System Architecture for Voice Collaboration Canada blank
Communications System Architecture for Voice Collaboration UK 1/26/2004
Communications System Architecture for Voice Collaboration UK 2,357,659
Communications System Architecture for Voice Collaboration US blank
Synchronization method and system for keeping track of Canada blank
encoding history to maintain digital system syncrhonization
during communication over lossy transmission media
Synchronization method and system for keeping track of UK 2350984
encoding history to maintain digital system syncrhonization
during communication over lossy transmission media
Synchronization method and system for keeping track of US blank
encoding history to maintain digital system syncrhonization
during communication over lossy transmission media
Branding dynamic link libraries Canada blank
Branding dynamic link libraries UK ab
Branding dynamic link libraries US 6,694,320
Policy representations and mechanisms for the control of Canada blank
software based communication and business systems
Policy representations and mechanisms for the control of Germany blank
software based communication and business systems
Policy representations and mechanisms for the control of UK 2,354,350
software based communication and business systems
Policy representations and mechanisms for the control of US blank
software based communication and business systems
An efficient hardware mechanism to calculate the energy of a Canada blank
U-law or A-law encoded digitized speach sample
An efficient hardware mechanism to calculate the energy of a UK blank
U-law or A-law encoded digitized speach sample
An efficient hardware mechanism to calculate the energy of a US blank
U-law or A-law encoded digitized speach sample
Best Effort Search Email Gateway Canada blank
Best Effort Search Email Gateway Europe ab
Best Effort Search Email Gateway UK blank
Best Effort Search Email Gateway US blank
Comfort noise generation scheme for open discontinuous Canada blank
transmission systems
Comfort noise generation scheme for open discontinuous UK ab
transmission systems
Comfort noise generation scheme for open discontinuous US blank
transmission systems
Ultra-sonic proximity sensor for telephony Canada blank
Ultra-sonic proximity sensor for telephony UK 2,366,932
Ultra-sonic proximity sensor for telephony US blank
Use of handset microphone to enhance speakerphone
loudspeaker performance Canada blank
Use of handset microphone to enhance speakerphone
loudspeaker performance Europe blank
Use of handset microphone to enhance speakerphone
loudspeaker performance UK abandoned
Use of handset microphone to enhance speakerphone
loudspeaker performance US blank
Telephone loudspeaker equalisation using a remote microphone Canada blank
Telephone loudspeaker equalisation using a remote microphone UK blank
Telephone loudspeaker equalisation using a remote microphone US blank
Resource Sharing Using Sliding Constraints Canada blank
Resource Sharing Using Sliding Constraints UK blank
Resource Sharing Using Sliding Constraints US blank
Simple Supplementary Service Protocol (SSSP) Canada blank
Simple Supplementary Service Protocol (SSSP) UK 2,358,986
Simple Supplementary Service Protocol (SSSP) UK blank
Simple Supplementary Service Protocol (SSSP) US blank
PDA Enbabled Set Canada blank
-4-
PDA Enbabled Set Europe blank
PDA Enbabled Set UK blank
PDA Enbabled Set US blank
Integrated Data Clock Extractor UK. blank
Voice activated language translation Canada blank
Voice activated language translation Europe blank
Voice activated language translation UK blank
Voice activated language translation UK blank
Voice activated language translation US blank
Hardware Authentication Method Canada blank
Hardware Authentication Method UK 2,361,567
Hardware Authentication Method US blank
Multi-Frequency (MF) Tone Detection Spectral Nulls UK blank
Visually Impaired Application Canada blank
Visually Impaired Application UK blank
Visually Impaired Application US blank
Utilizing sub packets for packet loss compensation in voice Europe blank
over IP networks
Utilizing sub packets for packet loss compensation in voice Germany blank
over IP networks
Utilizing sub packets for packet loss compensation in voice UK blank
over IP networks
Utilizing sub packets for packet loss compensation in voice US blank
over IP networks
Intermediate voice and DTMF detector device for improved Canada blank
speech recognition utilization and penetration
Intermediate voice and DTMF detector device for improved Europe blank
speech recognition utilization and penetration
Intermediate voice and DTMF detector device for Improved UK blank
speech recognition utilization and penetration
Intermediate voice and DTMF detector device for improved US blank
speech recognition utilization and penetration
Telephone independent provision of speech recognition during Canada blank
dial tone and subsequent call progress states
Telephone independent provision of speech recognition during UK abandoned
dial tone and subsequent call progress states
Telephone independent provision of speech recognition during US blank
dial tone and subsequent call progress states
Execution sets for generated logs Canada blank
Execution sets for generated logs Europe blank
Execution sets for generated logs US blank
Tree hierarchy and description for generated logs Canada blank
Tree hierarchy and description for generated logs Europe blank
Tree hierarchy and description for generated logs UK Abandoned
Tree hierarchy and description for generated logs US blank
Dynamic rule sets for generated logs Canada blank
Dynamic rule sets for generated logs Europe blank
Dynamic rule sets for generated logs UK AB
Dynamic rule sets for generated logs US blank
Method to register IP phones Canada blank
Adaptive predictive playout scheme for packetized voice
applications Canada blank
Adaptive predictive playout scheme for packetized voice
applications Europe blank
Adaptive predictive playout scheme for packetized voice UK blank
applications
Noise masking of microphone signals in wired US blank
telecommunications equipment and power loss disconnect
Voice Mail Number and E-Mail Extraction Canada blank
Voice Mail Number and E-Mail Extraction UK blank
Voice Mail Number and E-Mail Extraction US blank
System and method for the management of computer software Canada blank
maintenance
System and method for the management of computer software US blank
maintenance
Minet IP Protocol Extensions, Canada blank
Minet IP Protocol Extensions, US blank
A better presentation of a menu for an interactive voice Canada blank
response system
-5-
A better presentation of a menu for an Europe blank
interactive voice response system
A better presentation of a menu for an UK blank
interactive voice response system
A better presentation of a menu for an US blank
interactive voice response system
Method of using speech recognition to initiate a Canada blank
WAP Session
Method of using speech recognition to initiate a UK 2,364,480
WAP Session
Method of using speech recognition to initiate a US blank
WAP Session
Acoustic Talker Localization Canada blank
Acoustic Talker Localization UK blank
Acoustic Talker Localization US blank
Compensation of beamformer steering delay for Canada blank
improvement of handsfree speech recognition
Compensation of beamformer steering delay for Europe blank
improvement of handsfree speech recognition
Compensation of beamformer steering delay for UK blank
improvement of handsfree speech recognition
Compensation of beamformer steering delay for US blank
improvement of handsfree speech recognition
Packet buffer memory with integrated Canada blank
allocation/deallocation circuit
Packet buffer memory with integrated France blank
allocation/deallocation circuit
Packet buffer memory with integrated Germany blank
allocation/deallocation circuit
Packet buffer memory with integrated UK blank
allocation/deallocation circuit
Method for handling far-end speech effects in Canada blank
hands-free telephony systems based on acoustic
beamforming
Method for handling far-end speech effects in Canada blank
hands-free telephony systems based on acoustic
beamforming
Method for handling far-end speech effects in Europe blank
hands-free telephony systems based on acoustic
beamforming
Method for handling far-end speech effects in UK blank
hands-free telephony systems based on acoustic
beamforming
Method for handling far-end speech effects in US blank
hands-free telephony systems based on acoustic
beamforming
Noise Level Calculator for Echo Canceller Canada blank
Noise Level Calculator for Echo Canceller UK blank
Noise Level Calculator for Echo Canceller US blank
Methods and Apparatus for Previewing Canada blank
Multimedia Attachments of Electronic Messages
Methods and Apparatus for Previewing Europe 1,182,600
Multimedia Attachments of Electronic Messages
Methods and Apparatus for Previewing UK 2,366,500
Multimedia Attachments of Electronic Messages
Methods and Apparatus for Previewing US Abandoned
Multimedia Attachments of Electronic Messages
Microphone Gasket with Integrated Acoustic Canada blank
Resistance
Microphone Gasket with Integrated Acoustic UK blank
Resistance
Microphone Gasket with Integrated Acoustic US blank
Resistance
Distributed Echo Cancelling Canada blank
Distributed Echo Cancelling Europe 1367738
Distributed Echo Cancelling UK blank
Automatic Location-Aware Feature Selection Canada blank
Automatic Location-Aware Feature Selection Europe blank
Automatic Location-Aware Feature Selection UK blank
Automatic Location-Aware Feature Selection US blank
Pro-Active Features for Telephony Canada blank
Pro-Active Features for Telephony Europe blank
Pro-Active Features for Telephony UK blank
Pro-Active Features for Telephony US blank
A Split Browser for Stimulus Phones Canada blank
A Split Browser for Stimulus Phones Europe blank
A Split Browser for Stimulus Phones UK blank
A Split Browser for Stimulus Phones US blank
-6-
Method of Enabling a CPE to Test a Telephone Line and Report Canada blank
the Results of the Test
Method of Enabling a CPE to Test a Telephone Line and Report UK blank
the Results of the Test
Method of Enabling a CPE to Test a Telephone Line and Report US blank
the Results of the Test
Method and Apparatus for Establishing and maintaining Europe blank
voice communications Among a Community of Interest
Method and Apparatus for Establishing and maintaining UK blank
voice communications Among a Community of Interest
Method and Apparatus for Establishing and maintaining US blank
voice communications Among a Community of Interest
Mobile Interactive Logs Canada blank
Mobile Interactive Logs Europe blank
Mobile Interactive Logs UK blank
Mobile Interactive Logs US blank
Remote Assembly of Messages for Distributed Applications Canada blank
Remote Assembly of Messages for Distributed Applications France blank
Remote Assembly of Messages for Distributed Applications Germany blank
Remote Assembly of Messages for Distributed Applications UK blank
Master /Slave Frame Lock Method Canada blank
Master /Slave Frame Lock Method Europe blank
Master /Stave Frame Lock Method UK blank
Master /Slave Frame Lock Method US blank
Phantom-feed to Spare-Pair Conversion Europe blank
Phantom-feed to Spare-Pair Conversion UK blank
Tuple Space Operations for Fine Grained Control Canada blank
Tuple Space Operations for Fine Grained Control Europe blank
Tuple Space Operations for Fine Grained Control Europe Publication
Date & No
Tuple Space Operations for Fine Grained Control UK blank
Tuple Space Operations for Fine Grained Control US blank
A Hardware-Assisted Tuple Space Canada blank
A Hardware-Assisted Tuple Space Europe blank
A Hardware-Assisted Tuple Space UK blank
A Hardware-Assisted Tuple Space US blank
A protocol for Facilitating the Selection of Electronic Europe blank
Services Using Infrared and a Network Address ID
A protocol for Facilitating the Selection of Electronic UK blank
Services Using Infrared and a Network Address ID
A protocol for Facilitating the Selection of Electronic US blank
Services Using Infrared and a Network Address ID
An Infrared-based Protocol for Selecting a Service from Canada blank
a Set of Discovered Services
An Infrared-based Protocol for Selecting a Service from Europe blank
a Set of Discovered Services
An Infrared-based Protocol for Selecting a Service from UK blank
a Set of Discovered Services
An Infrared-based Protocol for Selecting a Service from US blank
a Set of Discovered Services
Remote Programming of Serialized Semiconductor Devices Canada blank
Using Web/Internet Protocols
Remote Programming of Serialized Semiconductor Devices Europe blank
Using Web/Internet Protocols
Remote Programming of Serialized Semiconductor Devices UK blank
Using Web/Internet Protocols
Remote Programming of Serialized Semiconductor Devices US blank
Using Web/Internet Protocols
Efficient Power Supply Start Up Circuit Europe blank
Efficient Power Supply Start Up Circuit UK blank
Efficient Power Supply Start Up Circuit US blank
A Device for Changing the Speaking Rate of Recorded Speech Canada blank
-7-
A Device for Changing the Speaking Rate of Recorded Speech Europe blank
A Device for Changing the Speaking Rate of Recorded Speech UK blank
A Device for Changing the Speaking Rate of Recorded Speech US blank
Headset or Handset signaling scheme Canada blank
Headset or Handset signaling scheme Europe blank
Headset or Handset signaling scheme UK blank
Headset or Handset signaling scheme US blank
Echo Canceller Employing H-register and Storage Register Canada blank
Echo Canceller Employing H-register and Storage Register Europe 1367736
Echo Canceller Employing H-register and Storage Register UK blank
Echo Canceller Employing H-register and Storage Register US blank
Cheap Lightpipe Design and Construction Canada blank
Cheap Lightpipe Design and Construction Europe blank
Cheap Lightpipe Design and Construction UK blank
Cheap Lightpipe Design and Construction US blank
Call Redirection Zones for Wireless Communications Canada blank
Call Redirection Zones for Wireless Communications Europe blank
Call Redirection Zones for Wireless Communications UK blank
Call Redirection Zones for Wireless Communications US blank
Line Echo Cancellation System Canada blank
Line Echo Cancellation System Europe 1367737
Line Echo Cancellation System UK blank
Line Echo Cancellation System US blank
Loudspeaker cap to reduce structural ...acoustic modes Canada blank
Loudspeaker cap to reduce structural ...acoustic modes Europe 02256665.7
Loudspeaker cap to reduce structural ...acoustic modes UK blank
Loudspeaker cap to reduce structural ...acoustic modes US blank
Robust Talker Localization in Reverberant Environment Canada blank
Robust Talker Localization in Reverberant Environment Europe blank
Robust Talker Localization in Reverberant Environment UK blank
Robust Talker Localization in Reverberant Environment US blank
Method to Improve Near-end Voice Activity Detection in Audio Canada blank
Systems Based on the Beamforming Technology
Method to Improve Near-end Voice Activity Detection in Audio Europe blank
Systems Based on the Beamforming Technology
Method to Improve Near-end Voice Activity Detection in Audio UK blank
Systems Based on the Beamforming Technology
Method to Improve Near-end Voice Activity Detection in Audio US blank
Systems Based on the Beamforming Technology
Method of indicating and controlling sound pickup direction Canada blank
and location in teleconferencing system
Method of indicating and controlling sound pickup direction Europe blank
and location in teleconferencing system
Method of indicating and controlling sound pickup direction France blank
and location in teleconferencing system
Method of indicating and controlling sound pickup direction UK blank
and location in teleconferencing system
Method of indicating and controlling sound pickup direction US blank
and location in teleconferencing system
Solution to Enhanced Emergency Services (e.g. E911) for IP Canada blank
telephony systems
Solution to Enhanced Emergency Services (e.g. E911) for IP Europe blank
telephony systems
Solution to Enhanced Emergency Services (e.g. E911) for IP UK blank
telephony systems
Solution to Enhanced Emergency Services (e.g. E911) for IP US blank
telephony systems
Integrated Configuration of Multiple Content Servers US blank
PDA to PDA Communications Using a Network Portal UK blank
Automated Voice and Text Language Translation System Canada blank
Automated Voice and Text Language Translation System Europe blank
Automated Voice and Text Language Translation System UK blank
Automated Voice and Text Language Translation System US blank
-8-
Privacy and Security Mechanism for Presence Systems with Canada blank
Tuple Spaces
Privacy and Security Mechanism for Presence Systems with Europe blank
Tuple Spaces
Privacy and Security Mechanism for Presence Systems with UK blank
Tuple Spaces
Privacy and Security Mechanism for Presence Systems with US blank
Tuple Spaces
Architecture and Implementation for Context Aware Call Canada blank
Processing with Local Feature Definition
Architecture and Implementation for Context Aware Call Europe blank
Processing with Local Feature Definition
Architecture and Implementation for Context Aware Call UK blank
Processing with Local Feature Definition
Architecture and Implementation for Context Aware Call US blank
Processing with Local Feature Definition
Context Aware Call Handling System Canada blank
Context Aware Call Handling System Europe blank
Context Aware Call Handling System UK blank
Context Aware Call Handling System US blank
Bimodal Feature Access for Web Applications Canada blank
Bimodal Feature Access for Web Applications Europe blank
Bimodal Feature Access for Web Applications UK blank
Bimodal Feature Access for Web Applications US blank
Making Presence Services Aware of Communication Services Canada blank
Making Presence Services Aware of Communication Services UK blank
Making Presence Services Aware of Communication Services US blank
Personalized and Customizable Feature Execution and Canada blank
Specification System for Application in IP Telephony and
elsewhere with Operational Semantics and Implemntation
with Deontic Task Trees
Personalized and Customizable Feature Execution and Europe blank
Specification System for Application in IP Telephony and
elsewhere with Operational Semantics and Implemntation
with Deontic Task Trees
Personalized and Customizable Feature Execution and UK blank
Specification System for Application in IP Telephony and
elsewhere with Operational Semantics and Implemntation
with Deontic Task Trees
Personalized and Customizable Feature Execution and US blank
Specification System for Application in IP Telephony and
elsewhere with Operational Semantics and Implemntation
with Deontic Task Trees
Method to Control Noise Level Calculations in a Conferencing Canada blank
System
Method to Control Noise Level Calculations in a Conferencing UK blank
System
Method to Control Noise Level Calculations in a Conferencing US blank
System
7 kHz audio earpieces (low leak conditions and high leak Canada blank
conditions) for wideband audio telephone handsets, cell
phone handsets or headsets
7 kHz audio earpieces (low leak conditions and high leak Europe 1372352
conditions) for wideband audio telephone handsets, cell
phone handsets or headsets
7 kHz audio earpieces (low leak conditions and high leak UK blank
conditions) for wideband audio telephone handsets, cell
phone handsets or headsets
7 kHz audio earpieces (low leak conditions and high leak US blank
conditions) for wideband audio telephone handsets, cell
phone handsets or headsets
Generation of availability indicators from call control Europe blank
policies for presence enabled telephony systems
-9-
Generation of availability indicators from call control UK blank
policies for presence enabled telephony systems
Generation of availability indicators from call control US blank
policies for presence enabled telephony systems
Internet Appliance Proxy Protocol to Support Canada blank
Location-based Services
Internet Appliance Proxy Protocol to Support Europe blank
Location-based Services
Internet Appliance Proxy Protocol to Support UK blank
Location-based Services
Availability and Location Predictor Using Call Processing Canada blank
Indications
Availability and Location Predictor Using Call Processing Europe blank
Indications
Availability and Location Predictor Using Call Processing UK blank
Indications
Availability and Location Predictor Using Call Processing US blank
Indications
Method for extending the frequency range of a beamformer Canada blank
without spatial aliasing
Method for extending the frequency range of a beamformer Europe blank
without spatial aliasing
Method for extending the frequency range of a beamformer UK blank
without spatial aliasing
Replaceable Personal Digital Assistant Cradle for Desktop Europe blank
Telephone
Replaceable Personal Digital Assistant Cradle for Desktop UK blank
Telephone
Replaceable Personal Digital Assistant Cradle for Desktop US blank
Telephone
IP Device Registration for a Multiple DHCP Server Network Canada blank
IP Device Registration for a Multiple DHCP Server Network UK blank
Role-based Presence Canada blank
Role-based Presence Europe blank
Role-based Presence UK blank
Role-based Presence US blank
Remote Policy Asst with means for PSTN/Internet UK blank
Interworking for QuS and Enabled Services
Asymmetrical loudspeaker enclosures to achieve Canada blank
enchanced low frequency response
Asymmetrical loudspeaker enclosures to achieve Europe blank
enchanced low frequency response
Asymmetrical loudspeaker enclosures to achieve UK blank
enchanced low frequency response
Interactive Conflict Resolution for Personalized Canada blank
Policy-Based Services
Interactive Conflict Resolution for Personalized Europe blank
Policy-Based Services
Interactive Conflict Resolution for Personalized UK blank
Policy-Based Services
Interactive Conflict Resolution for Personalized US blank
Policy-Based Services
Method for Broadband Constant Directivity Beamforming Canada blank
for Non Linear and Non Axi-symmetric Sensors Arrays
Embedded in an Obstacle
Method for Broadband Constant Directivity Beamforming Europe blank
for Non Linear and Non Axi-symmetric Sensors Arrays
Embedded in an Obstacle
Method for Broadband Constant Directivity Beamforming UK blank
for Non Linear and Non Axi-symmetric Sensors Arrays
Embedded in an Obstacle
A Method of Acoustic Echo Cancellation in Canada blank
Full-duplex Hands Free Audio Conferencing with
Spatial Directivity
A Method of Acoustic Echo Cancellation in US blank
Full-duplex Hands Free Audio Conferencing with
Spatial Directivity
Embedded VOIP Securfity Monitor for PDA attached telephone UK blank
A Method to Capture the Constant Echo Path Canada blank
Information in Full-Duplex Telephones
A Method to Capture the Constant Echo Path US blank
Information in Full-Duplex Telephones
One method of capturing and reusing the constant echo Canada blank
path information using the default coefficients in an
echo canceller
One method of capturing and reusing the constant echo Europe blank
path information using the default coefficients in an
echo canceller
One method of capturing and reusing the constant echo UK blank
path information using the default coefficients in an
echo canceller
-10-
One method of capturing and reusing the constant echo path US blank
information using the default coefficients in an echo
canceller
One method to reduce the switching effects when AES Canada blank
algorithm is used for echo suppression
One method to reduce the switching effects when AES Europe blank
algorithm is used for echo suppression
One method to reduce the switching effects when AES UK blank
algorithm is used for echo suppression
One method to reduce the switching effects when AES US blank
algorithm is used for echo suppression
A method to reduce acoustic coupling and howling effects in UK blank
full-duplex audio conferencing systems based on the
beamforming technology
High Availability Telephone Set UK blank
High Availability Telephone Set US blank
A method of optimal microphone any design under uniform UK blank
acoustic coupling constraints
Combined Use of Transducer UK blank
Low cost otocoupled DAA UK blank
System and Method of Self-Discovery and Self-Calibration in UK blank
a Video Conferencing System
Detecting Acoustic Echoes using Microphone Arrays UK blank
Physical Beamforming Using Omnidirectional Microphones UK blank
Narrow Band Tone Detection in Echo Canceller Systems UK blank
A method to detect an echo path change in Echo Canceller UK blank
System
High Precision Beamsteerer Based on Fixed Beamforming UK blank
Approach
Method for Selecting Impedance Setting for LS Trunk Line UK blank
Method of Dynamic Adaptation for Jitter Buffering in Packet blank blank
Networks
Double-Talk and Path Change Detection Using A Matrix of Canada blank
Correlation Coefficients
Inventor
Transport Protocols for Application Platforms Over Network blank blank
Portals
Patent Granted
Wireless Zone Management Canada 2043127
Wireless Zone Management Europe 1,255,119
Wireless Zone Management UK 2257321
Wireless Zone Management US 5586167
Wireless Zone Management US 5329576
Charger/Detector for Cordless Telephone Canada 2108225
Charger/Detector for Cordless Telephone UK 2283389
Charger/Detector for Cordless Telephone US 5596633
Cell Relay Transport Mechanism Canada blank
Cell Relay Transport Mechanism France EP0754397B1
Cell Relay Transport Mechanism Germany EP0754397B1
Cell Relay Transport Mechanism UK EP0754397B1
Basic Rate Interface Canada 2047641
Basic Rate Interface Germany blank
Basic Rate Interface UK blank
Basic Rate Interface US 5432791
Digital Wireless Interface Canada blank
Digital Wireless Interface European blank
Digital Wireless Interface US 5612990
Regulated Auxiliary Power Supply Canada 2053382
Regulated Auxiliary Power Supply Europe 0607246
Regulated Auxiliary Power Supply US 5502634
Off-hook telephone with temporary park feature Canada 2,049,583
Off-hook telephone with temporary park feature UK 0,599,931
Off-hook telephone with temporary park feature US 5,440,628
Wireless Interface Canada 2053776
Wireless Interface Germany 69217238
-11-
Wireless Interface UK 610287
Wireless Interface US 5677942
Mobile Wireless Communications System Canada 2,062,040
Mobile Wireless Communications System UK 2264841
Mobile Wireless Communications System US 5423065
Time Slot Assign for NX64 Switch System Canada 2109007
Time Slot Assign for NX64 Switch System UK 2283639
Time Slot Assign for NX64 Switch System US blank
Integrated Wired and Wireless Telecommunications System Canada blank
Integrated Wired and Wireless Telecommunications System Germany blank
Integrated Wired and Wireless Telecommunications System UK 2291565
Integrated Wired and Wireless Telecommunications System US 5602843
Method of Defining Operation of Switching System Peripherals Canada 2065131
Method of Defining Operation of Switching System Peripherals US 5386459
Multiple Access Canada ab
Multiple Access Germany ab
Multiple Access UK 2274961B
Multiple Access US 5544158
ST Bus DSP Interface Canada 2080159
ST Bus DSP Interface UK ▇▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Delayed Cancel Waiting Canada 2085280
Delayed Cancel Waiting UK 2273419B
Delayed Cancel Waiting US 5425092
Portable Telephone User Profiles Canada 2081125
Portable Telephone User Profiles Germany DE4335803C2
Portable Telephone User Profiles UK 2271912
Portable Telephone User Profiles US 5657377
Global Management of Telephone Directory Canada 2078045
Global Management of Telephone Directory Germany P4330986
Global Management of Telephone Directory UK 2270608
Global Management of Telephone Directory US 5509058
Method of Operating a Computer Program Canada 2080797
Method of Operating a Computer Program US 5,659,738
Associated Equipment Numbers Canada 2088420
Associated Equipment Numbers Germany 4325773
Associated Equipment Numbers UK 2274758B
Associated Equipment Numbers US 5454032
Unique Ringing on Prime Line Canada blank
Unique Ringing on Prime Line Germany blank
Unique Ringing on Prime Line UK 2276062
Unique Ringing on ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Wired Wireless Canada 2100699
Wired Wireless Germany 4424896
Wired Wireless UK 2280334
Wired Wireless US 5703942
Digital FSK Receiver Using Double Zero Crossing Canada 2116042
Digital FSK Receiver Using Double Zero Crossing Germany 19503576
Digital FSK Receiver Using Double Zero Crossing UK 2286951
Digital FSK Receiver Using Double Zero Crossing US 5,661,759
Programmable Digital Call Progress Tone Detector Canada 2116043
Programmable Digital Call Progress Tone Detector Germany 19504514
Programmable Digital Call Progress Tone Detector UK 2286746
Programmable Digital Call Progress Tone Detector US 5563942
Multiple Queue Resource Management Canada 2094210
Multiple Queue Resource Management US 5515428
-12-
Signalling System Canada 2110643
Signalling System Germany 4440545
Signalling System UK 22B4518
Signalling System US 5539816
Method and Apparatus for Implementing ▇▇▇▇ Groups Canada 2108224
Method and Apparatus for Implementing ▇▇▇▇ Groups Germany P4430344.0-31
Method and Apparatus for Implementing ▇▇▇▇ Groups UK 2282937
Method and Apparatus for Implementing ▇▇▇▇ Groups US blank
Hunting Mode Canada 2198223
Hunting Mode UK 2282938B
Automatic Telephone Feature Selector Canada 2110669
Automatic Telephone Feature Selector Germany blank
Automatic Telephone Feature Selector US 5541983
Method of Providing a Centrex Type Operation Using a PBX and Canada ab
a Central Switching Office
Method of Providing a Centrex Type Operation Using a PBX and UK ab
a Central Switching Office
Method of Providing a Centrex Type Operation Using a PBX and US 5949873
a Central Switching Office
Delayed Seizure on Associated Devices Canada 2132610
Delayed Seizure on Associated Devices UK 2293521
Delayed Seizure on Associated Devices US 5586169
Low Frequency Discriminator Circuit Canada 2123847
Low Frequency Discriminator Circuit Germany blank
Low Frequency Discriminator Circuit UK 2287594
Low Frequency Discriminator Circuit US 5546025
An Adaptive Method for Allocating Calls Canada 2123068
An Adaptive Method for Allocating Calls Germany P19516364.8
An Adaptive Method for Allocating Calls UK 2289599
An Adaptive Method for Allocating Calls US 5675636
Local Area Communications Server System Canada 2148970
Local Area Communications Server System Germany blank
Local Area Communications Server System UK 2295068
Local Area Communications Server System US 5,657,446
ACTIVE DIGIT CANCELLING PARALLEL DIALER Canada 2164035
ACTIVE DIGIT CANCELLING PARALLEL DIALER Germany Abandon
ACTIVE DIGIT CANCELLING PARALLEL DIALER UK 2296624
ACTIVE DIGIT CANCELLING PARALLEL DIALER US 5706341
Battery Switch for RAM Backup Canada blank
Battery Switch for RAM Backup UK 2288929
Battery Switch for RAM Backup US 5532676
Enterprise Communication System Canada 2119085
Enterprise Communication System Germany blank
Enterprise Communication System UK 2289598
Enterprise Communication System ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ 5,802,396
Help Desk Improvement Canada 2119,086
Help Desk Improvement UK 2287609
Help Desk Improvement ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 2146596
Loop Current Detector UK 2288880
Loop Current Detector US 5,768,342
Ring Discriminator Canada 2164247
Ring Discriminator Germany blank
Ring Discriminator UK 2297670
Ring Discriminator US 5610978
Service Context Sensitive Features & Applications Canada 2178153
-13-
Service Context Sensitive Features & Applications Germany blank
Service Context Sensitive Features & Applications UK 2301983
Service Context Sensitive Features & Applications US 5761288
Transfer of Basic Knowledge to Agents Canada 2224466
Transfer of Basic Knowledge to Agents UK 2322719
Transfer of Basic Knowledge to Agents US blank
Transfer of Basic Knowledge to Agents US AB
Dynamic Load Sharing Canada 2323331
Dynamic Load Sharing UK 2327174
Dynamic Load Sharing US 5,987,117
Method and Apparatus for Managing Calls Using a Soft Call Canada 2176976
Park
Method and Apparatus for Managing Calls Using a Soft Call Germany blank
Park
Method and Apparatus for Managing Calls Using a Soft Call UK 2301981
Park
Method and Apparatus for Managing Calls Using a Soft Call US 5,754,627
Park
Communication System Using Server Canada 2164550
Communication System Using Server Germany blank
Communication System Using Server UK 2296622
Communication System Using Server US 5631954
Human Machine Interface For Telephone Feature Invocation Canada 2163948
Human Machine Interface For Telephone Feature Invocation Germany blank
Human Machine Interface For Telephone Feature Invocation UK 2295747
Human Machine Interface For Telephone Feature Invocation US 5533110
Reset Circuit with Variable Delay Canada 2164036
Reset Circuit with Variable Delay Germany 19547116
Reset Circuit with Variable Delay UK 2297444
Reset Circuit with Variable Delay US 5543741
Multi-threading in a Multi-agent System US 5802396
Silent Monitoring Agent ID'S Canada 2208629
Silent Monitoring Agent ID's Germany blank
Silent Monitoring Agent ID'S UK 2314728
Silent Monitoring Agent ID's US 5764728
Application Call Routing Canada blank
Application Call Routing Germany AB
Application Call Routing UK 2326057
Application Call Routing US ab
Application Call Routing US ab
Creating Multi-Port RAM with TDM Canada 2199571
Creating Multi-Port RAM with TDM Germany blank
Creating Multi-Port RAM with TDM UK 2311153
Creating Multi-Port RAM with TDM US 5822776
Org Chart Based Call Routing Canada blank
Org Chart Based Call Routing Germany 19709214
Org Chart Based Call Routing UK 2311188
Org Chart Based Call Routing US 6,075,851
Common ARS Leading Digit Strings Canada blank
Common ARS Leading Digit Strings Germany blank
Common ARS Leading Digit Strings UK 2298762
Common ARS Leading Digit Strings US 6,301,353
Common ARS Leading Digit Strings US blank
Standby High Voltage Analog Line Feed Canada 2180316
Standby High Voltage Analog Line Feed US 5889858
Mechanism For Sharing of Guaranteed Resources Canada 2313614
Mechanism For Sharing of Guaranteed Resources UK 2,353,915
Mechanism For Sharing of Guaranteed Resources US blank
Architecture for Robust Voice CTI Canada 2,158,408
Architecture for Robust Voice CTI Germany 19636819.7-31
-14-
Architecture for Robust Voice CTI UK 2305331
Architecture for Robust Voice CTI US 6,091,803
PC Speedcall Canada 2161508
PC Speedcall Germany AB
PC Speedcall UK 2306871
PC Speedcall US AB
Transparent Call Indication Canada 2161506
Transparent Call Indication Germany P19644210
Transparent Call Indication UK 2306853
Transparent Call Indication US Abandoned
Series Equipment With DC Line Hold Transfer Canada 2232221
Series Equipment With DC Line Hold Transfer France blank
Series Equipment With DC Line Hold Transfer UK 2324439
Series Equipment With DC Line Hold Transfer US 5,940,500
Quotation Mechanism for Service Environments Canada blank
Quotation Mechanism for Service Environments UK blank
Quotation Mechanism for Service Environments UK 2349715
Quotation Mechanism for Service Environments US blank
Interconnect Design for use Between Flexible Circuits and Canada 2182438
Teledapt Cables
Interconnect Design for use Between Flexible Circuits and UK 2315930
Teledapt Cables
Interconnect Design for use Between Flexible Circuits and US 5967854
Teledapt Cables
Digital Phase Reversal Detector Canada blank
Digital Phase Reversal Detector Europe 0 856 212
Digital Phase Reversal Detector France blank
Digital Phase Reversal Detector Germany blank
Digital Phase Reversal Detector Japan blank
Digital Phase Reversal Detector UK blank
Digital Phase Reversal Detector US blank
Opportunistic Call Forwarding Canada 2,180,684
Opportunistic Call Forwarding UK 2315191
Opportunistic Call Forwarding US 6,130,938
Intelligent Message Leaving Canada blank
Intelligent Message Leaving UK 2315385
Intelligent Message Leaving US blank
Sustained Call Announce Canada AB
Sustained Call Announce Germany AB
Sustained Call Announce UK 2332810
Sustained Call Announce US AB
Automatic Speed Call Updating Canada 2,180,690
Automatic Speed Call Updating UK 2315189
Automatic Speed Call Updating US 6047062
Multiplexing TAPI Calls into one Virtual TAPI Call Canada ab
Multiplexing TAPI Calls into one Virtual TAPI Call UK 2323251
Multiplexing TAPI Calls into one Virtual TAPI Call US 5949765
Simulating Touch Screen Capability Using Video input Canada AB
Simulating Touch Screen Capability Using Video Input UK 2,315,859
Simulating Touch Screen Capability Using Video Input US AB
Animated Cursor Canada 2,217,081
Animated Cursor UK 2323259
Animated Cursor US 5898432
Dynamic Communication Groups Canada blank
Dynamic Communication Groups Germany blank
Dynamic Communication Groups UK 2328831
Dynamic Communication Groups US blank
Integrated PC/Cordless Phone/Telephone Network Interface Canada 2,180.991
Device
Integrated PC/Cordless Phone/Telephone Network Interface UK 2315192
Device
-15-
Integrated PC/Cordless Phone/Telephone Network Interface US 6006088
Device
Internet Telephony Gateway Canada 2180685
Internet Telephony Gateway France blank
Internet Telephony Gateway Germany blank
Internet Telephony Gateway UK blank
Internet Telephony Gateway US blank
Remote Line Monitoring Canada Abandoned
Remote Line Monitoring Germany Abandoned
Remote Line Monitoring UK 2324677
Remote Line Monitoring US Abandoned
Agent-Based Data Mining End Warehousing Canada 2260647
Agent-Based Data Mining End Warehousing UK 2336007
Agent-Based Data Mining End Warehousing US 6,460,037
Call Routing Based on Caller's Mood Canada blank
Call Routing Based on Caller's Mood Germany 19852002.6
Call Routing Based on Caller's Mood UK 2,331,201
Call Routing Based on Caller's Mood US 6,411,687
Merged Telephone and Data System Canada 2,173,027
Merged Telephone and Data System Germany blank
Merged Telephone and Data System UK 2311690
Merged Telephone and Data System US 5982767
Multiple Owner Resource Management Canada 2181009
Multiple Owner Resource Management UK 2,315,384
Multiple Owner Resource Management US 5920622
Simple Interconnect for Flexible Circuits Canada 2,182,237
Simple Interconnect for Flexible Circuits UK 2315927
Simple Interconnect for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Synchronization of Communication Devices Connected Over an Canada 2,199,647
Asynchronous Link
Web Based Help Desk, Auto Attendant Canada 2246130
Web Based Help Desk, Auto Attendant UK 2,329,046
Web Based Help Desk, Auto Attendant US 6,230,287
One Button Intelligent CTI Dialing Canada 2230692
One Button Intelligent CTI Dialing UK 2323499
One Button Intelligent CTI Dialing US 5903631
Automatic Web Page Creation Canada 2231980
Automatic Web Page Creation UK 2324896
Automatic Web Page Creation US 5940834
Peer to Peer Conferencing Canada ab
Peer to Peer Conferencing Germany blank
Peer to Peer Conferencing UK ab
Peer to Peer Conferencing US ab
Off-Hook Detector for Headset Canada 2215535
Off-Hook Detector for Headset UK 2317783
Off-Hook Detector for Headset US 5832075
System for Interactive Control of Computer and Telephone Canada 2186928
System for Interactive Control of Computer and Telephone UK 2318703
System for Interactive Control of Computer and Telephone US 6018571
Item Selection in a Telephony Interface Canada 2268996
Item Selection in a Telephony Interface UK 2336503
Item Selection in a Telephony Interface US 6,628,758
Database Access Server for PBX Canada 2,197,517
Database Access Server for PBX Germany blank
Database Access Server for PBX Ireland blank
Database Access Server for PBX UK 2,323,249
Database Access Server for PBX US 6,246,678
Dialable Screening Profile Canada 2,243,331
-16-
Dialable Screening Profile Germany blank
Dialable Screening Profile UK 2,328,110
Dialable Screening Profile US 6,363,140
E-mail with Embedded Java Application Canada 2262869
E-mail with Embedded Java Application UK 2,333,824
E-mail with Embedded Java Application US 6,526,042
Call Hold Improvement Canada 2264230
Call Hold Improvement UK 2338146
Call Hold Improvement US 6,415,020
Integrated Directory Services Canada 2217923
Integrated Directory Services UK 2330224
Integrated Directory Services US 6,377,950
Bidirectional Conversion Library Canada blank
Bidirectional Conversion Library UK 2330222
Bidirectional Conversion Library US 6,314,429
Smart transfer for answering positions Canada 2272738
Smart transfer for answering positions UK 2337892
Smart transfer for answering positions US blank
DNIC Peripheral Extender Canada blank
DNIC Peripheral Extender UK 2350010A
DNIC Peripheral Extender US 6,628,776
3D View of Incoming Communications Canada blank
3D View of Incoming Communications UK 2337435
3D View of Incoming Communications US blank
PC Server Telecommunications Power Canada 2253105
PC Server Telecommunications Power UK 2331655
PC Server Telecommunications Power US 6,434,236
Event Detector for OTP Canada blank
Event Detector for OTP UK 2339119
Event Detector for OTP US 2275116
Method of Operating a Modem in the Presence of Interrupted Canada 2220829
Dial Tone
Method of Operating a Modem in the Presence of Interrupted US 5974084
Dial Tone
Call Processing with Synchronized Tuple Spaces Canada blank
Call Processing with Synchronized Tuple Spaces UK 2353612
Call Processing with Synchronized Tuple Spaces US blank
Distributed Technique for Allocating Calls Canada blank
Distributed Technique for Allocating Calls UK 2344719
Distributed Technique for Allocating Calls US 6,646,990
Remote Peripheral Switch Backup Call Service Mechanism Canada 2289156
Remote Peripheral Switch Backup Call Service Mechanism UK 2344018
Remote Peripheral Switch Backup Call Service Mechanism US 6,504,922
Adaptive Rule-based Mechanism for Feature Interaction Canada blank
Resolution
Adaptive Rule-based Mechanism for Feature Interaction Germany blank
Resolution
Adaptive Rule-based Mechanism for Feature Interaction UK 2347579
Resolution
Adaptive Rule-based Mechanism for Feature Interaction UK 2,353,916
Resolution
Adaptive Rule-based Mechanism for Feature Interaction US 09/518,555
Resolution
Palm PC Dock-able Phone Canada 2298145
Palm PC Dock-able Phone UK 2346761
Palm PC Dock-able Phone US 6,647,103
Method of Compressing and Decompressing Audio Data Using Canada blank
Masking and Shifting of Audio Sample Bits
Method of Compressing and Decompressing Audio Data Using US 6,408,275
Masking and Shifting of Audio Sample Bits
Mechanism for discounting in a bidding process based on Canada 2288459
quality of Service
Mechanism for discounting in a bidding process based on UK blank
quality of Service
Mechanism for discounting in a bidding process based on US blank
quality of Service
Low Power Dialer Canada 2270039
-17-
Low Power Dialer UK 2337408
Low Power Dialer UK 2340342
Low Power Dialer US 6,185,297
MLTS Emergency Call Processing Canada blank
MLTS Emergency Call Processing UK 2349774
MLTS Emergency Call Processing US blank
Voice Mail By Twinning Canada blank
Voice Mail By Twinning UK 2356317
Voice Mail By Twinning US blank
Method and Apparatus for Migrating Embedded PBX System to Canada 2236525
Personal Computer
Method and Apparatus for Migrating Embedded PBX System to Germany blank
Personal Computer
Method and Apparatus for Migrating Embedded PBX System to UK 2336969
Personal Computer
Method and Apparatus for Migrating Embedded PBX System to US 6,366,656
Personal Computer
Range Editing Dialog Canada blank
Range Editing Dialog UK 2,358,072
Range Editing Dialog US 6,625,499
Combination Connector/Microphone Canada 2293937
Combination Connector/Microphone UK 2345816
Combination Connector/Microphone US 6,411,711
A caching mechanism to optimize the bidding process used to Canada blank
select resources
A caching mechanism to optimize the bidding process used to UK 2,358,762
select resources
A caching mechanism to optimize the bidding process used to US blank
select resources
User Interface for Feature Interaction Resolution Canada blank
User Interface for Feature Interaction Resolution Germany blank
User Interface for Feature Interaction Resolution UK 2,353,916
User Interface for Feature Interaction Resolution US blank
Adaptive Feature Behavior Canada blank
Adaptive Feature Behavior UK 2349040
Adaptive Feature Behavior US blank
Using a Gatekeeper to Produce an H.323 PBX Canada blank
Using a Gatekeeper to Produce an H.323 PBX UK 2349773A
Using a Gatekeeper to Produce an H.323 PBX US blank
Using a Gatekeeper to Produce an H.323 PBX US blank
Line Appearance Security Interface for TAPI SP Canada blank
Line Appearance Security Interface for TAPI SP UK 2,341,291
Line Appearance Security Interface for TAPI SP US 6,618,476
A Mechanism to Optimize a Distributed AARS Using RIP Caching Canada blank
A Mechanism to Optimize a Distributed AARS Using RIP Caching UK 2359446
A Mechanism to Optimize a Distributed AARS Using RIP Caching US blank
SEDO - Semantic Errors Diagnostic Operation for Multi-agent Canada blank
System
SEDO - Semantic Errors Diagnostic Operation for Multi-agent UK 2346461
System
SEDO - Semantic Errors Diagnostic Operation for Multi-agent US 6,550,024
System
Feature Provisioning by Injection Canada blank
Feature Provisioning by Injection UK 2,358,988
Feature Provisioning by Injection US blank
A Method for Noise Dosimeter in Appliances Employing Canada 2293522
Earphones or Handsets
A Method for Noise Dosimeter in Appliances Employing UK blank
Earphones or Handsets
A Method for Noise Dosimeter in Appliances Employing US 6,507,650
Earphones or Handsets
Telephone Headset Click-Free Muting Circuit Canada blank
Telephone Headset Click-Free Muting Circuit UK 2342798
Telephone Headset Click-Free Muting Circuit US 6,292,560
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Plastic Door UK 2084151
Plastic Door ▇▇ ▇▇▇.▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ blank
Click Free Muting Circuit for Headset UK 2344711
Click Free Muting Circuit for Headset US blank
Dynamic Rules Based Resource Allocation Canada 2295273
Dynamic Rules Based Resource Allocation UK 2347580
Dynamic Rules Based Resource Allocation US blank
On-demand buffering Canada blank
On-demand buffering UK blank
On-demand buffering US 6,546,366
Automatic synchronization of address directories for unified Canada 2299387
messaging
Automatic synchronization of address directories for unified UK blank
messaging
Automatic synchronization of address directories for unified US 6,418,200
messaging
Automatic selection of user preferences based on CLI data Canada 2295267
Automatic selection of user preferences based on CLI data UK 2347306
Automatic selection of user preferences based on CLI data US blank
Route Optimization Over Diverse Media Canada blank
Route Optimization Over Diverse Media UK 2361380
Route Optimization Over Diverse Media US blank
Onhook Telecom Power Supply Current Regulator Mode Canada 2,279,072
Onhook Telecom Power Supply Current Regulator Mode UK 2347238
Onhook Telecom Power Supply Current Regulator Mode US 6,137,276
Handwriting Phone Canada blank
Handwriting Phone UK 2360903
Handwriting Phone US 6,522,729
Using Line Appearance to Allow Multiple Devices to Appear Canada blank
Over a Single Line
Using Line Appearance to Allow Multiple Devices to Appear UK 2,350,009
Over a Single Line
Using Line Appearance to Allow Multiple Devices to Appear US blank
Over a Single Line
Log In To A Live Appearance Canada blank
Log In To A Live Appearance UK 2361831
Log In To A Live Appearance US blank
A method for the synchronization of analog call display data Canada 2320554
in distributed systems
A method for the synchronization of analog call display data UK 2355130
in distributed systems
A method for the synchronization of analog call display data US 6,597,767
in distributed systems
Feature Interaction Resolution Using Policies event based Canada blank
model and Fuzzy Logic
Feature interaction Resolution Using Policies event based Germany blank
model and Fuzzy Logic
Feature Interaction Resolution Using Policies event based UK 2,351,870
model and Fuzzy Logic
Feature Interaction Resolution Using Policies event based US blank
model and Fuzzy Logic
Feature Interaction Resolution Using Policies event based US 6,606,610
model and Fuzzy Logic
Method to Implement Digital Private Signalling System Canada blank
(DPNSS)
Method to Implement Digital Private Signalling System UK 2350014A
(DPNSS)
Method to Implement Digital Private Signalling System UK AB
(DPNSS)
Method to Implement Digital Private Signalling System US blank
(DPNSS)
Voice multicast method Canada blank
Voice multicast method UK 2349772
Voice multicast method US 6,650,744
Comfort Noise Generation Canada blank
Comfort Noise Generation UK 2350532
Comfort Noise Generation US blank
Complex acoustic path and gasket for use with microphones Canada blank
Complex acoustic path and gasket for use with microphones UK 2354393
Complex acoustic path and gasket for use with microphones US blank
A hardware mechanism to detect silence on a packetized Canada blank
voice stream
A hardware mechanism to detect silence on a packetized UK 2352378
voice stream
A hardware mechanism to detect silence on a packetized US blank
voice stream
Security Mechanisms and Architecture for Collaborative Canada blank
Software System using Tuple Spaces and Blackboard Systems
-19-
Security Mechanisms and Architecture for Collaborative Germany blank
Software System using Tuple Spaces and Blackboard Systems
Security Mechanisms and Architecture for Collaborative UK 2355140
Software System using Tuple Spaces and Blackboard Systems
Security Mechanisms and Architecture for Collaborative US blank
Software
System using Tuple Spaces and Blackboard Systems
Packet loss compensation by injecting spectrally shaped Canada blank
noise
Packet loss compensation by injecting spectrally shaped UK 2358558
noise
Packet loss compensation by injecting spectrally shaped US blank
noise
Method of releasing teledapt cables from deeply recssed RJ Canada blank
connectors
Method of releasing teledapt cables from deeply recssed RJ UK 2,356,495
connectors
Method of releasing teledapt cables from deeply recssed RJ US blank
connectors
Powering arrangement for an ethemet LAN connected telephone Canada 2325767
Powering arrangement for an ethemet LAN connected telephone UK 2,356,326
Powering arrangement for an ethernet LAN connected telephone US 6,480,122
Common data model including field interdependences Canada blank
Common data model including field interdependencies Europe blank
Common data model including field interdependencies France blank
Common data model including field interdependencies Germany blank
Common data model including field interdependencies UK 2355818
Common data model including field interdependencies US 6,643,659
Efficient Controlled current sink for LED backlight panel Canada blank
Efficient Controlled current sink for LED backlight panel UK 2,355,816
Efficient Controlled current sink for LED backlight panel US 6,529,182
Combination Visible and Infrared Light Pipe Canada blank
Combination Visible and Infrared Light Pipe UK 2,362,526
Combination Visible and Infrared Light Pipe US 6,641,309
Combination Visible and Infrared Light Pipe US blank
Efficient Battery Transfer Circuit Canada blank
Efficient Battery Transfer Circuit UK 2363919
Efficient Battery Transfer Circuit US 6,642,532
Efficient dual-source wide-input isolated DC-DC converter Canada blank
with effective current limit
Efficient dual-source wide-input isolated DC-DC converter UK 2360146
with effective current limit
Efficient dual-source wide-input isolated DC-DC converter US 6,424,545
with effective current limit
A Method for line circuits to provide constant current and UK 2360906
voltage feed capabilities
A Method for line circuits to provide constant current and US blank
voltage feed capabilities
Enclosure foot arrangement that can be used to stack Canada blank
enclosures
Enclosure foot arrangement that can be used to stack Germany ab
enclosures
Enclosure foot arrangement that can be used to stack UK ab
enclosures
Enclosure foot arrangement that can be used to stack US 6,540,091
enclosures
Enclosure foot arrangement that can be used to stack US 6695150
enclosures
Telephone line powered CO drop reconnect Canada blank
Telephone line powered CO drop reconnect UK 2364473
Telephone line powered CO drop reconnect US ab
Method of attaching moulded enclosures Canada blank
Method of attaching moulded enclosures UK 2365093
Method of attaching moulded enclosures US blank
Formed Lens Tab for Designation Card Insert Canada blank
Formed Lens Tab for Designation Card Insert UK blank
Formed Lens Tab for Designation Card Insert US 6,581,315
Superconsole-2000 Canada blank
Superconsole-2000 UK 2094102
Superconsole-2000 US D448746
Mouse Controller Canada 96902
Mouse Controller Canada blank
-20-
Mouse Controller France 659272-8
Mouse Controller France blank
Mouse Controller UK 2106657
Mouse Controller UK 3000892
Mouse Controller US D464,052 S
Mouse Controller US D474,169 S
5303 Conference Phone Canada 98870
5303 Conference Phone France 670150-53
5303 Conference Phone UK 2,104,854
5303 Conference Phone US 472539
Mitel 5230 IP Appliance Canada 99306
Mitel 5230 IP Appliance Canada 99307
Mitel 5230 IP Appliance France 026602
Mitel 5230 IP Appliance France 694332
Mitel 5230 IP Appliance Germany 40209041.1
Mitel 5230 IP Appliance Germany 40209289.9
Mitel 5230 IP Appliance UK 3008243
Mitel 5230 IP Appliance UK 3008244
Switching Matrix Canada 1108736
Switching Matrix Germany 2940259
Switching Matrix UK 2046057
Switching Matrix US 4245214
Ringing Decoder Circuit Canada 1142279
Ringing Decoder Circuit US 4293737
Keyless & Indicatorless Local Telephone Switching System Canada 1146245
Keyless & Indicatorless Local Telephone Switching System US 4376875
Subscriber Line 1 nterface Circuit Canada 1154185
Subscriber Line Interface Circuit US 4472608
Power Saving Line Circuit Canada 1157175
Power Saving Line Circuit US 4410766
Solid State Trunk Circuit Canada 1240088
Solid State Trunk Circuit Japan blank
Solid State Trunk Circuit UK 2183426
Solid State Trunk Circuit US 4776007
Interface Circuit for Remote Control of a PABX Canada 1205933
Telephone Line Status Circuit Canada 1233924
Telephone Line ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone Line Status Circuit UK 2176372
Telephone Line ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Constant Current Line Circuit Canada 1231480
Constant Current Line Circuit Germany 3531260
Constant Current Line Circuit UK 2172472
Constant Current Line Circuit US 4723280
Data Storage System Canada 1242809
Data Storage System UK 2184577
Data Storage System US 5034915
Dynamic Memory Refresh & Parity Checking Circuit Canada 1240066
Dynamic Memory Refresh & Parity Checking Circuit US 4682328
Communications Switching System Canada 1254981
Communications Switching System UK 2186762
Communications Switching System US 4791639
Telephone Handset Detector Canada 1236231
Telephone Handset Detector US 4672663
Wireless Telephone System Canada 1247266
Wireless Telephone System Canada 1261981
Wireless Telephone System UK 2171576
-21-
Wireless Telephone System UK 2208778
Wireless Telephone System US 5005183
Wireless Telephone System US 4866732
Circuit for Switching Between Balanced Networks Canada 1241784
Circuit for Switching Between Balanced Networks US 4742540
Latch Up Recovery Circuit US 4761702
Apparatus and Method for Synchronizing a Communication Canada ab
System
Apparatus and Method for Synchronizing a Communication UK 2198917
System
Apparatus and Method for Synchronizing a Communication US 4843617
System
Digital Signal Processing System US 4862452
Compensation Circuit for Use With an Integrating Amplifer Canada 1257027
Compensation Circuit for Use With an Integrating Amplifer Germany 3806346
Compensation Circuit for Use With an Integrating Amplifer Japan ▇▇▇▇▇▇▇
Compensation Circuit for Use With an Integrating Amplifer UK 2202413
Compensation Circuit for Use With an Integrating Amplifer US 4800586
Telephone call answering system Canada 1336449
Digital DTMF Tone Detector Canada 1289281
Digital DTMF Tone Detector UK 2219174
Digital DTMF Tone Detector US 5119322
Communication System Supporting Remote Operations Canada 1293042
Communication System Supporting Remote Operations UK 2215561
Communication System Supporting Remote Operations US 5007080
Trunk Cord with Distributed Signalling Voltages Canada 1289280
Trunk Cord with Distributed Signalling Voltages UK 2222056
Trunk Cord with Distributed Signalling Voltages US 4926467
Apparatus for Testing Canada 1311570
Apparatus for Testing US 4996702
Programmable Threshold Alert Canada 1326530
Programmable Threshold Alert US 4964155
Group Emergency Call System Canada 1333296
Group Emergency Call System UK 2225194
Group Emergency Call System US 5166972
Redundant Clock & Frame Pulse Synchronization System Canada 1302594
Data Transfer Canada 2019002
Data Transfer Canada 2108836
Data Transfer UK 22451273b
Data Transfer US 5341370
Data Transfer US 5220561ab
Voice Activated Telephone Set Canada 2058644
Voice Activated Telephone Set Canada 2149012
Voice Activated Telephone Set UK 2263042
Digitally Controlled Ringer Signal Generator Canada blank
Digitally Controlled Ringer Signal Generator US 5323456
PABX Common Relay System Canada 2052500
PABX Common Relay System Canada 2141772
PABX Common Relay System Germany 4232667
PABX Common Relay System UK 2260064
PABX Common Relay System UK 2289601
PABX Common Relay System UK 2289391
PABX Common Relay System US 5274634
Modular Communication System with Allocatable Bandwidth Canada 2056827
Modular Communication System with Allocatable Bandwidth UK 2256349
Modular Communication System with Allocatable Bandwidth UK 2286099
Modular Communication System with Allocatable Bandwidth UK 2286318
Modular Communication System with Allocatable Bandwidth US 5164940
Compressed Language Dictionary Canada blank
-22-
Compressed Language Dictionary UK 2259596
Compressed Language Dictionary US 5383121
Host Remote Signalling in Telephone Systems Canada 2052499
Host Remote Signalling in Telephone Systems US 5249222
Data Transport for Internal Messaging Canada 2058654
Data Transport for Internal Messaging Germany blank
Data Transport for Internal Messaging UK 2263043
Data Transport for Internal Messaging US 5638366
Programmable Call Progress Tones for a Switching System Canada 2068154
Programmable Call Progress Tones for a Switching System UK 2266820
Programmable Call Progress Tones for a Switching System US 5436964
Digital Class Receiver Canada 2069142
Digital Class Receiver UK 2267417
Digital Class Receiver US 5400365
Cycling Error Count for Link Maintenance Canada ab
Cycling Error Count for Link Maintenance Germany ab
Cycling Error Count for Link Maintenance UK ab
Cycling Error Count for Link Maintenance US 5680404
Cycling Error Count for Link Maintenance US blank
Digital Signal Processor Interface Canada 2080159
Digital Signal Processor Interface UK 2271448
Digital Signal Processor Interface US 5,649,148
Telephone System us 4,887,293
Telephone System US 4727578
Communication System Having ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Information Signalling
Circuit for Maintaining Hybrid Cancellation of Signals in a US 5054062
Communication System
Programmable Subscriber Set US 4788720
Expansion Subsystem for Use in a Communication System Canada blank
Expansion Subsystem for Use in a Communication System US 4736406
Digital key system architecture UK 2221596
Digital key system architecture US 5202883
Packet-Based Data Compression Method Canada 2065578
Method and Apparatus for Performing Simultaneous Data Canada Abandoned
Compression and Encryption
Method and Apparatus for Performing Simultaneous Data Europe blank
Compression and Encryption
Method and Apparatus for Performing Simultaneous Data US 6,122,379
Compression and Encryption
Method and Apparatus for Performing Data Compression Canada blank
Method and Apparatus for Performing Data Compression Europe blank
Method and Apparatus for Performing Data Compression US 5867114
LICENSED IP
"R/3 SOFTWARE END USER VALUE LICENSE AGREEMENT WITH SAP CANADA INC.", effective
February 16th, 2001 and entered into between Mitel Networks Corporation and SAP
Canada, Inc.
SECTION 4.26
INTELLECTUAL PROPERTY RIGHTS
SECTION 4.26(A): OWNED IP
EXCLUSIVE RIGHTS
Pursuant to the TPC Agreement, upon the occurrence of certain events of default,
TPC may direct the Corporation to transfer and deliver to TPC title to, and
possession of, and all rights of the Corporation in the Intellectual Property
(as defined in the TPC Agreement) developed in carrying out the Project (as
defined in the TPC Agreement).
JOINT OWNERSHIP
The Corporation is a party to a Joint Development and Distribution Agreement
with VCON Ltd., effective February 8th, 2000, pursuant to which VCON developed
certain customizations to the Corporation's products and the parties contributed
certain intellectual property, in the case of the Corporation the MiTAI and
MiNET protocols, to ensure the interoperability of the Corporation's ICP and IP
phones with VCON's conferencing endpoints.
SECTION 4.26(C): THIRD PARTY INFRINGEMENT
***
-2-
SECTION 4.26(D): CONTRACTS IMPAIRING RIGHT TO EXPLOIT OWNED IP
As disclosed in Section 4.26(a) of this Disclosure Schedule, upon the occurrence
of certain events of default under the TPC Agreement, TPC may direct the
Corporation to transfer and deliver to TPC title to, and possession of, and all
rights of the Corporation in the Intellectual Property (as defined in the TPC
Agreement) developed in carrying out the Project (as defined in the TPC
Agreement). The TPC Agreement further limits the Corporation's ability to use,
sell, transfer, assign, commercially exploit or convey the Owned IP.
SECTION 4.26(E): LIENS AND LEGAL PROCEEDINGS
Please see the disclosure set forth in Sections 4.26(c) and 4.27 of this
Disclosure Schedule.
SECTION 4.26(G) CONTRACTS GRANTING RIGHTS TO USE OWNED IP
As disclosed in Sections 4.26(a) and 4.26(d) of this Disclosure Schedule,
pursuant to the TPC Agreement, upon the occurrence of certain events of default,
TPC may direct the Corporation to transfer and deliver to TPC title to, and
possession of, and all rights of the Corporation in the Intellectual Property
(as defined in the TPC Agreement) developed in carrying out the Project (as
defined in the TPC Agreement).
SECTION 4.26(H): VALIDITY OR ENFORCEABILITY OF OWNED IP
None.
SECTION 4.26(J): DEVELOPMENT OF OWNED IP/WAIVER OF MORAL RIGHTS/IP OF THIRD
PARTIES
Contractors engaged through the Corporation's subsidiary, Mitel Networks
Limited, have not been required to irrevocably or unconditionally waive their
moral rights and other non-assignable rights.
SECTION 4.26(L): GOVERNMENT FUNDING
As set out in Section 4.26(a) of this Disclosure Schedule, pursuant to the TPC
Agreement, upon the occurrence of certain events of default, TPC may direct the
Corporation to transfer and deliver to TPC title to, and possession of, and all
rights of the Corporation in the Intellectual Property (as defined in the TPC
Agreement) developed in carrying out the Project (as defined in the TPC
Agreement). The TPC Agreement further limits the Corporation's ability to use,
sell, transfer, assign, commercially exploit or convey the Owned IP.
SECTION 4.26(N): PUBLICLY AVAILABLE SOFTWARE
None.
SECTION 4.26(O): DISCLOSURE OF SOURCE CODE
As described in Section 4.23(iii)(h) of this Disclosure Schedule, Mitel Networks
Limited is a party to an escrow agreement with Marks & ▇▇▇▇▇▇▇ in the U.K., and
NCC Escrow International Ltd., in favour of Marks & ▇▇▇▇▇▇▇ for the escrow of
certain of the Corporation's product source code.
SECTION 4.27
LITIGATION
COMPANY/SUBSIDIARY CLAIMANT COURT/JURISDICTION NATURE OF CLAIM
------------------------- ------------------- ------------------- --------------------------------------
Mitel Networks ▇▇▇▇▇ ▇▇▇▇▇▇ Ont. Superior Ct of Workplace issues (temporary reduction
Corporation (Class Action) Justice in hours & pension contributions;
claim for pay in lieu of notice)
Seeking certification as a class
action (Ottawa, Ontario only). No
certification to date.
*** *** *** ***
Mitel Networks ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Ont. Superior Ct of Wrongful Dismissal, discrimination
Corporation Justice
Mitel Networks ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ Ont. Superior Ct of Claim under the Courts of Justice Act,
Corporation Smart, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ the Highway Traffic Act, the Insurance
Smart and ▇▇▇▇▇▇ Act and the Family Law Act for damages
Smart by her arising from vehicle collision
Litigation
Guardian, ▇▇▇▇▇
▇▇▇▇▇
*** *** *** ***
Mitel Networks, Inc. ▇▇▇▇▇ ▇▇▇▇▇▇ U.S. District Breach of Contract/Tortious
and Aurora Electric ▇▇▇▇▇▇▇▇▇▇, 2nd dba Court of Alaska Interference brought by former Mitel
Winter Telecom Elite VAR
Mitel Networks Solutions, ▇▇▇▇ ▇▇▇▇▇▇▇ Human Rights Unfair labor practices;
Inc. Commission, unspecified discrimination
Virginia
Mitel Networks Solutions, ▇▇▇▇ ▇▇▇▇▇▇▇ VA - Circuit Court Motion for Judgment
Inc. of Fairfax County
Mitel Networks, Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ US District Court Sex Discrimination
(Texas)
-2-
COMPANY/SUBSIDIARY CLAIMANT COURT/JURISDICTION NATURE OF CLAIM
------------------------- ------------------- ------------------- --------------------------------------
Mitel Networks Solutions, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ EEOC, Cleveland Age Discrimination
Inc.
*** *** *** ***
Mitel Networks, Inc. and ▇▇▇▇▇▇, et at. (8 Supreme Court of Breach of Contract; Violation of a)
Mitel Networks Solutions, claimants total) the State of New Fair Labor Standards Act and b)
Inc. York Prevailing Wage Laws. Plaintiffs suing
Mitel subcontractor for wages;
extending suit to Mitel claiming
failure to ensure subcontractors
comply with wage & labor laws
Mitel Networks Solutions, de Stefano, Superior Court of Auto accident between de Stefano and
Inc. ▇▇▇▇▇▇ & ▇▇▇▇ ▇. New Jersey, Mitel employee driving company car
▇▇▇▇ ▇. Burlington County
Povernick, Jr.
*** *** *** ***
*** *** *** ***
Mitel Networks ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Superior Court Auto accident between ▇▇▇▇▇ and Mitel
Solutions, Inc. of New Jersey employee driving company car
Mitel Networks Solutions, Northeastern New York District Breach of contract; failure to
Inc. Telecom Court pay prevailing wage
SECTION 4.28
INSURANCE
Insurance Policies
CURRENT YEAR
POLICY NAME INSURER TERRITORY POLICY PERIOD
----------- -------------------------- ------------- --------------------
Property/Boiler & Machinery/Bl FM Global Worldwide Apr 1/03-June 1/04
Terrorism UK FM Global UK Apr 1/03-June 1/04
Commercial General Liability Chubb Worldwide Apr 1/03-June 1/04
Umbrella Liability Chubb Worldwide Apr 1/03-June 1/04
1st Excess Liability Liberty International Worldwide Apr 1/03-June 1/04
2nd Excess Liability Chubb Worldwide Apr 1/03-June 1/04
3rd Excess Liability Liberty International Worldwide Apr 1/03-June 1/04
Crime Chubb Worldwide Apr 1/03-June 1/04
Fiduciary Chubb Worldwide Apr 1/03-June 1/04
Kidnap, ▇▇▇▇▇▇ & Extortion Liberty International Worldwide Apr 1/03-June 1/04
E&O Chubb Worldwide May 1/03-June 1/04
Marine Cargo C.N.A. UK Apr 1/03-June 1/04
Employer Liability QBE (formerly Iron Trades) UK Apr 1/03-June 1/04
Automobile Liability Royal & Sun Alliance UK Apr 1/03-June 1/04
Foreign Auto/Workers AIG Worldwide Apr 1/04-Apr 1/05
Compensation
Automobile Liability Chubb Canada Apr 1/03-June 1/04
Small Office Policy Prudential HK Apr 1/03-June 1/04
Injury and Travel ACE Europe Europe May 28/03-June 1/04
Workers Compensation/Employers Norwich Union Dubai Mar 27/03-June 1/04
Liability
Automobile Liability ▇▇▇▇ & ▇▇▇▇▇▇▇ US Jun 10/03-04
Workers Compensation/Employer ▇▇▇▇ & ▇▇▇▇▇▇▇ US Jun 10/03-04
Liability
Engineering Insurance and Zurich Risk Services UK July 1/03 - 04
Inspection
Small Office Policy Equity Insurances Limited Barbados Jul 11/03-04
Pension Fund Trustee Indemnity American Int'l Group UK Aug 1/03-04
Small Office Policy AVIVA - CGU International Singapore Aug 1/03-04
D&O/EPL (Primary) Great American Ins Co. Worldwide Dec 1/03-04
D&O/EPL (1st Excess) Liberty International Worldwide Dec 1/03-04
D&O/EPL (2nd Excess) ACE INA Insurance Worldwide Dec 1/03-04
Commercial Comprehensive AGF France Dec 4/03-04
-2-
CURRENT YEAR
POLICY NAME INSURER TERRITORY POLICY PERIOD
----------- -------------------------- ------------- --------------------
Workers Compensation QBE (formerly Iron Trades) Australia To be confirmed
Life Insurance Canada Life (Policy 63562) Canada Jan 1/04-Dec 31/04
Accidental Death & Disability ACE INA (Policy Canada Jan 1/04-Dec 31/04
ABT102318)
Long Term Disability Canada Life (Policy 63562) Canada Jan 1/04-Dec 31/04
Business Travel Accident ACE INA (Policy North America Jan 1/04-Dec 31/04
ABT102319)
Life Insurance CNA (Policy SR83126299) US Jan 1/04-Dec 31/04
Accidental Death & Disability CNA (Policy SR83126299) US Jan 1/04-Dec 31/04
Long Term Disability CNA (Policy SR83126299) US Jan 1/04-Dec 31/04
Material Pending Claims
None, other than the potential coverage in respect of any claims disclosed in
Section 4.27 of this Disclosure Schedule.
SECTION 4.29
INSIDERS AND CONFLICTS OF INTEREST
SECTION 4.29(A): CONTRACTS WITH INSIDERS
The Corporation is a party to those Contracts with Insiders as set forth in
Section 4.23(iii)(e) of this Disclosure Schedule.
SECTION 4.29(B) MATERIAL AMOUNTS DUE TO OR FROM INSIDERS
On-going lease obligations to Mitel Research Park Corporation in connection with
the lease by the Corporation of ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, which lease
is described in Section 4.17(a)(ii) of this Disclosure Schedule.
SECTION 4.29(C): INTERESTS IN OTHER BUSINESS
None.
SECTION 4.33
COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.
The Corporation may be deemed a "distributing corporation" for purposes of the
Act, and may not have complied with all requirements of the Act to date as are
applicable to distributing corporations.
SCHEDULE C
FINANCIAL STATEMENTS
SCHEDULE D
PARALLEL INVESTORS
National Bank Financial & Co. Inc.
EdgeStone Capital Equity Fund II-US, L.P.
EdgeStone Capital Equity Fund II US-Inst., L.P.
National Bank Financial & Co. Inc. (on behalf of the EdgeStone
Capital Equity Canadian and Non-Canadian 2004 Affiliate Funds)
EXHIBIT A-1
SERIES A SHARE TERMS
SCHEDULE "A"
TO
ARTICLES OF AMENDMENT
MITEL NETWORKS CORPORATION
(THE "CORPORATION")
The first series of Class A Convertible Preferred Shares of the Corporation
shall consist of an unlimited number of shares which shall be designated as the
Class A Convertible Preferred Shares, Series 1 (the "SERIES A SHARES") and
which, in addition and subject to the rights, privileges, restrictions and
conditions attached to the Class A Convertible Preferred Shares as a class,
shall have attached thereto the rights, privileges, restrictions and conditions
set forth herein.
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
For purposes of these Series A Share provisions:
(a) "ACT" means the Canada Business Corporations Act.
(b) "ADDITIONAL COMMON SHARES" means the Common Shares, if any, issued
or issuable pursuant to Section 5.4 or Section 5.5.
(c) "AFFILIATE" of a Person means any Person that would be considered to
be an "affiliated entity" of such first-mentioned Person under
Ontario Securities Commission Rule 45-501 - Exempt Distributions, as
in effect on the Original Issuance Date.
(d) "AGGREGATE PREFERENCE REDEMPTION AMOUNT" means the Series A
Preference Redemption Amount plus the Series B Preference Redemption
Amount.
(e) "AGGREGATE PARTICIPATION REDEMPTION AMOUNT" means the Series A
Participation Redemption Amount plus the Series B Participation
Redemption Amount.
(f) "AVAILABLE FUNDS" has the meaning set out in Section 7.1 (a)(i).
(g) "BOARD OF DIRECTORS" means the board of directors of the
Corporation.
(h) "BUSINESS DAY" means any day, other than a Saturday or Sunday, on
which chartered banks in Ottawa, Ontario are open for commercial
banking business during normal banking hours.
-2-
(i) "CHANGE OF CONTROL EVENT" means:
(i) the sale, lease, exclusive and irrevocable licence, abandonment,
transfer or other disposition of all or substantially all of the
assets of the Corporation to a Person other than a Person that is an
Affiliate of the Corporation; or
(ii) (A) an amalgamation of the Corporation with another corporation
(other than with a Subsidiary of the Corporation), (B) a statutory
arrangement involving the Corporation or (C) any other transaction
involving the Corporation, whether by a single transaction or series
of transactions, pursuant to which, in the case of (A), (B) or (C)
above,
(1) any Person, together with his or its Affiliates hereafter
acquires the direct or indirect "beneficial ownership" (as
defined in the Act) of all of the issued and outstanding
shares in the capital of the Corporation; and
(2) the nature of the transaction (or series of transactions) is
such that the consideration (whether in the form of cash,
securities or other property) in connection with such
transaction (or series of transactions) would not be received
by the shareholders of the Corporation,
provided, however, that the Series A Majority Holders shall have the
right, on behalf of all Series A Holders, to waive the treatment of any of
such event as a "CHANGE OF CONTROL EVENT" (provided that any such waiver
must be in writing signed by the Series A Majority Holders and shall only
be effective as to the particular event in respect of which the waiver is
executed).
(j) "CLASS A PREFERRED SHARES" means the Class A Convertible Preferred Shares
in the capital of the Corporation, the first series of which are the
Series A Shares.
(k) "CLASS B PREFERRED SHARES" means the Class B Convertible Preferred Shares
in the capital of the Corporation, the first series of which are the
Series B Shares.
(l) "COMMON SHARE OFFERING" means the offering, issuance and sale by the
Corporation of Common Shares within nine months of the Original Issuance
Date for an aggregate purchase price of not more than $10,000,000.
(m) "COMMON SHARES" means the common shares in the capital of the Corporation.
(n) "CONSIDERATION PER SHARE" means:
(i) in respect of the issuance of Common Shares, an amount equal to:
(A) the total consideration received by the Corporation for the
issuance of such Common Shares, divided by
(B) the number of such Common Shares issued;
-3-
(ii) in respect of the issuance of Derivative Securities, an amount equal
to:
(A) the total consideration received by the Corporation for the
issuance of such Derivative Securities plus the minimum amount
of any additional consideration payable to the Corporation
upon exercise, conversion or exchange of such Derivative
Securities; divided by
(B) the maximum number of Common Shares that would be issued if
all such Derivative Securities were exercised, converted or
exchanged in accordance with their terms on the effective date
of the relevant calculation,
provided, however, that if the amount determined in accordance with
this clause (ii) equals zero in respect of any particular issuance
of Derivative Securities, then the "CONSIDERATION PER SHARE" in
respect of such issuance shall be the amount as may be determined by
the agreement in writing of the Corporation, the Series A Majority
Holders and the Series B Majority Holders. In the event that the
Corporation, the Series A Majority Holders and the Series B Majority
Holders do not agree on such amount, the Corporation shall not issue
such Derivative Securities.
(o) "CONTROL" means, with respect to any Person at any time:
(i) holding, as owner or other beneficiary, other than solely as the
beneficiary of an unrealized security interest, directly or
indirectly through one or more intermediaries (A) more than fifty
percent (50%) of the voting securities of that Person, or (B)
securities of that Person carrying votes sufficient to elect or
appoint the majority of individuals who are responsible for the
supervision or management of that Person; or
(ii) the exercise of de facto control of that Person whether direct or
indirect and whether through the ownership of securities, by
contract or trust or otherwise,
and the term "CONTROLLED" has a corresponding meaning.
(P) "CONVERSION DATE" means the date on which the documentation set out in
Section 5.8(a) is received by the Corporation.
(q) "CONVERSION VALUE" means the number determined in accordance with
Article 6.
(r) "CORPORATION" means Mitel Networks Corporation.
(s) "DAY" OR "DAYS" means calendar day or calendar days, unless otherwise
noted.
(t) "DERIVATIVE SECURITIES" means:
(i) all shares and other securities that are convertible into or
exchangeable for Common Shares (including the Series A Shares and
Series B Shares); and
-4-
(ii) all options, warrants and other rights to acquire Common Shares or
securities directly or indirectly convertible into or exchangeable
for Common Shares.
(u) "EXCLUDED ISSUANCES" has the meaning set out in Section 6.4.
(v) "FAIR MARKET VALUE" means:
(i) in respect of assets other than securities, the fair market value
thereof as determined in good faith by the Board of Directors,
provided, however, that if the Series A Majority Holders and/or the
Series B Majority Holders object in writing to any such
determination within 10 days of receiving notice of such
determination, the fair market value will be determined by an
independent investment banking or business valuation firm mutually
agreeable to the Board of Directors and the Series A Majority
Holders and/or the Series B Majority Holders, as the case may be,
whose decision is final and binding on all Persons (the costs of
which shall be borne by the Corporation);
(ii) in respect of Common Shares, the fair market value thereof, as
determined in accordance with Exhibit "1" attached to these Series A
Share provisions; and
(iii) in respect of securities other than Common Shares:
(A) if such securities are not subject to any statutory hold
periods or contractual restrictions on transfer:
(1) if traded on one or more securities exchanges or
markets, the weighted average of the closing prices of
such securities on the exchange or market on which the
securities are primarily traded over the 30-day period
ending three days prior to the relevant date;
(2) if actively traded over-the-counter, the weighted
average of the closing bid or sale prices (whichever are
applicable) over the 30-day period ending three days
prior to the relevant date; or
(3) if there is no active public market, the fair market
value of such securities as determined in good faith by
the Board of Directors, but no discount or premium is to
be applied to their valuation on the basis of the
securities constituting a minority block or a majority
block of securities, or
(B) if such securities are subject to statutory hold periods or
contractual restrictions on transfer, or both, the fair market
value of such securities as determined by applying an
appropriate discount,
-5-
as determined in good faith by the Board of Directors,
to the value as calculated in accordance with clause (A)
above,
provided, however, that if the Series A Majority Holders
and/or the Series B Majority Holders object in writing to any
determination of the Board of Directors made under clause (A)
or (B) above within 10 days of receiving notice of such
determination, the applicable fair market value and/or
discount, as the case may be, will be determined by an
independent investment banking or business valuation firm
mutually agreeable to the Board of Directors and the Series A
Majority Holders and/or the Series B Majority Holders, as the
case may be, whose decision is final and binding on all
Persons (the costs of which shall be borne by the
Corporation).
(w) "ISSUE PRICE" means $1.00, subject to appropriate adjustments for
stock dividends, stock splits, stock consolidations, capital
reorganizations and the like occurring after the Original Issuance
Date and affecting the Series A Shares.
(x) "JUNIOR SHARES" has the meaning set out in Section 4.1(a)(i).
(y) "LIQUIDATION EVENT" means a liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders
for the purpose of winding up its affairs.
(z) "▇▇▇▇▇▇▇▇ GROUP" means:
(i) ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, his spouse or former spouse, any
lineal descendant of ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, any spouse or
former spouse of any such lineal descendant, and their
respective legal personal representatives;
(ii) the trustee or trustees of any trust (including without
limitation a testamentary trust) for the exclusive benefit of
any one or more members of the ▇▇▇▇▇▇▇▇ Group;
(iii) any corporation all of the issued and outstanding shares of
which are beneficially owned by any one or more members of the
▇▇▇▇▇▇▇▇ Group;
(iv) any partnership all of the partnership interests in which are
beneficially owned by any one or more members of the ▇▇▇▇▇▇▇▇
Group; and
(v) any charitable foundation Controlled by any one or more
members of the ▇▇▇▇▇▇▇▇ Group,
and, for this purpose, a trustee or trustees referred to in clause
(ii) above shall be deemed to beneficially own any shares or
partnership interests held by them.
-6-
(aa) "NON-QUALIFIED IPO" means any public offering of the Common Shares,
other than a Qualified IPO (provided, that, any previous filing of a
registration statement or similar instrument with the United States
Securities and Exchange Commission in fulfillment of the
Corporation's existing obligations as a foreign private issuer shall
be deemed not to constitute a public offering for the purposes of
these Series A Share provisions).
(bb) "ORIGINAL ISSUANCE DATE" means, in respect of Series A Shares, the
date on which the first Series A Shares are issued.
(cc) "PARTIAL SALE EVENT" means:
(i) (A) an amalgamation of the Corporation with another
corporation (other than with a Subsidiary of the Corporation),
(B) a statutory arrangement involving the Corporation, (C) the
sale, exchange or other disposition of outstanding shares of
the Corporation, or (D) any other transaction involving the
Corporation (other than a public offering of securities of the
Corporation), whether by a single transaction or series of
transactions, pursuant to which, in the case of (A), (B), (C)
or (D) above, any Person, together with his or its Affiliates
(other than members of the ▇▇▇▇▇▇▇▇ Group), hereafter acquires
the direct or indirect "beneficial ownership" (as defined in
the Act) of securities of the Corporation representing more
than 50% but less than all of the issued and outstanding
shares in the capital of the Corporation; or
(ii) any event, whether by a single transaction or a series of
transactions, that results in ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and/or
Persons Controlled by ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ holding in the
aggregate less than 100,000,000 of the issued and outstanding
shares in the capital of the Corporation (subject to
appropriate adjustments for stock dividends, stock splits,
stock consolidations, capital reorganizations and the like
occurring after the Original Issuance Date), calculated on an
as-if-converted to Common Shares basis.
provided, however, that the Series A Majority Holders shall have the
right, on behalf of all Series A Holders, to waive the treatment of
any of such event as a "PARTIAL SALE EVENT" (provided that any such
waiver must be in writing signed by the Series A Majority Holders
and shall only be effective as to the particular event in respect of
which the waiver is executed).
(dd) "PERSON" includes any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural person in his
capacity as trustee, executor, administrator, or other legal
representative.
-7-
(ee) "QUALIFIED IPO" means a public offering of Common Shares in which:
(i) the price per share is at least two times:
(A) the aggregate Issue Price for all Series A Shares issued
by the Corporation,
divided by
(B) the sum of
(1) the number of Common Shares (other than Additional
Common Shares) into which any Series A Shares have
been converted (subject to appropriate adjustments
for stock dividends, stock splits, stock
consolidations, capital reorganizations and the
like occurring after the Original Issuance Date
and affecting the Common Shares); and
(2) the number of Common Shares (other than Additional
Common Shares) into which any outstanding Series A
Shares are then convertible;
(ii) the aggregate cash proceeds to the Corporation are not less
than $100,000,000 (before deducting expenses, underwriting
discounts and commissions); and
(iii) immediately following the closing of the public offering, the
Common Shares are listed and posted for trading, traded or
quoted on one or more of the Toronto Stock Exchange, the New
York Stock Exchange, the NASDAQ National Market System or the
AMEX Exchange.
(ff) "REDEMPTION NOTICE PERIOD" has the meaning set out in Section
7.3(a)(i).
(gg) "REDEMPTION TRIGGER DATE" means: (i) if no Series A Shares are
issued after the Original Issuance Date, that date which is five
years plus one day after the Original Issuance Date; or (ii) if any
Series A Shares are issued after the Original Issuance Date, the
earlier of (A) that date which is five years plus one day after the
last date of issuance of any Series A Shares, and (B) that date
which is five years and four months plus one day after the Original
Issuance Date, or such later date as the Corporation and the Series
A Majority Holders may agree in writing.
(hh) "SERIES A HOLDERS" means the holders of Series A Shares and "SERIES
A HOLDER" means any one of them.
(ii) "SERIES A MAJORITY HOLDERS" means, as of the relevant time of
reference, one or more Series A Holders of record who hold
collectively more than 50% of the outstanding Series A Shares.
(jj) "SERIES A PARTICIPATION REDEMPTION AMOUNT" has the meaning set out
in Section 7.l(a)(ii)(B).
-8-
(kk) "SERIES A PREFERENCE REDEMPTION AMOUNT" has the meaning set out in
Section 7.1(a)(ii)(A).
(ll) "SERIES A REDEMPTION AMOUNT" has the meaning set out in Section
7.1(a)(ii).
(mm) "SERIES A REDEMPTION AMOUNT PER SHARE" is the amount determined by
dividing the Series A Redemption Amount by the total number of
Series A Shares outstanding.
(nn) "SERIES A REDEMPTION REQUEST" has the meaning set out in Section
7.3(a).
(oo) "SERIES A SHARES" means the Class A Convertible Preferred Shares,
Series 1 in the capital of the Corporation.
(pp) "SERIES B HOLDERS" means the holders of Series B Shares and "SERIES
B HOLDER" means any one of them.
(qq) "SERIES B MAJORITY HOLDERS" means, as of the relevant time of
reference, one or more Series B Holders of record who hold
collectively more than 50% of the outstanding Series B Shares.
(rr) "SERIES B PARTICIPATION REDEMPTION AMOUNT" has the meaning ascribed
thereto in the Series B Share Terms.
(ss) "SERIES B PREFERENCE REDEMPTION AMOUNT" has the meaning ascribed
thereto in the Series B Share Terms.
(tt) "SERIES B REDEMPTION AMOUNT" has the meaning ascribed thereto in the
Series B Share Terms.
(uu) "SERIES B REDEMPTION AMOUNT PER SHARE" has the meaning ascribed
thereto in the Series B Share Terms.
(vv) "SERIES B REDEMPTION REQUEST" has the meaning ascribed thereto in
the Series B Share Terms.
(ww) "SERIES B SHARE TERMS" means the rights, privileges, restrictions
and conditions attached to the Series B Shares as set out in the
articles of the Corporation as same exist on the Original Issuance
Date.
(xx) "SERIES B SHARES" means the Class B Convertible Preferred Shares,
Series 1 in the capital of the Corporation.
(yy) "STOCK SPLIT" means:
(i) the issuance of Common Shares as a dividend or other
distribution on outstanding Common Shares;
(ii) the subdivision of outstanding Common Shares into a greater
number of Common Shares; or
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(iii) the combination of outstanding Common Shares into a smaller
number of Common Shares.
(zz) "SUBSIDIARY" has the meaning ascribed thereto in the Act on the
Original Issuance Date.
(aaa) "TPC" means Her Majesty the Queen in Right of Canada, as represented
by the Minister of Industry.
1.2 "AS-IF-CONVERTED TO COMMON SHARES BASIS"
For purposes of these Series A Share provisions, where a calculation is required
to be made on an "AS-IF-CONVERTED TO COMMON SHARES BASIS", such calculation will
be made by determining (in each case as of the applicable date for the
determination):
(a) in respect of the Series A Shares, the number of whole Common Shares
into which such Series A Shares are then convertible pursuant to
these Series A Share provisions;
(b) in respect of the Series B Shares, the number of whole Common Shares
into which such Series B Shares are then convertible pursuant to the
Series B Share Terms; and
(c) in respect of any other Derivative Securities, the number of whole
Common Shares into which such securities are then convertible
pursuant to the articles of the Corporation.
ARTICLE 2
VOTING RIGHTS
2.1 ENTITLEMENT TO VOTE AND RECEIVE MATERIALS
(a) Except as otherwise expressly provided in these Series A Share
provisions, or as provided by applicable law, each Series A Holder
is entitled to vote on all matters submitted to a vote or consent of
shareholders of the Corporation.
(b) Each Series A Holder is entitled to receive copies of all notices
and other materials sent by the Corporation to its shareholders
relating to written actions to be taken by shareholders in lieu of a
meeting. All such notices and other materials shall be sent to the
Series A Holders concurrently with delivery to the other
shareholders.
2.2 NUMBER OF VOTES
(a) Within the first two years after the Original Issuance Date, each
Series A Share entitles the Series A Holder to the number of votes
per share equal to the quotient obtained by dividing the Issue Price
by the Conversion Value.
(b) After two years from the Original Issuance Date, each Series A Share
entitles the Series A Holder to the number of votes per share equal
to the sum of (i) the
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quotient obtained by dividing the Issue Price by the Conversion
Value, and (ii) the quotient obtained by dividing the Issue Price by
the fair market value of a Common Share (and for such purposes, the
fair market value of a Common Share shall be as determined in good
faith by the Board of Directors at the time of the relevant
calculation).
(c) For purposes of determining the number of votes for each Series A
Share calculated in accordance with Section 2.2(a) or 2.2(b), the
determination shall be made as of the record date for the
determination of shareholders entitled to vote on such matter, or if
no record date is established, the date such vote is taken or any
written consent of shareholders is solicited, and shall be
calculated based on the Conversion Value in effect on that date.
2.3 SINGLE CLASS
Except as otherwise provided herein, or except as provided by applicable law,
the Series A Holders will vote together with the holders of Series B Shares and
Common Shares and any other series or class of shares entitled to vote on such
matters as a single class on all matters submitted to a vote of shareholders of
the Corporation.
2.4 EXCEPTION TO SINGLE CLASS
In addition to any other approvals required by applicable law, any addition to,
change to or removal of any right, privilege, restriction or condition attaching
to the Series A Shares as a series or the Class A Preferred Shares as a class
requires the affirmative vote or written approval of the Series A Majority
Holders.
ARTICLE 3
DIVIDENDS
3.1 ENTITLEMENT TO DIVIDENDS
The Series A Holders shall be entitled to receive, in respect of the Series A
Shares, non-cumulative dividends if, as and when declared by the Board of
Directors out of the monies of the Corporation properly applicable to the
payment of dividends, the amount of which the directors, in their absolute
discretion, may from time to time or at any time determine. Any declared but
unpaid dividend shall be paid immediately upon the conversion of a Series A
Share, if not previously paid.
3.2 PRIORITY OF DIVIDENDS
(a) Except as provided in Section 4.1, no dividend or other distribution
(other than a stock dividend giving rise to an adjustment under
Section 6.5) will be paid or set apart for payment in respect of any
share of any other class or series unless a dividend is concurrently
paid or set apart for payment in respect of each outstanding Series
A Share in an amount at least equal to the product of:
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(i) the amount of the dividend per share paid in respect of the
shares of such other class or series (calculated on an
as-if-converted to Common Shares basis); and
(ii) the number of Common Shares into which each Series A Share is
then convertible.
(b) When any declared non-cumulative dividend or amount payable on a
return of capital in respect of Series A Shares is not paid in full,
the Series A Holders shall participate rateably in respect of such
dividends in accordance with the sums which would be payable on the
Class A Preferred Shares if all such dividends were declared and
paid in full, and on any return of capital in accordance with the
sums which would be payable on such return of capital if all sums so
payable were paid in full.
ARTICLE 4
LIQUIDATION PREFERENCE
4.1 PAYMENT OF LIQUIDATION PREFERENCE
(a) Subject to the limitation in Section 4.1(b), upon the occurrence of
a Liquidation Event or Change of Control Event the Series A Holders
are entitled to receive the following amounts:
(i) Preference on a Liquidation Event. Upon the occurrence of a
Liquidation Event, the Series A Holders are entitled to be
paid out of the assets of the Corporation available for
distribution to its shareholders (pari passu with the holders
of any other series of Class A Preferred Shares), before any
payment shall be made to the holders of any series of Class B
Preferred Shares, Common Shares or any other class or series
of shares ranking on liquidation, dissolution or winding-up of
the Corporation junior to the Series A Shares (collectively,
the "JUNIOR SHARES"), an amount per Series A Share equal to
the Issue Price plus any declared but unpaid dividends payable
to Series A Holders. If, upon such a Liquidation Event, the
assets of the Corporation available for distribution to the
Corporation's shareholders shall be insufficient to pay the
Series A Holders the full amount to which they are entitled as
set out above, the holders of Series A Shares and any other
series of Class A Preferred Shares shall share rateably in any
amount remaining available for distribution in proportion to
the respective amounts which would otherwise have been payable
on or in respect of the shares held by them if all amounts
payable on or in respect of such shares were paid in full.
(ii) Preference on a Change of Control Event. Upon the occurrence
of a Change of Control Event, the Series A Holders are
entitled to receive an amount of cash, securities or other
property per Series A Share, before any payment shall be made
to the holders of Junior Shares, equal to the Issue Price plus
any declared but unpaid dividends payable to Series A Holders.
If upon the occurrence of a Change of Control Event, the cash,
securities
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or other property available for payment to the Corporation's
shareholders shall be insufficient to pay the Series A Holders
the full amount to which they are entitled as set out above,
the holders of Series A Shares and any class or series of
shares ranking on parity with the Series A Shares shall share
rateably in any such payment in proportion to the respective
amounts which would otherwise have been payable on or in
respect of the shares held by them if all amounts payable on
or in respect of such shares were paid in full.
(iii) Participation Amount. After the distribution to or payment of
all preferential amounts required to be paid to the holders of
Series B Shares, Series A Shares and any other series of Class
A Preferred Shares or Class B Preferred Shares upon a
Liquidation Event or upon a Change of Control Event (or funds
necessary for such payments have been set aside in trust so as
to be available for such payments), the remaining assets of
the Corporation available for distribution, or cash,
securities or other property available for payment to its
shareholders, shall be distributed or paid, as the case may
be, rateably (subject to the limitation in Section 4.1 (b) and
to the rights, if any, of holders of any other class or series
of shares of the Corporation to participate in payments or
distributions upon a Liquidation Event or Change of Control
Event) among the holders of all issued and outstanding: (A)
Class A Preferred Shares; (B) Class B Preferred Shares; and
(C) Common Shares (with the holders of any series of Class A
Preferred Shares and Class B Preferred Shares deemed to hold
that number of shares equal to the number of Common Shares
into which such series of Class A Preferred Shares or Class B
Preferred Shares, as the case may be, are then convertible).
(b) In the event that the applicable Liquidation Event or Change of
Control Event occurs within the first two years after the Original
Issuance Date, and the Series A Holders would otherwise be entitled
to receive a preferential payment pursuant to Section 4.1(a)(i) or
4.1(a)(ii), if the amount per Series A Share that would be payable
upon the occurrence of the Liquidation Event or Change of Control
Event pursuant to Section 4.1(a)(iii) to the holders of all issued
and outstanding Common Shares (assuming the conversion of all Class
A Preferred Shares and Class B Preferred Shares in accordance with
their terms immediately prior to the occurrence of the Liquidation
Event or Change of Control Event, as the case may be) is:
(i) equal to or greater than the sum of (A) two times the Issue
Price, and (B) any declared but unpaid dividends per Series A
Share, then the Series A Holders shall not be entitled to
receive payment of any preferential amounts pursuant to
Section 4.1(a)(i) or 4.1(a)(ii), as the case may be, and shall
only be entitled to receive the amount payable pursuant to
Section 4.1(a)(iii);or
(ii) less than the sum (A) two times the Issue Price, and (B) any
declared but unpaid dividends per Series A Share, then the
maximum amount per Series A Share that the Series A Holders as
such are entitled to receive
-13-
pursuant to Section 4.1(a) shall be the sum of (A) two times
the Issue Price, and (B) any declared but unpaid dividends per
Series A Share.
(c) In the event of any Liquidation Event or Change of Control Event:
(i) the Corporation will not permit such Liquidation Event or
Change of Control Event to occur unless the transaction (or
series of transactions) provides for a payment (by dividend or
other distribution by the Corporation or otherwise) to the
Series A Holders in connection therewith of their full
entitlements pursuant to Section 4.1(a) (subject to the
limitation in Section 4.1(b)); or
(ii) if the Corporation cannot prevent such Liquidation Event or
Change of Control Event from occurring, the Corporation shall,
subject to applicable laws, pay to the Series A Holders (by
dividend or other distribution) the full amount of their
entitlements pursuant to Section 4.1(a) (subject to the
limitation in Section 4.1(b)) or, if the Corporation cannot
legally pay such amount in full, the amount it is legally able
to pay shall be paid and the balance shall increase at the
rate of 15% per annum, compounded annually until such amount
is paid, and the Corporation shall not pay any amounts or make
any other distributions (other than any payment or
distribution made pro rata according to the respective
entitlements of the Series B Holders pursuant to section
4.1(c)(ii) of the Series B Share Terms and of the Series A
Holders pursuant to this clause (ii)) in respect of any other
class or series of its shares until such entitlements are
fully paid.
(d) The Corporation will not permit any transaction (or series of
transactions) that would constitute, but for Section 1.1(i)(ii)(2),
a "Change of Control Event", to occur unless the transaction (or
series of transactions) provides for a payment (by dividend or other
distribution by the Corporation or otherwise) to the Series A
Holders in connection therewith of the their full entitlements
pursuant to Sections 4.1(a)(ii) and 4.1(a)(iii) (subject to the
limitation in Section 4.1(b)).
4.2 DISTRIBUTION OTHER THAN CASH
In the case of a Liquidation Event, the Series A Holders may in any event elect
to receive any distribution or payment to which they are entitled in cash, if
any. The value of the securities or other assets for this purpose is their Fair
Market Value.
4.3 NOTICE
The Corporation shall provide notice in accordance with the provisions of
Section 8.2 to each Series A Holder, at the earliest practicable time, of the
date on which a proposed or reasonably anticipated Liquidation Event or Change
of Control Event shall take place. Such notice shall also specify the estimated
payment date, the amount to which the Series A Holders would be entitled and the
place where such payments are to be made.
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ARTICLE 5
CONVERSION
5.1 OPTIONAL CONVERSION RIGHTS
Each Series A Share is convertible, at any time and from time to time at the
option of the Series A Holder and without payment of additional consideration,
into Common Shares.
5.2 AUTOMATIC CONVERSION
The Series A Shares automatically convert into Common Shares:
(a) immediately prior to, and conditional upon, the closing of a
Qualified IPO; or
(b) with the affirmative vote or written consent of the Series A
Majority Holders.
5.3 CONVERSION RATE
The number of Common Shares into which each Series A Share is convertible is
equal to the quotient obtained by dividing the Issue Price (plus any declared
but unpaid dividends) by the Conversion Value, as adjusted from time to time in
accordance with Article 6.
5.4 ADDITIONAL COMMON SHARES ON CONVERSION
In the event of any conversion after two years from the Original Issuance Date,
in addition to the number of Common Shares otherwise issuable to a Series A
Holder upon a conversion of Series A Shares, each Series A Holder shall also be
entitled, in respect of each Series A Share so converted, to receive an
additional number of Common Shares as is equal to the Issue Price divided by the
Fair Market Value of a Common Share as of the date that the conversion is deemed
to be effected in accordance with Section 5.6.
5.5 ADDITIONAL COMMON SHARES ON CONVERSION IN A NON-QUALIFIED IPO
In the event of:
(a) an optional conversion pursuant to Section 5.1 in connection with a
Non-Qualified IPO; or
(b) an automatic conversion pursuant to Section 5.2(b) in connection
with a Non-Qualified IPO,
that occurs within the first two years after the Original Issuance Date, in
addition to the number of Common Shares otherwise issuable to a Series A Holder
upon a conversion of Series A Shares, each Series A Holder shall also be
entitled in respect of each Series A Share so converted, to receive that number
of additional Common Shares, if any, as is determined in accordance with the
following formula:
X-Y
---
Z
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Where:
X = two times the Issue Price
Y = the greater of: (i) the Issue Price; and (ii) the Offering
Price
Z = the Offering Price
For the purposes of this Section 5.5, "OFFERING PRICE" means the per share issue
price of the Common Shares issued in connection with the Non-Qualified IPO.
For the purposes of this Section 5.5 and Section 5.6(d), a conversion of Series
A Shares into Common Shares shall be deemed to be effected "in connection with a
Non-Qualified IPO" if (i) in the case of an optional conversion pursuant to
Section 5.1, such conversion was completed at the written request of the
Corporation in order to facilitate the Non-Qualified IPO, or (ii) in the case of
an automatic conversion pursuant to Section 5.2(b), the Series A Majority
Holders voting to approve or consenting to the automatic conversion agreed to
convert their Series A Shares at the written request of the Corporation in order
to facilitate the Non-Qualified IPO; provided that, the Corporation shall not
make such a written request to the Series A Holders unless the Corporation
concurrently makes a written request to the Series B Holders pursuant to the
Series B Share Terms.
5.6 EFFECTIVE DATE AND TIME OF CONVERSION
Conversion is deemed to be effected:
(a) subject to Section 5.6(d), in the case of an optional conversion
pursuant to Section 5.1, immediately prior to the close of business
on the Conversion Date;
(b) in the case of automatic conversion pursuant to Section 5.2(a),
immediately prior to the closing of the Qualified IPO;
(c) subject to Section 5.6(d), in the case of automatic conversion
pursuant to Section 5.2(b), at the time and on the date specified by
the Series A Majority Holders;
(d) in the case of an optional conversion or an automatic conversion "in
connection with a Non-Qualified IPO", as contemplated in Section
5.5, immediately prior to the closing of the Non-Qualified IPO; and
(e) notwithstanding any delay in the delivery of certificates
representing the Common Shares into which the Series A Shares have
been converted.
5.7 EFFECT OF CONVERSION
Upon the conversion of the Series A Shares:
(a) the rights of a Series A Holder as a holder of the converted Series
A Shares cease; and
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(b) each person in whose name any certificate for Common Shares is
issuable upon such conversion is deemed to have become the holder of
record of such Common Shares.
5.8 MECHANICS OF OPTIONAL CONVERSION
(a) To exercise optional conversion rights under Section 5.1, a Series A
Holder must:
(i) give written notice to the Corporation at its principal office
or the office of any transfer agent for the Common Shares:
(A) stating that the Series A Holder elects to convert such
shares; and
(B) providing the name or names (with address or addresses)
in which the certificate or certificates for Common
Shares issuable upon such conversion are to be issued;
(ii) surrender the certificate or certificates representing the
shares being converted to the Corporation at its principal
office or the office of any transfer agent for the Common
Shares; and
(iii) where the Common Shares are to be registered in the name of a
person other than the Series A Holder, provide evidence to the
Corporation of proper assignment and transfer of the
surrendered certificates to the Corporation, including
evidence of compliance with applicable Canadian and United
States securities laws and any applicable shareholders
agreement.
(b) As soon as reasonably practicable, but in any event within 10 days
after the Conversion Date, the Corporation will issue and deliver to
the Series A Holder a certificate or certificates in such
denominations as such Series A Holder requests for the number of
full Common Shares issuable upon the conversion of such Series A
Shares, together with cash in respect of any fractional Common
Shares issuable upon such conversion.
5.9 MECHANICS OF AUTOMATIC CONVERSION
(a) Upon the automatic conversion of any Series A Shares into Common
Shares, each Series A Holder must surrender the certificate or
certificates formerly representing that Series A Holder's Series A
Shares at the principal office of the Corporation or the office of
any transfer agent for the Common Shares.
(b) Upon receipt by the Corporation of the certificate or certificates,
the Corporation will issue and deliver to such Series A Holder,
promptly at the office and in the name shown on the surrendered
certificate or certificates, a certificate or certificates for the
number of Common Shares into which such Series A Shares are
converted, together with cash in respect of any fractional Common
Shares issuable upon such conversion.
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(c) The Corporation is not required to issue certificates evidencing the
Common Shares issuable upon conversion until certificates formerly
evidencing the converted Series A Shares are either delivered to the
Corporation or its transfer agent, or the Series A Holder notifies
the Corporation or such transfer agent that such certificates have
been lost, stolen or destroyed, and executes and delivers an
agreement to indemnify the Corporation from any loss incurred by the
Corporation in connection with the loss, theft or destruction.
(d) If the Board of Directors expects, acting reasonably, that the
Series A Shares will automatically convert, the Corporation will, at
least 20 days before the date it reasonably believes will be the
date of the automatic conversion, send by prepaid priority overnight
courier or deliver to each person who at the date of mailing or
delivery is a registered Series A Holder, a notice in writing of the
intention of the Corporation to automatically convert such shares.
That notice shall be sent or delivered to each Series A Holder at
the last address of that Series A Holder as it appears on the
securities register of the Corporation, or in the event the address
of any such Series A Holder does not so appear, then to the last
address of that Series A Holder known to the Corporation. Accidental
failure or omission to give that notice to one or more Series A
Holder(s) will not affect the validity of such conversion, but if
that failure or omission is discovered, notice shall be given
promptly to any Series A Holder that was not given notice. That
notice will have the same force and effect as if given in due time.
The notice will set out the basis under Section 5.2 for such
automatic conversion, the number of Series A Shares held by the
person to whom it is addressed which are to be converted (if known),
the number of Common Shares into which those Series A Shares will be
converted (including any Additional Common Shares), the expected
date of closing of the Qualified IPO, if applicable, and the place
or places in Canada at which Series A Holders may present and
surrender the certificate or certificates representing its Series A
Shares for conversion.
5.10 FRACTIONAL SHARES
No fractional Common Shares will be issued upon conversion of Series A Shares.
Instead of any fractional Common Shares that would otherwise be issuable upon
conversion of Series A Shares, the Corporation will pay to the Series A Holder a
cash adjustment in respect of such fraction in an amount equal to the same
fraction of the value per Common Share (as determined in good faith by the Board
of Directors) on the effective date of the conversion. For greater certainty,
all of a Series A Holder's Series A Shares will be aggregated for purposes of
calculating any fractional Common Share resulting from a conversion.
5.11 PARTIAL CONVERSION
If some but not all of the Series A Shares represented by a certificate or
certificates surrendered by a Series A Holder are converted, the Corporation
will execute and deliver to or on the order of the Series A Holder, at the
expense of the Corporation, a new certificate representing the number of Series
A Shares that were not converted.
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ARTICLE 6
CONVERSION VALUE
6.1 INITIAL CONVERSION VALUE
The initial Conversion Value is equal to the Issue Price and remains in effect
until the Conversion Value is adjusted in accordance with the provisions of this
Article 6.
6.2 ADJUSTMENTS FOR DILUTION
If, following the Original Issuance Date, the Corporation issues any additional
Common Shares or Derivative Securities (other than Excluded Issuances or in
connection with an event to which Section 6.5, 6.6 or 6.7 applies) for
Consideration Per Share that is less than the Conversion Value in effect
immediately prior to such issuance, then the Conversion Value in effect
immediately prior to such issuance shall be adjusted so that, upon such
issuance, the Conversion Value shall be reduced to an amount equal to the
Consideration Per Share of such additional Common Shares or Derivative
Securities.
6.3 ADDITIONAL PROVISIONS REGARDING DILUTION
For purposes of Section 6.2:
(a) if a part or all of the consideration received by the Corporation in
connection with the issuance of additional Common Shares or
Derivative Securities consists of property other than cash, such
consideration is deemed to have a value equal to its Fair Market
Value;
(b) no adjustment of the Conversion Value is to be made upon the
issuance of any Derivative Securities or additional Common Shares
that are issued upon the exercise, conversion or exchange of any
Derivative Securities;
(c) any adjustment of the Conversion Value is to be disregarded if, and
to the extent that, all of the Derivative Securities that gave rise
to such adjustment expire or are cancelled without having been
exercised or converted, so that the Conversion Value effective
immediately upon such cancellation or expiration is equal to the
Conversion Value that otherwise would have been in effect
immediately prior to the time of the issuance of the expired or
cancelled Derivative Securities, with any additional adjustments as
subsequently would have been made to that Conversion Value had the
expired or cancelled Derivative Securities not been issued;
(d) if the terms of any Derivative Securities previously issued by the
Corporation are changed (whether by their terms or for any other
reason) so as to raise or lower the Consideration Per Share payable
with respect to such Derivative Securities (whether or not the
issuance of such Derivative Securities originally gave rise to an
adjustment of the Conversion Value), the Conversion Value is
adjusted as of the date of such change;
(e) the Consideration Per Share received by the Corporation in respect
of Derivative Securities is determined in each instance as follows:
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(i) the Consideration Per Share is determined as of the date of
issuance of Derivative Securities without giving effect to any
possible future price adjustments or rate adjustments that
might be applicable with respect to such Derivative Securities
and that are contingent upon future events; and
(ii) in the case of an adjustment to the Conversion Value to be
made as a result of a change in terms of any Derivative
Securities, the Consideration Per Share for purposes of
calculating the adjustment to the Conversion Value is
determined as of the date of such change and, for greater
certainty, not as of the date of the issuance of the
Derivative Securities; and
(f) notwithstanding any other provisions contained in these Series A
Share provisions, but except as provided in Sections 6.3(d) or 6.5,
no adjustment to the Conversion Value is to be made in respect of
the issuance of additional Common Shares or Derivative Securities in
any case in which such adjustment would otherwise result in the
Conversion Value being greater than the Conversion Value in effect
immediately prior to the issuance of such additional Common Shares
or Derivative Securities.
6.4 EXCLUDED TRANSACTIONS
Notwithstanding Section 6.2, no adjustment to the Conversion Value is to be made
in connection with the following issuances ("EXCLUDED ISSUANCES"):
(a) any Series B Shares issued on the Original Issuance Date;
(b) any Common Shares issued or issuable upon conversion of the Series A
Shares or Series B Shares; provided that, any such conversion is
effected in accordance with the terms of such shares (including
provisions for adjustment) as such terms exist on the Original
Issuance Date;
(c) any Additional Common Shares;
(d) any Common Shares issued to the Series B Holders in accordance with
the Series B Share Terms;
(e) any Common Shares issued or issuable upon exercise of any warrants
granted to the Series A Holders in connection with such Series A
Holders' subscription for Series A Shares;
(f) any Common Shares issued pursuant to the Common Share Offering;
(g) any option to purchase Common Shares or other Derivative Securities
granted under any stock option plan, stock purchase plan or other
stock compensation program of the Corporation approved by the Board
of Directors and/or Common Shares or other Derivative Securities
allotted for issuance, issued or issuable pursuant to any such plan
or arrangement, or the issuance of any Common Shares upon the
exercise of any such options or other Derivative Securities;
-20-
(h) any equity securities issued pursuant to a Qualified IPO or a
Non-Qualified IPO;
(i) any warrants to acquire Common Shares issued to TPC or any permitted
assignee of TPC pursuant to obligations of the Corporation to issue
such warrants (as such obligations exist on or before the Original
Issuance Date or as such obligations may be amended with the
approval of the Board of Directors after the Original Issuance
Date), and any issuance of Common Shares pursuant to the exercise of
such warrants;
(j) any Common Shares or Derivative Securities issued as compensation to
any agent, broker, sub-agent or sub-broker with respect to the
transactions entered into by the Corporation with Series A Holders
and certain other shareholders of the Corporation, and any Common
Shares or Derivative Securities issuable upon exercise thereof;
(k) except as contemplated in Section 6.5, any equity securities issued
in respect of subdivisions, stock dividends or capital
reorganizations affecting the share capital of the Corporation;
(l) any equity securities issued to bona fide consultants or
professional advisors of the Corporation as part of the
consideration for services received by the Corporation from such
consultants or professional advisors;
(m) any Common Shares or Derivative Securities issued in connection with
an acquisition of assets or a business; provided that (i) the cost
of such acquisition is less than $10,000,000, (ii) any such
transaction is approved by the Board of Directors, and (iii) the
maximum aggregate number of Common Shares (including Common Shares
issuable on the conversion or exercise of Derivative Securities)
that may be issued pursuant to all transactions contemplated by this
clause (m) shall not exceed 5% of the aggregate number of Common
Shares issued and outstanding on the Original Issuance Date (subject
to appropriate adjustments for stock dividends, stock splits, stock
consolidations, capital reorganizations and the like occurring after
the Original Issuance Date), all calculated on an as-if-converted to
Common Shares basis; and
(n) any Common Shares or Derivative Securities issued to or in
connection with any of the following (i) licensors of technology to
the Corporation, (ii) lending or leasing institutions in connection
with obtaining debt financing, or (iii) any other technology
licensing, equipment leasing or other non-equity interim financing
transaction; provided that: (A) any such transaction or transactions
are approved by the Board of Directors; and (B) the maximum
aggregate number of Common Shares (including Common Shares issuable
on the conversion or exercise of Derivative Securities) that may be
issued pursuant to all transactions contemplated by this clause (n)
shall not exceed 5% of the aggregate number of Common Shares issued
and outstanding on the Original Issuance Date (subject to
appropriate adjustments for stock dividends, stock splits, stock
consolidations, capital reorganizations and the like occurring after
the Original Issuance Date), all calculated on an as-if-converted to
Common Shares basis.
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6.5 ADJUSTMENTS FOR STOCK SPLITS
After the Original Issuance Date, the Conversion Value shall be adjusted on the
record date in respect of each Stock Split, such that the Conversion Value is
equal to the product obtained by multiplying the Conversion Value immediately
before the Stock Split by a fraction:
(a) the numerator of which is the number of Common Shares issued and
outstanding immediately before the Stock Split; and
(b) the denominator of which is the number of Common Shares issued and
outstanding immediately after the Stock Split.
6.6 ADJUSTMENTS FOR CAPITAL REORGANIZATIONS
If, following the Original Issuance Date, the Common Shares are changed into the
same or a different number of shares of any other class or series, whether by
capital reorganization, reclassification or otherwise, the Corporation will
provide each Series A Holder with the right to convert each Series A Share into
the kind and amount of shares, other securities and property receivable upon
such change that a holder of a number of Common Shares equal to the number of
Common Shares into which such Series A Share was convertible immediately prior
to the change would be entitled to receive upon such change (subject to any
necessary further adjustments after the date of such change).
6.7 OTHER DISTRIBUTIONS
In the event the Corporation declares a distribution payable in securities
(other than securities of the Corporation), evidences of indebtedness issued by
the Corporation or other persons or assets (excluding cash dividends paid in the
ordinary course of business) then, in each such case for the purpose of this
Section 6.7, Series A Holders shall be entitled upon conversion of their Series
A Shares to a proportionate share of any such distribution as though they were
the holders of the number of Common Shares into which their Series A Shares were
convertible as of the record date fixed for the determination of the holders of
Common Shares of the Corporation entitled to receive such distribution.
6.8 NO IMPAIRMENT
The Corporation will not, by amendment of its articles or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed under this Article 6, but will at all times in good faith assist in
the carrying out of all the provisions of Article 5 and 6 and in the taking of
any action necessary or appropriate in order to protect the conversion rights of
the Series A Holders against impairment.
6.9 RESERVATION OF COMMON SHARES
The Corporation shall at all times reserve and keep available out of its
authorized but unissued Common Shares, solely for the purpose of effecting the
conversion of Series A Shares, such number of Common Shares as from time to time
is sufficient to effect the conversion of all
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outstanding Series A Shares, and if at any time the number of authorized but
unissued Common Shares is not sufficient to effect the conversion of all of the
then outstanding Series A Shares, then the Corporation will take such corporate
action as may, in the opinion of its legal counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares as is sufficient
for such purpose.
6.10 DISPUTES
If a dispute shall at any time arise with respect to adjustments in the
Conversion Value, such dispute shall be conclusively determined by the
Corporation's auditors, or if they are unable or unwilling to act, by such other
firm of independent chartered accountants as may be selected by the Board of
Directors and any such determination shall be binding upon the Corporation, the
Series A Holders and all other shareholders of the Corporation. Such auditors or
accountants shall be provided access to all necessary records of the
Corporation. If any such determination is made, the Corporation shall deliver a
certificate to the Series A Holders and Series B Holders describing such
determination.
6.11 CERTIFICATE AS TO ADJUSTMENTS
In each case of an adjustment or readjustment of the Conversion Value, the
Corporation will promptly furnish each Series A Holder and Series B Holder with
a certificate, prepared by the Corporation's accountants, showing such
adjustment or readjustment, and stating in reasonable detail the facts upon
which such adjustment or readjustment is based.
6.12 FURTHER ADJUSTMENT PROVISIONS
If, at any time as a result of an adjustment made pursuant to Section 6.6, a
Series A Holder becomes entitled to receive any shares or other securities of
the Corporation other than Common Shares upon surrendering Series A Shares for
conversion, the Conversion Value in respect of such other shares or securities
(if such other shares or securities are by their terms convertible securities)
will be adjusted after that time, and will be subject to further adjustment from
time to time, in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Series A Shares contained in this Article 6, and
the remaining provisions of these Series A Share provisions will apply mutatis
mutandis to any such other shares or securities.
6.13 WAIVER OF ADJUSTMENTS
Notwithstanding any other provisions of this Article 6, with the written consent
of the Corporation, the Series A Majority Holders shall be entitled, on behalf
of all Series A Holders, to waive any entitlement to an adjustment to the
Conversion Value under this Article 6. Any such waiver by the Series A Majority
Holders must be in writing and shall only be effective as to the particular
adjustment being waived. In such event, notice of such waiver shall be sent to
all Series A Holders and Series B Holders in accordance with Section 8.2.
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ARTICLE 7
REDEMPTION
7.1 REDEMPTION FOLLOWING THE REDEMPTION TRIGGER DATE
(a) On or after the Redemption Trigger Date, the Series A Majority
Holders shall have the right to request the Corporation to redeem
all of the Series A Shares. Upon receipt of such a request, in
writing, the Corporation will:
(i) deliver to each Series A Holder and Series B Holder within 30
days following the date the written request is received by the
Corporation a notice specifying the total funds legally
available to the Corporation for redemption of all of the
Series A Shares and Series B Shares outstanding at that time
(the "AVAILABLE FUNDS"); and
(ii) within 90 days, but not before the expiry of 30 days,
following the date the written request is received by the
Corporation redeem from the Series A Holders, subject to
Section 7.2, all the Series A Shares (and concurrently
therewith redeem from the Series B Holders all the Series B
Shares in the event that the redemption rights of the Series B
Shares have been exercised in accordance with the Series B
Share Terms) to the extent the Corporation has Available
Funds, by paying to the Series A Holders, in accordance with
Section 7.1(b), an amount (the "SERIES A REDEMPTION AMOUNT")
equal to the sum of:
(A) the number of Series A Shares outstanding multiplied by
the sum of (x) the Issue Price and (y) the per share
amount of any declared but unpaid dividends on the
Series A Shares (such amount being the "SERIES A
PREFERENCE REDEMPTION AMOUNT"); and
(B) the then-current Fair Market Value of the Common Shares
(other than Additional Common Shares) into which the
Series A Shares are then convertible (such amount being
the "SERIES A PARTICIPATION REDEMPTION AMOUNT").
(b) Subject to Section 7.2, each Series A Holder shall be paid that
portion of the Series A Redemption Amount equal to the Series A
Redemption Amount Per Share multiplied by the number of Series A
Shares held by the holder.
7.2 INSUFFICIENT FUNDS AND PRIORITIES
(a) If the Available Funds are insufficient to pay in full (i) the
Series A Redemption Amount with respect to the total number of
Series A Shares outstanding, and (ii) in the event that the
redemption rights of the Series B Shares have been exercised in
accordance with the Series B Share Terms, the Series B Redemption
Amount with respect to the total number of Series B Shares
outstanding, then those funds that are legally available for the
redemption of the Series A Shares in accordance with Section 7.1 and
the Series B Shares in accordance with the Series B Share
-24-
Terms will be used to redeem the maximum possible number of whole
shares in accordance with the following priorities:
(i) If the Available Funds are insufficient to pay in full the
Series A Preference Redemption Amount, those funds will be
used to redeem the maximum possible number of whole shares
rateably among the Series A Holders, and in such case, the
number of Series A Shares to be redeemed shall be the number
obtained by dividing (x) the Available Funds, by (y) the
Series A Redemption Amount Per Share.
(ii) If the Available Funds are sufficient to pay in full the
Series A Preference Redemption Amount, but are insufficient to
pay in full the Aggregate Preference Redemption Amount, those
funds will be used to redeem:
(A) that proportion of the total number of Series A Shares
determined by dividing (x) the Series A Preference
Redemption Amount, by (y) the Series A Redemption Amount
Per Share; and
(B) the maximum possible number of whole shares rateably
among the Series B Holders, and in such case, the number
of Series B Shares to be redeemed shall be the number
obtained by dividing (x) the Available Funds minus the
Series A Preference Redemption Amount, by (y) the Series
B Redemption Amount Per Share.
(iii) If the Available Funds are sufficient to pay in full the
Aggregate Preference Redemption Amount, but are insufficient
to pay in full the Aggregate Preference Redemption Amount plus
the Series A Participation Redemption Amount and Series B
Participation Redemption Amount, those funds will be used to
redeem:
(A) that proportion of the total number of Series A Shares
determined by dividing (x) the Series A Preference
Redemption Amount, by (y) the Series A Redemption Amount
Per Share;
(B) that proportion of the total number of Series B Shares
determined by dividing (x) the Series B Preference
Redemption Amount, by (y) the Series B Redemption Amount
Per Share; and
(C) the maximum possible number of whole shares rateably
among the Series A Holders and Series B Holders, and in
such case,
(1) the number of Series A Shares to be redeemed shall
be determined in accordance with the following
formula:
A x B
-----
C
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(2) the number of Series B Shares to be redeemed shall
be determined in accordance with the following
formula:
A x D
-----
E
Where:
A = the Available Funds minus the Aggregate
Preference Redemption Amount
B = the Series A Participation Redemption Amount
divided by the Aggregate Participation Redemption
Amount
C = the Series A Redemption Amount Per Share
D = the Series B Participation Redemption Amount
divided by the Aggregate Participation Redemption
Amount
E = the Series B Redemption Amount Per Share
(b) Any Series A Shares not redeemed in accordance with Section 7.2(a)
remain outstanding and remain entitled to all rights and preferences
otherwise provided in these Series A Share provisions. Any Series B
Shares not redeemed remain outstanding and remain entitled to all
rights and preferences otherwise provided in the Series B Share
Terms. As and when funds legally available for redemption of Series
A Shares and Series B Shares subsequently become available, those
funds will be used to redeem the maximum possible number of whole
shares rateably among the Series A Holders and Series B Holders in
accordance with clause (i), (ii) and (iii) of Section 7.2(a) above
and the Series B Share Terms. The Corporation shall not pay any
amounts or make any other distributions in respect of any other
class or series of its shares until all Series A Shares and Series B
Shares are redeemed as provided above, and all redemption payments
required to be made in accordance with this Section 7.2 are fully
paid to the Series A Holders and Series B Holders respectively.
7.3 REDEMPTION UPON A PARTIAL SALE EVENT
(a) In connection with a proposed transaction that would result in a
Partial Sale Event, the Series A Majority Holders shall have the
right, prior to the completion of the proposed transaction, to
request, in writing, the Corporation to redeem all of the Series A
Shares. Upon receipt of such a request (a "SERIES A REDEMPTION
REQUEST") the Corporation will:
(i) deliver to each Series A Holder and each Series B Holder
within 20 days (or such shorter or longer period as the
Corporation, the Series A Majority Holders and the Series B
Majority Holders may agree in writing) (the "REDEMPTION NOTICE
PERIOD") following the date the Series A Redemption Request is
received by the Corporation a copy of such Series
-26-
A Redemption Request and a notice specifying whether the
Corporation has sufficient funds legally available to the
Corporation for the redemption of all of the Series A Shares
and (in the event that the Corporation also receives a Series
B Redemption Request prior to the expiry of 30 days following
the Redemption Notice Period) all of the Series B Shares
outstanding; and
(ii) redeem, conditional upon and contemporaneously with the
completion of the transaction resulting in the Partial Sale
Event, from the Series A Holders all the Series A Shares (and
concurrently therewith redeem from the Series B Holders all
the Series B Shares in the event that the Corporation also
received a Series B Redemption Request within the period
specified in clause (i) above) provided the Corporation has
funds legally available for such redemption, by paying to the
Series A Holders, in accordance with Section 7.3(b), the
Series A Redemption Amount.
(b) Subject to Section 7.4, each Series A Holder shall be paid that
portion of the Series A Redemption Amount equal to the Series A
Redemption Amount Per Share multiplied by the number of Series A
Shares held by the holder.
7.4 INSUFFICIENT FUNDS
If in connection with the exercise of the redemption rights pursuant to a Series
A Redemption Request the total funds legally available to the Corporation are
insufficient to pay in full (i) the Series A Redemption Amount with respect to
the total number of Series A Shares outstanding, and (ii) in the event that the
Corporation also received a Series B Redemption Request pursuant to the Series B
Share Terms, the Series B Redemption Amount with respect to the total number of
Series B Shares outstanding, then:
(a) the Corporation shall not redeem any of the Series A Shares pursuant
to the Series A Redemption Request or any of the Series B Shares
pursuant to the Series B Redemption Request; and
(b) the Corporation will not permit the proposed transaction that would
otherwise result in a Partial Sale Event to occur unless Series A
Majority Holders and Series B Majority Holders direct, in writing,
the Corporation to permit such a transaction.
7.5 SURRENDER OF CERTIFICATES
If a redemption of Series A Shares pursuant to this Article 7 will occur, each
Series A Holder shall surrender to the Corporation the certificates representing
the Series A Shares to be redeemed by the Corporation in accordance with this
Article 7, in the manner and at the place designated by the Corporation, and
thereupon all redemption amounts to be paid for such shares shall be payable to
the order of the Person whose name appears on such certificates as the owner
thereof, and each surrendered certificate shall be cancelled and retired. If, in
the case of the exercise of redemption rights in accordance with Sections 7.1
and 7.2, less than all of the Series A Shares represented by such certificates
are redeemed, then the Corporation shall promptly issue new certificates
representing the shares not redeemed.
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ARTICLE 8
MISCELLANEOUS
8.1 NOTICES OF RECORD DATES
If:
(a) the Corporation establishes a record date to determine the Series A
Holders who are entitled to receive any dividend or other
distribution; or
(b) there occurs any Stock Split or other capital reorganization of the
Corporation, any reclassification of the capital of the Corporation,
any Change of Control Event, or any Liquidation Event,
the Corporation will deliver to each Series A Holder, at least 20 days
prior to such record date or the proposed effective date of the relevant
transaction, a notice specifying:
(i) the date of such record date for the purpose of such dividend
or distribution and a description of such dividend or
distribution;
(ii) the date on which any such reorganization, reclassification,
Change of Control Event or Liquidation Event is expected to
become effective; and
(iii) the time, if any, that is to be fixed as to when the holders
of record of Common Shares (or other securities) are entitled
to exchange their Common Shares (or other securities) for
cash, securities or other property deliverable upon such
reorganization, reclassification, Change of Control Event or
Liquidation Event.
8.2 NOTICES
All notices, requests, payments, instructions or other documents to be given
hereunder must be in writing or given by written telecommunication, and will be
deemed to have been duly given if:
(a) delivered personally (effective upon delivery);
(b) mailed by certified mail, return receipt requested, postage prepaid
(effective five Business Days after dispatch) if the recipient is
located in the United States or Canada;
(c) sent by a reputable, established courier service that guarantees
next Business Day delivery (effective the next Business Day) if the
recipient is located in the United States or Canada;
(d) sent by air mail or by commercial express overseas air courier, with
receipt acknowledged in writing by the recipient (effective upon the
date of such acknowledgement) if the recipient is located outside
the United States or Canada;
(e) sent by fax confirmed within 24 hours through one of the foregoing
methods (effective upon receipt of the fax in complete readable
form); and
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addressed as follows (or to such other address as the recipient party furnishes
by notice to the sending party for these purposes: (i) if to any Series A Holder
or Series B Holder, to the last address of that Series A Holder or Series B
Holder as it appears on the securities register of the Corporation, or in the
event the address of any such Series A Holder or Series B Holder does not so
appear, then to the last address of that Series A Holder or Series B Holder
known to the Corporation; and (ii) if to the Corporation, to the address of its
principal office.
8.3 NEGATIVE COVENANTS
So long as any Series A Shares are outstanding, the Corporation will not,
without the prior written approval of the Series A Majority Holders:
(a) designate any further series of Class A Preferred Shares or Class B
Preferred Shares;
(b) issue more than 30,000,000 Series A Shares (other than additional
Series A Shares issuable in respect of any stock dividends declared
by the Corporation);
(c) issue more than 68,000,000 Series B Shares (other than additional
Series B Shares issuable in respect of any stock dividends declared
by the Corporation); or
(d) amend the articles of the Corporation to add, change or remove any
rights, privileges, restrictions or conditions attached to the
Series A Shares or the Series B Shares or otherwise change the
Series A Shares or Series B Shares.
8.4 CURRENCY
All references to dollar amounts in these Series A Share provisions are to the
lawful currency of Canada.
8.5 TRANSFER AGENTS
The Corporation may appoint, and from time to time discharge and change, a
transfer agent for the Series A Shares or any other class of shares of the
Corporation. Upon any such appointment, discharge or change of a transfer agent,
the Corporation will send a written notice of such appointment, discharge or
change to each Series A Holder.
8.6 TRANSFER TAXES
The Corporation will pay all share transfer taxes, documentary stamp taxes and
the like that may be properly payable by the Corporation in respect of any
issuance or delivery of Series A Shares or Common Shares or other securities
issued in respect of Series A Shares in accordance with these Series A Share
provisions or certificates representing such shares or securities. The
Corporation is not required to pay any such tax that may be payable in respect
of any transfer involved in the issuance or delivery of Series A Shares or
Common Shares or other securities in a name other than that in which such shares
were registered, or in respect of any payment to any person other than the
registered Series A Holder of the shares with respect to any such shares, and is
not required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Corporation the amount
-29-
of any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid or is not payable.
-30-
EXHIBIT "1" TO
SCHEDULE "A"
DETERMINATION OF FAIR MARKET VALUE
The "FAIR MARKET VALUE" of Common Shares will be determined in accordance with
the following procedures:
(a) The Board of Directors, the Series A Majority Holders and the Series
B Majority Holders will in good faith attempt to agree upon the Fair
Market Value of the Common Shares that are the subject of the
proposed determination under this Exhibit "1".
(b) Fair Market Value of such Common Shares will in all cases (i) be
calculated on the assumption of an arm's length sale at open market
value on a "going concern basis" with no minority discount applied,
and (ii) take into account any conversion rights, liquidation
preferences and any other entitlements attached to any other
securities of the Corporation.
(c) If the Fair Market Value has not been agreed upon between the
Corporation, the Series A Majority Holders and the Series B Majority
Holders within 10 Business Days after commencing their good faith
attempt to agree upon the Fair Market Value under clause (a) above,
then within five Business Days after the end of such 10 Business Day
period, the Corporation, the Series A Majority Holders and the
Series B Majority Holders shall jointly appoint a U.S. or Canadian
nationally recognized independent investment banking or business
valuation firm (the "VALUATOR") to determine the Fair Market Value
of such shares which are subject of the proposed determination under
this Exhibit "1". If the Corporation, the Series A Majority Holders
and the Series B Majority Holders cannot agree on a Valuator within
such five Business Day period, any of the Corporation, the Series A
Majority Holders or the Series B Majority Holders may thereafter
apply to a court of competent jurisdiction to have the court appoint
such Valuator meeting the foregoing criteria to determine the Fair
Market Value of the subject shares. The determination by the
Valuator shall be final and binding on the Corporation, the Series A
Holders and the Series B Holders, absent manifest error.
(d) The Corporation shall be responsible for all costs incurred in
connection with the independent valuation performed by the Valuator
(including the costs of any court proceeding to appoint the
Valuator, if applicable).
(e) The Valuator shall be instructed to deliver its determination of
Fair Market Value as at the applicable valuation date, as soon as
practicable following its appointment and in any event within 30
Business Days thereafter.
(f) In the event that the Valuator provides a range of fair market
values, the middle of such range shall be utilized for purposes of
determining the Fair Market Value of the subject shares.
-31-
(g) The Corporation shall immediately provide to the Valuator such
information, including confidential information, and allow such firm
to conduct "due diligence" and make such investigations and
inquiries with respect to the affairs of the Corporation and its
subsidiaries as may be required by such Valuator in order to fulfill
its mandate, provided that such firm executes a confidentiality
agreement in favour of the Corporation containing standard terms and
conditions.
EXHIBIT A-2
SERIES B SHARE TERMS
SCHEDULE "B"
TO
ARTICLES OF AMENDMENT
MITEL NETWORKS CORPORATION
(THE "CORPORATION")
The first series of Class B Convertible Preferred Shares of the Corporation
shall consist of an unlimited number of shares which shall be designated as the
Class B Convertible Preferred Shares, Series 1 (the "SERIES B SHARES") and
which, in addition and subject to the rights, privileges, restrictions and
conditions attached to the Class B Convertible Preferred Shares as a class,
shall have attached thereto the rights, privileges, restrictions and conditions
set forth herein.
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
For purposes of these Series B Share provisions:
(a) "ACT" means the Canada Business Corporations Act.
(b) "ADDITIONAL COMMON SHARES" means the Common Shares, if any, issued
or issuable pursuant to Section 5.4 or Section 5.5.
(c) "AFFILIATE" of a Person means any Person that would be considered to
be an "affiliated entity" of such first-mentioned Person under
Ontario Securities Commission Rule 45-501 - Exempt Distributions, as
in effect on the Original Issuance Date.
(d) "AGGREGATE PREFERENCE REDEMPTION AMOUNT" means the Series A
Preference Redemption Amount plus the Series B Preference Redemption
Amount.
(e) "AGGREGATE PARTICIPATION REDEMPTION AMOUNT" means the Series A
Participation Redemption Amount plus the Series B Participation
Redemption Amount.
(f) "AVAILABLE FUNDS" has the meaning set out in Section 7.1(a)(i).
(g) "BOARD OF DIRECTORS" means the board of directors of the
Corporation.
(h) "BUSINESS DAY" means any day, other than a Saturday or Sunday, on
which chartered banks in Ottawa, Ontario are open for commercial
banking business during normal banking hours.
-2-
(i) "CHANGE OF CONTROL EVENT" means:
(i) the sale, lease, exclusive and irrevocable licence,
abandonment, transfer or other disposition of all or
substantially all of the assets of the Corporation to a Person
other than a Person that is an Affiliate of the Corporation;
or
(ii) (A) an amalgamation of the Corporation with another
corporation (other than with a Subsidiary of the Corporation),
(B) a statutory arrangement involving the Corporation or (C)
any other transaction involving the Corporation, whether by a
single transaction or series of transactions, pursuant to
which, in the case of (A), (B) or (C) above,
(1) any Person, together with his or its Affiliates
hereafter acquires the direct or indirect "beneficial
ownership" (as defined in the Act) of all of the issued
and outstanding shares in the capital of the
Corporation; and
(2) the nature of the transaction (or series of
transactions) is such that the consideration (whether in
the form of cash, securities or other property) in
connection with such transaction (or series of
transactions) would not be received by the shareholders
of the Corporation,
provided, however, that the Series B Majority Holders shall have the
right, on behalf of all Series B Holders to waive the treatment of
any of such event as a "CHANGE OF CONTROL EVENT" (provided that any
such waiver must be in writing signed by the Series B Majority
Holders and shall only be effective as to the particular event in
respect of which the waiver is executed).
(j) "CLASS A PREFERRED SHARES" means the Class A Convertible Preferred
Shares in the capital of the Corporation, the first series of which
are the Series A Shares.
(k) "CLASS B PREFERRED SHARES" means the Class B Convertible-Preferred
Shares in the capital of the Corporation, the first series of which
are the Series B Shares.
(l) "COMMON SHARE OFFERING" means the offering, issuance and sale by the
Corporation of Common Shares within nine months of the Original
Issuance Date for an aggregate purchase price of not more than
$10,000,000.
(m) "COMMON SHARES" means the common shares in the capital of the
Corporation.
(n) "CONSIDERATION PER SHARE" means:
(i) in respect of the issuance of Common Shares, an amount equal
to:
(A) the total consideration received by the Corporation for
the issuance of such Common Shares, divided by
(B) the number of such Common Shares issued;
-3-
(ii) in respect of the issuance of Derivative Securities, an amount
equal to:
(A) the total consideration received by the Corporation for
the issuance of such Derivative Securities plus the
minimum amount of any additional consideration payable
to the Corporation upon exercise, conversion or exchange
of such Derivative Securities; divided by
(B) the maximum number of Common Shares that would be issued
if all such Derivative Securities were exercised,
converted or exchanged in accordance with their terms on
the effective date of the relevant calculation,
provided, however, that if the amount determined in accordance
with this clause (ii) equals zero in respect of any particular
issuance of Derivative Securities, then the "CONSIDERATION PER
SHARE" in respect of such issuance shall be the amount as may
be determined by the agreement in writing of the Corporation,
the Series B Majority Holders and the Series A Majority
Holders. In the event that the Corporation, the Series B
Majority Holders and the Series A Majority Holders do not
agree on such amount, the Corporation shall not issue such
Derivative Securities.
(o) "CONTROL" means, with respect to any Person at any time:
(i) holding, as owner or other beneficiary, other than solely as
the beneficiary of an unrealized security interest, directly
or indirectly through one or more intermediaries (A) more than
fifty percent (50%) of the voting securities of that Person,
or (B) securities of that Person carrying votes sufficient to
elect or appoint the majority of individuals who are
responsible for the supervision or management of that Person;
or
(ii) the exercise of de facto control of that Person whether direct
or indirect and whether through the ownership of securities,
by contract or trust or otherwise,
and the term "CONTROLLED" has a corresponding meaning.
(p) "CONVERSION DATE" means the date on which the documentation set out
in Section 5.8(a) is received by the Corporation.
(q) "CONVERSION VALUE" means the number determined in accordance with
Article 6.
(r) "CORPORATION" means Mitel Networks Corporation.
(s) "DAY" or "DAYS" means calendar day or calendar days, unless
otherwise noted.
(t) "DERIVATIVE SECURITIES" means:
(i) all shares and other securities that are convertible into or
exchangeable for Common Shares (including the Series A Shares
and Series B Shares); and
-4-
(ii) all options, warrants and other rights to acquire Common
Shares or securities directly or indirectly convertible into
or exchangeable for Common Shares.
(u) "EXCLUDED ISSUANCES" has the meaning set out in Section 6.4.
(v) "FAIR MARKET VALUE" means:
(i) in respect of assets other than securities, the fair market
value thereof as determined in good faith by the Board of
Directors, provided, however, that if the Series B Majority
Holders and/or the Series A Majority Holders object in writing
to any such determination within 10 days of receiving notice
of such determination, the fair market value will be
determined by an independent investment banking or business
valuation firm mutually agreeable to the Board of Directors
and the Series B Majority Holders and/or the Series A Majority
Holders, as the case may be, whose decision is final and
binding on all Persons (the costs of which shall be borne by
the Corporation);
(ii) in respect of Common Shares, the fair market value thereof, as
determined in accordance with Exhibit "1" attached to these
Series B Share provisions; and
(iii) in respect of securities other than Common Shares:
(A) if such securities are not subject to any statutory hold
periods or contractual restrictions on transfer:
(1) if traded on one or more securities exchanges or
markets, the weighted average of the closing
prices of such securities on the exchange or
market on which the securities are primarily
traded over the 30-day period ending three days
prior to the relevant date;
(2) if actively traded over-the-counter, the weighted
average of the closing bid or sale prices
(whichever are applicable) over the 30-day period
ending three days prior to the relevant date; or
(3) if there is no active public market, the fair
market value of such securities as determined in
good faith by the Board of Directors, but no
discount or premium is to be applied to their
valuation on the basis of the securities
constituting a minority block or a majority block
of securities, or
(B) if such securities are subject to statutory hold periods
or contractual restrictions on transfer, or both, the
fair market value of such securities as determined by
applying an appropriate discount,
-5-
as determined in good faith by the Board of Directors,
to the value as calculated in accordance with clause
(A) above,
provided, however, that if the Series B Majority Holders
and/or the Series A Majority Holders object in writing to any
determination of the Board of Directors made under clause (A)
or (B) above within 10 days of receiving notice of such
determination, the applicable fair market value and/or
discount, as the case may be, will be determined by an
independent investment banking or business valuation firm
mutually agreeable to the Board of Directors and the Series B
Majority Holders and/or the Series A Majority Holders, as the
case may be, whose decision is final and binding on all
Persons (the costs of which shall be borne by the
Corporation).
(w) "ISSUE PRICE" means $1.00, subject to appropriate adjustments for
stock dividends, stock splits, stock consolidations, capital
reorganizations and the like occurring after the Original Issuance
Date and affecting the Series B Shares.
(x) "JUNIOR SHARES" has the meaning set out in Section 4.1 (a)(i).
(y) "LIQUIDATION EVENT" means a liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders
for the purpose of winding up its affairs.
(z) "▇▇▇▇▇▇▇▇ GROUP" means:
(i) ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, his spouse or former spouse, any
lineal descendant of ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, any spouse or
former spouse of any such lineal descendant, and their
respective legal personal representatives;
(ii) the trustee or trustees of any trust (including without
limitation a testamentary trust) for the exclusive benefit of
any one or more members of the ▇▇▇▇▇▇▇▇ Group;
(iii) any corporation all of the issued and outstanding shares of
which are beneficially owned by any one or more members of the
▇▇▇▇▇▇▇▇ Group;
(iv) any partnership all of the partnership interests in which are
beneficially owned by any one or more members of the ▇▇▇▇▇▇▇▇
Group; and
(v) any charitable foundation Controlled by any one or more
members of the ▇▇▇▇▇▇▇▇ Group,
and, for this purpose, a trustee or trustees referred to in clause
(ii) above shall be deemed to beneficially own any shares or
partnership interests held by them.
-6-
(aa) "NON-QUALIFIED IPO" means any public offering of the Common Shares,
other than a Qualified IPO (provided, that, any previous filing of a
registration statement or similar instrument with the United States
Securities and Exchange Commission in fulfillment of the
Corporation's existing obligations as a foreign private issuer shall
be deemed not to constitute a public offering for the purposes of
these Series B Share provisions).
(bb) "ORIGINAL ISSUANCE DATE" means, in respect of Series B Shares, the
date on which the first Series B Shares are issued.
(cc) "PARTIAL SALE EVENT" MEANS:
(i) (A) an amalgamation of the Corporation with another
corporation (other than with a Subsidiary of the Corporation),
(B) a statutory arrangement involving the Corporation, (C) the
sale, exchange or other disposition of outstanding shares of
the Corporation, or (D) any other transaction involving the
Corporation (other than a public offering of securities of the
Corporation), whether by a single transaction or series of
transactions, pursuant to which, in the case of (A), (B), (C)
or (D) above, any Person, together with his or its Affiliates
(other than members of the ▇▇▇▇▇▇▇▇ Group), hereafter acquires
the direct or indirect "beneficial ownership" (as defined in
the Act) of securities of the Corporation representing more
than 50% but less than all of the issued and outstanding
shares in the capital of the Corporation; or
(ii) any event, whether by a single transaction or a series of
transactions, that results in ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and/or
Persons Controlled by ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ holding in the
aggregate less than 100,000,000 of the issued and outstanding
shares in the capital of the Corporation (subject to
appropriate adjustments for stock dividends, stock splits,
stock consolidations, capital reorganizations and the like
occurring after the Original Issuance Date), calculated on an
as-if-converted to Common Shares basis.
provided, however, that the Series B Majority Holders shall have the
right, on behalf of all Series B Holders, to waive the treatment of
any of such event as a "PARTIAL SALE EVENT" (provided that any such
waiver must be in writing signed by the Series B Majority Holders
and shall only be effective as to the particular event in respect of
which the waiver is executed).
(dd) "PERSON" includes any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural person in his
capacity as trustee, executor, administrator, or other legal
representative.
-7-
(ee) "QUALIFIED IPO" means a public offering of Common Shares in which:
(i) the price per share is at least two times:
(A) the aggregate Issue Price for all Series A Shares issued
by the Corporation,
divided by
(B) the sum of
(1) the number of Common Shares (other than Additional
Common Shares) into which any Series A Shares have
been converted (subject to appropriate adjustments
for stock dividends, stock splits, stock
consolidations, capital reorganizations and the
like occurring after the Original Issuance Date
and affecting the Common Shares); and
(2) the number of Common Shares (other than Additional
Common Shares) into which any outstanding Series A
Shares are then convertible;
(ii) the aggregate cash proceeds to the Corporation are not less
than $100,000,000 (before deducting expenses, underwriting
discounts and commissions); and
(iii) immediately following the closing of the public offering, the
Common Shares are listed and posted for trading, traded or
quoted on one or more of the Toronto Stock Exchange, the New
York Stock Exchange, the NASDAQ National Market System or the
AMEX Exchange.
(ff) "REDEMPTION NOTICE PERIOD" has the meaning set out in Section
7.3(a)(i).
(gg) "REDEMPTION TRIGGER DATE" has the meaning ascribed thereto in the
Series A Share Terms.
(hh) "SERIES A HOLDERS" means the holders of Series A Shares and "SERIES
A HOLDER" means any one of them.
(ii) "SERIES A MAJORITY HOLDERS" means, as of the relevant time of
reference, one or more Series A Holders of record who hold
collectively more than 50% of the outstanding Series A Shares.
(jj) "SERIES A PARTICIPATION REDEMPTION AMOUNT" has the meaning ascribed
thereto in the Series A Share Terms.
(kk) "SERIES A PREFERENCE REDEMPTION AMOUNT" has the meaning ascribed
thereto in the Series A Share Terms.
-8-
(ll) "SERIES A REDEMPTION AMOUNT" has the meaning ascribed thereto in the
Series A Share Terms.
(mm) "SERIES A REDEMPTION AMOUNT PER SHARE" has the meaning ascribed
thereto in the Series A Share Terms.
(nn) "SERIES A REDEMPTION REQUEST" has the meaning ascribed thereto in
the Series A Share Terms.
(oo) "SERIES A SHARES" means the Class A Convertible Preferred Shares,
Series 1 in the capital of the Corporation.
(pp) "SERIES A SHARE TERMS" means the rights, privileges, restrictions
and conditions attached to the Series A Shares as set out in the
articles of the Corporation as same exist on the Original Issuance
Date.
(qq) "SERIES B HOLDERS" means the holders of Series B Shares and "SERIES
B HOLDER" means any one of them.
(rr) "SERIES B MAJORITY HOLDERS" means, as of the relevant time of
reference, one or more Series B Holders of record who hold
collectively more than 50% of the outstanding Series B Shares.
(ss) "SERIES B PARTICIPATION REDEMPTION AMOUNT" has the meaning set out
in Section 7.1(a)(ii)(B).
(tt) "SERIES B PREFERENCE REDEMPTION AMOUNT" has the meaning set out in
Section 7.1(a)(ii)(A).
(uu) "SERIES B REDEMPTION AMOUNT" has the meaning set out in Section
7.1(a)(ii).
(vv) "SERIES B REDEMPTION AMOUNT PER SHARE" is the amount determined by
dividing the Series B Redemption Amount by the total number of
Series B Shares outstanding.
(ww) "SERIES B REDEMPTION REQUEST" has the meaning set out in Section
7.3(a).
(xx) "SERIES B SHARES" means the Class B Convertible Preferred Shares,
Series 1 in the capital of the Corporation.
(yy) "STOCK SPLIT" means:
(i) the issuance of Common Shares as a dividend or other
distribution on outstanding Common Shares;
(ii) the subdivision of outstanding Common Shares into a greater
number of Common Shares; or
(iii) the combination of outstanding Common Shares into a smaller
number of Common Shares.
-9-
(zz) "SUBSIDIARY" has the meaning ascribed thereto in the Act on the
Original Issuance Date.
(aaa) "TPC" means Her Majesty the Queen in Right of Canada, as represented
by the Minister of Industry.
1.2 "AS-IF-CONVERTED TO COMMON SHARES BASIS"
For purposes of these Series B Share provisions, where a calculation is required
to be made on an "AS-IF-CONVERTED TO COMMON SHARES BASIS", such calculation will
be made by determining (in each case as of the applicable date for the
determination):
(a) in respect of the Series B Shares, the number of whole Common Shares
into which such Series B Shares are then convertible pursuant to
these Series B Share provisions;
(b) in respect of the Series A Shares, the number of whole Common Shares
into which such Series A Shares are then convertible pursuant to the
Series A Share Terms; and
(c) in respect of any other Derivative Securities, the number of whole
Common Shares into which such securities are then convertible
pursuant to the articles of the Corporation.
ARTICLE 2
VOTING RIGHTS
2.1 ENTITLEMENT TO VOTE AND RECEIVE MATERIALS
(a) Except as otherwise expressly provided in these Series B Share
provisions, or as provided by applicable law, each Series B Holder
is entitled to vote on all matters submitted to a vote or consent of
shareholders of the Corporation.
(b) Each Series B Holder is entitled to receive copies of all notices
and other materials sent by the Corporation to its shareholders
relating to written actions to be taken by shareholders in lieu of a
meeting. All such notices and other materials shall be sent to the
Series B Holders concurrently with delivery to the other
shareholders.
2.2 NUMBER OF VOTES
(a) Within the first two years after the Original Issuance Date, each
Series B Share entitles the Series B Holder to the number of votes
per share equal to the quotient obtained by dividing the Issue Price
by the Conversion Value.
(b) After two years from the Original Issuance Date, each Series B Share
entitles the Series B Holder to the number of votes per share equal
to the sum of (i) the quotient obtained by dividing the Issue Price
by the Conversion Value, and (ii) the quotient obtained by dividing
the Issue Price by the fair market value of a Common Share (and for
such purposes, the fair market value of a Common Share
-10-
shall be as determined in good faith by the Board of Directors at
the time of the relevant calculation).
(c) For purposes of determining the number of votes for each Series B
Share calculated in accordance with Section 2.2(a) or 2.2(b), the
determination shall be made as of the record date for the
determination of shareholders entitled to vote on such matter, or if
no record date is established, the date such vote is taken or any
written consent of shareholders is solicited, and shall be
calculated based on the Conversion Value in effect on that date.
2.3 SINGLE CLASS
Except as otherwise provided herein, or except as provided by applicable law,
the Series B Holders will vote together with the holders of Series A Shares and
Common Shares and any other series or class of shares entitled to vote on such
matters as a single class on all matters submitted to a vote of shareholders of
the Corporation.
2.4 EXCEPTION TO SINGLE CLASS
In addition to any other approvals required by applicable law, any addition to,
change to or removal of any right, privilege, restriction or condition attaching
to the Series B Shares as a series or the Class B Preferred Shares as a class
requires the affirmative vote or written approval of the Series B Majority
Holders.
ARTICLE 3
DIVIDENDS
3.1 ENTITLEMENT TO DIVIDENDS
The Series B Holders shall be entitled to receive, in respect of the Series B
Shares, non-cumulative dividends if, as and when declared by the Board of
Directors out of the monies of the Corporation properly applicable to the
payment of dividends, the amount of which the directors, in their absolute
discretion, may from time to time or at any time determine. Any declared but
unpaid dividend shall be paid immediately upon the conversion of a Series B
Share, if not previously paid.
3.2 PRIORITY OF DIVIDENDS
(a) Except as provided in Section 4.1, no dividend or other distribution
(other than a stock dividend giving rise to an adjustment under
Section 6.5) will be paid or set apart for payment in respect of any
share of any other class or series unless a dividend is concurrently
paid or set apart for payment in respect of each outstanding Series
B Share in an amount at least equal to the product of:
(i) the amount of the dividend per share paid in respect of the
shares of such other class or series (calculated on an
as-if-converted to Common Shares basis); and
(ii) the number of Common Shares into which each Series B Share is
then convertible.
-11-
(b) When any declared non-cumulative dividend or amount payable on a
return of capital in respect of Series B Shares is not paid in full,
the Series B Holders shall participate rateably in respect of such
dividends in accordance with the sums which would be payable on the
Class B Preferred Shares if all such dividends were declared and
paid in full, and on any return of capital in accordance with the
sums which would be payable on such return of capital if all sums so
payable were paid in full.
ARTICLE 4
LIQUIDATION PREFERENCE
4.1 PAYMENT OF LIQUIDATION PREFERENCE
(a) Subject to the limitation in Section 4.1(b), upon the occurrence of
a Liquidation Event or Change of Control Event the Series B Holders
are entitled to receive the following amounts:
(i) Preference on a Liquidation Event. Upon the occurrence of a
Liquidation Event, after the distribution to or payment of all
preferential amounts required to be paid to the holders of
Series A Shares and any other series of Class A Preferred
Shares (or funds necessary for such payments have been set
aside in trust so as to be available for such payments), the
Series B Holders are entitled to be paid out of the assets of
the Corporation available for distribution to its shareholders
(pari passu with the holders of any other series of Class B
Preferred Shares), before any payment shall be made to the
holders of Common Shares or any other class or series of
shares ranking on liquidation, dissolution or winding-up of
the Corporation junior to the Series B Shares (collectively,
the "JUNIOR SHARES"), an amount per Series B Share equal to
the Issue Price plus any declared but unpaid dividends payable
to Series B Holders. If, upon such a Liquidation Event (and
after the distribution to or payment of all preferential
amounts required to be paid to the holders of Series A Shares
and any other series of Class A Preferred Shares upon a
Liquidation Event (or funds necessary for such payments have
been set aside in trust so as to be available for such
payments)), the assets of the Corporation available for
distribution to the Corporation's shareholders shall be
insufficient to pay the Series B Holders the full amount to
which they are entitled as set out above, the holders of
Series B Shares and any other series of Class B Preferred
Shares shall share rateably in any amount remaining available
for distribution in proportion to the respective amounts which
would otherwise have been payable on or in respect of the
shares held by them if all amounts payable on or in respect of
such shares were paid in full.
(ii) Preference on a Change of Control Event. Upon the occurrence
of a Change of Control Event, after the distribution to or
payment of all preferential amounts required to be paid to the
holders of Series A Shares and any other series of Class A
Preferred Shares upon a Change of Control Event (or funds
necessary for such payments have been set aside in trust so as
to be available for such payments), the Series B Holders are
entitled
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to receive an amount of cash, securities or other property per
Series B Share, before any payment shall be made to the
holders of Junior Shares, equal to the Issue Price plus any
declared but unpaid dividends payable to Series B Holders. If
upon the occurrence of a Change of Control Event (and after
the distribution to or payment of all preferential amounts
required to be paid to the holders of Series A Shares and any
other series of Class A Preferred Shares upon a Change of
Control Event (or funds necessary for such payments have been
set aside in trust so as to be available for such payments)),
the cash, securities or other property available for payment
to the Corporation's shareholders shall be insufficient to pay
the Series B Holders the full amount to which they are
entitled as set out above, the holders of Series B Shares and
any class or series of shares ranking on parity with the
Series B Shares shall share rateably in any such payment in
proportion to the respective amounts which would otherwise
have been payable on or in respect of the shares held by them
if all amounts payable on or in respect of such shares were
paid in full.
(iii) Participation Amount. After the distribution to or payment of
all preferential amounts required to be paid to the holders of
Series A Shares, Series B Shares and any other series of Class
A Preferred Shares or Class B Preferred Shares upon a
Liquidation Event or upon a Change of Control Event (or funds
necessary for such payments have been set aside in trust so as
to be available for such payments), the remaining assets of
the Corporation available for distribution, or cash,
securities or other property available for payment to its
shareholders, shall be distributed or paid, as the case may
be, rateably (subject to the limitation in Section 4.1(b) and
to the rights, if any, of holders of any other class or series
of shares of the Corporation to participate in payments or
distributions upon a Liquidation Event or Change of Control
Event) among the holders of all issued and outstanding: (A)
Class A Preferred Shares; (B) Class B Preferred Shares; and
(C) Common Shares (with the holders of any series of Class A
Preferred Shares and Class B Preferred Shares deemed to hold
that number of shares equal to the number of Common Shares
into which such series of Class A Preferred Shares or Class B
Preferred Shares, as the case may be, are then convertible).
(b) In the event that the applicable Liquidation Event or Change of
Control Event occurs within the first two years after the Original
Issuance Date, and the Series B Holders would otherwise be entitled
to receive a preferential payment pursuant to Section 4.1(a)(i) or
4.1(a)(ii), if the amount per Series B Share that would be payable
upon the occurrence of the Liquidation Event or Change of Control
Event pursuant to Section 4.1(a)(iii) to the holders of all issued
and outstanding Common Shares (assuming the conversion of all Class
A Preferred Shares and Class B Preferred Shares in accordance with
their terms immediately prior to the occurrence of the Liquidation
Event or Change of Control Event, as the case may be) is:
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(i) equal to or greater than the sum of (A) two times the Issue
Price, and (B) any declared but unpaid dividends per Series B
Share, then the Series B Holders shall not be entitled to
receive payment of any preferential amounts pursuant to
Section 4.1(a)(i) or 4.1(a)(ii), as the case may be, and shall
only be entitled to receive the amount payable pursuant to
Section 4.1(a)(iii); or
(ii) less than the sum (A) two times the Issue Price, and (B) any
declared but unpaid dividends per Series B Share, then the
maximum amount per Series B Share that the Series B Holders as
such are entitled to receive pursuant to Section 4.1(a) shall
be the sum of (A) two times the Issue Price, and (B) any
declared but unpaid dividends per Series B Share.
(c) In the event of any Liquidation Event or Change of Control Event:
(i) the Corporation will not permit such Liquidation Event or
Change of Control Event to occur unless the transaction (or
series of transactions) provides for a payment (by dividend or
other distribution by the Corporation or otherwise) to the
Series B Holders in connection therewith of their full
entitlements pursuant to Section 4.1(a) (subject to the
limitation in Section 4.1(b)); or
(ii) if the Corporation cannot prevent such Liquidation Event or
Change of Control Event from occurring, the Corporation shall,
subject to applicable laws, pay to the Series B Holders (by
dividend or other distribution) the full amount of their
entitlements pursuant to Section 4.1(a) (subject to the
limitation in Section 4.1(b)) or, if the Corporation cannot
legally pay such amount in full, the amount it is legally able
to pay shall be paid and the balance shall increase at the
rate of 15% per annum, compounded annually until such amount
is paid, and the Corporation shall not pay any amounts or make
any other distributions (other than any payment or
distribution made pro rata according to the respective
entitlements of the Series A Holders pursuant to section
4.1(c)(ii) of the Series A Share Terms and of the Series B
Holders pursuant to this clause (ii)) in respect of any other
class or series of its shares until such entitlements are
fully paid.
(d) The Corporation will not permit any transaction (or series of
transactions) that would constitute, but for Section 1.1(i)(ii)(2),
a "Change of Control Event", to occur unless the transaction (or
series of transactions) provides for a payment (by dividend or other
distribution by the Corporation or otherwise) to the Series B
Holders in connection therewith of the their full entitlements
pursuant to Sections 4.1(a)(ii) and 4.1(a)(iii) (subject to the
limitation in Section 4.1(b)).
4.2 DISTRIBUTION OTHER THAN CASH
In the case of a Liquidation Event, the Series B Holders may in any event elect
to receive any distribution or payment to which they are entitled in cash, if
any. The value of the securities or other assets for this purpose is their Fair
Market Value.
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4.3 NOTICE
The Corporation shall provide notice in accordance with the provisions of
Section 8.2 to each Series B Holder, at the earliest practicable time, of the
date on which a proposed or reasonably anticipated Liquidation Event or Change
of Control Event shall take place. Such notice shall also specify the estimated
payment date, the amount to which the Series B Holders would be entitled and the
place where such payments are to be made.
ARTICLE 5
CONVERSION
5.1 OPTIONAL CONVERSION RIGHTS
Each Series B Share is convertible, at any time and from time to time at the
option of the Series B Holder and without payment of additional consideration,
into Common Shares.
5.2 AUTOMATIC CONVERSION
The Series B Shares automatically convert into Common Shares:
(a) immediately prior to, and conditional upon, the closing of a
Qualified IPO; or
(b) with the affirmative vote or written consent of the Series B
Majority Holders.
5.3 CONVERSION RATE
The number of Common Shares into which each Series B Share is convertible is
equal to the quotient obtained by dividing the Issue Price (plus any declared
but unpaid dividends) by the Conversion Value, as adjusted from time to time in
accordance with Article 6.
5.4 ADDITIONAL COMMON SHARES ON CONVERSION
In the event of any conversion after two years from the Original Issuance Date,
in addition to the number of Common Shares otherwise issuable to a Series B
Holder upon a conversion of Series B Shares, each Series B Holder shall also be
entitled, in respect of each Series B Share so converted, to receive an
additional number of Common Shares as is equal to the Issue Price divided by the
Fair Market Value of a Common Share as of the date that the conversion is deemed
to be effected in accordance with Section 5.6.
5.5 ADDITIONAL COMMON SHARES ON CONVERSION IN A NON-QUALIFIED IPO
In the event of:
(a) an optional conversion pursuant to Section 5.1 in connection with a
Non-Qualified IPO; or
(b) an automatic conversion pursuant to Section 5.2(b) in connection
with a Non-Qualified IPO,
-15-
that occurs within the first two years after the Original Issuance Date, in
addition to the number of Common Shares otherwise issuable to a Series B Holder
upon a conversion of Series B Shares, each Series B Holder shall also be
entitled in respect of each Series B Share so converted, to receive that number
of additional Common Shares, if any, as is determined in accordance with the
following formula:
X-Y
---
Z
Where:
X = two times the Issue Price
Y = the greater of: (i) the Issue Price; and (ii) the Offering
Price
Z = the Offering Price
For the purposes of this Section 5.5, "OFFERING PRICE" means the per share issue
price of the Common Shares issued in connection with the Non-Qualified IPO.
For the purposes of this Section 5.5 and Section 5.6(d), a conversion of Series
B Shares into Common Shares shall be deemed to be effected "in connection with a
Non-Qualified IPO" if (i) in the case of an optional conversion pursuant to
Section 5.1, such conversion was completed at the written request of the
Corporation in order to facilitate the Non-Qualified IPO, or (ii) in the case of
an automatic conversion pursuant to Section 5.2(b), the Series B Majority
Holders voting to approve or consenting to the automatic conversion agreed to
convert their Series B Shares at the written request of the Corporation in order
to facilitate the Non-Qualified IPO; provided that, the Corporation shall not
make such a written request to the Series B Holders unless the Corporation
concurrently makes a written request to the Series A Holders pursuant to the
Series A Share Terms.
5.6 EFFECTIVE DATE AND TIME OF CONVERSION
Conversion is deemed to be effected:
(a) subject to Section 5.6(d), in the case of an optional conversion
pursuant to Section 5.1, immediately prior to the close of business
on the Conversion Date;
(b) in the case of automatic conversion pursuant to Section 5.2(a),
immediately prior to the closing of the Qualified IPO;
(c) subject to Section 5.6(d), in the case of automatic conversion
pursuant to Section 5.2(b), at the time and on the date specified by
the Series B Majority Holders;
(d) in the case of an optional conversion or an automatic conversion "in
connection with a Non-Qualified IPO", as contemplated in Section
5.5, immediately prior to the closing of the Non-Qualified IPO; and
(e) notwithstanding any delay in the delivery of certificates
representing the Common Shares into which the Series B Shares have
been converted.
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5.7 EFFECT OF CONVERSION
Upon the conversion of the Series B Shares:
(a) the rights of a Series B Holder as a holder of the converted Series
B Shares cease; and
(b) each person in whose name any certificate for Common Shares is
issuable upon such conversion is deemed to have become the holder of
record of such Common Shares.
5.8 MECHANICS OF OPTIONAL CONVERSION
(a) To exercise optional conversion rights under Section 5.1, a Series B
Holder must:
(i) give written notice to the Corporation at its principal office
or the office of any transfer agent for the Common Shares:
(A) stating that the Series B Holder elects to convert such
shares; and
(B) providing the name or names (with address or addresses)
in which the certificate or certificates for Common
Shares issuable upon such conversion are to be issued;
(ii) surrender the certificate or certificates representing the
shares being converted to the Corporation at its principal
office or the office of any transfer agent for the Common
Shares; and
(iii) where the Common Shares are to be registered in the name of a
person other than the Series B Holder, provide evidence to the
Corporation of proper assignment and transfer of the
surrendered certificates to the Corporation, including
evidence of compliance with applicable Canadian and United
States securities laws and any applicable shareholders
agreement.
(b) As soon as reasonably practicable, but in any event within 10 days
after the Conversion Date, the Corporation will issue and deliver to
the Series B Holder a certificate or certificates in such
denominations as such Series B Holder requests for the number of
full Common Shares issuable upon the conversion of such Series B
Shares, together with cash in respect of any fractional Common
Shares issuable upon such conversion.
5.9 MECHANICS OF AUTOMATIC CONVERSION
(a) Upon the automatic conversion of any Series B Shares into Common
Shares, each Series B Holder must surrender the certificate or
certificates formerly representing that Series B Holder's Series B
Shares at the principal office of the Corporation or the office of
any transfer agent for the Common Shares.
-17-
(b) Upon receipt by the Corporation of the certificate or certificates,
the Corporation will issue and deliver to such Series B Holder,
promptly at the office and in the name shown on the surrendered
certificate or certificates, a certificate or certificates for the
number of Common Shares into which such Series B Shares are
converted, together with cash in respect of any fractional Common
Shares issuable upon such conversion.
(c) The Corporation is not required to issue certificates evidencing the
Common Shares issuable upon conversion until certificates formerly
evidencing the converted Series B Shares are either delivered to the
Corporation or its transfer agent, or the Series B Holder notifies
the Corporation or such transfer agent that such certificates have
been lost, stolen or destroyed, and executes and delivers an
agreement to indemnify the Corporation from any loss incurred by the
Corporation in connection with the loss, theft or destruction.
(d) If the Board of Directors expects, acting reasonably, that the
Series B Shares will automatically convert, the Corporation will, at
least 20 days before the date it reasonably believes will be the
date of the automatic conversion, send by prepaid priority overnight
courier or deliver to each person who at the date of mailing or
delivery is a registered Series B Holder, a notice in writing of the
intention of the Corporation to automatically convert such shares.
That notice shall be sent or delivered to each Series B Holder at
the last address of that Series B Holder as it appears on the
securities register of the Corporation, or in the event the address
of any such Series B Holder does not so appear, then to the last
address of that Series B Holder known to the Corporation. Accidental
failure or omission to give that notice to one or more Series B
Holder(s) will not affect the validity of such conversion, but if
that failure or omission is discovered, notice shall be given
promptly to any Series B Holder that was not given notice. That
notice will have the same force and effect as if given in due time.
The notice will set out the basis under Section 5.2 for such
automatic conversion, the number of Series B Shares held by the
person to whom it is addressed which are to be converted (if known),
the number of Common Shares into which those Series B Shares will be
converted (including any Additional Common Shares), the expected
date of closing of the Qualified IPO, if applicable, and the place
or places in Canada at which Series B Holders may present and
surrender the certificate or certificates representing its Series B
Shares for conversion.
5.10 FRACTIONAL SHARES
No fractional Common Shares will be issued upon conversion of Series B Shares.
Instead of any fractional Common Shares that would otherwise be issuable upon
conversion of Series B Shares, the Corporation will pay to the Series B Holder a
cash adjustment in respect of such fraction in an amount equal to the same
fraction of the value per Common Share (as determined in good faith by the Board
of Directors) on the effective date of the conversion. For greater certainty,
all of a Series B Holder's Series B Shares will be aggregated for purposes of
calculating any fractional Common Share resulting from a conversion.
-18-
5.11 PARTIAL CONVERSION
If some but not all of the Series B Shares represented by a certificate or
certificates surrendered by a Series B Holder are converted, the Corporation
will execute and deliver to or on the order of the Series B Holder, at the
expense of the Corporation, a new certificate representing the number of Series
B Shares that were not converted.
ARTICLE 6
CONVERSION VALUE
6.1 INITIAL CONVERSION VALUE
The initial Conversion Value is equal to the Issue Price and remains in effect
until the Conversion Value is adjusted in accordance with the provisions of this
Article 6.
6.2 ADJUSTMENTS FOR DILUTION
If, following the Original Issuance Date, the Corporation issues any additional
Common Shares or Derivative Securities (other than Excluded Issuances or in
connection with an event to which Section 6.5, 6.6 or 6.7 applies) for
Consideration Per Share that is less than the Conversion Value in effect
immediately prior to such issuance, then the Conversion Value in effect
immediately prior to such issuance shall be adjusted so that, upon such
issuance, the Conversion Value shall be reduced to an amount equal to the
Consideration Per Share of such additional Common Shares or Derivative
Securities.
6.3 ADDITIONAL PROVISIONS REGARDING DILUTION
For purposes of Section 6.2:
(a) if a part or all of the consideration received by the Corporation in
connection with the issuance of additional Common Shares or
Derivative Securities consists of property other than cash, such
consideration is deemed to have a value equal to its Fair Market
Value;
(b) no adjustment of the Conversion Value is to be made upon the
issuance of any Derivative Securities or additional Common Shares
that are issued upon the exercise, conversion or exchange of any
Derivative Securities;
(c) any adjustment of the Conversion Value is to be disregarded if, and
to the extent that, all of the Derivative Securities that gave rise
to such adjustment expire or are cancelled without having been
exercised or converted, so that the Conversion Value effective
immediately upon such cancellation or expiration is equal to the
Conversion Value that otherwise would have been in effect
immediately prior to the time of the issuance of the expired or
cancelled Derivative Securities, with any additional adjustments as
subsequently would have been made to that Conversion Value had the
expired or cancelled Derivative Securities not been issued;
(d) if the terms of any Derivative Securities previously issued by the
Corporation are changed (whether by their terms or for any other
reason) so as to raise or lower the Consideration Per Share payable
with respect to such Derivative Securities
-19-
(whether or not the issuance of such Derivative Securities
originally gave rise to an adjustment of the Conversion Value), the
Conversion Value is adjusted as of the date of such change;
(e) the Consideration Per Share received by the Corporation in respect
of Derivative Securities is determined in each instance as follows:
(i) the Consideration Per Share is determined as of the date of
issuance of Derivative Securities without giving effect to any
possible future price adjustments or rate adjustments that
might be applicable with respect to such Derivative Securities
and that are contingent upon future events; and
(ii) in the case of an adjustment to the Conversion Value to be
made as a result of a change in terms of any Derivative
Securities, the Consideration Per Share for purposes of
calculating the adjustment to the Conversion Value is
determined as of the date of such change and, for greater
certainty, not as of the date of the issuance of the
Derivative Securities; and
(f) notwithstanding any other provisions contained in these Series B
Share provisions, but except as provided in Sections 6.3(d) or 6.5,
no adjustment to the Conversion Value is to be made in respect of
the issuance of additional Common Shares or Derivative Securities in
any case in which such adjustment would otherwise result in the
Conversion Value being greater than the Conversion Value in effect
immediately prior to the issuance of such additional Common Shares
or Derivative Securities.
6.4 EXCLUDED TRANSACTIONS
Notwithstanding Section 6.2, no adjustment to the Conversion Value is to be made
in connection with the following issuances ("EXCLUDED ISSUANCES"):
(a) any Series A Shares issued on or after the Original Issuance Date;
(b) any Common Shares issued or issuable upon conversion of the Series A
Shares or Series B Shares; provided that, any such conversion is
effected in accordance with the terms of such shares (including
provisions for adjustment) as such terms exist on the Original
Issuance Date;
(c) any Additional Common Shares;
(d) any Common Shares issued to the Series A Holders in accordance with
the Series A Share Terms;
(e) any Common Shares issued or issuable upon exercise of any warrants
granted to the Series A Holders in connection with such Series A
Holders' subscription for Series A Shares;
(f) any Common Shares issued pursuant to the Common Share Offering;
-20-
(g) any option to purchase Common Shares or other Derivative Securities
granted under any stock option plan, stock purchase plan or other
stock compensation program of the Corporation approved by the Board
of Directors and/or Common Shares or other Derivative Securities
allotted for issuance, issued or issuable pursuant to any such plan
or arrangement, or the issuance of any Common Shares upon the
exercise of any such options or other Derivative Securities;
(h) any equity securities issued pursuant to a Qualified IPO or a
Non-Qualified IPO;
(i) any warrants to acquire Common Shares issued to TPC or any permitted
assignee of TPC pursuant to obligations of the Corporation to issue
such warrants (as such obligations exist on or before the Original
Issuance Date or as such obligations may be amended with the
approval of the Board of Directors after the Original Issuance
Date), and any issuance of Common Shares pursuant to the exercise of
such warrants;
(j) any Common Shares or Derivative Securities issued as compensation to
any agent, broker, sub-agent or sub-broker with respect to the
transactions entered into by the Corporation with Series A Holders
and certain other shareholders of the Corporation, and any Common
Shares or Derivative Securities issuable upon exercise thereof;
(k) except as contemplated in Section 6.5, any equity securities issued
in respect of subdivisions, stock dividends or capital
reorganizations affecting the share capital of the Corporation;
(l) any equity securities issued to bona fide consultants or
professional advisors of the Corporation as part of the
consideration for services received by the Corporation from such
consultants or professional advisors;
(m) any Common Shares or Derivative Securities issued in connection with
an acquisition of assets or a business; provided that (i) the cost
of such acquisition is less than $10,000,000, (ii) any such
transaction is approved by the Board of Directors, and (iii) the
maximum aggregate number of Common Shares (including Common Shares
issuable on the conversion or exercise of Derivative Securities)
that may be issued pursuant to all transactions contemplated by this
clause (m) shall not exceed 5% of the aggregate number of Common
Shares issued and outstanding on the Original Issuance Date (subject
to appropriate adjustments for stock dividends, stock splits, stock
consolidations, capital reorganizations and the like occurring after
the Original Issuance Date), all calculated on an as-if-converted to
Common Shares basis; and
(n) any Common Shares or Derivative Securities issued to or in
connection with any of the following (i) licensors of technology to
the Corporation, (ii) lending or leasing institutions in connection
with obtaining debt financing, or (iii) any other technology
licensing, equipment leasing or other non-equity interim financing
transaction; provided that: (A) any such transaction or transactions
are approved by the Board of Directors; and (B) the maximum
aggregate number of Common Shares (including Common Shares issuable
on the conversion or exercise of
-21-
Derivative Securities) that may be issued pursuant to all
transactions contemplated by this clause (n) shall not exceed 5% of
the aggregate number of Common Shares issued and outstanding on the
Original Issuance Date (subject to appropriate adjustments for stock
dividends, stock splits, stock consolidations, capital
reorganizations and the like occurring after the Original Issuance
Date), all calculated on an as-if-converted to Common Shares basis.
6.5 ADJUSTMENTS FOR STOCK SPLITS
After the Original Issuance Date, the Conversion Value shall be adjusted on the
record date in respect of each Stock Split, such that the Conversion Value is
equal to the product obtained by multiplying the Conversion Value immediately
before the Stock Split by a fraction:
(a) the numerator of which is the number of Common Shares issued and
outstanding immediately before the Stock Split; and
(b) the denominator of which is the number of Common Shares issued and
outstanding immediately after the Stock Split.
6.6 ADJUSTMENTS FOR CAPITAL REORGANIZATIONS
If, following the Original Issuance Date, the Common Shares are changed into the
same or a different number of shares of any other class or series, whether by
capital reorganization, reclassification or otherwise, the Corporation will
provide each Series B Holder with the right to convert each Series B Share into
the kind and amount of shares, other securities and property receivable upon
such change that a holder of a number of Common Shares equal to the number of
Common Shares into which such Series B Share was convertible immediately prior
to the change would be entitled to receive upon such change (subject to any
necessary further adjustments after the date of such change).
6.7 OTHER DISTRIBUTIONS
In the event the Corporation declares a distribution payable in securities
(other than securities of the Corporation), evidences of indebtedness issued by
the Corporation or other persons or assets (excluding cash dividends paid in the
ordinary course of business) then, in each such case for the purpose of this
Section 6.7, Series B Holders shall be entitled upon conversion of their Series
B Shares to a proportionate share of any such distribution as though they were
the holders of the number of Common Shares into which their Series B Shares were
convertible as of the record date fixed for the determination of the holders of
Common Shares of the Corporation entitled to receive such distribution.
6.8 NO IMPAIRMENT
The Corporation will not, by amendment of its articles or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed under this Article 6, but will at all times in good faith assist in
the carrying out of all the provisions of Article 5 and 6 and in the taking of
any action necessary
-22-
or appropriate in order to protect the conversion rights of the Series B Holders
against impairment.
6.9 RESERVATION OF COMMON SHARES
The Corporation shall at all times reserve and keep available out of its
authorized but unissued Common Shares, solely for the purpose of effecting the
conversion of Series B Shares, such number of Common Shares as from time to time
is sufficient to effect the conversion of all outstanding Series B Shares, and
if at any time the number of authorized but unissued Common Shares is not
sufficient to effect the conversion of all of the then outstanding Series B
Shares, then the Corporation will take such corporate action as may, in the
opinion of its legal counsel, be necessary to increase its authorized but
unissued Common Shares to such number of shares as is sufficient for such
purpose.
6.10 DISPUTES
If a dispute shall at any time arise with respect to adjustments in the
Conversion Value, such dispute shall be conclusively determined by the
Corporation's auditors, or if they are unable or unwilling to act, by such other
firm of independent chartered accountants as may be selected by the Board of
Directors and any such determination shall be binding upon the Corporation, the
Series B Holders and all other shareholders of the Corporation. Such auditors or
accountants shall be provided access to all necessary records of the
Corporation. If any such determination is made, the Corporation shall deliver a
certificate to the Series B Holders and Series A Holders describing such
determination.
6.11 CERTIFICATE AS TO ADJUSTMENTS
In each case of an adjustment or readjustment of the Conversion Value, the
Corporation will promptly furnish each Series B Holder and Series A Holder with
a certificate, prepared by the Corporation's accountants, showing such
adjustment or readjustment, and stating in reasonable detail the facts upon
which such adjustment or readjustment is based.
6.12 FURTHER ADJUSTMENT PROVISIONS
If, at any time as a result of an adjustment made pursuant to Section 6.6, a
Series B Holder becomes entitled to receive any shares or other securities of
the Corporation other than Common Shares upon surrendering Series B Shares for
conversion, the Conversion Value in respect of such other shares or securities
(if such other shares or securities are by their terms convertible securities)
will be adjusted after that time, and will be subject to further adjustment from
time to time, in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Series B Shares contained in this Article 6, and
the remaining provisions of these Series B Share provisions will apply mutatis
mutandis to any such other shares or securities.
6.13 WAIVER OF ADJUSTMENTS
Notwithstanding any other provisions of this Article 6, with the written consent
of the Corporation, the Series B Majority Holders shall be entitled, on behalf
of all Series B Holders, to waive any entitlement to an adjustment to the
Conversion Value under this Article 6. Any such waiver by the Series B Majority
Holders must be in writing and shall only be effective as to the
-23-
particular adjustment being waived. In such event, notice of such waiver shall
be sent to all Series B Holders and Series A Holders in accordance with
Section 8.2.
ARTICLE 7
REDEMPTION
7.1 REDEMPTION FOLLOWING THE REDEMPTION TRIGGER DATE
(a) On or after the Redemption Trigger Date, the Series B Majority
Holders shall have the right to request the Corporation to redeem
all of the Series B Shares. Upon receipt of such a request, in
writing, the Corporation will:
(i) deliver to each Series B Holder and Series A Holder within 30
days following the date the written request is received by the
Corporation a notice specifying the total funds legally
available to the Corporation for redemption of all of the
Series B Shares and Series A Shares outstanding at that time
(the "AVAILABLE FUNDS"); and
(ii) within 90 days, but not before the expiry of 30 days,
following the date the written request is received by the
Corporation redeem from the Series B Holders, subject to
Section 7.2, all the Series B Shares (and concurrently
therewith redeem from the Series A Holders all the Series A
Shares in the event that the redemption rights of the Series A
Shares have been exercised in accordance with the Series A
Share Terms) to the extent the Corporation has Available
Funds, by paying to the Series B Holders, in accordance with
Section 7.1(b), an amount (the "SERIES B REDEMPTION AMOUNT")
equal to the sum of:
(A) the number of Series B Shares outstanding multiplied by
the sum of (x) the Issue Price and (y) the per share
amount of any declared but unpaid dividends on the
Series B Shares (such amount being the "SERIES B
PREFERENCE REDEMPTION AMOUNT"); and
(B) the then-current Fair Market Value of the Common Shares
(other than Additional Common Shares) into which the
Series B Shares are then convertible (such amount being
the "SERIES B PARTICIPATION REDEMPTION AMOUNT").
(b) Subject to Section 7.2, each Series B Holder shall be paid that
portion of the Series B Redemption Amount equal to the Series B
Redemption Amount Per Share multiplied by the number of Series B
Shares held by the holder.
7.2 INSUFFICIENT FUNDS AND PRIORITIES
(a) If the Available Funds are insufficient to pay in full (i) in the
event that the redemption rights of the Series A Shares have been
exercised in accordance with the Series A Share Terms, the Series A
Redemption Amount with respect to the total number of Series A
Shares outstanding, and (ii) the Series B Redemption Amount with
respect to the total number of Series B Shares outstanding, then
-24-
those funds that are legally available for the redemption of the Series A Shares
in accordance with the Series A Share Terms and the Series B Shares in
accordance with Section 7.1 will be used to redeem the maximum possible number
of whole shares in accordance with the following priorities:
(i) If the Available Funds are insufficient to pay in full the Series A
Preference Redemption Amount, those funds will be used to redeem the
maximum possible number of whole shares rateably among the Series A
Holders, and in such case, the number of Series A Shares to be
redeemed shall be the number obtained by dividing (x) the Available
Funds, by (y) the Series A Redemption Amount Per Share.
(ii) If the Available Funds are sufficient to pay in full the Series A
Preference Redemption Amount, but are insufficient to pay in full
the Aggregate Preference Redemption Amount, those funds will be used
to redeem:
(A) that proportion of the total number of Series A Shares
determined by dividing (x) the Series A Preference Redemption
Amount, by (y) the Series A Redemption Amount Per Share; and
(B) the maximum possible number of whole shares rateably among the
Series B Holders, and in such case, the number of Series B
Shares to be redeemed shall be the number obtained by dividing
(x) the Available Funds minus the Series A Preference
Redemption Amount, by (y) the Series B Redemption Amount Per
Share.
(iii) If the Available Funds are sufficient to pay in full the Aggregate
Preference Redemption Amount, but are insufficient to pay in full
the Aggregate Preference Redemption Amount plus the Series A
Participation Redemption Amount and Series B Participation
Redemption Amount, those funds will be used to redeem:
(A) that proportion of the total number of Series A Shares
determined by dividing (x) the Series A Preference Redemption
Amount, by (y) the Series A Redemption Amount Per Share;
(B) that proportion of the total number of Series B Shares
determined by dividing (x) the Series B Preference Redemption
Amount, by (y) the Series B Redemption Amount Per Share; and
(C) the maximum possible number of whole shares rateably among the
Series A Holders and Series B Holders, and in such case,
(1) the number of Series A Shares to be redeemed shall be
determined in accordance with the following formula:
A x B
-----
C
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(2) the number of Series B Shares to be redeemed shall be
determined in accordance with the following formula:
A x D
-----
E
Where:
A = the Available Funds minus the Aggregate Preference
Redemption Amount
B = the Series A Participation Redemption Amount divided by
the Aggregate Participation Redemption Amount
C = the Series A Redemption Amount Per Share
D = the Series B Participation Redemption Amount divided by
the Aggregate Participation Redemption Amount
E = the Series B Redemption Amount Per Share.
(b) Any Series A Shares not redeemed remain outstanding and remain
entitled to all rights and preferences otherwise provided in
the Series A Share Terms. Any Series B Shares not redeemed in
accordance with Section 7.2(a) remain outstanding and remain
entitled to all rights and preferences otherwise provided in
these Series B Share provisions. As and when funds legally
available for redemption of Series A Shares and Series B
Shares subsequently become available, those funds will be used
to redeem the maximum possible number of whole shares rateably
among the Series A Holders and Series B Holders in accordance
with clause (i), (ii) and (iii) of Section 7.2(a) above and
the Series A Share Terms. The Corporation shall not pay any
amounts or make any other distributions in respect of any
other class or series of its shares until all Series B Shares
and Series A Shares are redeemed as provided above, and all
redemption payments required to be made in accordance with
this Section 7.2 are fully paid to the Series B Holders and
Series A Holders respectively.
7.3 REDEMPTION UPON A PARTIAL SALE EVENT
(a) In connection with a proposed transaction that would result in a
Partial Sale Event, the Series B Majority Holders shall have the
right, prior to the completion of the proposed transaction, to
request, in writing, the Corporation to redeem all of the Series B
Shares. Upon receipt of such a request (a "SERIES B REDEMPTION
REQUEST") the Corporation will:
(i) deliver to each Series B Holder and each Series A Holder
within 20 days (or such shorter or longer period as the
Corporation, the Series B Majority Holders and the Series A
Majority Holders may agree in writing) (the "REDEMPTION NOTICE
PERIOD") following the date the Series B Redemption Request is
received by the Corporation a copy of such Series
-26-
B Redemption Request and a notice specifying whether the
Corporation has sufficient funds legally available to the
Corporation for the redemption of all of the Series B Shares
and (in the event that the Corporation also receives a Series
A Redemption Request prior to the expiry of 30 days following
the Redemption Notice Period) all of the Series A Shares
outstanding; and
(ii) redeem, conditional upon and contemporaneously with the
completion of the transaction resulting in the Partial Sale
Event, from the Series B Holders all the Series B Shares (and
concurrently therewith redeem from the Series A Holders all
the Series A Shares in the event that the Corporation also
received a Series A Redemption Request within the period
specified in clause (i) above) provided the Corporation has
funds legally available for such redemption, by paying to the
Series B Holders, in accordance with Section 7.3(b), the
Series B Redemption Amount.
(b) Subject to Section 7.4, each Series B Holder shall be paid that
portion of the Series B Redemption Amount equal to the Series B
Redemption Amount Per Share multiplied by the number of Series B
Shares held by the holder.
7.4 INSUFFICIENT FUNDS
If in connection with the exercise of the redemption rights pursuant to a Series
B Redemption Request the total funds legally available to the Corporation are
insufficient to pay in full (i) the Series B Redemption Amount with respect to
the total number of Series B Shares outstanding, and (ii) in the event that the
Corporation also received a Series A Redemption Request pursuant to the Series A
Share Terms, the Series A Redemption Amount with respect to the total number of
Series A Shares outstanding, then:
(a) the Corporation shall not redeem any of the Series B Shares pursuant
to the Series B Redemption Request or any of the Series A Shares
pursuant to the Series A Redemption Request; and
(b) the Corporation will not permit the proposed transaction that would
otherwise result in a Partial Sale Event to occur unless Series B
Majority Holders and Series A Majority Holders direct, in writing,
the Corporation to permit such a transaction.
7.5 SURRENDER OF CERTIFICATES
If a redemption of Series B Shares pursuant to this Article 7 will occur, each
Series B Holder shall surrender to the Corporation the certificates representing
the Series B Shares to be redeemed by the Corporation in accordance with this
Article 7, in the manner and at the place designated by the Corporation, and
thereupon all redemption amounts to be paid for such shares shall be payable to
the order of the Person whose name appears on such certificates as the owner
thereof, and each surrendered certificate shall be cancelled and retired. If, in
the case of the exercise of redemption rights in accordance with Sections 7.1
and 7.2, less than all of the Series B Shares represented by such certificates
are redeemed, then the Corporation shall promptly issue new certificates
representing the shares not redeemed.
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ARTICLE 8
MISCELLANEOUS
8.1 NOTICES OF RECORD DATES
If:
(a) the Corporation establishes a record date to determine the Series B
Holders who are entitled to receive any dividend or other
distribution; or
(b) there occurs any Stock Split or other capital reorganization of the
Corporation, any reclassification of the capital of the Corporation,
any Change of Control Event, or any Liquidation Event,
the Corporation will deliver to each Series B Holder, at least 20 days
prior to such record date or the proposed effective date of the relevant
transaction, a notice specifying:
(i) the date of such record date for the purpose of such dividend
or distribution and a description of such dividend or
distribution;
(ii) the date on which any such reorganization, reclassification,
Change of Control Event or Liquidation Event is expected to
become effective; and
(iii) the time, if any, that is to be fixed as to when the holders
of record of Common Shares (or other securities) are entitled
to exchange their Common Shares (or other securities) for
cash, securities or other property deliverable upon such
reorganization, reclassification, Change of Control Event or
Liquidation Event.
8.2 NOTICES
All notices, requests, payments, instructions or other documents to be given
hereunder must be in writing or given by written telecommunication, and will be
deemed to have been duly given if:
(a) delivered personally (effective upon delivery);
(b) mailed by certified mail, return receipt requested, postage prepaid
(effective five Business Days after dispatch) if the recipient is
located in the United States or Canada;
(c) sent by a reputable, established courier service that guarantees
next Business Day delivery (effective the next Business Day) if the
recipient is located in the United States or Canada;
(d) sent by air mail or by commercial express overseas air courier, with
receipt acknowledged in writing by the recipient (effective upon the
date of such acknowledgement) if the recipient is located outside
the United States or Canada;
(e) sent by fax confirmed within 24 hours through one of the foregoing
methods (effective upon receipt of the fax in complete readable
form); and
-28-
addressed as follows (or to such other address as the recipient party furnishes
by notice to the sending party for these purposes: (i) if to any Series B Holder
or Series A Holder, to the last address of that Series B Holder or Series A
Holder as it appears on the securities register of the Corporation, or in the
event the address of any such Series B Holder or Series A Holder does not so
appear, then to the last address of that Series B Holder or Series A Holder
known to the Corporation; and (ii) if to the Corporation, to the address of its
principal office.
8.3 NEGATIVE COVENANTS
So long as any Series B Shares are outstanding, the Corporation will not,
without the prior written approval of one or more Series B Holders of record who
hold collectively more than 80% of the then outstanding Series B Shares:
(a) designate any further series of Class A Preferred Shares or Class B
Preferred Shares;
(b) issue more than 30,000,000 Series A Shares (other than additional
Series A Shares issuable in respect of any stock dividends declared
by the Corporation);
(c) issue more than 68,000,000 Series B Shares (other than additional
Series B Shares issuable in respect of any stock dividends declared
by the Corporation); or
(d) amend the articles of the Corporation to add, change or remove any
rights, privileges, restrictions or conditions attached to the
Series A Shares or the Series B Shares or otherwise change the
Series A Shares or Series B Shares.
8.4 CURRENCY
All references to dollar amounts in these Series B Share provisions are to the
lawful currency of Canada.
8.5 TRANSFER AGENTS
The Corporation may appoint, and from time to time discharge and change, a
transfer agent for the Series B Shares or any other class of shares of the
Corporation. Upon any such appointment, discharge or change of a transfer agent,
the Corporation will send a written notice of such appointment, discharge or
change to each Series B Holder.
8.6 TRANSFER TAXES
The Corporation will pay all share transfer taxes, documentary stamp taxes and
the like that may be properly payable by the Corporation in respect of any
issuance or delivery of Series B Shares or Common Shares or other securities
issued in respect of Series B Shares in accordance with these Series B Share
provisions or certificates representing such shares or securities. The
Corporation is not required to pay any such tax that may be payable in respect
of any transfer involved in the issuance or delivery of Series B Shares or
Common Shares or other securities in a name other than that in which such shares
were registered, or in respect of any payment to any person other than the
registered Series B Holder of the shares with respect to any such shares, and is
not required to make any such issuance, delivery or payment unless and until the
person otherwise entitled to such issuance, delivery or payment has paid to the
Corporation the amount
-29-
of any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid or is not payable.
-30-
EXHIBIT "1" TO
SCHEDULE "B"
DETERMINATION OF FAIR MARKET VALUE
The "FAIR MARKET VALUE" of Common Shares will be determined in accordance with
the following procedures:
(a) The Board of Directors, the Series B Majority Holders and the Series A
Majority Holders will in good faith attempt to agree upon the Fair
Market Value of the Common Shares that are the subject of the proposed
determination under this Exhibit "1".
(b) Fair Market Value of such Common Shares will in all cases (i) be
calculated on the assumption of an arm's length sale at open market
value on a "going concern basis" with no minority discount applied,
and (ii) take into account any conversion rights, liquidation
preferences and any other entitlements attached to any other
securities of the Corporation.
(c) If the Fair Market Value has not been agreed upon between the
Corporation, the Series B Majority Holders and the Series A Majority
Holders within 10 Business Days after commencing their good faith
attempt to agree upon the Fair Market Value under clause (a) above,
then within five Business Days after the end of such 10 Business Day
period, the Corporation, the Series B Majority Holders and the Series
A Majority Holders shall jointly appoint a U.S. or Canadian nationally
recognized independent investment banking or business valuation firm
(the "VALUATOR") to determine the Fair Market Value of such shares
which are subject of the proposed determination under this Exhibit
"1". If the Corporation, the Series B Majority Holders and the Series
A Majority Holders cannot agree on a Valuator within such five
Business Day period, any of the Corporation, the Series B Majority
Holders or the Series A Majority Holders may thereafter apply to a
court of competent jurisdiction to have the court appoint such
Valuator meeting the foregoing criteria to determine the Fair Market
Value of the subject shares. The determination by the Valuator shall
be final and binding on the Corporation, the Series B Holders and the
Series A Holders, absent manifest error.
(d) The Corporation shall be responsible for all costs incurred in
connection with the independent valuation performed by the Valuator
(including the costs of any court proceeding to appoint the Valuator,
if applicable).
(e) The Valuator shall be instructed to deliver its determination of Fair
Market Value as at the applicable valuation date, as soon as
practicable following its appointment and in any event within 30
Business Days thereafter.
(f) In the event that the Valuator provides a range of fair market values,
the middle of such range shall be utilized for purposes of determining
the Fair Market Value of the subject shares.
-31-
(g) The Corporation shall immediately provide to the Valuator such
information, including confidential information, and allow such firm
to conduct "due diligence" and make such investigations and inquiries
with respect to the affairs of the Corporation and its subsidiaries as
may be required by such Valuator in order to fulfill its mandate,
provided that such firm executes a confidentiality agreement in favour
of the Corporation containing standard terms and conditions.
EXHIBIT B
FORM OF SHAREHOLDERS AGREEMENT
Filed on May 3, 2004 as an exhibit to a Schedule 13D (Mitel as issuer) by
EdgeStone Capital Equity Fund II-A, L.P.; EdgeStone Capital Equity Fund II-US,
L.P.; EdgeStone Capital Equity Fund II-US-Inst., L.P.; National Bank Financial &
Co. Inc; EdgeStone Capital Equity Fund II-A GP, L.P.; EdgeStone Capital Equity
Fund II US GP, L.P.; EdgeStone Capital Equity Fund II-US-Inst. GP, L.P.;
EdgeStone Capital Equity Fund II-A GP, Inc; EdgeStone Capital Equity Fund
II-US Main GP, Inc.; EdgeStone Capital Equity Fund II-US-Inst. GP, Inc.; ▇▇▇▇▇▇
▇. ▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇▇▇; and EdgeStone
Capital Equity Fund II-B GP, Inc. and incorporated by reference.
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
Filed on May 3, 2004 as an exhibit to a Schedule 13D (Mitel as issuer) by
EdgeStone Capital Equity Fund II-A, L.P.; EdgeStone Capital Equity Fund II-US,
L.P.; EdgeStone Capital Equity Fund II-US-Inst., L.P.; National Bank Financial &
Co. Inc; EdgeStone Capital Equity Fund II-A GP, L.P.; EdgeStone Capital Equity
Fund II US GP, L.P.; EdgeStone Capital Equity Fund II-US-Inst. GP, L.P.;
EdgeStone Capital Equity Fund II-A GP, Inc; EdgeStone Capital Equity Fund II-US
Main GP, Inc.; EdgeStone Capital Equity Fund II-US-Inst. GP, Inc.; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇▇▇; and EdgeStone Capital
Equity Fund II-B GP, Inc. and incorporated by reference.
EXHIBIT D-l
FORM OF SERIES 1 WARRANTS
Filed on May 3, 2004 as an exhibit to a Schedule 13D (Mitel as issuer) by
EdgeStone Capital Equity Fund II-A, L.P.; EdgeStone Capital Equity Fund II-US,
L.P.; EdgeStone Capital Equity Fund II-US-Inst., L.P.; National Bank Financial &
Co. Inc; EdgeStone Capital Equity Fund II-A GP, L.P.; EdgeStone Capital Equity
Fund II US GP, L.P.; EdgeStone Capital Equity Fund II-US-Inst. GP, L.P.;
EdgeStone Capital Equity Fund II-A GP, Inc; EdgeStone Capital Equity Fund II-US
Main GP, Inc.; EdgeStone Capital Equity Fund II-US-Inst. GP, Inc.; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇▇▇; and EdgeStone Capital
Equity Fund II-B GP, Inc. and incorporated by reference.
EXHIBIT D-2
FORM OF SERIES 2 WARRANTS
Filed on May 3, 2004 as an exhibit to a Schedule 13D (Mitel as issuer) by
EdgeStone Capital Equity Fund II-A, L.P.; EdgeStone Capital Equity Fund II-US,
L.P.; EdgeStone Capital Equity Fund II-US-Inst., L.P.; National Bank Financial &
Co. Inc; EdgeStone Capital Equity Fund II-A GP, L.P.; EdgeStone Capital Equity
Fund II US GP, L.P.; EdgeStone Capital Equity Fund II-US-Inst. GP, L.P.;
EdgeStone Capital Equity Fund II-A GP, Inc; EdgeStone Capital Equity Fund II-US
Main GP, Inc.; EdgeStone Capital Equity Fund II-US-Inst. GP, Inc.; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇▇▇; and EdgeStone Capital
Equity Fund II-B GP, Inc. and incorporated by reference.
EXHIBIT E
FORM OF LEGAL OPINION
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Direct Dial: (▇▇▇)▇▇▇-▇▇▇▇
Our Matter Number: 1042789
April 23, 2004
EdgeStone Capital Equity Fund II-B GP, Inc.,
as agent for EdgeStone Capital Equity Fund II-A, L.P.
and its parallel investors
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇, P.O. Box 187
Toronto, Ontario
M5X 1A6
- and to -
EdgeStone Capital Equity Fund II Nominee, Inc.,
as nominee for EdgeStone Capital Equity Fund II-A, L.P.
and its parallel investors
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇, P.O. Box 187
Toronto, Ontario
M5X 1A6
Dear Sirs/Mesdames:
ISSUANCE OF CLASS A CONVERTIBLE PREFERRED SHARES, SERIES 1 ("SERIES A SHARES")
AND WARRANTS BY MITEL NETWORKS CORPORATION
We have acted as counsel to Mitel Networks Corporation (the "Corporation") in
connection with the issue and sale today by the Corporation of: (i) an aggregate
of 20,000,000 Series A Shares (the "Purchased Shares") to EdgeStone Capital
Equity Fund II-B G.P., Inc., as agent for EdgeStone Capital Equity Fund II-A,
L.P. and its parallel investors as listed in Schedule "A" hereto and EdgeStone
Capital Equity Fund II Nominee, Inc., as nominee for EdgeStone Capital Equity
Fund II-A, L.P. and its parallel investors as listed in Schedule "A" hereto
(collectively, "EdgeStone"), at a purchase price of $1.00 per share; (ii) a
warrant (the "Series 1 Warrant") entitling the holder thereof to purchase, at a
price of $1.25 per share, certain common shares in the capital of the
Corporation (the "Series 1 Warrant Shares"); and (iii) an additional warrant
(the "Series 2 Warrant") entitling the holder thereof, upon the occurrence of
certain events, to purchase certain common shares in the capital of the
Corporation (the "Series 2 Warrant Shares"). The issue and sale of the Purchased
Shares, Series 1 Warrant and Series 2 Warrant by the Corporation is pursuant to
the terms of a class A convertible preferred share subscription agreement (the
"Subscription Agreement") entered into between EdgeStone and the Corporation on
the date hereof. Pursuant to the Subscription Agreement, the Corporation also
granted to EdgeStone an option (the "EdgeStone Purchase Option") to purchase up
to an additional
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Page 2
5,000,000 Series A Shares (the "Purchase Option Shares"), at a purchase price of
$1.00 per share. The Series A Shares are convertible in accordance with their
terms into common shares in the capital of the Corporation (the "Conversion
Shares").
Immediately prior to Closing, the following transactions (the "Exchange and
Conversion Transactions") were undertaken by the Corporation with certain
shareholders of the Corporation:
(a) pursuant to an exchange and release agreement between the Corporation
and Power Technology Investment Corporation ("PTIC") dated the date
hereof, the Corporation issued 16,000,000 Class B Convertible
Preferred Shares, Series 1, to PTIC in exchange for 4,000,000 Common
Shares;
(b) pursuant to an exchange and release agreement between the Corporation
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation ("WCC") dated the date hereof, the
Corporation issued 40,897,750 Class B Convertible Preferred Shares,
Series 1, to WCC in exchange for 20,448,875 Common Shares; and
(c) pursuant to certain consent and notice of conversion instruments
executed by certain shareholders of the Corporation, the Corporation
issued an aggregate of 10,163,238 Class B Convertible Preferred
Shares, Series 1, to such shareholders upon conversion of an aggregate
of 5,081,619 Common Shares.
This opinion letter is provided pursuant to section 2.4(b)(iv) of the
Subscription Agreement. Unless otherwise defined in this letter, all capitalized
terms used in this letter have the meanings ascribed to them in the Subscription
Agreement.
A. DOCUMENTATION
As counsel for the Corporation, we have participated in the preparation of and
examined originals or copies of each of the following documents:
(a) the Subscription Agreement;
(b) a shareholders agreement (the "Shareholders Agreement") among the
Corporation, EdgeStone and certain other shareholders of the
Corporation dated the date hereof;
(c) a registration rights agreement (the "Registration Rights Agreement")
among the Corporation, EdgeStone and certain other shareholders of the
Corporation dated the date hereof;
(d) the Series 1 Warrant;
(e) the Series 2 Warrant;
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Page 3
(f) the form of share certificate representing the Purchased Shares; and
(g) a waiver and termination agreement between the Corporation and certain
existing shareholders of the Corporation.
The Subscription Agreement, the Shareholders Agreement and the Registration
Rights Agreement are hereinafter collectively referred to as the "Agreements".
B. JURISDICTION
We are solicitors qualified to practice law in the Province of Ontario and we
express no opinion as to any laws or any matters governed by any laws other than
the laws of the Province of Ontario and the federal laws of Canada applicable
therein.
C. SCOPE OF EXAMINATION
In connection with the opinions expressed in this letter we have considered such
questions of law and examined such public and corporate records, certificates
and other documents which are available to us and conducted such other
examinations as we have considered necessary.
D. ASSUMPTIONS AND RELIANCES
The opinions expressed in this letter are based on the assumption that all
documents referred to have been duly authorized, executed and delivered by, and
are enforceable in accordance with their respective terms against, all parties
thereto other than the Corporation.
We have assumed the legal capacity of all individuals, the genuineness of all
signatures and the authenticity of all documents submitted to us as originals
and the conformity to authentic original documents of all documents submitted to
us as certified, conformed, photostatic or facsimile copies.
In expressing the opinion set forth in paragraph 1, we have relied upon a
certificate of compliance dated April 23, 2004 issued by Industry Canada, a copy
of which has been delivered to you.
In expressing the opinions set forth in paragraph 2, we have relied, as to the
number of shares outstanding on the date hereof immediately prior to the
issuance and sale of the Purchased Shares, solely upon a review of the minute
books of the Corporation and a certificate of an officer of the Corporation (the
"Officer's Certificate") of even date herewith which is addressed to us and to
you, a copy of which has been delivered to you. We have also relied upon the
Officer's Certificate with respect to certain factual matters relevant to other
opinions expressed herein. We have conducted no independent verification of the
matters of fact referenced in the Officer's Certificate.
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Page 4
In connection with the opinion expressed in paragraph 12, we have assumed that:
- EdgeStone has fully complied with the representations, warranties and
acknowledgements expressed in the Subscription Agreement, and that all such
representations and warranties are true and correct on the date of this
letter; and
- no offering memorandum within the meaning of the Securities Act (Ontario)
and the rules and regulations thereunder (the "Ontario Act") has been
delivered in connection with the trade of the Purchased Shares, Series 1
Warrants and Series 2 Warrants to EdgeStone.
In expressing the opinion set out in paragraph 12, we have also relied upon the
restated order and ruling from the Ontario Securities Commission (the "OSC")
dated November 5,2002 (the "OSC Order") concerning EdgeStone Capital Equity Fund
II-A, L.P. and have assumed, without further inquiry, that the OSC Order is, on
the date hereof, in full force and effect, unamended, and that no proceedings
have been taken or threatened in any court or tribunal which seeks to amend,
modify, restrict or rescind the OSC Order.
The opinions expressed in paragraphs 13 and 14 below as to the issuance of the
Series 1 Warrant Shares, Series 2 Warrant Shares, Purchase Option Shares and
Conversion Shares in the future are based upon the applicable securities
legislation of the Province of Ontario, and orders, rulings, rules, policies and
interpretation notes made or issued thereunder, all as in force on the date
hereof. We can give no assurance that such prospective issuances will not be
affected by future amendments to, or by, additional or amended orders, rulings,
rules, policies or interpretation notes made or issued pursuant to such
legislation (including the expiry of such rulings).
E. OPINIONS
Based upon and subject to the foregoing and subject to the qualifications
contained herein, we are of the opinion that:
1. The Corporation is a corporation existing under the laws of Canada and has
not been dissolved. There are no restrictions on the corporate power and
capacity of the Corporation to own and lease property and assets and to
carry on business.
2. The authorized and issued capital of the Corporation will, upon the
completion of the Closing and the Exchange and Conversion Transactions,
consist of: (i) an unlimited number of common shares, of which 111,786,713
will be issued and outstanding; (ii) an unlimited number of class A
convertible preferred shares issuable in series, of which an unlimited
number are designated as Class A Convertible Preferred Shares, Series 1, of
which 20,000,000 will be issued and outstanding, and (iii) an unlimited
number of class B convertible preferred shares issuable in series, of which
an unlimited number are designated as Class B Convertible Preferred Shares,
Series 1, of which 67,060,988 will be issued and outstanding.
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Page 5
3. There are no restrictions on the corporate power and capacity of the
Corporation to enter into the Agreements or to carry out its obligations
thereunder, including the issuance of the Purchased Shares, the Series 1
Warrant and the Series 2 Warrant. The execution and delivery of the
Agreements and the performance by the Corporation of its obligations under
the Agreements have been duly authorized by all necessary corporate action
on the part of the Corporation.
4. Each of the Agreements has been duly executed and delivered by the
Corporation and is enforceable against the Corporation in accordance with
its terms.
5. The execution and delivery of the Agreements by the Corporation and the
performance of its obligations thereunder, including the issue, sale and
delivery of the Purchased Shares, Series 1 Warrant and Series 2 Warrant,
does not violate, contravene or breach or constitute default under: (i) the
articles or by-laws of the Corporation; or (ii) any laws of the Province of
Ontario or any federal laws of Canada applicable in the Province of
Ontario.
6. The Purchased Shares have been duly authorized and, upon receipt by the
Corporation of the aggregate purchase price therefor as set forth in the
Subscription Agreement, will be validly issued as fully paid and
non-assessable shares in the capital of the Corporation.
7. The Series 1 Warrant and the Series 2 Warrant have been duly authorized and
validly created and issued by all necessary corporate action on the part of
the Corporation and are enforceable in accordance with their respective
terms.
8. All necessary corporate action has been taken by the Corporation to
authorize the issuance of the Series 1 Warrant Shares, and upon the
exercise of the Series 1 Warrant in accordance with its terms, the Series 1
Warrant Shares will be validly issued and outstanding as fully paid and
non-assessable shares in the capital of the Corporation.
9. All necessary corporate action has been taken by the Corporation to
authorize the issuance of the Series 2 Warrant Shares, and upon the
exercise of the Series 2 Warrant in accordance with its terms, the Series 2
Warrant Shares will be validly issued and outstanding as fully paid and
non-assessable shares in the capital of the Corporation.
10. The Purchase Option Shares issuable by the Corporation upon exercise of the
EdgeStone Purchase Option in accordance with the Subscription Agreement
have been authorized and conditionally allotted for issuance by all
necessary corporate action on the part of the Corporation and, upon receipt
by the Corporation of the aggregate consideration in respect of the
Purchase Option Shares as set forth in the Subscription Agreement and all
other requirements for the issuance of the Purchase Option Shares as set
forth in the Subscription Agreement having been met, the Purchase Option
Shares will be validly issued and outstanding as fully paid and
non-assessable shares in the capital of the Corporation.
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Page 6
11. All necessary corporate action has been taken by the Corporation to
authorize the issuance of the Conversion Shares, and upon the conversion of
the Series A Shares in accordance with their terms, the Conversion Shares
will be validly issued and outstanding as fully paid and non-assessable
shares in the capital of the Corporation.
12. The offering, issue, sale and delivery of the Purchased Shares, Series 1
Warrant and Series 2 Warrant by the Corporation to EdgeStone in accordance
with the Subscription Agreement are exempt from the prospectus requirements
of the Ontario Act and no prospectus is required nor are other documents
required to be filed, proceedings taken or approvals, permits, consents or
authorizations of regulatory authorities obtained under the securities laws
of the Province of Ontario to permit the offering, issue, sale and delivery
of the Purchased Shares, Series 1 Warrant and Series 2 Warrant by the
Corporation to EdgeStone in Ontario, except for the requirement that the
Corporation, within 10 days after the date the trade is made, file a report
with the OSC on Form 45-501F1 prepared and executed in accordance with OSC
Rule ▇▇-▇▇▇ ▇▇▇▇▇▇ Distributions.
13. No prospectus or registration pursuant to the requirements of the
securities laws of the Province of Ontario is required nor are other
documents required to be filed, proceedings taken or approvals, permits,
consents or authorizations of regulatory authorities obtained under the
securities laws of the Province of Ontario to permit the issuance and
delivery by the Corporation of (i) the Series 1 Warrant Shares to holders
of the Series 1 Warrant resident in Ontario, (ii) the Series 2 Warrant
Shares to holders of the Series 2 Warrant resident in Ontario or (iii)
Purchase Option Shares to residents in Ontario, in each case provided that
no commission or other remuneration is paid or given in respect of the
issuance and delivery of such securities except for ministerial or
professional services or for services performed by a registered dealer.
14. No prospectus or registration pursuant to the requirements of the
securities laws of the Province of Ontario is required, nor are other
documents required to be filed, proceedings taken or approvals, permits,
consents or authorizations of regulatory authorities obtained under the
securities laws of the Province of Ontario to permit the issue and delivery
by the Corporation of the Conversion Shares upon the conversion of the
Series A Shares in accordance with their terms to holders of Series A
Shares resident in Ontario, provided that no commission or other
remuneration is paid or given to others in respect of the issue and
delivery of the Conversion Shares except for administrative, ministerial or
professional services or for services performed by a registered dealer.
F. QUALIFICATIONS
The opinions expressed herein are subject to the following qualifications:
(a) BANKRUPTCY - Enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium, arrangement or winding-up
laws or other similar laws affecting the enforcement of creditors'
rights generally.
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
Page 7
(b) EQUITABLE PRINCIPLES - Enforceability may be limited by equitable
principles, including the principle that equitable remedies such as
specific performance and injunction may only be granted in the
discretion of a court of competent jurisdiction.
(c) SEVERABILITY - The enforceability of provisions inserted in any of the
Agreements which purport to sever from such Agreement any provision
which is prohibited or unenforceable under applicable law without
affecting the enforceability or validity of the remainder of such
Agreement would be determined only in the discretion of the court.
(d) FETTERING OF DISCRETION - Any provisions of the Shareholders
Agreement: (i) which purport to ▇▇▇▇▇▇ the discretion of the board of
directors of the Corporation in managing the business and affairs of
the Corporation may be rendered unenforceable or the enforcement
thereof may be adversely affected as a consequence of it not being a
unanimous shareholders agreement as contemplated by Section 146(2) of
the Canada Business Corporations Act (the "Act"); and (ii) may be
rendered unenforceable or the enforcement thereof may be affected by
an order made by a court under Section 239 or 241 of the Act.
(e) LIMITATIONS ACT, 2002 - Enforceability of the Agreements will be
subject to the application of and limitations contained in the
Limitations Act, 2002 (Ontario) and we express no opinion as to
whether a court may find any provision of the Agreements to be
unenforceable as an attempt to vary or exclude a limitation period
under the Limitations Act, 2002 (Ontario).
(f) INDEMNITY - Enforceability of rights of indemnity and contribution
under the Agreements may be limited by applicable law.
The opinions in this letter are given solely for the benefit of the addressees
hereof in connection with the transactions referred to herein and may not, in
whole or in part, be relied upon by or shown or distributed to any other person.
Yours very truly,
[OSLER, ▇▇▇▇▇▇ & HARCOURT LLP]
JCW/DSK/NJG
[OSLER, ▇▇▇▇▇▇ & HARCOURT LOGO]
SCHEDULE A
LIST OF PARALLEL INVESTORS
National Bank Financial & Co. Inc.
EdgeStone Capital Equity Fund II-US, L.P.
EdgeStone Capital Equity Fund II US-Inst., L.P.
National Bank Financial & Co. Inc. (on behalf of the EdgeStone Capital Equity
Canadian and Non-Canadian 2004 Affiliate Funds)
CERTIFICATE
TO: OSLER, ▇▇▇▇▇▇ & HARCOURT LLP
AND TO: EDGESTONE CAPITAL EQUITY FUND II-B GP, INC., AS AGENT FOR
EDGESTONE CAPITAL EQUITY FUND II-A, L.P., AND ITS PARALLEL INVESTORS
AND TO: EDGESTONE CAPITAL EQUITY FUND II NOMINEE, INC., IN ITS CAPACITY
AS NOMINEE OF EDGESTONE CAPITAL EQUITY FUND II-A, L.P., AND ITS
PARALLEL INVESTORS
AND TO: FRASER ▇▇▇▇▇▇ CASGRAIN LLP
RE: OFFERING, ISSUANCE AND SALE (THE "OFFERING") OF 20,000,000 CLASS A
CONVERTIBLE PREFERRED SHARES, SERIES 1 AND CERTAIN WARRANTS TO
PURCHASE COMMON SHARES OF MITEL NETWORKS CORPORATION
In connection with the opinion to be provided by Osler, ▇▇▇▇▇▇ & Harcourt LLP
("OHH") on certain matters relating to Mitel Networks Corporation (the
"Corporation") regarding the Offering, the undersigned hereby certifies, on
behalf of the Corporation and not in his personal capacity, the following
matters:
1. I, ▇▇▇▇▇ ▇▇▇▇▇▇▇, am the Chief Financial Officer of the Corporation and as
such I am familiar with the books and records of the Corporation and its
business.
2. The corporate records and minute books of the Corporation provided by the
Corporation to OHH are the original or duplicate corporate records and
minute books of the Corporation and contain the minutes or copies thereof
of all proceedings of the shareholders and directors (or any committee
thereof) of the Corporation during the periods noted in such corporate
records and minute books and there have been no other meetings;
resolutions or proceedings of the shareholders or of the directors (or any
committee thereof) of the Corporation during such periods not reflected in
such corporate records and minute books. Such corporate records and minute
books are true, correct and complete in all material respects and, since
being made available to OHH, there have been no changes, additions or
alterations thereto other than those changes, additions or alterations
thereto which have been delivered to OHH.
3. No proceedings have been taken by the Corporation for the liquidation,
dissolution, winding up, insolvency, bankruptcy, amalgamation,
reorganization, or continuance of the Corporation, no such proceedings are
contemplated by the Corporation and the Corporation has no knowledge of
any such proceedings having been commenced or being contemplated in
respect of the Corporation by any other party.
4. As of the date hereof, the Corporation is up to date in the filings of all
of its corporate returns, including those required under the Canada
Business Corporations Act and similar legislation and the Corporation has
not received notice of any proceedings to cancel its articles or otherwise
to terminate its existence.
-2-
5. The authorized capital of the Corporation will, upon the completion of the
Closing consist of: (i) an unlimited number of common shares, of which
111,786,763 will be issued and outstanding; (ii) an unlimited number of
class A convertible preferred shares issuable in series, of which an
unlimited number are designated as Class A Convertible Preferred Shares,
Series 1, of which 20,000,000 will be issued and outstanding, and (iii) an
unlimited number of class B convertible preferred shares issuable in
series, of which an unlimited number are designated as Class B Convertible
Preferred Shares, Series 1, of which 67,060,988 will be issued and
outstanding. All of the foregoing issued shares in the capital of the
Corporation have been duly approved for issuance by the Board of Directors
and have been or will be upon completion of Closing validly issued and the
Corporation has been fully paid for such shares in money or in property or
past services that are not less in value than the fair equivalent of the
money that the Corporation would have received if such shares had been
issued for money.
The undersigned acknowledges that this certificate is to be relied upon by OHH
in rendering their opinions on the date of this certificate, and may be relied
upon by those permitted to rely on such opinions.
[Remainder of this page left intentionally blank - The next page
is the signature page.]
DATED this 23RD day of April, 2004
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
NAME: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
EXHIBIT F-l
FORM OF DEBENTURE HOLDER CONSENT
CONSENT AND NOTICE OF CONVERSION
TO: MITEL NETWORKS CORPORATION ("THE "CORPORATION")
RE: COMMON SHARES OF THE CORPORATION ISSUED ON OCTOBER 31, 2003 UPON
CONVERSION OF MANDATORY CONVERTIBLE DEBENTURES
WHEREAS:
A. The undersigned subscribed for one of a series of mandatory convertible
debentures (the "Debentures") issued by the Corporation in August of 2002
to certain investors (the "Debenture Investors").
B. Section 3.1 of the Debentures provided that, if the Corporation did not
complete certain financing arrangements by the Maturity Date (as defined
in the Debentures), the Debentures would be converted into common shares
of the Corporation at a price per share equal to the lesser of CDN$3.00
and the price per common share determined through external valuation by
the board of directors of the Corporation.
C. By letter dated October 31, 2003 (the "October 2003 Letter"), the
Corporation notified the Debenture Investors that the Debentures would be
converted into common shares of the Corporation (the "Debenture Shares")
at a conversion price of CDN$2.00 per share.
D. The October 2003 Letter provided that the Corporation would also offer the
Debenture Investors downside price protection, along with the option of
converting their Debenture Shares into the securities issued on the next
arm's length private investment transaction undertaken by the Corporation.
E. The Corporation intends to proceed with an arm's length private equity
financing transaction (the "Financing") whereby one or more new investors
will subscribe for a series of Class A Convertible Preferred Shares in the
capital of the Corporation at a purchase price of CDN$1.00 per share.
F. It is a requirement of the Financing that certain existing outstanding
securities of the Corporation be exchanged for, and that the Debenture
Shares be converted into, shares of a series of Class B Convertible
Preferred Shares in the capital of the Corporation (the "Series B
Shares"), the terms of which will be determined by the Board of Directors
of the Corporation in conjunction with the negotiation of the Financing.
G. In connection with the Financing each holder of the Debenture Shares would
receive two (2) Series B Shares for each Debenture Share.
NOW THEREFORE, in furtherance of the foregoing and for good and valuable
consideration:
1. The undersigned Debenture Investor hereby irrevocably agrees to surrender
all of the Debenture Shares held by such Debenture Investor and receive,
concurrent with closing the Financing, Series B Shares, on the basis of
two (2) Series B Shares for each Debenture Share held by such Debenture
Investor.
-2-
2. The undersigned Debenture Investor hereby agrees that upon the surrender
of his, her or its Debenture Shares and closing of the Financing in
accordance with and as contemplated by this Consent and Notice of
Conversion, the undersigned will have no further rights under the
Debentures, the Debenture Shares or the October 2003 Letter, other than
the right to receive the Series B Shares to which the undersigned is
entitled pursuant hereto upon such closing. The undersigned further agrees
that if the Financing does not close for any reason, the undersigned will
continue to hold his, her or its Debenture Shares but will have no right
to receive Series B Shares.
3. The undersigned Debenture Investor acknowledges that upon the surrender of
his, her or its Debenture Shares and delivery of the Series B Shares as
described in this Consent and Notice of Conversion, the Corporation will
have fulfilled all of its obligations under and in connection with the
Debentures, the Debenture Shares and the October 2003 Letter, if any, and
agrees that all of the Debenture Investor's rights thereunder (including
any price protection, anti-dilution or similar rights) are thereupon
terminated, and the Corporation has no further liability to the
undersigned with respect to any such rights.
4. The undersigned hereby waives any prior non-compliance on the part of the
Corporation with any terms of the Debentures, and releases, remises and
forever discharges the Corporation, its directors and officers of and from
all actions, causes of action, suits, debts, demands, contracts and claims
whatsoever and howsoever arising which the undersigned ever had, now has
or which the undersigned may hereinafter have relating to the Debentures,
the Debenture Shares and the October 2003 Letter.
5. The undersigned Debenture Investor hereby represents and warrants to the
Corporation as follows:
(a) The Debenture Investor is resident in the jurisdiction indicated on
the signature page hereto.
(b) If the Debenture Investor is a resident of the United States of
America:
(i) the securities received pursuant to the terms hereof will be
acquired for the Debenture Investor's own account and not with
a view to the distribution of any part thereof, and the
Debenture Investor has no present intention of selling,
granting participation in, or otherwise distributing the same;
(ii) the Debenture Investor has the knowledge and experience in
financial and business matters so as to be capable of
evaluating the merits and risks of the investment in the
Series B Shares and protecting the Debenture Investor's own
interests in connection therewith and has had the opportunity
to ask such questions of the Corporation and to review such
documents as the Debenture Investor deemed necessary in
connection with his, her or its subscription for such
securities, is able to fend for himself, herself or itself in
the transactions contemplated by this Consent and Notice of
Conversion and the agreements referred to herein, and has the
ability to bear the economic risk of the Debenture Investor's
investment pursuant to this Consent and Notice of Conversion;
-3-
(iii) the Debenture Investor is an accredited investor, as defined
in Rule 501 of Regulation D promulgated by the United States
Securities and Exchange Commission (the "Commission") under
the United States Securities Act of 1933 (the "Act"), as
amended, or any similar federal statute, and the rules and
regulations of the Commission issued under the Act, each as
they may, from time to time, be in effect;
(iv) the Debenture Investor understands that the Series B Shares to
be received pursuant to the terms hereof are characterized as
"restricted securities" under the federal securities laws and
certain state securities laws inasmuch as they are being
subscribed for from the Corporation in a transaction not
involving a public offering and that under such laws and
applicable regulations, such securities may be resold without
registration under the Act and those state securities laws
only in certain limited circumstances. In this connection, the
Debenture Investor represents that the Debenture Investor is
familiar with Rule 144 promulgated by the Commission under the
Act, as presently in effect, understands the resale
limitations imposed thereby and by the Act, and is aware that
the Corporation is under no obligation to create a public
market for its securities; and
(v) the Debenture Investor acknowledges and agrees that the
certificates evidencing the Series B Shares received pursuant
to the terms hereof will bear substantially the following
legend:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act") or the securities laws of any state.
These securities have been acquired for investment and
not with a view to distribution or resale. Such
securities may not be offered for sale, sold, delivered
after sale, transferred, pledged or hypothecated in the
absence of an effective registration statement covering
such securities under the Act and any applicable state
securities laws, unless the holder shall have obtained
an opinion of counsel satisfactory to the corporation
that such registration is not required."
(c) If the Debenture Holder is a resident of the Province of Ontario:
(i) the Debenture Investor is receiving Series B Shares pursuant
to the terms hereof as principal for his, her or its own
account and not for the benefit of any other person; and
(ii) the Debenture Investor is an "accredited investor" as defined
in Ontario Securities Commission Rule ▇▇-▇▇▇ ▇▇▇▇▇▇
Distributions.
(d) If the Debenture Investor is a resident of the Province of British
Columbia, the Debenture Investor is receiving Series B Shares
pursuant to the terms hereof as principal for its own account for
investment only, not for the benefit of any other person, and not
with a view to the resale or
-4-
distribution of all or any of the Series B Shares, and one of the
following is applicable to the Debenture Investor:
(i) the Debenture Shares to be converted by the Debenture Investor
hereunder have an aggregate value of not less than CDN$97,000 and if
the Debenture Investor is not an individual but is a corporation,
partnership, trust, fund, association or any other organization of a
group of persons, the Debenture Investor was not created solely, nor
is the Debenture Investor used primarily, to permit a group of
individuals to purchase securities without a prospectus and the
Debenture Shares to be converted by the Debenture Investor hereunder
would have an aggregate value of not less than CDN$97,000 or, if the
Debenture Investor is such an entity created or used primarily for
such purpose, the aggregate value of the Debenture Shares to be
converted hereunder by each of the individuals who form part of the
group is at least CDN$97,000; or
(ii) the Debenture Investor is an "accredited investor" as defined in
Multilateral Instrument 45-103.
(e) If the Debenture Investor is resident in the Province of Quebec:
(i) the Debenture Investor is acting for his/her/its own account and has
not been created, incorporated or established solely for purposes of
acquiring the Series B Shares pursuant to applicable private
placement exemptions under the Securities Act (Quebec);
(ii) the Debenture Investor is acquiring the Series B Shares for
investment only and not with a view to immediate resale or
distribution and understands that until the Corporation becomes a
reporting issuer in the Province of Quebec, the Debenture Investor
may not resell or otherwise transfer or dispose of the Series B
Shares except in accordance with the applicable provisions of the
Securities Act (Quebec); and
(iii) the Debenture Investor acknowledges and agrees that the conversion
of the securities hereunder is conditional upon such conversion
being exempt from the prospectus and registration requirements of
the Securities Act (Quebec) and understands that the Debenture
Shares to be converted by the Debenture Investor hereunder must have
an aggregate value of not less than CDN$ 150,000.
(f) If the Debenture Investor is resident in the Province of New Brunswick:
(i) the Debenture Investor is receiving Series B Shares pursuant to the
conversion hereunder as principal for his, her or its own account
and not for the benefit of any other person; and
-5-
(ii) the Debenture Investor acknowledges and agrees that the conversion
of the securities hereunder is conditional upon such conversion
being exempt from the registration requirements of the Security
Frauds Prevention Act (New Brunswick) and understands that the
Debenture Shares to be converted by the Debenture Investor hereunder
must have an aggregate value of not less than CDN$97,000.
(g) If the Debenture Investor is resident in the Province of Newfoundland and
Labrador:
(i) the Debenture Investor is receiving Series B Shares pursuant to the
conversion hereunder as principle for his, her or its own account
and not for the benefit of any other person;
(ii) the Debenture Investor acknowledges that this conversion is not
being made through the advertisement of the securities in printed
media of general and regular paid circulation, radio or television;
and
(iii) the Debenture Investor acknowledges and agrees that the conversion
of the securities hereunder is conditional upon such conversion
being exempt from the prospectus and registration requirements of
the Securities Act (Newfoundland) and understands that the Debenture
Shares to be converted by the Debenture Investor hereunder must have
an aggregate value of not less than CDN$97,000.
(h) If the Debenture Investor is a resident of Canada, the Debenture Investor
further acknowledges and agrees that:
(i) no person has made to the Debenture Investor any written or oral
representation (i) that any person will resell or repurchase the
Series B Shares, (ii) as to the future price or value of the Series
B Shares, or (iii) as to the listing of the Series B Shares on any
stock exchange or other market;
(ii) at present there is no market through which the Series B Shares may
be resold and there can be no assurance that such a market will
develop in the future;
(iii) the resale of the Series B Shares will be subject to certain resale
restrictions provided for in applicable securities legislation of
the provinces and territories of Canada, and the Debenture Investor
agrees with the Corporation to comply with such resale restrictions;
and
(iv) the certificates evidencing the Series B Shares received pursuant to
the terms here of will bear substantially the following legend:
"Unless permitted under securities legislation, the
holder of this security must not trade the security
before the date that is 4 months and a day after the
later of(i) [insert the distribution date], and (ii) the
date the issuer became a reporting issuer in any
province or territory."
-6-
(i) If the Debenture Investor is not a resident of Canada or the United
States of America:
(i) the Debenture Investor is not a U.S. Person (as defined in
Rule 902(o) of Regulation S ("Regulation S") promulgated by
the United States Securities and Exchange Commission, which
definition includes, but is not limited to, any natural person
resident in the United States, any corporation or partnership
incorporated or organized under the laws of the United States,
or any estate or trust of which any executor, administrator or
trustee is a U.S. Person), the Debenture Investor is not
acquiring the Series B Shares pursuant to the conversion
hereunder for the account or benefit of any U.S. Person or for
offering, resale or delivery for the account or benefit of any
U.S. Person or for the account of any person in any
jurisdiction other than the jurisdiction of residence of the
Debenture Investor, the Debenture Investor was not offered the
Series B Shares in the United States and the Debenture
Investor was outside the United States at the time of
execution and delivery of this Consent and Notice of
Conversion;
(ii) the Debenture Investor or the beneficial acquiror of Series B
Shares, as appropriate, will: (i) not sell or otherwise
dispose of the Series B Shares except in accordance with
applicable Canadian laws; and (ii) if such person sells or
otherwise disposes of the Series B Shares to a person other
than a resident of Canada during the period referred to
herein, such person covenants to obtain from such purchaser a
covenant in the same form as provided herein and the
Corporation shall have no obligation to register any purported
sale or disposition in violation of this Consent and Notice of
Conversion and any such sale or disposition shall be null and
void and of no force and effect; and
(iii) the conversion and issuance of Debenture Shares for Series B
Shares as contemplated in this Consent and Notice of
Conversion complies with or is exempt from any of the
applicable securities legislation in the jurisdiction in which
the Debenture Investor is resident and does not trigger any
obligation to prepare and file a prospectus, registration
statement or similar offering document with any security
regulatory authority or any other report with respect to such
conversion, and the Debenture Investor:
(A) is acquiring Series B Shares pursuant to the conversion
hereunder as principal for investment purposes only and
not with a view to resale or distribution; and
(B) has knowledge and experience with respect to an
investment of this type enabling him/her/it to evaluate
the merits and risks thereof and has the capacity to
obtain competent independent, business, legal and tax
advice regarding this investment.
6. The undersigned agrees to provide such further documents or instruments
required by the Corporation in order to effect the purpose of this Consent
and Notice of Conversion and carry out its provisions.
-7-
DATED this ____ day of ______, 2004.
INDIVIDUAL DEBENTURE INVESTOR:
_______________________________ ________________________________________
Signature of Witness Signature of Debenture Investor
(individual)
_______________________________ ________________________________________
Name of Witness (please print) Name of Debenture Investor
(please print)
________________________________________
Jurisdiction of Residence (please print)
________________________________________
Date of Birth (NON-RESIDENTS OF
CANADA ONLY)
CORPORATE DEBENTURE INVESTOR:
________________________________________
Name of Debenture Investor
By:__________________________________
Name:
Title:
________________________________________
Jurisdiction of Residence (please print)
________________________________________
Date of Incorporation (NON-RESIDENTS OF
CANADA ONLY)
EXHIBIT F-2
FORM OF PTIC EXCHANGE AND RELEASE AGREEMENT
EXCHANGE AND RELEASE AGREEMENT
THIS EXCHANGE AND RELEASE AGREEMENT is made April 23, 2004.
BETWEEN:
MITEL NETWORKS CORPORATION, a corporation incorporated under the
laws of Canada,
(the "CORPORATION")
AND:
POWER TECHNOLOGY INVESTMENT CORPORATION, a corporation incorporated
under the laws of Canada,
("PTIC")
RECITALS:
A. Pursuant to a subscription agreement made as of August 31, 2001 between
the Corporation and PTIC, as amended by amendment no. 1 made as of May 3,
2002 (together, the "SUBSCRIPTION AGREEMENT"), PTIC subscribed for
4,000,000 common shares in the capital of the Corporation (the "PTIC
COMMON SHARES").
B. In connection with the purchase and sale of the PTIC Common Shares, the
parties entered into an amended and restated shareholders agreement (the
"EXISTING SHAREHOLDERS AGREEMENT") made as of August 31, 2001 between the
Corporation, PTIC, Mitel Systems Corporation and Zarlink Semiconductor
Inc.
C. Article 2 of the Existing Shareholders Agreement provides that the
Corporation shall not issue any Securities (as defined in the Existing
Shareholders Agreement) to any persons unless such Securities have first
been offered to the Shareholders (as defined in the Existing Shareholders
Agreement), and the Shareholders shall have the right (the "PRE-EMPTIVE
RIGHTS") to purchase their proportionate share of such Securities.
D. Section 5.6 of the Subscription Agreement provides PTIC with a right (the
"EXCHANGE RIGHT"), upon the issuance of certain securities by the
Corporation, to exchange the PTIC Common Shares for certain securities of
the Corporation, as set forth therein.
E. Section 5.7 of the Subscription Agreement provides PTIC with a right (the
"ANTI-DILUTION RIGHT"), upon the issuance of certain securities by the
Corporation at a price lower than $4.00 per Common Share, to require the
Corporation to issue to PTIC certain additional securities of the
Corporation as necessary to maintain PTIC's then current ownership
percentage of the Corporation, as set forth therein.
-2-
F. The Corporation now proposes to enter into a financing transaction (the
"FINANCING"), pursuant to which it proposes to issue to EdgeStone Capital
Equity Fund II-A, L.P, ("EDGESTONE") and to certain of its parallel
investors up to 20,000,000 Class A Convertible Preferred Shares, Series 1
of the Corporation (the "SERIES A SHARES") at a purchase price of $1.00
per share. The Series A Shares are convertible in accordance with their
terms into common shares in the capital of the Corporation ("COMMON
SHARES").
G. In connection with the Financing, the Corporation also proposes to grant
or issue to EdgeStone: (i) an option (the "EDGESTONE PURCHASE OPTION") to
purchase up to an additional 5,000,000 Series A Shares, at a purchase
price of $1.00 per share; (ii) warrants (the "FINANCING WARRANTS") which
will entitle EdgeStone to purchase up to that number of Common Shares as
is equal to 25% of the number of Common Shares that would be issuable to
EdgeStone on conversion of its Series A Shares, exercisable at a price of
$1.25 per share; and (iii) a warrant (the "ANTI-DILUTION WARRANT") which
will entitle EdgeStone to acquire certain additional Common Shares upon
the occurrence of certain dilutive events. Following the Financing, the
Corporation also proposes to offer, issue and sell (the "COMMON SHARE
OFFERING") additional Common Shares for an aggregate purchase price of not
more than $10,000,000, and up to an additional 5,000,000 Series A Shares
(the "SUBSEQUENT SERIES A SHARE OFFERING"), to one or more additional
investors at a price of $1.00 per share.
H. In connection with the Financing, the Corporation also proposes that
certain existing outstanding securities of the Corporation, namely: (i)
the PTIC Common Shares, (ii) 20,448,875 common shares in the capital of
the Corporation (the "WCC COMMON SHARES") issued by the Corporation in
October, 2003 upon the conversion of certain promissory notes previously
issued by the Corporation in favour of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation; and
(iii) 5,445,775 common shares in the capital of the Corporation (the
"DEBENTURE SHARES") issued in October, 2003 upon the conversion of
mandatory convertible debentures previously issued by the Corporation in
favour of certain existing investors, will be exchanged for or converted
into (the "EXCHANGE AND CONVERSION TRANSACTION") Class B Convertible
Preferred Shares, Series 1 (the "SERIES B SHARES") of the Corporation, as
follows:
(a) the PTIC Common Shares will be exchanged for an aggregate of
16,000,000 Series B Shares, calculated on the basis of four Series B
Shares for each outstanding PTIC Common Share;
(b) the WCC Common Shares will be exchanged for an aggregate of
40,897,750 Series B Shares, calculated on the basis of two Series B
Shares for each outstanding WCC Common Share; and
(c) the Debenture Shares will be converted into an aggregate of up to
10,891,550 Series B Shares, calculated on the basis of two Series B
Shares for each Debenture Share.
The Series B Shares will be convertible in accordance with their terms
into Common Shares.
-3-
I. The parties therefore desire to enter into this Exchange and Release
Agreement to provide for the exchange of the PTIC Common Shares for
16,000,000 Series B Shares upon the Exchange and Conversion Transaction,
and to confirm that the Corporation has satisfied all obligations under
the agreements referred to above, and to terminate such agreements, as set
forth herein.
J. In connection with the Financing, the Corporation, PTIC, EdgeStone and
certain other shareholders of the Corporation will enter into a new
shareholders agreement and a registration rights agreement.
THEREFORE the parties agree as follows:
1. Waiver of Pre-emptive Rights and Termination of Existing Shareholders
Agreement
PTIC hereby agrees to enter into a waiver and termination agreement, in
substantially the form attached as Schedule "A" hereto, with the
Corporation, Mitel Systems Corporation and Zarlink Semiconductor Inc. to
provide for the waiver of Pre-emptive Rights in connection with the
issuance of various securities by the Corporation pursuant to the
Financing and the Exchange and Conversion Transaction, and to terminate
the Existing Shareholders Agreement.
2. Waiver of Subscription Agreement Rights
PTIC hereby irrevocably waives its rights under the Subscription
Agreement, including, without limitation, the Exchange Right and
Anti-Dilution Right, in connection with the issuance by the Corporation of
the following:
(a) the Series A Shares, EdgeStone Purchase Option, Financing Warrants
and Anti- Dilution Warrant pursuant to the Financing;
(b) the additional Series A Shares and any additional Financing Warrants
upon the exercise by EdgeStone or its permitted assignees of the
EdgeStone Purchase Option;
(c) any Series A Shares pursuant to the Subsequent Series A Share
Offering;
(d) the Common Shares upon the conversion of any Series A Shares in
accordance with their terms;
(e) the Common Shares upon the exercise of the Financing Warrants and
the Anti-Dilution Warrants in accordance with their respective
terms;
(f) the Common Shares pursuant to the Common Share Offering;
(g) the Series B Shares pursuant to the Exchange and Conversion
Transaction; and
(h) the Common Shares upon the conversion of any Series B Shares in
accordance with their terms.
-4-
3. Exchange of PTIC Common Shares and Release
(a) PTIC hereby irrevocably agrees to surrender all of the PTIC Common
Shares in exchange for, concurrent with the closing of the
Financing, an aggregate of 16,000,000 Series B Shares.
(b) In order to effect the Exchange and Conversion Transaction in
relation to the PTIC Common Shares, PTIC will return to the
Corporation for cancellation the certificate(s) representing the
PTIC Common Shares and, upon receipt thereof the Corporation will
issue to PTIC a certificate(s) representing an aggregate of
16,000,000 Series B Shares.
(c) PTIC hereby agrees that upon the surrender of the certificate(s)
representing the PTIC Common Shares in accordance with and as
contemplated by this Exchange and Release Agreement, PTIC will have
no further rights under or in respect of the PTIC Common Shares or
the Subscription Agreement, other than the right to receive the
16,000,000 Series B Shares to which PTIC is entitled in connection
with the Exchange and Conversion Transaction.
(d) PTIC acknowledges that upon the surrender of the certificate(s)
representing the PTIC Common Shares and delivery of a certificate(s)
representing an aggregate of 16,000,000 Series B Shares as described
in this Exchange and Release Agreement, the Corporation will have
fully satisfied any and all of its obligations under and in
connection with the PTIC Common Shares and the Subscription
Agreement, and agrees that all of its rights thereunder are
thereupon terminated, and the Corporation will have no further
liability to PTIC with respect to any such rights.
(e) Upon delivery of one or more share certificates representing an
aggregate of 16,000,000 Series B Shares as described in this
Exchange and Release Agreement, PTIC hereby releases, remises and
forever discharges the Corporation, its directors and officers of
and from all actions, causes of action, suits, debts, demands,
contracts and claims whatsoever and howsoever arising which PTIC
ever had, now has or which PTIC may have relating to the PTIC Common
Shares and the Subscription Agreement.
4. Representations and Warranties
PTIC hereby represents and warrants to the Corporation as follows:
(a) PTIC is resident in the Province of Quebec;
(b) PTIC is acting for its own account and has not been created,
incorporated or established solely for purposes of acquiring the
Series B Shares pursuant to applicable private placement exemptions
under the Securities Act (Quebec);
(c) PTIC is acquiring the Series B Shares for investment only and not
with a view to immediate resale or distribution and understands that
until the Corporation becomes a reporting issuer in the Province of
Quebec, PTIC may not resell or
-5-
otherwise transfer or dispose of the Series B Shares except in
accordance with the applicable provisions of the Securities Act
(Quebec); and
(d) PTIC acknowledges and agrees that the exchange of the securities
hereunder is conditional upon such exchange being exempt from the
prospectus and registration requirements of the Securities Act
(Quebec) and understands that the PTIC Common Shares to be exchanged
hereunder must have an aggregate value of not less than CDN$150,000.
5. Termination of Subscription Agreement
Upon and conditional on the closing of the Financing and Exchange and
Conversion Transaction, the Subscription Agreement is terminated; provided
that the representations and warranties of the Corporation in favour of
PTIC set forth in Section 6.20 of the Subscription Agreement shall survive
and continue for such period as if the Subscription Agreement had not been
so terminated; and further provided that PTIC hereby represents and
warrants that, as of the date of this Exchange and Release Agreement, it
has no actual knowledge of any breach by the Corporation of any of its
representations and warranties set forth in Section 6.20 of the
Subscription Agreement.
6. New Shareholders Agreement and Registration Rights Agreement
The Corporation and PTIC acknowledge that, with respect to the 16,000,000
Series B Shares to be issued to PTIC upon the Exchange and Conversion
Transaction, PTIC shall become a party to the following agreements to be
entered into in connection with and effective upon the closing of the
Financing:
(a) a new shareholders agreement, in substantially the form attached as
Schedule "B" hereto; and
(b) a registration rights agreement, in substantially the form attached
as Schedule "C" hereto.
7. General
(a) Entire Agreement. This Exchange and Release Agreement and the
agreements and other documents required to be delivered pursuant to
this Exchange and Release Agreement, constitute the entire agreement
between the parties with respect to the subject matter hereof and
thereof and set out all the covenants, promises, warranties,
representations, conditions, understandings and agreements between
the parties pertaining to the subject matter of this Exchange and
Release Agreement and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
written. There are no covenants, promises, warranties,
representations, conditions, understandings or other agreements,
oral or written, express, implied or collateral between the parties
in connection with the subject matter of this Exchange and Release
Agreement, except as specifically set forth in this Exchange and
Release Agreement and the agreements and other documents required to
be delivered pursuant to this Exchange and Release Agreement.
-6-
(b) Further Assurances. Each of the parties hereto shall with reasonable
diligence do all such things and provide all such reasonable
assurances as may be required to give effect to this Exchange and
Release Agreement, and each party shall provide such further
documents or instruments required by any other party as may be
reasonably necessary or desirable to effect the purpose of this
Exchange and Release Agreement and carry out its provisions.
(c) Jurisdiction. This Exchange and Release Agreement shall be construed
in accordance with the laws of the Province of Ontario and the laws
of Canada applicable therein and shall be treated in all respects as
an Ontario contract. Any action, suit or proceeding arising out of
or relating to this Exchange and Release Agreement shall be brought
in the courts of the Province of Ontario and each of the parties
hereby irrevocably submits to the jurisdiction of such courts.
(d) Currency. All references to money amounts herein are to the lawful
currency of Canada.
(e) Counterparts. This Exchange and Release Agreement may be executed in
counterparts, each of which, when executed by a party hereto, shall
be deemed to be an original and such counterparts shall together
constitute one and the same instrument.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK - THE NEXT PAGE IS THE
SIGNATURE PAGE.]
IN WITNESS OF WHICH the parties have executed this Exchange and Release
Agreement.
MITEL NETWORKS CORPORATION
BY:/s/ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name:▇. ▇▇▇▇▇▇▇
Title:C.F.O.
POWER TECHNOLOGY INVESTMENT CORPORATION
By:
-------------------------------------
Name:
Title:
IN WITNESS OF WHICH the parties have executed this Exchange and Release
Agreement.
MITEL NETWORKS CORPORATION
BY:
--------------------------------------
Name:
Title:
POWER TECHNOLOGY INVESTMENT CORPORATION
By:/s/ LESRIE RAENDEN
-------------------------------------
Name: LESRIE RAENDEN
Title: EVP Finance
SCHEDULE "A"
WAIVER AND TERMINATION AGREEMENT
THIS WAIVER AND TERMINATION AGREEMENT made April --, 2004.
BETWEEN:
MITEL NETWORKS CORPORATION, a corporation incorporated under the laws of
Canada,
(the "CORPORATION")
AND:
MITEL SYSTEMS CORPORATION, a corporation incorporated under the laws of
Canada,
("Systems")
AND:
ZARLINK SEMICONDUCTOR INC., a corporation incorporated under the laws of
Canada,
("ZARLINK")
AND:
POWER TECHNOLOGY INVESTMENT CORPORATION, a corporation incorporated under
the laws of Canada,
("PTIC")
RECITALS:
A. Systems, Zarlink and PTIC (collectively, the "SHAREHOLDERS" and each
individually, a "SHAREHOLDER") are the registered owners of certain shares
in the capital of the corporation.
B. The Shareholders and the Corporation are party to an amended and restated
shareholders agreement dated as of August 31, 2001 (the "SHAREHOLDERS
AGREEMENT").
C. Article 2 of the Shareholders Agreement provides that the Corporation
shall not issue any securities (as defined in the Shareholders Agreement)
to any persons unless such Securities have first been offered to the
Shareholders and the Shareholders shall have the right (the "PRE-EMPTIVE
RIGHTS") to purchase their proportionate share of such Securities.
D. The Corporation now proposes to enter into a financing transaction (the
"FINANCING"), pursuant to which it proposes to issue to EdgeStone Capital
Equity Fund II-A, L.P.
-2-
("EDGESTONE") and to certain of its parallel investors and potentially to
one or more additional investors up to 25,000,000 Class A Convertible
Preferred Shares, Series 1 of the Corporation (the "SERIES A SHARES") at a
purchase price of $1.00 per share. The Series A Shares will be convertible
in accordance with their terms into common shares in the capital of the
Corporation ("COMMON SHARES"). In connection with the Financing, the
Corporation also proposes to grant or issue to EdgeStone: (i) an option
(the "EDGESTONE PURCHASE OPTION") to purchase an additional 5,000,000
Series A Shares, at a purchase price of $1.00 per share; (ii) warrants
(THE "FINANCING WARRANTS") which will entitle EdgeStone to purchase up to
that number of Common Shares as is equal to 25% of the number of Common
Shares that would be issuable to EdgeStone on conversion of its Series A
Shares, exercisable at a price of $1.25 per share; and (iii) a warrant
(the "ANTI-DILUTION WARRANT") which will entitle EdgeStone to acquire
certain additional Common Shares upon the occurrence of certain dilutive
events. Following the Financing, the Corporation is also entitled to
offer, issue and sell (the "COMMON SHARE OFFERING") additional Common
Shares for an aggregate purchase price of not more than $10,000,000.
E. As a condition to the Financing, the Company also proposes that certain
existing outstanding securities of the Corporation, namely: (i) 4,000,000
Common Shares held by PTIC (the "PTIC COMMON SHARES"), (ii) 20,448,875
Common Shares (the "WCC COMMON SHARES") issued by the Corporation in
October, 2003 upon the conversion of certain promissory notes previously
issued by the Corporation in favour of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Corporation; and
(iii) 5,445,775 Common Shares (the "DEBENTURE Shares") issued in October,
2003 upon the conversion of mandatory convertible debentures previously
issued by the Corporation in favour of certain existing investors, will be
exchanged for or converted into (the "EXCHANGE AND CONVERSION
TRANSACTION") Class B Convertible Preferred Shares, Series 1 (the "SERIES
B SHARES") of the Corporation, as follows:
(a) the PTIC Common Shares will be exchanged for an aggregate of
16,000,000 Series B Shares, calculated on the basis of four Series B
Shares for each outstanding PTIC Common Share;
(b) the WCC Common Shares will be exchanged for an aggregate of
40,897,750 Series B Shares, calculated on the basis of two Series B
Shares for each outstanding WCC Common Share; and
(c) the Debenture Shares will be converted into an aggregate of up to
10,891,550 Series B Shares, calculated on the basis of two Series B
Shares for each Debenture Share.
The Series B Shares will be convertible in accordance with their terms
into Common Shares.
F. In connection with and as a condition of the Financing, the Shareholders
and the Corporation now desire enter into this Waiver and Termination
Agreement to provide for the waiver of Pre-emptive Rights in connection
with the Financing and Exchange and Conversion Transaction and to
terminate the Shareholders Agreement.
-3-
THEREFORE the parties agree as follows:
1. Waiver of Pre-emptive Rights
Each of the Shareholders hereby irrevocably waives its Pre-emptive Rights
under Article 2 of the Shareholders Agreement (including any right to
formal notice) in connection with the issuance by the Corporation of:
(a) the Series A Shares, EdgeStone Purchase Option, Financing Warrants
and Anti- Dilution Warrant pursuant to the Financing;
(b) the additional Series A Shares and Financing Warrants upon the
exercise by EdgeStone of the EdgeStone Purchase Option;
(c) the Common Shares upon the conversion of any Series A Shares in
accordance with their terms;
(d) the Common Shares upon the exercise of the Financing Warrants in
accordance with their terms;
(e) the Common Shares upon the exercise of the Anti-Dilution Warrant in
accordance with its terms;
(f) the Common Shares pursuant to the Common Share Offering;
(g) the Series B Shares pursuant to the Exchange and Conversion
Transaction; and
(h) the Common Shares upon the conversion of any Series B Shares in
accordance with their terms.
Each of the Shareholders further acknowledges that in connection with the
issuance of the above securities, the holders thereof will not be required
to become a party to the Shareholders Agreement, and the Shareholders
Agreement will be terminated as contemplated in this Waiver and
Termination Agreement.
2. Termination of Shareholders Agreement and Release
(a) The Shareholders Agreement is hereby terminated. This Waiver and
Termination Agreement, being duly executed by the Corporation and
each of the Shareholders constitutes a valid termination of the
Shareholders Agreement.
(b) Each Shareholder hereby acknowledges that the Corporation has fully
satisfied any and all of its obligations under and in connection
with the Shareholders Agreement, and agrees that all of its rights
thereunder are terminated, and the Corporation has no further
liability to such Shareholder with respect to any such rights.
(c) Each Shareholder hereby releases, remises and forever discharges the
Corporation, its directors and officers of and from all actions,
causes of action, suits, debts, demands, contracts and claims
whatsoever and howsoever arising
-4-
which such Shareholder ever had, now has or which such Shareholder
may have relating to the Shareholders Agreement.
3. General
(a) Entire Agreement. This Waiver and Termination Agreement and the
agreements and other documents required to be delivered pursuant to
this Waiver and Termination Agreement, constitute the entire
agreement between the parties and set out all the covenants,
promises, warranties, representations, conditions, understandings
and agreements between the parties pertaining to the subject matter
of this Waiver and Termination Agreement and supersede all prior
agreements, understandings, negotiations and discussions, whether
oral or written. There are no covenants, promises, warranties,
representations, conditions, understandings or other agreements,
oral or written, express, implied or collateral between the parties
in connection with the subject matter of this Waiver and Termination
Agreement except as specifically set forth in this Waiver and
Termination Agreement and any document required to be delivered
pursuant to this Waiver and Termination Agreement.
(b) Further Assurances. Each of the parties hereto shall with reasonable
diligence do all such things and provide all such reasonable
assurances as may be required to give effect to this Waiver and
Termination Agreement, and each party shall provide such further
documents or instruments required by any other party as may be
reasonably necessary or desirable to effect the purpose of this
Waiver and Termination Agreement and carry out its provisions.
(c) Jurisdiction. This Waiver and Termination Agreement shall be
construed in accordance with the laws of the Province of Ontario and
the laws of Canada applicable therein and shall be treated in all
respects as an Ontario contract. Any action, suit or proceeding
arising out of or relating to this Waiver and Termination Agreement
shall be brought in the courts of the Province of Ontario and each
of the parties hereby irrevocably submits to the jurisdiction of
such courts.
(d) Counterparts. This Waiver and Termination Agreement may be executed
in several counterparts, each of which, when executed by a party
hereto, shall be deemed to be an original and such counterparts
shall together constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS.]
-5-
IN WITNESS OF WHICH the parties have executed this Waiver and Termination
Agreement.
MITEL NETWORKS CORPORATION
By:
------------------------------------
Name:
Title:
MITEL SYSTEMS CORPORATION
By:
------------------------------------
Name:
Title:
ZARLINK SEMICONDUCTOR INC.
By:
------------------------------------
Name:
Title:
POWER TECHNOLOGY INVESTMENT CORPORATION
By:
------------------------------------
Name:
Title:
-6-
SCHEDULE "B"
NEW SHAREHOLDERS AGREEMENT
Filed on May 3, 2004 as an exhibit to a Schedule 13D (Mitel as issuer) by
EdgeStone Capital Equity Fund II-A,L.P.; EdgeStone Capital Equity Fund II-US,
L.P.; EdgeStone Capital Equity Fund II-US-Inst., L.P.; National Bank Financial &
Co. Inc; EdgeStone Capital Equity Fund II-A, GP, L.P.; EdgeStone Capital Equity
Fund II-US GP, L.P.; EdgeStone Capital Equity Fund II-US-Inst. GP, L.P.;
EdgeStone Capital Equity Fund II-A GP, Inc; EdgeStone Capital Equity Fund II-US
Main GP, Inc.; EdgeStone Capital Equity Fund II-US-inst. GP, Inc.; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇▇▇; and EdgeStone Capital
Equity Fund II-B GP, Inc. and uncorporated by reference.
-7-
SCHEDULE"C"
REGISTRATION RIGHTS AGREEMENT
Filed on May 3, 2004 as an exhibit to a Schedule 13D (Mitel as issuer) by
EdgeStone Capital Equity Fund II-A,L.P.; EdgeStone Capital Equity Fund II-US,
L.P.; EdgeStone Capital Equity Fund II-US-Inst., L.P.; National Bank Financial &
Co. Inc; EdgeStone Capital Equity Fund II-A, GP, L.P.; EdgeStone Capital Equity
Fund II-US GP, L.P., EdgeStone Capital Equity Fund II-US-Inst. GP, L.P.;
EdgeStone Capital Equity II-A GP, Inc.; EdgeStone Capital Equity Fund II-US Main
GP, Inc.; EdgeStone Capital Equity Fund II-US-inst. GP, Inc; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇;
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇▇▇▇▇; and EdgeStone Capital Equity
Fund II - B GP, Inc. and uncorporated by reference.
EXHIBIT F-3
FORM OF WCC EXCHANGE AND RELEASE AGREEMENT
EXCHANGE AND RELEASE AGREEMENT
THIS EXCHANGE AND RELEASE AGREEMENT is made April 23, 2004.
BETWEEN:
MITEL NETWORKS CORPORATION, a corporation incorporated under the laws of
Canada,
(the "CORPORATION")
-and-
▇▇▇▇▇▇ ▇▇▇▇▇▇ CORPORATION, a corporation incorporated under the laws of
the Province of Newfoundland,
("▇▇▇▇▇▇ ▇▇▇▇▇▇")
RECITALS:
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇ is the holder of 20,448,875 common shares in the capital of
the Corporation (the "WCC COMMON SHARES") which were issued to ▇▇▇▇▇▇
▇▇▇▇▇▇ by the Corporation in October, 2003 upon the conversion of certain
promissory notes (the "▇▇▇▇▇▇ ▇▇▇▇▇▇ NOTES") previously issued by the
Corporation to evidence certain debt of the Corporation to ▇▇▇▇▇▇ ▇▇▇▇▇▇.
B. The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Notes were converted into the WCC Common Shares at a
conversion price of $2.00 per share. In connection with such conversion,
the Corporation committed to offer certain downside price protection to
▇▇▇▇▇▇ ▇▇▇▇▇▇ in connection with the WCC Common Shares.
C. The Corporation now proposes to enter into a financing transaction (the
"FINANCING"), pursuant to which it proposes to issue to EdgeStone Capital
Equity Fund II-A, L.P. and to certain of its parallel investors
("EDGESTONE") up to an aggregate of 20,000,000 Class A Convertible
Preferred Shares, Series 1 of the Corporation at a purchase price of $1.00
per share.
D. In connection with the Financing, the Corporation also proposes that
certain existing outstanding securities of the Corporation, namely: (i)
the WCC Common Shares, (ii) 4,000,000 common shares in the capital of the
Corporation (the "PTIC COMMON SHARES") held by Power Technology Investment
Corporation ("PTIC"); and (iii) 5,445,775 common shares in the capital of
the Corporation (the "DEBENTURE SHARES") issued in October, 2003 upon the
conversion of mandatory convertible debentures previously issued by the
Corporation in favour of certain existing investors, will be exchanged for
or converted into (the "EXCHANGE AND CONVERSION TRANSACTION") Class B
Convertible Preferred Shares, Series 1 (the "SERIES B SHARES") of the
Corporation, as follows:
-2-
(a) the WCC Common Shares will be exchanged for an aggregate of
40,897,750 Series B Shares, calculated on the basis of two Series B
Shares for each outstanding WCC Common Share;
(b) the PTIC Common Shares will be exchanged for an aggregate of
16,000,000 Series B Shares, calculated on the basis of four Series B
Shares for each outstanding PTIC Common Share; and
(c) the Debenture Shares will be converted into an aggregate of up to
10,891,550 Series B Shares, calculated on the basis of two Series B
Shares for each Debenture Share.
E. The parties therefore desire to enter into this Exchange and Release
Agreement to provide for the exchange of the WCC Common Shares for an
aggregate of 40,897,750 Series B Shares as described above, and to confirm
that the Corporation has satisfied its obligations to ▇▇▇▇▇▇ ▇▇▇▇▇▇ as
contemplated herein.
THEREFORE the parties agree as follows:
1. Exchange, of WCC Common Shares and Release
(a) ▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby irrevocably agrees to surrender all of the WCC
Common Shares in exchange for, concurrent with the closing of the
Financing, an aggregate of 40,897,750 Series B Shares.
(b) In order to effect the Exchange and Conversion Transaction in
relation to the WCC Common Shares, ▇▇▇▇▇▇ ▇▇▇▇▇▇ will return to the
Corporation for cancellation the certificate(s) representing the WCC
Common Shares and, upon receipt thereof, the Corporation will issue
to ▇▇▇▇▇▇ ▇▇▇▇▇▇ one or more share certificates representing an
aggregate of 40,897,750 Series B Shares.
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby agrees that upon the surrender of the
certificate(s) representing the WCC Common Shares in accordance with
and as contemplated by this Exchange and Release Agreement, ▇▇▇▇▇▇
▇▇▇▇▇▇ will have no further rights under or in respect of the WCC
Common Shares, the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Notes or any other commitments of
the Corporation to ▇▇▇▇▇▇ ▇▇▇▇▇▇ in respect thereof, other than the
right to receive the 40,897,750 Series B Shares to which ▇▇▇▇▇▇
▇▇▇▇▇▇ is entitled in connection with the Exchange and Conversion
Transaction.
(d) ▇▇▇▇▇▇ ▇▇▇▇▇▇ acknowledges that upon the surrender of the
certificate(s) representing the WCC Common Shares and delivery of
one or more share certificates representing an aggregate of
40,897,750 Series B Shares as described in this Exchange and Release
Agreement, the Corporation will have fully satisfied any and all of
its obligations under and in connection with the WCC Common Shares,
the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Notes and any other commitments of the Corporation
to ▇▇▇▇▇▇ ▇▇▇▇▇▇ in respect thereof, including without limitation
any price protection or anti-dilution rights, and agrees that all of
its rights thereunder are thereupon terminated, and the Corporation
will have no further liability to ▇▇▇▇▇▇ ▇▇▇▇▇▇ with respect to any
such rights.
-3-
(e) Upon delivery of one or more share certificates representing an
aggregate of 40,897,750 Series B Shares as described in this
Exchange and Release Agreement, ▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby releases,
remises and forever discharges the Corporation, its directors and
officers of and from all actions, causes of action, suits, debts,
demands, contracts and claims whatsoever and howsoever arising which
▇▇▇▇▇▇ ▇▇▇▇▇▇ ever had, now has or which ▇▇▇▇▇▇ ▇▇▇▇▇▇ may have
relating to the WCC Common Shares, the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Notes and any
other commitments of the Corporation to ▇▇▇▇▇▇ ▇▇▇▇▇▇ in respect
thereof.
2. Representations and Warranties
▇▇▇▇▇▇ ▇▇▇▇▇▇ hereby represents and warrants to the Corporation as
follows:
(a) it is resident in the Province of Newfoundland;
(b) it is receiving the Series B Shares pursuant to the Exchange and
Conversion Transaction as described herein as principal for its own
account and not for the benefit of any other person;
(c) it acknowledges that this Exchange and Conversion Transaction is not
being made through the advertisement of the securities in printed
media of general and regular paid circulation, radio or television;
and
(d) it acknowledges and agrees that the exchange of the securities
hereunder is conditional upon such conversion being exempt from the
prospectus and registration requirements of the Securities Act
(Newfoundland) and understands that the WCC Common Shares to be
exchanged hereunder must have an aggregate value of not less than
$97,000.
3. General
(a) Entire Agreement. This Exchange and Release Agreement and the
agreements and other documents required to be delivered pursuant to
this Exchange and Release Agreement, constitute the entire agreement
between the parties and set out all the covenants, promises,
warranties, representations, conditions, understandings and
agreements between the parties pertaining to the subject matter of
this Exchange and Release Agreement and supersede all prior
agreements, understandings, negotiations and discussions, whether
oral or written. There are no covenants, promises, warranties,
representations, conditions, understandings or other agreements,
oral or written, express, implied or collateral between the parties
in connection with the subject matter of this Exchange and Release
Agreement, except as specifically set forth in this Exchange and
Release Agreement and any document required to be delivered pursuant
to this Exchange and Release Agreement.
(b) Further Assurances. Each of the parties hereto shall with reasonable
diligence do all such things and provide all such reasonable
assurances as may be required to consummate the transactions
contemplated by this Exchange and Release Agreement, and each
party shall provide such further documents or instruments
-4-
required by any other party as may be reasonably necessary or
desirable to effect the purpose of this Exchange and Release
Agreement and carry out its provisions.
(c) Jurisdiction. This Exchange and Release Agreement shall be construed
in accordance with the laws of the Province of Ontario and the laws
of Canada applicable therein and shall be treated in all respects as
an Ontario contract. Any action, suit or proceeding arising out of
or relating to this Exchange and Release Agreement shall be brought
in the courts of the Province of Ontario and each of the parties
hereby irrevocably submits to the jurisdiction of such courts.
(d) Currency. All references to money amounts herein are to the lawful
currency of Canada.
(e) Counterparts. This Exchange and Release Agreement may be executed in
counterparts, each of which, when executed by a party hereto, shall
be deemed to be an original and such counterparts shall together
constitute one and the same instrument.
IN WITNESS OF WHICH the parties have executed this Exchange and Release
Agreement.
MITEL NETWORKS CORPORATION ▇▇▇▇▇▇ ▇▇▇▇▇▇ CORPORATION
By: /s/ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: C.F.O Title: Director