EXHIBIT 2.1
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ARRANGEMENT AGREEMENT
among:
Siebel Systems, Inc.,
a Delaware corporation;
3045856 Nova Scotia Company,
a Nova Scotia unlimited liability company;
2000066 Ontario Inc.,
an Ontario corporation;
and
▇▇▇▇▇ Systems Inc.,
an Ontario corporation
______________________________
Dated as of September 11, 2000
______________________________
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Table Of Contents
Page
1. Description Of Transaction....................................................................... 1
1.1 Implementation Steps by the Company........................................................ 1
1.2 Implementation Steps by Parent, ExchangeCo and Nova Scotia Co.............................. 2
1.3 Interim Order.............................................................................. 2
1.4 Articles of Arrangement.................................................................... 3
1.5 Adjustments in the Parent Stock Exchange Ratio and the Exchangeable Share Exchange Ratio... 5
1.6 Management Proxy Circular; Securities Law Compliance....................................... 5
1.7 Preparation of Filings..................................................................... 6
2. Representations And Warranties Of The Company.................................................... 7
2.1 Subsidiaries; Due Organization; Etc........................................................ 7
2.2 Certificate of Incorporation and Bylaws.................................................... 8
2.3 Capitalization, Etc........................................................................ 8
2.4 Canadian Securities Commissions Filings; Financial Statements; Books and Records........... 9
2.5 Absence of Changes......................................................................... 10
2.6 Title to Assets............................................................................ 12
2.7 Receivables; Customers; Inventories........................................................ 13
2.8 Real Property; Equipment; Leasehold........................................................ 13
2.9 Proprietary Assets......................................................................... 13
2.10 Contracts.................................................................................. 16
2.11 Sale of Products; Performance of Services.................................................. 18
2.12 Liabilities................................................................................ 19
2.13 Compliance with Legal Requirements......................................................... 19
2.14 Certain Business Practices................................................................. 19
2.15 Governmental Authorizations................................................................ 19
2.16 Tax Matters................................................................................ 20
2.17 Employee and Labor Matters; Benefit Plans.................................................. 21
2.18 Environmental Matters...................................................................... 24
2.19 Insurance.................................................................................. 25
i.
Table Of Contents
(continued)
Page
2.20 Transactions with Affiliates............................................................... 25
2.21 Legal Proceedings; Orders.................................................................. 26
2.22 Authority; Inapplicability of Anti-takeover Statutes; Binding Nature of Agreement.......... 26
2.23 No Discussions............................................................................. 26
2.24 Accounting Matters......................................................................... 26
2.25 Vote Required.............................................................................. 27
2.26 Non-Contravention; Consents................................................................ 27
2.27 Fairness Opinion........................................................................... 28
2.28 Financial Advisor.......................................................................... 28
2.29 Reporting Issuer Status.................................................................... 28
2.30 Registration Rights........................................................................ 28
2.31 Full Disclosure............................................................................ 29
3. Representations And Warranties Of Parent, ExchangeCo And Nova Scotia Co.......................... 29
3.1 Due Organization; Subsidiaries............................................................. 29
3.2 Capitalization............................................................................. 29
3.3 SEC Filings; Financial Statements.......................................................... 30
3.4 Authority; Binding Nature of Agreement..................................................... 30
3.5 No Vote Required........................................................................... 31
3.6 Non-Contravention; Consents................................................................ 31
3.7 Valid Issuance............................................................................. 31
3.8 Accounting Matters......................................................................... 31
3.9 Disclosure................................................................................. 31
4. Certain Covenants Of The Company................................................................. 32
4.1 Access and Investigation................................................................... 32
4.2 Operation of the Company's Business........................................................ 33
4.3 No Solicitation............................................................................ 36
ii
Table Of Contents
(continued)
Page
5. Additional Covenants Of The Parties.............................................................. 38
5.1 Company Securityholders' Meeting........................................................... 38
5.2 Regulatory Approvals....................................................................... 39
5.3 Company Options............................................................................ 40
5.4 Employee Benefits.......................................................................... 41
5.5 Indemnification of Officers and Directors.................................................. 42
5.6 Pooling of Interests....................................................................... 42
5.7 Additional Agreements...................................................................... 42
5.8 Disclosure................................................................................. 43
5.9 Affiliate Agreements....................................................................... 43
5.10 Listing.................................................................................... 44
5.11 Public Corporation......................................................................... 44
6. Conditions Precedent To Obligations Of Parent, Exchangeco And Nova Scotia Co..................... 44
6.1 Accuracy of Representations................................................................ 44
6.2 Performance of Covenants................................................................... 44
6.3 Securityholder Approval; Exercise of Dissent Rights........................................ 45
6.4 Consents................................................................................... 45
6.5 Agreements and Documents................................................................... 45
6.6 Employees.................................................................................. 46
6.7 No Material Adverse Change................................................................. 46
6.8 Regulatory Approvals....................................................................... 46
6.9 Court Orders............................................................................... 47
6.10 Listing.................................................................................... 47
6.11 No Restraints.............................................................................. 47
6.12 No Governmental or Other Litigation........................................................ 47
6.13 Company Warrants........................................................................... 48
6.14 Compliance with (S)3(a)(10) of the Securities Act.......................................... 48
iii
Table Of Contents
(continued)
Page
7. Conditions Precedent To Obligation Of The Company............................................... 48
7.1 Accuracy of Representations................................................................ 48
7.2 Performance of Covenants................................................................... 48
7.3 Securityholder Approval.................................................................... 48
7.4 Documents.................................................................................. 49
7.5 Regulatory Approvals....................................................................... 49
7.6 Court Orders............................................................................... 50
7.7 Listing.................................................................................... 50
7.8 Effectiveness of Form S-3 Registration Statement........................................... 50
7.9 No Restraints.............................................................................. 50
7.10 No Governmental Litigation................................................................. 50
7.11 Compliance with (S)3(a)(10) of the Securities Act.......................................... 50
8. Termination..................................................................................... 50
8.1 Termination............................................................................... 50
8.2 Effect of Termination..................................................................... 52
8.3 Expenses; Termination Fees................................................................ 52
9. Miscellaneous Provisions........................................................................ 55
9.1 Amendment.................................................................................. 55
9.2 Waiver..................................................................................... 56
9.3 No Survival of Representations and Warranties.............................................. 56
9.4 Entire Agreement; Counterparts............................................................. 56
9.5 Applicable Law; Jurisdiction............................................................... 56
9.6 Disclosure Schedule........................................................................ 56
9.7 Attorneys' Fees............................................................................ 57
9.8 Assignability.............................................................................. 57
9.9 Notices.................................................................................... 57
9.10 Cooperation................................................................................ 58
iv
Table Of Contents
(continued)
Page
9.11 Severability............................................................................... 58
9.12 Currency................................................................................... 58
9.13 Construction............................................................................... 58
v
EXHIBITS
Exhibit A - Certain Definitions
Exhibit B - Form of Exchangeable Share Support Agreement
Exhibit C - Form of Affiliate Agreement
Exhibit D - Form of Noncompetition and Nonsolicitation Agreement
Exhibit E - Form of Release
Exhibit F - Form of Voting and Exchange Trust Agreement
Exhibit G - Persons to sign the Affiliate Agreement
Exhibit I - Form of Plan of Arrangement
ARRANGEMENT AGREEMENT
THIS ARRANGEMENT AGREEMENT ("Agreement") is made and entered into as of
September 11, 2000, by and among SIEBEL SYSTEMS, INC., a Delaware corporation
("Parent"); 3045856 Nova Scotia Company, a Nova Scotia unlimited liability
company and an indirectly wholly owned subsidiary of Parent ("Nova Scotia Co");
2000066 Ontario Inc., an Ontario corporation and an indirectly wholly owned
subsidiary of Parent and a directly wholly owned subsidiary of Nova Scotia Co
("ExchangeCo"), and ▇▇▇▇▇ SYSTEMS INC., an Ontario corporation (the "Company").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. The respective boards of directors of the Company, Parent, ExchangeCo
and Nova Scotia Co have approved the transactions contemplated by this
Agreement, and the board of directors of the Company has agreed to submit the
Plan of Arrangement and the other transactions contemplated hereby to its
shareholders for approval.
B. The Arrangement is intended to (i) provide to holders of Common Shares
who are Canadian Residents (as defined in Section 1.4) the opportunity to
dispose of their Common Shares in return for Exchangeable Shares on a tax-
deferred or "rollover" basis for Canadian income tax purposes pursuant to the
provisions of Section 85 of the Income Tax Act (Canada) and Section 1.4; and
(ii) be treated as a "pooling of interests" for financial reporting purposes
under United States generally accepted accounting principles.
C. In order to induce Parent to enter into this Agreement and to
consummate the Arrangement, concurrently with the execution and delivery of this
Agreement: (i) the Company is entering into a stock option agreement with Parent
(the "Stock Option Agreement"), pursuant to which the Company has granted to
Parent an option, exercisable under the circumstances specified therein, to
purchase Common Shares; and (ii) certain shareholders of the Company are
executing shareholder support agreements in favor of Parent (the "Shareholder
Support Agreements").
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
1. DESCRIPTION OF TRANSACTION
1.1 Implementation Steps by the Company. The Company covenants in
favor of Parent, ExchangeCo and Nova Scotia Co that the Company shall:
(a) as soon as practicable after the execution of this
Agreement, apply in a manner acceptable to Parent, acting reasonably, under
subsection 182(5) of the OBCA for an order approving the Arrangement and for the
Interim Order, and thereafter proceed with and diligently pursue the obtaining
of the Interim Order;
(b) as soon as practicable after the execution of this
Agreement, convene and hold the Company Securityholders' Meeting in accordance
with Section 5.1 for the purpose of considering the Arrangement Resolution (and
for any other proper purpose as may be acceptable to Parent, acting reasonably,
and as may be set out in the notice for such meeting); provided, however, that
the Company and Parent, acting reasonably and jointly, shall be entitled to
adjourn or postpone the Company Securityholders' Meeting for a period of time
agreed to by both the Company and Parent, if on the scheduled date of such
Company Securityholders' Meeting all of the Consents required pursuant to
Section 6.8 have not been obtained;
(c) subject to obtaining such approvals as are required by the
Interim Order, proceed with and diligently pursue the application to the Court
under subsections 182(3) and 182(5)(f) of the OBCA for the Final Order;
(d) subject to obtaining the Final Order and the satisfaction or
waiver of the other conditions herein contained in favor of each party, send to
the Director, for endorsement and filing by the Director, the Articles of
Arrangement and such other documents as may be required in connection therewith
under the OBCA to give effect to the Arrangement pursuant to subsection 183(2)
of the OBCA;
(e) on or prior to the Effective Date and subject to obtaining
the Final Order and the satisfaction or waiver of the other conditions herein
contained in its favor, execute and deliver the Exchangeable Share Support
Agreement and the Voting and Exchange Trust Agreement; and
(f) provide Parent with copies of and a reasonable opportunity
to comment on all applications, circulars and other documents prepared by or on
behalf of the Company in connection with the Arrangement and make any changes to
such applications, circulars and documents as are acceptable to the Company and
Parent, each acting reasonably.
1.2 Implementation Steps by Parent, ExchangeCo and Nova Scotia Co.
Parent, ExchangeCo and Nova Scotia Co covenant in favor of the Company that, on
or prior to the Effective Date and subject to obtaining the Final Order and the
satisfaction or waiver of the other conditions herein contained in favor of
Parent, ExchangeCo and Nova Scotia Co:
(a) Parent, ExchangeCo and Nova Scotia Co shall execute and
deliver the Exchangeable Share Support Agreement;
(b) Parent and ExchangeCo shall execute and deliver the Voting
and Exchange Trust Agreement; and
(c) Parent shall issue to the Trustee the Special Voting Share.
1.3 Interim Order. In the notice of motion for the application
contemplated by Section 1.1(a), the Company shall request that the Interim Order
provide:
2.
(a) for the class of Persons to whom notice is to be provided in
respect of the Arrangement and the Company Securityholders' Meeting and for the
manner in which such notice is to be provided;
(b) that the requisite approval for the Arrangement Resolution
shall be 66-2/3% of the votes cast on the Arrangement Resolution by the Company
Securityholders, voting as a single class, present in person or by proxy at the
Company Securityholders' Meeting (and that each holder of Common Shares is
entitled to one vote for each Common Share held and each holder of Company
Options and Company Warrants is entitled to the number of votes represented by
the number of Common Shares into which such holder's Company Option or Company
Warrants is convertible, rounded down to the nearest whole share and without
regard to vesting requirements, if any);
(c) that, in all other respects, the terms, restrictions and
conditions of the bylaws and articles of incorporation of the Company, including
quorum requirements and all other matters, shall apply in respect of the Company
Securityholders' Meeting; provided, however, the Company shall request that the
Interim Order provide that the Company and Parent, acting reasonably and
jointly, shall be entitled to adjourn or postpone the Company Securityholders'
Meeting for a period of time agreed to by both the Company and Parent, if on the
scheduled date of such Company Securityholders' Meeting all of the Consents
required pursuant to Section 6.8 have not been obtained; and
(d) for the grant of Dissent Rights to the holders of Common
Shares.
1.4 Articles of Arrangement. The Articles of Arrangement shall, with
such other matters as are necessary to effect the Arrangement, and all as
subject to the provisions of the Plan of Arrangement, provide substantially as
follows:
(a) that each outstanding Common Share (other than (i) the
Common Shares that are held by holders who have exercised their Dissent Rights
in accordance with Article 3 of the Plan of Arrangement and who are ultimately
entitled to be paid the fair value for such Common Shares and (ii) the Common
Shares that are held by Parent or any of its Affiliates, if any) that is held by
a holder who is a resident of Canada for purposes of the Income Tax Act (Canada)
(a "Canadian Resident") shall be transferred by the holder thereof to ExchangeCo
in exchange for 0.497 of a fully paid and non-assessable Exchangeable Share (the
fraction specified in this Section 1.4(b), as such fraction may be adjusted in
accordance with Section 1.5, is hereinafter referred to as the "Exchangeable
Share Exchange Ratio") and the name of each such holder will be removed from the
register of holders of Common Shares and added to the register of holders of
Exchangeable Shares and ExchangeCo will be recorded as the holder of such Common
Shares so transferred and shall be deemed to be the legal and beneficial owner
thereof; provided that, for purposes of clarifying the foregoing, (1) the
holders of Common Shares who are Canadian Residents and who make an effective
Parent Stock Election (as defined below) on or prior to the Election Deadline
will no longer be, and (2) the holders of Common Shares who are not Canadian
Residents will not be, entitled to receive Exchangeable Shares and will be
entitled to receive only shares of Parent Common Stock in accordance with
Section 1.4(b);
3.
(b) that each outstanding Common Share (other than (i) the
Common Shares that are held by holders who have exercised their Dissent Rights
in accordance with Article 3 of the Plan of Arrangement and who are ultimately
entitled to be paid the fair value for such Common Shares and (ii) the Common
Shares that are held by Parent or any of its Affiliates, if any) that is held by
a holder who is not a Canadian Resident or who is a Canadian Resident that has
elected, in a duly completed letter of transmittal and election form deposited
with the Depository (a "Parent Stock Election") no later than the Election
Deadline to exchange such share for 0.497 of a share of Parent Common Stock,
shall be transferred by the holder thereof to Nova Scotia Co in exchange for
0.497 of a fully paid and non-assessable share of Parent Common Stock (the
fraction specified in this Section 1.4(a), as such fraction may be adjusted in
accordance with Section 1.5, is hereinafter referred to as the "Parent Stock
Exchange Ratio"), and the name of each such holder of Common Shares shall be
removed from the register of holders of Common Shares and added to the register
of holders of Parent Common Stock and Nova Scotia Co will be recorded as the
holder of such Common Shares so transferred and will be deemed to be the legal
and beneficial owner thereof;
(c) no fractional Exchangeable Shares or fractional shares of
Parent Common Stock shall be delivered. In lieu thereof, each holder of Common
Shares who otherwise would be entitled to receive a fraction of an Exchangeable
Share or a fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Exchangeable Shares or fractional shares of Parent Common
Stock, as the case may be, issuable to such holder) shall be paid by the
Depository in an amount determined in accordance with Section 4.4 of the Plan of
Arrangement;
(d) that each Company Option that is outstanding and unexercised
immediately prior to the Effective Time will be exchanged for an option to
purchase Parent Common Stock pursuant to the terms of Section 5.3; and
(e) that each Company Warrant, if any are outstanding and
unexercised immediately prior to the Effective Time, will be exchanged for a
warrant to purchase Parent Common Stock (a "Replacement Warrant"), provided that
(A) each Replacement Warrant assumed by Parent may be exercised solely for
shares of Parent Common Stock, (B) the number of shares of Parent Common Stock
subject to each such Replacement Warrant shall be equal to the number of Common
Shares subject to such warrant immediately prior to the Effective Time
multiplied by the Parent Stock Exchange Ratio, rounding down to the nearest
whole share, (C) the per share exercise price under each such Replacement
Warrant shall be adjusted by dividing the U.S. Dollar Equivalent (calculated on
the Effective Date) of the per share exercise price under such warrant by the
Parent Stock Exchange Ratio and rounding up to the nearest whole cent and (D)
any restriction on the exercise of any such Replacement Warrant shall continue
in full force and effect and the term, exercisability and other provisions of
such warrant shall otherwise remain unchanged; provided, however, that each
Replacement Warrant assumed by Parent in accordance with this Section 1.4(e)
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, division or subdivision of shares, stock
dividend, reverse stock split, consolidation of shares, reclassification,
recapitalization or other similar transaction subsequent to the Effective Time.
4.
1.5 Adjustments in the Parent Stock Exchange Ratio and the
Exchangeable Share Exchange Ratio. If, between the date of this Agreement and
the Effective Time, the outstanding Common Shares or Parent Common Stock are
changed into a different number or class of shares by reason of any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar
transaction, then the Parent Stock Exchange Ratio and the Exchangeable Share
Exchange Ratio shall be appropriately adjusted. The parties hereby acknowledge
and agree that the Parent Stock Exchange Ratio, the Exchangeable Share Exchange
Ratio and any numbers relating to the capitalization of Parent set forth in this
Agreement including any such capitalization numbers in Section 3.2(a), reflect
the two-for-one stock split of Parent Common Stock that was declared effective
on September 8, 2000.
1.6 Management Proxy Circular; Securities Law Compliance.
(a) As promptly as practicable after the execution of this
Agreement, and in any event within 25 days thereafter, the Company, in
consultation with Parent, shall prepare the Management Proxy Circular (which
shall be in form and content acceptable to Parent, acting reasonably) together
with any other documents required by the Canadian Securities Laws or other
applicable Legal Requirements in connection with the Arrangement, and the
Company shall cause the Management Proxy Circular and other documentation
required in connection with the Company Securityholders' Meeting to be sent to
each holder of Common Shares, Company Options and Company Warrants and filed as
required by the Interim Order and applicable Legal Requirements.
(b) Parent and the Company shall use all reasonable efforts to
obtain all orders required from the applicable Canadian securities authorities
to permit the issuance and first resale of (i) the Exchangeable Shares, the
Parent Common Stock, the Replacement Options and the Replacement Warrants, if
any, issued pursuant to the Arrangement, (ii) the Parent Common Stock issued
upon exchange of the Exchangeable Shares pursuant to the provisions attaching to
the Exchangeable Shares set forth in the Plan of Arrangement, and (iii) the
Parent Common Stock issued from time to time upon the exercise of the
Replacement Options and Replacement Warrants, if any, in each case without
qualification with or approval of or the filing of any document, including any
prospectus or similar document, or the taking of any proceeding with, or the
obtaining of any further order, ruling or consent from, any Governmental Body or
regulatory authority under any Canadian Securities Laws or other Legal
Requirements or pursuant to the policies, rules and regulations of any
Governmental Body administering such Canadian Securities Laws or other Legal
Requirements, or the fulfilment of any other Legal Requirement in any such
jurisdiction (other than, with respect to such first resales, any restrictions
on transfer by reason of, among other things, a holder being a "control person"
of Parent or the Company for purposes of Canadian Securities Laws).
(c) As promptly as practicable after the execution of this
Agreement, Parent shall file a Form S-3 Registration Statement (or other
applicable form) in order to register under the Securities Act the Parent Common
Stock to be issued from time to time after the Effective Time upon exchange of
the Exchangeable Shares, and shall use its reasonable efforts to cause the Form
S-3 to become effective and to maintain the effectiveness of such registration
for
5.
the period that such Exchangeable Shares remain outstanding. Notwithstanding
anything to the contrary contained herein, Parent shall be under no obligation
to file the Form S-3 Registration Statement if it shall, in its reasonable
discretion, determine, based upon the written advice of counsel, that the
issuance of shares of Parent Common Stock upon exchange of the Exchangeable
Shares after the Effective Time is exempt from the registration requirements of
Section 5 of the Securities Act by virtue of Section 3(a)(9) thereof or by
virtue of another exemption therefrom.
1.7 Preparation of Filings.
(a) Parent and the Company shall use their reasonable efforts to
co-operate with one another in:
(i) the preparation of any application for the orders, any
required registration statements and any other documents reasonably deemed by
Parent or the Company to be necessary to discharge their respective obligations
under United States federal or state securities laws and under Canadian
Securities Laws in connection with the Arrangement and the other transactions
contemplated hereby;
(ii) the taking of all such action as may be required under
any applicable United States federal or state securities laws (including "blue
sky laws") and any applicable Canadian Securities Laws in connection with the
issuance of the Exchangeable Shares and the Parent Common Stock in connection
with the Arrangement or the issuance and exercise of the Replacement Options or
Replacement Warrants, if any are outstanding immediately prior to the Effective
Time; provided, however, that, notwithstanding anything to the contrary
contained in this Agreement, with respect to the United States "blue sky" and
Canadian provincial qualifications, neither Parent nor the Company (or any
Subsidiary or Affiliate of Parent or the Company) shall be required to register
or qualify as a foreign corporation or reporting issuer where any such Entity is
not now or on the Effective Date so registered or qualified; and
(iii) the taking of all such action as may be required under
the OBCA in connection with the transactions contemplated by this Agreement and
the Plan of Arrangement.
(b) Each of Parent and the Company shall furnish to the other
all such information concerning it and its shareholders as may be required for
the effectuation of the actions described in Section 1.6 and this Section 1.7.
(c) Each of Parent and the Company will notify the other
promptly of the receipt of any comments from Canadian Securities Commissions,
the SEC or its staff and of any request by Canadian Securities Commissions, the
SEC or its staff for amendments or supplements to the Management Proxy Circular
or a registration statement described in Section 1.6 or for additional
information, and will supply the other with copies of all correspondence with
Canadian Securities Commissions, the SEC or its staff with respect to the
Management Proxy Circular or any such registration statement. Parent and the
Company shall each promptly notify the other if at any time before or after the
Effective Time it becomes aware that the
6.
Management Proxy Circular or an application for an order or a registration
statement described in Section 1.6 contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading in light of
the circumstances in which they are made, or that otherwise requires an
amendment or supplement to the Management Proxy Circular or such application or
registration statement. In any such event, Parent and the Company shall co-
operate in the preparation of a supplement or amendment to the Management Proxy
Circular or such other document, as required and as the case may be, and, if
required, shall cause the same to be distributed to shareholders of the Company
and/or filed with the relevant securities regulatory authorities and/or stock
exchanges.
(d) The Company shall ensure that the Management Proxy Circular
complies with all applicable Legal Requirements. Without limiting the generality
of the foregoing, the Company shall ensure that the Management Proxy Circular
provides the Company Securityholders with information in sufficient detail to
permit them to form a reasoned judgement concerning the matters to be placed
before them at the Company Securityholders' Meeting and Parent shall provide all
information regarding Parent reasonably necessary for the Company to do so.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, ExchangeCo and Nova Scotia
Co that except as set forth in the Company Disclosure Schedule prepared in
accordance with Section 9.6:
2.1 Subsidiaries; Due Organization; Etc.
(a) The Company has no Subsidiaries, except for the corporations
identified in Part 2.1(a)(i) of the Company Disclosure Schedule; and neither the
Company nor any of the other corporations identified in Part 2.1(a)(i) of the
Company Disclosure Schedule owns any shares in the capital of, or any equity
interest of any nature in, any other Entity, other than the Entities identified
in Part 2.1(a)(ii) of the Company Disclosure Schedule. (The Company and each of
its Subsidiaries are referred to collectively in this Agreement as the "Acquired
Corporations.") None of the Acquired Corporations has agreed or is obligated to
make, or is bound by any Contract under which it may become obligated to make,
any future investment in or capital contribution to any other Entity. None of
the Acquired Corporations has, at any time, been a general partner of, or has
otherwise been liable for any of the debts or other obligations of, any general
partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and authority: (i)
to conduct its business in the manner in which its business is currently being
conducted; (ii) to own and use its assets in the manner in which its assets are
currently owned and used; and (iii) to perform its obligations under all
Contracts by which it is bound.
(c) Each of the Acquired Corporations is qualified to do
business as a foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature
7.
of its business requires such qualification, except where the failure to be so
qualified would individually or in the aggregate not have a Material Adverse
Effect on the Acquired Corporations.
2.2 Certificate of Incorporation and Bylaws. The Company has
delivered to Parent accurate and complete copies of the certificate of
incorporation, articles, bylaws and other charter and organizational documents
of the Company and each of the Company's material Subsidiaries identified in
Part 2.2 of the Company Disclosure Schedule, including all amendments thereto.
2.3 Capitalization, Etc.
(a) The authorized capital of the Company consists of (i) an
unlimited number of Common Shares, of which 18,833,739 Common Shares have been
issued and are outstanding as of the date of this Agreement and (ii) an
unlimited number of preferred shares, of which no preferred shares are issued or
outstanding as of the date of this Agreement. All of the outstanding Common
Shares have been duly authorized and validly issued, and are fully paid and
nonassessable. There are no Common Shares held by any of the other Acquired
Corporations. None of the outstanding Common Shares is entitled or subject to
any preemptive right, right of participation or any similar right; none of the
outstanding Common Shares is subject to any right of first refusal in favor of
the Company; and there is no Acquired Corporation Contract relating to the
voting or registration of, or restricting any Person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or similar right with
respect to), any Common Shares. None of the Acquired Corporations is under any
obligation, or is bound by any Contract pursuant to which it may become
obligated, to repurchase, redeem or otherwise acquire any outstanding Common
Shares. Upon consummation of the Arrangement, (A) the shares of Parent Common
Stock issued in exchange for any Common Shares that are subject to a Contract
pursuant to which the Company has the right to repurchase, redeem or otherwise
reacquire any Common Shares will, without any further act of Parent, the Company
or any other Person, become subject to the restrictions, conditions and other
provisions contained in such Contract, and (B) Parent will automatically succeed
to and become entitled to exercise the Company's rights and remedies under any
such Contract.
(b) As of the date of this Agreement: (i) 3,147,900 Common
Shares are subject to issuance pursuant to stock options granted and outstanding
under the Company's Amended and Restated Share Compensation Plan (the "Share
Compensation Plan"), (ii) there are no Common Shares that are subject to
issuance pursuant to the purchase rights granted under the Share Compensation
Plan and (ii) 12,500 Common Shares are reserved for future issuance pursuant to
the Company Warrants. (Purchase rights and options to purchase Common Shares
(whether granted by the Company pursuant to the Company's stock plans, assumed
by the Company in connection with any arrangement, merger, acquisition or
similar transaction or otherwise issued or granted) are referred to in this
Agreement as "Company Options.") Part 2.3(b) of the Company Disclosure Schedule
sets forth the following information with respect to each Company Option
outstanding as of the date of this Agreement: (i) the particular plan (if any)
pursuant to which such Company Option was granted; (ii) the name of the
optionee; (iii) the number of Common Shares subject to such Company Option; (iv)
the exercise price of such
8.
Company Option; (v) the date on which such Company Option was granted; (vi) the
applicable vesting schedule, and the extent to which such Company Option is
vested and exercisable as of the date of this Agreement; and (vii) the date on
which such Company Option expires. The Company has delivered to Parent accurate
and complete copies of all stock plans pursuant to which any of the Acquired
Corporations has granted outstanding stock awards, and the forms of all
agreements evidencing such awards. The Company has delivered to Parent accurate
and complete copies of the Company Warrants. The exercise price of the Company
Warrants is Cdn$6.00 per share.
(c) Except as set forth in Section 2.3(b), there is no (i)
outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any Common Shares or other shares of the
capital stock or other securities of any of the Acquired Corporations; (ii)
outstanding security, instrument or obligation that has the right to vote (other
than the Common Shares) or that is or may become convertible into or
exchangeable for any Common Shares or other shares of the capital stock or other
securities of any of the Acquired Corporations; (iii) shareholder rights plan
(or similar plan commonly referred to as a "poison pill") or Contract under
which any of the Acquired Corporations is or may become obligated to sell or
otherwise issue any Common Shares or other shares of its capital stock or any
other securities; or (iv) condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person against any of the
Acquired Corporations to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of any of the Acquired
Corporations.
(d) All outstanding Common Shares, options, warrants and other
securities of the Acquired Corporations have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.
(e) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof, and are owned beneficially and of
record by the Company, free and clear of any Encumbrances, other than
restrictions on transfer contained in the articles of incorporation or other
similar organizational documents of the Subsidiaries of the Company.
2.4 Canadian Securities Commissions Filings; Financial Statements;
Books and Records
(a) The Company has delivered or made available to Parent
accurate and complete copies of all prospectuses, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Company
with the Canadian Securities Commissions since January 1, 1996, and all
amendments thereto (the "Company Securities Commission Documents"). All
statements, reports, schedules, forms and other documents required to have been
filed by the Company with the Canadian Securities Commissions have been so filed
on a timely basis. None of the Company's Subsidiaries is required to file any
documents with the Canadian Securities Commissions. As of the time it was filed
with the Securities Commissions (or, if amended or superseded by a filing prior
to the date of this
9.
Agreement, then on the date of such filing): (i) each of the Company Securities
Commission Documents complied in all material respects with the applicable
requirements of the Canadian Securities Laws; and (ii) none of the Company
Securities Commission Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The financial statements (including any related notes)
contained in the Company Securities Commission Documents: (i) complied as to
form in all material respects with the published rules, regulations, policies
and notices of the Canadian Securities Commissions applicable thereto; (ii) were
prepared in accordance with Canadian generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by the Canadian Securities Commissions, and except that
the unaudited financial statements may not contain footnotes and are subject to
normal and recurring year-end adjustments that will not, individually or in the
aggregate, be material in amount), and (iii) fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of the Company and its consolidated subsidiaries for the periods covered
thereby.
(c) The books, records and accounts of each of the Acquired
Corporations, in all material respects, (i) have been maintained in accordance
with good business practices consistent with prior years, (ii) are stated in
reasonable detail and accurately and fairly reflect the transactions and
dispositions of the assets of such Acquired Corporations and (iii) accurately
and fairly reflect the basis for the financial statements referred to in Section
2.4(b). The Company has devised and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; and
(ii) transactions are recorded as necessary (A) to permit preparation of
financial statements in conformity with Canadian generally accepted accounting
principles, United States generally accepted accounting principles or any other
criteria applicable to such statements and (B) to maintain accountability for
assets.
2.5 Absence of Changes. Between December 31, 1999 and the date of
this Agreement:
(a) no event, violation, circumstance or other matter has
occurred or arisen that, in combination with any other events or circumstances,
has had or would reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations;
(b) there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of the assets of any of the
Acquired Corporations (whether or not covered by insurance);
(c) none of the Acquired Corporations has (i) declared, accrued,
set aside or paid any dividend or made any other distribution in respect of any
shares of capital stock, or (ii) repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities;
10.
(d) none of the Acquired Corporations has sold, issued or
granted, or authorized the issuance of, (i) any shares, capital stock or other
security (except for Common Shares issued upon the valid exercise of outstanding
Company Options), (ii) any option, warrant or right to acquire any shares,
capital stock or any other security (except for Company Options identified in
Part 2.3(b) of the Company Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any shares, capital stock or other
security;
(e) the Company has not amended or waived any of its rights
under, or permitted the acceleration of vesting under, (i) any provision of any
of the Company's stock option plans, (ii) any provision of any Contract
evidencing any outstanding Company Option, or (iii) any restricted stock
purchase agreement;
(f) there has been no amendment to the certificate of
incorporation, articles, bylaws or other charter or organizational documents of
any of the Acquired Corporations, and none of the Acquired Corporations has
effected or been a party to any merger, amalgamation, arrangement,
consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(g) none of the Acquired Corporations has received any
Acquisition Proposal;
(h) none of the Acquired Corporations has formed any Subsidiary
or acquired any equity interest or other interest in any other Entity;
(i) none of the Acquired Corporations has made any capital
expenditure which, when added to all other capital expenditures made on behalf
of the Acquired Corporations between December 31, 1999 and the date of this
Agreement, exceeds Cdn$800,000 in the aggregate;
(j) none of the Acquired Corporations has (i) entered into or
permitted any of the assets, including the Acquired Corporation Proprietary
Assets, owned or used by it to become bound by any Material Contract (as defined
in Section 2.10) except in the ordinary course of business and consistent with
past practices, or (ii) amended or terminated, or waived any material right or
remedy under, any Material Contract;
(k) none of the Acquired Corporations has (i) acquired, leased
or licensed any material right or other material asset from any other Person
except in the ordinary course of business and consistent with past practices,
(ii) sold or otherwise disposed of, or leased or licensed, any material right or
other material asset to any other Person, or (iii) waived or relinquished any
material right;
(l) none of the Acquired Corporations has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness having a value in excess of Cdn$30,000
in any individual case;
(m) none of the Acquired Corporations has made any pledge of any
of its assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except
11.
for pledges of immaterial assets made in the ordinary course of business and
consistent with past practices;
(n) none of the Acquired Corporations has (i) lent money to any
Person, or (ii) incurred or guaranteed any indebtedness for borrowed money;
(o) none of the Acquired Corporations has (i) adopted,
established or entered into any Employee Plan (as defined in Section 2.17), (ii)
caused or permitted any Employee Plan to be amended in any material respect, or
(iii) paid any bonus or made any profit-sharing or similar payment to, or
materially increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees;
(p) none of the Acquired Corporations has changed any of its
methods of accounting or accounting principles or practices in any respect,
except as otherwise required by Canadian or United States generally accepted
accounting principles;
(q) none of the Acquired Corporations has made any Tax election;
(r) none of the Acquired Corporations has commenced or settled
any Legal Proceeding;
(s) none of the Acquired Corporations has entered into any
material transaction or taken any other material action that, either
individually or in the aggregate, has had, or could reasonably be expected to
have, a Material Adverse Effect on the Acquired Corporations;
(t) none of the Acquired Corporations has entered into any
material transaction or taken any other material action outside the ordinary
course of business or inconsistent with past practices; and
(u) none of the Acquired Corporations has agreed or committed to
take any of the actions referred to in clauses "(c)" through "(t)" above.
2.6 Title to Assets. The Acquired Corporations own, and have good
and valid title to, all assets purported to be owned by them, including: (i) all
assets reflected on the Unaudited Interim Balance Sheet (except for inventory
sold or otherwise disposed of in the ordinary course of business since the date
of the Unaudited Interim Balance Sheet); and (ii) all other assets reflected in
the books and records of the Acquired Corporations as being owned by the
Acquired Corporations. All of said assets are owned by the Acquired
Corporations free and clear of any Encumbrances, except for (1) any lien for
current taxes not yet due and payable, (2) minor liens that have arisen in the
ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of any of the Acquired Corporations, and (3) liens
described in Part 2.6 of the Company Disclosure Schedule.
12.
2.7 Receivables; Customers; Inventories.
(a) All existing accounts receivable of the Acquired
Corporations (including those accounts receivable reflected on the Unaudited
Interim Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since June 30, 2000 and have not yet been collected)
(a) represent valid obligations of customers of the Acquired Corporations
arising from bona fide transactions entered into in the ordinary course of
business, (b) are current and will be collected in full, without any
counterclaim or set off (net of an allowance for doubtful accounts not to exceed
Cdn$250,000 in the aggregate).
(b) Part 2.7(b) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of all outstanding
loans and advances made by any of the Acquired Corporations to any employee,
director, consultant or independent contractor, other than routine travel, meal
and related advances made to employees in the ordinary course of business.
(c) Part 2.7(c) of the Company Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that accounted for (i) more than
Cdn$750,000 of the consolidated gross revenues of the Acquired Corporations in
the fiscal year ended December 31, 1999, or (ii) more than Cdn$350,000 of the
consolidated gross revenues of the Acquired Corporations in the six month period
ended June 30, 2000. The Company has not received any notice or other
communication (in writing or otherwise), and has not received any other
information, indicating that any customer or other Person identified in Part
2.7(c) of the Company Disclosure Schedule may cease dealing with any of the
Acquired Corporations or may otherwise reduce the volume of business transacted
by such Person with any of the Acquired Corporations below historical levels.
2.8 Real Property; Equipment; Leasehold. All material items of
equipment and other tangible assets owned by or leased to the Acquired
Corporations are adequate for the uses to which they are being put, are in good
and safe condition and repair (ordinary wear and tear excepted) and are adequate
for the conduct of the business of the Acquired Corporations in the manner in
which such business is currently being conducted. None of the Acquired
Corporations own any real property or any interest in real property, except for:
(i) the leaseholds created under the real property leases identified in Part
2.8(a)(i) of the Company Disclosure Schedule; and (ii) the land described in
Part 2.8(a)(ii) of the Company Disclosure Schedule to which the Company has good
and marketable fee title and which is owned by the Company free and clear of any
Encumbrances, except for the Encumbrances identified in Part 2.8(ii) of the
Company Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets
forth, with respect to each Proprietary Asset owned by any of the Acquired
Corporations and registered with any Governmental Body or for which an
application has been filed with any Governmental Body, (i) a brief description
of such Proprietary Asset, and (ii) the names of the jurisdictions covered by
the applicable registration or application. Part 2.9(a)(ii) of the Company
Disclosure
13.
Schedule identifies and provides a brief description of each Proprietary Asset
owned by any of the Acquired Corporations that is material to the business of
the Acquired Corporations. Part 2.9(a)(iii) of the Company Disclosure Schedule
identifies and provides a brief description of, and identifies any ongoing
royalty or payment obligations in excess of $10,000 with respect to, each
Proprietary Asset that is licensed or otherwise made available to any of the
Acquired Corporations by any Person and is material to the business of the
Acquired Corporations (except for any Proprietary Asset that is licensed to any
Acquired Corporation under any third party software license generally available
to the public), and identifies the Contract under which such Proprietary Asset
is being licensed or otherwise made available to such Acquired Corporation. The
Acquired Corporations have good and valid title to all of the Acquired
Corporation Proprietary Assets identified or required to be identified in Parts
2.9(a)(i) and 2.9(a)(ii) of the Company Disclosure Schedule, free and clear of
all Encumbrances, except for (i) any lien for current taxes not yet due and
payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (individually or in the aggregate) materially detract
from the value of the Acquired Corporation Proprietary Asset subject thereto or
materially impair the operations of either of the Acquired Corporations. The
Acquired Corporations have a valid right to use, license and otherwise exploit
all Proprietary Assets identified or required to be identified in Part
2.9(a)(iii) of the Company Disclosure Schedule. None of the Acquired
Corporations has developed jointly with any other Person any Acquired
Corporation Proprietary Asset that is material to the business of the Acquired
Corporations and with respect to which such other Person has any rights. There
is no Acquired Corporation Contract (with the exception of end user license
agreements, support agreements, consulting agreements and other customer
contracts in the forms previously delivered by the Company to Parent) pursuant
to which any Person has any right (whether or not currently exercisable) to use,
license or otherwise exploit any Acquired Corporation Proprietary Asset.
(b) The Acquired Corporations have taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Acquired Corporation Proprietary Assets (except Acquired
Corporation Proprietary Assets whose value would be unimpaired by disclosure).
Without limiting the generality of the foregoing, (i) each current or former
employee of any Acquired Corporation who is or was involved in, or who has
contributed to, the creation or development of any material Acquired Corporation
Proprietary Asset has executed and delivered to such Acquired Corporation an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Employee
Acknowledgement Agreement previously delivered by the Company to Parent, and
(ii) each current and former consultant and independent contractor to any
Acquired Corporation who is or was involved in, or who has contributed to, the
creation or development of any material Acquired Corporation Proprietary Asset
has executed and delivered to the Company an agreement (containing no exceptions
to or exclusions from the scope of its coverage) that is substantially identical
to the form of consulting agreement previously delivered to Parent. No current
or former employee, officer, director, shareholder, consultant or independent
contractor has any right, claim or interest in or with respect to any Acquired
Corporation Proprietary Asset.
(c) All patents, trademarks, service marks and copyrights held
by any of the Acquired Corporations are valid, enforceable and subsisting and
none of the Acquired
14.
Corporation Proprietary Assets and no Proprietary Asset that is currently being
developed by any of the Acquired Corporations (either by itself or with any
other Person) infringes, misappropriates or conflicts with any Proprietary Asset
owned or used by any other Person. None of the products, systems, software,
computer programs, source code, models, algorithm, formula, compounds,
inventions, designs, technology, proprietary rights or other intellectual
property rights or intangible assets that is or has been designed, created,
developed, assembled, manufactured or sold by any of the Acquired Corporations
is infringing, misappropriating or making any unlawful or unauthorized use of
any Proprietary Asset owned or used by any other Person, and none of such
products has at any time infringed, misappropriated or made any unlawful or
unauthorized use thereof. None of the Acquired Corporations has received any
notice or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful or unauthorized
use of, any Proprietary Asset owned or used by any other Person. To the best of
the knowledge of the Company, no other Person is infringing, misappropriating or
making any unlawful or unauthorized use of, and no Proprietary Asset owned or
used by any other Person infringes or conflicts with, any material Acquired
Corporation Proprietary Asset.
(d) The Acquired Corporation Proprietary Assets constitute all
the Proprietary Assets necessary to enable the Acquired Corporations to conduct
their business in the manner in which such business has been and is being
conducted. None of the Acquired Corporations has (i) licensed any Acquired
Corporation Proprietary Assets to any Person on an exclusive basis, or (ii)
entered into any covenant not to compete or Contract limiting or purporting to
limit the ability of any Acquired Corporation to exploit fully any Acquired
Corporation Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(e) None of the Acquired Corporations has disclosed or delivered
to any Person, or permitted the disclosure or delivery to any escrow agent or
other Person, of any Acquired Corporation Source Code. No event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time) will, or could reasonably be expected to, result in the disclosure or
delivery to any Person of any Acquired Corporation Source Code or the release
from any escrow of any other Acquired Corporation Proprietary Asset. Part
2.9(e)(i) of the Company Disclosure Schedule identifies each Contract pursuant
to which the Company has deposited or is required to deposit with an
escrowholder or any other Person any Acquired Corporation Source Code. Neither
the execution of this Agreement nor the consummation of any of the transactions
contemplated hereby could reasonably be expected to result in the release or
disclosure of any Acquired Corporation Source Code or the release from any
escrow of any other Acquired Corporation Proprietary Asset.
(f) Each computer, computer program and other item of software
(whether installed on a computer or on any other piece of equipment, including
firmware) that is owned or used by any of the Acquired Corporations for their
internal business operations is Year 2000 Compliant. Each computer program and
other item of software that has been designed, developed, sold, licensed or
otherwise made available to any Person by any of the Acquired Corporations is
Year 2000 Compliant. Each of the Acquired Corporations has conducted sufficient
Year 2000 compliance testing for each computer, computer program and item of
software referred to in the preceding two sentences to be able to determine
whether such computer, computer program and item of
15.
software is Year 2000 Compliant. Each of the Acquired Corporations has obtained
warranties or other written assurances from each of its suppliers or licensors
of any material Acquired Corporation Proprietary Assets to the effect that the
Acquired Corporation Proprietary Assets provided by such suppliers and licensors
to the Acquired Corporations is Year 2000 Compliant. For purposes of this
Section 2.9, a computer, computer program or other item of software shall be
deemed to be "Year 2000 Compliant" only if (i) the functions, calculations and
other computing processes of such computer, program or software perform in a
consistent and correct manner without interruption regardless of the date on
which such functions, calculations and processes are actually performed and
regardless of the date input to the applicable computer system (whether before,
on or after January 1, 2000); (ii) such computer, program or software accepts
and responds to year input in a manner that resolves any ambiguities as to
century in a defined, predetermined and appropriate manner; and (iii) such
computer, program or software determines leap years in accordance with the
following standard: (A) if dividing the year by 4 yields an integer, it is a
leap year, except for years ending in 00, but (B) a year ending in 00 is a leap
year if dividing it by 400 yields an integer.
(g) Except with respect to demonstration or trial copies, no
product, system, program or software module designed, developed, sold, licensed
or otherwise made available by any of the Acquired Corporations to any Person
contains any "back door," "time bomb," "Trojan horse," "worm," "drop dead
device," "virus" or other software routines or hardware components designed to
permit unauthorized access or to disable or erase software, hardware or data
without the consent of the user.
2.10 Contracts.
(a) Part 2.10 of the Company Disclosure Schedule identifies each
Acquired Corporation Contract that constitutes a "Material Contract." (For
purposes of this Agreement, each of the following shall be deemed to constitute
a "Material Contract"):
(i) any Contract (A) relating to the employment of, or the
performance of services by, any employee or consultant, (B) pursuant to which
any of the Acquired Corporations is or may become obligated to make any
severance, termination, change in control or similar payment to any current or
former employee or director, or (C) pursuant to which any of the Acquired
Corporations is or may become obligated to make any bonus or similar payment
(other than payments constituting base salary) in excess of Cdn$25,000 to any
current or former employee or director;
(ii) any Contract relating to the acquisition, transfer,
development, sharing or license of any Proprietary Asset (except for any
Contract pursuant to which (A) any Proprietary Asset is licensed to the Acquired
Corporations under any third party software license generally available to the
public, or (B) any Proprietary Asset which is not material to any of the
Acquired Corporations' respective businesses and is licensed by any of the
Acquired Corporations to any Person on a non-exclusive basis);
(iii) any Contract that provides for indemnification of any
officer, director, employee or agent;
16.
(iv) any Contract pursuant to which (a) any monies have
been loaned to any of the Acquired Corporations, or (B) any of the Acquired
Corporations have granted a security interest in any of its assets;
(v) any Contract imposing any restriction on the right or
ability of any Acquired Corporation (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, (C) to
solicit, hire or retain any Person as an employee, consultant or independent
contractor, (D) to develop, sell, supply, distribute, offer, support or service
any product or any technology or other asset to or for any other Person, (E) to
perform services for any other Person, or (F) to transact business or deal in
any other manner with any other Person;
(vi) any Contract (other than Contracts evidencing Company
Options) (A) relating to the acquisition, issuance, voting, registration, sale
or transfer of any securities, (B) providing any Person with any preemptive
right, right of participation, or similar right with respect to any securities,
or (C) providing any of the Acquired Corporations with any right of first
refusal with respect to, or right to repurchase or redeem, any securities;
(vii) any Contract incorporating or relating to any
guaranty, any warranty or any indemnity or similar obligation, except for
Contracts substantially identical to the end-user licenses, support agreements,
consulting agreements and other customer contracts in the forms previously
delivered by the Company to Parent;
(viii) any Contract relating to any currency hedging;
(ix) any Contract containing "standstill" or similar
provisions;
(x) any Contract (A) to which any Governmental Body is a
party or under which any Governmental Body has any rights or obligations, or (B)
directly or indirectly benefiting any Governmental Body (including any
subcontract or other Contract between any Acquired Corporation and any
contractor or subcontractor to any Governmental Body);
(xi) any Contract requiring that any of the Acquired
Corporations give any notice or provide any information to any Person prior to
considering or accepting any Acquisition Proposal or similar proposal, or prior
to entering into any discussions, agreement, arrangement or understanding
relating to any Acquisition Transaction or similar transaction;
(xii) any Contract that has a term of more than 60 days and
that may not be terminated by an Acquired Corporation (without penalty) within
60 days after the delivery of a termination notice by such Acquired Corporation;
(xiii) any Contract that contemplates or involves the
guaranteed payment or delivery of cash or other consideration in an amount or
having a value in excess of Cdn$100,000 in the aggregate or the payment of such
consideration any time within six months
17.
prior to or within six months after the date of this Agreement, or contemplates
or involves the performance of services having a value in excess of Cdn$100,000
in the aggregate; and
(xiv) any Contract that is otherwise material to any of the
Acquired Corporations, including any Contract that could reasonably be expected
to have a material effect on the ability of the Company to perform any of its
obligations under, or to consummate any of the transactions contemplated by,
this Agreement or the Stock Option Agreement.
The Company has delivered to Parent an accurate and complete copy of each
Acquired Corporation Contract that constitutes a Material Contract.
(b) Each Acquired Corporation Contract that constitutes a
Material Contract is valid and in full force and effect, and is enforceable in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) None of the Acquired Corporations has violated or breached,
or committed any default in any material respect under, any Acquired Corporation
Contract and, to the best of the knowledge of the Company, no other Person has
violated or breached, or committed any default under, any Acquired Corporation
Contract. To the best of the knowledge of the Company, no event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time) could reasonably be expected to (A) result in a violation or breach of
any of the provisions of any Acquired Corporation Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Acquired
Corporation Contract, (C) give any Person the right to receive or require a
rebate, chargeback, penalty or change in delivery schedule under any Acquired
Corporation Contract, (D) give any Person the right to accelerate the maturity
or performance of any Acquired Corporation Contract, (E) result in the
disclosure, release or delivery of any Acquired Corporation Source Code, or (F)
give any Person the right to cancel, terminate or modify any Acquired
Corporation Contract. Since January 1, 1998, none of the Acquired Corporations
has received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Acquired Corporation Contract.
2.11 Sale of Products; Performance of Services
(a) Each product, system, program, Proprietary Asset or other
asset designed, developed, manufactured, assembled, sold, installed, repaired,
licensed or otherwise made available by any of the Acquired Corporations to any
Person: (i) conformed and complied in all material respects with the terms and
requirements of any applicable warranty or other Contract and with all
applicable Legal Requirements; and (ii) was free of any bug, virus, design
defect or other defect or deficiency at the time it was sold or otherwise made
available, other than any immaterial bug or similar defect that has not had and
would not have an adverse effect, in any material respect, on such product,
system, program, Acquired Corporation Proprietary Asset or other asset (or the
operation or performance thereof). Part 2.11(a) of the Company Disclosure
Schedule contains an accurate and complete copy of the most recent "bug list"
with
18.
respect to each product, system, program or software module of each of the
Acquired Corporations.
(b) All installation services, programming services, integration
services, repair services, maintenance services, support services, training
services, upgrade services and other services that have been performed by the
Acquired Corporations were performed properly and in conformity with the terms
and requirements of all applicable warranties and other Contracts and with all
applicable Legal Requirements.
(c) Since January 1, 1998, no customer or other Person has
asserted or threatened to assert any claim against any of the Acquired
Corporations (i) under or based upon any warranty provided by or on behalf of
any of the Acquired Corporations, or (ii) based upon any services performed by
any of the Acquired Corporations.
2.12 Liabilities. None of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured,
except for: (a) liabilities identified as such in the "liabilities" column of
the Unaudited Interim Balance Sheet; (b) normal and recurring current
liabilities that have been incurred by the Acquired Corporations since June 30,
2000 in the ordinary course of business and consistent with past practices; and
(c) liabilities described in Part 2.12 of the Company Disclosure Schedule.
2.13 Compliance with Legal Requirements. Each of the Acquired
Corporations is, and has at all times since January 1, 1998 been, in compliance
in all material respects with all applicable Legal Requirements. Since January
1, 1998, none of the Acquired Corporations has received any notice or other
communication from any Governmental Body or other Person regarding any actual or
possible material violation of, or failure to comply with, any Legal
Requirement.
2.14 Certain Business Practices. None of the Acquired Corporations,
and (to the best of the knowledge of the Company) no director, officer, agent or
employee of any of the Acquired Corporations, has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the U.S. Foreign Corrupt Practices Act of
1977, as amended or any equivalent legislation in any Canadian province, or
(iii) made any other unlawful payment. There is no Contract, judgment,
injunction, order or decree binding upon any of the Acquired Corporations that
has or could reasonably be expected to have the effect of prohibiting,
restricting or materially impairing any business practice of any of the Acquired
Corporations, any acquisition of property by any of the Acquired Corporations or
the conduct of business by any of the Acquired Corporations as currently
conducted.
2.15 Governmental Authorizations.
(a) The Acquired Corporations hold all Governmental
Authorizations necessary to enable the Acquired Corporations to conduct their
respective businesses in the manner in which such businesses are currently being
conducted. All such Governmental Authorizations are valid and in full force and
effect. Each Acquired Corporation is, and at all
19.
times since January 1, 1998 has been, in substantial compliance with the terms
and requirements of such Governmental Authorizations. Since January 1, 1998,
none of the Acquired Corporations has received any notice or other communication
from any Governmental Body regarding (a) any actual or possible violation of or
failure to comply with any term or requirement of any material Governmental
Authorization, or (b) any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any material Governmental
Authorization. No Governmental Body has at any time challenged in writing the
right of any of the Acquired Corporations to design, manufacture, offer or sell
any of its respective products or services.
(b) Part 2.15(b) of the Company Disclosure Schedule describes
the terms of each grant, incentive or subsidy provided or made available to or
for the benefit of any of the Acquired Corporations by any Canadian (federal or
provincial), U.S. (federal or state) or foreign Governmental Body or otherwise.
Each of the Acquired Corporations is in full compliance with all of the terms
and requirements of each grant, incentive and subsidy identified or required to
be identified in Part 2.15(b) of the Company Disclosure Schedule. Neither the
execution, delivery or performance of this Agreement, nor the consummation of
the Arrangement or any of the other transactions contemplated by this Agreement,
will (with or without notice or lapse of time) give any Person the right to
revoke, withdraw, suspend, cancel, terminate or modify any grant, incentive or
subsidy identified or required to be identified in Part 2.15(b) of the Company
Disclosure Schedule.
2.16 Tax Matters.
(a) Each of the Tax Returns required to be filed by or on behalf
of the respective Acquired Corporations with any Governmental Body with respect
to any taxable period ending on or before the Closing Date (the "Acquired
Corporation Returns") (i) has been or will be filed on or before the applicable
due date (including any extensions of such due date), and (ii) has been, or will
be when filed, prepared in all material respects in compliance with all
applicable Legal Requirements and will be true and correct in all material
respects. All amounts shown on the Acquired Corporation Returns to be due on or
before the Closing Date have been or will be paid on or before the Closing Date.
All Taxes required to be withheld or collected have been and will continue to be
withheld and paid or remitted on or before the applicable due date up to and
before the Closing Date.
(b) The Unaudited Interim Balance Sheet fully accrues all actual
and contingent liabilities for Taxes with respect to all periods through June
30, 2000 in accordance with Canadian generally accepted accounting principles.
Each Acquired Corporation will establish, in the ordinary course of business and
consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from June 30, 2000 through the Closing Date.
(c) No Acquired Corporation Return has ever been audited or to
the knowledge of the Acquired Corporations, examined by any Governmental Body.
No extension or waiver of the limitation period applicable to any of the
Acquired Corporation Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from any Acquired
Corporation.
20.
(d) No claim, Legal Proceeding adjustment, assessment or
reassessment is pending or, to the best of the knowledge of the Company, has
been threatened, either formally or informally, against or with respect to any
Acquired Corporation in respect of any Tax. There are no unsatisfied liabilities
for Taxes (including related expenses) with respect to any notice of assessment
or reassessment or similar document received by any Acquired Corporation with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of assessment or reassessment or similar document which are being
contested in good faith by the Acquired Corporations and with respect to which
adequate reserves for payment have been established on the Unaudited Interim
Balance Sheet). There are no liens for Taxes upon any of the assets of any of
the Acquired Corporations except liens for current Taxes not yet due and
payable. None of the Acquired Corporations has entered into or become bound by
any agreement or consent pursuant to Section 341(f) of the Code (or any
comparable provision of state or foreign Tax laws). None of the Acquired
Corporations has been, and none of the Acquired Corporations will be, required
to include any adjustment in taxable income for any tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code (or any comparable
provision of state or foreign Tax laws) as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing. None of the
Acquired Corporations has made any distribution of stock of any controlled
corporation, as that term is defined in Code Section 355(a)(1).
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of any of the Acquired Corporations that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible. None of the Acquired Corporations
is, or has ever been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar Contract.
(f) Each Acquired Corporation is in full compliance with all
terms and conditions of any Tax exemptions, Tax holiday or other Tax reduction
agreement or order of any Governmental Body and the consummation of the
Arrangement will have no adverse effect on the continued validity and
effectiveness of any such Tax exemptions, Tax holiday or other Tax reduction
agreement or order.
2.17 Employee and Labor Matters; Benefit Plans.
(a) Part 2.17(a) of the Company Disclosure Schedule identifies
each salary, bonus, vacation, deferred compensation, incentive compensation,
stock purchase, stock option, severance pay, termination pay, death and
disability benefits, hospitalization, medical, life or other insurance, flexible
benefits, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement and each other employee benefit plan or
arrangement (collectively, the "Employee Plans") sponsored, maintained,
contributed to or required to be contributed to by any of the Acquired
Corporations for the benefit of any current or former employee of any of the
Acquired Corporations. Part 2.17(a) also identifies each Legal Requirement
pursuant to which any of the Acquired Corporations is required to establish any
reserve or make any contribution for the benefit of any current or former
employee located in
21.
any foreign jurisdiction. The Company has delivered to Parent accurate and
complete copies of the Employee Plans currently in force and all amendments
thereto together with, as applicable, accurate and complete copies of all
funding agreements and any Contracts relating to such Employee Plans (including
service provider agreements, insurance contracts, minimum premium contracts,
stop-loss agreements, investment management agreements, subscription and
participation agreements and recordkeeping agreements), all summary descriptions
of the Employee Plans provided to past or present participants therein, the two
most recent actuarial reports, any annual information returns required to be
filed under a Legal Requirement, the financial statements, if any, and evidence
of any registration in respect thereof.
(b) None of the Acquired Corporations has any knowledge of any
fact, condition or circumstance since the date of the documents provided in
accordance with section 2.17(a) above which would materially affect the
information contained therein and, in particular, and without limiting the
generality of the foregoing, no promises or commitments have been made by any of
the Acquired Corporations and no plans exist to amend any Employee Plan or to
provide increased benefits thereunder to any employee, except as required by a
Legal Requirement.
(c) All of the Employee Plans are, and have been since their
establishment, duly registered where required by Legal Requirement (including
registration with the relevant tax authorities where such registration is
required to qualify for tax exemption or other beneficial tax status) and are in
good standing under, and in compliance with, all Legal Requirements.
(d) None of the Acquired Corporations has ever sponsored,
maintained, contributed to or has been required to contribute to a pension plan
registered under the Income Tax Act (Canada).
(e) All Employee Plans have been administered in accordance with
their terms, there are no outstanding defaults or violations by any of the
Acquired Corporations of any obligation required to be performed by it in
connection with any Employee Plan and no order has been made or notice given
pursuant to any Legal Requirements requiring (or proposing to require) any of
the Acquired Corporations to take (or refrain from taking) any action in respect
of any Employee Plan.
(f) All returns, filings, reports and disclosures relating to
the Employee Plans required pursuant to the terms of the Employee Plans, Legal
Requirements or any regulatory authority, have been filed or distributed in
accordance with all requirements, all filing fees and levies imposed on the
Employee Plans by the regulatory authorities or Legal Requirements have been
made on a timely basis and the funds of the Employee Plans are not exposed to
any late filing fees that have not been remitted.
(g) There are no actions, suits, claims, trials, demands,
investigations, arbitrations or other proceedings pending or, to the knowledge
of any of the Acquired Corporations threatened with respect to the Employee
Plans against any of the Acquired Corporations, the funding agent, the insurers
or the fund of such Employee Plans, other than claims for benefits in the
ordinary course.
22.
(h) No event has occurred and no condition or circumstance
exists that has resulted or, could reasonably result in any Employee Plan being
ordered or required to be terminated or wound-up in whole or in part or having
its registration under any Legal Requirements being refused or revoked or being
placed under the administration of any trustee or receiver or any regulatory
authority or being required to pay any material taxes or penalties under any
Legal Requirements;
(i) No event has occurred and there has been no failure to act
on the part of any of the Acquired Corporations or any administrator of any of
the Employee Plans that could subject any of the Acquired Corporations to the
imposition of any tax, penalty or other disability with respect to any Employee
Plans, whether by way of indemnity or otherwise.
(j) The contribution obligations of any of the Acquired
Corporations to any of the Employee Plans that are multi-employer benefit plans
are accurately set out in the collective agreements provided to Parent.
(k) No Employee Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee or
director of any of the Acquired Corporations after any termination of service of
such employee or director.
(l) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Arrangement or any of the other
transactions contemplated by this Agreement, will result in any bonus, golden
parachute, severance or other payment or obligation to any current or former
employee or director of any of the Acquired Corporations (whether or not under
any Employee Plan), or materially increase the benefits payable or provided
under any Employee Plan, or result in any acceleration of the time of payment or
vesting of any such benefits. Without limiting the generality of the foregoing,
the consummation of the Arrangement will not result in the acceleration of
vesting of any unvested Company Options.
(m) Part 2.17(m) of the Company Disclosure Schedule contains a
list of all salaried employees of each of the Acquired Corporations as of the
date of this Agreement, and correctly reflects, in all material respects, their
salaries, any other compensation payable to them (including compensation payable
pursuant to bonus, deferred compensation or commission arrangements), their
dates of employment and their positions. None of the Acquired Corporations is a
party to any collective bargaining agreement with a trade union or council of
trade unions. No trade union, council of trade unions, employee bargaining
agency or affiliated bargaining agent holds bargaining rights with respect to
any of the Acquired Corporations employees by way of certification, interim
certification, voluntary recognition, designation or successor rights, has
applied to be certified as a bargaining agent of any of the Acquired
Corporations' employees or has applied to have any of the Acquired Corporations
declared a related employer pursuant to the Labour Relations Act (Ontario). All
of the employees of the Acquired Corporations are employed for an indefinite
term and the employment of such employees may be terminated on reasonable
notice.
(n) Part 2.17(n) of the Company Disclosure Schedule identifies
each employee of any of the Acquired Corporations who is not fully available to
perform work
23.
because of disability or other leave and sets forth the basis of such disability
or leave and the anticipated date of return to full service.
(o) There are no agreements for the payment of any pension,
bonus, share of profits, retirement allowance, insurance, hospitalization or
other benefits for any of the employees of the Acquired Corporations except as
set out in Part 2.17(o) of the Company Disclosure Schedule.
(p) Each of the Acquired Corporations is in compliance in all
material respects with all applicable Legal Requirements and Contracts relating
to employment, employment standards, employment practices, wages, bonuses,
benefits and terms and conditions of employment, including employee compensation
matters.
(q) There are no actual or to the knowledge of the Acquired
Corporations, threatened complaints or proceedings involving any of the Acquired
Corporations under the Labour Relations Act (Ontario) or any other similar
statute and there are no proceedings involving any of the Acquired Corporations
under the Human Rights Act (Ontario), the Employment Standards Act (Ontario),
the Pay Equity Act (Ontario), the Occupational Health and Safety Act (Ontario),
the Workplace Safety and Insurance Act (Ontario), the Employee Health Tax Act
(Ontario), the Canada Pension Plan or the Employment Insurance Act (Canada) or
any other similar statute.
(r) There are no material orders outstanding or issued by the
Occupational Safety and Health Branch of the Ontario Ministry of Labour which
have not been complied with or any material proceedings involving any of the
Acquired Corporations'employees before the Ontario Workplace Safety and
Insurance Board or any other similar tribunal or body.
(s) Each of the Acquired Corporations has good employee
relations, and none of the Acquired Corporations has any knowledge of any facts
indicating that the consummation of the Arrangement or any of the other
transactions contemplated by this Agreement will have a material adverse effect
on employee relations of any of the Acquired Corporations.
(t) All amounts owing in respect of employee payroll withholding
obligations, remittances, premiums, contributions and assessments under
provincial or federal statutes or employee benefit plans have been fully accrued
in the books and records of the Acquired Corporations and wages, vacation pay,
holiday pay and employee benefits of the employees of the Acquired Corporations
have been fully accrued in the Corporations' books and records and reflected as
such in the Corporations' financial statements.
2.18 Environmental Matters. Each of the Acquired Corporations (i) is
in compliance in all material respects with all applicable Environmental Laws,
and (ii) possesses all permits and other Governmental Authorizations required
under applicable Environmental Laws, and is in compliance with the terms and
conditions thereof. None of the Acquired Corporations has received any notice or
other communication (in writing or otherwise), whether from a Governmental Body,
citizens group, Employee or otherwise, that alleges that any of the
24.
Acquired Corporations is not in compliance with any Environmental Law, and, to
the best of the knowledge of the Company, there are no circumstances that may
prevent or interfere with the compliance by any of the Acquired Corporations
with any Environmental Law in the future. To the best of the knowledge of the
Company, (a) all property that is leased to, controlled by or used by any of the
Acquired Corporations, and all surface water, groundwater and soil associated
with or adjacent to such property, is free of any Materials of Environmental
Concern at levels which contravene, or which would require investigatory,
corrective or remedial action to be taken under, Environmental Laws and any
material environmental contamination of any nature, (b) none of the property
leased to, controlled by or used by any of the Acquired Corporations contains
any aboveground or underground storage tanks, asbestos, equipment using PCBs,
underground injection ▇▇▇▇▇, or associated works, and (c) none of the property
leased to, controlled by or used by any of the Acquired Corporations contains
any septic tanks in which process wastewater or any Materials of Environmental
Concern have been disposed of. No Acquired Corporation has ever sent or
transported, or arranged to send or transport, any Materials of Environmental
Concern to a site that, pursuant to any applicable Environmental Law, (i) has
been placed on the "National Priorities List" of hazardous waste sites or any
similar state list, (ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental remedial activity,
or (iii) is subject to a Legal Requirement to take "removal" or "remedial"
action as detailed in any applicable Environmental Law or to make payment for
the cost of cleaning up any site. (For purposes of this Section 2.18: (A)
"Environmental Law" means any federal, provincial, state, local, municipal or
foreign Legal Requirement relating to pollution or protection of human health or
the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (B) "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes (including liquid,
industrial and hazardous waste), hazardous material, toxic substances, dangerous
substances, petroleum and petroleum products and any other substance that is now
or hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
2.19 Insurance. The Company has delivered to Parent a copy of all
material insurance policies and all material self insurance programs and
materials relating to the business, assets and operations of the Acquired
Corporations. Each of such insurance policies is in full force and effect. Since
January 1, 1998, none of the Acquired Corporations has received any notice or
other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any material claim under any insurance policy, or (c) material adjustment in
the amount of the premiums payable with respect to any insurance policy. There
is no pending workers' compensation or other claim under or based upon any
insurance policy of any of the Acquired Corporations.
2.20 Transactions with Affiliates. Except as set forth in the Company
Securities Commission Documents filed prior to the date of this Agreement,
between the date of the Company's last proxy statement filed with the Canadian
Securities Commissions and the date of this Agreement, no event has occurred
that would be required to be reported by the Company
25.
pursuant to Item 8 of Form 30 prescribed pursuant to Section 176 of the
Regulation under the Securities Act (Ontario). Part 2.20 of the Company
Disclosure Schedule identifies each Person who is (or who may be deemed to be)
an "affiliate" (as that term is used in Rule 145 under the Securities Act) of
the Company as of the date of this Agreement.
2.21 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and to the best of the
knowledge of the Company, no Person has threatened to commence any Legal
Proceeding: (i) that involves any of the Acquired Corporations or any of the
assets owned or used by any of the Acquired Corporations; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Arrangement or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement. To the best of the
knowledge of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists that could reasonably be expected to, give rise
to or serve as a basis for the commencement of any such Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to
which any of the Acquired Corporations, or any of the assets owned or used by
any of the Acquired Corporations, is subject. To the best of the knowledge of
the Company, no officer or key employee of any of the Acquired Corporations is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the business of any of the Acquired Corporations.
2.22 Authority; Inapplicability of Anti-takeover Statutes; Binding
Nature of Agreement. The Company has the requisite corporate power and authority
to enter into and to perform its obligations under this Agreement and under the
Stock Option Agreement. The board of directors of the Company (at a meeting duly
called and held) has (a) unanimously determined that the Arrangement is fair to
the Company Securityholders and in the best interests of the Company, (b)
unanimously authorized and approved the execution, delivery and performance of
this Agreement and the Stock Option Agreement by the Company and unanimously
approved the Arrangement, and (c) unanimously determined to recommend the
approval of this Agreement by the holders of Common Shares and directed that
this Agreement and the Arrangement be submitted for consideration by the Company
Securityholders at the Company Securityholders' Meeting (as defined in Section
5.1). This Agreement and the Stock Option Agreement constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and any similar law relating to creditors' rights, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
2.23 No Discussions. None of the Acquired Corporations, and no
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating to
any Acquisition Proposal.
2.24 Accounting Matters. Neither the Company nor, to the best of the
knowledge of the Company, any Person who is (or who may be deemed to be) an
"affiliate" (as
26.
that term is used in Rule 145 under the Securities Act) of any of the Acquired
Corporations has taken or agreed to take, or plans to take, any action that
could prevent Parent from accounting, or adversely affect its ability to
account, for the Arrangement as a "pooling of interests" under United States
generally accepted accounting principles.
2.25 Vote Required. Subject to the terms and conditions of the Interim
Order, the approval of the Arrangement by two-thirds of the votes cast at the
Company Securityholders' Meeting (the "Required Company Securityholder Vote") is
the only vote of the holders of any class or series of the Company's capital and
securities necessary to approve the Arrangement and to otherwise consummate the
transactions contemplated by this Agreement.
2.26 Non-Contravention; Consents. Neither (1) the execution, delivery
or performance of this Agreement or the Stock Option Agreement, nor (2) the
consummation by the Company of the Arrangement or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement, will directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the articles or certificate of incorporation, bylaws or
other charter or organizational documents of any of the Acquired Corporations,
or (ii) any resolution adopted by the shareholders, the board of directors or
any committee of the board of directors of any of the Acquired Corporations;
(b) subject to obtaining the Consents set forth in Section 6.8,
contravene, conflict with or result in a violation of any Legal Requirement or
any order, writ, injunction, judgment or decree to which any of the Acquired
Corporations, or any of the assets owned or used by any of the Acquired
Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by any of the Acquired Corporations or that otherwise relates to
the business of any of the Acquired Corporations or to any of the assets owned
or used by any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Acquired Corporation
Contract, or give any Person the right to (i) declare a default or exercise any
remedy under any such Acquired Corporation Contract, (ii) a rebate, chargeback,
penalty or change in delivery schedule under any such Acquired Corporation
Contract, (iii) accelerate the maturity or performance of any such Acquired
Corporation Contract, or (iv) cancel, terminate or modify any term of such
Acquired Corporation Contract;
(e) result in the imposition or creation of any Encumbrance upon
or with respect to any asset owned or used by any of the Acquired Corporations
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of any of the Acquired Corporations); or
27.
(f) result in, or increase the likelihood of, the disclosure or
delivery to any escrowholder or other Person of any Acquired Corporation Source
Code, or the transfer of any material asset of any of the Acquired Corporations
to any Person.
Except as may be required by the Interim Order, the Final Order, Canadian
Securities Laws, the OBCA, the Competition Act (Canada), the Investment Canada
Act, the HSR Act, any other foreign antitrust law or regulation or the TSE Rules
and Bylaws, none of the Acquired Corporations was, is or will be required to
make any filing with or give any notice to, or to obtain any Consent from, any
Person in connection with (x) the execution, delivery or performance of this
Agreement or the Stock Option Agreement by the Company, or (y) the consummation
by the Company of the Arrangement or any of the other transactions contemplated
by this Agreement or the Stock Option Agreement.
2.27 Fairness Opinion. The Company's board of directors has received
the written opinion of Broadview International LLC, financial advisor to the
Company, dated the date of this Agreement, to the effect that the Parent Stock
Exchange Ratio and the Exchangeable Share Exchange Ratio is fair to the
shareholders of the Company from a financial point of view. The Company has
furnished an accurate and complete copy of said written opinion to Parent.
2.28 Financial Advisor. Except for Broadview International LLC, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Arrangement or any of the other
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Acquired Corporations. The total of all fees,
commissions and other amounts that have been paid by the Company to Broadview
International LLC and all fees, commissions and other amounts that may become
payable to Broadview International LLC by the Company if the Arrangement is
consummated will not exceed an amount equal to (i) 1.25% of the first
$100,000,000 of consideration received by the Company Securityholders pursuant
to this Agreement on the Closing Date; plus (ii) 1% of all consideration beyond
the first $100,000,000 of consideration received by the Company Securityholders
pursuant to this Agreement on the Closing Date; plus (iii) $15,000 as payment of
expenses. The Company has furnished to Parent accurate and complete copies of
all agreements under which any such fees, commissions or other amounts have been
paid to may become payable and all indemnification and other agreements related
to the engagement of Broadview International LLC.
2.29 Reporting Issuer Status. The Company is a "reporting issuer" or
has equivalent status in each of the provinces of Canada which have such
equivalent status and the Common Shares are listed on the TSE, and the Company
has not been notified of any default or alleged default by the Company of any
requirement of securities and corporate laws, regulations, orders, notices and
policies.
2.30 Registration Rights. No holder of securities issued by any of the
Acquired Corporations has any right to compel such Acquired Corporation to
register or otherwise qualify such securities for public sale in Canada or the
United States.
28.
2.31 Full Disclosure.
(a) This Agreement (including the Company Disclosure Schedule)
does not, and the certificate referred to in Section 6.5(i) will not, (i)
contain any representation, warranty or information that is false or misleading
with respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information were
or will be made or provided) not false or misleading.
(b) None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the
Management Proxy Circular or any amendment thereto (including any information
referred to therein or incorporated therein by reference) will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading. The
Management Proxy Circular will comply as to form in all material respects with
the provisions the Canadian Securities Laws, the OBCA and the regulations
thereunder, the Rules and Bylaws of the TSE, and of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder.
3. Representations And Warranties Of Parent, Exchangeco And Nova Scotia
Co
Parent, ExchangeCo and Nova Scotia Co represent and warrant to the Company
as follows:
3.1 Due Organization; Subsidiaries. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. ExchangeCo is a corporation duly organized, validly existing and in
good standing under the laws of the Province of Ontario. Nova Scotia Co is a
corporation duly organized, validly existing and in good standing under the laws
of the Province of Nova Scotia. Each of Parent, ExchangeCo and Nova Scotia Co
has all necessary power and authority: (a) to conduct its business in the manner
in which its business is currently being conducted; (b) to own and use its
assets in the manner in which its assets are currently owned and used; and (c)
to perform its obligations under all Contracts by which it is bound.
3.2 Capitalization.
(a) The authorized capital stock of Parent consists of
800,000,000 shares of Parent Common Stock and 2,000,000 shares of preferred
stock of Parent. As of August 1, 2000, 416,618,290 shares of Parent Common Stock
were issued and outstanding. As of the date of this Agreement, no shares of
preferred stock of Parent are outstanding. All of the outstanding shares of
Parent Common Stock have been duly authorized and validly issued, and are fully
paid and nonassessable. As of July 14, 2000, (i) 5,901,330 shares of Parent
Common Stock have been issued under Parent's Employee Stock Purchase Plan; and
(ii) 175,061,700 shares of Parent Common Stock are reserved for future issuance
pursuant to outstanding stock options.
29.
(b) The authorized capital stock of ExchangeCo consists of an
unlimited number of common shares. As of September 11, 2000, 100 common shares
of ExchangeCo were issued and outstanding. All of the outstanding common shares
of ExchangeCo have been duly authorized and validly issued, and are fully paid
and nonassessable.
(c) The authorized capital stock of Nova Scotia Co consists of
100,000,000,000,000 common shares. As of September 11, 2000, 100 common shares
of Nova Scotia Co were issued and outstanding. All of the outstanding common
shares of Nova Scotia Co have been duly authorized and validly issued, and are
fully paid and nonassessable.
3.3 SEC Filings; Financial Statements.
(a) Parent has delivered or made available to the Company
accurate and complete copies (excluding copies of exhibits) of each report,
registration statement and definitive proxy statement filed by Parent with the
SEC since January 1, 1999 (the "Parent SEC Documents"). All statements, reports,
schedules, forms and other documents required to have been filed by Parent with
the SEC have been so filed on a timely basis. As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The consolidated financial statements contained in the
Parent SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements and, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end audit adjustments which will not, individually or in the aggregate, be
material in amount); and (iii) fairly present the consolidated financial
position of Parent and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations of Parent and its
consolidated subsidiaries for the periods covered thereby.
3.4 Authority; Binding Nature of Agreement. Parent, ExchangeCo and
Nova Scotia Co have the requisite corporate power and authority to perform their
obligations under this Agreement, the Exchangeable Share Support Agreement and
the Voting and Exchange Trust Agreement and with respect to Parent only, under
the Stock Option Agreement; and the execution, delivery and performance by
Parent, ExchangeCo and Nova Scotia Co of this Agreement, the Exchangeable Share
Support Agreement and the Voting and Exchange Trust Agreement and by Parent of
the Stock Option Agreement have been duly authorized by all necessary action on
the part of Parent, ExchangeCo and Nova Scotia Co and their respective boards of
directors. This Agreement, the Exchangeable Share Support Agreement and the
Voting and Exchange Trust Agreement constitute or will constitute legal, valid
and binding obligations of Parent, ExchangeCo and Nova Scotia Co, and the Stock
Option Agreement constitutes the legal, valid and binding
30.
obligation of Parent, enforceable against them in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.5 No Vote Required. No vote of the holders of Parent Common Stock
is required to authorize the Arrangement.
3.6 Non-Contravention; Consents. Neither the execution and delivery
of this Agreement, the Exchangeable Share Support Agreement or the Voting and
Exchange Trust Agreement by Parent, ExchangeCo and Nova Scotia Co nor the
consummation by Parent, ExchangeCo or Nova Scotia Co of the Arrangement will (a)
conflict with or result in any breach of any provision of the certificate or
articles of incorporation or bylaws of Parent, ExchangeCo or Nova Scotia Co, (b)
result in a default by Parent, ExchangeCo or Nova Scotia Co under any Contract
to which Parent, ExchangeCo or Nova Scotia Co is a party, except for any default
that has not had and will not have a Material Adverse Effect on Parent, or (c)
result in a violation by Parent, ExchangeCo or Nova Scotia Co of any order,
writ, injunction, judgment, decree or other Legal Requirement to which Parent,
ExchangeCo or Nova Scotia Co is subject, except for any violation that has not
had and will not have a Material Adverse Effect on Parent. Except as may be
required by the Interim Order, the Final Order, the Securities Act, the Exchange
Act, state securities or "blue sky" laws, the DGCL, the HSR Act, any foreign
antitrust law or regulation and the NASD Bylaws (as they may relate to the
Management Proxy Circular), Parent, Exchange Co and Nova Scotia Co are not and
will not be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with the execution, delivery or
performance of this Agreement, the Exchangeable Share Support Agreement and the
Voting and Exchange Trust Agreement or the consummation of the Arrangement.
3.7 Valid Issuance. The Exchangeable Shares and the Parent Common
Stock to be issued in the Arrangement and on exchange of the Exchangeable Shares
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
3.8 Accounting Matters. Neither Parent nor to the best of the
knowledge of Parent, any Person who is (or who may be deemed to be) an
"affiliate" (as that term is used in Rule 145 under the Securities Act) of
Parent has taken or agreed to take, or plans to take, any action that could
prevent Parent from accounting, or adversely affect its ability to account, for
the Arrangement as a "pooling of interests" under United States generally
accepted accounting principles.
3.9 Disclosure. None of the information to be supplied by or on
behalf of Parent for inclusion in the Form S-3 Registration Statement will, at
the time the Form S-3 Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information to be supplied by or on behalf of
Parent for inclusion in the Management Proxy Circular will, at the time the
Management Proxy Circular is
31.
mailed to the Company Securityholders or at the time of the Company
Securityholders' Meeting (or any adjournment or postponement thereof), contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
4. Certain Covenants Of The Company
4.1 Access and Investigation.
(a) During the period from the date of this Agreement through
the earlier of (A) the Effective Time and (B) the termination of this Agreement
pursuant to the terms of Section 8.1 (the "Pre-Closing Period"), the Company
shall, and shall cause the respective Representatives of the Acquired
Corporations to: (1) provide Parent and Parent's Representatives with reasonable
access to the Acquired Corporations' Representatives, personnel and assets and
to all existing books, records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and (2) provide Parent and
Parent's Representatives with such copies of the existing books, records, Tax
Returns, work papers and other documents and information relating to the
Acquired Corporations, and with such additional financial, operating and other
data and information regarding the Acquired Corporations, as Parent may
reasonably request. Without limiting the generality of the foregoing, during the
Pre-Closing Period, the Company shall promptly provide Parent with copies of:
(i) all material operating and financial reports prepared
by the Acquired Corporations for the Company's senior management, including (A)
copies of the unaudited monthly consolidated balance sheets of the Acquired
Corporations and the related unaudited monthly consolidated statements of
operations, statements of shareholders' equity and statements of cash flows and
(B) copies of any sales forecasts, marketing plans, development plans, discount
reports, write-off reports, hiring reports and capital expenditure reports
prepared for the Company's senior management;
(ii) any written materials or communications sent by or on
behalf of the Company to its shareholders;
(iii) any material notice, document or other communication
sent by or on behalf of any of the Acquired Corporations to any party to any
Acquired Corporation Contract or sent to any of the Acquired Corporations by any
party to any Acquired Corporation Contract (other than any communication that
relates solely to routine commercial transactions between an Acquired
Corporation and the other party to any such Acquired Corporation Contract and
that is of the type sent in the ordinary course of business and consistent with
past practices);
(iv) any notice, report or other document filed with or
sent to any Governmental Body on behalf of any of the Acquired Corporations in
connection with the Arrangement or any of the other transactions contemplated by
this Agreement; and
(v) any material notice, report or other document received
by any of the Acquired Corporations from any Governmental Body.
32.
(b) Parent and the Company agree that the Confidentiality
Agreement shall apply to all documents and information provided to Parent
pursuant to Section 4.1(a).
4.2 Operation of the Company's Business.
(a) During the Pre-Closing Period: (i) the Company shall ensure
that each of the Acquired Corporations conducts its business and operations (A)
in the ordinary course and in accordance with past practices and (B) in
compliance with all applicable Legal Requirements and the requirements of all
Acquired Corporation Contracts that constitute Material Contracts; (ii) the
Company shall use all reasonable efforts to ensure that each of the Acquired
Corporations preserves intact its current business organization, keeps available
the services of its current officers and employees and maintains its relations
and goodwill with all suppliers, customers, landlords, creditors, licensors,
licensees, employees and other Persons having business relationships with the
respective Acquired Corporations; (iii) the Company shall keep in full force all
insurance policies referred to in Section 2.19; (iv) the Company shall cause to
be provided all notices, assurances and support required by any Acquired
Corporation Contract relating to any Proprietary Asset in order to ensure that
no condition under such Acquired Corporation Contract occurs that could result
in, or could increase the likelihood of, (A) any transfer or disclosure by any
Acquired Corporation of any Acquired Corporation Source Code, or (B) a release
from any escrow of any Acquired Corporation Source Code that has been deposited
or is required to be deposited in escrow under the terms of such Acquired
Corporation Contract; (v) the Company shall promptly notify Parent of (A) any
notice or other communication from any Person alleging that the Consent of such
Person is or may be required in connection with any of the transactions
contemplated by this Agreement or the Stock Option Agreement, and (B) any Legal
Proceeding commenced, or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting any of the Acquired Corporations
that relates to the consummation of the transactions contemplated by this
Agreement; and (vi) the Company shall (to the extent requested by Parent) cause
its officers and the officers of its Subsidiaries to report regularly to Parent
concerning the status of the Company's business.
(b) During the Pre-Closing Period, the Company shall not and
shall not permit any of the other Acquired Corporations to (except (i) with the
prior written consent of Parent which shall not be unreasonably withheld or
delayed and (ii) with respect to any matter that is expressly required by this
Agreement):
(i) declare, accrue, set aside or pay any dividend or make
any other distribution in respect of any Common Shares or other shares of
capital stock, or repurchase, redeem or otherwise reacquire any Common Shares or
other shares of capital stock or other securities;
(ii) amend or waive any of its rights under, or accelerate
the vesting under, any provision of any of the Company's stock option plans, any
provision of any agreement evidencing any outstanding stock option or any
restricted stock purchase agreement, or otherwise modify any of the terms of any
outstanding option, warrant or other security or any related Contract;
33.
(iii) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a party to any merger, arrangement,
consolidation, share exchange, business combination, amalgamation,
recapitalization, reclassification of shares, stock split, reverse stock split,
division or subdivision of shares, consolidation of shares or similar
transaction;
(iv) form any Subsidiary or acquire any equity interest or
other interest in any other Entity;
(v) make any capital expenditure (except that the
Acquired Corporations may make capital expenditures that, when added to all
other capital expenditures made on behalf of the Acquired Corporations, do not
exceed Cdn$100,000 monthly in the aggregate);
(vi) enter into or become bound by, or permit any of the
assets owned or used by it to become bound by, any Material Contract, or amend
or terminate, or waive or exercise any material right or remedy under, (A) any
Material Contract which relate to (1) the transfer, development, sharing or
license of any of the Acquired Corporation Source Code, except for licenses of
certain source code known as ▇▇▇▇▇ Software Development Kit and source code
escrow agreements substantially in the form previously provided to Parent (and
with Montreal Trust Company of Canada, DSI Technology Escrow Services, Fort ▇▇▇▇
Escrow Services, Inc. or FileSafe, Inc. as escrow agent) in each case in the
ordinary course of business consistent with past practice, (2) any distribution
arrangements, (3) any Proprietary Asset which is material to any of the Acquired
Corporations' respective businesses, except for licenses of the Acquired
Corporations' object code, documentation and certain source code known as ▇▇▇▇▇
Software Development Kit in the ordinary course of business consistent with past
practice, (4) the license of any Proprietary Asset by any of the Acquired
Corporations to any Person on an exclusive basis or (5) a third party's ability
to consent to any the transactions contemplated by this Agreement, or (B) any
Material Contract not otherwise described in clause "(A)," other than in the
ordinary course of business and consistent with past practice;
(vii) acquire, lease or license any right or other asset
from any other Person or sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person (except in each case for immaterial
assets acquired, leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with past practices), or waive or relinquish
any material right;
(viii) lend money to any Person, or incur or guarantee any
indebtedness (except that the Company may make routine borrowings in the
ordinary course of business and in accordance with past practices under its
current line of credit with Royal Bank of Canada, but not to exceed an aggregate
amount of Cdn$100,000);
(ix) hire any employee at the level of director or manager
or above or with an annual base salary in excess of Cdn$125,000, or promote any
employee except in order to fill a position vacated after the date of this
Agreement;
34.
(x) change any of its pricing policies, product return
policies, product maintenance polices, service policies, product modification or
upgrade policies, personnel policies or other business policies, or any of its
methods of accounting or accounting practices in any respect;
(xi) take or permit to be taken any action that could
preclude Parent from accounting for the Arrangement as a "pooling of interests"
for accounting purposes;
(xii) make any material Tax election;
(xiii) commence any Legal Proceeding (other than (A) for the
routine collection of amounts owing to any of the Acquired Corporations or (B)
in respect of a breach of this Agreement) or settle any Legal Proceeding;
(xiv) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices; or
(xv) agree or commit to take any of the actions described
in clauses "(i)" through "(xiv)" of this Section 4.2(b).
(c) During the Pre-Closing Period, each of Parent and the
Company (the "Notifying Party") shall promptly notify the other party in writing
of: (i) the discovery by the Notifying Party of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy in any representation or
warranty made by the Notifying Party in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement and that would cause or constitute a material inaccuracy in any
representation or warranty made by the Notifying Party in this Agreement if (A)
such representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of the Notifying Party; (iv) where the Company is the
Notifying Party, any event, condition, fact or circumstance, either individually
or in the aggregate, that would make the timely satisfaction by the Company of
any of the conditions set forth in Section 6 impossible or unlikely or that has
had or could reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations; and (v) where Parent is the Notifying Party, any event,
condition, fact or circumstance, either individually or in the aggregate, that
would make the timely satisfaction by Parent of any of the conditions set forth
in Section 7 impossible or unlikely or that has had or could reasonably be
expected to have a Material Adverse Effect on Parent. Without limiting the
generality of the foregoing, the Company shall promptly advise Parent in writing
of any Legal Proceeding or material claim threatened, commenced or asserted
against or with respect to any of the Acquired Corporations. No notification
given to Parent or the Company pursuant to this Section 4.2(c) shall limit or
otherwise affect any of the representations, warranties, covenants or
obligations of the other party contained in this Agreement.
35.
(d) During the Pre-Closing Period, the Company shall not and
shall not permit any of the other Acquired Corporations to, except with the
prior written consent of the Chief Financial Officer of Parent:
(i) sell, issue, grant or authorize the issuance or grant
of (A) any Common Shares or other capital stock or other security, (B) any
option, call, warrant or right to acquire any Common Shares or other capital
stock or other security, or (C) any instrument convertible into or exchangeable
for any Common Shares or other capital stock or other security, except that the
Company may issue shares of Common Shares upon the valid exercise of Company
Options or Company Warrants outstanding as of the date of this Agreement; or
(ii) establish, adopt or amend any employee benefit plan,
pay any bonus or make any profit-sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or other compensation
or remuneration payable to, any of its directors, officers or employees (except
that the Company (A) may make routine, reasonable salary increases in connection
with the Company's customary employee review process that do not individually
exceed $10,000, and (B) may pay customary bonus payments and profit sharing
payments consistent with past practices payable in accordance with existing
bonus and profit sharing plans referred to in Part 2.17(a) of the Company
Disclosure Schedule that do not individually exceed $10,000).
4.3 No Solicitation.
(a) The Company shall not directly or indirectly, and shall not
authorize or permit any of the other Acquired Corporations or any Representative
of any of the Acquired Corporations directly or indirectly to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal, (ii) furnish any information regarding any of the
Acquired Corporations to any Person in connection with or in response to an
Acquisition Proposal, (iii) engage in discussions or negotiations with any
Person with respect to any Acquisition Proposal, (iv) subject to Section 5.1(c),
approve, endorse or recommend any Acquisition Proposal or (v) enter into any
letter of intent or similar document or any Contract contemplating or otherwise
relating to any Acquisition Transaction; provided, however, that prior to the
approval the Arrangement by the Required Company Securityholder Vote, this
Section 4.3(a) shall not prohibit the Company from entering into a
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of the Company and containing customary "standstill"
provisions (a "Standard Confidentiality Agreement"), furnishing information
regarding the Acquired Corporations to, or entering into discussions or
negotiations with, any Person in response to an unsolicited written bona fide
Offer that is reasonably likely to lead to a Superior Offer that is submitted to
the Company by such Person (and not withdrawn) or subject to Section 5.1(c),
endorsing or recommending a Superior Offer if (1) neither the Company nor any
Representative of any of the Acquired Corporations shall have breached or taken
any action inconsistent with any of the provisions set forth in this Section 4.3
in a manner that directly or indirectly has led or contributed to the submission
of such Offer, (2) the board of directors of the Company concludes in good
faith, after considering the written advice of its
36.
outside legal counsel, that such action is required in order for the board of
directors of the Company to comply with its fiduciary obligations to the
Company's shareholders under applicable law, (3) at least two business days
prior to furnishing any such nonpublic information to, or entering into
discussions with, such Person, the Company gives Parent written notice of the
identity of such Person and of the Company's intention to furnish nonpublic
information to, or enter into discussions with, such Person, and the Company
receives from such Person an executed Standard Confidentiality Agreement and (4)
at the same time as it furnishes any such information to such Person, the
Company furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously furnished by the Company to
Parent). The parties agree that for purposes of the preceding sentence (but for
no other purpose), an Offer which is conditioned upon completion of due
diligence shall be deemed to constitute a "Superior Offer" if such Offer
otherwise meets the definition of "Superior Offer" as set forth in Exhibit A
hereto. Without limiting the generality of the foregoing, the Company
acknowledges and agrees that any action inconsistent with any of the provisions
set forth in the preceding sentence by any Representative of any of the Acquired
Corporations, whether or not such Representative is purporting to act on behalf
of any of the Acquired Corporations, shall be deemed to constitute a breach of
this Section 4.3 by the Company. Nothing in this Section 4.3(a) shall prohibit
the Company from complying with the requirements of Section 99 of the Securities
Act (Ontario) and corresponding provisions of applicable Canadian Securities
Laws in response to an unsolicited take-over bid for the Company.
(b) The Company shall promptly (and in no event later than 24
hours after receipt of any Acquisition Proposal, any inquiry or indication of
interest that could lead to an Acquisition Proposal or any request for nonpublic
information in connection with an Acquisition Proposal) advise Parent orally and
in writing of any Acquisition Proposal or any request for nonpublic information
relating to any of the Acquired Corporations in connection with an Acquisition
Proposal (including the identity of the Person making or submitting such
Acquisition Proposal and the terms thereof) that is made or submitted by any
Person during the Pre-Closing Period. The Company shall keep Parent fully
informed with respect to the status of any such Acquisition Proposal, inquiry,
indication of interest or request and any modification or proposed modification
thereto.
(c) The Company shall immediately cease and cause to be
terminated any existing discussions with any Person that relate to any
Acquisition Proposal.
(d) The Company agrees not to release or permit the release of
any Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which any of the Acquired
Corporations is a party or under which any of the Acquired Corporations has any
rights, and will use its best efforts to enforce or cause to be enforced each
such agreement at the request of Parent. The Company also will promptly request
each Person that has executed, on or after January 1, 1999, a confidentiality
agreement in connection with its consideration of a possible Acquisition
Transaction or equity investment to return all confidential information
heretofore furnished to such Person by or on behalf of any of the Acquired
Corporations.
37.
5. Additional Covenants Of The Parties
5.1 Company Securityholders' Meeting
(a) The Company shall take all action necessary under all
applicable Legal Requirements to call, give notice of and hold a meeting of all
Company Securityholders to vote on the approval of the Arrangement (the "Company
Securityholders' Meeting"). The Company Securityholders' Meeting shall be held
(on a date selected by the Company in consultation with Parent) as promptly as
practicable after the date of this Agreement. The Company shall ensure that all
proxies solicited in connection with the Company Securityholders' Meeting are
solicited in compliance with all applicable Legal Requirements.
(b) Subject to Section 5.1(c): (i) the Management Proxy Circular
shall include a statement to the effect that the board of directors of the
Company unanimously recommends that the Company Securityholders vote to approve
the Arrangement at the Company Securityholders' Meeting (the unanimous
recommendation of the Company's board of directors that the Company
Securityholders vote to approve the Arrangement being referred to as the
"Company Board Recommendation"); and (ii) the Company Board Recommendation shall
not be withdrawn or modified in a manner adverse to Parent, and no resolution by
the board of directors of the Company or any committee thereof to withdraw or
modify the Company Board Recommendation in a manner adverse to Parent shall be
adopted or proposed. For purposes of this Agreement, the Company Board
Recommendation shall be deemed to have been modified in a manner adverse to
Parent if the Company Board Recommendation is no longer unanimous.
(c) Notwithstanding Section 4.3(a)(iv) and Section 5.1(b), at
any time prior to the approval of this Agreement by the Required Company
Securityholder Vote, the Company Board Recommendation may be withdrawn or
modified in a manner adverse to Parent, and the Company's board of directors may
endorse or recommend, but may not accept or enter into any Contract (other than
a Standard Confidentiality Agreement pursuant to and in accordance with the
terms of Section 4.3(a)) with respect to, a Superior Offer (such withdrawal or
modification of the Company Board Recommendation or endorsement or
recommendation of a Superior Offer in accordance with this Section 5.1(c) is
hereinafter referred to as a "Company Board Recommendation Withdrawal"), if: (i)
the Company provides Parent with at least three business days prior notice of
any meeting of the Company's board of directors at which such board of directors
will consider a Company Board Recommendation Withdrawal; (ii) any Offer that is
causing the Company's board of directors to consider a Company Board
Recommendation Withdrawal is an unsolicited, bona fide written Offer made by a
third party and not withdrawn and is one which the Company's board of directors
determines in good faith (after considering the written advice of an independent
financial advisor of nationally recognized reputation) that such Offer
constitutes a Superior Offer; (iii) the Company's board of directors determines
in good faith, after having considered the written advice of the Company's
outside legal counsel, that, the Company Board Recommendation Withdrawal is
required in order for the Company's board of directors to comply with its
fiduciary obligations to the Company's shareholders under applicable law; (iv)
the Company Board Recommendation Withdrawal does not occur at any time within
five business days after Parent receives written notice from the Company
confirming that the Company's board of directors has determined that such
Company Board
38.
Recommendation Withdrawal is required in order for the Company's board of
directors to comply with its fiduciary obligations to the Company's shareholders
under applicable law; and (v) neither the Company nor any of its Representatives
shall have breached or taken any action inconsistent with any of the provisions
set forth in Section 4.3 in a manner that directly or indirectly has led or
contributed to the making of a Superior Offer that resulted in the Company Board
Recommendation Withdrawal.
(d) The Company's obligation to call, give notice of and hold
the Company Securityholders' Meeting in accordance with Section 5.1(a) shall not
be limited or otherwise affected by the commencement, disclosure, announcement,
submission, endorsement or recommendation of any Superior Offer or other
Acquisition Proposal by any Person (including the board of directors of the
Company), or by any withdrawal or modification of the Company Board
Recommendation.
(e) If (i) prior to the time of the Company Securityholders'
Meeting, a Person shall have publicly disclosed, announced, commenced, submitted
or made an Acquisition Proposal or an Acquisition Proposal shall have otherwise
become generally known to the shareholders of the Company, and (ii) such
Acquisition Proposal is publicly and definitively withdrawn on a date (the
"Acquisition Proposal Withdrawn Date") between the 30/th/ day prior to and the
day prior to the date of the Company Securityholders' Meeting, then, at the
request of Parent, in its sole discretion, the Company shall cause the Company
Securityholders' Meeting to be adjourned or postponed (as determined by Parent
in its sole discretion) for no more than 30 days after the Acquisition Proposal
Withdrawn Date.
5.2 Regulatory Approvals. Each party shall use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed by such party with any
Governmental Body with respect to the Arrangement and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall, promptly after the
date of this Agreement, prepare and file the notifications required under the
Investment Canada Act, the Competition Act (Canada), the HSR Act and any other
applicable foreign antitrust laws or regulations in connection with the
Arrangement, if applicable. The Company and Parent shall respond as promptly as
practicable to (i) any inquiries or requests received from the Investment Canada
Agency, the Federal Trade Commission or the Department of Justice for additional
information or documentation and (ii) any inquiries or requests received from
any state attorney general, the Director or other representative of the
Competition Tribunal (Canada), foreign antitrust authority or other Governmental
Body in connection with antitrust or related matters. Each of the Company and
Parent shall (1) give the other party prompt notice of the commencement or
threat of commencement of any Legal Proceeding by or before any Governmental
Body with respect to the Arrangement or any of the other transactions
contemplated by this Agreement, (2) keep the other party informed as to the
status of any such Legal Proceeding or threat, and (3) promptly inform the other
party of any communication to or from the Federal Trade Commission, the
Department of Justice or any other Governmental Body regarding the Arrangement.
Except as may be prohibited by any Governmental Body or by any Legal
Requirement, (a) the Company and Parent will consult and cooperate with one
another,
39.
and will consider in good faith the views of one another, in connection with any
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal made or submitted in connection with any Legal Proceeding under or
relating to the Competition Act (Canada), the HSR Act or any other foreign,
federal or state antitrust or fair trade law, and (b) in connection with any
such Legal Proceeding, each of the Company and Parent will permit authorized
Representatives of the other party to be present at each meeting or conference
relating to any such Legal Proceeding and to have access to and be consulted in
connection with any document, opinion or proposal made or submitted to any
Governmental Body in connection with any such Legal Proceeding. At the request
of Parent, the Company shall agree to divest, sell, dispose of, hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to its or its Subsidiaries' ability to operate or retain any of the
businesses, product lines or assets of the Company or any of its Subsidiaries,
provided that any such action is required by a Governmental Body in order to
obtain a required Consent related to the Arrangement and is conditioned upon the
consummation of the Arrangement. Within three business days after the date of
this Agreement, the Company shall prepare and file with the TSE a notice of the
option granted by the Company to Parent pursuant to the Stock Option Agreement
and the proposed issuance of Common Shares issuable upon the exercise of such
option and shall use its best efforts to cause the TSE to accept such notice,
without conditions, as soon as practicable.
5.3 Company Options.
(a) Subject to Section 5.3(b), at the Effective Time, each
Company Option which is outstanding and unexercised immediately prior to the
Effective Time, whether or not vested, shall be exchanged for an option to
purchase Parent Common Stock (a "Replacement Option"), and Parent shall assume
each such Company Option in accordance with the terms (as in effect as of the
date of this Agreement) of the stock plan under which it was issued and the
terms of the agreement by which it is evidenced. Accordingly, from and after the
Effective Time, (i) each Replacement Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of shares of Parent
Common Stock subject to each such Replacement Option shall be equal to the
number of Common Shares subject to such option immediately prior to the
Effective Time multiplied by the Parent Stock Exchange Ratio, rounding down to
the nearest whole share, (iii) the per share exercise price under each such
Replacement Option shall be adjusted by dividing the U.S. Dollar Equivalent
(calculated on the Effective Date) of the per share exercise price under such
option by the Parent Stock Exchange Ratio and rounding up to the nearest whole
cent and (iv) any restriction on the exercise of any such option shall continue
in full force and effect and the term, exercisability, vesting schedule and
other provisions of such option shall otherwise remain unchanged; provided,
however, that each Replacement Option assumed by Parent in accordance with this
Section 5.3(a) shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, division or subdivision of
shares, stock dividend, reverse stock split, consolidation of shares,
reclassification, recapitalization or other similar transaction subsequent to
the Effective Time. As soon as practicable (and in any event no later than 15
days) after the Effective Date, Parent shall file with the SEC a registration
statement on Form S-8 relating to the shares of Parent Common Stock issuable
with respect to the Replacement Options assumed by Parent in accordance with
this Section 5.3(a).
40.
(b) Notwithstanding anything to the contrary contained in this
Section 5.3, in lieu of assuming outstanding Company Options in accordance with
Section 5.3(a), Parent may, at its election, cause such outstanding Company
Options to be replaced by issuing substantially equivalent replacement stock
options in substitution therefor; provided that the tax consequences of such
substitution to the holders of Company Options shall be substantially equivalent
to the tax consequences to such holders if Parent had assumed such Company
Options in accordance with Section 5.3(a).
(c) Prior to the Effective Time, the Company shall use its
reasonable best efforts to take all action that may be necessary (under the
plans pursuant to which Company Options are outstanding and otherwise) to
effectuate the provisions of this Section 5.3 and to ensure that, from and after
the Effective Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section 5.3.
5.4 Employee Benefits.
(a) Parent currently intends to offer employment to all
employees of the Acquired Corporations. Parent agrees that all employees of the
Acquired Corporations who continue employment with Parent or the Acquired
Corporations after the Effective Time ("Continuing Employees") shall be eligible
to continue to participate in either Parent's or the Acquired Corporations'
health and welfare benefit plans; provided, however, that (i) nothing in this
Section 5.4 or elsewhere in this Agreement shall limit the right of Parent or
any of the Acquired Corporations to amend or terminate any such health or
welfare benefit plan at any time, and (ii) if Parent or any of the Acquired
Corporations terminates any such health or welfare benefit plan, then (upon
expiration of any appropriate transition period), the Continuing Employees shall
be eligible to participate in Parent's health and welfare benefit plans, to
substantially the same extent as similarly situated employees of Parent. The
Continuing Employees shall be given, to the extent consistent with Parent's
health and welfare benefit plans and with applicable law, service credit under
Parent's health and welfare benefit plans, for purposes of eligibility and
vesting, equal to the service credit currently provided to such Continuing
Employees under the Company's comparable employee health and welfare benefit
plans. The compensation paid and benefits provided to each employee who
continues employment with either Parent or the Company after the Closing Date
shall be paid or provided in accordance with Parent's compensation and benefits
policies and shall be at least as favorable in the aggregate as the compensation
and benefits provided to such employee immediately prior to the Closing Date.
Nothing in this Section 5.4 or elsewhere in this Agreement shall be construed to
create a right in any employee to employment with Parent, any of the Acquired
Corporations or any other Subsidiary or other Affiliate of Parent or any of the
Acquired Corporations.
(b) At the request of Parent, the Company agrees to take (or
cause to be taken) all actions necessary or appropriate to terminate, effective
immediately prior to the Effective Time, any employee benefit plan sponsored by
any of the Acquired Corporations (or in which any of the Acquired Corporations
participate) that contains a cash or deferred arrangement intended to qualify
under section 401(k) of the Code.
41.
(c) At the request of Parent, the Company agrees to take (or
cause to be taken) all actions necessary or appropriate to terminate, effective
immediately prior to the Effective Time, any other Employee Plan(s) sponsored,
maintained or contributed to by any of the Acquired Corporations (or in which
any of the Acquired Corporations participate).
5.5 Indemnification of Officers and Directors.
(a) All rights to indemnification existing in favor of those
Persons who are directors and officers of any Acquired Corporation as of the
date of this Agreement (the "Indemnified Persons") for their acts and omissions
occurring prior to the Effective Time, as provided in the indemnification
agreements between the Company and said Indemnified Persons (as in effect as of
the date of this Agreement) in the forms disclosed by the Company to Parent
prior to the date of this Agreement shall survive the Arrangement and shall be
the obligation of the Company and Parent for a period of six years from the
Effective Time.
(b) From the Effective Time until the sixth anniversary of the
Effective Time, Parent or the Company shall maintain in effect, for the benefit
of the Indemnified Persons with respect to their acts and omissions occurring
prior to the Effective Time, the existing policy of directors' and officers'
liability insurance maintained by the Company as of the date of this Agreement
in the form disclosed by the Company to Parent prior to the date of this
Agreement (the "Existing Policy"), to the extent that directors' and officers'
liability insurance coverage is commercially available; provided, however, that
(i) Parent or the Company, as the case may be, may substitute for the Existing
Policy a policy or policies of comparable coverage, and (ii) Parent or the
Company, as the case may be, shall not be required to pay annual premiums for
the Existing Policy (or for any substitute policies) in excess of $75,000 in the
aggregate. In the event any future annual premiums for the Existing Policy (or
any substitute policies) exceeds $75,000 in the aggregate, (A) Parent or the
Company shall be entitled to reduce the amount of coverage of the Existing
Policy (or any substitute policies) to the amount of coverage that can be
obtained for a premium equal to $75,000, and (B) Parent or the Company shall
notify the Indemnified Persons of the amount by which any such future annual
premiums exceeds $75,000 in the aggregate (the "Excess Amount") and shall permit
the Indemnified Persons to pay the Excess Amount.
5.6 Pooling of Interests. Each of the Company and Parent agrees (and
the Company agrees to cause the Acquired Corporations) (a) not to take any
action during the Pre-Closing Period that would adversely affect the ability of
Parent to account for the Arrangement as a "pooling of interests," and (b) to
use all reasonable efforts to attempt to ensure that each Person who is (or who
may be deemed to be) an "affiliate" (as that term is used in Rule 145 under the
Securities Act) does not take any action that could adversely affect the ability
of Parent to account for the Arrangement as a "pooling of interests." The
Company agrees to provide to Ernst & Young LLP such letters as shall be
reasonably requested by Ernst & Young LLP in connection with the letters
referred to in Sections 6.5(f) and 6.5(g).
5.7 Additional Agreements.
(a) Subject to Section 5.7(b), Parent and the Company shall use
all reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the
42.
Arrangement and make effective the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, but subject to
Section 5.7(b), each party to this Agreement (i) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Arrangement and the other transactions contemplated by this
Agreement, (ii) shall use all reasonable efforts to obtain each Consent (if any)
required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Arrangement or any
of the other transactions contemplated by this Agreement, and (iii) shall use
all reasonable efforts to lift any restraint, injunction or other legal bar to
the Arrangement. Each of Parent and the Company shall promptly deliver to the
other party a copy of each such filing made, each such notice given and each
such Consent obtained by it during the Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement: (i) to
dispose of or transfer or cause any of its Subsidiaries to dispose of or
transfer any assets, or to commit to cause any of the Acquired Corporations to
dispose of any assets; (ii) to discontinue or cause any of its Subsidiaries to
discontinue offering any product or service, or to commit to cause any of the
Acquired Corporations to discontinue offering any product or service; (iii) to
license or otherwise make available, or cause any of its Subsidiaries to license
or otherwise make available, to any Person, any technology, software or other
Proprietary Asset, or to commit to cause any of the Acquired Corporations to
license or otherwise make available to any Person any technology, software or
other Proprietary Asset; (iv) to hold separate or cause any of its Subsidiaries
to hold separate any assets or operations (either before or after the Closing
Date), or to commit to cause any of the Acquired Corporations to hold separate
any assets or operations; (v) to make or cause any of its Subsidiaries to make
any commitment (to any Governmental Body or otherwise) regarding its future
operations or the future operations of any of the Acquired Corporations; or (vi)
to contest any Legal Proceeding relating to the Arrangement if Parent determines
in good faith that contesting such Legal Proceeding might not be advisable.
5.8 Disclosure. Parent and the Company shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Arrangement or any of the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, neither Parent nor
the Company shall, and neither Parent nor the Company shall permit any of its
Subsidiaries or Representatives to, make any disclosure regarding the
Arrangement or any of the other transactions contemplated by this Agreement
unless (a) the other parties hereto shall have approved such disclosure or (b)
the party making the disclosure shall have been advised by its outside legal
counsel that such disclosure is required by applicable law or stock exchange
requirements (it being understood that the party making such disclosure shall
give notice to the other parties as far in advance of such disclosure as is
reasonably practicable and will in good faith consult with the other party and
consider the other party's suggestions concerning the nature, scope and manner
of disclosure).
5.9 Affiliate Agreements. The Company shall use all reasonable
efforts to cause each Person identified in Part 2.20 of the Company Disclosure
Schedule and each other Person who is or becomes (or may be deemed to be) an
"affiliate" (as that term is used in Rule 145 under the Securities Act) of the
Company to execute and deliver to Parent, prior to the date
43.
of the mailing of the Management Proxy Circular to the Company's shareholders,
an Affiliate Agreement in the form of Exhibit C.
5.10 Listing. Parent shall use its reasonable efforts to cause the
shares of Parent Common Stock being issued in connection with the Arrangement,
including those issued upon the exchange of Exchangeable Shares from time to
time and upon the exercise of Replacement Options or Replacement Warrants, if
any to be approved for listing (subject to notice of issuance) on the Nasdaq
National Market. Parent shall cause ExchangeCo to use its reasonable efforts to
cause the Exchangeable Shares to be created and to be listed and posted for
trading on the TSE by the Effective Time.
5.11 Public Corporation. Parent shall use reasonable efforts to ensure
that ExchangeCo remains a "public corporation" within the meaning of the Income
Tax Act (Canada) for so long as there are Exchangeable Shares outstanding (other
than those Exchangeable Shares held by Parent or any of its Affiliates).
6. Conditions Precedent To Obligations Of Parent, Exchangeco And Nova
Scotia Co
The obligations of Parent, ExchangeCo and Nova Scotia Co to effect the
Arrangement and otherwise consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (it being understood that as of the Effective Time,
all conditions herein shall be deemed to be satisfied and any liability for
failure to satisfy any condition herein shall be precluded):
6.1 Accuracy of Representations. The representations and warranties
of the Company contained in Section 2 of this Agreement shall be accurate in all
respects as of the date of this Agreement and as of the Closing Date as if made
on and as of the Closing Date (except (i) for such representations and
warranties which address matters only as of a particular time, which shall have
been accurate in all respects as of such particular time and (ii) as such
representations and warranties may be affected by transactions expressly
required pursuant to this Agreement or pursuant to the written consent of
Parent), except that any inaccuracies in such representations and warranties
will be disregarded if the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and would not reasonably be
expected to have, a Material Adverse Effect on the Acquired Corporations;
provided, however, that, for purposes of determining the accuracy of such
representations and warranties, (i) all "Material Adverse Effect" qualifications
and other materiality qualifications contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Disclosure Schedule made or purported to have been made after the date
of this Agreement shall be disregarded.
6.2 Performance of Covenants. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
44.
6.3 Securityholder Approval; Exercise of Dissent Rights.
(a) The Arrangement shall have been duly approved by the
Required Company Securityholder Vote and holders of not more than 5% of the
Common Shares issued and outstanding immediately prior to the Effective Time
(which issued and outstanding Common Shares shall include Common Shares issuable
pursuant to stock options, warrants or any other security of the Company that is
granted and outstanding, if, pursuant to any Legal Requirement, including the
Interim Order, any securityholder of the Company other than the holders of
Common Shares is entitled to exercise Dissent Rights with respect to such
options, warrants or other securities) shall have exercised their Dissent Rights
(and not withdrawn such exercise) in connection with the Arrangement.
(b) The Arrangement shall have been duly approved by the
Required Company Securityholder Vote in accordance with any conditions in
addition to those set forth in Section 6.3(a) which may be imposed by the
Interim Order and which are satisfactory to Parent, acting reasonably.
6.4 Consents. The Consents identified in Part 6.4 of the Company
Disclosure Schedule shall have been obtained and shall be in full force and
effect.
6.5 Agreements and Documents. Parent shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) Affiliate Agreements in the form of Exhibit C executed by
each Person who is listed on Exhibit G and each other Person who is or could
reasonably be deemed to be an "affiliate" (as that term is used in Rule 145
under the Securities Act) of the Company;
(b) Noncompetition and Nonsolicitation Agreements in the form of
Exhibit D, executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Chick, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇ (collectively, the "Key Employees") and a Release in the form of Exhibit
E, executed by each of the Key Employees, ▇. ▇▇▇▇▇▇ Armitage, E. ▇▇▇▇▇ ▇▇▇▇▇▇▇,
K. ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, except to the extent any such individual has
died or become permanently mentally incapacitated;
(c) Plan of Arrangement;
(d) Exchangeable Share Support Agreement;
(e) Voting and Exchange Trust Agreement;
(f) a letter from Ernst & Young LLP, dated as of the Closing
Date and addressed to Parent, the Company and KPMG LLP, reasonably satisfactory
in form and substance to Parent and KPMG LLP, to the effect that, after
reasonable investigation, Ernst & Young LLP is not aware of any fact concerning
the Acquired Corporations or any of the shareholders or affiliates of any of the
Acquired Corporations that could preclude Parent from accounting for the
Arrangement as a "pooling of interests" in accordance with United States
45.
generally accepted accounting principles, Accounting Principles Board Opinion
No. 16 and all published rules, regulations and policies of the SEC;
(g) a letter from KPMG LLP dated as of the Closing Date and
addressed to Parent, reasonably satisfactory in form and substance to Parent, to
the effect that KPMG LLP concurs with Parent management's conclusion that Parent
may account for the Arrangement as a "pooling of interests" in accordance with
United States generally accepted accounting principles, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and policies of the
SEC;
(h) a certificate executed on behalf of the Company by its Chief
Executive Officer and Chief Financial Officer confirming that the conditions set
forth in Sections 6.1, 6.2, 6.4, 6.6, 6.7, 6.12 and 6.13 have been duly
satisfied; and
(i) the written resignations of all officers and directors of
each of the Acquired Corporations, effective as of the Effective Time.
6.6 Employees. None of the individuals identified on Schedule 6.6(a)
shall have ceased to be employed by the Company, or shall have indicated to the
person such individual directly reports to, to any officer of the Company or to
the board of directors of the Company that such individual intends to terminate
his or her employment with the Company or, assuming that Parent offers such
individual terms of employment at least as favorable as those contemplated by
Section 5.4(a), to decline to accept employment with Parent; and not more than
one of the individuals identified on Schedule 6.6(b) shall have ceased to be
employed by the Company or shall have indicated to either the person such
individual directly reports to, to any officer of the Company or to the board of
directors of the Company that such individual intends to terminate his or her
employment with the Company or, assuming that Parent offers such individual
terms of employment at least as favorable as those contemplated by Section
5.4(a), to decline to accept employment with Parent.
6.7 No Material Adverse Change. Since the date of this Agreement,
there shall not have occurred any change, effect, event or circumstance that, in
combination with any other changes, effects, events or circumstances, has
resulted in or would reasonably be expected to result in a Material Adverse
Change on the Acquired Corporations.
6.8 Regulatory Approvals.
(a) Parent, ExchangeCo, Nova Scotia Co and the Company shall
have obtained (1) the following Consents and (2) all other Consents by all
Governmental Bodies that are necessary in connection with the Arrangement (other
than, with respect to the Consents contemplated by this clause "(2)," Consents
where the failure to obtain such Consents would not adversely impact in any
material respect the ability of Parent or any of its Subsidiaries or Affiliates
(including the Acquired Corporations) to conduct their respective businesses),
and each such Consent shall be on terms and conditions reasonably satisfactory
to Parent:
(i) Consents required under the Competition Act (Canada),
if applicable to the consummation of the Arrangement;
46.
(ii) Consents required under the Investment Canada Act, if
applicable to the consummation of the Arrangement;
(iii) exemption orders from the Canadian Securities
Commissions from the registration and prospectus requirements with respect to
the transactions contemplated by this Agreement; and
(iv) exemption orders from the Canadian Securities
Commissions which provide that the filing with the Canadian Securities
Commissions and the TSE of certain documents filed by Parent with the SEC will
satisfy any filing requirement of Parent and/or ExchangeCo in connection with
the "reporting issuer" status of ExchangeCo and the listing and trading of the
Exchangeable Shares on the TSE after the Closing.
(b) The waiting period under the HSR Act, if applicable to the
consummation of the Arrangement, shall have expired or been terminated, and
there shall not be in effect any voluntary agreement between Parent or the
Company and the Federal Trade Commission or the Department of Justice pursuant
to which Parent or the Company has agreed not to consummate the Arrangement for
any period of time; any similar waiting period under any applicable foreign
antitrust law or regulation or other similar Legal Requirement shall have
expired or been terminated; and any Consent required under any applicable
foreign antitrust law or regulation or other Legal Requirement shall have been
obtained.
6.9 Court Orders. The Interim Order and the Final Order shall each
have been obtained in a form and on terms reasonably satisfactory to Parent and
shall not have been set aside or modified (on appeal or otherwise) in a manner
unacceptable to Parent (acting reasonably).
6.10 Listing. The shares of Parent Common Stock to be issued in
connection with the Arrangement, including those to be issued upon the exchange
of Exchangeable Shares from time to time and upon the exercise of Replacement
Options or Replacement Warrants, if any are outstanding immediately prior to the
Effective Time, shall have been approved for listing (subject to notice of
issuance) on the Nasdaq National Market. The Exchangeable Shares issuable
pursuant to the Arrangement shall have been conditionally approved for listing
on the TSE, subject to the filing of required documentation.
6.11 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Arrangement shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Arrangement that makes consummation of the Arrangement
illegal.
6.12 No Governmental or Other Litigation. There shall not be pending
or threatened any Legal Proceeding in which a Governmental Body is or is
threatened to become a party or is otherwise involved, and there shall not be
pending any Legal Proceeding in which any other Person is a party or is
otherwise involved and which would reasonably be expected to have a Material
Adverse Effect on the Acquired Corporations or a Material Adverse Effect on
Parent: (a) challenging or seeking to restrain or prohibit the consummation of
the Arrangement or any of
47.
the other transactions contemplated by this Agreement; (b) relating to the
Arrangement and seeking to obtain from Parent or any of the Acquired
Corporations, any damages or other relief that may be material to Parent or the
Acquired Corporations; (c) seeking to prohibit or limit in any material respect
Parent's, ExchangeCo's or Nova Scotia Co's ability to vote, receive dividends
with respect to or otherwise exercise ownership rights with respect to the stock
of any of the Acquired Corporations; (d) that could materially and adversely
affect the right of Parent or any of the Acquired Corporations to own the assets
or operate the business of the Acquired Corporations; or (e) seeking to compel
any of the Acquired Corporations, Parent or any Subsidiary of Parent to dispose
of or hold separate any material assets as a result of the Arrangement or any of
the other transactions contemplated by this Agreement.
6.13 Company Warrants. Parent shall have received assurances
reasonably satisfactory to it that all Company Warrants shall have been
exercised.
6.14 Compliance with (S)3(a)(10) of the Securities Act(S). All
applicable requirements of Section 3(a)(10) of the Securities Act shall have
been satisfied with respect to the issuance of Parent Common Stock and
Exchangeable Shares pursuant to the Arrangement.
7. Conditions Precedent To Obligation Of The Company
The obligation of the Company to effect the Arrangement and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions (it being
understood that as of the Effective Time, all conditions herein shall be deemed
to be satisfied and any liability for failure to satisfy any condition herein
shall be precluded):
7.1 Accuracy of Representations. The representations and warranties
of Parent, ExchangeCo and Nova Scotia Co contained in Section 3 of this
Agreement shall be accurate in all respects as of the date of this Agreement and
as of the Closing Date as if made on and as of the Closing Date (except (i) for
such representations and warranties which address matters only as of a
particular time, which shall have been accurate in all respects as of such
particular time and (ii) as such representations and warranties may be affected
by transactions expressly required pursuant to this Agreement or pursuant to the
written consent of the Company), except that any inaccuracies in such
representations and warranties will be disregarded if the circumstances giving
rise to all such inaccuracies (considered collectively) do not constitute, and
would not reasonably be expected to have, a Material Adverse Effect on Parent;
provided, however, that, for purposes of determining the accuracy of such
representations and warranties, all "Material Adverse Effect" qualifications and
other materiality qualifications contained in such representations and
warranties shall be disregarded.
7.2 Performance of Covenants. All of the covenants and obligations
that Parent, ExchangeCo and Nova Scotia Co are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.
48.
7.3 Securityholder Approval.
(a) The Arrangement shall have been duly approved by the
Required Company Securityholder Vote.
(b) The Arrangement shall have been duly approved by the
Required Company Securityholder Vote in accordance with any conditions in
addition to those set forth in Section 7.3(a) which may be imposed by the
Interim Order and which are satisfactory to the Company, acting reasonably.
7.4 Documents. The Company shall have received the following
documents:
(a) Plan of Arrangement;
(b) Exchangeable Share Support Agreement;
(c) Voting and Exchange Trust Agreement; and
(d) a certificate executed on behalf of Parent by an executive
officer of Parent, confirming that the conditions set forth in Sections 7.1 and
7.2 have been duly satisfied.
7.5 Regulatory Approvals..
(a) Parent, ExchangeCo, Nova Scotia Co and the Company shall
have obtained (1) the following Consents and (2) all other Consents by all
Governmental Bodies that are necessary in connection with the Arrangement (other
than, with respect to the Consents contemplated by this clause "(2)," Consents
where the failure to obtain such Consents would not adversely impact in any
material respect the ability of Parent or any of its Subsidiaries or Affiliates
(including the Acquired Corporations) to conduct their respective businesses),
and each such Consent shall be on terms and conditions reasonably satisfactory
to Parent (it being understood that any Consents which would require any of the
Acquired Corporations or the directors or officers of the Acquired Corporations
to perform an illegal act shall be deemed not to be on terms and conditions
reasonably satisfactory to Parent):
(i) Consents required under the Competition Act (Canada),
if applicable to the consummation of the Arrangement;
(ii) Consents required under the Investment Canada Act
(Canada), if applicable to the consummation of the Arrangement; and
(iii) exemption orders from the Canadian Securities
Commissions from the registration and prospectus requirements with respect to
the transactions contemplated by this Agreement.
(b) The waiting period under the HSR Act, if applicable to the
consummation of the Arrangement, shall have expired or been terminated, and
there shall not be in effect any voluntary agreement between Parent or the
Company and the Federal Trade Commission or the Department of Justice pursuant
to which Parent or the Company has agreed
49.
not to consummate the Arrangement for any period of time; any similar waiting
period under any applicable foreign antitrust law or regulation or other similar
Legal Requirement shall have expired or been terminated; and any Consent
required under any applicable foreign antitrust law or regulation or other Legal
Requirement shall have been obtained.
7.6 Court Orders. The Interim Order and the Final Order shall each
have been obtained in a form and on terms reasonably satisfactory to the Company
and shall not have been set aside or modified (on appeal or otherwise) in a
manner unacceptable to the Company (acting reasonably).
7.7 Listing. The shares of Parent Common Stock to be issued in
connection with the Arrangement, including those to be issued upon the exchange
of Exchangeable Shares from time to time and upon the exercise of Replacement
Options or Replacement Warrants, if any are outstanding immediately prior to the
Effective Time, from time to time, shall have been approved for listing (subject
to notice of issuance) on the Nasdaq National Market. The Exchangeable Shares
issuable pursuant to the Arrangement shall have been conditionally approved for
listing on the TSE, subject to the filing of required documentation.
7.8 Effectiveness of Form S-3 Registration Statement. The Form S-3
Registration Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of such Form S-3
Registration Statement shall have been issued (and not withdrawn) by the SEC and
no proceedings for that purpose shall have been initiated (and still be pending)
by the SEC. Parent shall have received all United States securities or "blue
sky" authorizations necessary to issue the Parent Common Stock upon exchange of
the Exchangeable Shares.
7.9 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the
Arrangement by the Company shall have been issued by any court of competent
jurisdiction and remain in effect, and there shall not be any Legal Requirement
enacted or deemed applicable to the Arrangement that makes consummation of the
Arrangement by the Company illegal.
7.10 No Governmental Litigation. There shall not be pending any Legal
Proceeding in which a Canadian Governmental Body is a party or is otherwise
involved challenging or seeking to restrain or prohibit the consummation of the
Arrangement or any of the other transactions contemplated by this Agreement.
7.11 Compliance with (S)3(a)(10) of the Securities Act(S). All
applicable requirements of Section 3(a)(10) of the Securities Act shall have
been satisfied with respect to the issuance of Parent Common Stock and
Exchangeable Shares pursuant to the Arrangement.
8. Termination
8.1 Termination. This Agreement may be terminated prior to the
Effective Time (whether before or after the approval of the Arrangement by the
Required Company Securityholder Vote):
50.
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Arrangement shall not
have been consummated by February 28, 2001; provided, however, that (i) a party
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(b) if the failure to consummate the Arrangement by February 28, 2001 is
attributable to a failure on the part of such party to perform any covenant in
this Agreement required to be performed by such party at or prior to the
Effective Time, and (ii) the Company shall not be permitted to terminate this
Agreement pursuant to this Section 8.1(b) unless the Company shall have made any
payment required to be made to Parent pursuant to Section 8.3(a) and shall have
paid to Parent any fee required to be paid to Parent pursuant to Section 8.3(c);
(c) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Arrangement;
(d) by either Parent or the Company if (i) the Company
Securityholders' Meeting (including any adjournments and postponements thereof)
shall have been held and completed and the Company Securityholders shall have
taken a final vote on a proposal to approve the Arrangement, and (ii) the
Arrangement shall not have been approved at the Company Securityholders' Meeting
(and shall not have been approved at any adjournment or postponement thereof) by
the Required Company Securityholder Vote; provided, however, that the Company
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(d) unless the Company shall have made the payment required to be made to
Parent pursuant to Section 8.3(a) and shall have paid to Parent the fee required
to be paid to Parent pursuant to Section 8.3(d);
(e) by Parent (at any time prior to the approval of the
Arrangement by the Required Company Securityholder Vote) if a Triggering Event
shall have occurred;
(f) by Parent if (i) any of the Company's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 6.1 would not be satisfied if tested as of the
date of such inaccuracy or (ii) any of the Company's covenants contained in this
Agreement shall have been breached such that the condition set forth in Section
6.2 would not be satisfied if tested as of the date of such breach; provided,
however, that if an inaccuracy in any of the Company's representations and
warranties as of a date subsequent to the date of this Agreement or a breach of
a covenant by the Company is curable by the Company and the Company is
continuing to exercise all reasonable efforts to cure such inaccuracy or breach,
then Parent may not terminate this Agreement under this Section 8.1(f) on
account of such inaccuracy or breach; or
(g) by the Company if (i) any of Parent's representations and
warranties contained in this Agreement shall be inaccurate as of the date of
this Agreement, or shall have become inaccurate as of a date subsequent to the
date of this Agreement (as if made
51.
on such subsequent date), such that the condition set forth in Section 7.1 would
not be satisfied if tested as of the date of such inaccuracy or (ii) if any of
Parent's covenants contained in this Agreement shall have been breached such
that the condition set forth in Section 7.2 would not be satisfied if tested as
of the date of such breach; provided, however, that if an inaccuracy in any of
Parent's representations and warranties as of a date subsequent to the date of
this Agreement or a breach of a covenant by Parent is curable by Parent and
Parent is continuing to exercise all reasonable efforts to cure such inaccuracy
or breach, then the Company may not terminate this Agreement under this Section
8.1(g) on account of such inaccuracy or breach.
8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; provided, however, that (i) this Section 8.2, Section 8.3 and
Section 9 (and the Confidentiality Agreement) shall survive the termination of
this Agreement and shall remain in full force and effect, and (ii) the
termination of this Agreement shall not relieve any party from any liability for
any material breach of any representation, warranty, covenant, obligation or
other provision contained in this Agreement.
8.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Arrangement is consummated; provided, however,
that:
(i) Parent and the Company shall share equally all fees and
expenses, other than attorneys' fees, incurred in connection with (A) the
filing, printing and mailing of the Management Proxy Circular and any amendments
or supplements thereto and (B) the filing by the parties hereto of the
notification and report forms relating to the Arrangement under the HSR Act (if
applicable) and the filing of any notice or other document under the Investment
Canada Act, the Competition Act (Canada) and any other applicable foreign
antitrust law or regulation (if applicable);
(ii) if (A) this Agreement is terminated by Parent or the
Company pursuant to Section 8.1(b), (B) at or prior to the time of the
termination of this Agreement, any Person shall have publicly disclosed,
announced, commenced, submitted or made an Acquisition Proposal or an
Acquisition Proposal shall have otherwise become generally known to the
shareholders of the Company, (C) the failure of the Arrangement to be
consummated on or before the date referred to in Section 8.1(b) is not directly
attributable to a material breach of this Agreement by Parent or to any
investigation or review of the Arrangement by any Governmental Body, and (D)
prior to the date of termination of this Agreement, the Arrangement shall not
have been duly approved by the Required Company Securityholder Vote then
(without limiting any obligation of the Company to pay any fee payable pursuant
to Section 8.3(c)), the Company shall make a nonrefundable cash payment to
Parent, at the time specified in Section 8.3(b), in an amount equal to
$1,500,000 as payment in full of Parent's fees and expenses (including all
attorneys' fees, accountants' fees, financial advisory fees and filing fees)
that have been paid or that may become payable by or on behalf of
52.
Parent in connection with the preparation and negotiation of this Agreement and
the Stock Option Agreement and otherwise in connection with the Arrangement; and
(iii) if this Agreement is terminated by Parent or the
Company pursuant to Section 8.1(d) or by Parent pursuant to Section 8.1(e), then
(without limiting any obligation of the Company to pay any fee payable pursuant
to Section 8.3(d) or Section 8.3(e)), the Company shall make a nonrefundable
cash payment to Parent, at the time specified in Section 8.3(b), in an amount
equal to $1,500,000 as payment in full of Parent's fees and expenses (including
all attorneys' fees, accountants' fees, financial advisory fees and filing fees)
that have been paid or that may become payable by or on behalf of Parent in
connection with the preparation and negotiation of this Agreement and the Stock
Option Agreement and otherwise in connection with the Arrangement.
(b) In the case of termination of this Agreement by the Company
pursuant to Section 8.1(b) or Section 8.1(d), any nonrefundable payment required
to be made pursuant to clause "(ii)" or clause "(iii)" of the proviso to Section
8.3(a) shall be made prior to the time of such termination; and in the case of
termination of this Agreement by Parent pursuant to Section 8.1(b), Section
8.1(d) or Section 8.1(e), any nonrefundable payment required to be made pursuant
to clause "(ii)" or clause "(iii)" of the proviso to Section 8.3(a) shall be
made by the Company within two business days after such termination.
(c) If (A) this Agreement is terminated by Parent or the Company
pursuant to Section 8.1(b), (B) at or prior to the time of the termination of
this Agreement, any Person shall have publicly disclosed, announced, commenced,
submitted or made an Acquisition Proposal or an Acquisition Proposal shall have
otherwise become generally known to the shareholders of the Company, (C) the
failure of the Arrangement to be consummated on or before the date referred to
in Section 8.1(b) is not directly attributable to a material breach of this
Agreement by Parent or to any investigation or review of the Arrangement by any
Governmental Body, and (D) prior to the date of termination of this Agreement,
the Arrangement shall not have been duly approved by the Required Company
Securityholder Vote, then the Company shall pay to Parent, in cash at the time
specified in the next sentence, a nonrefundable fee in the amount of $10,050,000
(the "Initial Termination Fee"). In the case of termination of this Agreement by
the Company pursuant to Section 8.1(b), the Initial Termination Fee, if it shall
have become payable, shall be paid by the Company prior to such termination, and
in the case of termination of this Agreement by Parent pursuant to Section
8.1(b), the Initial Termination Fee, if it shall have become payable, shall be
paid by the Company within two business days after such termination. If (A) the
Initial Termination Fee has been paid or become payable and (B) within 360 days
after the date of termination of this Agreement, an Acquisition Transaction
(other than with Parent or one of Parent's Affiliates) is consummated or the
Company enters into a definitive agreement with respect to an Acquisition
Transaction (other than with Parent or one of Parent's Affiliates), the Company
shall pay to Parent in cash an additional nonrefundable fee of $20,100,000, such
payment to be made at or prior to the consummation of such Acquisition
Transaction or the entering into of such definitive agreement, whichever is
earlier.
(d) (i) If (A) this Agreement is terminated by Parent or the
Company pursuant to Section 8.1(d), (B) at or prior to the time of the
termination of this
53.
Agreement, any Person shall have publicly disclosed, announced, commenced,
submitted or made an Acquisition Proposal or an Acquisition Proposal shall have
otherwise become generally known to the shareholders of the Company, and (C)
such Acquisition Proposal is not publicly and definitively withdrawn on or
before the day prior to the date of the Company Securityholders' Meeting, then
the Company shall pay to Parent, in cash at the time specified in the next
sentence, a nonrefundable fee in the amount of the Initial Termination Fee. In
the case of termination of this Agreement by the Company pursuant to Section
8.1(d), the Initial Termination Fee, if it shall have become payable, shall be
paid by the Company prior to such termination, and in the case of termination of
this Agreement by Parent pursuant to Section 8.1(d), the Initial Termination
Fee, if it shall become payable, shall be paid by the Company within two
business days after such termination. If (A) the Initial Termination Fee has
been paid or become payable and (B) within 360 days after the date of
termination of this Agreement, an Acquisition Transaction (other than with
Parent or one of Parent's Affiliates) is consummated or the Company enters into
a definitive agreement with respect to an Acquisition Transaction (other than
with Parent or one of Parent's Affiliates), the Company shall pay to Parent in
cash an additional nonrefundable fee of $20,100,000, such payment to be made at
or prior to the consummation of such Acquisition Transaction or the entering
into of such definitive agreement, whichever is earlier.
(ii) Notwithstanding anything to the contrary contained in
Section 8.3(d)(i), if (A) this Agreement is terminated by Parent or the Company
pursuant to Section 8.1(d), (B) at or prior to the time of the termination of
this Agreement, any Person shall have publicly disclosed, announced, commenced,
submitted or made an Acquisition Proposal or an Acquisition Proposal shall have
otherwise become generally known to the shareholders of the Company, (C) such
Acquisition Proposal is publicly and definitively withdrawn on or before the day
prior to the date of the Company Securityholders' Meeting, and (D) within 360
days after the date of termination of this Agreement pursuant to Section 8.1(d),
an Acquisition Transaction (other than with Parent or one of Parent's
Affiliates) is consummated or the Company enters into a definitive agreement
with respect to an Acquisition Transaction (other than with Parent or one of
Parent's Affiliates), the Company shall pay to Parent in cash a nonrefundable
fee of $30,150,000, such payment to be made at or prior to the consummation of
such Acquisition Transaction or the entering into of such definitive agreement,
whichever is earlier.
(e) If this Agreement is terminated by Parent pursuant to Section
8.1(e), then the Company shall pay to Parent, in cash at the time specified in
the next sentence (and in addition to the amounts payable pursuant to Section
8.3(a)), a nonrefundable fee in the amount equal to $30,150,000. The fee
referred to in the preceding sentence shall be paid by the Company within two
business days after such termination. Notwithstanding anything to the contrary
contained in this Section 8.3(e), if: (i) at or prior to the time of the
termination of this Agreement by Parent pursuant to Section 8.1(e), no Person
shall have publicly disclosed, announced, commenced, submitted or made an
Acquisition Proposal and an Acquisition Proposal shall not have otherwise become
generally known to the shareholders of the Company; (ii) a Parent Event shall
have occurred; (iii) the Company provides Parent with at least three business
days prior notice of any meeting of the Company's board of directors at which
such board of directors will consider whether, as a direct result of and a
direct response to the occurrence of such Parent Event, the Company Board
Recommendation must be withdrawn or modified in a manner adverse to Parent; (iv)
the Company's board of directors determines in good faith, after having
considered the written advice of the Company's outside legal counsel, that the
withdrawal or modification of the Company Board Recommendation is required in
order for the Company's board of directors to comply with its fiduciary
obligations to the Company's shareholders under applicable law; (v) the Company
Board Recommendation is not withdrawn or
54.
modified in a manner adverse to Parent at any time within five business days
after Parent receives written notice from the Company confirming that the
Company's board of directors has determined that a withdrawal or modification of
the Company Board Recommendation is required in order for the Company's board of
directors to comply with its fiduciary obligations to the Company's shareholders
under applicable law; and (vi) Parent shall have terminated this Agreement
pursuant to Section 8.1(e), then the Company shall pay to Parent, in cash, at
the time specified in the next sentence, a nonrefundable fee in the amount of
$3,500,000 (the "Initial Triggering Event Fee"). The Initial Triggering Event
Fee, if it shall have become payable, shall be paid by the Company within two
business days after such termination. If (A) the Initial Triggering Event Fee
has been paid or become payable and (B) within 360 days after the date of
termination of this Agreement, an Acquisition Transaction (other than with
Parent or one of Parent's Affiliates) is consummated or the Company enters into
a definitive agreement with respect to an Acquisition Transaction (other than
with Parent or one of Parent's Affiliates), the Company shall pay to Parent in
cash an additional nonrefundable fee of $26,650,000, such payment to be made at
or prior to the consummation of such Acquisition Transaction or the entering
into of such definitive agreement, whichever is earlier.
(f) The parties hereby acknowledge and agree that for the purposes of
Section 8.3(a)(ii) and Sections 8.3(c), (d) and (e), the specific references to
"Acquisition Proposal" and "Acquisition Transaction" shall not include an
acquisition of additional Common Shares by Galileo Equity Management Inc. (a
"Galileo Acquisition"); provided that (i) Galileo Equity Management Inc. holds
the Common Shares for passive investment purposes only and (ii) none of the
Acquired Corporations and no Representative of any of the Acquired Corporations
shall have solicited, initiated, encouraged, induced or facilitated the making,
submission or announcement of a Galileo Acquisition.
(g) Notwithstanding anything to the contrary contained in this
Agreement, if the Company fails to pay when due any amount payable under this
Section 8.3, then (i) the Company shall reimburse Parent for all costs and
expenses (including fees and disbursements of counsel) incurred in connection
with the collection of such overdue amount and the enforcement by Parent of its
rights under this Section 8.3, and (ii) the Company shall pay to Parent interest
on such overdue amount (for the period commencing as of the date such overdue
amount was originally required to be paid and ending on the date such overdue
amount is actually paid to Parent in full) at a rate per annum equal to the
"prime rate" (as announced by Bank of America or any successor thereto) in
effect on the date such overdue amount was originally required to be paid.
9. Miscellaneous Provisions
9.1 Amendment. This Agreement may be amended with the approval of the
respective boards of directors of the Company and Parent at any time (whether
before or after the
55.
approval of the Arrangement by the Company's shareholders); provided, however,
that after any such approval by the Company's shareholders, no amendment shall
be made which by law requires further approval of the shareholders of the
Company without the further approval of such shareholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
9.2 Waiver. No failure on the part of any party to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No party shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
9.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Arrangement.
9.4 Entire Agreement; Counterparts. This Agreement and the other
agreements referred to herein constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among or between any
of the parties with respect to the subject matter hereof and thereof; provided,
however, that the Confidentiality Agreement shall not be superseded and shall
remain in full force and effect. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument
9.5 Applicable Law; Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof, except to the extent mandatorily governed by the
laws of the Province of Ontario. In any action between any of the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement: (a) each of the parties irrevocably and
unconditionally consents and submits to the exclusive jurisdiction and venue of
the state and federal courts located in the State of Delaware; (b) if any such
action is commenced in a state court, then, subject to applicable law, no party
shall object to the removal of such action to any federal court located in the
State of Delaware; (c) each of the parties irrevocably waives the right to trial
by jury; and (d) each of the parties irrevocably consents to service of process
by first class certified mail, return receipt requested, postage prepaid, to the
address at which such party is to receive notice in accordance with Section 9.9.
9.6 Disclosure Schedule. The Company Disclosure Schedule shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Section 2, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the
56.
corresponding numbered or lettered section in Section 2 and all other applicable
representations and warranties to which the relevancy of such disclosure is
readily apparent on its face, but shall not be deemed to relate to or to qualify
any other representation or warranty.
9.7 Attorneys' Fees. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
9.8 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of Parent's or the Company's rights hereunder may be assigned
by Parent or the Company without the prior written consent of the other party,
and any attempted assignment of this Agreement or any of such rights by Parent
or the Company, as the case may be, without such consent shall be void and of no
effect. Notwithstanding the foregoing, Parent, ExchangeCo and Nova Scotia Co may
assign, in their sole discretion, any or all of their respective rights and
interests and may delegate any or all of their respective obligations under this
Agreement to any direct or indirect wholly owned subsidiary of Parent,
ExchangeCo or Nova Scotia Co, as the case may be, provided that no such
assignment or delegation shall relieve Parent, ExchangeCo or Nova Scotia Co of
any of their respective obligations hereunder. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person (other than
the parties hereto) any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, except for the provisions of Section 5.5, which
are intended for the benefit of the Indemnified Persons.
9.9 Notices. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received (a) upon receipt when delivered
by hand, or (b) two business days after sent by registered mail or by courier or
express delivery service or by facsimile, provided that in each case the notice
or other communication is sent to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
if to Parent, ExchangeCo or Nova Scotia Co:
Siebel Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇▇
Attn: Vice President, Legal Affairs
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
57.
if to the Company:
▇▇▇▇▇ Systems Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: President and Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.10 Cooperation. Each of Parent and the Company agrees to cooperate
fully with the other party and to execute and deliver such further documents,
certificates, agreements and instruments and to take such other actions as may
be reasonably requested by the other party to evidence or reflect the
transactions contemplated by this Agreement and to carry out the intent and
purposes of this Agreement.
9.11 Severability In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
9.12 Currency Unless otherwise specified, all references in this
Agreement to sums of money, "dollars" or "$" shall mean United States dollars.
9.13 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections," "Exhibits" and "Schedules" are intended to refer to
Sections of this Agreement and Exhibits or Schedules to this Agreement.
(e) The bold-faced headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
58.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
SIEBEL SYSTEMS, INC.
By:_____________________________________
3045856 NOVA SCOTIA COMPANY
By:_____________________________________
2000066 ONTARIO INC.
By:_____________________________________
▇▇▇▇▇ SYSTEMS INC.
By:_____________________________________
[Signature Page]
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Corporation Contract. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any of the Acquired Corporations is a party; (b) by
which any of the Acquired Corporations or any asset of any of the Acquired
Corporations is or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or (c) under which
any of the Acquired Corporations has or may acquire any right or interest.
Acquired Corporation Proprietary Asset. "Acquired Corporation Proprietary
Asset" shall mean any Proprietary Asset owned by or licensed to any of the
Acquired Corporations or otherwise used by any of the Acquired Corporations.
Acquired Corporation Source Code. "Acquired Corporation Source Code" shall
mean any source code, or any portion, aspect or segment of any source code,
relating to any Acquired Corporation Proprietary Asset.
Acquisition Proposal. "Acquisition Proposal" shall mean any offer,
proposal, inquiry or indication of interest (other than an offer, proposal,
inquiry or indication of interest made or submitted by Parent) contemplating or
otherwise relating to any Acquisition Transaction.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of transactions, other than the transactions contemplated
by the Agreement, involving:
(a) (i) any merger, plan of arrangement, consolidation, amalgamation,
share exchange, business combination, recapitalization, tender offer, exchange
offer or other similar transaction involving any of the Acquired Corporations,
(ii) any transaction in which a Person or "group" (as defined in the Exchange
Act and the rules promulgated thereunder) of Persons directly or indirectly
acquires beneficial ownership of securities representing more than 20% of the
outstanding voting securities of any of the Acquired Corporations, or (iii) any
transaction in which any of the Acquired Corporations issues securities
representing more than 20% of the outstanding voting securities of any of the
Acquired Corporations;
(b) any sale, lease, exchange, transfer, license, or disposition of
any business or businesses or assets that constitute or account for 20% or more
of the consolidated net revenues, net income or assets of any of the Acquired
Corporations; or
(c) any liquidation or dissolution of any of the Acquired
Corporations.
Affiliate. "Affiliate" of any Person shall mean any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as applied to any Person, means the possession by another Person,
A-1.
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that first mentioned Person, whether through the
ownership of voting securities, by contract or otherwise.
Agreement. "Agreement" shall mean the Arrangement Agreement to which this
Exhibit A is attached, as it may be amended from time to time.
Arrangement. "Arrangement" shall mean an arrangement under Section 182 of
the OBCA on the terms and subject to the conditions set out in the Plan of
Arrangement, subject to any amendments or variations thereto made in accordance
with Section 9.1 of the Agreement or Article 6 of the Plan of Arrangement or
made at the direction of the Court in the Final Order.
Arrangement Resolution. "Arrangement Resolution" shall mean the special
resolution to be passed by the Company Securityholders at the Company
Securityholders Meeting.
Articles of Arrangement. "Articles of Arrangement" shall mean the articles
of arrangement of the Company in respect of the Arrangement required by Section
183(1) of the OBCA to be sent to the Director after the Final Order is made.
Canadian Securities Commissions. "Canadian Securities Commissions" shall
mean the securities commissions or other securities regulatory authorities of
each of the provinces and territories of Canada.
Canadian Securities Laws. "Canadian Securities Laws" shall mean the
securities acts and comparable Legal Requirements of each of the provinces and
territories of Canada.
Closing Date. "Closing Date" shall mean the date to be designated by Parent
and the Company with respect to the consummation of the transactions
contemplated by the Agreement (the "Closing"), which in any event shall be no
later than the fifth business day after the satisfaction or waiver of the last
to be satisfied or waived of the conditions set forth in Sections 6 and 7 (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions).
Common Shares. "Common Shares" shall mean the common shares in the capital
of the Company.
Company Disclosure Schedule. "Company Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by the Company in accordance with the
requirements of Section 9.6 of the Agreement and that has been delivered by the
Company to Parent on the date of the Agreement and signed by the President of
the Company.
Company Warrants. "Company Warrants" shall mean those certain warrants to
purchase 12,500 Common Shares pursuant to a warrant agreement dated February 28,
2000 between the Company and a certain Entity.
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Company Securityholders. "Company Securityholders" shall mean the holders
of Common Shares, the holders of Company Options and the holders of Company
Warrants.
Confidentiality Agreement. "Confidentiality Agreement" shall mean the
Mutual Non-Disclosure Agreement dated as of March 9, 2000 between Parent and the
Company.
Consent. "Consent" shall mean any approval, consent, order, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature.
Court. "Court" shall mean the Ontario Superior Court of Justice.
Depository. "Depository" shall mean Montreal Trust Company of Canada at its
principal office in Toronto, Ontario at the address set out in the letter of
transmittal and election form in its capacity as a depository for the Common
Shares under the Arrangement or such other trust company or other Entity that
Parent may, in its reasonable discretion, choose as depository.
Director. "Director" shall mean the Director appointed pursuant to Section
278 of the OBCA.
Dissent Rights. "Dissent Rights" shall mean the rights of dissent in
connection with the Arrangement described in Section 3.1 of the Plan of
Arrangement.
Effective Date. "Effective Date" shall mean the date shown on the
certificate of arrangement to be issued by the Director under the OBCA giving
effect to the Arrangement.
Effective Time. "Effective Time" has the meaning ascribed thereto in the
Plan of Arrangement.
Election Deadline. "Election Deadline" shall mean 5:00 p.m. (EST) on the
date which is two business days prior to the date of the Company
Securityholders' Meeting.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust,
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company (including any company limited by shares, limited liability company or
joint stock company), firm, society or other enterprise, association,
organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as am ended.
Exchangeable Share Support Agreement. "Exchangeable Share Support
Agreement" shall mean the agreement to be entered into among Parent, ExchangeCo
and Nova Scotia Co, substantially in the form of Exhibit B attached to the
Agreement, with such changes thereto as the parties to the Agreement, acting
reasonably, may agree.
Exchangeable Shares. "Exchangeable Shares" shall mean the exchangeable
shares in the capital of ExchangeCo having substantially the rights, privileges,
restrictions and condition set out in Appendix 1 of the Plan of Arrangement.
Final Order. "Final Order" shall mean the final order of the Court
approving the Arrangement as such order may be amended at any time prior to the
Effective Time or, if appealed, then (unless such appeal is withdrawn or
denied), as affirmed on appeal prior to the Effective Time.
Form S-3 Registration Statement. "Form S-3 Registration Statement" shall
mean the registration statement on Form S-3 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock upon the exchange of any
Exchangeable Shares, as said registration statement may be amended prior to the
time it is declared effective by the SEC in accordance with the provisions of
the Agreement.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, provincial, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department, agency,
commission, instrumentality, official, ministry, fund, foundation, center,
organization, unit, body or Entity and any court or other tribunal).
HSR Act. "HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
Interim Order. "Interim Order" means the interim order of the Court in
respect of the Arrangement, as contemplated by Section 1.3 of the Agreement.
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Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
provincial, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Body (or under the authority of the Nasdaq National Market or the
TSE).
Management Proxy Circular. "Management Proxy Circular" shall mean the
notice of the Company Securityholders' Meeting and accompanying management proxy
circular to be sent to the Company Securityholders in connection with the
Company Securityholders' Meeting.
Material Adverse Change on the Acquired Corporations. "Material Adverse
Change on the Acquired Corporations" shall mean any change, effect, event or
circumstance that is, or would reasonably be expected to be, material and
adverse to (i) the business, condition, capitalization, operations, financial
performance or prospects of the Acquired Corporations, taken as a whole, (ii)
the ability of the Company to consummate the Arrangement or any of the other
transactions contemplated by the Agreement or to perform any of its obligations
under the Agreement, or (iii) Parent's, ExchangeCo's or Nova Scotia Co's ability
to vote, receive dividends with respect to or otherwise exercise ownership
rights with respect to the shares of the Acquired Corporations; provided,
however, that none of the following shall be deemed, in and of itself, to
constitute a Material Adverse Change on the Acquired Corporations: (a) a change
in the market price or trading volume of the Common Shares and (b) a reduction
in revenue of the Company as a result of a delay in customer orders that are
demonstrated to have resulted directly from the public announcement of the
Arrangement.
Material Adverse Effect. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on the Acquired
Corporations if such event, violation, inaccuracy, circumstance or other matter
had or would reasonably be expected to have a material adverse effect on (i) the
business, condition, capitalization, operations, financial performance or
prospects of the Acquired Corporations taken as a whole, (ii) the ability of the
Company to consummate the Arrangement or any of the other transactions
contemplated by the Agreement or to perform any of its obligations under the
Agreement, or (iii) Parent's, ExchangeCo's or Nova Scotia Co's ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with
respect to the shares of the Acquired Corporations; provided, however, that none
of the following shall be deemed, in and of itself, to constitute a Material
Adverse Effect on the Acquired Corporations: (a) a change in the market price or
trading volume of the Common Shares and (b) a reduction in revenue of the
Company as a result of a delay in customer orders that are demonstrated to have
resulted directly from the public announcement of the Arrangement. An event,
violation, inaccuracy, circumstance
or other matter will be deemed to have a "Material Adverse Effect" on Parent if
such event, violation, inaccuracy, circumstance or other matter had or would
reasonably be expected to have a material adverse effect on (i) the business,
condition, capitalization, operations, financial performance or prospects of
Parent and its Subsidiaries taken as a whole or (ii) the ability of Parent to
consummate the Arrangement or any of the other transactions contemplated by the
Agreement or to perform any of its obligations under the Agreement; provided,
however, that a change in the market price or trading volume of the Parent
Common Stock shall not be deemed, in and of itself, to constitute a Material
Adverse Effect on Parent.
OBCA. "OBCA" shall mean the Business Corporations Act (Ontario) as now in
effect and as it may be amended from time to time, including the regulations
made thereunder.
Offer. "Offer" shall mean an offer to acquire directly or indirectly 100%
of the outstanding Common Shares of the Company or all or substantially all of
its assets pursuant to a merger, plan of arrangement, consolidation,
amalgamation, share exchange, business combination, tender offer, exchange
offer, asset sale or other similar transaction.
Parent Common Stock. "Parent Common Stock" shall mean the Common Stock,
$0.001 par value per share, of Parent.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Plan of Arrangement. "Plan of Arrangement" shall mean the plan of
arrangement substantially in the form of Exhibit I attached to the Agreement and
any amendments or variations thereto made in accordance with Section 9.1 of the
Agreement or Article 6 of the Plan of Arrangement or made at the direction of
the Court in the Final Order.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service ▇▇▇▇ (whether
registered or unregistered), service ▇▇▇▇ application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, source code, model, algorithm, formula, compound,
invention, design, blueprint, engineering drawing, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset; or (b) right to use or exploit any of the foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives. SEC.
"SEC" shall mean the United States Securities and Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Special Voting Share. "Special Voting Share" shall mean the share of
special voting stock of Parent having substantially the rights, privileges,
restrictions and conditions described in the Voting and Exchange Trust
Agreement.
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Subsidiary. An entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record,
(a) an amount of voting securities or other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or (b) at least 50% of
the outstanding equity or financial interests or such Entity.
Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written Offer made by a third party on terms that the board of directors of the
Company determines, in good faith, considering the written advice of an
independent financial advisor of nationally recognized reputation, to be more
favorable to the Company's shareholders than the terms of the Arrangement;
provided, however, that any such Offer shall not be deemed to be a "Superior
Offer" if any financing required to consummate the transaction contemplated by
such Offer is not committed and is not reasonably capable of being obtained by
such third party.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax,
unemployment or employment tax or insurance premium, national and provincial
health insurance tax, Canada Pension Plan amount, excise tax, goods and services
tax ("GST") ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, withholding tax or payroll tax), levy, assessment,
tariff, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
Triggering Event. A "Triggering Event" shall be deemed to have occurred if:
(i) the board of directors of the Company shall have failed to unanimously
recommend that the Company's shareholders vote to approve the Arrangement, or
shall have withdrawn or modified in a manner adverse to Parent the Company Board
Recommendation (it being understood that the Company Board Recommendation shall
be deemed to have been modified in a manner adverse to Parent if the Company
Board Recommendation is no longer unanimous), or shall have taken any other
action which a reasonable Person would believe indicates that the board of
directors of the Company does not support the Arrangement or does not believe
that the Arrangement is in the best interests of the Company's shareholders;
(ii) the Company shall have failed to include in the Management Proxy Circular
the Company Board Recommendation or a statement to the effect that the board of
directors of the Company has determined and believes that the Arrangement is in
the best interests of the Company's shareholders; (iii) the board of directors
of the Company fails to reaffirm the Company Board Recommendation, or fails to
reaffirm its determination that the Arrangement is in the best interests of the
Company's shareholders, within ten business days after Parent requests in
writing that such recommendation or determination be
A-7.
reaffirmed; (iv) the board of directors of the Company shall have approved,
endorsed or recommended any Acquisition Proposal; (v) the Company shall have
entered into any letter of intent or similar document or any Contract providing
for any Acquisition Proposal (other than a Standard Confidentiality Agreement
permitted pursuant to and in accordance with the terms of Section 4.3(a)); (vi)
a tender or exchange offer relating to securities of the Company shall have been
commenced by a Person other than Parent or any of Parent's Affiliates and the
Company shall not have sent to its securityholders, within ten business days
after the commencement of such tender or exchange offer, a statement disclosing
that the Company recommends rejection of such tender or exchange offer; (vii) an
Acquisition Proposal is publicly announced, and the Company (A) fails to issue a
press release announcing its opposition to such Acquisition Proposal within ten
business days after such Acquisition Proposal is announced or (B) otherwise
fails to take all reasonable steps to oppose such Acquisition Proposal; or
(viii) any of the Acquired Corporations or any Representative of any of the
Acquired Corporations shall have breached in any material respect or taken any
action inconsistent in any material respect with any of the provisions set forth
in Section 4.3; provided, however, that if: (1) a Material Adverse Effect on
Parent shall have occurred (the "Parent Event"); (2) the board of directors of
the Company shall have concluded in good faith, after having considered the
written advice of its outside legal counsel, that the board of directors must
disclose the facts giving rise to such Parent Event to its shareholders in order
to comply with its fiduciary duties or obligations under Canadian Securities
Laws; (3) the Company shall have given Parent as much advance notice as is
reasonably practicable (and in any event at least two business days advance
notice) prior to making any such disclosure; (4) the Company shall have
consulted with Parent and considered Parent's suggestions concerning the nature,
scope and manner of such disclosure; and (5) such disclosure shall be limited to
disclosing the consequences under the Arrangement Agreement to the Company of
withdrawing or modifying the Company Board Recommendation or endorsing or
recommending a Superior Offer pursuant to the terms of Section 5.1(c) and only
those underlying facts giving rise to the Parent Event that the board of
directors of the Company must disclose pursuant to its fiduciary duties or the
requirements of Canadian Securities Laws and nothing further, then such
disclosure, in and of itself, shall not constitute a Triggering Event.
Trustee. "Trustee" shall mean Montreal Trust Company of Canada or such
other trust company or other Entity that Parent may, in its reasonable
discretion, choose as trustee.
TSE. "TSE" shall mean The Toronto Stock Exchange.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
mean the unaudited consolidated balance sheet of the Company and its
consolidated subsidiaries as of June 30, 2000, included in the Company's Second
Quarter Report for the fiscal quarter ended June 30, 2000, as filed with the OSC
prior to the date of this Agreement.
U.S. Dollar Equivalent. U.S. Dollar Equivalent shall mean, in respect of an
amount expressed in Canadian dollars at any date, the product obtained by
multiplying: (a) the number of Canadian dollars, by (b) the noon spot exchange
rate on such date for Canadian dollars expressed in United States dollars as
reported by the Bank of Canada or, in the event such spot exchange rate is not
available, such spot exchange rate on such date for Canadian dollars
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expressed in United States dollars as may be deemed by the board of directors of
the Company and the board of directors of Parent, acting jointly and reasonably,
to be appropriate for such purpose.
Voting and Exchange Trust Agreement. "Voting and Exchange Trust Agreement"
shall mean an agreement to be made among Parent, ExchangeCo and the Trustee
substantially in the form of Exhibit F attached to the Agreement, with such
changes thereto as the parties hereto, acting reasonably, may agree.
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