EXHIBIT 99.1
SUPPORT AGREEMENT
THIS AGREEMENT is made the 24th day of January, 2005,
AMONG:
ACTIVANT SOLUTIONS INC., a corporation existing under the laws
of the State of Delaware,
(hereinafter called "PARENT"),
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ACTIVANT SOLUTIONS ACQUISITIONCO LTD., a corporation
incorporated under the laws of Canada, and a subsidiary of
Parent
(hereinafter called the "OFFEROR"),
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SPEEDWARE CORPORATION INC., a corporation incorporated under
the laws of Canada,
(hereinafter called the "COMPANY").
WHEREAS Parent, through the Offeror, desires to acquire all of the common shares
in the capital of the Company (the "SHARES"), including all Shares issued upon
(i) the exercise of currently outstanding stock options ("OPTIONS") granted
pursuant to the Company's 2003 Stock Option Plan and the Revised 2001 Stock
Option Plan (collectively, the "STOCK OPTION PLANS"); and (ii) the exercise of
the Warrants (as herein defined), and is prepared to make an offer by way of a
take-over bid to purchase the Shares, on the terms and subject to the conditions
contained herein;
AND WHEREAS the board of directors of the Company (the "BOARD OF DIRECTORS") has
determined, after consultation with its legal advisors, and upon receiving the
Fairness Opinion (defined below), and the unanimous recommendation of the
independent committee of the Board of Directors, and after considering other
relevant factors, that it would be advisable and in the best interests of the
Company for the Board of Directors to cooperate with Parent and the Offeror and
take all reasonable action to support the Offer and to unanimously recommend
acceptance of the Offer to holders of the Shares (the "SHAREHOLDERS"), on the
terms and subject to the conditions contained herein;
AND WHEREAS contemporaneously herewith, Parent and the Offeror have entered into
a lock-up agreement (the "LOCK-UP AGREEMENT") with those Persons (as defined
herein) enumerated in Schedule D (collectively, the "SELLERS") (which Sellers
hold in the aggregate Shares representing approximately 48% of the outstanding
Shares, in each case on a fully-diluted basis) pursuant to
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which each of the Sellers have agreed to irrevocably deposit to the Offer (as
defined herein) all Shares owned by the Sellers;
AND WHEREAS certain terms are defined in Schedule C to this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the respective
covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each party, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
1.1 THE OFFER
(a) The Company hereby represents and warrants to, and in favour of Parent
and the Offeror, and acknowledges that Parent and the Offeror are
relying on such representations and warranties in entering into this
Agreement and making the Offer, that (i) the Board of Directors, after
consultation with its legal advisors, and upon receiving the fairness
opinion of GMP Securities Ltd. (the "FAIRNESS OPINION") and the
unanimous recommendation of the independent committee of the Board of
Directors, and after considering other relevant factors, has
unanimously: (A) determined that the Offer, including the price per
Share offered pursuant to the Offer, is fair from a financial point of
view to the Shareholders and that this Agreement and the transactions
contemplated hereby are in the best interests of the Company; (B)
approved this Agreement and the transactions contemplated hereby; and
(C) resolved to recommend that the Shareholders accept the Offer and
deposit their Shares to the Offer; and (ii) the independent committee
of the Board of Directors has determined, acting in good faith, that
the value of any benefit that any related party of the Company who is
an employee, director or consultant of the Company or a Subsidiary,
including, without limitation, Polar Enterprise Partners Inc., Polar
Enterprise Partners Limited Partnership, Polar Capital Corporation and
Polar Capital Investments Inc., is entitled to receive, directly or
indirectly, as a consequence of the Offer, net of any offsetting costs
to such related party, is less than the prescribed amount set out in
clause (c)(iv)(B)(II) of the definition of "collateral benefit" under
Rule 61-501 (the "BENEFIT DETERMINATION"); provided that (X) in the
case of the Company's Chief Executive Officer and of the President of
ECS, the amount payable to each of them under the Severance Agreements
or the ▇▇▇▇▇▇▇ Amending Agreement, as the case may be, may exceed the
prescribed amount; (Y) in the case of Polar Capital Corporation, the
amount payable under the Management Termination Agreement may exceed
the prescribed amount in respect of the 117,135 Shares beneficially
owned by Polar Capital Corporation and Polar Corporation Investments
Inc.; and (Z) in the case of an employee of the Company or any
Subsidiary who, together with the associated entities of such employee,
beneficially owns or exercises control or direction over less than one
percent of the outstanding Shares (as determined under Ontario
securities Laws), the amount payable to such employee under the
Employment and Consulting Agreements may exceed the prescribed amount.
(b) Subject to the terms and conditions set forth below, the Offeror shall
make an offer (the "OFFER") to purchase all of the Shares. The terms of
the Offer shall include any
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amendments to, or extensions of, such Offer made in accordance with the
terms of this Agreement, including, without limitation, removing or
waiving any condition or extending the date by which Shares may be
deposited. The Offeror shall offer to acquire the Shares for CDN$3.91
per Share, in cash.
(c) Subject to Subsection 1.1(h) and 1.2(d), the Offeror shall make, or
cause to be made, the Offer to all Shareholders and mail the Offer and
accompanying take-over bid circular (such circular, together with the
Offer, being referred to herein as the "BID CIRCULAR") to each
registered Shareholder, Option holder and Warrant holder not later than
11:59 p.m. (Toronto time) on the latest of (i) the fifth business day
following the execution hereof; (ii) the second business day following
the date upon which the last of the decisions or rulings referred to in
Section 1.1(h)(vii) is obtained or, if the Offeror waives the condition
set forth in Section 1.1(h)(vii), the second business day following the
date of such waiver; and (iii) the second business day following the
date the Reconciled Financial Statements have been delivered to Parent,
or if the Offeror waives the condition set forth in Section
1.1(h)(viii), the second business day following the date of such waiver
("LATEST MAILING DATE"); provided, however, that if the mailing of the
Bid Circular is delayed by reason of (A) an injunction or order made by
a court or regulatory authority of competent jurisdiction or (B) the
Offeror not having regulatory waiver, consent or approval which is
necessary to permit the Offeror to mail the Offer then, provided that
such injunction or order is being contested or appealed or such
regulatory waiver, consent or approval is being actively sought, as
applicable, then the Latest Mailing Date shall be extended to the
second business day following the date on which such injunction or
order ceases to be in effect or such waiver, consent or approval is
obtained, as applicable.
(d) The Bid Circular shall be prepared in both the English and French
languages and in accordance with this Agreement and applicable
Securities Laws.
(e) Prior to the mailing of the Bid Circular, the Offeror shall provide the
Company with an opportunity to review and comment on it, recognizing
that whether or not such comments are appropriate to be included in the
Bid Circular will be determined by the Offeror, acting reasonably.
(f) The Offer will be made in accordance with applicable Securities Laws
and shall expire no earlier than 8:00 a.m. (Toronto time) on the 36th
day after the day (the "MAILING DATE") that the Offer is mailed to
Shareholders, Option holders and Warrant holders, subject to the right
of the Offeror to extend the period during which Shares may be
deposited under the Offer (as it may be extended, the "EXPIRY TIME").
The Offer shall be subject only to the conditions set forth in Schedule
A annexed hereto.
(g) It is understood and agreed that the Offeror may, in its sole
discretion, amend, supplement, modify or waive any term or condition of
the Offer, provided that the Offeror will not, without the prior
written consent of the Company, (i) increase the Minimum Tender
Condition, (ii) decrease the consideration per Share, (iii) change the
form of consideration payable under the Offer (other than to add
additional consideration or the option of Shareholders to choose one or
more alternative forms of consideration in addition to the form of
consideration contemplated herein) or (iv) impose additional conditions
to the Offer.
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(h) The obligation of the Offeror to make the Offer by mailing the Bid
Circular to Shareholders is conditional on the prior satisfaction of
the following conditions, all of which conditions are included for the
sole benefit of the Offeror and any or all of which may be waived by
the Offeror in whole or in part in its sole discretion without
prejudice to any other rights it may have under this Agreement or
otherwise:
(i) each of the Sellers shall have entered into the Lock-up
Agreement, which shall be in full force and effect and none of
them shall have failed in any material respect to fulfil any
of their covenants, agreements, representations or warranties
therein;
(ii) each owner of Warrants who is not a Seller shall have provided
to the Company (in the form acceptable to Parent):
(A) an irrevocable notice to exercise, prior to the
Expiry Time, the Warrants beneficially owned by each
of them; or
(B) an irrevocable notice to exercise such Warrants and
an irrevocable direction to tender the Shares
issuable thereunder to the Offer prior to the Expiry
Time, conditional upon the take up of the Shares by
the Offeror;
(iii) the obligations of the Offeror hereunder shall not have been
terminated pursuant to Section 6.1;
(iv) no circumstance, fact, change, event or occurrence shall have
occurred that would render it impossible for one or more of
the conditions set out on Schedule A hereto to be satisfied;
(v) the Board of Directors shall not have withdrawn, modified or
changed any of the recommendations or determinations set forth
in Section 1.1;
(vi) no cease trade order, injunction or other prohibition at Law
shall exist against the Offeror making the Offer or taking up
or paying for Shares deposited under the Offer;
(vii) the Offeror shall have received a ruling or decision from the
relevant Canadian securities regulatory authorities which
provides (A) that the terms of the Employment and Consulting
Agreements are not contrary to Subsection 97(2) of the
Securities Act (Ontario) and the equivalent provisions of the
Securities Laws of the other provinces and territories of
Canada, and (B) all of the 12,303,565 Shares in the aggregate
held by Polar Enterprise Partners Limited Partnership and
Polar Enterprise Partners Inc. (including Shares issuable upon
the exercise of Options and Warrants) acquired by the Offeror
under the Offer may be included as votes in favour of a
subsequent business combination in determining whether
minority approval has been obtained for the purposes of Rule
61-501 and Policy Q-27 or the Offeror shall have otherwise
determined in its sole discretion that all such Shares may be
so included;
(viii) the Reconciled Financial Statements shall have been delivered
to Parent;
(ix) the Company shall have complied with its obligations under
this Agreement;
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(x) all representations and warranties of the Company:
(A) that are qualified by a reference to Material Adverse
Effect shall be true and correct in all respects at
the time of the mailing of the Offer; and
(B) that are not qualified by a reference to a Material
Adverse Effect shall be true and correct in all
respects at the time of the mailing of the Offer
unless the failure to be true or correct (x) has not
had or would not reasonably be expected to have, a
Material Adverse Effect (and, for this purpose, any
reference to "material" or other concepts of
materiality in such representations and warranties
shall be ignored); or (y) has not impeded or would
not reasonably be expected to impede the completion
of the Offer, a Compulsory Acquisition, a Subsequent
Acquisition Transaction or any other transaction
contemplated under this Agreement;
(xi) there shall not have occurred or arisen (or there shall not
have been generally disclosed or discovered, if not previously
disclosed in writing to and acknowledged by the Offeror) since
the execution of this Agreement, any Material Adverse Effect;
and
(xii) there shall not have occurred or arisen since the execution of
this Agreement, any change, effect, condition, event,
occurrence or state of facts that is, or would reasonably be
expected to be (individually or in the aggregate), material
and adverse to the business, affairs, operations,
capitalization, results of operations, financial condition,
rights, assets, prospects or liabilities (including, without
limitation, any contingent liabilities that may arise as a
result of litigation proceedings initiated or threatened since
the execution of this Agreement against Parent or any of its
subsidiaries) of Parent and its subsidiaries taken as a whole;
provided that, for greater certainty, the termination of any
third party financing commitment obtained by Parent in
connection with the Offer for any reason other than as a
result of the conditions enumerated in this Subsection 1.1(h)
or in Schedule A not being satisfied or capable of being
satisfied, shall not in and of itself be considered to be a
change, effect, condition, event, occurrence or state of facts
of the nature referred to in this paragraph 1.1(h)(xii).
1.2 COMPANY SUPPORT FOR THE OFFER
(a) The Company represents and warrants to and in favour of the Offeror and
Parent, and acknowledges that the Offeror and Parent are relying upon
such representations and warranties in entering into this Agreement,
that, as of the date hereof after reasonable inquiry, the Company and
the Board of Directors has been advised and believes that each of the
directors and senior officers of the Company intends to tender their
Shares, including (i) the Shares of which they are the beneficial
owner; and (ii) the Shares issuable on the exercise of all Options held
by them.
(b) The Company shall prepare and make available for distribution
contemporaneously with the Bid Circular sufficient copies of the
directors' circular (the "DIRECTORS' CIRCULAR"), prepared both in the
English and French languages and in accordance with applicable
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Securities Laws, which shall reflect the foregoing determinations and
recommendations set forth in Subsection 1.1(a) including, without
limitation, the Benefit Determination.
(c) Prior to the final approval of the Directors' Circular by the Board of
Directors, the Company shall provide the Offeror with an opportunity to
review and comment on it, recognizing that whether or not such comments
are appropriate to be included in the Directors' Circular will be
determined by the Company and the Board of Directors, acting
reasonably.
(d) The Company shall provide the Offeror, within two business days
following the execution and delivery of this Agreement, with a list (in
both written and electronic form) of the registered Shareholders,
together with their addresses and respective holdings of Shares. The
Company shall concurrently provide the Offeror with the names,
addresses and holdings of all holders of Options and Warrants. The
Company shall from time to time request that its registrar and transfer
agent furnish the Offeror with such additional information, including
updated or additional lists of Shareholders, a list of participants in
book-based nominee registered shareholders such as CDS & Co. and CEDE &
Co. and a non-objecting beneficial owner (NOBO) list), mailing labels
and lists of securities positions and other assistance as the Offeror
may reasonably request in order to be able to communicate the Offer to
the Shareholders and to such other Persons as are entitled to receive
the Offer under applicable Laws. All such deliveries shall be in
printed form and, if available, in computer-readable form.
1.3 INFORMATION AGENT AND DEALER MANAGER
The Offeror may, if it decides to do so, appoint an information agent and/or a
dealer manager in connection with the Offer to solicit acceptances of the Offer.
Any dealer manager may form a soliciting dealer group comprised of members of
the Investment Dealers Association of Canada and of the stock exchanges in
Canada and their United States broker dealer affiliates to solicit acceptances
of the Offer.
1.4 DIRECTORS
The Board of Directors immediately following the acquisition by the Offeror of
more than 50% of the outstanding Shares pursuant to the Offer shall be
reconstituted through resignations of all the Company directors and the
appointment of nominees of the Offeror in their stead. The Company shall, in
accordance with the foregoing and subject to the provisions of the CBCA, assist
the Offeror to secure the resignations of all the Company directors to be
effective at such time as may be required by the Offeror and to use reasonable
efforts to cause the election or appointment of the Offeror nominees to fill the
vacancies so created in order to effect the foregoing without the necessity of a
shareholder meeting.
1.5 SUBSEQUENT ACQUISITION TRANSACTION
If, within 120 days after the date of the Offer, the Offer has been accepted by
holders of not less than 90% of the Shares, the Offeror intends, to the extent
possible, to acquire (a "COMPULSORY ACQUISITION") the remainder of the Shares
from those Shareholders who have not accepted the Offer pursuant to Section 206
of the Canada Business Corporations Act (the "CBCA"). If that statutory right of
acquisition is not available, the Offeror may pursue other means of acquiring
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the remaining Shares not tendered to the Offer. The Company agrees with the
Offeror that, in the event the Offeror takes up and pays for Shares under the
Offer representing at least the Minimum Tender Condition, it will assist the
Offeror in connection with any proposed amalgamation, statutory arrangement,
capital reorganization or other transaction of the Company and the Offeror or an
affiliate of the Offeror (a "SUBSEQUENT ACQUISITION TRANSACTION") to acquire the
remaining Shares that is to be completed within 120 days of the termination of
the Offer, provided that the consideration offered in connection with the
Subsequent Acquisition Transaction is of the same form offered under the Offer
and is at least equivalent in value to the consideration offered under the
Offer.
1.6 PERFORMANCE OF THE OFFEROR
Parent hereby unconditionally guarantees the due and punctual performance of
each and every obligation of the Offeror arising under this Agreement,
including, without limitation, the making of the Offer, subject to the terms of
this Agreement.
1.7 HOLDCO ELECTION
The Offer will provide that where a corporation ("HOLDCO") incorporated under
the CBCA on or after January 1, 2005 and having no assets other than Shares and
no liabilities whatsoever is the beneficial owner and holder of record of
Shares, all the shareholders of Holdco (the "HOLDCO SHAREHOLDERS") shall be
entitled to jointly elect (the "HOLDCO ELECTION") to accept the Offer by selling
to the Offeror all of the outstanding shares (the "HOLDCO SHARES") of Holdco for
an aggregate price equal to the aggregate value of the Shares held by such
Holdco (based on a price of $3.91 per Share), provided that such Holdco
Shareholders and such Holdco shall have notified the Offeror at least seven
business days prior to the Expiry Time of such holder's intention to tender in
such fashion and such holder and such Holdco shall have entered into a share
purchase agreement (a "HOLDCO AGREEMENT") with the Offeror not later than 5:00
p.m. (Toronto time) on the seventh business day prior to the Expiry Time. Each
Holdco Agreement will contain such representations and warranties, terms and
conditions and indemnities as the Offeror may reasonably request in connection
therewith including, without limitation, the representations and warranties,
terms and conditions and indemnities set out in Schedule E hereto, and
containing a requirement for such holder's counsel to provide opinions to the
Offeror in form satisfactory to the Offeror, acting reasonably, in connection
with the closing of the purchase and sale of such Holdco Shares. The obligation
of the Offeror to complete the purchase of the Holdco Shares pursuant to the
Holdco Agreement will be subject to the same conditions as the Offer, subject to
any appropriate conforming changes. The Holdco Agreement will provide that the
closing of the purchase and sale of the Holdco Shares will be completed in
escrow (the "ESCROW HOLDCO CLOSING") no later than two business days prior to
the Expiry Time and become effective at the time at which the Offeror first
takes up and pays for Shares deposited under the Offer. At the Escrow Holdco
Closing, the Holdco Shareholders will be required to deliver certificates
representing the Holdco shares and the Shares held by the Holdco. All documents
delivered at the Escrow Holdco Closing will be held in escrow by the depository
under the Offer until the Offeror first takes up and pays for Shares deposited
under the Offer.
1.8 OUTSTANDING OPTIONS AND WARRANTS
(a) Subject to the receipt of any necessary regulatory approvals, the
Company agrees that Persons holding Options under the Stock Option
Plans shall be entitled to exercise all of
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their Options and tender all Shares issued in connection therewith
under the Offer upon payment by certified cheque or bank draft of the
exercise price in full. The Board of Directors shall not, prior to the
completion of the Offer, grant additional Options pursuant to the Stock
Option Plans. It is agreed by the Company that all the Options that are
tendered to the Company for exercise, conditional on the Offeror taking
up Shares under the Offer (the "CONDITIONAL OPTION EXERCISE"), shall be
deemed to have been exercised immediately prior to the take-up of
Shares by the Offeror. It is also agreed by the Company that all
Warrants that are tendered to the Company for exercise, conditional on
the Offeror taking up Shares under the Offer (the "CONDITIONAL WARRANT
EXERCISE") shall be deemed to be exercised on the date Shares are taken
up by the Offeror under the Offer. Furthermore, the Offeror shall
accept as validly tendered under the Offer as of the date the Offeror
first takes up and acquires the Shares under the Offer (the "TAKE-UP
DATE"), all Shares that are to be issued pursuant to the Conditional
Option Exercise and Conditional Warrant Exercise, provided that the
holders of the Options and Warrants have provided Notices of Guaranteed
Delivery prior to the Expiry Time in form acceptable to the Offeror
indicating that such Shares are tendered pursuant to the Offer and
provided that, if applicable, such holder agrees to surrender their
remaining unexercised Options to the Company for cancellation for no
consideration effective immediately after the Take-Up Date.
(b) The Company shall use its reasonable best efforts to ensure, and shall
implement such mechanics as may be appropriate pursuant to the Stock
Options Plans and in accordance with Law to give effect to, the
exercise or other termination of all outstanding Options at or prior to
the Expiry Time, including without limitation:
(i) causing the vesting of option entitlements under the Stock
Option Plans and any other compensation arrangements to
accelerate prior to the Expiry Time, such that all outstanding
Options shall be exercisable and fully vested prior to the
Expiry Time;
(ii) applying for all consents and authorizations required in
connection with the foregoing, including any exemptions or
consents required from any Governmental Authority in
connection with any amendments to the Stock Option Plans
required in connection with the foregoing; and
(iii) procuring from each holder of the Options an option
termination agreement (pursuant to which no remuneration is
payable to such holder of the Options in any form whatsoever)
in form and substance satisfactory to the Offeror and the
Company, acting reasonably; provided that no such termination
agreement shall be required where the termination of the
Option upon completion of the Offer is expressly provided for
by the terms of such Option.
(c) The Company shall take such steps as necessary to give effect to the
Conditional Option Exercise and the Conditional Warrant Exercise in
order to permit the Shares to be issued pursuant thereto to be tendered
to the Offer prior to the Expiry Time and to have such Shares issued on
the Take-up Date. Without limitation to the foregoing, the Company
shall obtain such commitments and directions as the Offeror may require
to ensure the foregoing and will provide guarantees of the delivery of
all such Shares on the Take-up
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Date pursuant to Notices of Guaranteed Delivery in form acceptable to
the Offeror executed by holders of Options and Warrants and delivered
prior to the Expiry Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE OFFEROR
The Offeror and Parent hereby jointly and severally represent and warrant to the
Company as follows, and acknowledge that the Company is relying upon these
representations and warranties in connection with the entering into of this
Agreement:
2.1 ORGANIZATION
Parent is a corporation validly existing under the Laws of the State of
Delaware. The Offeror is a corporation validly existing under the Laws of
Canada. Each of Parent and the Offeror has the right, power and authority to
conduct its business as conducted at the date of this Agreement.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT
Each of the Offeror and Parent has the requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by each of the Offeror and Parent and
the consummation of the transactions contemplated by this Agreement have been
duly authorized as necessary by the boards of directors of Parent and the
Offeror and no other corporate proceedings on the part of either Parent or the
Offeror are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of the Offeror and Parent and constitutes a valid and binding obligation of each
of the Offeror and Parent, enforceable by the Company against each of the
Offeror and Parent in accordance with its terms, provided that enforcement may
be limited by: (a) bankruptcy, insolvency and other similar Laws of general
application affecting the enforcement of creditors' rights generally, and (b)
specific performance, injunctive relief and other equitable remedies may be
granted only in the discretion of a court of competent jurisdiction. The
execution and delivery by each of the Offeror and Parent of this Agreement and
the performance by it of its obligations hereunder and the completion of the
Offer will not violate, conflict with or result in a breach of any provision of
(a) the constating documents of Parent or the Offeror; (b) any Law to which
Parent or the Offeror is subject or by which Parent or the Offeror is bound; or
(c) any agreement, contract, indenture, deed of trust, mortgage, bond,
instrument, licence, franchise or permit to which Parent or the Offeror is a
party or by which Parent or Offeror is bound, other than, with respect to (b) or
(c) above, such violations, conflicts or breaches which will not, individually
or in the aggregate, prevent or materially delay the consummation of the
transactions contemplated by this Agreement. Other than in connection with or in
compliance with the provisions of Securities Laws, no authorization, consent or
approval of, or filing with, any Governmental Authority is necessary on the part
of the Offeror or Parent for the consummation of the transactions contemplated
by this Agreement, except for such authorizations, consents, approvals and
filings as to which the failure to obtain or make would not, individually or in
the aggregate, prevent or materially delay consummation of the transactions
contemplated by this Agreement.
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2.3 FINANCING
The Offeror has made adequate arrangements to ensure that the required funds
will be available to effect payment in full for the Shares acquired pursuant to
the Offer.
2.4 OWNERSHIP OF SHARES
None of the Offeror, Parent or their respective subsidiaries beneficially own
any Shares.
2.5 MATERIAL ADVERSE EFFECT
To Parent's knowledge, as of the date hereof, there are no facts or matters, the
existence of which will cause or could reasonably be expected to cause the
condition to the Offeror's obligation to take up, purchase or pay for any Shares
deposited under the Offer set forth in paragraph (g) of Schedule A annexed
hereto to not be satisfied. For purposes of this Section 2.5, references to
"PARENT'S KNOWLEDGE" shall be deemed to mean the actual current awareness of
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
or ▇▇▇▇▇▇▇ ▇▇▇ as to such fact or matter, without any duty to investigate or
inquire about such fact or matter. For the avoidance of doubt, Parent is making
no representations or warranties with respect to any facts or matters with
respect to the Company or its Subsidiaries and/or the impact that any such fact
or matter would or could reasonably be expected to have on Parent and its
Subsidiaries taken as a whole.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 REPRESENTATIONS AND WARRANTIES
Except for the exceptions set forth in the Disclosure Schedule, the Company
represents and warrants to the Offeror and Parent as set out in Schedule B
hereto, and acknowledges that the Offeror and Parent are relying upon the
representations and warranties in Schedule B in connection with the entering
into of this Agreement and the making of the Offer. The Company represents and
warrants that the exceptions set forth in the Disclosure Schedule are identified
by specific references to provisions of this Agreement.
ARTICLE IV
COVENANTS
4.1 COVENANTS OF THE COMPANY
The Company covenants and agrees that, prior to the earlier of the time this
Agreement is terminated in accordance with the terms hereof and the time (the
"EFFECTIVE TIME") Persons designated by the Offeror pursuant to the terms hereof
represent a majority of the directors of the Company, unless the Offeror shall
otherwise agree in writing or as otherwise expressly contemplated or permitted
by this Agreement:
(a) the Company shall, and shall cause each of the Subsidiaries to, conduct
its and their respective businesses only in, not take any action except
in, and maintain their respective facilities in, the usual, ordinary
and regular course of business and in compliance with applicable Laws;
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(b) the Company shall not directly or indirectly do or permit to occur, and
shall cause each of the Subsidiaries not to do or permit to occur, any
of the following:
(i) issue, sell, pledge, lease, dispose of, encumber, exclusively
license or agree to issue, sell, pledge, lease, dispose of,
encumber or exclusively license (A) any additional Shares, or
any options, warrants, calls, puts, conversion privileges or
rights of any kind to acquire any Shares, or other securities
of the Company or any of the Subsidiaries (other than pursuant
to the exercise of Options or Warrants currently outstanding
as contemplated by this Agreement); or (B) except in the
usual, ordinary and regular course of business consistent in
type and amount with past practice, any assets of the Company
or any of the Subsidiaries; (ii) amend or propose to amend the
articles, by-laws or other constating documents of the Company
or any of the Subsidiaries;
(ii) amend or propose to amend the articles, by-laws or other
constating documents of the Company or any of the Subsidiaries
(iii) split, combine or reclassify any outstanding Shares;
(iv) redeem, purchase or offer to purchase any Shares or other
securities of the Company or any shares or other securities of
any of the Subsidiaries;
(v) declare, set aside or pay any dividend or other distribution
payable in cash, stocks property or otherwise, with respect to
the Shares;
(vi) reorganize, amalgamate or merge the Company or any of the
Subsidiaries with any other Person;
(vii) reduce the stated capital of the Company or of any of the
Subsidiaries;
(viii) acquire or agree to acquire (by merger, amalgamation,
acquisition of shares or assets, lease or otherwise) any
Person or make any investment either by purchase of shares or
securities, contributions of capital (other than to any of the
Subsidiaries), property transfer or purchase of, any property
or assets of any other Person other than the acquisition of
inventory in the usual, ordinary and regular course of
business consistent in type and amount with past practice;
(ix) sell, transfer, assign or license any interest in any of the
Intellectual Property of the Company or its Subsidiaries other
than in its usual, ordinary and regular course of business;
(x) incur or commit to incur any indebtedness for borrowed money
of the Company and its Subsidiaries or any other material
liability or obligation, or issue any debt securities, or
guarantee, endorse or otherwise as an accommodation become
responsible for, the obligations of any other Person, or make
any loans or advances;
(xi) make any capital expenditure or incur any obligations or
liabilities in connection therewith in excess of the capital
expenditure schedule set out in the Disclosure Schedule;
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(xii) adopt a plan of liquidation or resolutions providing for the
liquidation or dissolution of the Company or any of the
Subsidiaries;
(xiii) pay, discharge or satisfy any material claims, liabilities or
obligations other than the payment, discharge or satisfaction,
in the usual, ordinary and regular course of business
consistent in type and amount with past practice, of
liabilities reflected or reserved against in the Company's
financial statements or incurred in the usual, ordinary and
regular course of business consistent in type and amount with
past practice;
(xiv) commence or settle any litigation, proceeding, claim, action,
assessment or investigation involving the Company or a
Subsidiary before any Governmental Authority; or
(xv) authorize, recommend, propose or agree to any release or
relinquishment of any material contractual right or other
material right under any license or permit;
(c) the Company shall not, and shall cause each of the Subsidiaries not to,
enter into or modify any employment, severance, or similar agreements
or arrangements with, or grant any bonuses, salary increases, benefit
increases, severance or termination pay to, any officers, directors or
consultants other than pursuant to binding commitments already entered
into as disclosed in the Disclosure Schedule or, in the case of
employees who are not officers or directors, take any action other than
in the usual, ordinary and regular course of business consistent with
past practice (none of which actions shall be unreasonable or unusual)
with respect to hiring, the grant of any bonuses, salary increases,
benefit increases, severance or termination pay or with respect to any
increase of benefits payable in effect on the date hereof;
(d) the Company shall not, and shall cause each of the Subsidiaries not to,
adopt or amend any Company Benefit Plans except as required by
applicable Law and except as contemplated by this Agreement;
(e) the Company shall use its best efforts, and cause each of the
Subsidiaries to use its best efforts, to cause its current insurance
(or re-insurance) policies not to be cancelled or terminated or any of
the coverage thereunder to lapse unless, simultaneously with such
termination, cancellation or lapse, replacement policies underwritten
by insurance and re-insurance companies of nationally recognized
standing providing coverage equal to or greater than the coverage under
the cancelled, terminated or lapsed policies for substantially similar
premiums are in full force and effect;
(f) the Company shall use its best efforts, and cause each of the
Subsidiaries to use its best efforts, to preserve intact their
respective business organizations, assets and goodwill, to maintain
their respective real property interests (including title to and
leasehold interests in respect of any real property) in good standing,
to keep available the services of its and their officers and employees
as a group, and not take any action or omit to take any action, or
permit any of the Subsidiaries to take any action or omit to take any
action, which would render, or which reasonably would be expected to
render, any representation or warranty made by it in this Agreement
untrue at any time prior to the Effective Time if then made; and
promptly notify the Offeror in writing of any event or
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occurrence that would reasonably be expected to have a Material Adverse
Effect and of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same
may be contemplated);
(g) the Company and each of the Subsidiaries shall: (i) duly and timely
file all Tax Returns required to be filed by it on or after the date
hereof and ensure that all such Tax Returns are true, complete and
correct in all respects; (ii) timely pay all Taxes which are due and
payable; (iii) not make or rescind any expressed or deemed election
relating to Taxes; (iv) not make a request for a Tax ruling or enter
into a closing agreement with any taxing authorities; (v) not settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes;
(vi) not change in any material respect any of its methods of reporting
income, deductions or accounting for income Tax purposes from those
employed in the preparation of its income Tax Return for the taxation
year ending September 30, 2003, except as may be required by applicable
Law; (vii) take reasonable commercial efforts to minimize the
expiration of any tax-loss carry forwards for the Company and its
Subsidiaries; and (viii) co-operate with the Offeror in respect of the
Tax planning of Parent and the Offeror which planning includes, for
greater certainty, the increase in the cost for purposes of the Tax Act
of certain properties of the Company pursuant to the provisions of
subsections 88(1)(c) and (d) of the Tax Act, except activities that are
prohibited by applicable Law, provided that the Company shall not be
required to effect any transaction in connection with such planning
prior to the Effective Time except as provided herein;
(h) the Company shall continue to file all documents or information
required to be filed by the Company under applicable Securities Laws or
with the Toronto Stock Exchange (the "TSX"), in accordance with
timelines prescribed under applicable Securities Laws and by the TSX,
and all such documents or information, when filed, shall comply as to
form in all respects with the requirements of applicable Securities
Laws and the rules of the TSX and shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(i) other than the change in the Company's reporting currency from CDN$ to
US$, the Company shall not make or permit to be made any change to any
accounting method, policy or principle used by the Company and its
Subsidiaries, except as may be prescribed by the Canadian Institute of
Chartered Accountants including any prescribed changes to GAAP;
(j) except as otherwise described in this Agreement, the Company shall not,
and shall not permit any of the Subsidiaries to, authorize or propose,
or enter into or modify any contract, agreement, commitment or
arrangement, to do any of the matters prohibited by the other
paragraphs of this Section 4.1;
(k) the Company shall use all reasonable commercial efforts, and cause each
of its Subsidiaries to use all reasonable commercial efforts, to
satisfy (or cause the satisfaction of) the conditions of the Offer set
forth in Schedule A to this Agreement, to the extent the same is within
its control, and take, or cause to be taken, all other action and to
do, or cause to be done, all other things necessary, proper or
advisable under all applicable Laws to support the Offer, including
using its reasonable commercial efforts to:
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(i) obtain all necessary consents, approvals and authorizations as
are required to be obtained by it under any contract and
applicable Law, including consents required under the
Contracts listed in Schedule M, each in the form acceptable to
Parent, and on terms which shall not require any payment for
the obtaining thereof, or any material modification to such
Contracts;
(ii) co-operate with the Offeror to oppose, lift or rescind any
injunction or restraining order or other order or action
seeking to stop, or otherwise adversely affect the Offeror's
ability to consummate the Offer; and
(iii) co-operate with the Offeror in connection with the performance
by it of its obligations hereunder;
(l) it shall make or co-operate as necessary in the making of all necessary
filings and applications under all applicable Laws required in
connection with the transactions contemplated herein and take all
reasonable action necessary to be in compliance with such Laws;
(m) the Company shall not, and shall cause each of the Subsidiaries not to,
adopt, approve, ratify, enter into or modify any collective bargaining
agreement, voluntary recognition, material side letter, memorandum of
understanding or similar agreement with any labour organization
covering any employees; and
(n) the Company shall, if so requested by Parent, terminate or cause to be
terminated the Credit Facilities prior to the Effective Time.
4.2 COVENANTS OF THE OFFEROR AND PARENT
Each of the Offeror and Parent covenants and agrees that, except as contemplated
in this Agreement, until the Expiry Time or the day upon which this Agreement is
terminated in accordance with the terms hereof, whichever is earlier, it shall
use all reasonable commercial efforts to satisfy (or cause the satisfaction of)
the conditions of the Offer set forth in Schedule A to this Agreement, to the
extent the same is within its control, and take, or cause to be taken, all other
action and to do, or cause to be done, all other things necessary, proper or
advisable under all applicable Laws to complete the Offer, in accordance with
the terms thereof, including using its reasonable commercial efforts to: (i)
obtain all necessary consents, approvals and authorizations as are required to
be obtained by it under any applicable Law and to satisfy any condition provided
for under this Agreement; (ii) oppose, lift or rescind any injunction or
restraining order or other order or action seeking to stop, or otherwise
adversely affect its ability to consummate the Offer; and (iii) co-operate with
the Company in connection with the performance by it of its obligations
hereunder.
4.3 MUTUAL COVENANTS
(a) Each of the Offeror, Parent and the Company, as promptly as practicable
after the execution of this Agreement, will (i) make, or cause to be
made, all such filings and submissions under all applicable Laws, as
may be required or desirable for it to consummate the Offer and the
transactions contemplated herein in accordance with the terms of this
Agreement, (ii) use its reasonable commercial efforts to obtain, or
cause to
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be obtained, all Authorizations necessary or advisable to be obtained
by it in order to consummate the Offer and the transactions
contemplated herein, and (iii) use its reasonable commercial efforts to
take, or cause to be taken, all other actions which are necessary or
advisable in order for it to fulfil its obligations under this
Agreement. For greater certainty and notwithstanding the foregoing,
Parent and the Offeror are under no obligation to take any steps or
action that would, in the sole discretion of Parent and the Offeror,
affect Parent's or the Offeror's right to own, use or exploit, as sole
shareholder of the Company upon completion of the Offer, either the
Company or its Subsidiaries assets or any of Parent's or Offeror's
assets. The parties will coordinate and cooperate with one another in
exchanging such information and supplying such assistance as may be
reasonably requested by each in connection with the foregoing
including, without limitation, providing each other with all notices
and information supplied to or filed with any Governmental Authority
(except for notices and information which the Company or Parent and the
Offeror, in each case acting reasonably, considers highly confidential
and sensitive which may be filed on a confidential basis), and all
notices and correspondence received from any Governmental Authority in
connection therewith. The Company shall certify the accuracy of the
information (other than information relating to Parent and the Offeror)
contained in the applications by Parent to obtain the rulings and
decisions referred to in paragraph 1.1(h)(vii).
(b) Subject to the terms and conditions hereof, Parent, and the Offeror on
the one hand and the Company on the other hand, shall keep the other
apprised of the status of matters relating to the completion of the
Offer including: (i) promptly notifying the other of, and if in writing
promptly furnishing the other with copies of, any communications from
or with any securities regulatory authority with respect to the Offer;
and (ii) permitting the other to review in advance, and considering in
good faith the views of the other in connection with, any material
proposed communication with any securities regulatory authority in
connection with proceedings under or relating to applicable Securities
Laws with respect to the Offer.
ARTICLE V
MISCELLANEOUS
5.1 FURTHER ASSURANCES
Subject to the conditions herein provided, each party agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as is practicable the transactions contemplated by the
Offer and this Agreement, including (i) the execution and delivery of such
documents as the other parties may reasonably require and (ii) obtaining such
information, documents or consents required in connection with the preparation
of the Bid Circular, and using reasonable best efforts to obtain all necessary
waivers, consents and approvals and to satisfy any condition provided for under
this Agreement, including without limitation those set forth in Section 1.1 and
Schedule A and to effect all necessary registrations and filings, including, but
not limited to, filings under applicable Securities Laws and submissions of
information requested by Governmental Authorities. Each of the parties shall
co-operate in all reasonable respects with the other parties in taking such
actions. Without limitation to the foregoing, the Company shall provide to
Parent and the Offeror such information as either may reasonably request in
order for
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them to determine whether the conditions set out in Section 1.1(h) and Schedule
A have been satisfied, including the number of Shares, Warrants and Options
outstanding.
5.2 NO SOLICITATIONS
(a) The Company acknowledges that since December 6, 2004 it has complied
with the binding provisions of the Letter of Intent. The Company shall
not and shall cause its Subsidiaries to not, directly or indirectly,
through any officer, director, employee, advisor, representative, agent
or otherwise (including for greater certainty any investment banker,
lawyer or accountant), (i) make, solicit, initiate, encourage or
otherwise facilitate (including by way of furnishing information or
entering into any form of agreement, arrangement or understanding)
inquiries from or submissions of proposals or offers from any other
Person (including any of its officers or employees) relating to any
merger, amalgamation, arrangement, share exchange, take-over bid,
tender offer, recapitalization, liquidation, dissolution,
consolidation, recapitalization or business combination involving the
Company or any Subsidiary, any substantial acquisition or sale of
assets or assignment of contracts (or any lease, long-term supply
agreement, exchange, mortgage, pledge or other arrangement having a
similar economic effect) in a single transaction or a series of related
transactions, any material purchase or sale of the equity of the
Company or its Subsidiaries or rights thereto or interests therein or
thereto (including from treasury), or any other kind of transaction
such as an issuer bid that has the effect of increasing a Person's
beneficial ownership interest of the equity of Company or its
Subsidiaries, or any bona fide proposal to, or public announcement of
an intention to, do any of the foregoing excluding the transactions
contemplated by this Agreement (such foregoing inquiries or proposals
being referred to herein as an "ACQUISITION PROPOSAL"); (ii)
participate in any discussions or negotiations regarding, or furnish to
any Person any information with respect to or otherwise co-operate in
any way with, respond to, assist or participate in, facilitate or
encourage any effort or attempt by any other Person to do or seek to do
any of the foregoing; (iii) withdraw or modify in a manner adverse to
Parent or the Offeror the approval or recommendation of the Board of
Directors of the transaction contemplated by this Agreement; (iv)
approve or recommend any Acquisition Proposal; or (v) enter into any
agreement, arrangement or understanding related to any Acquisition
Proposal. Notwithstanding the preceding sentence nothing contained in
this Section 5.2 or any other provision of this Agreement shall prevent
the Board of Directors from considering, participating in any
discussions or negotiations or entering into a confidentiality
agreement and providing information pursuant to Section 5.2(d) (but,
subject to Section 5.3, the Company shall not approve, recommend or
enter into any other agreement, arrangement or understanding) regarding
an unsolicited bona fide written Acquisition Proposal (i) that is not
subject to a financing contingency and in respect of which adequate
arrangements will have been made to ensure that the required funds will
be available to effect payment in full for all Shares, (ii) that did
not otherwise result from a breach of this Section 5.2, (iii) that the
Board of Directors has determined in good faith (after consultation
with its financial advisors and with outside counsel) is reasonably
capable of being completed, taking into account all legal, financial,
regulatory and other aspects of such proposal and the Person making the
proposal and, would, if consummated in accordance with its terms as
proposed, result in a transaction which is more favourable to
Shareholders from a financial point of view than the Offer, (iv) that
the Board of Directors has determined in good faith would result in a
Shareholder receiving a higher consideration per Share than is offered
under the Offer, and (v) that the Board of
-17-
Directors has concluded in good faith, after considering applicable
Laws and receiving the advice of outside counsel that such action is
required by the Board of Directors to comply with fiduciary duties
under applicable Laws (a "SUPERIOR PROPOSAL") nor shall anything
contained in this Section 5.2 or any other provision of this Agreement
require the Company to cause any of its directors to take any action or
refrain from taking any action that is required by a director to
fulfill his fiduciary obligation under the CBCA as a director of the
Company in connection with a Superior Proposal.
(b) The Company acknowledges that since December 6, 2004 it has ceased and
caused to be terminated, and it shall continue to and shall cause the
officers, directors, employees, representatives and agents of the
Company and the Subsidiaries to immediately cease and cause to be
terminated, any existing discussions or negotiations with any parties
(other than Parent and the Offeror) with respect to any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition
Proposal. The Company agrees not to release any third party from any
confidentiality or standstill agreement to which the Company and such
third party are parties, or waive any provision thereunder. The Company
shall immediately request the return or destruction of all information
provided to any third parties who have entered into a confidentiality
agreement with the Company relating to any potential Acquisition
Proposal and shall use all reasonable efforts to ensure that such
requests are honoured.
(c) The Company shall immediately provide notice to Parent and the Offeror
of any future bona fide Acquisition Proposal or any request for
non-public information relating to the Company or any of the
Subsidiaries in connection with such a bona fide Acquisition Proposal
or for access to the properties, books or records of the Company or any
Subsidiary by any Person that informs the Company, any member of the
Board of Directors or such Subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent and the
Offeror shall be made from time to time upon a member of the Board of
Directors or a senior officer becoming aware of such request or
proposal, first immediately orally and then promptly in writing and
shall indicate the identity of the Person making such proposal, inquiry
or contact, all material terms thereof and such other details of the
proposal, inquiry or contact known to the Company or as Parent or the
Offeror may reasonably request.
(d) If the Company receives a request for non-public information or access
to properties, books or records of the Company or any of the
Subsidiaries from a party who proposes to the Company an unsolicited
bona fide written Acquisition Proposal and the Company is permitted,
subject to and as contemplated under this Section 5.2 to negotiate the
terms of such Acquisition Proposal then, and only in such case, the
Company may provide such party with access to information regarding the
Company, subject to the execution of a confidentiality agreement which
is substantially similar to the agreement then in effect between the
Company and Parent and providing for standstill provisions other than
to effect a Superior Proposal, provided however that the Company sends
a copy of any such confidentiality agreement to Parent promptly (and in
any event within 24 hours) upon its execution and Parent is provided
with a list of or copies of the information provided to such Person and
is immediately provided with access to similar information to which
such Person was provided.
-18-
(e) The Company shall ensure that the officers and directors of the Company
and its Subsidiaries and any investment bankers or other advisors or
representatives retained by the Company are aware of the provisions of
this Section, and the Company shall be responsible for any breach of
this Section 5.2 by such officers, directors, employees, bankers,
advisors or representatives.
5.3 NOTICE BY THE COMPANY OF SUPERIOR PROPOSAL DETERMINATION
(a) Subject to compliance with Section 5.2, and subject to the rights of
Parent and the Offeror under Section 5.4 and this Section 5.3, the
Company may approve or recommend any agreement, understanding or
arrangement in respect of a Superior Proposal if, and only if: (i) it
has provided the Offeror with a copy of the Superior Proposal document;
and (ii) three business days (the "MATCH PERIOD") shall have elapsed
from the later of (A) the date the Offeror received written notice
("SECTION 5.3 NOTICE") advising the Offeror that the Board of Directors
has resolved, subject only to compliance with this Section 5.3, to
accept, approve, recommend or enter into an agreement, understanding or
arrangement in respect of such Superior Proposal, specifying the terms
and conditions of such Superior Proposal and identifying the Person
making such Superior Proposal and (B) the date the Offeror received a
copy of such Superior Proposal.
(b) During a Match Period, the Company agrees that the Offeror shall have
the right, but not the obligation, to offer to amend the terms of this
Agreement and/or the Offer. The Company shall negotiate in good faith
with the Offeror to make such adjustments to the terms and conditions
of this Agreement and the Offer as would enable the Offeror to proceed
with the Offer, as amended. If the Offeror amends the Offer during the
Match Period to provide that Shareholders shall receive a value per
Share which is equal to or greater than the value per Share provided in
the Superior Proposal, the Board of Directors of the Company shall not
withdraw, modify or change any recommendation with respect to the
Offer, as so amended, or take any action to approve or recommend any
agreement, understanding or arrangement in respect of a Superior
Proposal, and shall reconfirm this Agreement and its recommendation in
respect of the Offer, as so amended, by the immediate dissemination of
a press release and an updated Directors' Circular, if required, both
in the forms acceptable to the Offeror, acting reasonably.
(c) The Company also acknowledges and agrees that each successive amendment
to any Acquisition Proposal shall constitute a new Acquisition Proposal
for purposes of the requirement under clause (ii) of Section 5.3(a) to
initiate an additional Section 5.3 Notice and Match Period.
5.4 Fees
(a) If at any time after the execution of this Agreement:
(i) the Board of Directors withdraws, modifies or changes any of
its recommendations or determinations with respect to the
Offer (including, without limitation, the Benefit
Determination) or resolves to do so or recommends that
Shareholders accept or vote in favour of another transaction;
(ii) the Board of Directors approves or recommends an Acquisition
Proposal;
-19-
(iii) the Board of Directors shall have failed to reaffirm its
recommendation of the Offer by press statement within two
business days after the public announcement of any Acquisition
Proposal (or, in the event that the Offer shall be scheduled
to expire within such two business day period, prior to the
scheduled expiry of the Offer);
(iv) an Acquisition Proposal is publicly announced, proposed,
offered or made to the Shareholders or to the Company prior to
the Expiry Time of the Offer, the Offer is not completed as a
result of the Minimum Tender Condition not being satisfied,
and an Acquisition Proposal is consummated at any time within
180 days following the expiry of the Offer; or
(v) the Company enters into an agreement (other than a
confidentiality agreement in compliance with Section 5.2(d))
with any Person with respect to an Acquisition Proposal made
prior to the Expiry Time,
then the Company shall pay to Parent (or as it may direct) forthwith
after such event, by way of certified cheque or wire transfer in
immediately available funds, the sum equal to CDN$5,730,400. For
greater certainty, the Company shall not be obligated to make more than
one payment under Subsection 5.4(a) if one or more of the events
specified therein occurs.
(b) For greater certainty, the obligations of the Company under this
Section 5.4 shall survive termination of this Agreement, regardless of
the circumstances thereof.
(c) Each party acknowledges that the payment of the fees under this Section
5.4 is a payment of liquidated damages which is a genuine pre-estimate
of the damages which Parent and the Offeror will suffer or incur as a
result of the event giving rise to such damages and the resultant
termination of this Agreement and is not a penalty. The Company
irrevocably waives any right it may have to raise as a defence that any
such liquidated damages are excessive or punitive. For greater
certainty, the parties agree that upon payment of the fees under this
Section 5.4 in the manner provided in the event of the termination of
this Agreement, no other amounts will be due and payable as damages or
otherwise by the Company to the Offeror or Parent in connection with
this Agreement. Nothing contained herein shall preclude a party from
seeking injunctive relief to restrain any breach or threatened breach
of the covenants or agreements set forth in this Agreement or otherwise
to obtain specific performance of any of such covenants or agreements,
without the necessity of posting a bond or security in connection
therewith.
5.5 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the others of: (a) the occurrence or
failure to occur of any event, which occurrence or failure would cause or may
cause any representation or warranty on its part contained in this Agreement to
be untrue or inaccurate in any material respect at any time from the date hereof
to the Effective Time; and (b) any failure of such party, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
giving of notice in accordance with this Agreement shall not cure any breach or
default by any party under this Agreement.
-20-
5.6 INVESTIGATION
(a) Upon reasonable notice, the Company shall (and shall cause each of its
Subsidiaries to) afford Parent's or the Offeror's officers, employees,
counsel, accountants and other authorized representatives and advisors
access, during normal business hours and without undue disruption to
the business of the Company from the date hereof and until the earlier
of the Effective Time or the termination of this Agreement, to its and
its Subsidiaries' properties, books, contracts and records as well as
to its management personnel, and during such period, Company shall (and
shall cause each of its Subsidiaries to) furnish promptly to Parent or
the Offeror all information concerning Company's and its Subsidiaries'
businesses, properties and personnel as Parent or the Offeror may
reasonably request subject to confidentiality obligations of the
Company and the Subsidiaries. Any further investigation by a party
hereto and its advisors shall not mitigate, diminish or affect the
representations and warranties of the other parties contained in this
Agreement or any document or certificate given pursuant hereto.
(b) In order to assist Parent and Offeror with any third party financing in
connection with the Offer (including the refinancing of same), the
Company shall, and shall cause each of its Subsidiaries to, provide
such assistance and cooperation as Parent and Offeror may reasonably
request, including, but not limited to, cooperation in the preparation
of any offering memorandum or similar document, delivering such
financial statements, financial reports and forecasts, reports of
auditors, and comfort letters as may be reasonably required in
connection therewith, cooperating with initial purchasers or placement
agents, making senior management of the Company reasonably available
for customary "roadshow", rating agency and lender presentations and
cooperation with prospective lenders in performing their due diligence.
Without limitation to the foregoing, the Company shall deliver to
Parent as soon as possible, but in any event no later than 14 days from
the date of this Agreement, audited consolidated financial statements
of the Company for the years ended September 30, 2004, 2003 and 2002
(including statements of earnings, deficit and cash flows for the
periods covered thereby and balance sheets as at September 30, 2004 and
2003) and unaudited consolidated financial statements of the Company
for the periods ended December 31, 2004 and 2003, prepared in
accordance with GAAP, in each case reconciled to United States
generally accepted accounting principles in accordance with Item 17 of
Form 20-F under the Exchange Act (collectively, the "RECONCILED
FINANCIAL STATEMENTS"). If this Agreement is terminated by Parent or
the Offeror pursuant to Section 6.1(b)(i) or 6.1(f) or by the Company
pursuant to Section 6.1(c), 6.1(d) or 6.1(e) and in any case the
Company is not in default of any material covenant, obligation,
representation or warranty under this Agreement, Parent shall pay to
the Company the reasonable out-of-pocket expenses actually incurred by
the Company up to a maximum of $100,000 in providing the assistance
requested by Parent under this Section 5.6(b).
(c) Each of the Offeror, Parent and the Company acknowledges that
information provided to it under Section 5.6(a) above will be
non-public and/or confidential in nature and will be subject to the
terms of the Confidentiality Agreement and Section 5.6(a). For greater
certainty, the provisions of the Confidentiality Agreement shall
survive the termination of this Agreement.
-21-
5.7 SHAREHOLDER CLAIMS
The Company shall not settle or compromise any claim brought by any present,
former or purported holder of any securities of the Company in connection with
the transactions contemplated by this Agreement prior to the Effective Time
without the prior written consent of the Offeror which shall not be unreasonably
withheld or delayed.
5.8 OFFICERS' AND DIRECTORS' INSURANCE
The Offeror agrees that for the period (the "POLICY PERIOD") from the Effective
Date until the sixth anniversary of the Effective Date, the Offeror will
maintain, or cause the Company or any successor to the Company to maintain, the
Company's current directors' and officers' insurance policy or an equivalent
policy, subject in any case to terms and conditions no less advantageous to the
directors and officers of the Company than those contained in the policy in
effect on the date hereof, for all current and former directors and officers of
the Company, covering claims made prior to or within six years after the
Effective Date (such policy or equivalent policy being the "EXISTING D&O POLICY"
and such six-year coverage period being the "COVERAGE PERIOD") so long as the
annual premium therefor is not in excess of 200% of the last annual premium paid
by the Company prior to the date hereof; provided however, that if the annual
premium for the Existing D&O Policy would exceed 200% of the last annual premium
paid by the Company prior to the date hereof (the "BASE PREMIUM") such that, the
Existing D&O Policy lapses during the Policy Period, then (i) the Offeror shall
use its reasonable best efforts to obtain a policy for the duration of the
Policy Period which provides insurance for the current directors and officers to
replace the Existing D&O Policy in respect of the Coverage Period, on terms that
the Offeror determines in its sole discretion to be as favourable to such
directors and officers as the Offeror may reasonably obtain from its insurance
carrier for an annual premium of approximately (but no more than) 200% of the
Base Premium; or (ii) the current directors and the Chief Financial Officer may
themselves elect to obtain a policy equivalent to the Existing D&O Policy in
respect of the Coverage Period in which event, the Offeror shall contribute
during the duration of the Policy Period in respect of such policy an annual
amount equal to 200% of the Base Premium.
ARTICLE VI
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
6.1 TERMINATION
This Agreement may be terminated by notice in writing:
(a) at any time prior to the Effective Time by mutual written consent of
Parent, the Offeror and the Company;
(b) by Parent or the Offeror at any time:
(i) after March 1, 2005 if any condition to making the Offer is
not satisfied or waived by such date;
(ii) if the Company is in default of any material covenant or
obligation under this Agreement; or
(iii) if any representation or warranty of the Company:
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(A) that is qualified by a reference to a Material
Adverse Effect shall be untrue or incorrect in any
respect; or
(B) that is not qualified by a reference to a Material
Adverse Effect shall be untrue or incorrect, in any
respect unless the failure to be true or correct (x)
has not had or would not reasonably be expected to
have, a Material Adverse Effect (and, for this
purpose, any reference to "material" or other
concepts of materiality in such representations and
warranties shall be ignored); or (y) has not impeded
or would not reasonably be expected to impede the
completion of the Offer, a Compulsory Acquisition, a
Subsequent Acquisition Transaction or any other
transaction contemplated under this Agreement;
(c) by the Company at any time if any representation or warranty of the
Offeror or Parent under this Agreement is materially untrue or
incorrect, and such failure of a representation or warranty to be true
and correct would prevent or materially delay consummation of the
transactions contemplated by this Agreement;
(d) by the Company if the Offeror has not taken up and paid for Shares
deposited under the Offer within 90 days after the Bid Circular is
mailed to the Shareholders, otherwise than as a result of the breach by
the Company of any material covenant or obligation under this Agreement
or as a result of any representation or warranty of the Company in this
Agreement being untrue or incorrect in any material respect; provided,
however, that if the Offeror's take-up and payment for Shares deposited
under the Offer is delayed by (i) an injunction or order made by a
court or regulatory authority of competent jurisdiction, or (ii) Parent
or the Offeror not having obtained any regulatory waiver, consent or
approval which is necessary to permit the Offeror to take up and pay
for Shares deposited under the Offer, then, provided that such
injunction or order is being contested or appealed or such regulatory
waiver, consent or approval is being actively sought, as applicable,
this Agreement shall not be terminated by the Company pursuant to this
Section 6.1(d) until the earlier of (i) 180 days after the Offer is
commenced, and (ii) the tenth business day following the date on which
such injunction or order ceases to be in effect or such waiver, consent
or approval is obtained, as applicable;
(e) by the Company if the Offeror does not mail the Offer within the time
contemplated by Section 1.1(c) (other than as a result of any act of
the Company or breach by the Company of any of its obligations
hereunder or because any of the conditions to the making of the Offer
was not satisfied or waived);
(f) by Parent or the Offeror if any condition of the Offer shall not be
satisfied or waived at the Expiry Time of the Offer and Parent or the
Offeror has not elected to waive such condition;
(g) by Parent or the Offeror if any event described in Section 5.4(a)
occurs that results in an amount becoming payable to Parent thereunder;
or
(h) by the Company, in order to enter into a definitive written agreement,
understanding or arrangement with respect to a Superior Proposal,
subject to compliance with Section 5.2
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and 5.3 of this Agreement provided the amount required to be paid
pursuant to Subsection 5.4(a) has been paid.
6.2 AMENDMENT
This Agreement may not be amended except by an instrument signed by each of the
parties hereto.
6.3 WAIVER
At any time prior to the Effective Time, any of the parties may, without
prejudice to any other rights which such party may have: (a) extend the time for
the performance of any of the obligations or other acts of the other parties; or
(b) waive compliance with any of the agreements of the other parties or with any
conditions to its own obligations, in each case only to the extent such
obligations, agreements or conditions are intended for its benefit. No waiver of
any of the provisions of this Agreement shall be deemed to constitute a waiver
of any other provision (whether or not similar), nor shall such waiver
constitute a waiver or continuing waiver unless otherwise expressly provided in
writing. The failure by a party at any time to exercise any of its rights will
not be deemed to be a waiver of any such right and each such right shall be
deemed to be an ongoing right which may be asserted at any time and from time to
time.
6.4 EFFECT OF TERMINATION
If this Agreement is terminated as provided in Section 6.1, there shall be no
liability or further obligation on the part of any party hereto or any of their
respective shareholders, officers or directors, except as set forth in Sections
5.4, 7.3 and this Section 6.4, which provisions shall survive the termination of
this Agreement; provided that nothing in this Section 6.4 shall relieve the
parties to this Agreement of liability for breach of any representation,
warranty or covenant of this Agreement occurring prior to the termination
thereof. No termination of this Agreement shall affect the obligations of the
parties pursuant to the Confidentiality Agreement, except to the extent
specified therein.
ARTICLE VII
GENERAL PROVISIONS
7.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Subject to Section 6.4, the representations, warranties and agreements in this
Agreement shall terminate at the Effective Time or upon termination of this
Agreement pursuant to Section 6.1.
7.2 BROKERS
Other than in respect of the financial advisors to the directors of the Company
or any soliciting dealer retained by the Offeror, Parent, the Offeror and the
Company represent and warrant to each other that no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission, or to
the reimbursement of any of its expenses, in connection with the Offer or any
similar transaction.
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7.3 EXPENSES
Except as provided for in Section 5.4, all fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fee, cost or expense, whether or not the Offer
is consummated. The Company agrees that, except as provided for in Section 5.4,
the fees, costs and expenses incurred by the Company and any Subsidiaries in
connection with this Agreement and the transactions contemplated hereby will not
exceed $750,000 in the aggregate.
7.4 PUBLIC STATEMENTS
Parent and the Company agree to make a joint press release with respect to this
Agreement and the transactions contemplated herein as soon as practicable after
the date hereof. Parent and the Company further agree that, from the date hereof
until the earlier of the completion of the Offer and the termination of this
Agreement, there will be no public announcement or other disclosure of the
transactions contemplated by this Agreement unless they have mutually agreed
thereto or unless otherwise required by applicable Law, based on the advice of
counsel. The parties acknowledge that this Agreement (and/or a report relating
hereto) shall be filed with the Canadian securities regulatory authorities and
the United States Securities and Exchange Commission. If either Parent or the
Company is required by Law to make a public announcement with respect to the
transactions contemplated herein, such party will provide as much notice to the
other of them as reasonably possible, including the proposed text of the
announcement.
7.5 NOTICES
All notices, requests, demands and other communications hereunder shall be
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended or delivered, or if sent by
facsimile transmission, upon confirmation that such transmission has been
properly effected, to the Person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
Person. The date of receipt of any such notice or other communication if
delivered personally shall be deemed to be the date of delivery thereof, or if
sent by facsimile transmission the date of such transmission if sent on a
business day, failing which it shall be deemed to have been received on the next
business day.
If to Parent or the Offeror:
Activant Solutions Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone No.: ▇▇▇-▇▇▇-▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
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with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Suite 3800, P.O. Box ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Company:
Speedware Corporation
▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇
▇▇. ▇▇▇▇▇▇▇ (▇▇▇▇▇▇) ▇▇▇ ▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
With a copy to:
Lang ▇▇▇▇▇▇▇▇ LLP
BCE Place
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Phone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Any party may at any time change its address for service from time to time by
giving notice to the other parties in accordance with this Section 7.5.
7.6 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this Agreement are
expressed in Canadian dollars.
7.7 INTERPRETATION AND AUTHORSHIP
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
References to Sections and articles refer to Sections and articles of this
Agreement unless otherwise stated. Unless the context
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otherwise requires, words used herein importing the singular include the plural
and vice versa. Each reference herein to knowledge of a party means, unless
otherwise specified, the knowledge of such party's officers following due
inquiry. If the date on which any action is required to be taken hereunder by a
party is not a business day, such action shall be required to be taken on the
next succeeding day which is a business day. The parties hereto agree that the
terms and language of this Agreement were the results of negotiations between
the Company and Parent and the Offeror and, as a result, there shall be no
presumption that any ambiguity in this Agreement shall be resolved against any
party to this Agreement.
7.8 SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated and the parties shall negotiate in good faith to modify this
Agreement to preserve each party's anticipated benefits under this Agreement.
7.9 REMEDIES
The parties hereto acknowledge and agree that an award of money damages would be
inadequate for any breach of this Agreement by any party or its representatives
and any such breach would cause the non-breaching party irreparable harm.
Accordingly, the parties hereto agree that, in the event of any breach or
threatened breach of this Agreement by one of the parties, the non- breaching
party will also be entitled, without the requirement of posting a bond or other
security, to equitable relief, including injunctive relief and specific
performance. Such remedies will not be exclusive remedies for any breach of this
Agreement but will be in addition to all other remedies available at Law or
equity to each of the parties.
7.10 ENTIRE AGREEMENT, ASSIGNMENT AND GOVERNING LAW
This Agreement and the Confidentiality Agreement constitute the entire agreement
and supersede all other prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof.
In the event of any inconsistency between the provisions of this Agreement and
the Confidentiality Agreement, the provisions of this Agreement shall prevail.
This Agreement: (a) is not intended to confer upon any Person, other than the
parties hereto, any rights or remedies hereunder; (b) shall not be assigned by
operation of Law or otherwise, except that the Offeror may assign all or any
portion of its rights under this Agreement to any affiliate of Parent; and (c)
shall be governed in all respects, including validity, interpretation and
effect, exclusively by the Laws of the Province of Ontario and the Laws of
Canada applicable therein. Each party hereby attorns to the non-exclusive
jurisdiction of the courts of Ontario.
The parties hereto have requested that this Agreement and all documents or
notices relating thereto be drafted in the English language. Les parties ont
exige que la presente convention et tous les documents qui s'y rattachent soient
rediges en anglais.
-27-
7.11 COUNTERPARTS
This Agreement may be executed in any number of counterparts (by facsimile or
otherwise), each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument, and it
shall not be necessary in making proof of this Agreement to produce more than
one counterpart.
IN WITNESS WHEREOF the parties have executed this Agreement on the date first
written above.
ACTIVANT SOLUTIONS INC.
By: /s/ A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President & CEO
ACTIVANT SOLUTIONS ACQUISITIONCO LTD.
By: /s/ A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
SPEEDWARE CORPORATION INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Chairman
SCHEDULE A
CONDITIONS OF THE OFFER
The Offeror shall have the right to withdraw the Offer and shall not be required
to take up, purchase or pay for, and shall have the right to extend the period
of time during which the Offer is open and postpone taking up and paying for,
any Shares deposited under the Offer unless all of the following conditions are
satisfied or waived by the Offeror at or prior to the Expiry Time:
(a) at the time the Offeror first takes up and pays for the Shares under
the Offer, there shall have been validly deposited under the Offer and
not withdrawn at least 66 2/3% of the Shares outstanding on a fully
diluted basis (the "MINIMUM TENDER CONDITION");
(b) all government or regulatory consents, approvals and expiries of
waiting periods required by Law (including, without limitation, those
of any stock exchanges or other securities regulatory authorities)
shall have been obtained or occurred on terms satisfactory to the
Offeror, in its sole discretion, and all applicable statutory or
regulatory waiting periods shall have expired or been terminated;
(c) the Directors' Circular shall have disclosed the full particulars of
any benefit that any related party of the Company who is an employee,
director or consultant of the Company or any Subsidiary is entitled to
receive, directly or indirectly, as a consequence of the Offer and the
determination of the independent committee of the Board of Directors
that the value of the benefit, net of any offsetting costs to such
related party, is less than the prescribed amount set out in clause
(c)(iv)(B)(II) of the definition of "collateral benefit" under Rule
61-501 other than as expressly provided in Section 1.1(a) of the
Support Agreement;
(d) the Offeror shall have determined in its sole discretion that no act,
action, suit or proceeding shall have been threatened or taken before
or by any Governmental Authority (including, without limitation, by any
Person) in Canada or elsewhere, whether or not having the force of Law,
and no Law shall have been proposed, enacted, promulgated or applied,
in either case:
(i) which has the effect or may have the effect to cease trade,
enjoin, prohibit or impose material limitations, damages or
conditions on the purchase by or the sale to the Offeror of
the Shares or the right of the Offeror to own or exercise full
rights of ownership of the Shares; or
(ii) which has had, or if the Offer were consummated, could be
expected to have a Material Adverse Effect; or
(iii) which would prevent, make uncertain or materially delay the
completion of the acquisition by the Offeror of the Shares
pursuant to a Subsequent Acquisition Transaction or a
Compulsory Acquisition Transaction;
(e) the Offeror shall have determined in its sole discretion that there
shall not exist any prohibition at Law against the Offeror making the
Offer or taking up and paying for any Shares deposited under the Offer
or completing any Compulsory Acquisition Transaction or Subsequent
Acquisition Transaction in respect of any Shares not acquired under the
Offer;
-2-
(f) there shall not have occurred or arisen (or there shall not have been
generally disclosed or discovered, if not previously disclosed in
writing to and acknowledged by the Offeror) since the execution of this
Agreement, any Material Adverse Effect;
(g) there shall not have occurred or arisen since the execution of this
Agreement, any change, effect, condition, event, occurrence or state of
facts that is, or would reasonably be expected to be (individually or
in the aggregate), material and adverse to the business, affairs,
operations, capitalization, results of operations, financial condition,
rights, assets, prospects or liabilities (including, without
limitation, any contingent liabilities that may arise as a result of
litigation proceedings initiated or threatened since the execution of
this Agreement against Parent or any of its subsidiaries) of Parent and
its subsidiaries taken as a whole; provided that, for greater
certainty, the termination of any third party financing commitment
obtained by Parent in connection with the Offer for any reason other
than as a result of the conditions enumerated in this Schedule A not
being satisfied or capable of being satisfied, shall not in and of
itself be considered to be a change, effect, condition, event,
occurrence or state of facts of the nature referred to in this
paragraph (g);
(h) at the Expiry Time, all representations and warranties of the Company
in this Agreement and of each of the Sellers in the Lock-up Agreement
respectively: (i) that are qualified by a reference to Material Adverse
Effect shall be true and correct in all respects; and (ii) that are not
qualified by a reference to a Material Adverse Effect shall be true and
correct in all respects unless the failure to be true or correct (x)
has not had or would not reasonably be expected to have, a Material
Adverse Effect (and, for this purpose, any reference to "material" or
other concepts of materiality in such representations and warranties
shall be ignored); or (y) has not impeded or would not reasonably be
expected to impede the completion of the Offer, a Compulsory
Acquisition, a Subsequent Acquisition Transaction or any other
transaction contemplated under this Agreement;
(i) this Agreement shall not have been terminated;
(j) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or financial occurrence
of national or international consequence or any Law, action, inquiry or
other occurrence of any nature whatsoever which adversely affects, or
may adversely affect, the financial markets in Canada or the United
States generally;
(k) all outstanding Options, Warrants or other rights (including rights
pursuant to the Stock Option Plans and the Warrant Agreements) or
entitlements granted to purchase or otherwise acquire authorized and
unissued Shares shall have been exercised in full, or irrevocably
released, surrendered, terminated or waived or otherwise dealt with by
the holders thereof on terms and conditions satisfactory to the
Offeror, in its sole discretion;
(l) the Company shall have observed and performed its covenants in the
Agreement in all material respects; and
(m) the Employment and Consulting Agreements shall be in full force and
effect without amendments which have not been agreed to by the Offeror.
The foregoing conditions are for the exclusive benefit of the Offeror and may be
asserted by the Offeror regardless of the circumstances (including any action or
inaction by the Offeror or any of
-3-
its affiliates) giving rise to any such condition. The Offeror may, in the
Offeror's sole discretion, waive any of the foregoing conditions, in whole or in
part, at any time and from time to time, both before and after the Expiry Time,
without prejudice to any other rights which the Offeror may have. The failure by
the Offeror at any time to exercise any of the foregoing rights will not be
deemed to be a waiver of any such right and each such right shall be deemed to
be an ongoing right which may be asserted at any time and from time to time.
SCHEDULE B
REPRESENTATIONS AND WARRANTIES
1. ORGANIZATION AND QUALIFICATION
The Company is validly existing under the CBCA and has full corporate power and
authority to own its assets and conduct its business as now owned and conducted.
The Company is duly qualified to carry on business, and is in good standing, in
each jurisdiction in which the character of its properties or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect. True and complete copies of
the articles and by-laws of the Company have been delivered to Parent and the
Company has not taken any action to amend or supersede such documents. All such
organizational documents are in full force and effect.
2. SUBSIDIARIES
The Company does not have any interests in any Person, other than those listed
in the Disclosure Schedule (the "SUBSIDIARIES"). None of the Subsidiaries holds,
directly or indirectly, any equity interest in, or any options or rights for any
equity interest in, any Person, other than in certain circumstances, interests
in another Subsidiary. Each of the Subsidiaries is validly existing and in good
standing under the Laws of its jurisdiction of incorporation, has full corporate
power and authority to own its assets and conduct its business as now owned and
conducted by it and, other than as disclosed in the Disclosure Schedule, is duly
qualified to carry on business in each jurisdiction in which the character of
its properties or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a Material
Adverse Effect. True and complete copies of the articles and by-laws of each of
the Subsidiaries have been made available to Parent and none of the Subsidiaries
has taken any action to amend or supersede such documents. All such
organizational documents are in full force and effect. Other than as disclosed
in the Disclosure Schedule, the Company beneficially owns, directly or
indirectly, all of the issued and outstanding securities of each of the
Subsidiaries. Other than as disclosed in the Disclosure Schedule, all of the
outstanding shares or other equity interests in the capital of each of the
Subsidiaries that is a corporation are validly issued, fully-paid and
non-assessable and all such shares or other equity interests are owned free and
clear of all liens, claims or encumbrances, other than security interests which
may have been granted under the Credit Facilities.
3. COMPLIANCE WITH LAWS AND LICENSES
(a) Other than as disclosed in the Disclosure Schedule, the Company and
each of the Subsidiaries has complied with and is in compliance with
all applicable Laws, other than such failure to comply as would not
have a Material Adverse Effect. Other than as disclosed in the
Disclosure Schedule, each of the Company and its Subsidiaries has all
licenses, permits, consents, certificates and authorizations, orders or
approvals of (as well as bonds and security provided in connection
therewith), and has made all required registrations (collectively,
"PERMITS AND REGISTRATIONS") with, any Governmental Authority that is
required in connection with the ownership of their respective assets or
the conduct of their respective operations and each of them has fully
complied with and is in compliance with all such Permits and
Registrations, except where the failure to have obtained or made such
Permit or Registration or to comply therewith would not have a Material
Adverse Effect. Each Permit and Registration is valid, subsisting and
in good
-2-
standing. Neither the Company nor any Subsidiary has received any
notice, whether written or oral, of the revocation or non-renewal of
any Permit or Registration, or of any intention of any Governmental
Authority to revoke or refuse to re-new any Permit or Registration and,
to the knowledge of the Company, all such Permits and Registrations
shall continue to be effective and any required renewals thereof shall
be available in order for the Company and the Subsidiaries to continue
to conduct their respective businesses as they are currently being
conducted and in accordance with the existing plans of the Company and
the Subsidiaries. None of the Company or any of the Subsidiaries is in
conflict with, or in default under or in violation of its articles or
by-laws or equivalent organizational documents.
(b) The Company does not provide any of the services and is not engaged in
any of the activities of a business described in Subsection 14.1(5) of
the Investment Canada Act (Canada).
(c) As of the financial year ended September 30, 2004, the Company does not
have assets in, or revenues in or from, Canada that exceed $50,000,000.
(d) To the Company's knowledge, less than 40% (calculated in accordance
with Schedule 14D-1F or Rule 14d-1 under the United States Securities
Exchange Act of 1934 as amended (the "EXCHANGE ACT") of the outstanding
Shares are held by US holders (as defined in Schedule 14D-1F of the
Exchange Act). Assuming that Parent and Offeror comply with the
appropriate provisions of Rule 14(d)-1(b) under the Exchange Act, the
Company is eligible to file with the United States Securities and
Exchange Commission a solicitation/recommendation statement in
compliance with Rule 14e-2(c) under the Exchange Act on Schedule
14D-9F. The Company is a foreign private issuer, as that term is
defined in Rule 3b-4 of the Exchange Act. The Company is not an
investment company registered or required to be registered under the
United States Investment Company Act, as amended. The Company does not
have a class of securities registered under Section 12 of the Exchange
Act.
(e) The Company is a "reporting issuer" in material compliance with all
applicable Securities Laws and the Shares are only listed on the TSX.
(f) Polar Capital Corporation is a consultant (as defined in Section 1.1 of
Multinational Instrument 45-105) under the Management Services
Agreement.
4. CAPITALIZATION
The authorized share capital of the Company consists of an unlimited number of
Shares and an unlimited number of non-voting preferred shares, issuable in
series. As at the date hereof: (a) 30,637,383 Shares are issued and outstanding
and there are no non-voting preferred shares outstanding, (b) there are
outstanding Options to purchase Shares issued under the Stock Option Plans
providing for the issuance of 1,835,501 Shares upon the exercise thereof; and
(c) pursuant to the Warrant Agreements there are a maximum of 4,166,667 Shares
issuable upon conversion of all outstanding Warrants. The terms of the Options
(including exercise prices and vesting thereof) are disclosed in the Disclosure
Schedule. The holders of the Options and Warrants are disclosed in the
Disclosure Schedule. Except as disclosed above, there are no shares of the
Company outstanding and no options, warrants, conversion privileges, calls,
puts, repurchase or redemption rights or other rights, agreements, arrangements,
commitments or obligations of the
-3-
Company or any of the Subsidiaries to, directly or indirectly issue or sell any
shares of the Company or of any of the Subsidiaries or securities or obligations
of any kind convertible into, exchangeable for or otherwise carrying the right
or obligation to acquire any shares of the Company or any of the Subsidiaries,
nor are there outstanding any stock appreciation rights, phantom equity or
similar rights, agreements, arrangements or commitments based upon the book
value, income or any other attribute of the Company or any of the Subsidiaries.
All outstanding Shares have been duly authorized and validly issued, are fully
paid and non-assessable and are not subject to, nor were they issued in
violation of, any pre-emptive rights, and all Shares issuable upon exercise of
outstanding Options and the exercise of the Warrants in accordance with their
respective terms will be duly authorized and validly issued, fully paid and
non-assessable and will not be subject to any pre-emptive rights.
5. AUTHORITY RELATIVE TO THIS AGREEMENT
The Company has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized by the
Board of Directors and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement (except for obtaining shareholder
approval in respect of any Subsequent Acquisition Transaction). This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable by Parent or the Offeror against
the Company in accordance with its terms, provided that enforcement may be
limited by (a) bankruptcy, insolvency and other similar Laws of general
application affecting the enforcement of creditors' rights generally, and (b)
specific performance, injunctive relief and other equitable remedies may be
granted only in the discretion of a court of competent jurisdiction. The
execution and delivery by the Company of this Agreement and the performance by
it of its obligations hereunder and the completion of the Offer will not: (a)
violate, conflict with or result in a breach of any provision of: (i) the
constating documents of the Company or any of the Subsidiaries; (ii) except as
provided in Section 5(b) below, any agreement, contract, indenture, deed of
trust, mortgage, bond, instrument, license, franchise or permit to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is bound; or (iii) any Law to which the Company or any of the
Subsidiaries is subject or by which the Company or any of the Subsidiaries is
bound; (b) except as disclosed in the Disclosure Schedule, give rise to any
right to notice or of termination, or the acceleration of any indebtedness,
under any such agreement, contract, indenture, deed of trust, mortgage, bond,
instrument, license, franchise or permit; or (c) except as disclosed in the
Disclosure Schedule, give rise to any rights of first refusal or trigger any
change in control provisions (including granting a right or licence with respect
to any Intellectual Property owned or used by the Company or any Subsidiary to
any Person) or any restriction or limitation (including any loss or impairment
of Parent or the Offeror's right to own or use any Intellectual Property owned
or used by the Company or its Subsidiaries) under any such agreement, contract,
indenture, deed of trust, mortgage, bond, instrument, license, franchise or
permit, or result in the imposition of any encumbrance, charge or lien upon any
of the Company's assets or the assets of any of the Subsidiaries. Other than in
connection with or in compliance with the provisions of Securities Laws, no
authorization, consent or approval of, or filing with, any Governmental
Authority is necessary for the consummation by the Company of its obligations
under this Agreement or for the completion of the Offer, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make would
-4-
not, individually or in the aggregate, prevent or materially delay consummation
of the transactions contemplated by this Agreement.
6. OPTIONS AND WARRANTS
As a result of commitments to be obtained by the Company prior to the Mailing
Date, all unexercised Options and Warrants shall expire upon the take-up and
payment by the Offeror of Shares under the Offer (provided that at such time the
Offeror has taken up and paid for at least 662/3% of the Shares on a
fully-diluted basis) and the Stock Option Plans shall be terminated for no
additional consideration by the Company.
7. EMPLOYMENT AND CONSULTING AGREEMENTS
Except as disclosed in the Disclosure Schedule, the parties to the Employment
and Consulting Agreements do not own or have any other right or interest in any
Shares, Options or Warrants.
8. SHAREHOLDER AND SIMILAR AGREEMENTS
Except as disclosed in the Disclosure Schedule, the Company is not, and to the
Company's knowledge no shareholder is, a party to any shareholder, pooling,
voting trust, registration rights agreement or other similar agreement or right
capable of becoming any of the foregoing relating to the Shares of the Company
or the securities of any of the Subsidiaries.
9. FILINGS
(a) Documents or information filed by the Company under applicable
Securities Laws since and including September 30, 2003 to and including
the date hereof (the "COMPANY'S PUBLIC DOCUMENTS") (i) complied, in all
material respects, with the requirements of such laws; and (ii) did not
contain an untrue statement of a material fact relating to the Company
and its Subsidiaries and their respective businesses or omit to state a
material fact required to be stated therein or necessary to make the
statements relating to the Company and its Subsidiaries, in light of
the circumstances in which they were made, not misleading. The Company
has not filed any confidential material change report with any
securities regulatory authority that at the date hereof remains
confidential.
(b) The Company will deliver to Parent, as soon as they become available,
true and complete copies of any report or statement filed by it with
any securities regulatory authorities subsequent to the date hereof. As
of their respective dates, such reports and statements (excluding any
information therein provided in writing by Parent, as to which the
Company makes no representation) will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of
Law.
10. FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company for the financial
year ended September 30, 2004, including the notes thereto and the report of the
Company's auditors thereon, and the interim financial statements of the Company
as at and for the three, six and nine month period(s) ended December 31, 2003,
March 31, 2004 and June 30, 2004, all as contained
-5-
in the Company's Public Documents, were prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada applied on a basis consistent
with prior periods, except as noted therein, are correct in all material
respects, are complete and present fairly the assets, liabilities (whether
accrued, absolute, contingent or otherwise) and financial condition of the
Company and the Subsidiaries on a consolidated basis as at the respective dates
thereof and the results of operations of the Company and the Subsidiaries on a
consolidated basis for the respective periods covered thereby.
11. RECEIVABLES
The accounts receivable of the Company, except to the extent of the allowance
for doubtful accounts set forth in the financial statements, are bona fide
receivables, arose out of arms' length transactions in the normal and usual
practices of the Company, are recorded correctly on the books and records of the
Company, and, other than as disclosed in the Disclosure Schedule, the Company
has no reason to believe that such accounts receivable will not be collected in
full in the ordinary course of business within the ordinary time frame for such
receivables consistent with historical practices of the Company. Such
receivables are not subject to any defense, counterclaim or setoff or discounts
or credits not reflected in the financial statements, and (a) no facts or
circumstances exist which would cause any of such accounts receivable to have to
be written down or written off in excess of the allowance for doubtful accounts
set forth in the financial statements, and (b) since the date of the Company's
most recent balance sheet at September 30, 2004, the Company has not discounted
or sold such accounts receivable or any portion thereof.
12. INTEREST IN PROPERTIES
Except as disclosed in the Disclosure Schedule and for encumbrances that do not
individually or in the aggregate have a Material Adverse Effect, the Company and
the Subsidiaries have title to, or a valid and subsisting leasehold interest or
licence in or to, all assets, properties and rights, including, without
limitation, the Intellectual Property which are used in the conduct of their
business, free and clear of any claims, security interests, liens, conditions
and restrictions or other encumbrances, and constitute all of the assets,
properties and rights reasonably required for the conduct of the business of the
Company and the Subsidiaries, considered on a consolidated basis, as such
business is currently being conducted.
13. INTELLECTUAL PROPERTY RIGHTS
(a) The Disclosure Schedule contains a complete and accurate list of (i)
all of the issued or registered Intellectual Property and all
applications therefor (including a designation of the jurisdictions in
which each such item of Intellectual Property has been issued or
registered or in which any such application for issuance or
registration of such item of Intellectual Property has been filed),
either (A) owned, in whole or in part, by the Company or any Subsidiary
(the "REGISTERED INTELLECTUAL PROPERTY"), or (B) validly licensed, in
whole or in part, to the Company or any Subsidiary by third parties,
excluding software licensed under a shrink-wrap or click-through
agreement on commercially reasonable terms through commercial
distributors or in consumer retail stores for a license fee of no more
than $10,000 (the "LICENSED INTELLECTUAL PROPERTY"), and (ii) all other
Intellectual Property that is unregistered but material to the Company.
Copies of material documentation (other than applications therefor) and
any material
-6-
agreements relating to the Registered Intellectual Property and the
Licensed Intellectual Property have been made available to Parent.
(b) All necessary registration, maintenance, renewal and other relevant
filing fees due through the date hereof in connection with Registered
Intellectual Property (other than Registered Intellectual Property
which is not material to the Company or its Subsidiaries) have been
timely paid, and all necessary documents and certificates in connection
with Registered Intellectual Property have been timely filed with the
relevant patent, trade-▇▇▇▇, copyright or other relevant authorities in
Canada or foreign jurisdictions, as the case may be, for the purpose of
maintaining such Registered Intellectual Property, other than such
Registered Intellectual Property which the Company has determined
(acting reasonably) to have lapsed or expired as disclosed in the
Disclosure Schedule.
(c) Other than as disclosed in the Disclosure Schedule, the Company and its
Subsidiaries have all right, title and interest in and to, or a valid,
binding and continuing license to use, sell and license (as the case
may be) and have taken all reasonable commercial efforts to protect,
all of the Intellectual Property used, sold, licensed or otherwise
commercially exploited by the Company or any of its Subsidiaries in
their respective businesses (i) as currently carried on and (ii) after
the Effective Time in the same manner as they are currently carried on
and currently proposed to be carried on. To the Company's knowledge, no
Person is misappropriating or infringing any Intellectual Property
owned by or licensed to the Company or any Subsidiary, and no claims
have been brought against such Person by the Company or any Subsidiary
and, other than as disclosed in the Disclosure Schedule, the Company
has not received notice of any such potential infringement. Other than
as disclosed in the Disclosure Schedule, all of the Intellectual
Property owned or used by the Company and its Subsidiaries is in full
force and effect and has not been used or enforced or failed to be used
or enforced in a manner that would result in the abandonment,
cancellation, invalidity or unenforceability thereof.
(d) All patents, registered trade-marks, registered service marks and
registered copyrights held by the Company or the Subsidiaries are valid
and subsisting, and to the knowledge of the Company, there are no
outstanding challenges to the validity of any such patents or
registrations. The manufacture, use, marketing, licensing, importation,
offer for sale or sale of the products or services of the Company or
any Subsidiary, and the current and currently proposed business
practices and methods of the Company or any Subsidiary, do not infringe
or constitute an unauthorized use or misappropriation of any
Intellectual Property right of any other Person and, to the knowledge
of the Company, do not infringe, constitute an unauthorized use of or
violate any other right of any Person (including pursuant to any
non-disclosure agreements or obligations to which the Company or any
Subsidiary is a party). The services, materials, tools, work products,
hardware and Intellectual Property owned, used, practiced, licensed,
provided, developed or otherwise commercially exploited by the Company
or any Subsidiary, any modifications to customer materials performed by
the Company or any Subsidiary or any other resources or items provided
to customers by the Company or any Subsidiary do not infringe or
constitute an unauthorized use or misappropriation of any Intellectual
Property of any other Person and, to the knowledge of the Company, do
not infringe, constitute an unauthorized use of or violate any other
right of any Person (including pursuant to any non-disclosure
agreements or obligations to which the Company or any Subsidiary is a
party).
-7-
(e) To the knowledge of the Company, all Intellectual Property that the
Company or any Subsidiary claims to own was: (i) developed by employees
of the Company or its Subsidiaries within the scope of their
employment; (ii) developed by independent contractors or consultants
who have assigned all of their rights, title and interest in and to
such Intellectual Property to the Company or its Subsidiaries pursuant
to written agreements; or (iii) otherwise acquired by the Company or
its Subsidiaries from a third party who assigned all rights, title and
interest in and to such Intellectual Property to the Company or its
Subsidiaries pursuant to written agreements; and all of the foregoing
have expressly waived any moral rights they may have in such
Intellectual Property. To the knowledge of the Company, without
limiting the generality of the foregoing, all former and current
employees, officers, consultants and contractors of the Company or its
Subsidiaries either (i) have been a party to a "work for hire"
arrangement or agreement with the Company or its Subsidiaries, in
accordance with all applicable Law, that has accorded the Company or
its Subsidiaries full, effective, exclusive and original ownership of
all tangible or intangible property thereby arising, or (ii) have
executed appropriate instruments of assignment in favour of the Company
or its Subsidiaries as to any claim against the Company or its
Subsidiaries in connection with such Person's involvement in the
conception and development of the Intellectual Property, and no such
claim has been asserted or is threatened.
(f) The Company and its Subsidiaries have taken reasonable steps to protect
and preserve the confidentiality of all non-public, proprietary
Intellectual Property and information material to the business of the
Company and its Subsidiaries ("CONFIDENTIAL INFORMATION"). No
Confidential Information has been authorized to be disclosed or, to the
knowledge of the Company, has been actually disclosed by the Company or
any Subsidiary to any third party other than pursuant to a
nondisclosure agreement restricting the disclosure and use of
Confidential Information. Each employee, consultant and independent
contractor of the Company or its Subsidiaries has entered into a
written non-disclosure agreement with the Company or the applicable
Subsidiary, other than any such employee, consultant or independent
contractor who does not have and has not had access to Confidential
Information which may be material to the Company. All use, disclosure
or appropriation by the Company and the Subsidiaries of Confidential
Information not owned by the Company or any Subsidiary has been
pursuant to the terms of a written agreement between the Company and
the owner of such Confidential Information, or is otherwise lawful.
(g) To the knowledge of the Company, as of the Effective Time, the
Company's and the Subsidiaries' currently licensed and marketed
commercially available products, including any customized products,
operate and function materially and substantially in accordance with
agreed specifications or corresponding end user documentation provided
by the Company or its Subsidiaries and in accordance with applicable
contractual obligations of the Company and its Subsidiaries.
(h) Except as disclosed in the Disclosure Schedule, (i) none of the
Intellectual Property owned or used by the Company or any Subsidiary
is, in whole or in part, subject to the provisions of any open source
or quasi-open source licence agreement or any other agreement
obligating the Company to make source code available to any Person or
to publish or place in escrow source code and (ii) no open source code
or quasi-open source code is incorporated into any product now or
heretofore or currently proposed to be
-8-
shipped by or on behalf of the Company or any Subsidiary. Except as
disclosed in the Disclosure Schedule, neither the Company nor any
Subsidiary has licensed any software in source code form to any Person.
(i) To the knowledge of the Company, as of the Effective Time, all of the
Company's and the Subsidiaries' currently licensed and marketed
commercially available products are and shall be free of any disabling
codes, "bombs", "worms", instructions, virus, or any other contaminant
that may, or may be used to (i) limit, harm, delay, destroy, damage,
delete, interrupt, or interfere with any Person's use thereof or (ii)
undertake any unauthorized action concerning any Intellectual Property
whatsoever, including any unauthorized use, access, viewing,
transmission, modification, deletion or disablement of any Intellectual
Property owned or used by the Company or any Subsidiary or any other
computer programs, data or Intellectual Property of any other Person.
(j) Except with respect to licenses of commercial off-the-shelf software,
and except pursuant to the Material Contracts listed in the Disclosure
Schedule, neither the Company nor any Subsidiary is required,
obligated, or under any liability whatsoever, to make any payments by
way of royalties, fees or otherwise to any owner, licensor of, or other
claimant to any Intellectual Property, or other third party, with
respect to the use thereof or in connection with the conduct of the
businesses of the Company and its Subsidiaries as currently conducted
or currently proposed to be conducted.
(k) To the knowledge of the Company, the Company and its Subsidiaries have
an industry-standard privacy or data rights policy available on all of
their respective websites and has complied, and is in compliance, with
such policy in all material respects. None of the Company and its
Subsidiaries has received any notice claiming or alleging that it has
not complied with its privacy policy or any Laws governing the
operation of such websites, nor does the Company know of any facts or
circumstances that would give rise to any such claim or allegation.
14. ABSENCE OF CERTAIN CHANGES OR EVENTS
Other than as set out in the Disclosure Schedule, since September 30, 2004:
(a) the Company and the Subsidiaries have conducted their respective
businesses only in the usual, ordinary and regular course and
consistent with past practice;
(b) no liability or obligation of any nature (whether absolute, accrued,
contingent or otherwise), which has had or is reasonably likely to have
a Material Adverse Effect, has incurred;
(c) there has not been any event or occurrence which has had or is
reasonably likely to have a Material Adverse Effect;
(d) there has not been any change in the accounting practices used by the
Company and the Subsidiaries, other than the change in reporting
currency from CDN$ to US$;
(e) there has not been any acquisition, sale, lease or transfer of material
assets, properties or rights of the Company or the Subsidiaries, or any
contract or agreement entered into with
-9-
respect to the foregoing by the Company or the Subsidiaries, other than
in the usual, ordinary and regular course of business consistent in
type and amount with past practice;
(f) neither the Company nor the Subsidiaries has received any notice of
termination by or from any third party respecting any Material Contract
of the Company or the Subsidiaries, nor has any such contract been
terminated, and, to the knowledge of the Company, no such notice of
termination, or actual termination, is pending or threatened and
neither the Company nor its Subsidiaries has received any notice of or
is aware of any request for material changes to the terms or conditions
of any Material Contract, including pricing concessions and changes to
performance metrics;
(g) there has not been any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, shares or
property) in respect of, any of the shares of the Company or any
Subsidiary, the securities of which were not at the relevant time
wholly-owned by the Company, or a redemption, retirement, acquisition
by the Company or any Subsidiary, the securities of which were not at
the relevant time wholly-owned by the Company, purchase for
cancellation of any of the Company's or such Subsidiary's securities,
or any split, reverse split, combination or reclassification of any of
the Company's or any of such Subsidiary's shares, or any issuance or
the authorization of any issuance of any other securities in respect
of, in lieu of, or in substitution for securities of the Company;
(h) none of the Company or any of its Subsidiaries has made any grant of
credit to any customer or distributor on terms or in amounts more
favourable than had been extended to such customer or distributor in
the past;
(i) neither the Company nor any Subsidiary has transferred or licensed any
rights to any Intellectual Property other than in its usual, ordinary
and regular course of business;
(j) except for ordinary course adjustments to compensation arrangements for
non-executive employees, there has not been any increase in the salary
or similar remuneration payable to any non-executive employees of any
of the Company or the Subsidiaries;
(k) there has not been any increase in the salary or similar remuneration
payable to any officers or senior or executive officers of the Company
or the Subsidiaries;
(l) there has been no act or omission by the Company or the Subsidiaries to
take any action that would result in the occurrence of any of the
foregoing.
15. SEVERANCE AND EMPLOYMENT
(a) Except as set out in the Disclosure Schedule, no employee or former
employee of the Company or the Subsidiaries is in violation of any term
of any consulting agreement, employment contract, patent disclosure
agreement or confidentiality agreement, or any restrictive covenant
agreement entered into with a previous employee by reason of any such
employee being employed by the Company.
(b) Except for contracts listed in the Disclosure Schedule, neither the
Company nor any of the Subsidiaries has entered into any written or
oral employment, consulting or any other individual compensation
agreement, arrangement or understanding which provides for
-10-
payment by the Company or any Subsidiary on a change of control or
severance of employment, other than oral employment contracts which
terminate upon reasonable notice in accordance with applicable Law
(which contracts do not provide for payments on a change of control).
True and complete copies of such contracts and all amendments thereto
have been provided to Parent.
(c) Except as disclosed in the Disclosure Schedule, neither the Company nor
any of the Subsidiaries is a party to any collective bargaining
agreement nor subject to any application for certification and no trade
union, council of trade unions, employee bargaining agency or
affiliated bargaining agent, hold bargaining rights with respect to any
of the employees and during the last twelve months there have been no
threatened or apparent union-organizing campaigns for employees nor are
there any current, pending or threatened strikes, lockouts, work
stoppages or slowdowns affecting the Company or any of the
Subsidiaries.
(d) The Company and its Subsidiaries are in compliance with all Laws
relating to the employment of labour, including all such Laws relating
to wages, hours, the Worker Adjustment and Retraining Notification Act
and any similar state or local "mass layoff" or "plant closing" law
("WARN"), collective bargaining, discrimination, civil rights, safety
and health, workers' compensation and the collection and payment of
withholding and/or social security taxes and any similar tax which may
be applicable to the Company or any Subsidiary, except for
non-compliance, which would not have a Material Adverse Effect. There
has been no "mass layoff" or "plant closing" (as defined by WARN or any
similar non-US law) with respect to the Company or any of its
Subsidiaries since January 1, 2004.
(e) Except as disclosed in the Disclosure Schedule, no current or former
director, officer, employee, agent or consultant (or their respective
affiliates) is indebted to the Company or its Subsidiaries and there
are no oral or written guarantees provided by the Company or any of its
Subsidiaries.
16. LITIGATION, ETC.
Except as set out in the Disclosure Schedule, there is no claim, action,
proceeding, or investigation pending or, to the knowledge of the Company,
threatened against or relating to the Company or any of the Subsidiaries or
affecting any of their properties, assets or rights (including any claim of
infringement, unauthorized use, misappropriation or violation or any claim
challenging the ownership, use, validity or enforceability of any Intellectual
Property) whether or not before or by any Governmental Authority nor is the
Company aware of any existing ground on which any such claim, action, proceeding
or investigation might be commenced with any reasonable likelihood of success.
Neither the Company nor any of the Subsidiaries is subject to any outstanding
order, writ, injunction or decree. To the knowledge of the Company, neither it
nor any of its Subsidiaries is the subject of any governmental investigations or
inquiries (including inquiries as to the qualification to hold or receive any
Permit or Registration). There is no claim, action, proceeding or investigation
pending or, or to the knowledge of the Company, threatened against the Company
or any Subsidiary before any Governmental Authority which, if determined
adversely to the Company or any Subsidiary, would delay or prevent the
consummation of the Offer and the Company has no knowledge of any existing
ground on which such claim, action, suit, proceeding or investigation might be
-11-
commenced with any reasonable likelihood of success. Details of all outstanding
litigation have been provided to Parent and are listed in the Disclosure
Schedule.
17. TAXES
(a) Other than as disclosed in the Disclosure Schedule, the Company and
each of the Subsidiaries have duly and in a timely manner filed all Tax
Returns required to be filed by each of them on or before the date
hereof in the form and the time prescribed by applicable Laws for so
doing, and all such Tax Returns are true and complete in all material
respects. The Company and each of the Subsidiaries has duly and timely
paid all Taxes, including all instalments on account of Taxes for the
current year, that are due and payable prior to the date hereof, other
than those which are being contested in good faith and in respect of
which reserves have been provided in the financial statements of the
Company contained in the Company's Public Documents. Since September
30, 2004, the Company and each Subsidiary have not (i) incurred any
liability for Taxes, (ii) engaged in any transaction or event which
would result in a liability for Taxes, or (iii) realized any income or
gain for Tax purposes, other than, in each case, the ordinary course of
business. Other than as disclosed in the Disclosure Schedule, adequate
provision has been made in accordance with GAAP in the financial
statements of the Company contained in the Company's Public Documents
for the amount of all Taxes owing by the Company and each of its
Subsidiaries that are not yet due and payable and that relate to
periods ending on or prior to the Effective Time and where no taxable
period ends or is deemed to end on or immediately prior to the
Effective Time for all Taxes in respect of any time or event prior to
the Effective Time. Other than as disclosed in the Disclosure Schedule,
neither the Company nor any of the Subsidiaries has requested any
extension of time within which to file any Tax Return or to pay or
remit any amount in respect of Taxes. Neither the Company nor any
Subsidiary has received any refund of Taxes to which it is not
entitled.
(b) Other than as set out in the Disclosure Schedule, there are no actions,
suits, audits, proceedings, investigations or claims pending or
threatened against the Company or any of the Subsidiaries in respect of
Taxes, or any matters under discussion with any Governmental Authority
relating to Taxes asserted by any such authority. No event has occurred
or circumstances exist which could reasonably be expected to give rise
to or serve as a valid basis for the commencement of any such action,
suit, audit, investigation or claim. Offeror has received complete
copies of (i) all Tax Returns of the Company and its Subsidiaries
relating to the taxable periods since December 31, 2000; and (ii) any
audit report issued within the last three years relating to any Taxes
due from or with respect to the Company or any Subsidiary. All income
and capital Tax Returns of the Company and the Subsidiaries for
taxation years ending before January 1, 2003 have been assessed by the
relevant Governmental Authority.
(c) Neither the Company nor any of the Subsidiaries has executed any
outstanding waivers or comparable consents regarding the application of
the statute of limitations or providing for an extension of time with
respect to any Taxes or Tax Returns. There are no liens for Taxes upon
any asset of the Company or any of the Subsidiaries except for liens
for Taxes not yet due. Neither the Company nor any Subsidiary has
entered into any agreement with, or provided any undertaking to, any
Person pursuant to which it has assumed liability for the payment of
Taxes owing by such Person. Except as disclosed in
-12-
the Disclosure Schedule, neither the Company nor any Subsidiary has
granted to any Person any power of attorney that is currently in force
with respect to any Tax matters.
(d) The Company and each of its Subsidiaries have withheld or collected all
amounts required to be withheld or collected by them on account of
Taxes and have remitted all such amounts to the appropriate
Governmental Authority when required by Law to do so.
(e) The Company has at all relevant times been and is a taxable Canadian
corporation within the meaning of subsection 89(1) of the Tax Act. The
Company has never been required to file any Tax Return with, and has
never been liable to pay any Taxes to, any Governmental Authority
outside Canada. The Disclosure Schedule lists (i) all types of Taxes
paid, and all types of Tax Returns filed by or on behalf of Company or
any Subsidiary, and (ii) all of the jurisdictions that impose such
Taxes and/or duty to file such Tax Returns. Neither the Company nor any
of the Subsidiaries has received a request to file a Tax Return from a
Governmental Authority in a jurisdiction where it does not file Tax
Returns.
(f) Each of the Company and Speedware Ltee./Ltd is duly registered under
subdivision (d) of Division V of Part IX of the Excise Tax Act (Canada)
with respect to the goods and services tax and harmonized sales tax and
under Division I of Chapter VIII of Title I of the Quebec Sales Tax Act
with respect to the Quebec sales tax and the registration numberS with
respect to the Company are 10248 4425 RT0001, 1002172832TQ0001,
respectively, and with respect to Speedware Ltee./Ltd are 10248 4441
RT0001 and 1002468600TQ0001, respectively.
(g) Each Subsidiary that is organized under the Laws of the United States
or any political subdivision thereof:
(i) except as disclosed in the Disclosure Schedule, has never been
a member of any affiliated group within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the
"CODE"), or any comparable or analogous group under state,
local or non-United States Law;
(ii) does not have any contract, agreement, plan or arrangement
covering any Person that, individually or collectively, that
could give rise to the payment of any amount that would not be
deductible by the Offeror or such Subsidiary or their
respective affiliates by reason of Section 280G of the Code;
(iii) is not subject to any private letter ruling of the Internal
Revenue Service or comparable rulings of any Governmental
Authority;
(iv) has constituted neither a "distributing corporation" nor a
"controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code (A) in the two years prior to the date of this Agreement
or (B) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement;
-13-
(v) has not engaged in any "intercompany transactions" in respect
of which gain was and continues to be deferred pursuant to
Treasury Regulations Section 1.1502-13 or any analogous or
similar provision of Law and does not have any "excess loss
accounts" in respect of the stock of any Subsidiary pursuant
to Treasury Regulations Section 1.1502-19, or any analogous or
similar provision of Law;
(vi) has disclosed on its United States federal income Tax Returns
all positions taken therein that could give rise to
substantial understatement of United States federal income tax
within the meaning of Section 6662 of the Code;
(vii) does not have, nor has it ever had, a permanent establishment
in any country other than the United States, nor, except as
set forth on the Disclosure Schedule, has it engaged in a
trade or business in any country other than the United States
that subjected it to tax in such country; and
(viii) is not and has not been within the five-year period ending on
the date hereof a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code.
18. INSURANCE
The Company has made available to Parent copies of all policies of insurance
maintained by the Company or any of the Subsidiaries naming the Company or any
of the Subsidiaries as an insured. All policies of insurance shall remain in
force and effect and shall not be cancelled or otherwise terminated as a result
of transactions contemplated by this Agreement, including the Offer. No material
claims have been made under policies of insurance since January 1, 2004 and
there is no claim pending under any of such policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies. All
premiums payable under such policies of insurance have been paid and the Company
and the Subsidiaries are in compliance in all material respects with the terms
of such policies. The Company has no knowledge of any threatened termination of,
or material premium increase with respect to, any such policies.
19. PENSION AND EMPLOYEE BENEFITS
(a) The Disclosure Schedule sets forth a correct and complete list of each
Company Benefit Plan and such Disclosure Schedule separately identifies
each US Benefit Plan. Except as set forth in the Disclosure Schedule,
the Company and the Subsidiaries do not have any Company Benefit Plans.
Each Company Benefit Plan complies in all material respects with all
applicable Laws and such plans have been administered in compliance
with applicable Laws and their terms. Other than as disclosed in the
Disclosure Schedule, there have been no promised improvements,
increases or changes to any Company Benefit Plan.
(b) Each US Benefit Plan that is intended to qualify for tax-favored
treatment under the Code is so qualified, and any trusts intended to be
exempt from federal income taxation under Section 501 of the Code is so
exempt. Nothing has occurred with respect to the operation of the US
Benefit Plan that could reasonably be expected to cause the loss of
such qualification or exemption or the imposition of any liability,
penalty or tax under ERISA or the Code.
-14-
(c) Except as disclosed in the Disclosure Schedule, none of the Company
Benefit Plans provide for post-employment life or health insurance,
benefits or coverage for any participant or any beneficiary of a
participant, except, with respect to the US Benefit Plans, as may be
required under the Consolidate Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), and at the expense of the participant or
the participant's beneficiary.
(d) The Company and the Subsidiaries have no, and within the last six years
have not had any, defined benefit plans, including any retirement plans
subject to Title IV of ERISA or any multiemployer plans within the
meaning of Section 3(37) of ERISA.
(e) All employer or employee payments, contributions or premiums required
to be remitted, paid to or in respect of each Company Benefit Plan have
been paid or remitted in a timely fashion in accordance with its terms
and all Laws, and no Taxes, penalties or fees are owing or exigible
under any Company Benefit Plan.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (except pursuant
to severance and change of control payments as disclosed in the
Disclosure Schedule) will (i) result in any payment becoming due to any
employee; (ii) increase any benefits otherwise payable under any
Company Benefit Plan; or (iii) result in the acceleration of the time
of payment or vesting of any such benefits other than as required by
applicable Law.
(g) Neither the Company nor any of its Subsidiaries is a party to any
contract, agreement, plan or other arrangement that, individually or
collectively, could give rise to the payment of any amount which would
not be deductible by reason of Section 162(m) or Section 280G of the
Code or would give rise to an excise Tax pursuant to Section 4999 of
the Code.
20. ENVIRONMENTAL
(a) The Company and the Subsidiaries have not caused or permitted nor has
there been any release, emission, spill or discharge, in violation of
any Environmental Laws, of any Hazardous Substances on, in, around, to,
from or in connection with the Leased Real Property or any real
property formerly owned, operated or leased by the Company or the
Subsidiaries.
(b) None of the Leased Real Property (i) has during the time occupied by
the Company or the Subsidiaries or, to the knowledge of the Company, at
any time prior to that, been used as a waste disposal site or as a
licensed or unlicensed landfill, or (ii) has during the time occupied
by the Company or the Subsidiaries had asbestos-containing materials,
PCBs, radioactive substances or aboveground or underground storage
systems, active or abandoned, located on, at or under them except as
disclosed in the Disclosure Schedule.
(c) To the knowledge of the Company, there are no current facts,
circumstances or conditions arising out of or relating to the
operations or ownership of the Company or the Subsidiaries, or of real
property currently or, to the knowledge of the Company, previously
owned or leased by the Company or the Subsidiaries that would
reasonably be expected to result in the Company or the Subsidiaries
incurring material liabilities under Environmental Laws.
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21. ABSENCE OF CERTAIN LIABILITIES
Except as disclosed in the Disclosure Schedule, the Company and the
Subsidiaries, considered on a consolidated basis, do not have any liabilities of
any nature, whether accrued, absolute, fixed, contingent or otherwise, whether
due or to become due and required to be recorded or reflected on a consolidated
balance sheet of the Company under GAAP, except: (a) as reflected or reserved
against or disclosed in the Company's balance sheet as at the financial year
ended September 30, 2004 included in the Company's Public Documents, (b)
liabilities incurred since September 30, 2004 that: (i) have been incurred in
the ordinary course of business consistent with past practice and (ii) have not
had and are not to have, individually or in the aggregate, a Material Adverse
Effect; (iii) and which do not violate, in any respect, any covenants contained
in this Agreement or constitute a breach of any representation or warranty made
in or pursuant to this Agreement. No amount is outstanding under the Credit
Facilities.
22. BOOKS AND RECORDS
The books, records and accounts of the Company (a) have been maintained in
accordance with applicable Law; (b) have been maintained in accordance with good
business practices on a basis consistent with prior years; and (c) fairly,
correctly and accurately set out, record and disclose (i) the financial position
of the Company and the Subsidiaries and (ii) all material financial transactions
relating to each of their businesses. The Company has devised and maintains a
system of internal accounting controls sufficient to provide reasonable
assurances of (a), (b) and (c) above and to permit preparation of financial
statements in conformity with GAAP.
23. MATERIAL CONTRACTS
(a) Each Material Contract of the Company or the Subsidiaries is in full
force and effect and there exists no default or event of default or
event, occurrence, condition or act which, with the giving of notice,
the lapse of time or the happening of any other event or condition,
would become a default, an event of default or would trigger a right to
notice or terminate thereunder.
(b) The Company and any Subsidiary has not violated or breached any of the
terms or conditions of any Material Contract, and, to the knowledge of
the Company, all the covenants to be performed by any other party
thereto have been fully performed. Neither the Company nor any
Subsidiary is a party to any Material Contract which it does not have
the capacity to perform, including the necessary personnel, equipment,
products and supplies.
(c) The Company has made available to Parent and Offeror a true and
complete copy of all Material Contracts. A list of all Material
Contracts of the Company and its Subsidiaries are identified in the
Disclosure Schedule.
(d) Except as disclosed in the Disclosure Schedule, there are no minimum
non-cancellable commitments on any vendor contracts entered into by the
Company or its Subsidiaries.
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24. RESTRICTIONS ON BUSINESS ACTIVITIES
There is no judgment, injunction, order or decree binding upon the Company or
any of the Subsidiaries which has or could reasonably be expected to have the
effect of restricting, prohibiting or materially impairing:
(a) any current or currently proposed business practice of the Company or
any of the Subsidiaries (including the right to use any Intellectual
Property owned or used by the Company or any Subsidiary);
(b) the Company or any of its Subsidiaries from carrying on its business
with any customer or within any geographic region;
(c) any acquisition or disposition of property by the Company or any of the
Subsidiaries; or
(d) the conduct of business by the Company or any of the Subsidiaries as
currently conducted or as currently proposed to be conducted by the
Company or any of the Subsidiaries.
25. FAIRNESS OPINION
The Company has received an opinion from its financial advisor, that, as of the
date hereof, the Offer is fair, from a financial point of view, to Shareholders,
which opinion shall be included in the Directors' Circular.
26. INTERESTED PARTY TRANSACTIONS
Except as disclosed in the Disclosure Schedule, neither the Company nor any of
the Subsidiaries is indebted to any current or former director, officer,
employee, agent or consultant of the Company (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses). No current or
former director, officer, employee, agent or consultant of the Company or any of
the Subsidiaries is a party to any contract, arrangement or understanding or
other transactions required to be disclosed pursuant to applicable Laws.
27. LEASED REAL PROPERTY
Neither the Company nor any of its Subsidiaries owns any Real Property. The
Disclosure Schedule lists all Real Property leased or subleased to the Company
or any of its Subsidiaries as of the date of this Agreement (the "LEASED REAL
PROPERTY"). Neither the Company nor any of its Subsidiaries uses any Real
Property other than the Leased Real Property. The Company has delivered to
Parent true, correct and complete copies of the leases and subleases (as amended
to date) and other agreements for occupancy, including all amendments,
extensions and other modifications thereto as of the date of this Agreement with
respect to each Leased Real Property (each, a "REAL PROPERTY LEASE" and,
collectively, the "REAL PROPERTY LEASES"). Each Real Property Lease is legal,
valid, binding and enforceable, and in full force and effect, provided that
enforcement may be limited by bankruptcy, insolvency and other similar Laws of
general application affecting the enforcement of creditors' rights generally,
specific performance, injunctive relief and other equitable remedies may be
granted only in the discretion of a court of competent jurisdiction. There does
not exist under any Real Property Lease any event of default or event or
condition that, after notice or lapse of time or both, would constitute a
default, violation, breach or event of default thereunder on the part of the
Company or any of its Subsidiaries or, to the knowledge of the Company, any
other party thereto. Neither the Company
-17-
nor any of its Subsidiaries, as applicable, has assigned, transferred, conveyed,
mortgaged, subleased, deeded in trust or encumbered any of its interest in any
of the Real Property Leases.
28. CANCELLATION OF CONTRACTS
Since September 30, 2004, there has been no termination or cancellation of, and
no adverse modification or change in, the business relationship with any
customer or group of customers which individually or in the aggregate provided
more than 5% of the Company's revenue (based on the audited financial statements
of the Company for the period ended September 30, 2004).
29. NO JOINT VENTURE INTERESTS, ETC.
Neither the Company nor any of the Subsidiaries is a partner, beneficiary,
trustee, co-tenant, joint-venturer or otherwise a participant in any
partnership, trust, joint venture, co-tenancy or similar jointly owned business
undertaking and neither the Company nor any of the Subsidiaries has significant
investment interests in any business owned or controlled by any third party.
30. RIGHTS PLAN
The Company has no shareholder rights plan or similar plan contemplated to be
put in place by the Company.
31. FULL DISCLOSURE
The Company has provided to Parent information, including financial, marketing,
sales and operational information, on a historical basis, relating to the
Company and the Subsidiaries. All such information which has been provided to
Parent is true and correct and no material facts have been omitted from that
information which would make such information misleading at the time that it was
provided.
32. SEVERANCE AGREEMENTS
Each of ▇▇. ▇▇▇▇▇▇, Mr. Cristiano and ▇▇. ▇▇▇▇▇ has entered into the severance
and non-competition agreements with the Company, in the form attached as
Schedule F annexed hereto (the "SEVERANCE AGREEMENTS").
33. MANAGEMENT TERMINATION AGREEMENT
Polar Capital Corporation has entered into a termination and non-competition
agreement with the Company with respect to the Management Services Agreement in
the form attached as Schedule G annexed hereto (the "MANAGEMENT TERMINATION
AGREEMENT").
34. PRELUDE
(a) The Prelude Agreement has been amended in the form attached as Schedule
H annexed hereto (the "AMENDED PRELUDE AGREEMENT").
(b) ▇▇▇ ▇. ▇▇▇▇ has entered into an amending agreement with Prelude
Systems, Inc. ("PRELUDE") with respect to the ▇▇▇▇ Employment Agreement
in the form attached as Schedule I annexed hereto (the "▇▇▇▇ AMENDING
AGREEMENT").
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(c) The Undertaking Agreement has been terminated through the entering into
of a terminating agreement in the form attached as Schedule J annexed
hereto (the "UNDERTAKING TERMINATION AGREEMENT").
(d) ▇▇▇ ▇. ▇▇▇▇ has entered into an amending agreement with Speedware USA
Inc. and Lang ▇▇▇▇▇▇▇▇ LLP with respect to the Share Pledge and Escrow
Agreement in the form attached as Schedule K (the "PLEDGE AMENDING
AGREEMENT").
(e) Except as disclosed in the Disclosure Schedule, the Company is not
aware of any pending indemnification claims or matters for which
indemnification may be sought by the Company or Speedware USA Inc. or
other pending disputes under the Prelude Agreement.
SCHEDULE C
DEFINITIONS
(a) "ACQUISITION PROPOSAL" has the meaning ascribed thereto in Subsection
5.2(a);
(b) "AGREEMENT" means this support agreement and all the Schedules hereto;
(c) "AMENDED PRELUDE AGREEMENT" has the meaning ascribed thereto in
paragraph 34(a) of Schedule B;
(d) "▇▇▇▇▇▇▇▇ CHANGE OF CONTROL AGREEMENT" means the change of control and
non-competition agreement and acknowledgement dated as of January 24,
2005 between ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ECS (in the form attached as Schedule L
annexed hereto);
(e) "AUTHORIZATIONS" means, with respect to any Person, any order, permit,
approval, consent, waiver, licence or similar authorization of any
Governmental Authority having jurisdiction over the Person;
(f) "BASE PREMIUM" has the meaning ascribed thereto in Section 5.8;
(g) "BENEFIT DETERMINATION" has the meaning ascribed in Subsection 1.1(a);
(h) "BID CIRCULAR" has the meaning ascribed thereto in Section 1.1(c);
(i) "BOARD OF DIRECTORS" has the meaning ascribed thereto in Recital 2;
(j) "BUSINESS DAY" means any day, other than a Saturday or Sunday, on which
banks are open for business in Toronto, Ontario and Dallas, Texas;
(k) "CBCA" has the meaning ascribed thereto in Section 1.5;
(l) "COBRA" has the meaning ascribed thereto in paragraph 19(c) of Schedule
B;
(m) "CODE" has the meaning ascribed thereto in paragraph 17(g)(i) of
Schedule B;
(n) "COMPANY" has the meaning ascribed thereto in the preamble;
(o) "COMPANY BENEFIT PLANS" means all employee benefit plans (including
"employee benefit plans" within the meaning of Section 3(3) of ERISA),
and all loans to employees, equity or equity-based compensation, stock
purchase, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, life insurance or
accident insurance, bonus, pension, profit sharing, savings, deferred
compensation, incentive, change in control, retention and educational
assistance plans, or similar programs or arrangements, to which the
Company or any Subsidiaries have any obligations, contingent or
otherwise. "COMPANY BENEFIT PLAN" means any such plan;
(p) "COMPANY'S PUBLIC DOCUMENTS" has the meaning ascribed thereto in
paragraph 9 of Schedule B;
-2-
(q) "COMPULSORY ACQUISITION" has the meaning ascribed thereto in Section
1.5;
(r) "CONDITIONAL OPTION EXERCISE" has the meaning ascribed thereto in
Subsection 1.8(a);
(s) "CONDITIONAL WARRANT EXERCISE" has the meaning ascribed thereto in
Subsection 1.8(a);
(t) "CONFIDENTIAL INFORMATION" has the meaning ascribed thereto in
paragraph 13(f) of Schedule B;
(u) "CONFIDENTIALITY AGREEMENT" means the confidentiality agreement entered
into between the Company and Parent;
(v) "CONTRACTS" means the contracts listed in Schedule M;
(w) "COVERAGE PERIOD" has the meaning ascribed thereto in Section 5.8;
(x) "CREDIT FACILITIES" means the existing credit facilities of the Company
or any of its Subsidiaries, being the $1.5 million demand operating
facility that Speedware Ltd. has with the Royal Bank of Canada;
(y) "DIRECTORS CIRCULAR" has the meaning ascribed thereto in Subsection
1.2(b);
(z) "DISCLOSURE SCHEDULE" means the written disclosure letter addressed to
the Offeror and Parent dated the date hereof and delivered to Parent
(i) in draft form two business days prior to the date hereof; and (ii)
in final form contemporaneously with the delivery of this Agreement;
(aa) "ECS" means Enterprise Computer Systems, Inc.;
(bb) "EFFECTIVE TIME" has the meaning ascribed thereto in Section 4.1;
(cc) "EMPLOYMENT AND CONSULTING AGREEMENTS" means the Severance Agreements,
the Management Termination Agreement, the ▇▇▇▇ Agreements, the ▇▇▇▇▇▇▇
Amending Agreement, the Waters Change of Control Agreement and the
▇▇▇▇▇▇▇▇ Change of Control Agreement;
(dd) "ENVIRONMENTAL LAWS" means all Laws relating to the protection of the
environment or natural resources, occupational health and safety, or
the use, storage, disposal, discharge, packaging, transport, handling,
containment, clean-up or other remediation or corrective action of any
Hazardous Substances, in each case, as in effect on the date hereof;
(ee) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any rules or regulations promulgated thereunder;
(ff) "ESCROW HOLDCO CLOSING" has the meaning ascribed thereto in Section
1.7;
(gg) "EXCHANGE ACT" has the meaning ascribed thereto in Subsection 3(d) of
Schedule B;
-3-
(hh) "EXISTING D&O POLICY" has the meaning ascribed thereto in Section 5.8;
(ii) "EXPIRY TIME" has the meaning ascribed thereto in Subsection 1.1(f);
(jj) "FAIRNESS OPINION" has the meaning ascribed thereto in Subsection
1.1(a);
(kk) "GAAP" has the meaning ascribed thereto in paragraph 10 of Schedule B;
(ll) "GOVERNMENTAL AUTHORITY" means any government, regulatory authority,
governmental department, agency, commission, bureau, official,
minister, Crown corporation, court, board, tribunal, dispute settlement
panel or body or other Law, rule or regulation-making entity:
(i) having or purporting to have jurisdiction on behalf of any
nation, province, state or other geographic or political
subdivision thereof; or
(ii) exercising, or entitled or purporting to exercise any
administrative, executive, judicial, legislative, policy,
regulatory or taxing authority or power;
(mm) "HAZARDOUS SUBSTANCES" means all pollutants, contaminants, wastes of
any nature, chemicals, deleterious substances, hazardous material,
toxic or hazardous wastes or any other substance, (including asbestos,
asbestos containing materials, mould, microbial organisms or substances
related thereto), matter or material regulated by or under
Environmental Laws;
(nn) "HOLDCO" has the meaning ascribed thereto in Section 1.7;
(oo) "HOLDCO AGREEMENT" has the meaning ascribed thereto in Section 1.7;
(pp) "HOLDCO ELECTION" has the meaning ascribed thereto in Section 1.7;
(qq) "HOLDCO SHARES" has the meaning ascribed thereto in Section 1.7;
(rr) "HOLDCO SHAREHOLDERS" has the meaning ascribed thereto in Section 1.7;
(ss) "INTELLECTUAL PROPERTY" means all proprietary rights and intellectual
property of any kind, and related priority rights, whether protected,
created or arising under the Laws of Canada or any other jurisdiction
or under any international convention, including:
(i) copyrights and registrations and applications therefor in any
original works, moral rights, and all rights in any works of
authorship not subject to copyright, including, without
limitation, so-called "look and feel", design elements,
ordering of content, graphic user interface, ideas or
concepts, software, programs or applications (in both source
code and object form code), algorithms, databases and data
collections, documentation, technical manuals, compilers,
interpreters and tangible or intangible proprietary
information or material;
(ii) trade-marks and service marks and registrations and
applications therefor (including both registered and
unregistered trade-marks and service marks), designs, logos,
indicia, distinguishing guises, trade dress, trade or brand
-4-
names, business names, any other source or business
identifiers including domain names, and all goodwill
associated with the foregoing;
(iii) trade secrets, confidential information and know-how,
innovations, discoveries, concepts, ideas, processes,
technology, licences, sub-licences, formulas, reports and
studies, data, research designs, research results, records and
notes, prototypes, drawings, product designs and/or
specifications, maskworks, net lists, schematics, inventions
(whether or not patentable), invention records, databases,
customer lists, supplier lists, pricing and cost information,
and business and marketing plans and proposals;
(iv) patents and utility models and applications therefore and all
provisionals, re-issuances, continuations,
continuations-in-part, divisions, revisions, extensions,
renewals, substitutions and re-examinations thereof and all
equivalent or similar rights anywhere in the world in
inventions and discoveries including invention disclosures;
and
(v) contractual rights having equivalent effect.
(tt) "LATEST MAILING DATE" has the meaning ascribed thereto in Subsection
1.1(c);
(uu) "LAWS" means applicable Laws (including common law), statutes, by-laws,
rules, regulations, directives, instructions, orders, ordinances,
protocols, codes, guidelines, treaties, policies, notices, directions,
decrees, judgments, awards or requirements, in each case of any
Governmental Authority;
(vv) "LEASED REAL PROPERTY" has the meaning ascribed thereto in paragraph 27
of Schedule B;
(ww) "LETTER OF INTENT" means the letter of intent dated December 6, 2004 of
Parent, accepted and agreed to by the Company on December 6, 2004;
(xx) "LICENSED INTELLECTUAL PROPERTY" has the meaning ascribed in Subsection
13(a) of Schedule B;
(yy) "LOCK-UP AGREEMENT" has the meaning ascribed thereto in Recital 3;
(zz) "MADE AVAILABLE" means made available by the Company or any of its
Subsidiaries in any of the Company's datarooms set up for Parent in
respect of the transactions contemplated under this Agreement and for
which the information it relates to has been identified by the Company
in the applicable dataroom index provided to Parent prior to the date
hereof;
(aaa) "MAILING DATE" has the meaning ascribed thereto in Subsection 1.1(f);
(bbb) "MANAGEMENT SERVICES AGREEMENT" means the consulting agreement between
Polar Capital Corporation and the Company dated April 24, 2002, as
amended by a letter agreement dated December 1, 2004;
(ccc) "MANAGEMENT TERMINATION AGREEMENT" has the meaning ascribed to it in
paragraph 33 of Schedule B;
-5-
(ddd) "MATCH PERIOD" has the meaning ascribed thereto in Section 5.3(a);
(eee) "MATERIAL ADVERSE EFFECT" means any change, effect, condition, event,
occurrence or state of facts that is, or would reasonably be expected
to be (individually or in the aggregate), material and adverse to the
business, affairs, operations, capitalization, results of operations,
financial condition, rights, assets, prospects or liabilities
(including, without limitation, any contingent liabilities that may
arise through outstanding, pending or threatened litigation) of the
Company and its Subsidiaries taken as a whole;
(fff) "MATERIAL CONTRACT" means any contract of the Company or any Subsidiary
that is, or would reasonably be expected to be, material to the
business, affairs, operations, assets, prospects, condition (financial
or otherwise), or liabilities of the Company and its Subsidiaries taken
as a whole, including (i) any customer contract which provided for, in
the year ended September 30, 2004, or is expected to provide for, in
the year ending September 30, 2005, at least U.S.$100,000 of revenue to
the Company or any Subsidiary in such year; (ii) any supplier or vendor
contract which, in the year ended September 30, 2004, provided for or
is expected to provide for, in the year ending September 30, 2005, at
least U.S.$100,000 of expenditure by the Company or any Subsidiary in
any such year; (iii) any other contract which is not expected to
terminate within one year from the date of this Agreement, but
excluding each such contract which is not, or would not be expected to
be material to the business, affairs, operations, assets, prospects,
condition (financial or otherwise) or liabilities of the Company and
its Subsidiaries taken as a whole; (iv) any grant by or on behalf of
the Company or any Subsidiary to a Person of any right to use any
Intellectual Property owned by or licensed to the Company or any
Subsidiary, whether by licence, sub-licence, agreement, consent,
permission or otherwise, but excluding each such grant which is not, or
would not be expected to be material to the business, affairs,
operations, assets, prospects, condition (financial or otherwise) or
liabilities of the Company and its Subsidiaries taken as a whole; (v)
any grant to the Company or any Subsidiary of a right to use any third
party Intellectual Property, whether by licence, sub-licence,
agreement, consent, permission or otherwise, but excluding each such
grant which is not, or would not be expected to be material to the
business, affairs, operations, assets, prospects, condition (financial
or otherwise) or liabilities of the Company and its Subsidiaries taken
as a whole; (vi) any agreement that limits or restricts the ability of
the Company or any Subsidiaries to use any of the Intellectual Property
owned or used by the Company or any Subsidiary; (vii) any agreement
that limits or restricts the ability of the Company or any Subsidiary
to compete in any geographic area or line of business with any Person
or restricts the Persons to whom the Company or any Subsidiary may sell
products or deliver services; (viii) any loan or credit agreement,
mortgage, indenture, note or other contract or instrument evidencing
indebtedness for borrowed money by the Company or any of its
Subsidiaries or any contract or instrument pursuant to which
indebtedness for borrowed money may be incurred or is guaranteed by the
Company or any of its Subsidiaries; (ix) any contract that restricts
the ability of the Company or any Subsidiary to acquire or dispose of
property; (x) consulting agreements; (xi) indemnification contracts
(including contracts that contain an agreement by the Company or any
Subsidiary to indemnify any other Person against any claim of
infringement or misappropriation of any Intellectual Property); (xii)
any mortgage,
-6-
pledge, security agreement, deed of trust, or other contract granting a
lien or encumbrance on any material assets or property of the Company
or its Subsidiaries; (xiii) financial derivatives master agreement or
confirmation, or futures account opening agreements and/or brokerage
statements, evidencing financial hedging or similar trading activities.
(ggg) "MINIMUM TENDER CONDITION" has the meaning ascribed thereto in
paragraph (a) of Schedule A;
(hhh) "OFFER" has the meaning ascribed thereto in Section 1.1(b);
(iii) "OFFEROR" has the meaning ascribed thereto in the preamble;
(jjj) "OPTIONS" has the meaning ascribed thereto in Recital 1;
(kkk) "PARENT" has the meaning ascribed thereto in the preamble;
(lll) "PARENT'S KNOWLEDGE" has the meaning ascribed thereto in Section 2.5;
(mmm) "PLEDGE AMENDING AGREEMENT" has the meaning ascribed thereto in
paragraph 34(d) of Schedule B;
(nnn) "PERMITS AND REGISTRATIONS" has the meaning ascribed thereto in Section
3(a) of Schedule B;
(ooo) "PERSON" means any individual, sole proprietorship, partnership, firm,
entity, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, Government
Authority, and where the context requires any of the foregoing when
they are acting as trustee, executor, administrator or other legal
representative;
(ppp) "POLICY PERIOD" has the meaning ascribed thereto in Section 5.8;
(qqq) "POLICY Q-27" means the Regulation entitled Policy Statement No. Q-27
-- "Protection of Minority Securityholders in the Course of Certain
Transactions" of the l'Agence nationale d'encadrement du secteur
financier (also known as l'Autorite des marches financiers), as the
same may be amended;
(rrr) "PRELUDE" has the meaning ascribed thereto in paragraph 34(b) of
Schedule B;
(sss) "PRELUDE AGREEMENT" means the share purchase agreement dated as of July
1, 2004 between Speedware USA Inc., the Company, Prelude, ▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and the Prelude Vendors pursuant to which Speedware
USA Inc. acquired all of the shares in the capital of Prelude;
(ttt) "PRELUDE VENDORS" means collectively, the ▇▇▇▇ Family Partnership,
Ltd., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
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(uuu) "REAL PROPERTY" means the immoveable property now or formerly owned or
leased by the Company and/or the Subsidiaries;
(vvv) "REAL PROPERTY LEASE" has the meaning ascribed thereto in paragraph 27
of Schedule B;
(www) "RECONCILED FINANCIAL STATEMENTS" has the meaning ascribed thereto in
Subsection 5.6(b);
(xxx) "REGISTERED INTELLECTUAL PROPERTY" has the meaning ascribed thereto in
paragraph 13(a) of Schedule B;
(yyy) "RULE 61-501" means Ontario Securities Commission Rule 61-501 --
Insider Bids, Issuer Bids, Going Private Transactions and Related Party
Transactions, as the same may be amended;
(zzz) "SECTION 5.3 NOTICE" has the meaning ascribed thereto in Subsection
5.3(a);
(aaaa) "SECURITIES LAWS" means the CBCA, all applicable Canadian provincial
and territorial securities Laws and all applicable United States
federal securities Laws and the applicable "blue sky" or securities
Laws of the states of the United States;
(bbbb) "SELLERS" has the meaning ascribed thereto in Recital 3;
(cccc) "SEVERANCE AGREEMENTS" has the meaning ascribed thereto in paragraph 32
of Schedule B;
(dddd) "SHARE PLEDGE AND ESCROW AGREEMENT" means the share pledge and escrow
agreement dated as of July 1, 2004 among Speedware USA Inc., ▇▇▇ ▇.
▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP;
(eeee) "SHAREHOLDERS" has the meaning ascribed hereto in Recital 2;
(ffff) "SHARES" has the meaning ascribed thereto in Recital 1;
(gggg) "STOCK OPTION PLANS" has the meaning ascribed thereto in Recital 1;
(hhhh) "SUBSEQUENT ACQUISITION TRANSACTION" has the meaning ascribed thereto
in Section 1.5;
(iiii) "SUBSIDIARIES" has the meaning ascribed thereto in paragraph 2 of
Schedule B;
(jjjj) "SUPERIOR PROPOSAL" has the meaning ascribed thereto in Subsection
5.2(a);
(kkkk) "TAKE-UP DATE" has the meaning ascribed thereto in Subsection 1.8(a);
(llll) "TAX ACT" means the Income Tax Act (Canada);
(mmmm) "TAX RETURN" means all Tax returns, reports, elections and other
filings with respect to Taxes;
-8-
(nnnn) "TAXES" means any taxes, charges, fees, levies or other assessments,
including all net income, gross income, capital taxes, gross receipt
taxes, premiums, sales and use, goods and services, harmonized sales,
employer health, ad valorem, transfer, gains, profits, windfall
profits, excise, franchise, real and personal property, gross receipts,
capital stock, production, business and occupation, license, stamp,
custom duties, alternative or add-on minimum taxes, employment,
disability, payroll, Canada or Quebec Pension Plan premiums, severance
or withholding taxes, or other withholding obligations, social security
premiums, workers' compensation premiums, employment insurance or
compensation premiums, other taxes or similar charges of any kind
whatsoever imposed by any Governmental Authority or taxing authority
(domestic or foreign) or for which such entity is responsible and
includes instalments of Taxes and any interest, fines and penalties on
or additions to any such taxes or in respect of a failure to comply
with any requirement relating to any Tax Return;
(oooo) "TSX" has the meaning ascribed thereto in Subsection 4.1(h);
(pppp) "▇▇▇▇▇▇▇ AMENDING AGREEMENT" means the amending agreement and
acknowledgement dated as of January 24, 2005 between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
ECS and the Company which amended the employment and non-competition
agreement dated as of April 17, 2003 between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ECS and
the Company (in the form attached as Schedule N annexed hereto);
(qqqq) "UNDERTAKING AGREEMENT" means the undertaking agreement dated July 1,
2004 by and among ▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Prelude, Speedware USA
Inc. and the Company;
(rrrr) "UNDERTAKING TERMINATION AGREEMENT" has the meaning ascribed thereto in
paragraph 34(c) of Schedule B;
(ssss) "US BENEFIT PLAN" means any Company Benefit Plan maintained primarily
for the benefit of employees situated in the United States;
(tttt) "WARN" has the meaning ascribed thereto in paragraph 15(d) of Schedule
B;
(uuuu) "WARRANT AGREEMENTS" means the warrant certificates W-1 to W-9 each
dated April 24, 2002 issued by the Company, pursuant to which the
holders thereof are entitled to exercise 1,388,889 Warrants at an
exercise price of $1.00 per warrant, 1,388,889 Warrants at an exercise
price of $1.50 per warrant and 1,388,889 Warrants at an exercise price
of $2.00 per warrant;
(vvvv) "WARRANTS" means the 4,166,667 Share purchase warrants issued by the
Company pursuant to the Warrant Agreements;
(wwww) "WATERS CHANGE OF CONTROL AGREEMENT" means the change of control and
non-competition agreement and acknowledgement dated as of January 23,
2005 between ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ECS (in the form attached as Schedule O
annexed hereto);
(xxxx) "▇▇▇▇ AGREEMENTS" means the Amended Prelude Agreement, the ▇▇▇▇
Amending Agreement, the Undertaking Termination Agreement and the
Pledge Amending Agreement;
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(yyyy) "▇▇▇▇ AMENDING AGREEMENT" has the meaning ascribed thereto in paragraph
34(b) of Schedule B; and
(zzzz) "▇▇▇▇ EMPLOYMENT AGREEMENT" means the employment agreement dated as of
October 15, 2003 between ▇▇▇ ▇. ▇▇▇▇ and Prelude, as amended by an
amending agreement dated July 19, 2004.
SCHEDULE D
Polar Enterprise Partners Inc.
Polar Enterprise Partners Limited Partnership
Polar Capital Corporation
Polar Capital Investments Inc.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
3188361 Canada Ltd.
▇▇▇▇ ▇▇▇▇▇▇ Theoret
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
Nick Cristiano
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE E
PROVISIONS TO BE INCLUDED IN HOLDCO AGREEMENT
1. REPRESENTATIONS AND WARRANTIES OF HOLDCO AND THE HOLDCO SHAREHOLDERS
Holdco and each of the Holdco Shareholders hereby jointly and severally
represent and warrant to the Offeror as follows and hereby acknowledge and
confirm that the Offeror is relying on such representations and warranties in
connection with the purchase by the Offeror of the Holdco Shares:
(a) the Shares which are being tendered to the Offer have been held
directly since o, 2005 by Holdco;
(b) the execution and delivery of this Holdco Agreement by the Holdco
Shareholders and Holdco and the completion by the Holdco Shareholders
and Holdco of the transactions contemplated hereby:
(i) will not conflict with, result in the breach of or constitute
a default under the articles, by-laws or resolutions of Holdco
or any agreement, indenture, contract, lease, deed of trust,
licence, option, instrument or other commitment, whether
written or oral (a "Contract") to which the Holdco
Shareholders or Holdco is a party; and
(ii) do not and will not violate any provision of law or
administrative regulation or any judicial or administrative
award, judgment or decree binding upon the Holdco Shareholders
or Holdco;
(c) each of the Holdco Shareholders and Holdco is a resident of Canada for
the purposes of the Tax Act or if any Holdco Shareholder is not a
resident of Canada for such purposes, either: (i) such Holdco
Shareholder has provided a certificate pursuant to subsection 116(2) of
the Tax Act in respect of the sale by such Holdco Shareholder of the
Holdco Shares being tendered to the Offer by such Holdco Shareholder
with a certificate limit that is not less than the value of the
consideration payable by the Offeror to such Holdco Shareholder
pursuant to the Offer; or (ii) such Holdco Shareholder acknowledges
that the Offeror shall be permitted to withhold from the amount payable
to such Holdco Shareholder pursuant to the Offer any amount required to
be remitted by the Offeror pursuant to subsection 116(5) of the Tax Act
or pursuant to applicable tax laws of any other jurisdiction;
(d) this Holdco Agreement has been duly executed and delivered by each of
the Holdco Shareholders and Holdco and is a valid and binding
obligation of each of the Holdco Shareholders and Holdco enforceable
against each of the Holdco Shareholders and Holdco in accordance with
its terms, subject to applicable bankruptcy, insolvency and other laws
affecting the enforcement of creditors' rights generally and provided
that equitable remedies will only be awarded in the discretion of a
court of competent jurisdiction;
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(e) all of the Holdco Shares are registered in the name of, and
beneficially owned by, not more than five Holdco Shareholders free and
clear of all liens, charges, encumbrances, adverse interests, claims
and equities (collectively, "Liens");
(f) no person has any agreement, warrant or option or any right capable of
becoming an agreement, warrant or option for the purchase from any of
the Holdco Shareholders of any of the Holdco Shares or from Holdco of
any shares or other securities of Holdco or of any of the Shares held
by Holdco;
(g) the Holdco Shares are validly issued and outstanding as fully paid and
non-assessable shares in the capital of Holdco and no other shares of
Holdco have been issued or are outstanding;
(h) Holdco is a corporation duly incorporated on or after January 1, 2005
and duly organized and validly existing under the CBCA;
(i) Holdco is the beneficial and registered holder of [INSERT NUMBER]
Shares (the "Subject Shares") all of which are held by Holdco free and
clear of all Liens;
(j) since incorporation the sole activity of Holdco has been the
acquisition and ownership of the Subject Shares;
(k) Holdco owns or holds no property or assets or any interests therein of
any nature or kind whatsoever other than the Subject Shares and Holdco
carries on no business of any kind whatever;
(l) Holdco holds the Subject Shares as capital property for purposes of the
Tax Act;
(m) Holdco has no obligations, indebtedness or liabilities (whether actual
or contingent) of any nature or kind to any person, including without
limitation any liabilities in respect of income, corporate, capital,
goods and services, sales, excise or any other Canadian federal,
provincial, local or foreign taxes, duties or imposts of any nature or
kind whatsoever, or in respect of any judgments, orders, fines,
penalties, awards or decrees of any court, tribunal or governmental,
administrative or regulatory department, commission, board, bureau,
agency or instrumentality, domestic or foreign;
(n) Holdco has no subsidiaries and is not bound by any agreement or
arrangement to acquire or lease in any manner any shares or assets of
any nature or kind whatsoever;
(o) Holdco has no employees and its directors and officers receive no
remuneration or compensation from Holdco;
(p) Holdco is not a party to any agreement of any nature or kind whatsoever
except for the agreement with the Holdco Shareholder pursuant to which
Holdco acquired the Subject Shares (a true and complete copy of which
has been provided to the Offeror);
(q) there are no claims, investigations, actions, suits or proceedings
pending or threatened against or affecting the Holdco Shareholder,
whether at law or in equity or before or by any federal, provincial,
municipal or other governmental or administrative or regulatory
department, commission, board, tribunal, bureau, agency or
instrumentality, domestic or
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foreign, that would adversely affect in any manner the ability of the
Holdco Shareholder to enter into this Holdco Agreement and perform its
obligations hereunder;
(r) there are no claims, investigations, actions, suits or proceedings
pending or threatened against or affecting Holdco, whether at law or in
equity or before or by any federal, provincial, municipal or other
governmental or administrative or regulatory department, commission,
board, tribunal, bureau, agency or instrumentality, domestic or
foreign;
(s) Holdco has duly and timely paid all taxes which are or have been due
and payable by it and duly and timely filed all tax returns required to
be filed with the appropriate taxing or other governmental authority;
(t) Holdco is in full compliance with all laws, rules or regulations to
which Holdco or the Subject Shares may be subject;
(u) the books and records of Holdco fairly and correctly set out and
disclose in all respects, in accordance with generally accepted
accounting principles in Canada consistently applied, the financial
position of Holdco as of the date hereof and all financial and other
transactions of Holdco have been accurately recorded in such books and
records;
(v) the corporate records and minute books of Holdco contain complete and
accurate minutes of all meetings of the directors and shareholders of
Holdco held since its incorporation and all such meetings were duly
called and held and the share certificate books, register of
shareholders, register of transfers and register of directors and
officers of Holdco are complete and accurate;
(w) the Holdco Shareholders acknowledge that where there is more than one
Holdco Shareholder, no Holdco Shareholder shall be entitled to withdraw
any Holdco Shares tendered to the Offer unless the notice of withdrawal
is duly executed by all of the Holdco Shareholders and such Holdco
Shares are otherwise withdrawn in compliance with all provisions of the
Offer relating to withdrawals.
2. COVENANTS
(a) Holdco Documents. The Holdco Shareholder and Holdco shall forthwith
make available to the Offeror and its authorized representatives all
minute books, share certificate books, share registers, books of
account, accounting records, corporate documents and all other books or
records, documents, tax elections, information or data relating to
Holdco (collectively the "Holdco Documents"). At the Escrow Holdco
Closing, all of the Holdco Documents shall be delivered to the Offeror
by Holdco Shareholder and Holdco, together with the resignations of all
of the directors and officers of Holdco.
(b) Tax Returns. The Holdco Shareholder shall prepare and file, at its own
cost and expense, all tax returns of Holdco in respect of all periods
ending on or prior to the date the purchase and sale of the Holdco
Shares becomes effective, subject to the Offeror's rights to approve
all such returns as to form and substance.
3. INDEMNIFICATION
(a) Obligations to Indemnify. The Holdco Shareholder agrees to indemnify
and save harmless, on an after-tax basis, the Offeror and Parent from
all claims, demands,
-4-
proceedings, losses, damages, liabilities, deficiencies, costs and
expenses (including, without limitation, all legal and other
professional fees and disbursements, interest, penalties and amounts
paid in settlement) (collectively "Losses") suffered or incurred by the
Offeror as a result of or arising directly or indirectly out of or in
connection with any breach by the Holdco Shareholder or Holdco of any
representation, warranty, obligation or covenant of the Holdco
Shareholder or Holdco contained in this Holdco Agreement. The Offeror
agrees to indemnify and save harmless, on an after-tax basis, Holdco
Shareholder from all Losses suffered or incurred by the Holdco
Shareholder as a result of or arising directly or indirectly out of or
in connection with any breach by the Offeror of any representation,
warranty, obligation or covenant of the Offeror contained in this
Holdco Agreement.
(b) Notice of Claim. In the event that a party (the "Indemnified Party")
shall become aware of any claim, proceeding or other matter (a "Claim")
in respect of which another party (the "Indemnifying Party") agreed to
indemnify the Indemnified Party pursuant to this Holdco Agreement, the
Indemnified Party shall promptly give written notice thereof to the
Indemnifying Party. Such notice shall specify whether the Claim arises
as a result of a claim by a person against the Indemnified Party (a
"Third Party Claim") or whether the Claim does not so arise (a "Direct
Claim"), and shall also specify with reasonable particularity (to the
extent that the information is available) the factual basis for the
Claim and the amount of the Claim, if known. If, through the fault of
the Indemnified Party, the Indemnifying Party does not receive notice
of any Claim in time to contest effectively the determination of any
liability susceptible of being contested, the Indemnifying Party shall
be entitled to set off against the amount claimed by the Indemnified
Party the amount of any Losses incurred by the Indemnifying Party
resulting directly from the Indemnified Party's failure to give such
notice on a timely basis.
(c) Direct Claims. With respect to any Direct Claim, following receipt of
notice from the Indemnified Party of the Claim, the Indemnifying Party
shall have 30 days to make such investigation of the Claim as is
considered necessary or desirable. For the purpose of such
investigation, the Indemnified Party shall make available to the
Indemnifying Party the information relied upon by the Indemnified Party
to substantiate the Claim, together with all such other information as
the Indemnifying Party may reasonably request. If both parties agree at
or prior to the expiration of such 30-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such
Claim, the Indemnifying Party shall immediately pay to the Indemnified
Party the full agreed upon amount of the Claim, failing which the
matter shall be referred to binding arbitration in accordance with the
Arbitration Act, 1991 (Ontario).
(d) Third Party Claims. With respect to any Third Party Claim, the
Indemnified Party shall have the exclusive right, at the expense of the
Indemnifying Party, to contest, settle or pay the amount claimed and to
retain counsel and other experts or advisers selected by the
Indemnified Party in its sole discretion in connection therewith;
provided, however, that the Indemnified Party shall not settle any
Third Party Claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed;
provided, however, that the Indemnifying Party shall remain liable for
the settlement amount even if any such consent is not obtained for any
reason. If the Indemnified Party elects to assume such control, the
Indemnifying Party shall have the right, at its sole expense, to
participate in the negotiation, settlement or defence of such
-5-
Third Party Claim. If any Third Party Claim is of a nature such that
the Indemnified Party is required by applicable law to make a payment
to any person (a "Third Party") with respect to the Third Party Claim
before the completion of settlement negotiations or related legal
proceedings, the Indemnified Party may make such payment and the
Indemnifying Party shall, forthwith after demand by the Indemnified
Party, reimburse the Indemnified Party for such payment. If the amount
of any liability of the Indemnified Party under the Third Party Claim
in respect of which such payment was made, as finally determined, is
less than the amount that was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified Party shall, forthwith after receipt
of the difference from the Third Party, pay the amount of such
difference to the Indemnifying Party.
(e) Payment and Cooperation. The Indemnifying Party shall pay to the
Indemnified Party all amounts for which the Indemnifying Party is
liable pursuant to this section promptly after the Indemnified Party
incurs the Loss in respect of which such liability arises. The
Indemnified Party and the Indemnifying Party shall co-operate fully
with each other with respect to Third Party Claims, and shall keep each
other fully advised with respect thereto (including supplying copies of
all relevant documentation promptly as it becomes available).
4. SURVIVAL
The representations, warranties and covenants of the Holdco Shareholders shall
survive the sale of the Holdco Shares to the Offeror.
SCHEDULE F
See attached.
SCHEDULE G
See attached.
SCHEDULE H
See attached.
SCHEDULE I
See attached.
SCHEDULE J
See attached.
SCHEDULE K
See attached.
SCHEDULE L
See attached.
SCHEDULE M
Reseller Agreement between Optio Software, Inc. and Prelude dated August 13,
1998
IBM Independent Software Vendor (ISV) Agreement between the Company and IBM
Corporation dated June 1, 2001
SCHEDULE N
See attached.
SCHEDULE O
See attached.