EXHIBIT 10.24
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of
the 26th of June, 2002, by and among (i) MDSI Mobile Data Solutions, Inc., a
Canadian corporation ("MDSI"); (ii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") and ▇▇▇▇ ▇.
▇▇▇▇▇▇ ("▇▇▇▇▇▇," and collectively with ▇▇▇▇▇▇▇▇, the "Shareholders"), residents
of the State of Missouri; and (iii) Connectria Corporation, a Missouri
corporation ("Connectria").
RECITALS
A. Pursuant to an Agreement and Plan of Reorganization, dated as of May
9, 2000 (the "Reorganization Agreement"), MDSI acquired all of the outstanding
voting securities of Connectria by a merger of a subsidiary of MDSI with and
into Connectria as the surviving corporation (the "Merger") in a reorganization
pursuant to Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
B. The Shareholders, who collectively owned 97.6% of the outstanding
common stock of Connectria immediately prior to the Merger, received an
aggregate of 824,700 shares of common stock of MDSI as the consideration for the
Merger (the "MDSI Shares").
C. MDSI and the Shareholders have reached a mutual understanding
concerning the unwinding of MDSI's acquisition of Connectria, through (i) a
distribution by MDSI to the Shareholders of one hundred percent (100%) of the
outstanding voting securities of Connectria and (ii) the transfer by the
Shareholders to MDSI of the MDSI Shares, in a transaction intended to qualify as
a tax-deferred transaction pursuant to Section 355 of the Code.
D. MDSI and the Shareholders have reached additional understandings
concerning (a) the terms of a mutual release among the parties, (b) the existing
indebtedness of Connectria to MDSI, (c) certain indebtedness of the Shareholders
to MDSI, (d) the options for common stock of MDSI held by the Shareholders, and
(e) certain other matters, all as more specifically set forth in this Agreement
or in the other agreements having their forms attached as exhibits to this
Agreement.
NOW, THEREFORE, in consideration of these premises, the representations,
warranties, covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Amendment of Connectria's Articles of Incorporation and Bylaws. Within
five (5) days after the date of this Agreement, MDSI shall take all appropriate
action to cause Article III of the Articles of Incorporation of Connectria to be
amended (i) to authorize the issuance of up to one hundred thousand (100,000)
shares of preferred stock, par value .01 per share (the "Preferred Stock"), and
(ii) to authorize the Board of Directors of Connectria, by resolution or
resolutions, at any time and from time to time, to divide and establish any or
all of the unissued shares of Preferred Stock into one or more series and,
without limiting the generality of the foregoing, to fix and determine the
designation of each such share, the number of shares which shall constitute such
series and certain powers, preferences and relative participating, optional or
other special rights and qualifications, limitations and restrictions of the
shares of each series so
established (such amendment, the "Charter Amendment"). In addition, the parties
hereto shall cause the bylaws of Connectria to be amended to include a new
Article __ containing restrictions on the transferability of shares of stock of
Connectria, such Article to be in form and substance mutually satisfactory to
the parties hereto.
2. Establishment of Series of Nonvoting Preferred Stock. Concurrently
with or immediately following the proper filing of the Charter Amendment with
the office of the Secretary of State of Missouri, MDSI shall cause Connectria to
establish, by all appropriate board action, a series of Preferred Stock, with a
maximum issue of 50,380 shares, to be known as the "Series A Nonvoting Preferred
Stock," and having the preferences and relative rights, and qualifications,
limitations and restrictions, set forth in Exhibit A attached to this Agreement
(the "Series A Designations").
3. Capital Contributions and Warrant. Immediately following the proper
filing of the Series A Designations with the office of the Secretary of State of
Missouri, MDSI shall take all appropriate action to contribute to the capital of
Connectria the principal amount of the $2,519,000 indebtedness of Connectria
(the "Contributed Debt"). In recognition of such contribution, MDSI shall cause
Connectria to issue to MDSI a warrant to purchase up to 50,380 shares of Series
A Nonvoting Preferred Stock, such warrant to have the exercise price, rights,
expiration date and other terms set forth in Exhibit B attached to this
Agreement (the "Warrant"). Concurrently therewith, MDSI shall contribute to the
capital of Connectria all of MDSI's right, title and interest in and to its
notes receivable from ▇▇▇▇▇▇▇▇ (in the principal amount of $150,000) and from
▇▇▇▇▇▇ (in the principal amount of $100,000), and no additional securities of
Connectria shall be issued to MDSI in respect of such contribution.
4. Working Capital Loan and Services Agreement. Immediately prior to the
Closing (as defined in Section 5 below), MDSI shall take the following actions:
(a) MDSI shall lend to Connectria the sum of Two Hundred Fifty
Thousand Dollars ($250,000), which loan (i) shall be evidenced by a promissory
note of Connectria having the interest rate, repayment terms and other terms set
forth in Exhibit C attached to this Agreement (the "MDSI Note"), and (ii) shall
be secured by a security interest in the assets of Connectria which shall be
subordinate and junior in right of payment to any present and future
indebtedness of Connectria for borrowed money to a financial institution taking
a security interest or other lien on substantially all of the assets of
Connectria, pursuant to a Subordinated Security Agreement in the form attached
as Exhibit D to this Agreement (the "Subordinated Security Agreement").
(b) MDSI and Connectria shall enter into an agreement for hosting
services to be provided by Connectria to MDSI (and providing for the return of
certain servers and accounting systems from Connectria to MDSI), having a term
of five (5) years and otherwise having the terms set forth in a mutually agreed
upon Services Agreement at terms no less favorable than those provided to any
other customer of Connectria for such services, and MDSI shall pay to Connectria
the sum of $250,000 in prepayment of the services to be provided to MDSI by
Connectria during the term of the Services Agreement.
5. Exchange at Closing. Subject to the terms and conditions set forth in
this Agreement, on July 15, 2002 or such other date (no later than July 31,
2002) as the parties shall
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agree (the "Closing Date"), the following actions shall be taken concurrently by
the Shareholders and MDSI, such actions to be effective as of June 30, 2002 (the
"Effective Date") (such actions are collectively referred to as the "Closing"):
(a) ▇▇▇▇▇▇▇▇ shall surrender to MDSI for cancellation (i)
certificates representing 549,800 shares of common stock of MDSI ("MDSI Common
Stock") owned by ▇▇▇▇▇▇▇▇, and (ii) options to purchase 68,725 shares of MDSI
Common Stock (of a total of 137,450 options held by him).
(b) ▇▇▇▇▇▇ shall surrender to MDSI for cancellation (i) certificates
representing 274,900 shares of MDSI Common Stock owned by ▇▇▇▇▇▇, and (ii)
options to purchase 34,363 shares of MDSI Common Stock (of a total of 68,725
options held by him).
(c) In exchange for the shares of MDSI Common Stock and options
therefor surrendered by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, MDSI shall distribute to ▇▇▇▇▇▇▇▇
4,100,000 shares of common stock, par value $0.01 per share, of Connectria
("Connectria Common Stock"), and shall distribute to ▇▇▇▇▇▇ 2,050,000 shares of
Connectria Common Stock.
(d) ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall resign all positions they hold as an
officer or director of MDSI.
(e) The parties hereto shall enter into (i) a Confidentiality and
Noncompetition Agreement in substantially the form attached as Exhibit F to this
Agreement, pursuant to which Connectria and the Shareholders will agree to
refrain from competing with MDSI for a period of two (2) years, and (ii) a
Mutual Release in substantially the form attached as Exhibit G to this
Agreement.
6. Representations and Warranties of MDSI. To induce the Shareholders to
enter into this Agreement and to exchange their shares of MDSI Common Stock for
Connectria Common Stock, MDSI hereby represents and warrants to the Shareholders
and Connectria as of the Closing as follows:
(a) MDSI is a corporation duly organized, validly existing and in
good standing under the laws of Canada and has the corporate power and authority
to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution and delivery by MDSI of this Agreement and the other
agreements, instruments and documents to be executed by MDSI in connection
herewith, and the performance by MDSI of its obligations hereunder and
thereunder, have been duly authorized and approved by all requisite action of
the Board of Directors of MDSI in accordance with the charter and bylaws of MDSI
and applicable law. This Agreement, and the other agreements, instruments and
documents to be executed by MDSI in connection herewith constitute and shall
constitute the valid and binding obligations of MDSI, enforceable against MDSI
in accordance with their respective terms.
(b) Since the Merger, except for the amendment to the articles of
incorporation of Connectria referenced in Section 1 above, no amendment to the
articles of incorporation or bylaws of Connectria has been effected or approved
by the Board of Directors of MDSI or, to the knowledge of MDSI, by Connectria.
To the knowledge of MDSI, MDSI has delivered to the Shareholders all minutes of
meetings of the Board of Directors and shareholder
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of Connectria since the date of the Merger, which minutes, to the knowledge of
MDSI, contain an accurate record of all formal actions taken by the Board of
Directors and shareholder of Connectria during such period.
(c) MDSI is the record and beneficial owner of 6,150,000 shares of
common stock of Connectria, all of which are owned by MDSI free and clear of all
liens, security interests, claims, encumbrances, options, transfer restrictions
and other rights of third parties claiming by, through or under MDSI. Since the
Merger, to the knowledge of MDSI, except as contemplated by this Agreement,
Connectria has not issued or authorized any additional shares of stock of any
class of Connectria, or granted to any person any option, warrant, preemptive
right, convertible security or other right to purchase any equity security of
Connectria, nor has Connectria granted or authorized any "phantom" stock rights
or similar participation interests in the profits of Connectria.
(d) Neither MDSI nor, to the knowledge of MDSI, Connectria is a party
to, subject to or bound by any note, bond, mortgage, indenture, deed of trust,
agreement, lien, contract or other instrument or obligation or any statute, law,
rule, regulation, judgment, order, writ, injunction or decree of any court,
administrative or regulatory body, governmental agency, arbitrator, mediator or
similar body, franchise or license, which would conflict with or be breached or
violated or the obligations thereunder accelerated or increased (whether or not
with notice or lapse of time or both), by the execution, delivery or performance
by MDSI or Connectria of this Agreement or would prevent the carrying out of the
transactions contemplated hereby. No waiver or consent of any third person or
governmental authority (except for a consent of the Toronto Stock Exchange to be
obtained by the Closing) is required for the execution of this Agreement or the
consummation of the transactions contemplated hereby by MDSI or, to the
knowledge of MDSI, Connectria.
(e) Attached hereto as Schedule 6(e) are the balance sheet (the
"Balance Sheet") of Connectria as of May 31, 2002, and the related statements of
income and retained earnings for the period ended May 31, 2002 (collectively,
the "Unaudited Financial Statements"). The Unaudited Financial Statements have
been prepared in accordance with the MDSI's regular internal accounting
practices, applied on a consistent basis. To the knowledge of MDSI, the
Unaudited Financial Statements fairly present in all material respects the
financial position and the results of operations and changes in financial
position of Connectria for the respective periods indicated and do not omit to
state or reflect any material fact concerning Connectria required to be stated
or reflected therein or necessary to make the statements therein not misleading.
(f) There is no suit, claim, action or proceeding now pending against
MDSI or, to the knowledge of MDSI, against Connectria, or, to the best knowledge
of MDSI, threatened against MDSI or Connectria, nor has MDSI received written
notice that such a suit, claim, action or proceeding is threatened, before any
court, grand jury, administrative or regulatory body, governmental agency,
arbitration or mediation panel or similar body, to which MDSI or Connectria is a
party or which may result in any judgment, order, decree, liability, award or
other determination which will, or could, have any material adverse effect on
Connectria or on the transactions contemplated by this Agreement.
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(g) Except as set forth on Schedule 6(g) attached hereto, neither
MDSI nor any subsidiary of MDSI is a party to any agreement with Connectria, or
holds any claim, debt or other obligation of Connectria to MDSI or any such
subsidiary, or furnishes goods or services to Connectria, or owns or has other
rights with respect to assets that are used by Connectria in the conduct of its
business.
(h) Since the Merger, to the knowledge of MDSI, Connectria has not
paid or declared any dividends or other distributions in respect of the
Connectria Common Stock or entered into any agreement to take any such action.
(i) Except for this Agreement, neither MDSI nor, to the knowledge of
MDSI, Connectria is a party to or bound by any agreement, undertaking or
commitment (i) to cause Connectria to merge or consolidate with, or acquire all
or substantially all of the property and assets of, any other corporation or
person or any division thereof, (ii) to sell, lease or exchange all or
substantially all of the property and assets of Connectria to any other person,
or (iii) respecting any other material transactions involving Connectria or the
business or assets of Connectria, not in the ordinary course of business.
(j) To the knowledge of MDSI, no representation or warranty by MDSI
in this Agreement or in any Exhibit, Schedule, certificate or other agreement,
instrument or document furnished or to be furnished to the Shareholders pursuant
to this Agreement contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact, necessary to make the
statements herein or therein not misleading.
7. Representations and Warranties of Shareholders. To induce MDSI to
enter into this Agreement and to exchange the shares of Connectria Common Stock
for MDSI Common Stock, the Shareholders hereby represent and warrant to MDSI as
of the Closing as follows:
(a) This Agreement, and the other agreements, instruments and
documents to be executed by the Shareholders in connection herewith constitute
and shall constitute the valid and binding obligations of the Shareholders,
enforceable against each of them in accordance with their respective terms.
(b) ▇▇▇▇▇▇▇▇ is the record and beneficial owner of 549,800 shares of
MDSI Common Stock and options to acquire 137,450 shares of MDSI Common Stock,
all of which is owned by ▇▇▇▇▇▇▇▇ free and clear of all liens, security
interests, claims, encumbrances, options, transfer restrictions and other rights
of third parties, other than restrictions imposed by MDSI that will terminate as
part of the Closing under this Agreement. ▇▇▇▇▇▇ is the record and beneficial
owner of 274,900 shares of MDSI Common Stock and options to acquire 68,725
shares of MDSI Common Stock, all of which is owned by ▇▇▇▇▇▇ free and clear of
all liens, security interests, claims, encumbrances, options, transfer
restrictions and other rights of third parties, other than restrictions imposed
by MDSI that will terminate as part of the Closing under this Agreement.
(c) The Shareholders have advised MDSI of all information acquired
prior to the date of this Agreement, and the Shareholders will advise MDSI of
all information
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they obtain prior to Closing, which the Shareholders believe results, or could
reasonably be expected to result, in a breach of any representation or warranty
of MDSI set forth herein..
(d) Neither ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇▇ is a party to, subject to or bound by
any note, bond, mortgage, indenture, deed of trust, agreement, lien, contract or
other instrument or obligation or any statute, law, rule, regulation, judgment,
order, writ, injunction or decree of any court, administrative or regulatory
body, governmental agency, arbitrator, mediator or similar body, franchise or
license, which would conflict with or be breached or violated or the obligations
thereunder accelerated or increased (whether or not with notice or lapse of time
or both), by the execution, delivery or performance by ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ of
this Agreement or would prevent the carrying out of the transactions
contemplated hereby. No waiver or consent of any third person or governmental
authority is required for the execution of this Agreement or the consummation of
the transactions contemplated hereby by ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇.
(e) ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ acknowledge that they have been actively
managing the business of Connectria since the Merger, and are familiar with the
operations of the business of Connectria. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ are acquiring the
Connectria Common Stock for their own accounts, and have no present intention of
distributing the Connectria Common Stock in violation of applicable securities
laws. In determining whether to proceed with this transaction, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ are relying solely on their own knowledge of Connectria and its business
and on the warranties of MDSI set forth in Section 6 of this Agreement.
(f) The Shareholders represent and warrant that they:
(i) have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an
investment in the Connectria Common Stock and are able to bear the economic
risk of loss of their entire investment;
(ii) they have been provided with access to such information
concerning Connectria as they have considered necessary or appropriate in
connection with their investment decision to acquire the Connectria Common
Stock;
(iii) they understand that the Connectria Common Stock has not
been and will not be registered under the Securities Act of 1933, as
amended (the "Securities Act") or the securities laws of any state of the
United States and that the distribution by MDSI of the Connectria Common
Stock to the Shareholders is being made in reliance on an exemption from
such registration requirements; and
(iv) they are "accredited investors" within the meaning of Rule
501 of Regulation D under the Securities Act.
(g) Since the Merger, except for the amendment to the articles of
incorporation of Connectria referenced in Section 1 above, to the knowledge of
the Shareholders no amendment to the articles of incorporation or bylaws of
Connectria has been effected or approved by the Board of Directors of
Connectria. To the knowledge of the Shareholders, the Shareholders have
delivered to MDSI all minutes of meetings of the Board of Directors of
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Connectria since the date of the Merger, which minutes contain an accurate
record of all formal actions taken by the Board of Directors of Connectria
during such period.
(h) Since the Merger, to the knowledge of the Shareholders, except as
contemplated by this Agreement, Connectria has not issued or authorized any
additional shares of stock of any class of Connectria, or granted to any person
any option, warrant, preemptive right, convertible security or other right to
purchase any equity security of Connectria, nor has Connectria granted or
authorized any "phantom" stock rights or similar participation interests in the
profits of Connectria.
(i) To the knowledge of the Shareholders, Connectria is not a party
to, subject to or bound by any note, bond, mortgage, indenture, deed of trust,
agreement, lien, contract or other instrument or obligation or any statute, law,
rule, regulation, judgment, order, writ, injunction or decree of any court,
administrative or regulatory body, governmental agency, arbitrator, mediator or
similar body, franchise or license, which would conflict with or be breached or
violated or the obligations thereunder accelerated or increased (whether or not
with notice or lapse of time or both), by the execution, delivery or performance
by MDSI or Connectria of this Agreement or would prevent the carrying out of the
transactions contemplated hereby. No waiver or consent of any third person or
governmental authority is required for the execution of this Agreement or the
consummation of the transactions contemplated hereby by Connectria.
(j) Except as noted in Schedule 6(g) attached hereto, to the
knowledge of the Shareholders, neither the Shareholders nor Connectria is a
party to or has entered into any agreement, undertaking or commitment under
which (i) MDSI or any of its subsidiaries has or may have any commitment,
liability or obligation, contingent or otherwise or (ii) any third party
acquired or has the right to acquire any interest in, or any lien claim or
encumbrance upon, any property, right, asset or interest of MDSI or any of its
subsidiaries.
(k) To the knowledge of the Shareholders, the general ledger of
Connectria as of May 31, 2002 furnished by Connectria to MDSI has been prepared
consistent with Connectria's past practice, is in accordance with the books and
records of Connectria and does not omit to state or reflect any material item
required to be stated or reflected therein or necessary to make such ledger not
misleading.
(l) There is no suit, claim, action or proceeding now pending against
Connectria or, to the knowledge of the Shareholders, threatened against or
Connectria, nor have Connectria or the Shareholders received written notice that
such a suit, claim, action or proceeding is threatened, before any court, grand
jury, administrative or regulatory body, governmental agency, arbitration or
mediation panel or similar body, to which Connectria is a party or which may
result in any judgment, order, decree, liability, award or other determination
which will, or could, have any material adverse effect on Connectria or on the
transactions contemplated by this Agreement.
(m) To the knowledge of Shareholders, no representation or warranty
by the Shareholders in this Agreement or in any Exhibit, Schedule, certificate
or other agreement, instrument or document furnished or to be furnished to MDSI
pursuant to this
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Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact, necessary to make the statements
herein or therein not misleading.
8. MDSI's Conditions to Closing. The obligation of MDSI to proceed with
the Closing shall be subject to the fulfillment of the following conditions to
the satisfaction of MDSI:
(a) The representations and warranties of the Shareholders herein
contained shall be true and correct in all material respects on the Closing Date
as if made on such date, and the Shareholders shall have performed all covenants
and obligations and complied with all conditions required by this Agreement to
be performed or complied with by them on or prior to the Closing.
(b) Each of the Shareholders shall have delivered all documents
required to be delivered by them at Closing, as more specifically set forth in
this Agreement, in each case in form and substance consistent with this
Agreement or otherwise reasonably satisfactory to MDSI.
(c) All necessary consents, authorizations and approvals of, and all
filings, recordings and registrations with, any governmental authority or
regulatory body that are required as a condition to the consummation of the
transactions contemplated by this Agreement (including, but not limited to, the
approval of the Toronto Stock Exchange) shall have been obtained or made.
(d) This Agreement and the transactions contemplated hereby shall
have been approved by the Board of Directors of MDSI and Connectria, and the
Exchange shall have been approved by the Toronto Stock Exchange.
9. Shareholders' Conditions to Closing. The obligation of the
Shareholders to proceed with the Closing shall be subject to the fulfillment of
the following conditions to the satisfaction of the Shareholders:
(a) The representations and warranties of MDSI herein contained shall
be true and correct in all material respects on the Closing Date as if made on
such date, and MDSI shall have performed all covenants and obligations and
complied with all conditions required by this Agreement to be performed or
complied with by it on or prior to the Closing.
(b) MDSI shall have delivered all documents required to be delivered
by MDSI at Closing, as more specifically set forth in this Agreement, in each
case in form and substance consistent with this Agreement or otherwise
reasonably satisfactory to Shareholders.
(c) MDSI shall have delivered to Shareholders final executed copies
of all documents executed and delivered in order to complete the transactions
described in Sections 1 through 4 of this Agreement, all of which shall be in
form and substance consistent with this Agreement or otherwise reasonably
satisfactory to Shareholders.
(d) All necessary consents, authorizations and approvals of, and all
filings, recordings and registrations with, any governmental authority or
regulatory body that are
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required as a condition to the consummation of the transactions contemplated by
this Agreement shall have been obtained or made.
10. Additional Covenants and Acknowledgments of the Parties.
(a) Between the date of this Agreement and the Closing Date, MDSI and
the Shareholders shall cooperate to cause Connectria to operate only in the
ordinary course of business consistent with past practice, and each of MDSI and
the Shareholders shall continue to provide the same level of services and
assistance as has been provided by such parties to Connectria in the period
preceding the date of this Agreement. Neither MDSI nor the Shareholders shall
take, or cause Connectria to take, any action to distribute any cash dividends
or other assets to MDSI or to repay any indebtedness of Connectria to MDSI, or
any other action that is inconsistent with the purposes of this Agreement or
that could reasonably be expected to have an adverse impact on Connectria or its
assets, liabilities, condition (financial or otherwise), business or prospects.
(b) Prior to Closing, each party shall use all commercially
reasonable efforts to fulfill the conditions to Closing which are reasonably
within such party's control.
(c) Prior to carrying out the actions required in Sections 1 through
4 of this Agreement, MDSI shall furnish to Shareholders for their review and
approval copies of any document or instruments to be executed by MDSI or
Connectria in connection therewith (to the extent the forms of such documents or
instruments are not attached as exhibits to this Agreement), and the
Shareholders shall not unreasonably withhold or delay their approval of such
documents.
(d) From and after Closing, the Shareholders shall cause Connectria
to use all commercially reasonable efforts to terminate, or to obtain the
release of MDSI from, the $1,000,000 in loan guarantees and equipment leases
made by MDSI on behalf of Connectria, as identified in Schedule 6(g) attached
hereto.
(e) The parties acknowledge that the transactions occurring at
Closing are intended to qualify as a tax-deferred transaction under Section 355
of the Internal Revenue Code of 1986, as amended (the "Code"), and the parties
shall not take any position on any tax return or information return that is
inconsistent with such position. Notwithstanding the foregoing, however, each
party acknowledges that such party is relying on its or his own tax advisors in
connection with, and is solely responsible for its or his respective tax
consequences arising from, the transactions contemplated by this Agreement, and
no party makes any warranty or representation with respect to the tax
consequences of such transactions to any party to this Agreement. The parties
will continue to take the position on all tax returns and information returns
that the Merger was a tax-deferred reorganization under Section 368(a) of the
Code.
(f) Connectria shall withhold all amounts required to be withheld
under United States tax withholding laws with respect to (i) the stated five
percent (5%) dividend payments on the Series A Nonvoting Preferred Stock, (ii)
interest payments under the MDSI Note, and (iii) other payments if (and only to
the extent that) changes in applicable tax laws, in published interpretations of
any applicable taxing authority or court, or in the United States-Canada Income
Tax Treaty subsequent to the date of this Agreement impose a legal obligation
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on Connectria to withhold. If any amounts are withheld by Connectria on any
payment or transaction contemplated by this Agreement, the Warrant or the Series
A Nonvoting Preferred Stock (other than amounts permitted to be withheld by
Connectria as provided in clauses (i), (ii) and (iii) of the immediately
preceding sentence), Connectria shall bear the full burden of such withholding
tax, and any such payment to MDSI shall not be reduced for such withholding tax.
(g) MDSI shall not withhold any amount under Canadian tax withholding
laws with respect to the distribution of Connectria Common Stock to ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ in exchange for their shares of and options for MDSI Common Stock
pursuant to the transactions contemplated by this Agreement, except only to the
extent changes in applicable tax laws and interpretations or in the United
States-Canada Income Tax Treaty subsequent to the date of this Agreement impose
a legal obligation on MDSI to withhold); and if any amounts are required to be
withheld by MDSI on any such distribution or transaction contemplated by this
Agreement (other than amounts permitted to be withheld by MDSI under the
foregoing exception), MDSI shall bear the full burden of such withholding tax
and any such distribution to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall not be reduced for such
withholding tax.
(h) MDSI acknowledges and agrees that (i) the fair value of the
Warrant to be received by it pursuant to this Agreement is not less than the
fair value of the Contributed Debt, and (ii) the fair value of the Connectria
Common Stock to be distributed to the Shareholders pursuant to this Agreement
has been valued by MDSI not to exceed Four Million Eight Hundred Thousand
Dollars ($4,800,000). No party to this Agreement shall take any position on any
tax return or information return that is inconsistent with the immediately
preceding sentence. Each party to this Agreement acknowledges and agrees that
the consideration paid and to be paid to such party under this Agreement has a
fair value reasonably equivalent to the value of the securities and other rights
to be surrendered by such party under this Agreement.
(i) Connectria acknowledges and agrees that the trademark and service
▇▇▇▇ "eService," the domain "▇▇▇▇▇▇▇▇.▇▇▇" and the items of equipment listed on
Schedule 10(i) hereto are the property of MDSI and all items of equipment shall
be returned to MDSI upon request and will be maintained in accordance with the
Services Agreement.
11. Taxes, Returns and Adjustments.
(a) MDSI, at its expense (to the extent such expense is not reflected
in the Closing Financial Statements, as defined below), shall be responsible for
causing the preparation, signing and filing of all of Connectria's tax returns
for all tax periods ending after the closing date of the Merger and on or before
the Effective Date to the extent such tax returns are due prior to the Effective
Date (with regard to extensions). Such tax returns shall be prepared
consistently with MDSI's and Connectria's historical practices. MDSI shall
permit the Shareholders, or their designee, to review and comment on, prior to
filing, any such tax return. The preparation and filing of any U.S. federal,
state, foreign or local government tax return for Connectria for (i) any tax
period ending prior to the Effective Date to the extent such tax return is due
after the Effective Date (taking into account any valid extensions), and (ii)
any tax period that straddles the Effective Date, shall be the responsibility of
Connectria and the Shareholders. Connectria shall not amend or modify, or take
any position inconsistent with, such tax returns without the prior written
consent of MDSI, which consent may be withheld in its sole discretion.
- 10 -
Connectria and the Shareholders shall fully cooperate with MDSI with respect to
the preparation, signing and filing of such Connectria tax returns.
(b) To the extent accrued and unpaid taxes are not reflected on
Connectria's financial statements as of the Effective Date prepared by MDSI in
accordance with generally accepted accounting principles in the United States
(the "Closing Financial Statements"), MDSI shall be liable for, shall indemnify
and hold Connectria and the Shareholders harmless against, and shall make
payment of, any foreign, U.S. federal, state and local taxes, including any
interest and penalties, payable by Connectria for all tax periods of Connectria
or portions thereof ending after the closing date of the Merger and on or before
the Effective Date, whether or not such taxes were shown on any tax return of
Connectria for such periods, including any tax liability of Connectria resulting
from any audit or other adjustment by any taxing authority to any tax returns in
respect of such periods. MDSI shall be entitled to any refunds of taxes for any
such tax period to the extent such refunds are paid to Connectria. MDSI shall be
liable for and shall indemnify Connectria for any interest and penalties imposed
by reason of any underpayment of estimated taxes in respect of any tax period of
Connectria that straddles the Effective Date to the extent such estimated tax
payments were due on or prior to the Effective Date. Connectria will fully
cooperate with MDSI, and will provide MDSI with full access to Connectria's
books and records, with respect to the preparation of the Closing Financial
Statements.
(c) From and after the Effective Date, the Shareholders, Connectria
and MDSI shall give prompt notice to each other of any proposed audit or
adjustment by any taxing authority to taxes of Connectria for all tax periods of
Connectria that end after the closing date of the Merger and on or before the
Effective Date or that straddle the Effective Date. MDSI, at its expense, shall
be responsible for, and control, any audits of any returns filed (or required to
be filed) by Connectria with respect to any tax period of Connectria that ends
after the closing date of the Merger and on or before the Effective Date,
provided that Connectria or the Shareholders, at their expense, may participate
in any such audit. MDSI shall not settle or compromise any such audit without
the prior written consent of the Shareholders, which consent shall not be
unreasonably withheld. Connectria, at its expense, shall be responsible for, and
control, any audits of any returns (i) for all tax periods of Connectria that
straddle the Effective Date and (ii) all tax periods of Connectria beginning
after the Effective Date. Connectria shall not settle or compromise any audit
for any period referred to in clause (i) of the immediately preceding sentence
without the prior written consent of MDSI, which consent shall not be
unreasonably withheld.
12. Limitation on Transfers of Securities.
(a) From and after the Closing Date, neither the Warrant, the Series
A Nonvoting Preferred Stock receivable upon exercise thereof nor any interest
therein (the "Securities") shall be transferable except upon satisfaction of the
relevant conditions specified in this Section 11, which conditions are intended
to ensure compliance with the provisions of the Securities Act of 1933 (the
"Securities Act") in respect of the transfer of any of the Securities or any
interest therein. MDSI will cause any proposed transferee of the Securities (or
of any interest therein) held by it to agree to take and hold such Securities
(or any interest therein) subject to the provisions and upon the conditions
specified in this Section 12.
- 11 -
(b) Each certificate for Securities issued to MDSI or to a subsequent
transferee shall (unless otherwise permitted by the provisions of this Section
12) include a legend in substantially the following form, in addition to any
other legend that may be required by law:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED,
HYPOTHE-CATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT RELATING TO THE SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT,
(ii) RULE 144 OR 144A UNDER SUCH ACT, OR (iii) AN OPINION OF COUNSEL OR
OTHER EVIDENCE SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT SUCH
SALE, TRANSFER, HYPOTHECATION OR OTHER ASSIGNMENT IS IN COMPLIANCE WITH THE
PROVISIONS OF SUCH ACT.
(c) Notice of Proposed Transfers. Not less than three business days
prior to any proposed transfer of any Securities bearing the restrictive legend
set forth in Section 12(b) or any interest therein, the holder thereof shall
give written notice to Connectria of such holder's intention to effect such
transfer, setting forth the manner and circumstances of the proposed transfer in
reasonable detail. Any such proposed transfer which is not made pursuant to a
registration statement filed under the Securities Act may be effected only if
the MDSI shall have received such notice of transfer accompanied by (i) an
opinion of counsel, representation letter or other written evidence reasonably
satisfactory to Connectria, addressed to Connectria, to the effect that the
proposed transfer of such Securities or such interest therein may be effected
without registration of such Securities under the Securities Act. In addition,
if the holder of the Securities delivers to Connectria an opinion of counsel
reasonably satisfactory to Connectria that subsequent transfers of such
Securities will not require registration under the Securities Act, Connectria
will promptly after such contemplated transfer deliver new certificates for such
Securities that do not bear the legend set forth in Section 12(b) above. If the
foregoing conditions entitling the holder to effect a proposed transfer of such
Securities without registration have not been satisfied, the holder in each case
will not transfer the Securities proposed to be transferred. Each certificate
evidencing the Securities transferred as above provided shall bear the
appropriate legend set forth in Section 12(b), and each agreement purporting to
transfer any interest in any of the Securities shall bear a similar legend.
13. Miscellaneous.
(a) Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (a) when such notice is
personally delivered, (b) five (5) days after dispatch by certified or
registered mail, return receipt requested, (c) two (2) business days after
dispatch by a reputable overnight delivery service, or (d) upon transmission by
facsimile machine, provided an answerback is received and provided further that
notice is confirmed by any other permissible method. Notices shall be addressed
to such party at its address hereinafter set forth or such other address as such
party may hereafter specify by notice given pursuant to this Section 13(a).
- 12 -
If to MDSI:
MDSI Mobile Data Solutions Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Chairman & CEO
with a copy to:
▇▇▇▇▇▇ & Whitney LLP
U.S. Bank Centre
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ or Connectria:
Connectria Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
(b) Amendment. This Agreement may be amended or modified in whole or
in part only by a document in writing signed by the party or party against which
such amendment is to be enforced.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one instrument. It shall not be necessary that each
party's signature appear on all counterparts, and signatures of the parties
hereto transmitted by facsimile shall be binding and shall be treated as
original signatures for all purposes of enforcing this Agreement.
- 13 -
(d) Severability. If any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement and any other application thereof shall
not in any way be affected or impaired thereby.
(e) Publicity. Except as otherwise required by law, regulation, court
order, subpoena or other compulsory process, neither MDSI, Connectria nor either
Shareholder shall, without the prior written consent of the other parties, issue
a press release or other public statement which discloses the terms or existence
of this Agreement. Not less than twenty-four (24) hours prior to issuing any
press release or other public statement regarding this Agreement or the
transactions contemplated hereby, MDSI shall deliver a copy of such press
release or statement to the Shareholders.
(f) Headings. The headings in this Agreement are inserted for
convenience only and in no way alter, amend, modify, limit or restrict the
contractual obligations of MDSI, Connectria and the Shareholders.
(g) Dispute Resolution and Expenses of Enforcement. All disputes
arising after the Closing under this Agreement shall be submitted to binding
arbitration in Denver, Colorado before a single arbitrator of the American
Arbitration Association selected jointly by the disputing parties (or if the
parties cannot agree on a single arbitrator, then such dispute shall be
submitted to panel of three arbitrators, one designated by each party, and the
third appointed by the two so designated). The arbitration shall be conducted in
accordance with the commercial arbitration rules of the AAA, except as the
parties may agree to modify them. Any arbitration award shall be final and
binding on all parties in interest, and judgment on any arbitration award may be
recorded in any court of competent jurisdiction. All costs of the arbitration
itself shall be divided equally between the disputing parties. The arbitrator or
panel shall have the power to designate the party in such arbitration who is not
the prevailing party, and such non-prevailing party shall reimburse the
prevailing party for all reasonable costs and expenses incurred by such
prevailing party (including without limitation reasonable attorneys' fees, but
excluding such prevailing party's share of the arbitration costs) in such
arbitration or in any negotiations or mediation leading up to such arbitration.
(h) Binding Effect. This Agreement shall be binding on, inure to the
benefit of and be enforceable by and against MDSI and Connectria and their
successors and assigns, and each of the Shareholders and their heirs, personal
representatives and successors in interest.
(i) Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto and made a part hereof, embodies the entire
understanding of the Shareholders, Connectria and MDSI relative to the
transactions contemplated hereby and there is no other agreement or
understanding in effect among the parties hereto relating to the subject matter
of this Agreement, unless executed and delivered in connection herewith on the
Closing Date.
(j) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York .
- 14 -
(k) Representation. The parties acknowledge that the Shareholders are
represented by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP and that MDSI is represented by ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP with respect to the transactions contemplated by this Agreement.
- 15 -
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
MDSI MOBILE DATA SOLUTIONS , INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Authorized Officer
CONNECTRIA CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Authorized Officer
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
- 16 -
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RELATIVE RIGHTS,
QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS
OF THE
SERIES A PREFERRED STOCK
OF
CONNECTRIA CORPORATION
-----------------------
Pursuant to Section 351.180 of The General
and Business Corporation Law of the State of Missouri
-----------------------
Connectria Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the provisions of The General and Business
Corporation Law of the State of Missouri (the "GBCL"), certifies as follows:
FIRST: The Articles of Incorporation of the Corporation, as amended and
currently in effect, authorize the issuance of 100,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), and further authorize
the Board of Directors of the Corporation, by resolution or resolutions, at any
time and from time to time, to divide and establish any or all of the unissued
shares of Preferred Stock not then allocated to any series of Preferred Stock
into one or more series and, without limiting the generality of the foregoing,
to fix and determine the designation of each such share, the number of shares
which shall constitute such series and certain powers, preferences and relative
participating, optional or other special rights and qualifications, limitations
and restrictions of the shares of each series so established.
SECOND: The Board of Directors of the Corporation, at a meeting duly
convened and held on June __, 2002, at which a quorum was present and voting
throughout, duly adopted the following resolutions fixing and determining the
designation and setting forth the designations, powers, preferences and rights,
and the qualifications, limitations or restrictions of a certain series of said
Preferred Stock, and authorizing the issuance of a new series of Preferred
Stock, as follows:
RESOLVED, that pursuant to Section 351.180 of the GBCL, the Board of
Directors hereby designates 50,380 shares of the Preferred Stock of the
Corporation as Series A Nonvoting Preferred Stock; and be it
FURTHER RESOLVED, that the voting powers, designations, preferences and
relative, participating, optional and other special rights, and
qualifications, limitations and restrictions in respect of the Series A
Nonvoting Preferred Stock shall be as follows:
1
1. Definitions. The capitalized terms set forth herein have the
respective meanings ascribed to them as follows:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Company" shall mean this corporation.
(c) "Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
(d) "Common Stock Dividend" shall mean a stock dividend declared and paid
on the Common Stock that is payable in shares of Common Stock.
(e) "Distribution" shall mean the transfer of cash or property by the
Company to one or more of its shareholders without consideration,
whether by dividend or otherwise (except a Common Stock Dividend). A
Permitted Repurchase (defined below) is not a Distribution.
(f) "Original Issue Date" for each share of Series A Nonvoting Preferred
Stock shall mean the date on which such share is issued by the
Company.
(g) "Permitted Repurchase" shall mean a repurchase by the Company of
shares of Common Stock held by employees, directors, independent
contractors, or other persons performing services for the Company or a
Subsidiary pursuant to stock purchase agreements or stock option
exercise agreements, for consideration not exceeding the then fair
market value of the repurchased shares as determined in good faith by
the board.
(h) "Preferred Stock" shall mean any series of Preferred Stock of the
Company.
(i) "Redemption Date" shall mean and be the date specified in a Redemption
Notice as the effective date of any redemption by the Company pursuant
to Section 5 hereof.
(j) "Redemption Notice" shall mean and be the notice to holders of Series
A Nonvoting Preferred Stock of a redemption at the option of the
Corporation pursuant to Section 5 hereof.
2
(k) "Redemption Price" shall mean the Stated Value of each share of Series
A Nonvoting Preferred Stock as of the Redemption Date, together with
all dividends declared thereon and unpaid at the Redemption Date for
such shares.
(l) "Series A Nonvoting Preferred Stock" shall mean the Series A Nonvoting
Preferred Stock, par value $0.01 per share, of the Company.
(m) "Stated Value" of the Series A Nonvoting Preferred Stockshall mean (a)
$100.00 per share at all times up to and including June 30, 2007, and
(b) $0.01 per share at all times from and after July 1, 2007.
(n) "Subsidiary" shall mean any corporation of which at least 80% of the
outstanding voting stock is at the time owned directly or indirectly
by the Company or by one or more of such subsidiary corporations.
2. Dividend Rights. When and as declared by the board of directors of the
Company, the Company shall pay to the holders of the Series A Preferred Stock,
out of the assets of the Company available for the payment of dividends under
the GBCL, preferential dividends at the times and in the amounts provided for in
this paragraph 2 and no more. Dividends shall be paid by mailing the Company's
good check in the proper amount to each holder of the Series A Preferred Stock
to such holder at such holder's address as it appears on the Company's register
at least five days prior to the due date of each dividend. Dividends on each
share of Series A Preferred Stock shall be calculated at the rate and in the
manner prescribed herein from and including the date of issuance of such share
to and including the date on which the Stated Value of such share shall have
been paid, whether or not such dividends shall have been declared and whether or
not there shall be (at the time such dividends are calculated or become payable
or at any other time) profits, surplus or other funds of the Company legally
available for the payment of dividends. Dividends shall be calculated
cumulatively (but shall not compound) on a daily basis on each share of Series A
Preferred Stock at the rate of five (5%) per annum (based on a 365/366-day year)
of the Stated Value thereof. Dividends shall be paid on the thirty-first (31st)
day of December of each year. To the extent any annual dividend is not paid with
respect to a share of Series A Preferred Stock, an amount equal to such dividend
shall be added to the Stated Value of such share and shall remain a part thereof
until (but only until) such dividends are paid. If at any time the Company shall
pay less than the total amount of dividends then calculated on the Series A
Preferred Stock, such payment shall be distributed among the holders of the
Series A Preferred Stock so that an equal amount shall be paid with respect to
each outstanding share.
3. Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the funds and
assets of the Company that may be legally distributed to the Company's
shareholders after payment of or provision for the
3
obligations of the Company to its lenders and other creditors (the "Available
Funds and Assets") shall be distributed to the Company's shareholders in the
following manner:
(a) Priority. The holders of Series A Nonvoting Preferred Stock then
outstanding shall be entitled to be paid, out of the Available Funds and Assets,
and prior and in preference to any payment or distribution (or any setting apart
of any payment or distribution) of any Available Funds and Assets on any shares
of Common Stock, an amount per share of Series A Nonvoting Preferred Stock equal
to the Stated Value of each share of Series A Nonvoting Preferred Stock held by
such holder (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) plus all declared but unpaid dividends on the
shares of Series A Nonvoting Preferred Stock held by such holder, if any. If
upon any liquidation, dissolution or winding up of the Company, the Available
Funds and Assets shall be insufficient to permit the payment to all holders of
the Series A Nonvoting Preferred Stock of their full preferential amount
described in this Section 3(a), then all of the remaining Available Funds and
Assets shall be distributed among the holders of the then outstanding shares of
Series A Nonvoting Preferred Stock pro rata, according to the number of
outstanding shares of Series A Nonvoting Preferred Stock then held by each
holder thereof.
(b) Merger or Sale of Assets. Each of the following shall be deemed
to be a liquidation, dissolution or winding up of the Company as those terms are
used in Section 3(a): (i) An acquisition of the Company by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) pursuant to which the
Company's shareholders immediately prior to such transaction or series of
related transactions own immediately following such transaction or series of
related transactions, less than 50% of the outstanding voting power of the
resulting entity, and (ii) the sale of all or substantially all of the assets of
the Company. Holders of shares of Series A Nonvoting Preferred Stock shall be
given notice of any such transaction set forth in this Section 3(b) not later
than the earlier of (A) 10 days prior to the shareholders' meeting called to
approve the transaction, and (B) 20 days prior to the closing of such
transaction (such notice shall be deemed given upon the earlier of actual
receipt thereof or deposit thereof in the United States mail, by certified or
registered mail, return receipt requested, postage prepaid, addressed to each
holder of record at the address of such holder appearing on the books of the
Company).
(c) Non-Cash Consideration. If any assets of the Company distributed
to shareholders in connection with any liquidation, dissolution or winding up of
the Company are other than cash, then the value of such non-cash assets shall be
deemed to be their fair market value as determined in good faith by the Board.
4. Voting Rights. Holders of outstanding shares of Series A Nonvoting
Preferred Stock shall not be entitled to vote in the election of directors of
the Company or on any other matter coming to the attention of the shareholders
of the Company.
4
5. Redemption at Option of Corporation.
(a) In accordance with this Section 5, the Company at the option of
the Board may redeem the whole or any part of the Series A Nonvoting Preferred
Stock outstanding at any time or from time to time by paying the Redemption
Price in cash, for each share of Series A Nonvoting Stock to be redeemed.
(b) Not less than thirty (30) days prior to the applicable Redemption
Date, a Redemption Notice shall be mailed to each holder of record of the Series
A Nonvoting Preferred Stock at their post office address last shown on the stock
register of the Company. The Redemption Notice shall:
(i) Identify the number of shares of Series A Nonvoting
Preferred Stock which are outstanding and the total number of such shares
to be redeemed;
(ii) Identify the number of such shares to be redeemed from the
recipient of the notice;
(iii) State the Redemption Date and Redemption Price; and
(iv) State the manner and the place for delivery to the Company
of the certificate or certificates representing the shares to be redeemed.
(c) On or before the Redemption Date, each holder of shares of Seris
A Nonvoting Preferred Stock to be redeemed shall surrender the certificate or
certificates representing such shares to the Company, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price
for such shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof.
(d) In case of the redemption of only a part of Series A Nonvoting
Preferred Stock at any time outstanding, the Company shall select by lot, or in
such other manner as the Board may determine, the shares so to be redeemed.
(e) From and after the Redemption Date (unless the Company shall
default in payment of the Redemption Price), all dividends on shares called for
redemption shall cease to accrue, such shares shall be deemed no longer
outstanding, and all rights of the holders thereof as shareholders of the
Company, except the right to receive the Redemption Price, shall terminate.
(f) The Board shall have full power and authority subject to the
limitations and provisions herein contained to prescribe the manner in which and
the terms and conditions upon which the Series A Nonvoting Preferred Stock shall
be redeemed from time to time.
(g) Any notice required by the provisions of this Section 5 to be
given to the holders of shares of Series A Nonvoting Preferred Stock shall be
deemed given upon the earlier of actual receipt thereof or deposit thereof in
the United States mail, by certified or registered mail, return receipt
requested, postage prepaid, addressed to each holder of record at the address of
such holder appearing on the books of the Company.
5
6. Mandatory Redemption by Company. The Company shall redeem all of the
outstanding shares of Series A Preferred Stock, at the then Stated Value
thereof, upon the closing of any transaction or series of related transactions
involving an equity investment in Connectria for which the net proceeds to
Connectria are $10,000,000 or more (a "Major Equity Financing"). Not less than
ten (10) days prior to the closing of any Major Equity Financing, the Company
shall give written notice to the holders of the Series A Preferred Stock of the
Company's intention to complete the Major Equity Financing. Such notice shall be
mailed to each holder of record of the Series A Preferred Stock at its post
office address last shown on the stock register of the Company. Each holder of
shares of Series A Preferred Stock shall surrender the certificate or
certificates representing such shares to the Company, in the manner and at the
place designated in the notice, and thereupon the Stated Value of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof. From and after the date on
which the Major Equity Financing is completed, all dividends on shares of Series
A Preferred Stock shall cease to accrue, such shares shall be deemed no longer
outstanding, and all rights of the holders thereof as shareholders of the
Company, except the right to receive the Stated Value, shall terminate.
7. Restrictions and Limitations.
(a) The Company shall not, without the approval of MDSI Mobile Data
Solutions Inc. and the holders of a majority of the outstanding shares of Series
A Preferred Nonvoting Stock:
(i) alter or change the rights, preferences or privileges of the
Series A Nonvoting Preferred Stock;
(ii) increase or decrease the authorized number of shares of
Series A Nonvoting Preferred Stock or increase the number of shares of
Preferred Stock, or establish any other series of Preferred Stock;
(iii) amend any provision of the Company's Articles of
Incorporation or Bylaws in any manner that would have a material adverse
effect on the holders of Series A Nonvoting Preferred Stock;
(iv) authorize or issue, or obligate itself to issue, any other
equity security, including any debt instrument or other security that is
convertible into or exercisable for any equity security, in each case
having a preference over, or being on a parity with, the Series A Nonvoting
Preferred Stock with respect to dividends and upon liquidation;
(vi) pay or declare any dividend on any shares of Common Stock
(other than a Common Stock Dividend) or Preferred Stock unless the full
amount of annual dividends theretofore payable with respect to the Series A
Preferred Stock has been paid; or
(vii) redeem or repurchase any shares of Preferred Stock or
Common Stock (other than permitted repurchases pursuant to agreements which
give the Company the
6
right to repurchase shares of Common Stock upon the termination of services
which shall not exceed an amount greater than $250,000 per year).
8. No Reissuance of Preferred Stock. No share or shares of Series A
Nonvoting Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled, retired and eliminated from the shares of Preferred Stock which
the Company shall be authorized to issue upon being reacquired by the Company.
7
IN WITNESS WHEREOF, Connectria Corporation has caused this Certificate to
be signed by its President and attested by its Secretary this _____ day of June,
2002.
CONNECTRIA CORPORATION
By:
------------------------------------
President
(SEAL)
Attest:
----------------------------------
Secretary
8
STATE OF MISSOURI )
)
COUNTY OF ST. LOUIS )
On this ___ day of June, 2002, before me personally appeared
_______________, to me personally known, who, being by me duly sworn, did say
that he is the President of Connectria Corporation, a Missouri corporation, and
that he signed the foregoing document as President of the corporation, and that
the said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors; and he acknowledged said instrument to be
the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State aforesaid, the day and year first above written.
---------------------------------------
Notary Public
(SEAL)
My Commission Expires:
9
EXHIBIT B
NEITHER THIS WARRANT NOR THE SERIES A PREFERRED STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAW. NEITHER THIS WARRANT NOR ANY OF THE
UNDERLYING SERIES A PREFERRED STOCK MAY BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THE SAME IS REGISTERED AND QUALIFIED IN ACCORDANCE WITH SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION AND QUALIFICATION ARE
NOT REQUIRED.
50,380 Shares of Series A Preferred Stock Warrant No. 1
WARRANT
to Purchase 50,380 Shares of Series A Preferred Stock of
CONNECTRIA CORPORATION
THIS CERTIFIES THAT, for value received, MDSI MOBILE DATA SOLUTIONS INC. or
registered assigns is entitled, subject to the terms and conditions set forth
herein, to purchase from CONNECTRIA CORPORATION, a corporation organized and
existing under the laws of the State of Missouri (the "Company"), at any time on
or before 5:00 P.M. St. Louis, Missouri time on the Final Exercise Date, Fifty
Thousand Three Hundred Eighty (50,380) shares of Series A Preferred Stock of the
Company for Fifty Dollars ($50.00) per share in lawful money of the United
States of America. The number of shares of Series A Preferred Stock which may be
purchased hereunder, and the Purchase Price therefor, are subject to adjustment
as hereinafter set forth in Sections 2, 3 and 8.
Section 1. Definitions. For all purposes of this Warrant the following
terms shall have the meanings indicated:
"Board of Directors" shall mean the board of directors of the Company as
constituted from time to time.
"Company" shall mean CONNECTRIA CORPORATION, a corporation organized and
existing under the laws of the State of Missouri, and its successors and
assigns.
"Final Exercise Date" shall mean June 30, 2007.
"Initial Purchase Price" shall mean the initial Purchase Price per share of
Fifty Dollars ($50.00).
"Purchase Price" initially shall mean the Initial Purchase Price, and
thereafter shall be such Initial Purchase Price as adjusted and in effect from
time to time thereafter pursuant to the provisions of Section 8 hereof.
"Repurchase Price" shall mean Two Million Five Hundred Nineteen Thousand
Dollars ($2,519,000) if this Warrant has not been fully exercised prior to the
repurchase by the Company pursuant to Section 5 of this Warrant; provided that
if this Warrant then has been exercised in part, then the Repurchase Price shall
be a fraction of such amount, the numerator of which is the number of shares of
Series A Preferred Stock then covered by this Warrant, and the denominator of
which is the number of shares of Series A Preferred Stock originally covered by
this Warrant (in each case after making the appropriate adjustments required by
Section 8 of this Warrant).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
regulations promulgated by the SEC thereunder.
"Series A Preferred Stock" shall mean the Series A Preferred Stock of the
Company, par value $0.01 per share.
"Transfer" shall include any disposition of this Warrant or Warrant Stock,
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Warrant" shall mean this Warrant, evidencing the right, subject to
fulfillment of the conditions set forth herein, to purchase initially an
aggregate of 50,380 shares of Series A Preferred Stock, and all Warrants issued
in exchange, transfer or replacement thereof.
"Warrantholder" shall mean the registered holder or holders of this Warrant
and any related Warrant Stock.
"Warrant Shares" shall mean the shares of Series A Preferred Stock
purchased or purchasable by the registered holder(s) of this Warrant upon the
exercise thereof pursuant to Section 5.
All terms used in this Warrant which are not defined in Section 1 shall have the
respective meanings ascribed thereto elsewhere in this Warrant.
Section 2. Initial Number of Warrant Shares; Purchase Price. The initial
number of shares of Series A Preferred Stock which the Warrantholder shall have
the right to purchase is 50,380 shares of Series A Preferred Stock, subject to
the conditions in Section 3 and to adjustment pursuant to Section 8 hereof. The
Initial Purchase Price for each Warrant Share shall be Fifty Dollars ($50.00),
payable only in cash. The Purchase Price for the Warrant Shares shall be subject
to adjustment pursuant to Section 7 hereof.
- 2 -
Section 4. Method of Exercise; Legend.
(a) Exercise of Warrant. This Warrant is exercisable in whole or in part at
any time or from time to time on or after the date hereof, and prior to the
Final Exercise Date. In order to exercise this Warrant, the registered holder
hereof shall complete the Subscription Form attached hereto, and deliver this
Warrant and cash or a bank certified or cashier's check in an amount equal to
the then aggregate Purchase Price of the Warrant Shares being purchased, to the
Company, at ____________________________, St. Louis, Missouri (or at such other
location as the Company may designate by notice in writing to the holder of this
Warrant). Upon receipt by the Company of such Subscription Form, this Warrant
and Payment, such holder shall be deemed a holder of record of the Series A
Preferred Stock specified in said Subscription Form, and the Company shall, as
promptly as practicable, and in any event within 10 business days thereafter,
execute and deliver to such holder a certificate or certificates evidencing the
aggregate number of Series A Preferred Stock specified in said Subscription
Form. Each certificate so delivered shall be registered in the name of such
holder or, subject to Section 7 below, such other name as shall be designated by
such holder. The Company shall pay all expenses, taxes and other charges payable
in connection with the preparation, execution and delivery of certificates
pursuant to this Section, except that, in case such certificates shall be
registered in a name or names other than the name of the registered holder of
this Warrant, funds sufficient to pay all transfer taxes which shall be payable
upon the execution and delivery of such certificate or certificates shall be
paid by the registered holder hereof to the Company at the time of delivering
this Warrant to the Company as mentioned above.
(b) Transfer Restriction Legend. Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Securities Act, shall bear a legend
substantially similar to the following on the face thereof:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED PURSUANT TO
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW.
NEITHER THESE SHARES, NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED
AND QUALIFIED IN ACCORDANCE WITH SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY, SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under an effective registration statement of the
securities represented thereby) shall also bear such legend unless in the
opinion of counsel specified in Section 6, the securities represented thereby
need no longer be subject to the restrictions contained in this Warrant. The
provisions of Section 7 shall
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be binding upon all subsequent holders of certificates bearing the above legend,
and shall also be applicable to all subsequent holders of this Warrant.
(c) Character of Warrant Stock. All Series A Preferred Stock issuable upon
the exercise of this Warrant shall be duly authorized, validly issued, fully
paid and nonassessable.
Section 5. Repurchase at Option of Company. In accordance with this Section
5, the Company at its option of the Board may repurchase this Warrant in whole,
and not in part, at any time by paying to the Warrantholder the Repurchase Price
in cash. Not less than ten (10) days prior to the date on which the Company
desires to effect such repurchase, the Company shall mail a written notice of
repurchase to the Warrantholder as set forth in Section 12 of this Warrant. On
or before the date specified in such written notice, the Warrantholder shall
surrender this Warrant to the Company at the address specified in Section 4 of
this Warrant, and thereupon the Repurchase Price for this Warrant shall be
payable to the Holder hereof. From and after the date specified in the Company's
notice of repurchase (unless the Company shall default in payment of the
Repurchase Price), all rights of the Holder hereof under this Warrant, except
the right to receive the Repurchase Price, shall terminate.
Section 6. Ownership and Replacement.
(a) Ownership of this Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration or transfer
as provided in this Section 6.
(b) Exchange and Replacement. This Warrant is exchangeable upon the
surrender hereof by the registered holder to the Company at its office described
in Section 5, for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares that may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by said registered holder
at the time of surrender. Subject to compliance with Section 6, this Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the registered holder hereof in person or by duly authorized
attorney, and a new Warrant shall be made and delivered by the Company, of the
same tenor and date as this Warrant but registered in the name of the
transferee, upon surrender of this Warrant, duly endorsed, to said office of the
Company. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
the Company, and upon surrender and cancellation of this Warrant, if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant. This Warrant shall be promptly cancelled by the Company upon the
surrender hereof in connection with any exchange, transfer or replacement. The
Company shall pay all expenses, taxes (other than transfer taxes) and other
charges payable in connection with the preparation, execution and delivery of
Warrants pursuant to this Section 6.
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Section 7. Transfer of Warrants or Warrant Shares.
(a) Warrants and Warrant Shares Not Registered. The holder of this Warrant,
by accepting this Warrant, represents and acknowledges that this Warrant and the
Warrant Shares which may be purchased upon exercise of this Warrant are not
being registered under the Securities Act on the grounds that the issuance of
this Warrant and the offering and sale of such Warrant Shares are exempt from
registration under the Securities Act pursuant to one or more exemptions
therefrom, including Section 4(2) thereof, and that the Company's reliance on
such exemption is predicated in part on the initial Warrantholder's
representations and agreements made to and with the Company in the Securities
Purchase Agreement dated on or about the date hereof.
Notwithstanding any provisions contained in this Warrant to the contrary,
this Warrant and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Section 7, which conditions are intended,
among other things, to ensure compliance with the provisions of the Securities
Act and applicable state securities laws in respect of the transfer of this
Warrant or of such Warrant Shares.
(b) Notice of Intention to Transfer; Opinion of Counsel. The holder of this
Warrant, by accepting this Warrant, agrees that prior to any transfer of this
Warrant or any transfer of the related Warrant Shares, such holder will (i) give
written notice to the Company of its intention to effect such transfer, and (ii)
deliver to the Company (A) an opinion of counsel for the Company or an opinion,
in form and substance reasonably satisfactory to counsel for the Company, of
counsel skilled in securities matters (selected by such holder and reasonably
satisfactory to the Company) as to the absence of the necessity of registration
under the Securities Act, or (B) an interpretative letter from the Securities
and Exchange Commission to the effect that the proposed transfer may be made
without registration under the Securities Act, in either case accompanied by
evidence that such transfer will also be in compliance with applicable state
securities ("blue sky") laws; provided, however, that the foregoing shall not
apply with respect to any Warrant or Warrant Shares as to which there is a
registration statement in effect under the Securities Act at the time of the
proposed transfer.
By accepting this Warrant, the Warrantholder agrees to indemnify the Company and
hold it harmless from and against all damages, losses, liabilities (including
liability for rescission), costs and expenses which the Company may incur under
the Securities Act or otherwise by reason of any misrepresentation by the
Warrantholder of facts concerning it or any proposed transfer of the Warrants
and/or Warrant Shares with respect to the availability of any exemption from
registration under the Securities Act.
Section 8. Adjustment of Number of Shares and Purchase Price.
(a) Adjustments for Distributions, Divisions or Consolidation or
Combination of Shares. In the event of any increase or decrease in the number of
shares of issued Series A Preferred Stock by reason of a distribution, division
or consolidation or combination of such Shares at any time or from time to time
after the date hereof such that the holders of Series A Preferred Stock shall
have had an adjustment made, without payment therefor, in the number of
- 5 -
shares of Series A Preferred Stock owned by them or, on or after any record date
fixed for the determination of eligible holders, shall have become entitled or
required to have had an adjustment made in the number of Series A Preferred
Stock owned by them, without payment therefor, there shall be a corresponding
adjustment as to the number of shares of Series A Preferred Stock covered by
this Warrant (and to the Purchase Price for each Warrant Share under this
Warrant) with the result that the Warrantholder's proportionate interest in the
shares of Series A Preferred Stock shall be maintained as before the occurrence
of such event without change in the aggregate Purchase Price set forth in said
Warrant.
(b) Adjustments for Recapitalization, Reclassification, Reorganization or
Other Like Capital Transactions or for Merger and Consolidation. In the event
the Company (or any other corporation or other entity the securities of which
are receivable at the time upon exercise of the Warrant) shall effect a plan of
recapitalization, reclassification, reorganization or other like capital
transaction or shall merge or consolidate with or into another entity or convey
all or substantially all of its assets to another entity at any time or from
time to time on or after the date hereof, then in each such case the
Warrantholder upon the exercise of this Warrant at any time after the
consummation of such recapitalization, reclassification, reorganization or other
like capital transaction or of such merger, consolidation or conveyance shall be
entitled to receive (in lieu of the securities or other property to which such
holder would have been entitled to receive upon exercise prior to such
consummation), the securities or other property to which the Warrantholder would
have been entitled to have received upon consummation of the subject transaction
if the holder hereof had exercised this Warrant immediately prior to such
consummation without adjustment to the aggregate Purchase Price set forth in
said Warrant and all subject to further adjustment pursuant to Section 8(a)
hereof.
Section 9. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Series A
Preferred Stock upon exercise of this Warrant, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction to the nearest whole number of shares of Series A Preferred Stock or
other securities, properties or rights receivable upon exercise of this Warrant.
Section 10. Special Agreements of the Company. The Company covenants and
agrees that:
(a) Reservation of Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, a number of shares of Series A
Preferred Stock deliverable upon the exercise of this Warrant, and it will have
at all times any other rights or privileges sufficient to enable it at any time
to fulfill all of its obligations hereunder.
(b) Avoidance of Certain Actions. The Company will not, by amendment of its
Articles of Incorporation or Bylaws or through any reorganization, transfer of
assets, consolidation, merger, issue or sale of securities or otherwise, avoid
or take any action which would have the effect of avoiding the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in
- 6 -
carrying out all of the provisions of this Warrant and in taking all of such
action as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(c) Successors. This Warrant shall be binding upon any corporation or other
entity succeeding to the Company by merger or consolidation, and the Company
will not enter into any such transaction without obtaining the written agreement
of any such successor to be bound by the terms of this Warrant as if it were the
issuer hereof.
Section 11. Notifications by the Company. In case at any time:
(a) the Company shall propose to make any distribution to the holders
of Series A Preferred Stock;
(b) the Company shall make an offer for subscription pro rata to the
holders of its Series A Preferred Stock of any additional securities of the
Company;
(c) there shall be any reorganization, merger, consolidation,
liquidation, dissolution, sale of assets, equity financing or other
transaction which would result in any obligation of the Company to redeem
outstanding shares of Series A Preferred Stock, or to make a distribution
to holders of Series A Preferred Stock;
then, in any one or more of such cases, the Company shall give written notice to
Warrantholder of the date on which (i) the books of the Company shall close, or
a record shall be taken for such distribution or subscription rights, or (ii)
such reorganization, merger, consolidation, liquidation, dissolution, sale of
assets, equity financing or other transaction shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of Series A
Preferred Stock shall participate in such distribution or subscription rights,
or shall be entitled to exchange their Series A Preferred Stock for securities
or other property deliverable upon any such reorganization, merger,
consolidation, liquidation, dissolution, sale of assets, equity financing or
other transaction, as the case may be. Such written notice shall be given not
less than 30 days and not more than 90 days prior to the action in question and
not less than 30 days and not more than 90 days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto and
such notice may state that the record date is subject to the effectiveness of a
registration statement under the Securities Act, or to a favorable vote of the
shareholders of the Company, if either is required.
Section 12. Notices. Any notice or other document required or permitted to
be given or delivered to Warrantholder shall be delivered at, or sent by
certified or registered mail to the Warrantholder at, the most recent address of
the Warrantholder shown on the records of the Company, or to such other address
as shall have been furnished to the Company in writing by such Warrantholder.
Any notice or other document required or permitted to be given or delivered to
the Company shall be sent by certified or registered mail to the Company at its
address set forth in Section 4 (and notice shall be deemed delivered three (3)
business days after
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deposit in the mail), or such other address as shall have been furnished to the
Warrantholder by the Company.
Section 13. No Voting Rights; Limitation of Liability. This Warrant shall
not entitle any Warrantholder to vote on any matter coming to the attention of
the Shareholders of the Company or to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the
Warrantholder to purchase Series A Preferred Stock hereunder, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Purchase Price or any rights of
such holder as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
Section 14. Miscellaneous. This Warrant shall be governed by, and construed
and enforced in accordance with, the laws of the State of Missouri. This Warrant
and any provision hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions
hereof.
[The balance of this page has been left blank intentionally]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized representative, and to be dated as of June __, 2002.
CONNECTRIA CORPORATION
By
---------------------------------------
Authorized Officer
ACCEPTED this ----- day of June, 2002:
MDSI MOBILE DATA SOLUTIONS INC.
By
---------------------------------------
Authorized Officer
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ASSIGNMENT
To Be Executed by the Registered Holder if It Desires to Transfer the
Within Warrant
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
--------------------------------------
(Name)
--------------------------------------
(Address)
the right to purchase shares of Series A Preferred Stock, covered by the within
Warrant, as said Shares were constituted at the date of said Warrant, and does
hereby irrevocably constitute and appoint Attorney to make such transfer on the
books of the Company maintained for the purpose, with full power of
substitution.
Signature
---------------------------------
Dated
---------------------
In the presence of
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
SUBSCRIPTION FORM
To Be Executed by the Registered Holder if It Desires to Exercise the
Within Warrant
The undersigned hereby exercises the right to purchase shares of
Series A Preferred Stock covered by the within Warrant at the date of this
subscription and herewith makes payment of the sum of $ representing the
Purchase Price in effect at this date. Certificates for such Shares shall be
issued in the name of and delivered to the undersigned, unless otherwise
specified by written instructions, signed by the undersigned and accompanying
this subscription.
Dated
---------------------
Signature
-------------------------------
Address
-------------------------------
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EXHIBIT C
PROMISSORY NOTE
$250,000.00 June __, ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
FOR VALUE RECEIVED, the undersigned, CONNECTRIA CORPORATION, a Missouri
corporation ("Maker"), hereby promises to pay to MDSI MOBILE DATA SOLUTIONS
INC., a Canadian corporation, or its assigns ("Holder") the principal sum of TWO
HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00), together with
interest thereon, all as hereinafter provided and upon the following agreements,
terms and conditions:
Interest. The outstanding principal amount of this promissory note (this
"Note") shall bear interest from time to time, from the date hereof until paid
in full, at the rate of 5.0% per annum. All computations of interest shall be
made on the basis of a year of 365 (or 366, as the case may be) days for the
actual number of days (including the first day, but excluding the last day)
occurring in the period for which such interest is payable. No interest shall be
due and payable until the Maturity Date (as defined below).
Term. This Note, including all unpaid principal and accrued and unpaid
interest, shall be due and payable on June __, 2004 (the "Maturity Date").
Payment. Maker shall pay all principal and interest owing hereunder in full
on the Maturity Date. Principal and interest shall be payable in lawful money of
the United States of America that shall be the legal tender for public and
private debts at the time of payment, and payment shall be made to Holder at
such place as Holder may specify in writing from time to time.
Prepayment. Maker may prepay this Note in full or in part at any time
without notice, premium or penalty. All amounts prepaid shall be applied first
to the payment of accrued interest and the balance remaining, if any, shall be
applied to the reduction of principal.
Security. This Note is secured by that certain Security Agreement dated
June __, 2002 (the "Security Agreement"), made by Maker in favor of Holder
covering substantially all of the assets relating to Maker's business (the
"Assets"). Reference is hereby made to the Security Agreement for a description
of the Assets used as collateral, the nature and extent of the security, and the
rights of Holder and the other secured parties thereunder in respect of the
security.
Waivers. Maker hereby waives demand, presentment for payment, protest,
notice of protest, notice of nonpayment, notice of dishonor and all other
notice, filing of suit and diligence in collecting this Note, and agrees to
remain bound for payment of this obligation notwithstanding any extension of
time, substitution or release of security or any other indulgence granted to
Maker by Holder, without notice thereof to any of them.
1
Transfer; Successors and Assigns. The terms and conditions of this Note
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Notwithstanding the foregoing, the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Maker. Subject to the preceding sentence, this Note may be
transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form reasonably satisfactory to the Maker. Thereupon, a new note for
the then outstanding principal amount and interest will be issued to, and
registered in the name of, the transferee. Interest and principal are payable
only to the registered holder of this Note.
Notices. Any notice required or permitted by this Note shall be in writing
and shall be deemed to have been duly given upon delivery, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or seventy-two (72) hours after being deposited in the U.S.
mail, as first class mail, with postage prepaid, addressed to the party to be
notified at such party's address as set forth below or as subsequently modified
by written notice.
Shareholders, Directors and Officers Not Liable. In no event shall any
shareholder, officer or director of the Maker be liable for any amounts due or
payable pursuant to this Note.
Amendment. Any term of this Note may be amended or waived only with the
written consent of the Maker and the Holder. Any amendment or waiver effected in
accordance with this provision shall be binding upon the Maker, the Holder and
each transferee of the Note.
Holder as Owner. The Maker may deem and treat the Holder of this Note as
the absolute owner for all purposes regardless of any notice to the contrary.
Attorneys' Fees. Maker agrees to pay the Holder's reasonable expenses and
costs in collecting and enforcing this Note, including reasonable attorneys'
fees.
Applicable Law. This Note shall be governed by, and construed in accordance
with, the laws of the State of Washington, including matters of construction,
validity and performance.
NOTICE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
2
IN WITNESS WHEREOF, Maker has executed this Note as of the date first above
written.
CONNECTRIA CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
ACCEPTED AND AGREED BY HOLDER:
MDSI MOBILE DATA SOLUTIONS INC.
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
3
EXHIBIT D
SECURITY AGREEMENT
From: Connectria Corporation, a Missouri corporation ("Debtor"), whose chief
executive office is located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
To: MDSI Mobile Data Solutions Inc., a Canadian corporation (the "Secured
Party").
(A) Grant of Security Interest.
In consideration of financial accommodations given or continued, Debtor
grants to the Secured Party a security interest in the properties, tangible or
intangible, described in the Property Schedule attached hereto as Exhibit A (the
"Collateral") to secure payment and performance of all Debtor's obligations to
the Secured Party, whether currently existing or arising after the date hereof,
including, without limitation, the Debtor's obligations pursuant to the $250,000
Promissory Note dated June __, 2002, made by Debtor in favor of the Secured
Party (collectively, the "Indebtedness"). Unless otherwise defined herein, words
used in this agreement shall have the meanings given them in the Uniform
Commercial Code. An "Obligor" shall mean any person other than or in addition to
Debtor who now or hereafter is indebted or obligated on sums or other
obligations secured hereby, including, without limitation, any guarantor.
(B) Debtor's Representations and Agreements. Debtor warrants, represents and
agrees:
1. Debtor will immediately pay: (a) any Indebtedness when due, with
interest at the rate or rates provided for by any instrument or document ("Loan
Document") evidencing the Indebtedness or from which the Indebtedness arises and
(b) the Secured Party's reasonable costs of collecting the Indebtedness and
realizing on Collateral, including attorneys fees and expenses (whether or not
proceedings are instituted, and including costs relating to bankruptcy or
insolvency proceedings), with interest from date of demand at the maximum rate
provided for by any Loan Document to which the Secured Party is a party.
2. Debtor owns all Collateral absolutely and no other person has or claims
any interest in any Collateral, except for such interests of other persons that
exist as of the date of this agreement or that arise in the ordinary course of
business. Debtor will defend any proceeding that may affect the Secured Party's
security interest in any Collateral, and will indemnify the Secured Party for
all costs and expenses of the Secured Party's defense. Notwithstanding the
foregoing, in connection with any financing arrangement entered into (and any
indebtedness incurred by Debtor thereunder, including future advances made)
after the date hereof with a financial institution, Debtor may grant to such
financial institution a security interest or other lien on any or all of
Debtor's assets to secure such financing arrangement.
3. Debtor will give the Secured Party 30 days' prior written notice of any
change in Debtor's name, the location of any tangible Collateral or the Debtor's
jurisdiction of organization.
4. Debtor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter levied or imposed
on or affecting the Collateral.
5. Debtor agrees that from time to time, at the expense of Debtor, Debtor
shall promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable in order to perfect
and protect any security interest granted hereby or to enable the Secured Party
to exercise and enforce their rights and remedies hereunder with respect to any
Collateral. Debtor hereby authorizes the Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of Debtor where permitted by
law. A carbon, photographic or other reproduction of this agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. Debtor will provide
the Secured Party such information regarding the nature, extent, condition and
location of the Collateral as the Secured Party may request from time to time.
6. The Secured Party is irrevocably appointed Debtor's attorney-in-fact to
do any act which Debtor is obligated hereby to do and fails to do within ten
(10) days after demand therefor, and to execute and file in Debtor's name any
financing statements and amendments or other filings, notices and documents
thereto required to protect
- 1 -
or perfect the Secured Party's security interest hereunder, all to protect and
preserve the Collateral and the Secured Party's rights hereunder. While an Event
of Default has occurred and is continuing, the Secured Party may: (a) endorse,
collect and receive delivery or payment of instruments and documents
constituting Collateral; (b) make extension agreements with respect to or
affecting Collateral, exchange it for other Collateral, release persons liable
thereon or take security for the payment thereof, and compromise disputes in
connection therewith; (c) use or operate Collateral for the purpose of
preserving Collateral or its value and for preserving or liquidating Collateral;
(d) demand, ▇▇▇ for, collect, receive and give acquittance for any and all
monies due or to become due thereon or by virtue thereof; and (e) settle,
compromise, compound, prosecute or defend an action or proceeding with respect
thereto.
7. The Debtor waives (a) any right to require the Secured Party to proceed
against any Obligor before the Debtor, or to pursue any other remedy; (b)
presentment, protest and notice of protest; (c) any right to direct the
application proceeds of the Secured Party's realization on any Collateral to
particular Indebtedness; and (d) any right of subrogation to the Secured Party
until Indebtedness shall have been paid or performed in full.
(C) Defaults and Remedies; Non-waiver.
1. Each of the following shall constitute an "Event of Default:" (a)
Debtor's failure to pay any sum secured hereby when the same is due; (b) failure
to perform or comply with any agreement, condition or provision in this
agreement or any Loan Document within 30 days after written notice from the
Secured Party indicating that a failure to perform will constitute an "Event of
Default" hereunder; (c) any warranty contained in this agreement shall prove to
have been materially inaccurate when made; or (d) the filing of any petition
under bankruptcy or similar debtors' relief laws by the Debtor or any Obligor,
the passage of 60 days after the filing of any such petition by another against
the Debtor or any Obligor without the relevant proceeding being discharged or
stayed, or any assignment for the benefit of creditors or appointment of a
receiver involving substantially all of the Debtor's assets.
2. During the continuance of an Event of Default, the Secured Party may, by
notice to the Debtor, declare that they are realizing upon the Collateral
hereunder. Upon such notice, so long as an Event of Default is continuing: (a)
the Secured Party may declare all or any part of the Indebtedness owed to the
Secured Party to be immediately due and (b) the Secured Party shall have all
rights provided by this agreement or provided by law, including the Uniform
Commercial Code, and may sell Collateral in one or more sales, and such rights
shall be exercised as determined by the Secured Party. (The preceding sentence
shall not limit the rights and remedies of the Secured Party pursuant to the
Loan Documents with respect to its Indebtedness.) Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral and any cash held shall be
applied by the Secured Party in the following order of priorities: (i) first, to
payment of the expenses of such sale or other realization, including reasonable
compensation to agents and counsel for the Secured Party, and all expenses,
liabilities and advances incurred or made by the Secured Party in connection
therewith; (ii) second, to the payment of all indebtedness of any other secured
parties with respect to security interests (A) granted prior to the effective
date of this Security Agreement for indebtedness incurred prior to the effective
date of this Security Agreement, or (B) granted pursuant to Section (B)2 of this
Security Agreement, until all such indebtedness of such parties have been paid
in full; (iii) third, to the payment of all Indebtedness to the Secured Party or
its respective successors and assigns, until all Indebtedness of the Secured
Party shall have been paid in full; (v) fourth, to the payment of amounts
required by law; and (iv) finally, to payment to the Debtor or its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds. At the Secured Party's option, any such sale may
be conducted in any locality where the Secured Party has an office. The Secured
Party may purchase at such sale. The Secured Party may require Debtor to
assemble the Collateral and make it available to the Secured Party at a place
designated by the Secured Party that is reasonably convenient to both parties.
The Secured Party's acceptance of partial or delinquent payments or failure of
the Secured Party to exercise any right or remedy at any time shall not waive
any obligation of any Debtor or Obligor, or any right or remedy of the Secured
Party, or modify this agreement, or waive any other similar default.
- 2 -
(D) Expenses.
In the event that the Debtor fails to comply with the provisions of the
Loan Documents or this Security Agreement, such that the validity, perfection or
rank of any security interest is thereby diminished or put at risk, the Secured
Party (i) may deliver written notice of such non-compliance to the Debtor
requesting that it cure such non-compliance, and (ii) if within ten business
days after delivery of such notice the Debtor has failed to cure such
non-compliance, the Secured Party may, but shall not be required to, effect such
compliance on behalf of the Debtor, and the Debtor shall reimburse the Secured
Party for the reasonable costs thereof on demand. All insurance expenses and all
expenses of protecting, storing, warehousing, appraising, insuring, handling,
maintaining and shipping the Collateral, any and all excise, property, sales,
and use taxes imposed by any state, federal, or local authority on any of the
Collateral, or in respect of periodic appraisals and inspections of the
Collateral to the extent the same may reasonably be requested by the Secured
Party from time to time, or in respect of the sale or other disposition thereof,
shall be borne and paid by the Debtor; and if the Debtor fails to promptly pay
any portion thereof when due, the Secured Party may, at their option, but shall
not be required to, pay the same and charge the Debtor's account therefor, and
the Debtor agrees to reimburse the Secured Party therefor on demand. All
reasonable sums so paid or incurred by the Secured Party for any of the
foregoing and any and all other sums for which the Debtor may become liable
hereunder and all costs and expenses (including attorneys' fees, legal expenses
and court costs) reasonably incurred by the Secured Party in enforcing or
protecting the security interests or any of their rights or remedies under this
Security Agreement, shall, together with interest thereon for each day from the
date demanded until paid at the rate of 8% per annum, be obligations secured by
this Security Agreement.
(E) Subordination.
Secured Party hereby agrees that in connection with Debtor's entering into
any credit facility or finance arrangement with a financial institution for
purposes of obtaining working capital and other general corporate financing,
Secured Party shall execute and deliver to such financial institution a
subordination agreement subordinating in favor of such financial institution its
rights to payment of any indebtedness owed by Debtor to Secured Party and all
security interests which Debtor has then granted to Secured Party. Secured Party
further agrees to execute and deliver to such financial institution such other
documents as such financial institution may reasonably request in order to
implement such subordination agreement.
(F) General Provisions.
1. On transfer of all or any part of the Indebtedness, as permitted by the
Loan Document, Secured Party may transfer all or any part of the Security
Interest securing such Indebtedness. This agreement benefits the Secured Party's
successors and assigns and binds Debtor's successors and assigns. Time is of the
essence. This agreement and supplementary schedules hereto contain the entire
security agreement between the Secured Party and Debtor. Debtor will execute any
additional agreements, assignments or documents which the Secured Party
reasonably may reasonably request to effectuate this agreement or perfect any
rights or interests of Secured Party hereunder. This agreement shall be governed
by, and construed in accordance with, the laws of the State of Washington.
2. Beyond the exercise of reasonable care in the custody thereof, the
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Secured Party shall be deemed to have exercised
reasonable care in the custody of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any warehouseman, carrier, forwarding agency,
consignee or other agent or bailee selected by the Secured Party in good faith;
provided, however, nothing in this Section shall be deemed to prejudice any
rights of the Debtor against such warehouseman, carrier, forwarding agency,
consignee or other agent or bailee.
3. Neither this Security Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only in writing signed by the
Debtor and the Secured Party.
- 3 -
4. All notices, approvals, requests, demands and other communications shall
be given in accordance with the Loan Documents.
5. Upon the repayment in full of the Indebtedness, this Security Agreement
shall terminate and all rights to the Collateral shall revert to the Debtor.
6. Captions, titles and section and paragraph divisions and arrangements in
this agreement and in any instruments and documents heretofore or hereafter made
or executed are for convenience and for reference only, and shall not affect the
meaning, interpretation or construction thereof. Whenever the context so
requires, any gender shall include all other genders, and the singular number
shall include the plural.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
Dated this __ day of June, 2002
CONNECTRIA CORPORATION
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
- 4 -
EXHIBIT A
PROPERTY SCHEDULE
Description of Collateral:
All Debtor's right, title and interest in and to the following:
(a) All inventory now owned or hereafter at any time acquired by Debtor
which is held for sale or lease, or is furnished or to be furnished under
contracts of service, or is held as raw materials, work in process, or materials
used or consumed or to be used or consumed in Debtor's business, and all
manufacturing and processing rights, patents, patent rights, licenses,
trademarks, trade names, domain names, royalties and copyrights in connection
therewith to the extent that such rights may be assigned to the Secured Party
including without limiting the generality of the foregoing, all documents of
title now existing or hereafter at any time acquired by Debtor and covering
goods of any type or kind hereinabove described;
(b) All accounts (rights to payment for property that has been or is to be
sold, leased, licensed, assigned or otherwise disposed of sold or leased, or for
services rendered or for services rendered or to be rendered, or for a secondary
obligation incurred or to be incurred) of Debtor now existing or hereafter at
any time acquired;
(c) All general intangibles, including without limitation payment
intangibles and other rights of Debtor to the payment of money no matter how
evidenced, rights to tax refunds, and all chattel paper, investment property,
documents, letters of credit and letter of credit rights, instruments and other
writings evidencing such right now existing or hereafter at any time, and all
commercial tort claims, and all contracts (rights to payment under a contract
for the sale or lease of goods or the furnishing of services, which rights have
not been earned by performance) and contract rights of Debtor now existing or
hereafter at any time arising;
(d) All equipment, and all accessions thereto;
(e) All now existing and hereafter acquired books and records relating to
the foregoing collateral and all equipment containing such books and records;
and
(f) All proceeds of the foregoing collateral (including, without limitation
proceeds which constitute property of the types described in clauses (a) through
(e) above), and including proceeds of insurance, products thereof and any
property which Debtor may receive on account thereof . "Proceeds" includes
whatever is acquired upon the sale, lease, licenses, exchange or other
disposition of collateral or proceeds, whether such disposition is voluntary or
involuntary, whatever is collected on, or distributed on account of, collateral,
rights arising out of collateral, claims arising out of the loss, nonconformity
or interference with the use of, defects or infringements of rights in, or
damage to, collateral and insurance payable (whether or not the Secured Party is
the loss payee thereof) by reason of the loss or nonconformity of, defects or
infringement of rights in, or damage to, the collateral or otherwise with
respect to any of the foregoing.
- 5 -
EXHIBIT F
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement"), is entered into as of
this ____ day of June, 2002 among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇.
▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇"), Connectria Corporation, a Missouri corporation, its
affiliates, successors and assigns ("Connectria"), and MDSI Mobile Data
Solutions Inc., a Canadian corporation, its affiliates, successors, and assigns
("MDSI"). ▇▇. ▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ are sometimes collectively referred to as
the "Executives." ▇▇. ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇, and Connectria are sometimes
referred to collectively as the "Covenantors."
R E C I T A L S
A. Pursuant to an Agreement and Plan of Reorganization, dated as of May
9, 2000 (the "Reorganization Agreement"), MDSI acquired all of the outstanding
voting securities of Connectria by a merger of a subsidiary of MDSI with and
into Connectria as the surviving corporation (the "Merger"), and the Executives,
who collectively owned 97.6% of the outstanding common stock of Connectria
immediately prior to the Merger, received an aggregate of 824,700 shares of
common stock of MDSI as the consideration for the Merger (the "MDSI Shares").
B. Since the closing of the Merger, the Executives have served as
employees and executive officers of MDSI and ▇▇. ▇▇▇▇▇▇▇▇ has served a director
of MDSI. In such capacities, the Executives have had access to and gained
knowledge of certain confidential information of MDSI and specialized knowledge
of its business.
C. MDSI and the Executives have reached a mutual understanding concerning
the unwinding of MDSI's acquisition of Connectria, as set forth in the Exchange
Agreement among MDSI, Connectria and the Executives dated as of June __, 2002
(the "Exchange Agreement"), to which this Agreement is attached as Exhibit F.
The execution and delivery of this Agreement by the parties hereto is a
condition to the closing of the transactions described in the Exchange Agreement
and the receipt by the Executives and Connectria of the consideration provided
for therein.
NOW, THEREFORE, in consideration of the foregoing mutual premises and the
following representations, warranties, covenants and agreements set forth herein
and in the Exchange Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Covenantors
and MDSI, intending to be legally bound hereby, agree as follows:
A G R E E M E N T
1. ACKNOWLEDGEMENTS. The parties represent, warrant, acknowledge, and
agree that:
a. Business. MDSI's business consists of, among other things, the
business described in MDSI's filings with the Securities and Exchange
Commission, including,
1
but not limited to, its Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (the "Business");
b. Specialized Knowledge. As a result of the Covenantors' active
participation in MDSI and the Business, they have specialized knowledge of the
Business, including, but not limited to, the market in which MDSI operates, the
method by which MDSI earns revenue, key personnel of MDSI, key customer contacts
and prospects, and other Confidential Information (defined below) ("Specialized
Knowledge");
c. Irreparable Harm. MDSI would be irreparably harmed and impaired
if the Covenantors were to engage, directly or indirectly, in any Competitive
Services (defined below) or disclose any Specialized Knowledge in violation of
this Agreement.
d. Reasonable Covenants. The Covenantors have been fully advised by
counsel in connection with the negotiation, preparation, execution and delivery
of this Agreement, the Exchange Agreement, and the transactions contemplated by
those agreements. The Covenantors agree that MDSI would not engage in any of the
transactions contemplated by the Exchange Agreement and this Agreement without
the benefit of each of the restrictive covenants and agreements contained
herein. Accordingly, the Covenantors agree to be bound by the noncompetition
agreement and the other restrictive covenants and agreements contained in this
Agreement to the maximum extent permitted by law, it being the intent and spirit
of the parties that the noncompetition agreement and the other restrictive
covenants and agreements contained herein shall be valid and enforceable in all
respects.
2. RESTRICTIVE COVENANTS.
a. Confidential Information.
(i) MDSI Information. The Covenantors agree to hold in strictest
confidence and not to use or disclose to any person, firm, corporation or other
entity, any Confidential Information of MDSI. If at any time the Covenantors
become involved in a legal proceeding that may result in disclosure of any
Confidential Information, the Covenantors will promptly notify MDSI of such
proceeding prior to disclosing any Confidential Information, and will fully
cooperate with MDSI in whatever actions it deems are necessary to protect the
Confidential Information.
(ii) Third Party Information. The Covenantors recognize that MDSI
has received confidential information from third parties subject to a duty on
MDSI's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. The Covenantors agree to hold all such
confidential or proprietary information in the strictest confidence and not to
disclose it to any person, firm or corporation.
b. Non-Competition. The Covenantors agree that until the second
anniversary of the Closing Date, as defined in the Exchange Agreement (the
"Closing Date"), the Covenantors will not as individuals, proprietors, partners,
stockholders, officers, employees, directors, consultants, joint venturers,
investors, lenders, or in any other capacity whatsoever, engage anywhere in the
world in any Competitive Services (defined below); provided, however, the
Covenantors may own, directly or indirectly, solely as a passive investment,
securities of any
2
entity traded on any national securities exchange or automated quotation system
if none of the Covenantors are a controlling person of, or a member of a group
which controls such entity, and the Covenantors are not collectively, directly
or indirectly, the beneficial owners of one percent (1.0%) or more of any class
of securities of such entity (as determined pursuant to Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, provided, however, that in the case
of rights to acquire securities, a Covenantor shall be deemed to be the
beneficial owner of such securities without regard to whether the rights are
exercisable within the sixty (60) day period referred to in Rule
13d-3(d)(1)(i)).
c. Solicitation of Employees, Consultants and Other Parties.
(i) Customers and Suppliers. The Covenantors agree that until
the second anniversary of the Closing Date, the Covenantors shall not directly
or indirectly solicit, influence, induce, recruit or encourage (collectively, to
"Solicit") or attempt to Solicit any licensor, licensee, customer or supplier of
the MDSI or its products, which the Covenantors or any employee, consultant or
agent of Connectria had contact with while employed by or affiliated with MDSI,
or that are known to any such persons, in order to divert his, her or its
business away from MDSI or otherwise terminate his, her or its relationship with
MDSI.
(ii) Employees. The Covenantors acknowledge and agree that they
possess confidential information about employees of MDSI relating to their
education, experience, skills, abilities, compensation and benefits, and their
interpersonal relationships with customers or suppliers of MDSI. The Covenantors
acknowledge and agree that the information they possess about MDSI employees is
not generally known, is of substantial value to MDSI in developing its business
and in securing and retaining customers, and was acquired by the Covenantors
because of their business position with MDSI. Accordingly, the Covenantors agree
that until the second anniversary of the Closing Date, they will not, directly
or indirectly, Solicit any employee or consultant of MDSI for the purpose of (i)
being employed by Connectria or by any person or entity engaged in the Business,
or (ii) interfering with or terminating his or her employment relationship with
MDSI for any purpose or no purpose; and that the Covenantors will not convey any
such confidential information or trade secrets about other employees of MDSI to
any other person or entity.
d. Returning MDSI Documents. The Covenantors represent and warrant
that, except as otherwise provided in the Exchange Agreement or an Exhibit or
Schedule thereto, they have delivered or will deliver to MDSI (and will not
keep, recreate or deliver to anyone else) any and all devices, records, data,
notes, reports, proposals, lists, correspondence, specifications, drawings,
blueprints, sketches, laboratory notebooks, materials, flow charts, equipment,
other tangible media or property, or reproductions of any aforementioned items
developed or otherwise acquired by Covenantors for MDSI while employed by or
affiliated with MDSI, or otherwise belonging to MDSI.
3. RIGHTS AND REMEDIES UPON BREACH BY THE EXECUTIVES OR THE MDSI. If the
Covenantors breach or threaten to commit a breach of any of the provisions of
this Agreement MDSI shall have the following rights and remedies, each of which
shall be independent of the others and severally enforceable, and each of which
shall be in addition to, and not in lieu of, any other rights or remedies
available to MDSI:
3
a. Specific Performance. The right and remedy to have each and every
one of the covenants in this Agreement specifically enforced and the right and
remedy to obtain injunctive relief, including a temporary restraining order and
a preliminary or temporary injunction, it being agreed that any breach or
threatened breach of any of the noncompetition or other restrictive covenants
and agreements contained herein would cause irreparable injury to MDSI and that
money damages would not provide an adequate remedy at law to MDSI.
b. Accounting. The right and remedy to require the Covenantors to
account for and pay over to MDSI all compensation, profits, monies, accruals,
increments or other benefits derived or received by the Covenantors or any
Connected Entity (defined below) that result from any transaction or activity
constituting a breach of this Agreement.
c. Severability of Covenants. The Covenantors acknowledge and agree
that the noncompetition and other restrictive covenants and agreements contained
herein are reasonable and valid in geographic and temporal scope and in all
other respects, and do not impose limitations greater than that are necessary to
protect the goodwill, Confidential Information, and other business interests of
MDSI. If, however, any court subsequently determines that any of such covenants
or agreements, or any part thereof, is invalid or unenforceable, the remainder
of such covenants and agreements shall not thereby be affected and shall be
given full effect without regard to the invalid portions.
d. Blue-Penciling. If any court of competent jurisdiction determines
that any of the noncompetition and other restrictive covenants and agreements,
or any part thereof, is unenforceable because of the duration or geographic
scope of such provision, such court shall have the power to reduce the duration
or scope of such provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable to the maximum extent permitted by
applicable law.
e. Enforceability in All Jurisdictions. The parties hereto intend to
and hereby confer jurisdiction to enforce each and every one of the covenants
and agreements contained herein upon the courts of any jurisdiction within the
geographic scope of such covenants and agreements. If the courts of any one or
more of such jurisdictions hold any such covenant or agreement unenforceable by
reason of the breadth or such scope or otherwise, it is the intention of the
parties hereto that such determination shall not bar or in any way affect MDSI's
right to the relief provided above in the courts of any other jurisdiction
within the geographic scope of such covenants and agreements, as to breaches of
such covenants and agreements in such other respective jurisdictions, such
covenants and agreements as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants and agreements.
4. DEFINITIONS. For the purposes of this Agreement, the following terms
will have the following meanings:
a. Competitive Services. "Competitive Services" means the design,
development, production, support, market or sale of products or services
competitive with any kind or type of products or services (including actual or
demonstrably anticipated research or development of MDSI) on which the
Covenantors or any employee, consultant or agent of
4
Connectria worked or about which any of such persons learned Confidential
Information during the Covenantors' employment by or affiliation with MDSI; but
"Competitive Services" excludes any business activity that is, or at any time in
the last two years has been, engaged in by Connectria.
b. Confidential Information. "Confidential Information" means any
MDSI confidential or proprietary information, technical data, trade secrets or
know-how, including, but not limited to, research, product plans, products,
services, suppliers, customer lists and customers (including, but not limited
to, customers of MDSI whom Covenantors became acquainted with during their
affiliation with MDSI), prices and costs, markets, software, developments,
inventions, laboratory notebooks, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, licenses,
finances, budgets or other business information disclosed to the Covenantors,
acquired by Covenantors, or created by Covenantors, either directly or
indirectly, whether in writing, orally, by drawings, or by observation of parts
or equipment or otherwise, during the period of the Covenantors' affiliation
with MDSI. The Covenantors understand and agree that "Confidential Information"
includes, but is not limited to, information pertaining to any aspect of MDSI's
(or its suppliers' or customers') business, financial or technical affairs which
derived economic value from not being generally known. The Covenantors further
understand and agree that Confidential Information does not include any of the
foregoing items which has become publicly and widely known and made generally
available through no wrongful act of the Covenantors or of others who were under
confidentiality obligations as to the item or items involved.
c. Connected Entity. "Connected Entity" means: any natural person,
corporation, partnership, limited liability company or other entity, or any
representative of such person or entity, in which any Covenantor has any
material financial or ownership interest.
5. NOTICES.
All notices and other communications under this Agreement shall be in
writing and shall be deemed given (a) when such notice is personally delivered,
(b) five (5) days after dispatch by certified or registered mail, return receipt
requested, (c) two (2) business days after dispatch by a reputable overnight
delivery service, or (d) upon transmission by facsimile machine, provided an
answerback is received and provided further that notice is confirmed by any
other permissible method. Notices shall be addressed to such party at its
address hereinafter set forth or such other address as such party may hereafter
specify by notice given pursuant to this section:
If to MDSI:
MDSI Mobile Data Solutions Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Chairman & CEO
5
with a copy to:
▇▇▇▇▇▇ & Whitney LLP
U.S. Bank Centre
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Covenantors:
Connectria Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
6. GENERAL PROVISIONS.
a. Governing Law. This Agreement shall be construed, interpreted,
and governed in accordance with the laws of the State of Missouri, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
b. Entire Agreement/Modification. This Agreement, the Exchange
Agreement, and all documents incorporated by reference herein, represent the
entire agreement of the parties with respect to the subject matter hereof and
shall supersede any and all previous contracts, arrangements or understandings
between the parties hereto with respect to the subject matter hereof. This
Agreement may not be modified or amended except by an instrument in writing
signed by the party or parties against which such amendment or modification is
to be enforced.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
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MDSI MOBILE DATA SOLUTIONS INC.
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By:
Name:
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CONNECTRIA CORPORATION
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By:
Name:
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EXHIBIT G
MUTUAL RELEASE
THIS MUTUAL RELEASE (the "Release") is made and entered into as of the ___
day of _____, 2002, by and among MDSI Mobile Data Solutions, Inc., a Canadian
corporation ("MDSI"), Connectria Corporation, a Missouri corporation
("Connectria"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") and ▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇"), residents of Missouri. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ sometimes are referred to
collectively as the "Shareholders."
RECITALS
A. The parties hereto entered into an Agreement and Plan of
Reorganization, dated as of April 1, 2000 (the "Merger Agreement"), pursuant to
which MDSI acquired by subsidiary merger all of the outstanding stock of
Connectria.
B. The parties hereto have entered into an Exchange Agreement, dated as
of June __, 2002 (the "Exchange Agreement"), pursuant to which, among other
things, the Shareholders have agreed to surrender all of their common stock, and
certain options to purchase common stock, of MDSI in exchange for a distribution
by MDSI to the Shareholders of all of the outstanding stock of Connectria.
C. The execution and delivery of this Release is a condition precedent to
closing the transaction contemplated by the Exchange Agreement.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the receipt and sufficiency of which are hereby acknowledged, IT
IS HEREBY AGREED AS FOLLOWS:
1. Release by Shareholders. Subject to paragraph 4 of this Release, each
of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, for himself and his heirs, personal representatives,
successors and assigns, does hereby release and forever discharge MDSI, each
Affiliate of MDSI and their respective shareholders, officers, directors,
employees and agents (and their respective heirs, executors, administrators,
successors and assigns, as the case may be) (hereinafter collectively referred
to as the "MDSI Released Parties") of and from all manner of actions, causes of
action, suits, debts, sums of money, accounts, covenants, controversies,
agreements, promises, guarantees, obligations, damages, judgments, claims and
demands, whatsoever, in law or in equity, which ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ now has, or
ever had, or which ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ may be entitled to assert, against the
MDSI Released Parties, or any of them, which arise out of or are in any way
related to the Merger Agreement and the other agreements and instruments
executed in connection therewith, including but not limited to the agreements
and instruments listed on Schedule 1 attached hereto (the "Terminated
Agreements"), or to the employment of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ by MDSI or any
Affiliate, or to any other transaction between any of the MDSI Parties, on the
one hand, and ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇, on the other hand. The term "Affiliate" means
any person controlling, controlled by or under common control with MDSI (but
such term excludes Connectria). Without limiting the generality of the
foregoing, such release includes the release of claims for any breach of
▇▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇▇'▇ Employment Agreement or any
implied or other express employment contract, claims for unlawful discharge,
claims alleging a violation of the Age Discrimination in Employment Act of 1967,
as amended, 29 U.S.C. ss.621, et seq., the Missouri Human Rights Act, the
Conscientious Employee Protection Act or similar statutes, or claims pursuant to
any other federal, state or local law regarding discrimination based on race,
age, sex, religion, marital status, disability, national origin, or other
protected categories, claims for alleged violation of any other local, state, or
federal law, regulations, ordinance or public policy having any bearing
whatsoever on the terms or conditions of ▇▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇▇'▇ employment with
MDSI or any Affiliate of MDSI, and claims pursuant to common law.
2. Release by Connectria. Subject to paragraph 4 of this Release,
Connectria, for itself and its successors and assigns, does hereby release and
forever discharge each of the MDSI Released Parties of and from all manner of
actions, causes of action, suits, debts, sums of money, accounts, covenants,
controversies, agreements, promises, guarantees, obligations, damages,
judgments, claims and demands, whatsoever, in law or in equity, which Connectria
now has, or ever had, or which Connectria may be entitled to assert, against the
MDSI Released Parties, or any of them, which arise out of or are in any way
related to the Merger Agreement and the other agreements and instruments
executed in connection therewith, including but not limited to the Terminated
Agreements, or to any other transaction between MDSI and Connectria.
3. Release by MDSI. Subject to paragraph 4 of this Release, MDSI, for
itself, each of its Affiliates and their respective successors and assigns, does
hereby release and forever discharge each Shareholder and Connectria and its
officers, directors, employees and agents (and their respective heirs,
executors, administrators, successors and assigns, as the case may be)
(hereinafter collectively referred to as the "Connectria Released Parties") of
and from all manner of actions, causes of action, suits, debts, sums of money,
accounts, covenants, controversies, agreements, promises, guarantees,
obligations, damages, judgments, claims and demands, whatsoever, in law or in
equity, which MDSI or any Affiliate now has, or ever had, or which MDSI or any
Affiliate may be entitled to assert, against the Connectria Released Parties, or
any of them, which arise out of or are in any way related to the Merger
Agreement and the other agreements and instruments executed in connection
therewith, including but not limited to the Terminated Agreements, or to any
other transaction between MDSI or any Affiliate thereof, on the one hand, and
Connectria or either Shareholder, on the other hand.
4. Certain Rights and Claims Not Released. Notwithstanding the releases
contained in paragraphs 1 through 3 of this Release, the following rights,
claims and obligations of the parties are not relinquished or released by this
Release:
(a) Any right or obligation of any of the parties hereto under the
Exchange Agreement and any agreement or instrument executed pursuant to or in
contemplation of the Exchange Agreement;
(b) Any right of either Shareholder (i) to be paid his regular
compensation for services rendered to MDSI or any Affiliate through the date of
the closing under the Exchange Agreement, (ii) to receive vested benefits under
any employee benefit plan of MDSI or any Affiliate thereof in which the
Shareholder and/or his eligible dependents are
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participants or beneficiaries, (iii) to exercise any right or privilege under
any option to purchase common stock of MDSI which is not being surrendered to
MDSI pursuant to the Exchange Agreement, and (iv) to be indemnified for his
actions as an officer or director of MDSI or any subsidiary thereof, to the same
extent as any other present or former officer or director of MDSI or any
subsidiary thereof; and
(c) Any right or privilege of MDSI under the Warrant to purchase
50,380 shares of Series A Preferred Stock of Connectria, which was issued by
Connectria to MDSI in exchange for certain indebtedness of Connectria to MDSI.
5. Cross-Indemnification. Each of the Shareholders and Connectria agrees
that, if any person claiming through such party initiates any legal proceeding
against any of the MDSI Released Parties to enforce any of the claims released
by this Release, then such Shareholder or Connectria (as applicable) shall
indemnify and hold harmless the MDSI Released Parties from any and all such
claims, and all reasonable legal fees and costs incurred in defending any such
claims asserted after the execution hereof. MDSI agrees that, if any person
claiming through MDSI or any Affiliate thereof initiates any legal proceeding to
enforce any of the claims released by this Release, then MDSI shall indemnify
and hold harmless the Connectria Released Parties from any and all such claims,
and all reasonable legal fees and costs incurred in defending any such claims
asserted after the execution hereof.
6. Warranty of Ownership. The parties each warrant and represent that
they are the owners and holders of the claims released by this Release, and that
no claims released hereby have been sold, assigned or otherwise transferred to
any third persons.
7. Miscellaneous. This Release shall bind MDSI, each Affiliate thereof
and Connectria and their respective successors and assigns, and the Shareholders
and their respective heirs, personal representatives, successors and assigns.
This Release shall inure to the benefit of the MDSI Released Parties, the
Connectria Released Parties and their respective heirs, personal
representatives, successors and assigns. This Release may be executed in
counterparts, with signatures transmitted by facsimile to be original signatures
for all purposes, each counterpart shall be an original document and all
counterparts taken together shall be a single agreement.
8. Governing Law. This Release shall be governed by, and interpreted and
enforced in accordance with, the internal laws of the State of Missouri.
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IN WITNESS WHEREOF, the parties hereto have caused this Release to be duly
executed on the day and year first above written.
MDSI MOBILE DATA SOLUTIONS INC.
By:
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Name:
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Its:
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CONNECTRIA CORPORATION
By:
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Name:
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Its:
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