EXHIBIT 10.1
TABLE OF CONTENTS
Page
1. Definitions. 2
2. The Transactions. 12
2.1 Description of the Transactions. 12
2.2 Voting and Exchange Trust Agreement. 14
2.3 Exchangeable Share Support Agreement. 14
2.4 Founders' Additional Restrictions Agreement. 14
2.5 Exemption From Registration. 15
2.6 Closing. 15
2.7 Taking of Necessary Action; Further Action. 15
2.8 Accounting Consequences. 15
2.9 Adjustments to Exchange Ratio. 15
2.10 Fractional Shares. Fractional shares shall be
handled in accordance with Section 4.6 of the Plan of
Arrangement. 16
2.11 Tax Treatment. 16
3. Representations and Warranties of the Company. 16
3.1 Organization and Good Standing. 16
3.2 Authority; No Conflict. 17
3.3 Capitalization. 18
3.4 Subsidiaries. 19
3.5 Financial Statements. 20
3.6 Books and Records. 20
3.7 Title to Properties; Encumbrances. 20
3.8 Condition and Sufficiency of Assets. 21
3.9 No Undisclosed Liabilities. 21
3.10 Taxes. 21
3.11 No Material Adverse Change. 23
3.12 Employee Matters and Company Employee Plans. 23
3.13 Compliance with Legal Requirements; Governmental
Authorizations. 28
3.14 Legal Proceedings; Orders. 29
3.15 Absence of Certain Changes and Events. 30
3.16 Contracts; No Defaults. 33
3.17 Environmental and Product Matters. 35
3.18 Intellectual Property. 36
3.19 Certain Agreements. 37
3.20 Certain Payments. 38
3.21 Relationships with Related Persons. 38
3.22 Brokers or Finders. 38
3.23 Board Approval.. 38
3.24 Shareholder Approval. 39
3.25 Sales and Assets in the United States and Canada. 39
3.26 Exemption Applications; Information Circular. 39
4. Representations and Warranties of Parent and Acquisition
Sub. 40
4.1 Organization and Good Standing. 40
4.2 Authority; No Conflict. 40
4.3 Capitalization. 41
4.4 Certain Proceedings. 42
4.5 SEC Documents. 42
4.6 Brokers or Finders. 43
4.7 Suspension and Trading. 43
4.8 NASDAQ Listing. 43
4.9 Interim Operations of Acquisition Sub. 43
4.10 Prospectus Exemptions. 43
5. Covenants of the Company. 43
5.1 Access and Investigation. 43
5.2 Operation of the Businesses of the Company. 44
5.3 Negative Covenant. 44
5.4 Required Approvals. 45
5.5 Notification. 45
5.6 Covenants Regarding Non-Solicitation. 45
5.7 Best Efforts. 45
5.8 Moral Rights. 46
5.9 Information Circular; Permit Application. 46
5.10 Shareholder Approval. 47
5.11 Founders' Additional Restrictions Agreement. 47
5.12 Employment Agreements. 47
5.13 Repurchase of Founders' Class B Preferred Shares. 47
5.14 Third Party Consents. 48
5.15 Consent of Option Holders. 48
5.16 Delivery of Cash Consideration; Indemnification. 48
6. Covenants of Parent. 48
6.1 Approvals of Governmental Bodies. 48
6.2 Best Efforts and Further Assurances . 48
6.3 Support Agreement and Voting and Exchange Trust
Agreement. 49
6.4 Registration Statement; Form S-8 Registration
Statement. 49
6.5 Canadian Securities Compliance. 52
6.6 Issuance of Nonvoting Preferred Stock. 53
6.7 Officers' and Directors' Indemnification: Insurance. 53
7. Conditions Precedent to Parent's Obligation to Close. 53
7.1 Accuracy of Representations. 53
7.2 The Company's Performance. 54
7.3 Consents. 54
7.4 Additional Documents. 54
7.5 No Proceedings. 55
7.6 No Claim Regarding Stock Ownership or Sale Proceeds. 55
7.7 No Prohibition. 55
7.8 Shareholder Approval. 55
7.9 Canadian Approvals. 55
7.10 Nasdaq Listing. 56
7.11 Dissent Rights. 56
7.12 Court Approval. 56
7.13 Termination of 401(k) Plan. 56
7.14 No Material Adverse Change in the Company's Business. 56
8. Conditions Precedent to the Company's Obligation to Close.57
8.1 Accuracy of Representations. 57
8.2 Parent's Performance. 57
8.3 Additional Documents. 57
8.4 No Proceedings. 58
8.5 No Injunction. 58
8.6 Shareholder Approval. 58
8.7 Canadian Approvals. 58
8.8 Nasdaq Listing. 58
8.9 Court Approval. 58
9. Termination. 58
9.1 Termination Events. 58
9.2 Effect of Termination. 59
10. Escrow Fund. 60
10.1 Escrow Shares. 60
10.2 Damage Threshold. 61
10.3 Escrow Period. 61
10.4 Claims upon Escrow Fund. 61
10.5 Objections to Claims. 62
10.6 Resolution of Conflicts; Arbitration. 62
10.7 Company Agent. 63
10.8 Actions of the Company Agent. 64
10.9 Third-Party Claims. 64
11. General Provisions. 64
11.1 Expenses and Liability. 64
11.2 Public Announcements. 64
11.3 Confidentiality. 65
11.4 Notices. 65
11.5 Jurisdiction; Service of Process. 66
11.6 Further Assurances. 67
11.7 Waiver. 67
11.8 Entire Agreement and Modification. 67
11.9 Disclosure Letter. 67
11.10 Assignments, Successors, and No Third-Party Rights. 68
11.11 Severability. 68
11.12 Section Headings, Construction. 68
11.13 Time of Essence. 68
11.14 Governing Law. 69
11.15 Counterparts. 69
11.16 No Third-Party Beneficiaries. 69
11.17 Currency. 69
EXHIBITS
Exhibit A Plan of Arrangement
Exhibit B Voting and Exchange Trust Agreement
Exhibit C Exchangeable Share Support Agreement
Exhibit D Founders' Additional Restrictions Agreement
Exhibit E Company Affiliate Agreement
Exhibit F Voting Agreement
Exhibit G Noncompetition and Confidentiality Agreements
Exhibit H Escrow Agreement
SCHEDULES
Schedule A Founders
Schedule B Vesting and Release Schedule
Schedule C Voting Agreement Shareholders
Schedule D Noncompetition Employees
AGREEMENT AND PLAN OF ACQUISITION AND ARRANGEMENT
This Agreement and Plan of Acquisition and Arrangement, dated as
of December 14, 1999 (the "Agreement"), is entered into by and between
Rational Software Corporation, a Delaware corporation ("Parent"),
Rational International, a California corporation and subsidiary of
Parent ("International Corp."), 3037936 Nova Scotia Company, a Nova
Scotia unlimited liability company and indirect subsidiary of Parent
("Holding ULC"), 1386501 Ontario Limited, an Ontario business
corporation and indirect subsidiary of Parent ("Acquisition Sub"),
1386503 Ontario Limited, a corporation incorporated under the laws of
Ontario ("Amalco") and ObjecTime Limited, a corporation incorporated
under the laws of Ontario (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Parent and the Company have
each determined that it is advisable and in the best interests of their
respective shareholders for Parent to acquire control of the Company
through a statutory arrangement (the "Arrangement") involving the
exchange of all of the issued and outstanding shares of the Company,
other than those shares owned by Parent or any of its subsidiaries (the
"Excluded Shares") for shares in Parent or an indirect subsidiary of
Parent (the "Acquisition Sub") upon the terms and conditions set forth
herein;
WHEREAS, as contemplated herein, Parent shall incorporate Holding
ULC, which shall in turn incorporate Acquisition Sub under the Business
Corporations Act (Ontario), which shall in turn incorporate Amalco
under the Business Corporations Act (Ontario);
WHEREAS, application will be made to the Ontario Superior Court
pursuant to the Business Corporations Act (Ontario) for an interim
order and directions and a final order with respect to a plan of
arrangement (the "Plan of Arrangement") substantially in the form of
the plan of arrangement annexed hereto as Exhibit A pursuant to which
Amalco and Company will amalgamate to form ObjecTime Limited, an
Ontario corporation ("New ObjecTime");
WHEREAS, upon receipt of a final order of the Superior Court of
Ontario approving the Plan of Arrangement, articles of arrangement
attaching the Plan of Arrangement (the "Articles of Arrangement") shall
be filed with the Ministry of Consumer and Commercial Relations for the
Province of Ontario giving effect to the Arrangement and the share
exchange;
WHEREAS, pursuant to the Plan of Arrangement, once approved, and
subject to the terms and conditions of this Agreement, all of the
issued and outstanding shares of capital stock of the Company, other
than the Excluded Shares, shall be exchanged for cash together with
either Parent Common Shares or Exchangeable Shares (as defined herein);
WHEREAS, as contemplated by the Plan of Arrangement and pursuant
to the terms of the Exchangeable Shares, and pursuant to the Support
Agreement and the Voting and Exchange Trust Agreement (each as defined
herein), the Exchangeable Shares shall be exchangeable by the holders
for shares of Common Stock, $0.01 par value per share, in the capital
of Parent (the "Parent Common Shares") on a one-for-one basis at any
time on or before the earlier of (i) the date of the one-year
anniversary after all such shares have been released pursuant to the
Escrow Agreement and (ii) a date five years after the Effective Time
(as defined herein) (the "Exchange Period"); provided that when
seventy-five percent (75%) of the Exchangeable Shares have been
converted, all remaining Exchangeable Shares must be exchanged within
six months after written notice;
WHEREAS, following the Effective Date, it is currently intended
that New ObjecTime will be continued to the corporate laws of the
Province of Nova Scotia and amalgamated with an unlimited liability
company to become an unlimited liability company;
WHEREAS, as an inducement for Parent to enter into this
Agreement, certain stockholders of the Company will enter into a Voting
Agreement pursuant to which they agree to vote in favor of the adoption
and approval of this Agreement and the approval of the Arrangement (the
"Voting Agreement"); and
WHEREAS, Parent, Acquisition Sub and the Company intend that the
Exchangeable Shares will be generally received by resident Canadian
shareholders of the Company without recognition of any gain or loss
pursuant to the Income Tax Act (Canada) and resident Canadian
shareholders of the Company will not be required to file United States
Tax Returns solely as a result of the Acquisition to be effected by the
Plan of Arrangement.
AGREEMENT
The parties, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and
valuable consideration, intending to be legally bound, hereby agree as
follows:
1. Definitions.
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Acquisition Shares" -- the Parent Common Shares issuable upon
exchange of the Exchangeable Shares and Parent Common Shares issued
directly to holders of Shares pursuant to the Plan of Arrangement.
"Acquisition Sub" -- as defined in the recitals to this
Agreement.
"Affiliate" - the person deemed an affiliate as the term
"affiliate" is used for purposes of Rule 144 of the Rules and
Regulations under the Securities Act of 1933, as amended.
"Applicable Contract" -- any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company has or may
become subject to any obligation or liability, or (c) by which the
Company or any of the assets owned or used by it is or may become
bound.
"Arrangement" -- as defined in the recitals to this Agreement.
"Articles" -- as defined in the recitals to this Agreement.
"Articles of Arrangement" - as defined in the recitals to this
Agreement.
"Assumed Option" - a Company Option that shall be assumed by
Parent at the Effective Time.
"Balance Sheets" -- as defined in Section 3.5.
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided,
however, that an obligation to use Best Efforts under this Agreement
does not require the Person subject to that obligation to take actions
that would result in a materially adverse change in the benefits to
such Person of this Agreement and the Contemplated Transactions.
"Breach" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if
there is or has been any inaccuracy in or breach of, or any failure to
perform or comply with, such representation, warranty, covenant,
obligation, or other provision.
"Canadian Securities Laws" -- the securities legislation of each
province or territory of Canada, including any successor legislation,
rules and regulations issued pursuant to that legislation or any
successor legislation, as interpreted and applied by the applicable
securities regulatory authority.
"Class B Non-Voting Preference Shares" - the Class B Non-Voting
Preference Shares in the capital of Acquisition Sub having
substantially the rights, privileges, restrictions and conditions set
out in the provisions attaching to the Class B Non-Voting Preference
Shares attached hereto as Appendix 2 to Exhibit A.
"Closing" -- as defined in Section 2.6.
"Closing Date" -- the date and time as of which the Closing
actually takes place.
"Commission" -- the U.S. Securities and Exchange Commission.
"Company" -- as defined in the first paragraph of this Agreement.
"Company Affiliate Agreements" -- as defined in Section 7.4(c).
"Company Employee Plan" -- all oral or written plans,
arrangements, agreements, programs, policies, practices or undertakings
with respect to some or all of the current or former directors,
officers, employees, independent contractors or agents of the
Corporation or any Subsidiary which provide for or relate to:
(a) bonus, profit sharing or deferred profit
sharing, performance compensation, deferred or incentive compensation,
share compensation, share purchase or share option purchase, share
appreciation rights, phantom stock, vacation or vacation pay, sick pay,
employee loans, or any other compensation in addition to salary
("Incentive Plans");
(b) retirement or retirement savings, including,
without limitation, registered or unregistered pension plans, pensions,
supplemental pensions, registered retirement savings plans and
retirement compensation arrangements (whether or not they are funded or
unfunded) ("Pension Plans"); or
(c) insured or self-insured benefits for or
relating to income continuation or other benefits during absence from
work (including short term disability, long term disability and workers
compensation), hospitalization, health, welfare, legal costs or
expenses, medical or dental treatments or expenses, life insurance,
accident, death or survivor's benefits, supplementary employment
insurance, day care, tuition or professional commitments or expenses or
similar employment benefits ("Benefit Plans");
"Company International Employee Plan" - as defined in Section
3.12(a).
"Company Options" - all outstanding options or rights to purchase
shares of capital stock of the Company issued under the Company Option
Plans.
"Company Option Plans" -- the ObjecTime Limited Canadian Stock
Option Plan (1997), as amended, the ObjecTime Limited U.S. Stock Option
Plan (1997), as amended, the ObjecTime Limited 1998 Canadian Stock
Option Plan, as amended, and the ObjecTime Limited 1998 U.S. Stock
Option Plan, as amended.
"Company Shares" -- as defined in Section 3.3.
"Confidential Information" -- as defined in Section 3.18(f).
"Consent" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions
contemplated by this Agreement, including:
(a) the Transactions (as defined in this Section) and
Parent's exercise of control over the Company;
(b) the execution, delivery, and performance of the
Voting Agreements, the Noncompetition Agreements, the Company Affiliate
Agreements, the Escrow Agreement, the Support Agreement, the Founders'
Additional Restrictions Agreement and the Voting and Exchange Trust
Agreement; and
(c) the performance by Parent and the Company of their
respective covenants and obligations under this Agreement.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied)
that is legally binding.
"Court" -- the Ontario Superior Court.
"Damages" -- as defined in Section 10.1.
"Depositary Agent" -- as defined in Section 10.1.
"Director" -- the director appointed pursuant to Section 278 of
the Ontario Act.
"Disclosure Letter" -- the disclosure letter delivered by the
Company to Parent concurrently with the execution and delivery of this
Agreement.
"Dissent Rights" -- means a shareholder of the Company's rights
of dissent in respect of the Arrangement described in Section 3.1 of
the Plan of Arrangement.
"$" and "Dollars" -- United States dollars.
"Effective Date" -- as defined in Section 2.1(b).
"Effective Time" -- as defined in Section 2.1(b) of this
Agreement.
"Employee" -- any current employee, officer, or director of the
Company.
"Employee Agreement" -- each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit
or similar agreement or contract between the Company and any Employee
or consultant.
"Encumbrance" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of
any other attribute of ownership.
"Environmental Laws" -- as defined in Section 3.17.
"Equity Equivalents" -- securities (including Options to purchase
any shares of Company common shares) which, by their terms, are or may
be exercisable or exchangeable for or into common shares, preferred
shares or other securities at the election of the holder thereof.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Escrow Agreement" -- as defined in Section 10.1.
"Escrow Shares" -- as defined in Section 10.1.
"Exchange Period" - as defined in the recitals to this Agreement.
"Exchange Ratio" -- the ratio at which each Company Share will be
exchanged into Class B Non-Voting Preference Shares of Acquisition Sub,
being .0388 of a Class B Non-Voting Preference Share for each Company
Share.
"Exchangeable Shares" - fully paid and non-assessable Class A
Non-Voting Preference Shares in the capital of Acquisition Sub.
"Excluded Shares" - all Company Shares held by Parent or any of
its subsidiaries immediately prior to the Effective Time.
"Exemption Application" -- as defined in Section 3.27.
"Exemption Order" -- as defined in Section 3.28.
"Facilities" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any
buildings, plants, structures, or equipment (including motor vehicles)
currently or formerly owned or operated by the Company.
"Final Order" -- as defined in Section 2.1(b).
"Founder" -- each Person listed on Schedule A hereto.
"Founders' Additional Restrictions Agreement" -- as defined in
Section 2.4.
"GAAP" -- generally accepted Canadian accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet
and the other financial statements referred to in Section 3.5 were
prepared.
"Governmental Authorization" -- any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental Body" -- any:
(a) nation, province, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal,
foreign, or other government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"Holding ULC" - as defined in the Recitals to this Agreement.
"Information Circular" -- as defined in Section 3.27.
"Individual Shareholder Agreements" - the shareholder agreements
entered into with each holder of Company Shares.
"Intellectual Property" -- as defined in Section 3.18(a).
"Interim Order" -- as defined in Section 2.1(a).
"Investment Assets" -- all debentures, notes and other evidences
of indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities),
interest in joint ventures and general and limited partnerships,
mortgage loans and other investment or portfolio assets owned of record
or beneficially by the Company.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant thereto.
"IRS" -- the United States Internal Revenue Service or any
successor and, to the extent relevant, the United States Department of
the Treasury.
"Knowledge" -- an individual will be deemed to have "Knowledge"
of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of such
fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who
is serving as a director, officer, partner, executor, or trustee of
such Person (or in any similar capacity) has, or at any time had,
"Knowledge" of such fact or other matter.
"Legal Requirement" -- any federal, provincial, state, local,
municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, principle of common
law, regulation, rule, policy statement, statute, or treaty.
"Material" -- as defined in Section 3.
"Material Adverse Effect" -- as defined in Section 3.
"Merger Shares" - the Exchangeable Shares and Parent Common
Shares issued in exchange for the Company Shares pursuant to the Plan
of Arrangement.
"Noncompetition Agreements" -- as defined in Section 7.4(f).
"Ontario Act" -- the Business Corporations Act (Ontario).
"Order" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any
arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only
if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal day-to-
day operations of such Person;
(b) such action is not required to be authorized by the
board of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically
authorized by the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations
of other Persons that are in the same line of business as such Person.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the memorandum and
articles of association of a company; (c) any charter or similar
document adopted or filed in connection with the creation, formation,
or organization of a Person; and (d) any amendment to any of the
foregoing.
"OSA" -- the Securities Act (Ontario) or any successor law, and
rule and regulations issued pursuant to that Act or any successor law.
"Parent" -- as defined in the first paragraph of this Agreement.
"Parent Common Shares" -- the Common Stock, $0.01 par value per
share, of Parent.
"Parent SEC Documents" -- as defined in Section 4.5.
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, unlimited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental
Body.
"Plan of Arrangement" -- defined in the recitals to this
Agreement.
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"Registrable Shares" -- the Parent Common Shares issuable under
the Arrangement, Parent Common Shares issuable upon exchange of the
Exchangeable Shares, and Parent Common Shares issuable upon exercise or
conversion of Assumed Options.
"Registration Statement" -- as defined in Section 6.4.
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person who beneficially owns, directly or
indirectly, ten percent (10%) of the issued and outstanding equity
securities or equity interests in the specified Person;
(b) any Person who beneficially owns, directly or
indirectly, ten percent (10%) of voting securities or other voting
interests in the specified Person;
(c) any Person who has the right to designate a director
in the specified Person;
(d) any Person who has the right to appoint the chief
executive officer of the specified Person;
(e) any entity in which a Related Person owns twenty-five
percent (25%) or more of the issued and outstanding equity securities
or equity interests in such entity;
(f) each Person that serves as a director, officer,
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(g) any Person in which such specified Person holds a
Material Interest;
(h) any Person with respect to which such specified
Person serves as a general partner or a trustee (or in a similar
capacity); and
(i) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other
natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other
equity interests representing at least 10% of the outstanding equity
securities or equity interests in a Person.
"Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"Securities Act" -- the U.S. Securities Act of 1933, as amended,
or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has not
occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means
a Subsidiary of the Company.
"Support Agreement" -- the Exchangeable Share Support Agreement,
as defined in Section 6.3.
"Tax" -- includes income tax, purchase tax, value added tax,
excise tax, sales tax, Goods and Services Tax, Provincial Sales Tax,
franchise tax, withholding tax, and any other tax of any kind imposed
on the Company, its assets or its properties payable to any Canadian,
U.S., provincial, state, local, or foreign government, including in all
cases interest, penalties and any other additions to tax and including
in all cases any liability for the Taxes of another person as a
transferee or successor, by contract or otherwise.
"Tax Return" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
`Third Party Intellectual Property Rights" -- as defined in
Section 3.18(b).
"Threatened" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been
given (orally or in writing) that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued
in the future.
"Transactions" -- the transactions described in Section 2.1 of
this Agreement.
"Vesting and Release Schedule" -- as defined on Schedule B
hereto.
"Voting Agreement" -- as defined in the recitals to this
Agreement.
"Voting and Exchange Trust Agreement" -- as defined in
Section 6.3.
2. The Transactions.
2.1 Description of the Transactions.
(a) As promptly as practicable, the Company shall
apply to the Court pursuant to Section 182 of the Ontario Act for an
interim order in form and substance reasonably satisfactory to Parent
and the Company (the "Interim Order") providing for, among other things
the calling and holding of a special meeting of the securityholders of
the Company (the "Company Shareholder Meeting") for the purpose of
considering and, if deemed advisable, approving the Arrangement under
Section 182 of the Ontario Act and pursuant to this Agreement and the
Plan of Arrangement, with such changes, modifications and additions
thereto as the parties may reasonably agree upon. The notice of motion
for the application for the Interim Order shall request that the
Interim Order provide (i) for the class of Persons to whom notice shall
be provided in respect of the Arrangement and the Company Shareholder
Meeting and for the manner in which such notice shall be provided,
(ii) that the requisite shareholder approval for the special resolution
approving the Arrangement shall be 66-2/3% of the votes cast on such
special resolution by holders of Company Shares, each voting separately
as a class, (and, in the case of the Class A Preferred Shares and the
Class 8 Special Shares, both including and excluding votes held by
persons who were not employees of the Company on September 30, 1999)
and by holders of Company Options voting separately as to holders of
Company Options granted under the 1997 Company Option Plans and the
1998 Company Option Plans present in person or by proxy at the Company
Shareholder Meeting, (iii) that, in all other respects, the terms,
restrictions and conditions of the Articles of Incorporation and By-
Laws of the Company, including quorum requirements and all other
matters, shall apply in respect of the Company Shareholder Meeting and
(iv) for the grant of the rights of dissent in respect of the
arrangement described in Section 3.1 of the Plan of Arrangement.
(b) If the shareholders of the Company shall
approve the Arrangement in accordance with the Interim Order, and
subject to the satisfaction or waiver of the other conditions set forth
in Article 7 and 8, the Company shall as promptly as practicable
(a) take all necessary steps to submit the Arrangement to the Court and
apply for a final order of the Court approving the Arrangement in such
fashion as the Court may direct (the "Final Order"). At 12:01 a.m.
(the "Effective Time") on the date (the "Effective Date") shown on the
Certificate of Arrangement issued by the Director giving effect to the
Arrangement, the reorganization of capital and other transactions set
out in Section 2.2 of the Plan of Arrangement shall occur and shall be
deemed to occur in the order set forth in such Section 2.2 without any
further act or formality.
(c) Pursuant to the terms of the Plan of
Arrangement and subject to the Escrow Agreement, commencing at the
Effective Time, the following events will occur:
(i) the Company will reorganize its share
capital so that each Class A Preferred Share and Class 8 Special Share
will be exchanged for one share of a newly created class of Class B
Common Shares;
(ii) Amalco and the Company will amalgamate to
form New ObjecTime and will continue as one corporation under the
Ontario Act;
(iii) each outstanding common share of Amalco,
each outstanding Company Share deemed to be held by Holding ULC under
the Plan of Arrangement and each Outstanding Company Share held by
Parent or its affiliates will be converted into one common share of New
ObjecTime and each outstanding Company Share that is not held by (A) a
holder who has exercised its Dissent Rights and is ultimately entitled
to be paid the fair market value of the Holder's Company Shares or (B)
Parent or its affiliates will be converted into that number of Class B
Non-Voting Preference Shares equal to the Exchange Ratio;
(iv) each outstanding preference share of
Amalco will be converted into one preference share of New ObjecTime;
(v) one-third (1/3) of the outstanding Class
B Non-Voting Preference Shares held by each person who is not a
resident of Canada for the purposes of the Income Tax Act (Canada) will
be transferred by the holder to Holding ULC in exchange for
consideration consisting of $48.77 cash for each Class B Non-Voting
Preference Share transferred;
(vi) each other outstanding Class B Non-Voting
Preference Share held by a person who is not a resident of Canada for
the purposes of the Income Tax Act (Canada) will be transferred by the
holder to Holding ULC in exchange for one Parent Common Share;
(vii) one-third (1/3) of the outstanding Class
B Non-Voting Preference Shares held by each person who is a resident of
Canada for the purposes of the Income Tax Act (Canada) will be
transferred by the holder to Holding ULC in exchange for consideration
consisting of $48.77 cash for each Class B Non-Voting Preference Share
transferred;
(viii) each other Class B Non-Voting Preference
Share held by a person who is a resident of Canada for the purposes of
the Income Tax Act (Canada) will be transferred by the holder to
Acquisition Sub in exchange for one Exchangeable Share;
(ix) the Class B Non-Voting Preference Shares
transferred to Acquisition Sub will be cancelled; and each Class B Non-
Voting Preference Share transferred to Holding ULC will be exchanged
for one common share of Acquisition Sub and the Class B Non-Voting
Preference Shares so exchanged will be cancelled;
(x) each Option shall be converted, without
any act or formality on the part of the holder thereof, into an Assumed
Option; and
(xi) the Merger Shares to be issued at the
Effective Time shall be deposited with the Depositary Agent and shall
be released or forfeited on the last day of each full calendar month
following the Effective Time in accordance with the Vesting and Release
Schedule; provided that, in the event that 75% of the number of
Exchangeable Shares initially issued have been exchanged, all remaining
Exchangeable Shares must be exchanged within six months after written
notice and will no longer be subject to such Vesting and Release
Schedule.
2.2 Voting and Exchange Trust Agreement.
On or before the Closing, Parent, Acquisition Sub and a bank or
trust company to be selected by Parent and approved by Acquisition Sub
and the Company as trustee (the "Trustee"), shall execute and deliver a
Voting and Exchange Trust Agreement in substantially the form set forth
as Exhibit B hereto, with such changes and additions thereto as may be
reasonably requested by the Trustee (as so executed, the "Voting Trust
Agreement"). Parent shall deposit with the Trustee the number of
Parent Common Shares equal to the number of Exchangeable Shares to
secure the voting rights relating to Parent Common Shares granted for
the benefit of the holders of the Exchangeable Shares, such shares to
be held by the Trustee in accordance with the Voting Trust Agreement.
2.3 Exchangeable Share Support Agreement.
On or before the Closing, Parent, Holding ULC and Acquisition Sub
shall execute and deliver the Exchangeable Share Support Agreement (the
"Support Agreement") in substantially the form set forth on Exhibit C.
2.4 Founders' Additional Restrictions Agreement.
Contemporaneously with the execution and delivery hereof, on or
before the Closing, Parent and Founders of the Company shall execute
and deliver a Founders' Additional Restrictions Agreement substantially
in the form set forth as Exhibit D hereto (as so executed, the
"Founders' Agreement").
2.5 Exemption From Registration.
Parent hereby agrees within twenty days after Parent files a Form
10-K with the SEC for the fiscal year ended March 31, 2000, to file
with the SEC, and thereafter to use its commercially reasonable efforts
to cause the effectiveness of a registration statement under the
Securities Act so as to register the issuance of the Parent Common
Shares receivable upon exchange of the Exchangeable Shares, and to use
commercially reasonable efforts to maintain the effectiveness of such
registration statement (the "Public Registration") until the earlier of
(i) the date which is one year after the date on which the Exchange
Period has terminated and (ii) six years from the Effective Time, and
to take any action required to be taken under applicable SEC, state and
provincial securities Laws and the regulations of the Nasdaq National
Market (the "NNM") in connection with the issuance of such Parent
Common Shares.
2.6 Closing.
Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 9 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Sections 7 and 8 hereof, the closing of the
Transactions (the "Closing") will take place on January 11, 2000 at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, unless another time or place is agreed to in writing by the
parties hereto. At the Closing, the parties hereto shall deliver the
documents contemplated hereby together with such other customary
documents as may be reasonably requested by the parties.
2.7 Taking of Necessary Action; Further Action.
If, at any time after the Effective Time, any such further action
is necessary or desirable to carry out the purposes of this Agreement
and the Acquisition to be effected by the Plan of Arrangement, the
officers and directors of the Company are fully authorized to take, and
will take, all such lawful and necessary action.
2.8 Accounting Consequences.
It is intended by the parties hereto that the Transactions shall
qualify for accounting treatment as a purchase under U.S. generally
accepted accounting principles.
2.9 Adjustments to Exchange Ratio.
The Exchange Ratio shall be adjusted to reflect fully the effect
of any stock split, reverse split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common
Shares or the Shares), reorganization, recapitalization or other like
change with respect to Parent Common Shares or the Company Shares
occurring after the date hereof and prior to the Effective Time.
2.10 Fractional Shares. Fractional shares shall be
handled in accordance with Section 4.6 of the Plan of Arrangement.
2.11 Tax Treatment.
It is intended that the Transactions shall generally constitute
(i) a taxable exchange for United States federal income tax purposes
(not qualifying under Sections 368 or 351 of the IRC) to holders of
Shares who are U.S. residents or who are otherwise subject to taxation
in the United States on the sale or exchange of Shares, (ii) a tax
deferred reorganization for Canadian federal income tax purposes for
owners of Shares who are residents of Canada for Canadian federal
income tax purposes to the extent of their receipt of Exchangeable
Shares as a consequence of the Arrangement; (iii) a tax deferred
conversion of Company Options into Assumed Options for Canadian federal
income tax purposes for owners of Company Options who are residents of
Canada for Canadian federal income tax purposes to the extent of their
receipt of Assumed Options as a consequence of the Arrangement; and
(iv) a tax deferred conversion of Company Options into Assumed Options
for U.S. federal income tax purpose for owners of Company Options who
are residents of the United States for U.S. federal income tax purposes
to the extent of their receipt of Assumed Options as a consequence of
the Arrangement.
3. Representations and Warranties of the Company.
Except as set forth in the Disclosure Letter hereto, the Company
represents and warrants to Parent that the representations and
warranties set forth in this Section 3 are true and correct as of the
date of this Agreement. In this Agreement, any reference to any event,
change, condition or effect being "material" with respect to any entity
or group of entities means any material event, change, condition or
effect related to the financial condition, assets (including intangible
assets), capitalization, liabilities, business or results of operations
of such entity or group of entities. In this Agreement, any reference
to a "Material Adverse Effect" with respect to any entity or group of
entities means any event, change or effect that is materially adverse
to the financial condition, assets (including intangible assets),
capitalization, liabilities, business or results of operations of such
entity and its subsidiaries, taken as a whole.
3.1 Organization and Good Standing.
(a) Part 3.1 of the Disclosure Letter contains a
complete and accurate list for the Company of its name, the name of its
subsidiary, the Company's and its Subsidiary's jurisdictions of
incorporation, amalgamation, continuance or formation, their principal
place of business, other jurisdictions in which the Company or its
Subsidiary is authorized to do business, and their capitalization. The
Company is a corporation incorporated and validly existing, and in good
standing under the laws of the Province of Ontario, with full corporate
power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to
own or use, and to perform all its obligations under Applicable
Contracts. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state,
province or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) The Company has delivered to Parent a copy of
the Organizational Documents of the Company, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement has been duly executed and
delivered and constitutes the legal, valid, and binding obligation of
the Company, enforceable against the Company in accordance with its
terms subject to bankruptcy, insolvency and other similar laws
effecting creditors' rights generally and to general principles of
equity. Subject to the approval of this Agreement by the Company's
shareholders, the Company has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement
and to perform its obligations under this Agreement.
(b) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Arrangement by the
Company's shareholders.
(c) Except as set forth in Part 3.2 of the
Disclosure Letter, neither the execution and delivery of this Agreement
nor the consummation or performance of the obligations of the Company
in connection with the Transactions will, directly or indirectly (with
or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of directors or the
shareholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right
to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order
to which the Company or any of the assets owned or used by the Company,
may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or any of the
assets owned or used by, the Company;
(iv) cause the Company to become subject to,
or to become liable for the payment of, any Tax;
(v) cause any of the assets owned by the
Company to be reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Applicable Contract; or
(vii) result in the imposition or creation of
any Encumbrance upon or with respect to any of the assets owned or used
by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, the
Company is not or will not be required to give any notice to or obtain
any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of
its obligations in connection with the Transactions.
3.3 Capitalization.
The authorized equity securities of the Company consists of an
unlimited number of Class A Common Shares, an unlimited number of Class
A Preferred Shares, 3,699,457 Class B Preferred Shares, 100 Class C
Preferred Shares, and an unlimited number of Class 8 Special Shares.
There currently are issued and outstanding 8,895,058 Class A Common
Shares, 4,681,086 Class A Preferred Shares, 3,699,457 Class B Preferred
Shares, 100 Class C Preferred Shares, and 550,695 Class 8 Special
Shares (collectively, "Company Shares"). There currently are options
outstanding for the purchase of an aggregate of 1,244,374 Class A
Preferred Shares of the company under the ObjecTime Limited Canadian
Stock Option Plan (1997) and the U.S. Stock Option Plan (1997) and an
aggregate of 8,227,145 Class 8 Special shares under the ObjecTime
Limited 1998 Canadian Stock Option Plan and 1998 U.S. Stock Option Plan
(the "Company Option Plans"). There currently are and as of the
Closing there will be no other outstanding commitments to issue any
shares of capital stock or voting securities of the Company. Except as
disclosed in Part 3.3 of the Disclosure Letter, all outstanding shares
of the Company capital stock are duly authorized, validly issued, fully
paid and non-assessable and are not subject to preemptive rights or
rights of first refusal created by statute, its Articles of
Incorporation or Bylaws of the Company or any agreement to which the
Company is a party or by which it is bound. All issuances of capital
stock or options with respect thereto have been made in compliance with
applicable laws. Except for the rights created pursuant to this
Agreement and the Contemplated Transactions, there are no other
options, calls, rights, commitments or agreements of any character to
which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of capital
stock of the Company. True and complete copies of all agreements and
instruments relating to or issued under the Company Option Plans have
been provided to legal counsel for Parent. Prior to the Closing, the
Company shall have delivered to Parent all shareholder agreements or
similar arrangements relating to capital stock of the Company.
With respect to each share or option of the Company, Part 3.3 of
the Disclosure Letter sets forth the identity of each beneficial holder
thereof, the number and type of securities issuable thereunder, and, if
applicable, the exercise price therefor, the exercise period, the
maximum term, and vesting schedule thereof (including a description of
the circumstances under which such vesting schedule can or will be
accelerated) and the residence or principal place of business of each
holder.
Except as set forth in Part 3.3 of the Disclosure Letter, no
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of the Company. Except as
described in Part 3.3 of the Disclosure Letter, there are no Options or
other Contracts to which the Company is a party that relates to the
issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities
or other securities of the Company was issued in violation of the
Securities Act, any Canadian Securities Law or any other Legal
Requirement. The Company does not own, or have any Contract to
acquire, any equity securities or other securities of any Person or any
direct or indirect equity or ownership interest in any other business.
3.4 Subsidiaries.
The Company is the owner of all outstanding shares of each of its
Subsidiaries and all such shares are duly authorized, validly issued,
fully paid and nonassessable. All of the outstanding shares of each
Subsidiary are owned by the Company free and clear of all liens,
charges, claims or encumbrances, or rights of others. There are no
outstanding subscriptions, options, puts, calls, rights, exchangeable
or convertible securities or other commitments or agreements of any
character relating to the issued or unissued shares or other securities
of any such Subsidiary, or otherwise obligating the Company or any such
Subsidiary to issue, transfer, sell, purchase, redeem or otherwise
acquire any such securities. The Company does not directly or
indirectly own any equity or similar interest in, or any interest
convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other
Person other than its interests in the Company's Subsidiary set forth
in Part 3.4 of the Disclosure Letter.
3.5 Financial Statements.
The Company has delivered to Parent: consolidated balance sheets
of the Company and its Subsidiary as at March 31, 1999, and
September 30, 1999 and 1998 (including the notes thereto, the "Balance
Sheets"), and the related statements of operations and deficit for the
fiscal year then ended, together with the report thereon of Ernst &
Young LLP independent chartered accountants for the year ended March
31, 1999. Such financial statements and notes fairly present the
financial condition and the results of operations, and cash flow of the
Company as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP; the
financial statements referred to in this Section 3.5 reflect the
consistent application of such accounting principles throughout the
periods involved. No financial statements of any Person other than the
Company are required by GAAP to be included in the financial statements
of the Company.
3.6 Books and Records.
Except as set out in the Disclosure Letter, the books of account,
minute books and share certificate books of the Company, all of which
have been made available to Parent, are complete and correct and have
been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls. The minute
books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the shareholders, the
Boards of Directors, and committees of the Boards of Directors of the
Company, and no meeting of any such shareholders, Board of Directors,
or committee has been held for which minutes have not been prepared and
are not contained in such minute books. At the Closing, all of those
books and records will be in the possession of the Company.
3.7 Title to Properties; Encumbrances.
Part 3.7 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other real property
interests owned by the Company. The Company owns all the properties
and assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own, located in the Facilities owned
or operated by the Company or reflected as owned in the books and
records of the Company, including all of the properties and assets
reflected in the Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in
Part 3.7 of the Disclosure Letter and personal property sold since the
date of the Balance Sheet, in the Ordinary Course of Business), and all
of the properties and assets (except for personal property acquired and
sold in the Ordinary Course of Business), which subsequently purchased
or acquired properties and assets (other than inventory and short-term
investments) are listed in Part 3.7 of the Disclosure Letter. Except
as set forth in Part 3.7 of the Disclosure Letter, all material
properties and assets reflected in the Balance Sheet are free and clear
of all Encumbrances except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet
as securing specified liabilities or obligations, with respect to which
no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets (such
mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default)
exists, and (c) liens for current taxes not yet due.
3.8 Condition and Sufficiency of Assets.
The building, plants, structures, and equipment of the Company
are sufficient for the continued conduct of the Company's businesses
after the Closing in substantially the same manner as conducted prior
to the Closing.
3.9 No Undisclosed Liabilities.
Except as set forth in Part 3.9 of the Disclosure Letter, the
Company has no material liabilities or obligations of any nature in
excess of $50,000 whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in
the Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.10 Taxes.
For the purpose of the representations in this Section 3.10,
"Company" shall mean "Company and its Subsidiary."
(a) The Company has timely filed or caused to be
timely filed all Tax Returns that are or were required to be filed by
it pursuant to applicable Legal Requirements. The Company has delivered
or made available to Parent copies of, and Part 3.10 of the Disclosure
Letter contains a complete and accurate list of, all such Tax Returns
reporting a tax liability of $25,000 or more relating to income or
other taxes filed since March 31, 1996 correct and complete copies of
which (including schedules thereto) have been made available to the
Parent. The Company has paid, or made provision for the payment of,
all Taxes that have or may have become due, pursuant to those Tax
Returns (whether or not shown on such Tax Returns) or otherwise, or
pursuant to any assessment received by the Company, except such Taxes,
if any, as are listed in Part 3.10 of the Disclosure Letter and are
being contested in good faith and as to which adequate reserves have
been provided in the Balance Sheets.
(b) Canadian federal and provincial income tax
assessments have been issued to the Company and its Subsidiaries
covering all past periods up to and including the fiscal year ended
March 31, 1999 and such assessments, if any amounts were owing in
respect thereof, have been paid, and only the fiscal years subsequent
to September 30, 1996 remain open for reassessment of additional taxes,
interest or penalties. Assessments for all other applicable Taxes have
been issued and any amounts owing thereunder have been paid, and only
the time period subsequent to September 30, 1996 remains open for
reassessment of additional Taxes.
(c) Part 3.10 of the Disclosure Letter contains a
complete and accurate list of all audits of all Tax Returns filed by
the Company, including a reasonably detailed description of the nature
and outcome of each audit. All deficiencies proposed as a result of
such audits have been paid, reserved against, settled, or, as described
in Part 3.10 of the Disclosure Letter, are being contested in good
faith by appropriate proceedings. Part 3.10 of the Disclosure Letter
describes all adjustments to the Tax Returns filed by the Company for
all taxable years since inception, and the resulting deficiencies
proposed by the appropriate tax authorities. Except as described in
Part 3.10 of the Disclosure Letter, the Company has not given or been
requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for
which the Company may be liable.
(d) The charges, accruals, and reserves with
respect to Taxes on the books of the Company are adequate and are at
least equal to the Company's liability for Taxes and professional fees
related thereto. There exists no proposed tax assessment against the
Company except as disclosed in the Balance Sheet or in Part 3.10 of the
Disclosure Letter. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(e) There are no liens with respect to Taxes upon
any Company assets other than liens for Current Taxes not yet due and
payable.
(f) All Tax Returns filed by the Company are true,
correct, and complete. There is no Tax sharing agreement that will
require any payment by the Company after the date of this Agreement.
The Company has never been a member of an affiliated, consolidated,
unitary or combined group filing group returns.
(g) No claims have been made, which are currently
pending, by any Canadian federal or provincial tax authority or any
other taxing authority in connection with any Taxes of the Company.
(h) All Canadian, U.S. and foreign income, profits,
franchise, sales, use, occupancy, property, severance, excise, value
added and other taxes (including interest and penalties) due from the
Company, have been fully paid, or have been or will be adequately
provided for in the Balance Sheet.
(i) The Company is not subject to any adjustment or
penalty by reason of underpayment or violation of any order, rule or
regulation of, or a default with respect to, any return or report
required to be filed with, any federal, provincial, state, local,
foreign or other governmental taxing agency, department, commission,
board, bureau or instrumentality to which they are subject.
(j) The Company has not made, is not obligated to
make and is not party to any agreement that could obligate it to make
any payments that would not be deductible under Sections 162, 280G or
404 of the U. S. Internal Revenue Code.
(k) Except for the assets held by the Company's
Delaware subsidiary ObjecTime, Inc., the Company does not own any
property that would, when sold, give rise to income, gain or loss that
would be taken into account in calculating U.S. taxable income of the
Company.
(l) The Company is not and has not been a United
States real property holding corporation (as defined in Code sections
897(c)(2) and 897(c)(4)) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the U.S. Internal Revenue Code.
(m) The Company has not requested or received a
ruling from any taxing authority or signed a closing or other agreement
with any taxing authority relating to Taxes.
(n) All material elections made by the Company
relating to Taxes are set forth in Part 3.10 of the Disclosure Letter.
(o) There are no powers of attorney with respect to
Taxes of the Company currently in force.
3.11 No Material Adverse Change.
Since March 31, 1999, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or
condition of the Company, and, to the Knowledge of the Company, no
event has occurred or circumstance exists that is reasonably likely to
result in such a material adverse change.
3.12 Employee Matters and Company Employee Plans.
Parent acknowledges that the Company employs a significant
percentage of its workforce in Canada, and as such U.S. laws governing
employment and employee benefit plans will not apply, and many of the
benefit plans referred to in this section will not exist for the
Company's Canadian employees. With that understanding, the Company
makes the following representations: Part 3.12 of the Disclosure Letter
contains a complete and accurate list of the following information for
each Employee or consultant of the Company, including: each Employee on
leave of absence or layoff status: name; job title; aggregate annual
remuneration (gross salary); vacation accrued; and service credited for
purposes of vesting and eligibility to participate under a Company
Employee Plan or any retirement, severance pay or employee benefit
plan. For the purposes hereof "remuneration" includes bonuses but
excludes non-monetary fringe benefits and additional costs to the
Company in respect of remuneration.
(a) Part 3.12 of the Disclosure Letter identifies
with respect to the Company, its Subsidiary and any trade or business
(whether or not incorporated) which is treated as a single employer
with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code or any analogous provisions of Canadian law (an "ERISA
Affiliate"), all Company Employee Plans including (i) all Pension Plans
whether or not such plans are subject to ERISA or any applicable
Canadian law pertaining to such plans, (ii) each loan to a non-officer
employee, loans to officers and directors and any Incentive Plans,
(iii) all Benefit Plans including all Benefit Plans which are subject
to Code Section 125 or any analogous Canadian law or Code Section 129
or any analogous Canadian law programs or arrangements which are not
employee benefit plans as otherwise covered under clause (i) above,
(iv) other fringe or employee benefit plans, programs or arrangements
that apply to senior management or employees located outside the United
States of the Company and that do not generally apply to all employees,
and (v) any current or former employment or executive compensation or
severance agreements, written or otherwise, as to which unsatisfied or
potential obligations of the Company exist for the benefit of, or
relating to, any present or former employee, consultant or director of
the Company. In addition, Part 3.12 of the Disclosure Letter lists
each Company Employee Plan that has been adopted and mentioned by the
Company for the benefit of employees outside the United States (the
"Company International Employee Plans").
(b) The Company has furnished to Parent a copy of
each of the Company Employee Plans and related plan documents
(including trust documents, insurance policies or contracts) and has,
with respect to each Company Employee Plan which is subject to ERISA
reporting requirements or any applicable Canadian law, provided copies
of the Form 5500 reports or any reports required by applicable Canadian
law filed for the last three plan years. Any Company Employee Plan
intended to be qualified under Section 401(a) of the Code or registered
under any applicable Canadian pension benefits legislation has either
obtained from the Internal Revenue Service or the applicable Canadian
regulatory authorities a favorable determination letter as to its
qualified status under the Code or similar approval under any
applicable Canadian law, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation (or relies on
such favorable determination letter issued by the Internal Revenue
Service with respect to a prototype plan adopted by the Company), or
has applied to the Internal Revenue Service for such a determination
letter or approval prior to the expiration of the requisite period
under applicable Treasury Regulations or Internal Revenue Service
pronouncements in which to apply for such determination letter or
approval and to make any amendments necessary to obtain a favorable
determination or approval. The Company has also furnished Parent with
the most recent Internal Revenue Service determination letter or any
similar Canadian approval issued or relied upon with respect to each
such Company Employee Plan, and nothing has occurred since the issuance
of each such letter or approval which could reasonably be expected to
cause the loss of the tax-qualified status of any Company Employee Plan
subject to Code Section 401(a) or Canadian pension benefits legislation
or the Income Tax Act (Canada).
(c) (A) Other than continued health care coverage
required under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA") or applicable employment standards
legislation of any Canadian province, none of the Company Employee
Plans promises or provides retiree medical or other retiree welfare or
non-pension benefits to any person; (B) there has been no "prohibited
transaction" or other similar event, as such are defined in Section 406
of ERISA and Section 4975 of the Code or any analogous Canadian law,
with respect to any Company Employee Plan, which could reasonably be
expected to have, in the aggregate, a Material Adverse Effect on the
Company; (C) each Company Employee Plan has been administered in
accordance with its terms and in compliance with the requirements
prescribed by any and all statutes, rules and regulations (including
ERISA, the Code or any applicable Canadian law), and the Company and
its subsidiary or ERISA Affiliates have performed all obligations
required to be performed by them under, are not in any respect in
default under or violation of, and have no knowledge of any default or
violation by any other party to, any of the Company Employee Plans;
(D) neither the Company nor its subsidiary or ERISA Affiliate is
subject to any liability or penalty under Sections 4976 through 4980 of
the Code, Title I of ERISA or any applicable Canadian law with respect
to any of the Company Employee Plans and which individually or in the
aggregate could reasonably be expected to have a Material Adverse
Effect on the Company; (E) all material contributions required to be
made by the Company or its subsidiary or ERISA Affiliate to any Company
Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Company
Employee Plan for the current plan years; (F) with respect to each
Company Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the thirty
(30) day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or
4041 or ERISA, nor any event under Canadian law has occurred which
would entitle any Person to partially or fully wind-up or require the
partial or full winding-up of any Company Employee Plan or Pension Plan
which could adversely affect the tax status of any Company Employee
Plan; and (G) no Company Employee Plan is covered by, and neither the
Company nor its subsidiary or ERISA Affiliate has incurred or expects
to incur any liability under Title IV of ERISA, Section 412 of the
Code. All Company Employee Plans which are required to be are fully
funded and have been invested in accordance with the relevant terms of
each plan and all applicable law, and, in the case of Pension Plans,
are fully funded on a going concern and solvency basis in accordance
with generally accepted actuarial principles and actuarial methods and
assumptions contained in the most recent actuarial report of the plan.
With respect to each Company Employee Plan subject to ERISA as either
an employee pension plan within the meaning of Section 3(2) of ERISA or
an employee welfare benefit plan within the meaning of Section 3(l) of
ERISA, and any Pension Plan registered under applicable Canadian law,
the Company has prepared in good faith and timely filed all requisite
governmental reports (which were true and correct as of the date filed)
and the Company has properly and timely filed and distributed or posted
all notices and reports to employees required to be filed, distributed
or posted with respect to each such Company Employee Plan. No suit,
administrative proceeding, action or other litigation has been brought,
or is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS, United States
Department of Labor or any analogous Canadian authority. Neither the
Company nor its subsidiary or other ERISA Affiliate is a party to, or
has made any contribution to or otherwise incurred any obligation
under, any "multiemployer plan" as defined in Section 3(37) of ERISA,
or any similar provisions of Canadian law.
(d) With respect to each Company Employee Plan, the
Company has complied with the applicable health care continuation and
notice provisions of COBRA and the proposed regulations thereunder and
any applicable provisions of the employment standards legislation of
any Canadian province, except to the extent that such failure to comply
would not have a Material Adverse Effect.
(e) The consummation of the transactions
contemplated by this Agreement will not (A) entitle any current or
former employee or other service provider of the Company, its
subsidiary or any other ERISA Affiliate to severance benefits or any
other payment, or (B) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or service
provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by the Company,
its subsidiary or other ERISA Affiliate relating to, or change in
participation or coverage under, any Company Employee Plan which would
materially increase the expense of maintaining such Plan above the
level of expense incurred with respect to that Plan for the most recent
fiscal year included in the Company's financial statements.
(g) Each Company International Employee Plan has
been established, maintained and administered in compliance with its
terms and conditions and with the requirements prescribed by any and
all statutory or regulatory laws applicable to such International
Employee Plan, except to the extent that such failure to comply would
not have a Material Adverse Effect. No Company International Employee
Plan has material unfunded liability that as of the Effective Time will
not be offset by insurance or fully accrued.
(h) The Company is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and
employment practices and, to the extent, if any, that the Company is
not in compliance, such failure to comply would not have a Material
Adverse Effect on the Company, and are not engaged in any unfair labor
practice. Except as disclosed in Part 3.12 of the Disclosure Letter,
there are no pending claims against the Company under any workers
compensation plan or policy or for long term disability. Except as
disclosed in Part 3.12 of the Disclosure Letter, the Company does not
have any obligations under COBRA or any applicable provision of the
employment standards legislation of any Canadian province with respect
to any former employees or qualifying beneficiaries thereunder. There
are no legal actions pending or threatened between the Company and any
of its respective employees. The Company is not a party to any
collective bargaining agreement or other labor union contract nor are
there any activities or proceedings of any labor union to organize any
such employees. Each current and former employee or consultant of the
Company has executed and delivered to the Company proprietary
information and invention assignment agreement in a form acceptable to
Parent. Any modifications, alterations, exhibits or attachments to
such forms have also been provided to legal counsel for Parent. To the
knowledge of the Company, none of the employees or consultants of the
Company is obligated under any contract or other agreement, or subject
to any judgment, decree or order of any governmental authority that
would interfere with the business of the Company, as currently
conducted or as proposed to be conducted after the Stock Purchase. To
the knowledge of the Company, no current or former employee or
consultant of the Company has violated any term of any employment or
consulting contract or other agreement relating to such person's
employment or consulting relationship with any other person as such may
relate to such person's employment or consulting relationship with the
Company or its subsidiary.
(i) To the Company's Knowledge, no Employee or
consultant of the Company is in violation of any term of any
employment, employment contract, patent disclosure agreement or any
other contract or agreement relating to the relationship of any such
person with the Company or any other party because of the nature of the
business conducted or to be conducted by the Company. To the Company's
Knowledge, no Employee or consultant of the Company is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement,
between such Employee or consultant and any other Person ("Proprietary
Rights Agreement") that in any way adversely affects or will affect
(i) the performance of his duties as an Employee or consultant of the
Company, (ii) the ability of the Company to conduct its business,
including any Proprietary Rights Agreement with any such Employee or
consultant or (iii) the ability of such Employee or consultant to
assign to the Company or to any other Person any rights to any
invention, improvement or discovery. The Company is currently not
party to, and since its inception has never been party to, any
collective bargaining agreements or other labor Contracts covering any
of its Employees. Since March 31, 1999 there has not been, there is
not presently pending or existing, and, to the Company's Knowledge,
there is not Threatened, any organizing, strike, slowdown, picketing,
work stoppage, or employee grievance process. The Company has complied
in all respects with all Legal Requirements required to be complied
with by the Company relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes
and occupational safety and health and any failure to comply would not
have a Material Adverse Effect on the Company. The Company is not
liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements. To the Knowledge of the
Company, except as contemplated herein, there is no employee who has
any plans to terminate his or her employment with the Company before or
within twelve months following the Effective Date.
(j) Each Company Employee Plan has been
established, maintained and administered in compliance in all material
respects with its terms and conditions and with the requirements
prescribed by any and all statutory or regulatory laws that are
applicable to such Company Employee Plan and, to the extent, if any,
that the Company is not in compliance, such failure to comply would not
have a Material Adverse Effect on the Company. Furthermore, no Company
Employee Plan has unfunded liabilities, that as of the Closing, will
not be offset by insurance or fully accrued. Except as required by
law, no condition, other than approval of such action by the Company's
board of directors, exists that would prevent the Company from
terminating or amending any Company Employee Plan.
3.13 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Part 3.13 of the
Disclosure Letter:
(i) the Company is, and at all times since
March 31, 1999 has been, in full compliance with each Legal Requirement
that is or was applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets except to the
extent that such failure to comply would not have a Material Adverse
Effect on the Company;
(ii) no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may
constitute or result in a violation by the Company of, or a failure on
the part of the Company to comply with, any Legal Requirement except to
the extent that such failure to comply would not have a Material
Adverse Effect on the Company, or (B) may give rise to any obligation
on the part of the Company to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature; and
(iii) the Company has not received, at any time
since March 31, 1999, any notice or other communication (whether oral
or written) from any Governmental Body or any other Person regarding
(A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential obligation on the part of the Company
to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 3.13 of the Disclosure Letter contains a
complete and accurate list of each Governmental Authorization that is
held by the Company or that otherwise relates to the business of, or to
any of the assets owned or used by, the Company. Each Governmental
Authorization listed or required to be listed in Part 3.13 of the
Disclosure Letter is valid and in full force and effect. Except as set
forth in Part 3.13 of the Disclosure Letter:
(i) the Company is, and at all times has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
Part 3.13 of the Disclosure Letter;
(ii) no event has occurred or circumstance
exists that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.13 of the
Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or
any modification to, any Governmental Authorization listed or required
to be listed in Part 3.13 of the Disclosure Letter;
(iii) the Company has not received any notice
or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible,
or potential violation of or failure by the Company to comply with any
term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization held by the Company; and
(iv) all applications required to have been
filed for the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.13 of the Disclosure Letter have been
duly filed on a timely basis with the appropriate Governmental Bodies,
and all other filings required to have been made with respect to such
Governmental Authorizations have been duly made by the Company on a
timely basis with the appropriate Governmental Bodies.
(c) The Governmental Authorizations listed in Part
3.13 of the Disclosure Letter collectively constitute all of the
Governmental Authorizations necessary to permit the Company to lawfully
conduct and operate its businesses in the manner it currently conducts
and operates such businesses and to permit the Company to own and use
its assets in the manner in which it currently owns and uses such
assets.
3.14 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.14(a) of the
Disclosure Letter, there is no pending Proceeding:
(i) that has been commenced by or against the
Company or that otherwise relates to the business of, or any of the
assets owned or used by, the Company; or
(ii) that challenges, or that may have the
effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.
(b) To the Knowledge of the Company, except as set
forth in Part 3.14(b) of the Disclosure Letter, (1) no such Proceeding
has been Threatened by or against the Company, and (2) no event has
occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding by or against the
Company. The Company has delivered to Parent copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed
in Part 3.14 of the Disclosure Letter. The Proceedings listed in Part
3.14 of the Disclosure Letter will not have a Material Adverse Effect
on the Company.
(c) There is no Order to which the Company, or any
of the assets owned or used by the Company, is subject; and
(d) To the Knowledge of the Company, no Employee is
subject to any Order that prohibits such Employee from engaging in or
continuing any conduct, activity, or practice relating to the business
of the Company.
3.15 Absence of Certain Changes and Events.
Except as set forth in Part 3.15 of the Disclosure Letter since
March 31, 1999, the Company has conducted its businesses only in the
Ordinary Course of Business and there has not occurred:
(a) the entering into of any Contract, commitment
or transaction or the incurrence of any material liabilities outside of
the Ordinary Course of Business;
(b) the entering into of any Contract in connection
with any transaction involving a business combination;
(c) the alteration, or entering into of any
Contract or other commitment to alter, its interest in any corporation,
association, joint venture, partnership or business entity in which the
Company or any of its Subsidiaries directly or indirectly holds any
interest on the date hereof;
(d) the entering into of any strategic alliance,
joint development or joint marketing Contract other than joint
marketing efforts in the Ordinary Course of Business;
(e) any material amendment or other modification
(or agreement to do so), except for routine amendments or modifications
made in the Ordinary Course of Business, or material violation of the
terms of, any of the Contracts set forth or described in the Disclosure
Letter;
(f) the entering into of any transaction with any
officer, director, shareholder, or Affiliate of the Company, other than
pursuant to any Contract in effect on March 31, 1999 and disclosed to
Parent pursuant to Part 3.16 of the Disclosure Letter or other than
pursuant to any contract of employment and listed pursuant to Part 3.12
of the Disclosure Letter;
(g) the entering into or amendment of any Contract
pursuant to which any other Person is granted manufacturing, marketing,
distribution, licensing or similar rights of any type or scope with
respect to any products of the Company or Company Intellectual Property
other than as contemplated by the Contracts or Licenses of the Company
and its Subsidiaries disclosed in the Disclosure Letter;
(h) the declaration, setting aside or payment of
any dividends on or making of any other distributions (whether in cash,
stock or property) in respect of any Company Common Shares or Equity
Equivalents, or any split, combination or reclassification of any
Company Common Shares or Equity Equivalents or issuance or
authorization of the issuance of any other securities in respect of, in
lieu of or in substitution for Company Common Shares or Equity
Equivalents, or the repurchase, redemption or other acquisition,
directly or indirectly, of any Company Common Shares or Equity
Equivalents by the Company except for repurchases of Company Shares
upon termination of employment;
(i) except for (i) the issuance of Company Shares
upon exercise or conversion of then-outstanding Company Options or (ii)
the issuance of options available for grant under the Company's Option
Plans in the Ordinary Course of Business to eligible participants under
the Company Option Plans consistent with past practice, the issuance,
grant, delivery, sale or authorization of or proposal to issue, grant,
deliver or sell, or purchase or proposal to purchase, any Company
Shares, Equity Equivalents or modification or amendment of the rights
of any holder of any outstanding Company Shares or Equity Equivalents
(including to reduce or alter the consideration to be paid to the
Company upon the exercise of any outstanding Company Options or other
Equity Equivalents), nor have there been any agreements, arrangements,
plans or understandings with respect to any such modification or
amendment;
(j) any amendments to the Organizational Documents
of the Company of any of its Subsidiaries;
(k) any transfer (by way of a license or otherwise)
to any Person of rights to any Company Intellectual Property other than
non-exclusive transfers to the Company's customers, distributors or
other licensees in the Ordinary Course of Business; any disposition or
sale of, waiver of rights to, license or lease of, or incurrence of any
material lien on, any material assets and properties (other than
Company Intellectual Property) of the Company and its Subsidiaries,
other than dispositions of inventory, or licenses of products to
Persons in the Ordinary Course of Business of the Company;
(l) the write-off or write-down or making of any
determination to write off or write-down, or revalue, any of the assets
and properties of the Company, or change in any reserves or liabilities
associated therewith, individually or in the aggregate in an amount
exceeding $25,000;
(m) the failure to pay or otherwise satisfy
material liabilities of the Company or its Subsidiaries when due,
except such as are being contested in good faith;
(n) the incurrence of any indebtedness or guarantee
of any such indebtedness in an aggregate amount exceeding $25,000 or
issuance or sale of any debt securities of the Company or any of its
Subsidiaries or guarantee of any debt securities of others;
(o) the grant of any severance or termination pay
to any director, officer employee or consultant, except payments made
as required by Law or pursuant to written Contracts outstanding on the
date hereof, the terms of which are disclosed in the Disclosure
Schedule;
(p) an increase in salary, rate of commissions,
rate of consulting fees or any other compensation of any current
officer, director, shareholder, employee, independent contractor or
consultant of the Company or any of its Subsidiaries;
(q) the establishment or modification of (i)
targets, goals, pools or similar provisions under any plan, employment
Contract or other employee compensation arrangement or independent
contractor Contract or other compensation arrangement or (ii) salary
ranges, increased guidelines or similar provisions in respect of any
plan, employment Contract or other employee compensation arrangement or
independent contractor Contract or other compensation arrangement;
(r) the adoption, entering into, amendment,
modification or termination (partial or complete) of any Company
Employee Plan;
(s) the payment of any discretionary or stay bonus;
(t) the making or changing of any material election
in respect of Taxes, adopt or change any accounting method in respect
of Taxes, the entering into of any tax allocation agreement, tax
sharing agreement, tax indemnity agreement or closing agreement,
settlement or compromise of any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes with any
Taxing Authority or otherwise;
(u) the making of any change in the accounting
policies, principles, methods, practices or procedures of the Company
(including without limitation for bad debts, contingent liabilities or
otherwise, respecting capitalization or expense of research and
development expenditures, depreciation or amortization rates or timing
of recognition of income and expense);
(v) any failure to pay or otherwise satisfy any
obligations to procure, maintain, renew, extend or enforce any material
Company Intellectual Property, including, but not limited to,
submission of required documents or fees during the prosecution of
patent, trademark or other applications for registered Intellectual
Property rights; and
(w) any entering into any agreement to do any of
the foregoing.
3.16 Contracts; No Defaults.
(a) Part 3.16(a) of the Disclosure Letter contains
a complete and accurate list, and the Company has delivered to Parent
true and complete copies, of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the
Company of an amount or value in excess of $25,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to the
Company of an amount or value in excess of $25,000;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $10,000;
(iv) each lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and
other Applicable Contract affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $25,000 and with terms of less than one year);
(v) each licensing agreement or other
Applicable Contract other than Company's standard "shrinkwrap" product
license agreements entered into in the Ordinary Course of Business with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former Employees,
consultants, or contractors regarding the appropriation or the non-
disclosure of any of the Intellectual Property;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other Employee
representative of a group of Employees;
(vii) each joint venture, partnership, and
other Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any other
Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of
the Company or any Affiliate of the Company or limit the freedom of the
Company or any Affiliate of the Company to engage in any line of
business or to compete with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits,
other than direct payments for goods;
(x) each power of attorney executed by the
Company that is currently effective and outstanding;
(xi) each Applicable Contract entered into
other than in the Ordinary Course of Business that contains or provides
for an express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital
expenditures in excess of $15,000;
(xiii) each written warranty, guaranty, and or
other similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of Business;
and
(xiv) each amendment, supplement, and
modification (whether oral or written) in respect of any of the
foregoing.
(b) Except as set forth in Part 3.16(b) of the
Disclosure Letter, each Applicable Contract identified or required to
be identified in Part 3.16(a) of the Disclosure Letter is in full force
and effect and is valid and enforceable against the Company in
accordance with its terms.
(c) Except as set forth in Part 3.16(c) of the
Disclosure Letter:
(i) the Company is, and at all times since
March 31, 1999 has been, in compliance with all applicable terms and
requirements of each Applicable Contract under which the Company has or
had any obligation or liability or by which the Company or any of the
assets owned or used by the Company is or was bound;
(ii) to the Knowledge of the Company, each
other Person that has or had any obligation or liability under any
Applicable Contract under which the Company has or had any rights is,
and at all times since the Company's inception has been, in compliance
with all applicable terms and requirements of such Applicable Contract;
(iii) to the Knowledge of the Company, no event
has occurred or circumstance exists that (with or without notice or
lapse of time) may contravene, conflict with, or result in a violation
or breach of, or give the Company or other Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not been given or
received from any other Person, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or
potential violation or breach of, or default under, any Applicable
Contract.
(d) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts
paid or payable to the Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand to
the Company for such renegotiation.
3.17 Environmental and Product Matters.
Except as set forth in Part 3.17 of the Disclosure Letter:
The Company (i) has obtained all applicable permits, licenses and
other authorizations that are required under United States or Canadian
federal, provincial, state, local or foreign laws relating to pollution
or protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants
or hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or hazardous or toxic materials
or wastes by the Company or its subsidiary (or their respective
agents); (ii) is in compliance with all material terms and conditions
of such required permits, licenses and authorizations, and also is in
compliance with all other material limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in such laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand
letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, is not aware of and have not received notice of any
event, condition, circumstance, activity, practice, incident, action or
plan that is reasonably likely to interfere with or prevent continued
compliance or that would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or
proceeding, based on or resulting from the Company's (or any of its
agents) manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge or release
into the environment of any pollutant, contaminant or hazardous or
toxic material or waste; (iv) has not disposed of any pollutants,
contaminants or hazardous or toxic materials or wastes into the soil or
groundwater at any properties owned or leased by the Company, either
now or in the past, or at any other property that would result in any
assessment or remedial action; and (v) has taken all actions necessary
under applicable requirements of federal, state, local or foreign laws,
rules or regulations to register any products or materials required to
be registered by the Company (or any of its agents) thereunder.
3.18 Intellectual Property.
(a) Except as set forth in Part 3.18 of the
Disclosure Letter, the Company owns the exclusive, enforceable rights
to use, sell, license and dispose of, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor,
technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source
code and object code form), and tangible or intangible proprietary
information or material ("Intellectual Property") that are used or
required in the business of the Company as currently conducted. No
Intellectual Property used or required in the business of the Company
as currently conducted is subject to any lien, pledge, encumbrance or
other restriction, or is held by any third party pursuant to any escrow
agreement or similar arrangement.
(b) Identified in Part 3.18 of the Disclosure
Letter are (A) all patents and patent applications and all registered
and unregistered trademarks, trade names and service marks, registered
and unregistered copyrights, and maskworks, related to the Company's
businesses and included in the Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been
issued or registered or in which any application for such issuance and
registration has been filed, (B) all material licenses, sublicenses and
other agreements to which the Company is a party and pursuant to which
any person is authorized to use any Intellectual Property (excluding
object-code end-user licenses granted to end-users in the ordinary
course of business), and (C) all material licenses, sublicenses and
other agreements to which the Company is a party and pursuant to which
the Company is authorized to use any third party patents, trademarks or
copyrights, including software ("Third Party Intellectual Property
Rights") which are incorporated in, are, or form a part of any product
of the Company.
(c) To the best of the Company's knowledge, there
is no unauthorized use, disclosure, infringement or misappropriation of
any Intellectual Property rights of the Company, any trade secret
material to the Company, or any Intellectual Property right of any
third party to the extent licensed by or through the Company, by any
third party, including any employee or former employee of the Company.
The Company has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property,
other than indemnification provisions contained in purchase orders or
customer agreements arising in the Ordinary Course of Business.
(d) The Company is not, nor will be as a result of
the execution and delivery of this Agreement or the performance of the
obligations under this Agreement, and the consummation of the
Contemplated Transactions, in breach of any license, sublicense or
other agreement relating to the Intellectual Property or Third Party
Intellectual Property Rights.
(e) All patents and registered trademarks, service
marks and copyrights held by the Company are valid and subsisting. The
Company (A) is not a party to any suit, action or proceeding which
involves a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary
right of any third party, (B) has not brought any action, suit or
proceeding for infringement of Intellectual Property or breach of any
license or agreement involving Intellectual Property against any third
party, including without limitation any current or former employee or
consultant of the Company or (C) has no knowledge of any basis for any
suit, action or proceeding described in (A) or (B) and has received no
communication from any person relating to any possible basis for any
suit, action or proceeding described in (A) or (B). The manufacture,
marketing, licensing or sale of products of the Company does not
infringe any trademark, service mark, copyright, trade secret or to the
best of the Company's knowledge, patent or other proprietary right of
any third party.
(f) The Company believes it has taken all
reasonable and appropriate steps to protect and preserve the
confidentiality of all Intellectual Property not otherwise protected by
patents, or patent applications or copyright ("Confidential
Information"). All use (known to the Company) or disclosure of
Confidential Information owned by the Company by or to a third party
has been pursuant to the terms of a written agreement between the
Company and such third party. To the best of the Company's knowledge,
all use or disclosure of Confidential Information not owned by the
Company has been pursuant to the terms of a written agreement between
the Company and the owner of such Confidential Information, or is
otherwise lawful.
3.19 Certain Agreements.
Except as set forth in Part 3.19 of the Disclosure Letter, the
execution and delivery of this Agreement and the consummation of the
Contemplated Transactions will not (i) result in any payment
(including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or
employee of the Company or its subsidiary, (ii) materially increase any
benefits otherwise payable by the Company or its subsidiary or
(iii) result in the acceleration of the time of payment or vesting of
any such benefits.
3.20 Certain Payments.
Since its inception, neither the Company nor, to the Company's
Knowledge, any Employee, consultant or any other Person associated
with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (i)
to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in
respect of the Company or any Affiliate of the Company, or (iv) in
violation of any applicable Legal Requirement, (b) established or
maintained any fund or asset that has not been recorded in the books
and records of the Company.
3.21 Relationships with Related Persons.
(a) Except as disclosed in Part 3.21 of the
Disclosure Letter, (i) there are no Contracts or liabilities between
the Company, on the one hand, and (I) any current or former officer,
director, shareholder, or to the knowledge of the Company, any
Affiliate of the Company or (II) any Person who, to the knowledge of
the Company, is an associate of any such officer, director, shareholder
or Affiliate, on the other hand, (ii) the Company does not provide nor
causes to be provided any assets, services or facilities to any such
current or former officer, director, shareholder or Affiliate, (iii)
neither the Company nor any such current or former officer, director,
shareholder or Affiliate provides or causes to be provided any assets,
services or facilities to the Company and (iv) the Company does not
beneficially own, directly or indirectly, any Investment Assets of any
such current or former officer, director, shareholder or Affiliate.
(b) Each of the Contracts and liabilities listed in
Part 3.21 of the Disclosure Letter were entered into or incurred, as
the case may be, on terms no less favorable to the Company (in the
reasonable judgment of the Company) than if such Contract or liability
was entered into or incurred on an arm's- length basis on competitive
terms. Any Contract to which the Company is a party and in which any
director of the Company has a financial interest in such Contract was
approved in accordance with applicable law.
3.22 Brokers or Finders.
Other than as described in Part 3.22 of the Disclosure Letter,
the Company has incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or
other similar payment in connection with this Agreement or the
Contemplated Transactions.
3.23 Board Approval. The Board of Directors of the
Company has, prior to the date hereof, unanimously (i) approved this
Agreement and the Arrangement and (ii) determined that the Arrangement
is in the best interests of the shareholders of the Company and is on
terms that are fair to such shareholders.
3.24 Shareholder Approval.
The Company has no reason to believe that any shareholder or
group of shareholders representing more than 5% of the outstanding
Shares entitled to vote will exercise Dissent Rights in connection with
shareholder approval of this Agreement and the Transactions.
3.25 Sales and Assets in the United States and Canada.
(a) During its most recent fiscal year ended
March 31, 1999, the Company made aggregate sales in or into the United
States of less than $25 million; and
(b) As of its most recent balance sheet, had assets
in the United States having an aggregate book value of less than $15
million.
(c) The aggregate value of the assets in Canada of
the Company, together with each of its affiliates (as such term is
defined in the Competition Act (Canada) determined in accordance with
the Competition Act), does not exceed CDN. $35 million. The aggregate
gross revenues from sales in, from or into Canada of the Company
together with each of its respective affiliates (as such term is
defined in the Competition Act), determined in accordance with, and for
the period prescribed by the Competition Act, does not exceed CDN. $35
million.
3.26 Exemption Applications; Information Circular.
At the time of filing the applications for the Interim Order and
Final Order, the time of the relevant hearings of the Court and the
time the Interim Order and the Final Order are effective, such
Exemption Applications shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. At
the time of filing the applications (the "Exemption Applications") for
issuance of orders (the "Exemption Orders") of the Ontario Securities
Commission and the Quebec Securities Commission pursuant to which
(i) the issuance of the Exchangeable Shares to be issued in accordance
with the Plan of Arrangement and the assumption of the Company Options
to be assumed in accordance with the Plan of Arrangement, (ii) the
issuance of the Parent Common Shares including any shares to be issued
in exchange for the Exchangeable Shares and on the exercise of the
Company Options to be assumed in accordance with the Plan of
Arrangement, (iii) the sale on the NNM of the Parent Common Shares
described in clause (ii) will be exempt from the registration and
prospectus requirements of the Securities Act (Ontario) and the
Securities Act (Quebec) and at the time of the relevant hearing and the
time the Exemption Order is effective, the information supplied by the
Company for inclusion shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
information supplied by the Company for inclusion in the information
circular to be sent to the shareholders of the Company in connection
with the Company Shareholders Meeting (such information circular as
amended or supplemented is referred to herein as the "Information
Circular") shall not, on the date the Information Circular is first
mailed to the Company's shareholders, at the time of the Company
Shareholders Meeting and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under
which they are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Company Shareholders Meeting which has become false or misleading.
Notwithstanding the foregoing, the Company makes no representation,
warranty or covenant with respect to any information supplied by Parent
or Acquisition Sub which is contained in any of the foregoing
documents.
4. Representations and Warranties of Parent and Acquisition Sub.
Parent and Acquisition Sub jointly and severally represent and
warrant to the Company as follows:
4.1 Organization and Good Standing.
Each of Parent and Acquisition Sub is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware and the Province of Ontario, respectively, with full
corporate power and authority to conduct its business as it is now
being conducted and to own or use the properties and assets that it
purports to own or use. Parent is duly qualified to conduct business
as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid,
and binding obligation of each of Parent and Acquisition Sub,
enforceable against it in accordance with its terms. Upon the
execution and delivery by Parent of the Escrow Agreement, the Voting
and Exchange Trust Agreement, and the Support Agreement, each of these
three agreements will constitute the legal, valid, and binding
obligations of Parent enforceable against it in accordance with its
respective terms. Parent has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement, the Escrow
Agreement, the Voting and Exchange Trust Agreement and the Support
Agreement and to perform its obligations under this Agreement, the
Escrow Agreement, the Voting and Exchange Trust Agreement and the
Support Agreement.
(b) Neither the execution and delivery of this
Agreement, the Voting and Exchange Trust Agreement, the Escrow
Agreement or the Support Agreement by Parent nor the consummation or
performance of any of the Transactions by Parent will directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of
Parent, or (B) any resolution adopted by the board of directors or the
shareholders of Parent;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right
to challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order
to which Parent or any of the assets owned or used by Parent, may be
subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by
Parent or Acquisition Sub or that otherwise relates to the business of,
or any of the assets owned or used by, Parent; or
(iv) contravene, conflict with, or result in a
violation of any of the terms or requirements of any Contract to which
Parent is a party or by which Parent may be bound.
(c) Except for the approval of ▇▇▇▇▇▇'s board of
directors, Parent will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement,
the Escrow Agreement, the Voting Agreement, the Voting and Exchange
Trust Agreement and the Support Agreement or the consummation or
performance of any of the Transactions.
4.3 Capitalization.
(a) The authorized capital stock of Parent consists
of 150,000,000 Parent Common Shares and no shares of Preferred Stock.
At the close of business on September 30, 1999, 86,649,828 Parent
Common Shares were outstanding, 14,732,227 Parent Common Shares were
issuable upon the exercise of outstanding stock options and 9,379,809
Parent Common Shares were held by Parent in its treasury. All
outstanding Parent Common Shares are validly issued, fully paid, non-
assessable and free of preemptive rights. The Parent Common Shares and
the Exchangeable Shares, when issued and delivered in accordance with
the terms of this Agreement and the Support Agreement (in the case of
the Parent Common Shares issuable in respect of the Exchangeable
Shares), and the Parent Common Shares issuable upon exercise or
conversion of the Assumed Options, will have been duly authorized and
validly issued, fully paid and non-assessable. Except as disclosed
above or in the Parent SEC Documents or as otherwise contemplated by
this Agreement, as of September 30, 1999, there were no outstanding
subscriptions (other than those subscriptions issued pursuant to
Parent's employee stock purchase plans in the Ordinary Course of
Business, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other anti-
takeover agreement, obligating Parent or any subsidiary thereof to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of Parent, or obligating or any
subsidiary of Parent to grant, extend or enter into any such agreement
or commitment.
(b) The authorized capital stock of Acquisition Sub
consists of an unlimited number of shares of common stock, of which
1,000 are issued and outstanding.
4.4 Certain Proceedings.
There is no pending Proceeding that has been commenced against
Parent or Acquisition Sub and that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions. To Parent's Knowledge, no such
Proceeding has been Threatened.
4.5 SEC Documents.
Parent has furnished or made available to the Company a true and
complete copy of each form, statement, annual, quarterly and other
report, registration statement (including exhibits and amendments) and
definitive proxy statement filed by Parent with the U.S. Securities and
Exchange Commission ("SEC") since December 31, 1998 (the "Parent SEC
Documents"), which are all the documents (other than preliminary
material) that Parent was required to file with the SEC since such
date. As of their respective filing dates, the Parent SEC Documents
complied in all material respects with the requirements of the U.S.
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, and none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made,
not misleading. Since the filing of the most recent Quarterly Report
on Form 10-Q included in the Parent SEC Documents, none of Parent's
Organizational Documents has been amended or modified except to
decrease the number of Directors who sit on Parent's Board of
Directors. The balance sheets and the related statements of
operations, shareholders' equity (deficit) and cash flows (including
the related notes thereto) of Parent included in the Parent SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, are in accordance with the books and records of
Parent, have been prepared in accordance with U.S. generally accepted
accounting principles applied on a basis consistent with prior periods
(except as otherwise noted therein), and present fairly the financial
position of Parent as of their respective dates, and the results of its
operations and its cash flows for the periods presented therein.
4.6 Brokers or Finders.
Parent and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement.
4.7 Suspension and Trading.
No order ceasing or suspending trading securities of the Parent
is currently outstanding and no proceedings for this purpose have been
instituted or, to the Knowledge of the Parent, are pending,
contemplated or Threatened.
4.8 NASDAQ Listing.
The Parent Common Shares are currently listed for trading on the
NNM.
4.9 Interim Operations of Acquisition Sub.
Acquisition Sub was formed solely for the purpose of engaging in
the Contemplated Transactions, has engaged in no other business
activities and has conducted its operations only as contemplated
hereby.
4.10 Prospectus Exemptions.
Neither Parent nor Acquisition Sub is a reporting issuer under
the OSA. At the Effective Time, after giving effect to the issuance of
the Acquisition Shares and the Parent Common Shares issuable upon
conversion or exercise of the Assumed Options, the Persons or companies
whose last address as shown on the books of the Parent was in Ontario
and who held Parent Common Shares (i) did not hold more than 10% of
Parent's Common Shares; and (ii) do not represent a number more than
10% of the total number of holders of Parent Common Shares.
5. Covenants of the Company.
5.1 Access and Investigation.
Between the date of this Agreement and the earlier of the
Effective Time or the termination of this Agreement, upon reasonable
notice the Company shall (i) give Parent and Acquisition Sub and their
respective officers, employees, accountants, counsel, financing sources
and other agents and representatives full access to all buildings,
offices, and other facilities of the Company and its Subsidiaries and,
to the extent permitted by law, to all books and records of the Company
and its Subsidiaries, whether located on the premises of the Company or
at another location; (ii) permit Parent and Acquisition Sub to make
such inspections as they may require; (iii) cause its officers to
furnish Parent and Acquisition Sub such financial, operating, technical
and product data and other information with respect to the business and
assets and properties of the Company and its Subsidiaries as Parent and
Acquisition Sub from time to time may request to verify the
representations and warranties provided herein and for integration
planning purposes, including without limitation financial statements
and schedules; (iv) allow ▇▇▇▇▇▇ and Acquisition Sub the opportunity to
interview non-clerical employees and other personnel and Affiliates of
the Company with the Company's prior written consent, which consent
shall not be unreasonably withheld or delayed; and (v) assist and
cooperate with Parent and Acquisition Sub in the development of
integration plans for implementation by Parent and the Company
following the Effective Time; provided, however, that no investigation
pursuant to this Section 5.1 shall affect or be deemed to modify any
representation or warranty made by the Company herein.
5.2 Operation of the Businesses of the Company.
Between the date of this Agreement and the Closing Date, the
Company will:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the
current business organization of the Company, keep available the
services of the current Employees and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, Employees, agents, and others having business
relationships with the Company;
(c) confer with Parent concerning operational
matters of a material nature; and
(d) otherwise report periodically to Parent
concerning the status of the business, operations, and finances of the
Company.
5.3 Negative Covenant.
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, the Company
will not, without the prior consent of Parent, take any affirmative
action, or fail to take any reasonable action within its control, as a
result of which any of the changes or events listed in Section 3.15 is
likely to occur.
5.4 Required Approvals.
As promptly as practicable after the date of this Agreement, the
Company will make all filings required by Legal Requirements by the
Company to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date,
the Company will (a) cooperate with Parent with respect to all filings
that Parent elects to make or is required by Legal Requirements to make
in connection with the Contemplated Transactions, and (b) cooperate
with Parent in obtaining the Consents identified in Section 4.2 hereof
and (c) information necessary for the filing of the Registration
Statement.
5.5 Notification.
Between the date of this Agreement and the Closing Date, the
Company will promptly notify Parent in writing if the Company becomes
aware of any fact or condition that causes or constitutes a Breach of
any of the Company's representations and warranties as of the date of
this Agreement, or if the Company becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of such
fact or condition. Should any such fact or condition require any change
in the Disclosure Letter if the Disclosure Letter were dated the date
of the occurrence or discovery of any such fact or condition, the
Company will promptly deliver to Parent a supplement to the Disclosure
Letter specifying such change. During the same period, the Company
will promptly notify Parent of the occurrence of any Breach of any
covenant of the Company in this Section 5 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.6 Covenants Regarding Non-Solicitation.
(a) The Company shall not, directly or indirectly,
through any officer, director, Employee, representative or agent of the
Company, (i) solicit, initiate or knowingly encourage (including by way
of furnishing information or entering into any form of agreement,
arrangement or understanding) the initiation of any inquiries or
proposals regarding a merger, arrangement, consolidation, sale of
assets, reorganization or recapitalization with any party other than
Parent and its affiliates (an "Acquisition Proposal"), (ii) participate
in any discussions or negotiations regarding any Acquisition Proposal,
(iii) withdraw or modify in a manner adverse to Parent the approval of
the Board of Directors of the Company of the Contemplated Transactions
(iv) approve or recommend any Acquisition Proposal or (v) cause the
Company to enter into any agreement related to any Acquisition
Proposal.
5.7 Best Efforts.
Between the date of this Agreement and the Closing Date, the
Company will use its Best Efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the
conditions of the Closing under this Agreement consistent with their
respective obligations hereunder. The Company, at the reasonable
request of the Parent, shall execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement
and the transactions contemplated hereby consistent with their
respective obligations hereunder.
5.8 Moral Rights.
The Company shall use its Best Efforts to cause those Employees,
independent contractors and agents who have developed Software programs
and who are currently employed or contracted by the Company to sign an
agreement waiving their moral rights in such Software programs, which
waiver shall be in a form acceptable to Parent, acting reasonably.
5.9 Information Circular; Permit Application.
(a) As soon as practicable after the execution of
this Agreement, the Company shall prepare, with the cooperation of
Parent, the Information Circular for the shareholders of the Company to
approve the Plan of Arrangement, the Acquisition to be effected by the
Plan of Arrangement, this Agreement, and the transactions contemplated
thereby and hereby. The Information Circular shall constitute a
disclosure document for the offer and issuance of the Exchangeable
Shares to be received in connection with the Acquisition to be effected
by the Plan of Arrangement and Parent Common Shares issuable pursuant
to Exchangeable Shares. Parent and the Company shall each use
reasonable commercial efforts to cause the Information Circular to
comply with applicable Canadian and United States federal and
provincial and state securities laws requirements. Each of Parent and
the Company agrees to provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Information Circular, or
in any amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in the
preparation of the Information Circular. The Company will promptly
advise Parent, and Parent will promptly advise the Company, in writing
if at any time prior to the Effective Time either the Company or Parent
shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Information Circular in order to
make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Information Circular
shall contain the recommendation of the Board of Directors of Company
that the Company shareholders approve the Acquisition to be effected by
this Agreement, the Plan of Arrangement and the transactions
contemplated hereby and thereby, and the conclusion of the Board of
Directors that the terms and conditions of the Plan of Arrangement and
this Agreement are advisable and fair and reasonable to the
shareholders of Company. Anything to the contrary contained herein
notwithstanding, Company shall not include in the Information Circular
any information with respect to Parent or its Affiliates, the form and
content of which information shall not have been approved by Parent
prior to such inclusion.
(b) As soon as practicable after the execution of
this Agreement, Parent shall prepare, with the cooperation of the
Company, the Exemption Applications. Parent and the Company shall each
use commercially reasonable efforts to cause the Exemption Applications
to comply with the requirements of applicable federal and provincial
laws and to obtain the Exemption Orders. Each of Parent and the
Company agrees to provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Exemption Applications, or
in any amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in the
preparation of the Exemption Applications. The Company will promptly
advise Parent, and Parent will promptly advise the Company, in writing
if at any time prior to the Effective Time either the Company or Parent
shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Exemption Applications in order
to make the statements contained or incorporated by reference therein
not misleading or to comply with applicable Law.
5.10 Shareholder Approval.
As soon as practicable following the execution of this Agreement,
the Company shall call a special meeting of its shareholders for the
purpose of seeking approval of this Agreement and the Transactions.
5.11 Founders' Additional Restrictions Agreement.
Prior to the Effective Time, Company will cause the Founders to
execute and deliver the Founders' Additional Restrictions Agreement in
the Form of Exhibit D (the "Founder's Agreement").
5.12 Employment Agreements.
Prior to the Effective Time, ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
shall each enter into an employment agreement with Parent, in a form
acceptable to Parent, which shall provide for the elimination of any
severance payments to such individuals in connection with the
Contemplated Transactions. Such employment agreements shall supersede
all conflicting provisions in any change of control or employment
agreements in existence prior to the Closing Date.
5.13 Repurchase of Founders' Class B Preferred Shares.
Prior to the Effective Time, Company will repurchase all Class B
Preferred Shares of the Company which are held by Founders at a price
of $2.68 per share to be paid in cash, and such Class B Preferred
Shares shall be canceled.
5.14 Third Party Consents.
As soon as practicable following the date hereof, Company will
use its Best Efforts to assist Parent in obtaining any consents,
waivers and approvals under any of its or its subsidiary's respective
agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated
hereby.
5.15 Consent of Option Holders.
Prior to the Effective Time, all holders of Company Options shall
have approved additional restrictions on the rights of such holder in
connection with the vesting and receipt of such Options, in a manner
acceptable to Parent.
5.16 Delivery of Cash Consideration; Indemnification.
On the Closing Date, Parent shall deliver the total cash
consideration to a representative of the Company, who shall distribute
to each Company employee his or her portion of such consideration.
Company agrees to indemnify Parent for any expenses incurred in
connection with a claim by a Company employee of a late delivery or
non-delivery of any portion of the such cash consideration.
6. Covenants of Parent.
6.1 Approvals of Governmental Bodies.
As promptly as practicable after the date of this Agreement,
Parent will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate
the Contemplated Transactions. Between the date of this Agreement and
the Closing Date, Parent will, and will cause each Related Person to,
cooperate with the Company with respect to all filings the Company is
required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with the Company in
obtaining all consents identified in Part 3.2 of the Disclosure Letter;
provided that this Agreement will not require Parent to dispose of or
make any change in any portion of its business or to incur any other
burden to obtain a Governmental Authorization.
6.2 Best Efforts and Further Assurances .
Between the date of this Agreement and the Closing Date, Parent
will use its best efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions of the
Closing under this Agreement consistent with their respective
obligations hereunder. Parent, at the reasonable request of the
Company, shall execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the
transactions contemplated hereby consistent with their respective
obligations hereunder.
6.3 Support Agreement and Voting and Exchange Trust
Agreement.
Prior to the Effective Time, Parent shall execute and deliver the
Exchangeable Share Support Agreement in the form of Exhibit D (the
"Support Agreement") and the Voting and Exchange Trust Agreement in the
form of Exhibit C (the "Voting and Exchange Trust Agreement").
6.4 Registration Statement; Form S-8 Registration
Statement.
(a) For purposes of this Section 6.8, "register,"
"registered," and "registration" refer to a registration effected by
preparing and filing a "Registration Statement" or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such Registration Statement or document, and "Holders"
refers to the holders of Exchangeable Shares, Rational Common Shares
and Assumed Options in respect of which Registrable Shares may be
resold pursuant to the Resale Registration Statement.
(b) Parent, within twenty days after Parent files a
Form 10-K for the fiscal year ended March 31, 2000, shall prepare and
file a Registration Statement covering the resale of the Registrable
Shares to the general public and shall use its Best Efforts to cause
such Registration Statement to become effective (such Registration
Statement specifically, the "Resale Registration Statement").
(c) In connection with any Resale Registration
Statement, Parent will:
(i) Prepare and file with the Commission a
Registration Statement with respect to such securities, and use its
Best Efforts to cause such Registration Statement to become effective,
and prepare and file with the Commission such amendments to such
Registration Statement and supplements to the prospectus contained
therein as may be necessary to keep such Registration Statement
effective until the earlier of (i) the date which is one year after the
date on which the Exchange Period has terminated; or (ii) six years
from the date of effectiveness of such Registration Statement;
(ii) Furnish to the Holders such reasonable
number of copies of the Registration Statement, the prospectus filed
therewith and such other documents as may be reasonably required in
order to facilitate the sale of such Registrable Securities;
(iii) Use its Best Efforts to register or
qualify the Registrable Shares under such state securities or blue sky
laws of such jurisdictions as the Holders may reasonably request in
writing, except that Parent shall not for any purpose be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not
so qualified;
(iv) Notify the Holders, promptly after it
shall receive notice thereof, of the time when such Registration
Statement has become effective or a supplement to any prospectus
forming part of such Registration Statement has been filed;
(v) Notify the Holders promptly as to any
request by the Commission for the amending or supplementing of such
Registration Statement or prospectus or for additional information;
(vi) Prepare and promptly file with the
Commission and promptly notify the Holders of the filing of such
amendment or supplement to such Registration Statement or prospectus as
may be necessary to correct any statements or omissions if, at the time
when a prospectus relating to such securities is required to be
delivered under the Securities Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as then
in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading;
provided, however, that Parent may delay the filing of any such
amendment or supplement (for a period not to exceed 90 days), if Parent
shall in good faith determine that such amendment or supplement would
require Parent to disclose a material development or potential material
development involving Parent, the disclosure of which would have a
material adverse effect on Parent; provided, further, that Parent may
suspend use of such Registration Statement in such instance or for such
time as may be reasonably necessary to update or amend such
Registration Statement to correct any untrue statement of a material
fact in, or an omission of a material fact from, such Registration
Statement; and
(vii) Advise the Holders, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
Registration Statement or the initiation or threatening of any
proceeding for that purpose and promptly use its Best Efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued.
(d) All fees, costs and expenses of and incidental
to the registration required by this Section 6.4 shall be borne by
Parent other than any underwriting discounts or fees (if any) which
shall be borne by the Holders. The fees, costs and expenses of
registration to be borne by Parent shall include, without limitation,
all registration and filing fees, printing expenses, fees and
disbursements of counsel and accountants for Parent, all legal fees and
disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified, the premiums and other costs
of policies of insurance against liability (if any) arising out of such
public offering.
(e) Parent will indemnify and hold harmless each
Holder, its directors and officers, and any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who
controls such Holder or such underwriter within the meaning of the
Securities Act, from and against and will reimburse such Holder and
each such underwriter and controlling person with respect to, any and
all loss, damage, liability, cost and expense to which such Holder or
any such underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that Parent will not be liable in any such case to
the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such Holder, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(f) Each Holder will indemnify and hold harmless
Parent, its directors and officers, any controlling person and any
underwriter with respect to, any and all loss, damage, liability, cost
or expense to which Parent or any controlling person and/or any
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by such Holder to Parent
specifically for use in the preparation thereof.
(g) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (e) or (f) of this Section 6.4
of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified party
will, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of said paragraph (e) or (f), promptly
notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those
available to the indemnifying party, or if there is a conflict of
interest which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party
pursuant to the provisions of said paragraph (e) or (f) for any legal
or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the provision of the preceding sentence,
(ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of
the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
(h) In addition, as soon as practicable after the
Closing Date and in any event no later than 10 business days following
the Closing Date, Parent shall cause the Parent Common Shares issuable
upon the exercise or conversion of Assumed Options to be registered
under the Securities Act on Form S-8.
6.5 Canadian Securities Compliance.
Parent and the Company shall use their Best Efforts to obtain all
orders required from the applicable Canadian securities authorities to
permit the issuance and first resale through the NNM in accordance with
the rules of the NNM and all laws applicable to the NNM of (a) the
Exchangeable Shares and Parent Common Shares issued pursuant to the
Contemplated Transactions, (b) the Parent Common Shares issued upon
exchange of the Exchangeable Shares from time to time, and (c) the
Parent Common Shares issued from time to time upon the exercise of the
Assumed Options (the "Exemption Orders"), in each case without
qualification with or approval of or the filing of any document,
including any prospectus or similar document, or the taking of any
proceeding with or the obtaining of any further order, ruling or
consent from, any Governmental Body or regulatory authority under any
Canadian federal, provincial or territorial securities or other laws
applicable to the residents of Ontario and Quebec or pursuant to the
rules and regulations of any such regulatory authority administering
such laws, or the fulfillment of any other legal requirement in any
such jurisdiction (other than, with respect to such first resales, any
restrictions on transfer by reason of, among other things, a holder
being a "control person" of Parent or Acquisition Sub for purposes of
Canadian provincial securities laws).
6.6 Issuance of Nonvoting Preferred Stock.
In connection with the Arrangement and the other transactions
contemplated herein, (i) Parent shall cause Acquisition Sub to issue
all shares of a class of nonvoting preference shares solely in exchange
for services and (ii) Parent and Acquisition Sub shall cause Amalco to
issue all shares of a class of nonvoting preference shares solely in
exchange for services.
6.7 Officers' and Directors' Indemnification: Insurance.
On or prior to the Effective Time, Parent shall cause the Company
to obtain six years "tail" coverage under the Company's existing
directors' and officers' liability insurance covering the officers and
directors of the Company who are currently covered by such insurance,
on terms and conditions no less favourable to such directors and
officers than those in effect on the date hereof, provided that in no
event shall Parent or the Company be required to expend for such tail
coverage more than CDN $35,000 in the aggregate.
7. Conditions Precedent to Parent's Obligation to Close.
▇▇▇▇▇▇'s obligation to consummate the Transactions and to take
the other actions required to be taken by Parent at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Parent, in whole or
in part):
7.1 Accuracy of Representations.
(a) All of the Company's representations and
warranties in this Agreement (considered collectively), and each of
these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Disclosure Letter.
(b) Each of the Company's representations and
warranties in Sections 3.3, 3.5, 3.9, and 3.11 must have been accurate
in all respects as of the date of this Agreement, and must be accurate
in all respects as of the Closing Date as if made on the Closing Date,
without giving effect to any supplement to the Disclosure Letter.
7.2 The Company's Performance.
(a) All of the covenants and obligations that the
Company is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and
each of these covenants and obligations (considered individually), must
have been duly performed and complied with in all material respects.
(b) Each of the covenants and obligations in
Section 5.4 must have been performed and complied with in all respects.
7.3 Consents.
Each of the Consents identified in Part 3.2 of the Disclosure
Letter, and each Consent identified in Part 4.2, must have been
obtained and must be in full force and effect.
7.4 Additional Documents.
Each of the following documents must have been delivered to
Parent:
(a) an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ dated the Closing
Date;
(b) from each person who is identified as an
"affiliate" of the Company, a Company Affiliate Agreement in the form
of Exhibit E (the "Company Affiliate Agreements"), and each such
Company Affiliate Agreement shall be in full force and effect;
(c) from each shareholder of the Company identified
on Schedule C, a Voting Agreement in the form of Exhibit F (the "Voting
Agreement") and each such Voting Agreement shall be in full force and
effect.;
(d) from each Employee identified on Schedule D, an
executed Noncompetition Agreement in the form of Exhibit G
("Noncompetition Agreements"), and each such Noncompetition Agreement
shall be in full force and effect and Parent shall not have received
any notice that any such Employee intends to fail to perform his or her
obligations under his or her Noncompetition Agreement;
(e) from each Founder, a Founders' Additional
Restrictions Agreement in the form of Exhibit D (the "Founders'
Agreement"), and each such Founders' Agreement shall be in full force
and effect.
(f) from the trustee for the holders of Company
Shares not exercising Dissent Rights, the Escrow Agreement and the
Voting and Exchange Trust Agreement;
(g) the Exemption Orders, in form and substance
reasonably satisfactory to Parent; and
(h) from the Company, an executed copy of the
Articles of Arrangement in the form of Exhibit A.
7.5 No Proceedings.
Since the date of this Agreement, there must not have been
commenced or Threatened against Parent, or against any Person
affiliated with Parent, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any
of the Contemplated Transactions.
7.6 No Claim Regarding Stock Ownership or Sale Proceeds.
Except as set forth on Part 3.3 of the Disclosure Letter, there
must not have been made or Threatened by any Person any claim asserting
that such Person is the holder or the beneficial owner of, or has the
right to acquire or to obtain beneficial ownership of, any stock of, or
any other voting, equity, or ownership interest in, any of the Company.
7.7 No Prohibition.
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Parent or any Person
affiliated with Parent to suffer any material adverse consequence
under, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise
formally proposed by or before any Governmental Body.
7.8 Shareholder Approval.
This Agreement and the Arrangement shall have been approved and
adopted by the affirmative requisite vote of the shareholders of the
Company.
7.9 Canadian Approvals.
The Company and Parent each shall have filed all notices and
information (if any) required under (i) the Investment Canada Act
(Canada) and (ii) Part IX of the Competition Act (Canada) and the
Parent, acting reasonably, shall be satisfied that the transaction may
proceed without approval under either statute or that all such
approvals have been obtained.
7.10 Nasdaq Listing.
The Acquisition Shares and the Parent Common Shares issuable upon
exercise or conversion of the Assumed Options shall have been approved
for listing, subject to notice of issuance, on the Nasdaq National
Market.
7.11 Dissent Rights.
Holders of not more than five percent (5%) of the Shares or five
percent (5%) of the Options shall have exercised Dissent Rights, other
statutory appraisal rights or rights to have the Company repurchase
Shares pursuant to the Individual Shareholder Agreements or similar
contractual rights.
7.12 Court Approval.
The Court shall have issued the Interim Order and the Final Order
approving the Arrangement in form and substance reasonably satisfactory
to Parent and reflecting the terms hereof, and such Final Order shall
not have been set aside or modified in any manner unacceptable to
Parent on appeal or otherwise.
7.13 Termination of 401(k) Plan.
If required by Parent in writing, Company shall, immediately
prior to the Effective Time, have terminated the Company 401(k) Plan
(the "Plan") and no further contributions shall be made to the Plan.
Participants of the Plan shall be given the opportunity to elect to
roll over the entire amount of their contributions to the Plan into
Parent's existing 401(k) Plan on a tax-deferred basis. The Company
shall have provided to Parent (i) executed resolutions by the Board of
Directors of the Company authorizing the termination and (ii) an
executed amendment to the Plan sufficient to assure compliance with all
applicable requirements of the Internal Revenue Code and regulations
thereunder so that the tax-qualified status of the Plan will be
maintained at the time of termination.
7.14 No Material Adverse Change in the Company's Business.
Since the September 30, 1999, there shall not have occurred any
event (whether or not covered by insurance) that has resulted or might
reasonably be expected to result in a material adverse change in the
condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects of the Company
or its subsidiary, taken as a whole.
8. Conditions Precedent to the Company's Obligation to Close.
The Company's obligation to consummate the Arrangement and to
take the actions required to be taken by the Company at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Company, in
whole or in part):
8.1 Accuracy of Representations.
All of Parent's representations and warranties in this Agreement
(considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all
material respects as of the date of this Agreement and must be accurate
in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 Parent's Performance.
All of the covenants and obligations that Parent is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and
complied with in all material respects.
8.3 Additional Documents.
Parent must have caused the following documents to be delivered
to the Company:
(a) an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
dated the Closing Date;
(b) an opinion of ▇▇▇▇, ▇▇▇▇ dated the Closing
Date;
(c) executed copies of the Articles of Arrangement,
the Support Agreement, the Escrow Agreement and the Voting and Exchange
Trust Agreement;
(d) the Canadian Securities Orders, in form and
substance reasonably satisfactory to the Company; and
(e) such other documents as the Company may
reasonably request for the purpose of (i) enabling their counsel to
provide the opinion referred to in Section 7.4(a), (ii) evidencing the
accuracy of any representation or warranty of Parent, (iii) evidencing
the performance by Parent of, or the compliance by Parent with, any
covenant or obligation required to be performed or complied with by
Parent, (ii) evidencing the satisfaction of any condition referred to
in this Section 8, or (v) otherwise facilitating the consummation of
any of the Contemplated Transactions.
8.4 No Proceedings.
Since the date of this Agreement, there must not have been
commenced or Threatened against the Company, or against any Person
affiliated with the Company, any Proceeding (a) involving any challenge
to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any
of the Contemplated Transactions.
8.5 No Injunction.
There must not be in effect any Legal Requirement or any
injunction or other Order that (a) prohibits the consummation of the
Arrangement, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
8.6 Shareholder Approval.
This Agreement and the Transactions shall have been approved and
adopted by the affirmative requisite vote of the shareholders of the
Company.
8.7 Canadian Approvals.
The Company and Parent each shall have filed all notices and
information (if any) required under (i) the Investment Canada Act
(Canada) and (ii) Part IX of the Competition Act (Canada) and the
Parent, acting reasonably, shall be satisfied that the transaction may
proceed without approval under either statute or that all such
approvals have been obtained.
8.8 Nasdaq Listing.
The Acquisition Shares and the Parent Common Shares issuable upon
the exercise or conversion of the Assumed Options shall have been
approved for listing, subject to notice of issuance, on the Nasdaq
National Market.
8.9 Court Approval.
The Court shall have issued the Interim Order and the Final Order
approving the Arrangement in form and substance reasonably satisfactory
to the Company and reflecting the terms hereof, and such Final Order
shall not have been set aside or modified in any manner unacceptable to
the Company on appeal or otherwise.
9. Termination.
9.1 Termination Events.
This Agreement may, by notice given prior to or at the Closing,
be terminated:
(a) by either Parent, on the one hand, or the
Company, on the other, if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not
been waived;
(b) (i) by Parent if any of the conditions in
Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Parent to comply with its obligations under this
Agreement) and Parent has not waived such condition on or before the
Closing Date; or (ii) by the Company, if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of the Company to comply with its obligations under
this Agreement) and the Company has not waived such condition on or
before the Closing Date;
(c) by Parent if (i) the Company's Board of
Directors withdraws or modifies its recommendation of the Transactions,
(ii) the Company willfully breaches this Agreement, (iii) the Company's
shareholders do not approve the Arrangement on or before January 20,
2000 or (iv) shareholders of the Company owning more than five percent
(5%) of the Company Shares exercise Dissent Rights or other statutory
appraisal rights;
(d) by the Company if Parent willfully breaches
this Agreement;
(e) by mutual consent of Parent and the Company; or
(f) by either Parent or the Company if the Closing
has not occurred (other than through the failure of any party seeking
to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before January 31, 2000, or such later date as
the parties may agree upon.
9.2 Effect of Termination.
Each party's right of termination under Section 9.1 is in
addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to
Section 9.1, all further obligations of the parties under this
Agreement will terminate, except that the obligations in Sections 11.1,
11.2 and 11.3 will survive; provided, however, that if this Agreement
is terminated by a party because of the Breach of the Agreement by the
other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result
of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies
will survive such termination unimpaired, subject to the provisions of
Section 11.1 hereof.
10. Escrow Fund.
10.1 Escrow Shares.
As soon as practicable after the Effective Time, the number of
Exchangeable Shares set forth opposite the name of each Founder in
Annex C to the Escrow Agreement having a value of $3,800,000
(collectively the "Escrow Shares") shall be registered in the name of,
and be deposited with The Bank of Nova Scotia Trust Company of New York
(the "Depositary Agent"), such deposit to constitute the escrow fund
(the "Escrow Fund") and to be governed by the terms set forth herein
and in the Escrow Agreement attached hereto as Exhibit H (the "Escrow
Agreement"). The Escrow Fund (but only up to a maximum of the value of
the Escrow Shares) shall be the exclusive remedy of Parent for a breach
of a representation or warranty by Company and shall be available to
compensate Parent for any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution
of value, whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty
made by the Company in this Agreement as if such representation or
warranty were made on and as of the Closing Date, other than any such
Breach that is disclosed in a supplement to the Disclosure Letter;
(b) any Breach by the Company of any covenant or
obligation of the Company in this Agreement that is not waived on or
prior to Closing; or
(c) resolution or settlement of any Proceeding
arising out of the claims described in Part 3.14(b) of the Disclosure
Letter.
Parent and its affiliates shall act in good faith and in a
commercially reasonable manner, taking into account the needs of
Parent's then consolidated business and duties it owes to all of its
equity holders, to mitigate any Damages they may suffer. Any claim for
indemnification for Damages hereunder shall be offset or reduced by
(i) any tax benefit received by Parent or its affiliates as a result of
such Damages and (ii) in the case of third-party claims, by any amount
actually recovered by Parent or its affiliates pursuant to
counterclaims made by any of them directly relating to the facts giving
rise to such third-party claims.
Parent and Company each acknowledge that such Damages, if any,
would relate to unresolved contingencies existing at the Closing, which
if resolved at the Closing would have led to a reduction in the total
number of shares Parent would have agreed to issue in connection with
the Contemplated Transactions.
10.2 Damage Threshold.
Notwithstanding the foregoing, Parent may not receive any shares
from the Escrow Fund unless and until an Officer's Certificate or
Certificates (as defined in Section 10.4 below) identifying Damages the
aggregate amount of which exceeds $100,000 has been delivered to the
Depositary Agent as provided in Section 10.4 below and such amount is
determined pursuant to this Article 10 to be payable, in which case
Parent shall receive shares equal in value to the full amount of the
Damages; provided, however, that in no event shall Parent receive more
than the Escrow Shares.
10.3 Escrow Period.
The Escrow Period shall terminate with respect to the Escrow
Shares upon the second anniversary of the Closing Date provided that
this escrow shall terminate with respect to 50% of the Escrow Shares on
the first anniversary of the Closing Date, and such Escrow Shares shall
be released by the Depositary Agent; provided, however, that a portion
of the Escrow Shares, which, in the reasonable judgment of Parent,
subject to the objection of the Company Agent (as defined in
Section 10.7 below) and the subsequent arbitration of the matter in the
manner provided in Section 10.6 hereof, are necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate theretofore
delivered to the Depositary Agent prior to termination of the Escrow
Period with respect to the facts and circumstances existing prior to
expiration of the Escrow Period, shall remain in the Escrow Fund until
such claims have been resolved. Any and all releases of the Escrow
Shares upon termination of the Escrow Period shall be released to the
Holder's Accounts held by the Depository Agent for the Founders
according to the terms of the Escrow Agreement.
10.4 Claims upon Escrow Fund.
(a) Upon receipt by the Depositary Agent on or
before the last day of the Escrow Period of a certificate signed by the
Chief Executive Officer, the President, the Chief Financial Officer or
the General Counsel of Parent (an "Officer's Certificate"):
(i) stating that Damages exist in an
aggregate amount greater than $100,000, and
(ii) specifying in reasonable detail the
individual items of such Damages included in the amount so stated, the
date each such item was paid, or properly accrued or arose, the nature
of the misrepresentation, breach of warranty or claim to which such
item is related, the Depositary Agent shall, subject to the provisions
of Article 10 hereof, transfer and deliver to Parent out of the Escrow
Fund, as promptly as practicable, Escrow Shares whose value is equal to
the amount of the Damage.
(b) For the purpose of compensating Parent for its
Damages pursuant to this Agreement, the Exchangeable Shares in the
Escrow Fund shall be valued at $48.77 per share (as adjusted for stock
splits, reverse stock splits and similar events). Parent and Company
understand that the variation in the trading price of Parent's stock
may cause the number of shares required to satisfy an escrow claim to
differ from the amount of shares calculated based on the fair market
value of such shares on the date such claim is made.
10.5 Objections to Claims.
At the time of delivery of any Officer's Certificate to the
Depositary Agent, a duplicate copy of such Officer's Certificate shall
be delivered to the Company Agent (defined in Section 10.7 below) and
for a period of thirty (30) days after such delivery, the Depositary
Agent shall make no transfer or delivery of Escrow Shares pursuant to
Section 10.4 hereof unless the Depositary Agent shall have received
written authorization from the Company Agent to make such delivery.
After the expiration of such thirty (30) day period, the Depositary
Agent shall make transfer and delivery of the Escrow Shares in
accordance with Section 10.4 hereof, provided that no such payment,
transfer or delivery may be made if the Company Agent shall object in a
written statement to the claim made in the Officer's Certificate, and
such statement shall have been delivered to the Depositary Agent and to
Parent prior to the expiration of such thirty (30) day period.
10.6 Resolution of Conflicts; Arbitration.
(a) In case the Company Agent shall so object in
writing to any claim or claims by ▇▇▇▇▇▇ made in any Officer's
Certificate, Parent shall have forty-five (45) days to respond in a
written statement to the objection of the Company Agent. If after such
forty-five (45) day period there remains a dispute as to any claims,
the Company Agent and Parent shall attempt in good faith for sixty (60)
days to agree upon the rights of the respective parties with respect to
each of such claims. If the Company Agent and Parent should so agree,
a memorandum setting forth such agreement shall be prepared and signed
by both parties and shall be furnished to the Depositary Agent. The
Depositary Agent shall be entitled to rely on any such memorandum and
shall distribute the Escrow Shares from the Escrow Fund in accordance
with the terms thereof.
(b) If no such agreement can be reached after good
faith negotiation, either Parent or the Company Agent may, by written
notice to the other, demand arbitration of the matter unless the amount
of the damage or loss is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted
by one arbitrator. Within fifteen (15) days after such written notice
is sent, Parent and the Company Agent shall together select one
arbitrator, failing which, Parent and Company Agent shall apply to a
California court to appoint one arbitrator. The decision of the
arbitrator as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this
Agreement, and notwithstanding anything in Section 10.6 hereof, the
Depositary Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund in
accordance therewith.
(c) Judgment upon any award rendered by the
arbitrator may be entered in any court having jurisdiction. Any such
arbitration shall be held in Cupertino, California under the commercial
rules then in effect of the American Arbitration Association. For
purposes of this Section 10.6(c), in any arbitration hereunder in which
any claim or the amount thereof stated in the Officer's Certificate is
at issue, Parent shall be deemed to be the Non-Prevailing Party unless
the arbitrator awards Parent more than one-half (1/2) of the amount in
dispute; otherwise, the Company shareholders for whom the Escrow Shares
otherwise issuable to them have been deposited in the Escrow Fund shall
be deemed to be the Non-Prevailing Party. The Non-Prevailing Party to
an arbitration shall pay its own expenses, the fees of each arbitrator,
the administrative fee of the American Arbitration Association, and the
expenses, including without limitation, attorneys' fees and costs,
reasonably incurred by the other party to the arbitration.
10.7 Company Agent.
(a) ▇▇▇▇▇ ▇▇▇▇▇ shall be constituted and appointed
as agent ("Company Agent") for and on behalf of the Company
shareholders to give and receive notices and communications, to
authorize transfer and delivery to Parent of the Escrow Shares in
satisfaction of claims by ▇▇▇▇▇▇, to object to such transfers and
deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts
and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of the Company Agent
for the accomplishment of the foregoing. Such agency may be changed by
the holders of a majority in interest of the Escrow Fund from time to
time upon not less than 10 days' prior written notice to Parent. No
bond shall be required of the Company Agent, and the Company Agent
shall receive no compensation for his services. Notices or
communications to or from the Company Agent shall constitute notice to
or from each of the Company's shareholders.
(b) The Company Agent shall not be liable for any
act done or omitted hereunder, as the Company Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done
or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith. The Company shareholders shall severally
indemnify the Company Agent and hold him harmless against any loss,
liability or expense incurred without gross negligence or bad faith on
the part of the Company Agent and arising out of or in connection with
the acceptance or administration of his duties hereunder.
(c) The Company Agent shall have reasonable access
to information about the Company and the reasonable assistance of the
Company's and Acquisition Sub's officers and employees for purposes of
performing its duties and exercising its rights hereunder, provided
that the Company Agent shall treat confidentially and not disclose any
nonpublic information from or about the Company to anyone (except on a
need to know basis to individuals who agree to treat such information
confidentially).
10.8 Actions of the Company Agent.
A decision, act, consent or instruction of the Company Agent
shall constitute a decision of all Company shareholders for whom Escrow
Shares otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each such Company
shareholder, and the Depositary Agent and Parent may rely upon any
decision, act, consent or instruction of the Company Agent as being the
decision, act, consent or instruction of each and every such Company
shareholder. The Depositary Agent and Parent are hereby relieved from
any liability to any person for any acts done by them in accordance
with such decision, act, consent or instruction of the Company Agent.
10.9 Third-Party Claims.
In the event Parent becomes aware of a third-party claim which
▇▇▇▇▇▇ believes may result in a demand against the Escrow Fund, Parent
shall promptly notify the Company Agent of such claim and provide
details thereof, and the Company Agent shall be entitled, at its
expense, to participate in or assume control of any defense of such
claim. If the Company Agent elects to assume control of the defense,
Parent shall have the right to participate in the defense and Parent
shall have the right in its sole discretion to settle any such claim;
provided, however, that Parent may not effect the settlement of any
such claim without the consent of the Company Agent, which consent
shall not be unreasonably withheld. In the event that the Company
Agent has consented to any such settlement, the Company Agent shall
have no power or authority to object under Section 10.5 or any other
provision of this Article X to the amount of any claim by Parent
against the Escrow Fund for indemnity with respect to such settlement.
11. General Provisions.
11.1 Expenses and Liability.
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants.
11.2 Public Announcements.
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all,
at such time and in such manner as Parent determines. Unless consented
to by Parent in advance or required by Legal Requirements, prior to the
Closing the Company shall keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person other than
Employees and Company shareholders. The Company and Parent will
consult with each other concerning the means by which the Company's
Employees, customers, and suppliers and others having dealings with the
Company will be informed of the Contemplated Transactions, and Parent
will have the right to be present for any such communication.
11.3 Confidentiality.
Between the date of this Agreement and the Closing Date, Parent,
and the Company will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Parent and the
Company to maintain in confidence, any information furnished by one
party to another party in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or
such information becomes publicly available through no fault of such
party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by or necessary or appropriate in
connection with legal proceedings. If the Contemplated Transactions
are not consummated, each party will return or destroy as much of such
written information as the other party may reasonably request.
11.4 Notices.
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return
receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
The Company: ObjecTime Limited
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to: Gray ▇▇▇▇ ▇▇▇▇ & Freidenrich LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No. : (▇▇▇) ▇▇▇-▇▇▇▇
Parent: Rational Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to: ▇▇▇▇ ▇▇▇▇▇▇
Suite 3000, Aetna Tower
P.O. Box 270, TD Centre
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be
deemed given upon delivery, (ii) if delivered by facsimile transmission
to the facsimile number as provided for in this Section, be deemed
given upon facsimile confirmation, (iii) if delivered by mail in the
manner described above to the address as provided for in this Section,
be deemed given on the earlier of the seventh Business Day following
mailing or upon receipt and (iv) if delivered by overnight courier to
the address as provided in this Section, be deemed given on the earlier
of the first Business Day following the date sent by such overnight
courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person
to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party
hereto.
11.5 Jurisdiction; Service of Process.
Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be brought
against any of the parties in the United States District Court for the
Northern District of California, and each of the parties consents to
the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in
the preceding sentence may be served on any party anywhere in the
world.
11.6 Further Assurances.
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such
other documents, and (c) to do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this
Agreement.
11.7 Waiver.
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by
any party in exercising any right, power, or privilege under this
Agreement or the documents referred to in this Agreement will operate
as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the
other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand
as provided in this Agreement or the documents referred to in this
Agreement.
11.8 Entire Agreement and Modification.
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with
the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except
by a written agreement executed by the party to be charged with the
amendment.
11.9 Disclosure Letter.
(a) The disclosures in the Disclosure Letter, and
those in any Supplement thereto, must relate only to the
representations and warranties in the Section of the Agreement to which
they expressly relate and not to any other representation or warranty
in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure
Letter (other than an exception expressly set forth as such in the
Disclosure Letter with respect to a specifically identified
representation or warranty), the statements in the body of this
Agreement will control.
11.10 Assignments, Successors, and No Third-Party Rights.
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties except that Parent may
assign any of its rights under this Agreement to any Subsidiary of
Parent, provided that the Parent continues to be liable for its
obligations hereunder. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to
the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
11.11 Severability.
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid or unenforceable only in part
or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
11.12 Section Headings, Construction.
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
11.13 Time of Essence.
With regard to all dates and time periods set forth or referred
to in this Agreement, time is of the essence.
11.14 Governing Law.
This Agreement will be governed by the laws of the State of
California without regard to conflicts of laws principles other than
those directing application of California law.
11.15 Counterparts.
This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original copy of this Agreement and
all of which, when taken together, will be deemed to constitute one and
the same agreement.
11.16 No Third-Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the
benefit of the Parties hereto, and nothing in this Agreement is
intended to or shall confer upon any other person, including without
limitation any Company shareholders or securityholders, any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
11.17 Currency.
Other than where specified in this Agreement, all monetary
figures expressed in this Agreement refer to United States dollars.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
RATIONAL INTERNATIONAL
(INTERNATIONAL CORP)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
RATIONAL SOFTWARE CORPORATION
(PARENT)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President, Chief Financial Officer, Secretary
3037936 NOVA SCOTIA COMPANY
(HOLDING ULC)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
OBJECTIME LIMITED (COMPANY)
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
1386501 ONTARIO LIMITED
(ACQUISITION SUB)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
1386503 ONTARIO LIMITED (AMALCO)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
[Signature page to Agreement and Plan of Acquisition and Arrangement]
AGREEMENT AND PLAN OF
ACQUISITION AND
ARRANGEMENT
by and between
RATIONAL SOFTWARE CORPORATION,
3037936 NOVA SCOTIA COMPANY,
1386501 ONTARIO LIMITED,
1386503 ONTARIO LIMITED
and OBJECTIME LIMITED
Dated as of December 14, 1999
Exhibit A
Exhibit "A"
PLAN OF ARRANGEMENT
UNDER SECTION 182
OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE 1.
INTERPRETATION
1.1. Definitions
In this Agreement,
1.1.1. "Acquisition Agreement" means the agreement and plan of
acquisition and arrangement dated as of December 14, 1999 among
Rational, Rational International, Holding ULC, Acquisition Sub,
Amalco and ObjecTime, as amended, supplemented, restated or replaced
from time to time providing for, among other things, the
Arrangement;
1.1.2. "Acquisition Sub" means 1386501 Ontario Limited, a
corporation existing under the laws of the Province of Ontario, and
being a subsidiary of Holding ULC;
1.1.3. "Affiliate" has the meaning given to that term in the OBCA;
1.1.4. "Amalco" means 1386503 Ontario Limited, a corporation
existing under the laws of the Province of Ontario, and being a
subsidiary of Acquisition Sub;
1.1.5. "Amalgamating Company" has the meaning given to that term in
section 2.2.1;
1.1.6. "Amalgamation" means the amalgamation, to be effected
pursuant to the Arrangement, of ObjecTime and Amalco under the laws
of the Province of Ontario;
1.1.7. "Applicable Exchange" means NASDAQ;
1.1.8. "Arrangement" means an arrangement under the provisions of
Section 182 of the OBCA on the terms and conditions set out in the
Acquisition Agreement and this Plan of Arrangement and any amendment
or variation made in accordance with the terms of the Acquisition
Agreement, this Plan of Arrangement, or made at the direction of the
Court in the Final Order which will have been obtained in form and
substance satisfactory to each party to the Acquisition Agreement,
acting reasonably;
1.1.9. "Articles of Arrangement" means the articles of arrangement
of ObjecTime in respect of the Arrangement required by the OBCA to
be sent to the Director after the Final Order is made;
1.1.10. "Assumed Option" has the meaning given to that term in
section 2.2.4;
1.1.11. "Business Day" means any day on which commercial banks are
open for business in New York, New York and Toronto, Ontario other
than a Saturday, a Sunday or a day observed as a holiday in Toronto,
Ontario under the laws of the Province of Ontario or the federal laws
of Canada or in New York, New York under the laws of the State of New
York or the federal laws of the United States of America;
1.1.12. "Capital Reorganization" has the meaning given to that term
in section 5.3;
1.1.13. "Certificate" means the certificate of arrangement giving
effect to the Arrangement, issued by the Director pursuant to
Section 183 of the OBCA after the Articles of Arrangement are filed;
1.1.14. "Class 8 Special Share" means a Class 8 Special Share in the
capital of ObjecTime;
1.1.15. "Class A Preferred Share" means a Class A Preferred Share in
the capital of ObjecTime;
1.1.16. "Class-B Non-Voting Preference Shares" means the Class B
Non-Voting Preference Shares in the capital of Acquisition Sub
having substantially the rights, privileges, restrictions and
conditions set out in Appendix 4;
1.1.17. "Class B Common Shares" means the Class B common shares in
the capital of ObjecTime having substantially the rights,
privileges, restrictions and conditions set out in Appendix 1;
1.1.18. "Court" means the Ontario Superior Court of Justice;
1.1.19. "Current Market Price" has the meaning given to that term in
the Exchangeable Share Provisions;
1.1.20. "Depositary" means The Bank of Nova Scotia Trust Company of
New York;
1.1.21. "Deposited Shares" means the Rational Common Shares equal to
the number of Exchangeable Shares from time to time issued and
outstanding, which shares are to be issued to, deposited with, and
voted by, the Trustee as described in the Voting and Exchange Trust
Agreement;
1.1.22. "Director" means the Director appointed under Section 278 of
the OBCA;
1.1.23. "Dissent Rights" has the meaning given to that term in
section 3.1;
1.1.24. "Dissenting Shareholder" means a holder of ObjecTime Shares
who dissents in respect of the Arrangement in strict compliance with
the Dissent Rights;
1.1.25. "Dividend Amount" has the meaning given to that term in
section 5.1.1;
1.1.26. "Effective Date" means the date shown in the Certificate;
1.1.27. "Effective Time" means 12:01 a.m. on the Effective Date;
1.1.28. "Escrow Agreement" means the escrow agreement substantially
in the form of the agreement set out in Appendix 6;
1.1.29. "Exchange Ratio" means the quotient obtained when the
ObjecTime Share Price is divided by the Rational Common Share Price,
being 0.0388;
1.1.30. "Exchangeable Share" means a Class A non-voting preferred
share in the capital of Acquisition Sub;
1.1.31. "Exchangeable Share Provisions" means the rights,
privileges, restrictions and conditions attaching to the
Exchangeable Shares, which rights, privileges, restrictions and
conditions will be substantially as set out in Appendix 5;
1.1.32. "Exchangeable Share Voting Event" has the meaning given to
that term in the Exchangeable Share Provisions;
1.1.33. "Exempt Exchangeable Share Voting Event" has the meaning
given to that term in the Exchangeable Share Provisions;
1.1.34. "Final Order" means the final order of the Court approving
the Arrangement, as that order may be amended or varied at any time
prior to the Effective Date;
1.1.35. "Governmental Entity" means any (a) multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitral body, commission, board, bureau or agency, domestic or
foreign, (b) any subdivision, agent, commission, board, or authority
of any of the foregoing or (c) any quasi-governmental or private
body exercising any regulatory, expropriation or taxing authority
under or for the account of any of the foregoing;
1.1.36. "Holding ULC" means 3037936 Nova Scotia Company, an
unlimited company existing under the laws of Nova Scotia, and being
an indirect wholly-owned subsidiary of Rational;
1.1.37. "Interim Order" means an interim order of the Court in
respect of the Arrangement as contemplated by the Acquisition
Agreement;
1.1.38. "ITA" means the Income Tax Act (Canada);
1.1.39. "Law" means all laws, statutes, codes, ordinances, decrees,
rules, regulations, by-laws, judicial or arbitral or administrative
or ministerial or departmental or regulatory judgments, orders,
decisions, rulings or awards, including general principles of common
and civil law, and conditions of any grant of approval, permission,
authority or license of any Governmental Entity, statutory body or
self-regulatory authority (including the Applicable Exchange), and
the term "applicable" with respect to those Laws and in the context
that refers to one or more Persons, means that those Laws apply to
that Person or Persons or its or their business, undertaking,
property or securities;
1.1.40. "Liquidation Amount" has the meaning given to that term in
the Exchangeable Share Provisions;
1.1.41. "Liquidation Call Purchase Price" has the meaning given to
that term in section 5.1.1;
1.1.42. "Liquidation Call Right" has the meaning given to that term
in section 5.1.1;
1.1.43. "Liquidation Date" has the meaning given to that term in the
Exchangeable Share Provisions;
1.1.44. "NASDAQ" means the Nasdaq National Market;
1.1.45. "New ObjecTime" means the company continuing as a result of
the Amalgamation;
1.1.46. "New ObjecTime Common Shares" means the common shares in the
capital of New ObjecTime having substantially the rights,
privileges, restrictions and conditions set out in Appendix 2;
1.1.47. "New ObjecTime Preference Shares" means the preference
shares in the capital of New ObjecTime having substantially the
rights, privileges, restrictions and conditions set out in Appendix
3;
1.1.48. "OBCA" means the Business Corporations Act (Ontario), as now
in effect and as it may be amended from time to time prior to the
Effective Date;
1.1.49. "ObjecTime" means ObjecTime Limited, a corporation existing
under the laws of the Province of Ontario;
1.1.50. "ObjecTime Circular" means the notice of the ObjecTime
Meeting to be sent to holders of ObjecTime Shares and the
accompanying management information circular;
1.1.51. "ObjecTime Disbursing Representative" has the meaning given
to that term in section 4.2;
1.1.52. "ObjecTime Meeting" means the special meeting of holders of
ObjecTime Shares (including any adjournment thereof) that is to be
convened as provided by the Interim Order to consider, and if deemed
advisable, to approve the Arrangement;
1.1.53. "ObjecTime Option" means an option to purchase ObjecTime
Shares granted under any of the ObjecTime Option Plans, which option
is outstanding and unexercised on the Effective Date;
1.1.54. "ObjecTime Optionholder" means a holder of an ObjecTime
Option;
1.1.55. "ObjecTime Option Plans" means the ObjecTime Limited
Canadian Stock Option Plan (1997), as amended, the ObjecTime Limited
U.S. Stock Option Plan (1997), as amended, the ObjecTime Limited
1998 Canadian Stock Option Plan, as amended, and the ObjecTime
Limited 1998 U.S. Stock Option Plan, as amended;
1.1.56. "ObjecTime Resolution" means the special resolution passed
by the holders of ObjecTime Shares at the ObjecTime Meeting;
1.1.57. "ObjecTime Securities" means ObjecTime Shares and ObjecTime
Options;
1.1.58. "ObjecTime Shareholder" means a registered holder of
ObjecTime Shares;
1.1.59. "ObjecTime Share Price" means US$1.89;
1.1.60. "ObjecTime Shares" means the Class A common shares, Class A
preferred shares, Class B preferred shares, Class C preferred shares
and Class 8 special shares in the capital of ObjecTime and includes
the Class B Common Shares into which the Class A Preferred Shares
and Class 8 Special Shares will be converted under the Arrangement;
1.1.61. "Person" means any individual, partnership, limited
partnership, joint venture, syndicate, sole proprietorship, company
or corporation with or without share capital, unincorporated
association, trust, trustee, executor, administrator or other legal
personal representative, regulatory body or agency, government or
governmental agency, authority or entity however designated or
constituted;
1.1.62. "Plan of Arrangement", "hereof", "hereunder" and similar
expressions means this Plan of Arrangement, including the appendices
to this Plan of Arrangement and includes any agreement or instrument
supplementary or ancillary to this Plan of Arrangement;
1.1.63. "Rational" means Rational Software Corporation, a
corporation existing under the laws of the State of Delaware, and
any successor corporation;
1.1.64. "Rational Common Share Price" means US$48.77;
1.1.65. "Rational Common Shares" means the shares of common stock,
US$0.01 par value, of Rational;
1.1.66. "Rational Control Transaction" has the meaning given to that
term in the Exchangeable Share Provisions;
1.1.67. "Redemption Call Purchase Price" has the meaning given to
that term in section 5.2.1;
1.1.68. "Redemption Call Right" has the meaning given to that term
in section 5.2.1;
1.1.69. "Redemption Date" has the meaning given to that term in the
Exchangeable Share Provisions;
1.1.70. "Restricted Options" has the meaning given to that term in
section 2.2.4.4;
1.1.71. "Transfer Agent" has the meaning given to that term in
section 5.1.2;
1.1.72. "Trustee" means The Bank of Nova Scotia Trust Company of New
York;
1.1.73. "United States Dollar Equivalent" means, in respect of an
amount expressed in a currency other than United States dollars (the
"Foreign Currency Amount") at any date, the product obtained by
multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on that date for that foreign currency expressed in
United States dollars as reported by the Federal Reserve Bank of New
York or, in the event that spot exchange rate is not available, any
exchange rate on that date for the foreign currency expressed in
United States dollars as may be deemed by the Board of Directors of
Rational to be appropriate for that purpose.
1.1.74. "Voting and Exchange Trust Agreement" has the meaning given
to that term in the Exchangeable Share Provisions.
1.2. Sections and Headings
The division of this Plan of Arrangement into sections and
the inclusion of headings are for convenience of reference only and will
not affect the construction or interpretation of this Plan of
Arrangement.
1.3. Gender and Number
In this Plan of Arrangement, unless the context otherwise
requires, words importing the singular include the plural and vice versa
and words importing gender include all genders.
1.4. Governing Law
This Plan of Arrangement will be governed by and construed
in accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein.
ARTICLE 2.
GENERAL MATTERS
2.1. Binding Effect
This Plan of Arrangement will become effective at, and be
binding at and after, the Effective Time, on (i) ObjecTime, Rational,
Holding ULC, Acquisition Sub, Amalco, and New ObjecTime, (ii) all
holders of ObjecTime Shares, (iii) all holders of Class B Non-Voting
Preference Shares, (iv) all holders of Exchangeable Shares, (v) all
holders of Rational Common Shares received in exchange for Class B
Non-Voting Preference Shares, (vi) all holders of securities
exchangeable for or convertible into ObjecTime Shares, and (vii) all
other holders of securities of Acquisition Sub, Amalco or New ObjecTime.
2.2. Arrangement
Commencing at the Effective Time, the following will occur
and will be deemed to occur in the following order without any further
act or formality:
2.2.1. ObjecTime will effect the following capital reorganization:
2.2.1.1. ObjecTime will be authorized to issue an
unlimited number of ObjecTime Class B Common Shares which
will have attached the rights, privileges, restrictions and
conditions set out in Appendix 1 to this Plan of
Arrangement;
2.2.1.2. each outstanding Class A Preferred Share and
Class 8 Special Share will be converted into one fully paid
and non-assessable Class B Common Share and the names of the
holders of the shares so converted will be removed from the
registers of holders of Class A Preferred Shares and/or
Class 8 Special Shares, as the case may be, and added to the
register of holders of Class B Common Shares;
2.2.1.3. there will be deducted from the stated capital
account in the accounting records of ObjecTime maintained
for the Class A Preferred Shares an amount equal to the
stated capital of the Class A Preferred Shares and deducted
from the stated capital account in the accounting records of
ObjecTime maintained for the Class 8 Special Shares an
amount equal to the stated capital of the Class 8 Special
Shares; and
2.2.1.4. there will be added to the stated capital
account in the accounting records of ObjecTime maintained
for the Class B Common Shares of ObjecTime an amount equal
to the aggregate amount deducted pursuant to section 2.2.1.3
from the stated capital accounts maintained for the Class A
Preferred Shares and Class 8 Special Shares;
2.2.2. ObjecTime and Amalco (each an "Amalgamating Company") will
amalgamate and continue as one corporation under the OBCA; and
2.2.2.1. on the Amalgamation:
2.2.2.1.1. each outstanding common share of Amalco,
each outstanding ObjecTime Share deemed to be held by
Holding ULC pursuant to section 3.1.2 and each
outstanding ObjecTime Share held by Rational or its
Affiliates will be converted into one fully paid and
non-assessable New ObjecTime Common Share and the
names of the holders of the shares so converted will
be added to the register of holders of New ObjecTime
Common Shares;
2.2.2.1.2. each outstanding ObjecTime Option deemed
to be held by Holding ULC pursuant to section 3.1.2
will be cancelled;
2.2.2.1.3. each outstanding preference share of
Amalco will be converted into one fully paid and non-
assessable New ObjecTime Preference Share and the
names of the holders of the shares so converted will
be added to the register of holders of New ObjecTime
Preference Shares; and
2.2.2.1.4. each outstanding ObjecTime Share that is
not held by (i) a holder who has exercised its Dissent
Rights and is ultimately entitled to be paid the fair
value of that holder's ObjecTime Shares or
(ii) Rational or its Affiliates, will be converted
into that number of fully paid and non-assessable
Class B Non-Voting Preference Shares equal to the
Exchange Ratio and the name of each holder of
ObjecTime Shares so converted will be added to the
register of holders of Class B Non-Voting Preference
Shares;
2.2.2.2. New ObjecTime will afterwards possess all the
property, rights, privileges and franchises and will be
subject to all the liabilities, contracts and debts of each
of the Amalgamating Companies;
2.2.2.3. unless and until otherwise determined in the
manner required by Law, or by New ObjecTime, its directors
or shareholders, the following provisions will apply to New
ObjecTime:
2.2.2.3.1. Name. The name of New ObjecTime will be
"ObjecTime Limited";
2.2.2.3.2. Registered Office. The registered office
of New ObjecTime will be located in the Regional
Municipality of Ottawa-Carleton in the Province of
Ontario. The address of the registered head office of
New ObjecTime will be ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇;
z2.2.2.3.3. Business and Powers. There will be no
restrictions on the business New ObjecTime may carry
on or the powers it may exercise;
2.2.2.3.4. Authorized Share Capital. New ObjecTime
will be authorized to issue an unlimited number of New
ObjecTime Common Shares and 25,000 New ObjecTime
Preference Shares;
2.2.2.3.5. Share Provisions. The New ObjecTime
Common Shares will have attached the rights,
privileges, restrictions and conditions set out in
Appendix 2 to this Plan of Arrangement and the New
ObjecTime Preference Shares shall have attached
thereto the rights, privileges, restrictions and
conditions set out in Appendix 3 to this Plan of
Arrangement;
2.2.2.3.6. Share Restrictions. The right to transfer
shares of New ObjecTime will be restricted in that no
shareholder will be entitled to transfer any share or
shares in the capital of New ObjecTime without the
express sanction of the directors of New ObjecTime
expressed by a resolution passed at a meeting of the
board of directors of New ObjecTime or consented to by
an instrument or instruments in writing signed by a
majority of the directors of New ObjecTime.
The number of shareholders of New ObjecTime, exclusive
of Persons who are in its employment, or in the
employment of an affiliate of New ObjecTime, and
exclusive of Persons who, having been formerly in the
employment of New ObjecTime, or in the employment of
an affiliate of New ObjecTime, were, while in that
employment, and have continued after the termination
of that employment to be, shareholders of New
ObjecTime, will be limited to not more than 50, two or
more persons who are the joint registered owners of
one or more shares being counted as one shareholder.
Any invitation to the public to subscribe for
securities of New ObjecTime is prohibited;
2.2.2.3.7. Number of Directors. The number of
directors of New ObjecTime will be a number not less
than one and not more than ten as the shareholders of
New ObjecTime may from time to time determine by
special resolution;
2.2.2.3.8. Directors. The initial director of New
ObjecTime will be:
Name Redidense Address Canadian Resident
--------------- ------------------- -------------
▇▇▇▇▇▇▇ 66 Rathnelly Avenue Yes
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Ontario
▇▇▇▇▇▇▇▇ M4V 2M6
Subsequent directors will be elected at the next
annual meeting of New ObjecTime;
2.2.2.3.9. By-laws. The by-laws of New ObjecTime
will be the by-laws of Amalco;
2.2.2.4. there will be added to the stated capital
account in the accounting records of New ObjecTime
maintained for the New ObjecTime Common Shares an amount
equal to the aggregate of (a) the stated capital of the
common shares of Amalco, and (b) the amount obtained by
multiplying the stated capital of the ObjecTime Shares as of
the Effective Time by the number of issued and outstanding
ObjecTime Shares (i) deemed to be held by Holding ULC
pursuant to section 3.1.2 and (ii) held by Rational or its
Affiliates, and dividing that product by the number of
issued and outstanding ObjecTime Shares as of that time;
there will be added to the stated capital account in the
accounting records of New ObjecTime maintained for the New
ObjecTime Preference Shares an amount equal to the stated
capital of the preference shares of Amalco; and, there will
be added to the stated capital account in the accounting
records of Acquisition Sub maintained for the Class B
Non-Voting Preference Shares an amount equal to the
aggregate of the amount obtained by multiplying the stated
capital of the ObjecTime Shares as of the Effective Time by
the number of issued and outstanding ObjecTime Shares as of
that time (other than those (i) deemed to be held by Holding
ULC pursuant to section 3.1.2 or (ii) held by Rational or
its Affiliates), and dividing that product by the number of
issued and outstanding ObjecTime Shares as of that time;
2.2.3. immediately after the Amalgamation, Acquisition Sub will
effect the following capital reorganization:
2.2.3.1. one-third (1/3) of the outstanding Class B
Non-Voting Preference Shares held by each Person who is not
a resident of Canada for the purposes of the ITA (rounded up
to the nearest whole share) will be deemed to have been
transferred by the holder to Holding ULC in exchange for
cash equal to the Rational Common Share Price for each
Class B Non-Voting Preference Share transferred and each
remaining outstanding Class B Non-Voting Preference Share
held by a Person who is not a resident of Canada for the
purposes of the ITA will be deemed to have been transferred
by the holder to Holding ULC in exchange for one fully paid
and non-assessable Rational Common Share and the name of
those transferring holders will be removed from the register
of holders of Class B Non-Voting Preference Shares and added
to the register of holders of Rational Common Shares and
Holding ULC will be recorded as the registered holder of the
Class B Non-Voting Preference Shares so exchanged and will
be deemed to be the legal and beneficial owner of those
shares;
2.2.3.2. one-third (1/3) of the outstanding Class B
Non-Voting Preference Shares held by each Person who is a
resident of Canada for the purposes of the ITA (rounded up
to the nearest whole share) will be deemed to have been
transferred by the holder to Holding ULC in exchange for
cash equal to the Rational Common Share Price for each
Class B Non-Voting Preference Share transferred and Holding
ULC will be recorded as the registered holder of the Class B
Non-Voting Preference Shares so exchanged and will be deemed
to be the legal and beneficial owner of those shares;
2.2.3.3. each remaining outstanding Clas- B Non-Voting
Preference Share held by a Person who is a resident of
Canada for the purposes of the ITA will be deemed to have
been transferred by the holder to Acquisition Sub in
exchange for one fully paid and non-assessable Exchangeable
Share and the name of that holder will be removed from the
register of holders of Class B Non-Voting Preference Shares
and added to the register of holders of Exchangeable Shares;
2.2.3.4. the Clas- B Non-Voting Preference Shares
transferred to Acquisition Sub pursuant to section 2.2.3.3
will be cancelled and each Class B Non-Voting Preference
Share transferred to Holding ULC pursuant to section 2.2.3.1
or 2.2.3.2 will be exchanged for one fully paid and non-
assessable common share of Acquisition Sub, Holding ULC will
be recorded as the registered holder of those common shares
of Acquisition Sub, and the Class B Non-Voting Preference
Shares so exchanged will be cancelled; and
2.2.3.5. the stated capital accounts of Acquisition Sub
will be adjusted as follows:
2.2.3.5.1. there will be deducted from the stated
capital account in the accounting records of
Acquisition Sub maintained for the Class B Non-Voting
Preference Shares an amount equal to the number
obtained by multiplying the stated capital of the
Class B Non-Voting Preference Shares, calculated as
set out in section 2.2.2.4, by the number of issued
and outstanding Class B Non-Voting Preference Shares
transferred to Acquisition Sub pursuant to
section 2.2.3.3 and dividing that product by the
number of Class B Non-Voting Preference Shares issued
on the Amalgamation;
2.2.3.5.2. there will be added to the stated capital
account in the accounting records of Acquisition Sub
maintained for the Exchangeable Shares an amount equal
to the amount deducted pursuant to section 2.2.3.5.1
from the stated capital account maintained for the
Class B Non-Voting Preference Shares;
2.2.3.5.3. there will be deducted from the stated
capital account in the accounting records of
Acquisition Sub maintained for the Class B Non-Voting
Preference Shares an amount equal to the stated
capital of the Class B Non-Voting Preference Shares,
calculated as set out in section 2.2.2.4, less the
amount previously deducted pursuant to section
2.2.3.5.1; and
2.2.3.5.4. there will be added to the stated capital
account in the accounting records of Acquisition Sub
maintained for the common shares of Acquisition Sub an
amount equal to the amount deducted pursuant to
section 2.2.3.5.3 from the stated capital account
maintained for the Class B Non-Voting Preference
Shares;
2.2.4. outstanding ObjecTime Options will be reorganized as
follows:
2.2.4.1. Rational will assume each of the ObjecTime
Option Plans, which, from and after the Effective Time, will
be deemed to be modified (i) to refer to Rational as the
grantor of the ObjecTime Options and the issuer of the
securities issuable upon exercise of the ObjecTime Options,
(ii) to refer to Rational Common Shares as the securities
issuable upon exercise of the ObjecTime Options and (iii) to
be otherwise subject to the terms of this Plan of
Arrangement;
2.2.4.2. each outstanding ObjecTime Option will become an
option (an "Assumed Option") to purchase a number of
Rational Common Shares equal to the product of the Exchange
Ratio multiplied by the number of ObjecTime Shares subject
to that ObjecTime Option. The Assumed Option will provide
for an exercise price per Rational Common Share equal to the
United States Dollar Equivalent of the exercise price per
share of the ObjecTime Option immediately prior to the
Effective Time divided by the Exchange Ratio. If the
foregoing calculation results in an Assumed Option being
exercisable for a fraction of a Rational Common Share, then
the number of Rational Common Shares subject to that Assumed
Option will be rounded down to the next whole number of
Rational Common Shares and the total exercise price for the
Assumed Option will be reduced by the exercise price of the
fractional Rational Common Share. The term to expiry,
conditions to and manner of exercising, vesting schedule,
and all other terms and conditions of the Assumed Option
will otherwise be unchanged from those of the ObjecTime
Options except as set out in this Plan of Arrangement, and
any document or agreement previously evidencing a ObjecTime
Option will afterwards evidence and be deemed to evidence
the Assumed Option;
2.2.4.3. all Assumed Options which have not vested on or
prior to November 30, 1999 and one-third (1/3) of each
holder's Assumed Options which have vested on or prior to
November 30, 1999 may be exercised by the respective holders
as they become vested in accordance with the terms of the
respective ObjecTime Option Plan under which those Assumed
Options were granted, as amended by this Plan of
Arrangement;
2.2.4-4. two-thirds (2/3) of each holder's Assumed
Options which have vested on or prior to November 30, 1999
(the "Restricted Options") will be deposited with Rational
and distributed to the holder of the Restricted Options or
transferred to Rational as contemplated by the Vesting and
Release Schedule attached to the Escrow Agreement, and, if
and when distributed to the holder, may be exercised by the
holder in accordance with the terms of the respective
ObjecTime Option Plan under which the distributed Restricted
Options were granted, as amended by this Plan of
Arrangement; and
2.2.4.5. notwithstanding the terms of the respective
ObjecTime Option Plan under which any Restricted Options
were granted, in the event that the employment of a holder
of Restricted Options with New ObjecTime is terminated in a
manner which would not permit a Blockage Notice (as defined
in the Escrow Agreement) to be delivered under the Vesting
and Release Schedule attached to the Escrow Agreement
(including termination without cause, death or disability),
then Rational will continue to distribute those Restricted
Options to the holder of the Restricted Options as
contemplated by the Vesting and Release Schedule and those
Restricted Options may be exercised by the holder in
accordance with section 2.2.4.4 until 30 days after the date
on which all Exchangeable Shares are required to be
exchanged in accordance with their terms;
2.2.5. coincident with and as part of the capital reorganization
set out in section 2.2.3, Rational and Acquisition Sub will execute
the Voting and Exchange Trust Agreement and Rational will issue to
and deposit with the Trustee the Deposited Shares, certain voting
rights in respect of which Deposited Shares will be granted in
consideration of the payment to Rational of US$1.00, which Deposited
Shares will be afterwards held of record by the Trustee as trustee
solely for the use and benefit of Rational in accordance with the
Voting and Exchange Trust Agreement except with respect to certain
voting rights which the Trustee will hold for and on behalf of, and
for the use and benefit of the holders of the Exchangeable Shares in
accordance with the Voting and Exchange Trust Agreement. All rights
of holders of Exchangeable Shares under the Voting and Exchange
Trust Agreement will be received by them as part of the property
receivable under section 2.2.3.3 in exchange for the Class B
Non-Voting Preference Shares; and
2.2.6. immediately after the capital reorganization, each of the
holders of Rational Common Shares and Exchangeable Shares issued
pursuant to this Plan of Arrangement will be deemed to have entered
into and to be bound by the provisions of the Escrow Agreement in
respect of all of those shares issued to the holder.
2.3. Section 85 Election
Each holder of Class A Preferred Shares and Class 8 Special
Shares will be entitled to make an income tax election pursuant to
section 85 of the Income Tax Act (Canada) and any other similar
provision of provincial law with respect to the conversion of that
holder's Class A Preferred Shares or Class 8 Special Shares, as the case
may be, into Class B Common Shares pursuant to section 2.2.1 of this
Arrangement by providing two signed copies of the necessary election
forms to New ObjecTime within 90 days following the issuance of a
Certificate of Arrangement in respect of the Arrangement, duly completed
with the details of the number of shares converted and the applicable
agreed amounts for the purposes of that election. Thereafter, subject
to the election forms complying with the provisions of the Income Tax
Act (Canada), the forms will be signed by New ObjecTime and returned to
that ObjecTime Shareholder for filing with Canada Customs and Revenue
Agency within 180 days following the date of issuance of a Certificate
of Arrangement in respect of the Arrangement.
2.4. Allocation of Proceeds
Each ObjecTime Shareholder who holds shares both directly
and indirectly through a registered retirement savings plan of which
that shareholder is the sole beneficiary will be entitled to direct
Holding ULC and Acquisition Sub to allocate the aggregate cash and share
payments payable under this Plan of Arrangement to the ObjecTime
Shareholder personally and to the ObjecTime Shareholder's registered
retirement savings plan as between them in any manner as the ObjecTime
Shareholder directs; provided that, the aggregate consideration received
by each of them equals the aggregate consideration payable to each of
them under this Plan of Arrangement based on the number of ObjecTime
Shares held by each of them.
ARTICLE 3.
RIGHTS OF DISSENT
3.1. Rights of Dissent
3.1.1. Holders of ObjecTime Securities may exercise rights of
dissent with respect to those securities pursuant to and in the
manner set out in Section 185 of the OBCA and this section 3.1 (the
"Dissent Rights") in connection with the Arrangement as the same may
be modified by the Interim Order or the Final Order.
3.1.2. Holders of ObjecTime Securities who duly exercise the rights
of dissent and who:
3.1.2.1. are ultimately entitled to be paid fair value
for their ObjecTime Securities will be deemed to have
transferred those ObjecTime Securities to Holding ULC
immediately prior to the Effective Time, to the extent the
fair value of those shares is paid by Holding ULC, and to
ObjecTime immediately prior to the Effective Time, to the
extent the fair value of those shares is paid by ObjecTime,
and, in the case of ObjecTime Securities so transferred to
ObjecTime, those securities will be cancelled as of the
Effective Time; or
3.1.2.2. are ultimately not entitled, for any reason, to
be paid fair value for their ObjecTime Securities will be
deemed to have participated in the Arrangement on the same
basis as any non-dissenting holder of ObjecTime Securities
and will receive cash and Exchangeable Shares or Rational
Common Shares in exchange for their Class B Non-Voting
Preference Shares received on the Amalgamation on the basis
determined in accordance with section 2.2.3 above or Assumed
Options in exchange for their ObjecTime Options on the basis
determined in accordance with section 2.2.4 above;
but in no case will Rational, Acquisition Sub, Holding ULC,
ObjecTime, New ObjecTime or any other Person be required to
recognize those holders as holders of ObjecTime Shares or ObjecTime
Options after the Effective Time, and the names of those holders of
ObjecTime Shares will be deleted from the register of shareholders
of ObjecTime Shares at the Effective Time and the names of those
holders of ObjecTime Options will be deleted from any register or
record of holders of ObjecTime Options at the Effective Time.
ARTICLE 4.
CERTIFICATES AND FRACTIONAL SHARES
4.1. Delivery of Register and Certificates
Immediately prior to the Effective Time, ObjecTime will
deliver to Rational a certified copy of the register of ObjecTime
Shareholders, together with all original certificates representing
outstanding ObjecTime Shares.
4.2. Delivery of Cash
At the Effective Time, Holding ULC will deliver to a
representative of ObjecTime (the "ObjecTime Disbursing Representative")
one or more cheques, issued in those amounts as may be requested by the
ObjecTime Disbursing Representative no less than two Business Days prior
to the Effective Time, which cheque(s) represent in the aggregate the
total amount of cash which all former holders of ObjecTime Shares have
the right to receive in accordance with this Plan of Arrangement
(rounded down, in the case of each holder, to the nearest whole cent).
The ObjecTime Disbursing Representative will deliver to each former
holder of ObjecTime Shares the cash which that holder has a right to
receive in accordance with section 2.2.3.1 and 2.2.3.2.
4.3. Delivery of Exchangeable Shares
At or promptly after the Effective Time, Acquisition Sub
will deposit with the Depositary, for the benefit of the holders of
Class B Non-Voting Preference Shares who will receive Exchangeable
Shares in connection with the Arrangement, the certificates representing
the Exchangeable Shares issued upon the exchange of Class B Non-Voting
Preference Shares. The certificates representing the Exchangeable
Shares issued will be held in accordance with the Escrow Agreement. The
subaccount of each holder maintained in accordance with the Escrow
Agreement will be credited with that number of Exchangeable Shares which
the holder has the right to receive.
4.4. Delivery of Rational Common Shares
At or promptly after the Effective Time, Holding ULC will
deposit with the Depositary, for the benefit of the holders of Class B
Non-Voting Preference Shares who will receive Rational Common Shares in
connection with the Arrangement, the certificates representing the
Rational Common Shares issued upon the exchange of Class B Non-Voting
Preference Shares. The certificates representing the Rational Common
Shares issued will be held in accordance with the Escrow Agreement. The
subaccount of each holder maintained in accordance with the Escrow
Agreement will be credited with that number of Rational Common Shares
which the holder has the right to receive.
4.5. Class B -on-Voting Preference Shares
For greater certainty, no certificates representing Class B
Non-Voting Preference Shares will be issued and those Class B Non-Voting
Preference Shares will be evidenced by the certificates representing
ObjecTime Shares converted into Class B Non-Voting Preference Shares on
the Amalgamation.
4.6. Fractional Shares
If as a result of the Amalgamation, a Person will become
entitled to a fractional interest in a Class B Non-Voting Preference
Share, the fractional interest in that Class B Non-Voting Preference
Share will be rounded to the nearest whole Class B Non-Voting Preference
Share and the whole Class B Non-Voting Preference Shares that Person is
entitled to receive on the Amalgamation will be evidenced by the
certificates representing the ObjecTime Shares held by that Person which
were converted into those Class B Non-Voting Preference Shares on the
Amalgamation.
Pursuant to sections 2.2.3.1 and 2.2.3.2, exchanges of
Class B Non-Voting Preference Shares for cash and Rational Common Shares
or Exchangeable Shares will occur only on the basis of whole Class B
Non-Voting Preference Shares. No certificates or scrip representing
fractional Exchangeable Shares or fractional Rational Common Shares will
be issued to any holder of Class B Non-Voting Preference Shares and no
dividend, stock split or other change in the capital structure of
Acquisition Sub or Rational, as the case may be, will relate to any
fractional security and those fractional interests will not entitle the
owner of those interests to exercise any rights as a security holder of
Acquisition Sub or Rational, as the case may be.
4.7. Extinction of Rights
Any cheques representing the cash amount payable to a former
holder of ObjecTime Shares in accordance with this Plan of Arrangement
which cheque has not been presented to the bankers of Holding ULC for
payment or that otherwise remain unclaimed for a period of six years
from the date on which they were mailed will be forfeited to Holding
ULC.
4.8. Withholding Rights
Acquisition Sub, Holding ULC, Rational and the Depositary
will be entitled to deduct and withhold from any dividend or
consideration otherwise payable to any holder of ObjecTime Shares,
Class B Non-Voting Preference Shares, Rational Common Shares or
Exchangeable Shares, any amounts as Acquisition Sub, Holding ULC,
Rational or the Depositary is required or permitted to deduct and
withhold with respect to that payment under the ITA, the United States
Internal Revenue Code of 1986 or any provision of provincial, state,
local or foreign tax Law, in each case, as amended. To the extent that
amounts are so withheld, those withheld amounts will be treated for all
purposes of this Plan of Arrangement as having been paid to the holder
of the shares in respect of which the deduction and withholding was
made, provided that the withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required
or permitted to be deducted or withheld from any payment to a holder
exceeds the cash portion of the consideration otherwise payable to the
holder, Acquisition Sub, Holding ULC, Rational and the Depositary are
hereby authorized to sell or otherwise dispose of that portion of the
consideration as is necessary to provide sufficient funds to Acquisition
Sub, Holding ULC, Rational or the Depositary, as the case may be, to
enable it to comply with those deduction or withholding requirement and
Acquisition Sub, Holding ULC, Rational or the Depositary will notify the
holder and remit to the holder any unapplied balance of the net proceeds
of that sale.
ARTICLE 5.
CERTAIN RIGHTS OF HOLDING ULC TO ACQUIRE
EXCHANGEABLE SHARES
5.1. Holding ULC Liquidation Call Right
5.1.1. Holding ULC will have the overriding right (the "Liquidation
Call Right"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of Acquisition Sub pursuant
to Article 5 of the Exchangeable Share Provisions, to purchase from
all but not less than all of the holders of Exchangeable Shares
(other than any holder of Exchangeable Shares which is an affiliate
of Rational) on the Liquidation Date all but not less than all of
the Exchangeable Shares held by each holder on payment by Holding
ULC of an amount per share (the "Liquidation Call Purchase Price")
equal to the Current Market Price of a Rational Common Share on the
last Business Day prior to the Liquidation Date, which will be
satisfied in full by Holding ULC causing to be delivered to that
holder one Rational Common Share, plus, to the extent not paid by
Acquisition Sub, an additional amount equivalent to the full amount
of all declared and unpaid dividends on each Exchangeable Share held
by that holder on any dividend record date which occurred prior to
the date of purchase by Holding ULC (the "Dividend Amount"). In the
event of the exercise of the Liquidation Call Right by Holding ULC,
each holder will be obligated to sell all of the Exchangeable Shares
held by the holder to Holding ULC on the Liquidation Date on payment
by Holding ULC to the holder of the Liquidation Call Purchase Price
for each share, and Acquisition Sub will have no obligation to pay
the Liquidation Amount of those shares so purchased by Holding ULC.
5.1.2. To exercise the Liquidation Call Right, Holding ULC must
notify Acquisition Sub's transfer agent (the "Transfer Agent"), as
agent for the holders of Exchangeable Shares, and Acquisition Sub of
Holding ULC's intention to exercise that right at least 45 days
before the Liquidation Date in the case of a voluntary liquidation,
dissolution or winding-up of Acquisition Sub and at least five
Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding-up of Acquisition
Sub. The Transfer Agent will notify the holders of Exchangeable
Shares as to whether or not Holding ULC has exercised the
Liquidation Call Right promptly after the expiry of the period
during which the same may be exercised by Holding ULC. If Holding
ULC exercises the Liquidation Call Right, then on the Liquidation
Date, Holding ULC will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal to
the Liquidation Call Purchase Price.
5.1.3. For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call Right, Holding
ULC will instruct and authorize the Trustee to deposit with the
Transfer Agent, on or before the Liquidation Date, certificates
representing the aggregate number of Rational Common Shares
deliverable by Holding ULC and a cheque or cheques of Holding ULC
payable at par at any branch of the bankers of Holding ULC
representing the aggregate Dividend Amount in payment of the total
Liquidation Call Purchase Price, less any amounts withheld pursuant
to section 4.8 of this Plan of Arrangement. Provided that Holding
ULC has complied with the immediately preceding sentence, on and
after the Liquidation Date, the rights of each holder of
Exchangeable Shares will be limited to receiving that holder's
proportionate part of the total Liquidation Call Purchase Price
payable by Holding ULC upon presentation and surrender by the holder
of certificates representing the Exchangeable Shares held by that
holder and the holder will on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the
Rational Common Shares to which it is entitled. Upon surrender to
the Transfer Agent of a certificate or certificates representing
Exchangeable Shares, together with any other documents and
instruments as may be required to effect a transfer of Exchangeable
Shares under the OBCA and the by-laws of Acquisition Sub and any
additional documents and instruments as the Transfer Agent may
reasonably require, the holder of the surrendered certificate or
certificates will be entitled to receive in exchange for the
certificate(s), and the Transfer Agent on behalf of Holding ULC will
deliver to that holder, certificates representing the Rational
Common Shares to which the holder is entitled and a cheque or
cheques of Holding ULC payable at par at any branch of the bankers
of Holding ULC in payment of the remaining portion, if any, of the
total Liquidation Call Purchase Price, less any amounts withheld
pursuant to section 4.8 of this Plan of Arrangement. If Holding ULC
does not exercise the Liquidation Call Right in the manner described
above, on the Liquidation Date the holders of the Exchangeable
Shares will be entitled to receive in exchange for those shares the
liquidation price otherwise payable by Acquisition Sub in connection
with the liquidation, dissolution or winding-up of Acquisition Sub
pursuant to Article 5 of the Exchangeable Share Provisions.
5.2. Holding ULC Redemption Call Right
5.2.1. Holding ULC will have the overriding right (the "Redemption
Call Right"), notwithstanding the proposed redemption of
Exchangeable Shares by Acquisition Sub pursuant to Article 7 of the
Exchangeable Share Provisions, to purchase from all but not less
than all of the holders of Exchangeable Shares (other than any
holder of Exchangeable Shares which is an affiliate of Rational) on
the Redemption Date all but not less than all of the Exchangeable
Shares held by each holder on payment by Holding ULC to each holder
of an amount per Exchangeable Share (the "Redemption Call Purchase
Price") equal to the Current Market Price of a Rational Common Share
on the last Business Day prior to the Redemption Date, which will be
satisfied in full by Holding ULC causing to be delivered to that
holder one Rational Common Share, plus the Dividend Amount. In the
event of the exercise of the Redemption Call Right by Holding ULC,
each holder will be obligated to sell all of the Exchangeable Shares
held by the holder to Holding ULC on the Redemption Date on payment
by Holding ULC to the holder of the Redemption Call Purchase Price
for each share, and Acquisition Sub will have no obligation to
redeem those shares so purchased by Holding ULC.
5.2.2. To exercise the Redemption Call Right, Holding ULC must
notify the Transfer Agent, as agent for the holders of Exchangeable
Shares, and Acquisition Sub of Holding ULC's intention to exercise
that right at least 60 days before the Redemption Date, except in
the case of a redemption occurring as a result of a Rational Control
Transaction, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event, in which case Holding ULC will so
notify the Transfer Agent and Acquisition Sub on or before the
Redemption Date. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not Holding ULC has exercised
the Redemption Call Right promptly after the expiry of the period
during which the same may be exercised by Holding ULC. If Holding
ULC exercises the Redemption Call Right, then on the Redemption
Date, Holding ULC will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal to
the Redemption Call Purchase Price.
5.2.3. For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Redemption Call Right, Holding
ULC will instruct and authorize the Trustee to deposit with the
Transfer Agent, on or before the Redemption Date, certificates
representing the aggregate number of Rational Common Shares
deliverable by Holding ULC and a cheque or cheques of Holding ULC
payable at par at any branch of the bankers of Holding ULC
representing the aggregate Dividend Amount in payment of the total
Redemption Call Purchase Price, less any amounts withheld pursuant
to section 4.8 of this Plan of Arrangement. Provided that Holding
ULC has complied with the immediately preceding sentence, on and
after the Redemption Date, the rights of each holder of Exchangeable
Shares will be limited to receiving that holder's proportionate part
of the total Redemption Call Purchase Price payable by Holding ULC
upon presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by that holder and the
holder will on and after the Redemption Date be considered and
deemed for all purposes to be the holder of the Rational Common
Shares to which it is entitled. Upon surrender to the Transfer
Agent of a certificate or certificates representing Exchangeable
Shares, together with any other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the OBCA
and the by-laws of Acquisition Sub and any additional documents and
instruments as the Transfer Agent may reasonably require, the holder
of the surrendered certificate or certificates will be entitled to
receive in exchange for the certificate(s), and the Transfer Agent
on behalf of Holding ULC will deliver to that holder, certificates
representing the Rational Common Shares to which the holder is
entitled and a cheque or cheques of Holding ULC payable at par at
any branch of the bankers of Holding ULC in payment of the remaining
portion, if any, of the total Redemption Call Purchase Price, less
any amounts withheld pursuant to section 4.8 of this Plan of
Arrangement. If Holding ULC does not exercise the Redemption Call
Right in the manner described above, on the Redemption Date the
holders of the Exchangeable Shares will be entitled to receive in
exchange for the shares the redemption price otherwise payable by
Acquisition Sub in connection with the redemption of the
Exchangeable Shares pursuant to Article 7 of the Exchangeable Share
Provisions.
5.3. Capital Reorganization of Rational
If at any time there is a capital reorganization of Rational
or a consolidation, merger, arrangement or amalgamation (statutory or
otherwise) of Rational with or into another entity (this type of event
being a "Capital Reorganization"), any holder of Exchangeable Shares
whose Exchangeable Shares have not been exchanged for Rational Common
Shares in accordance with the provisions of this Plan of Arrangement,
the Exchangeable Share Provisions or the Voting and Exchange Trust
Agreement prior to the record date for that Capital Reorganization will
be entitled to receive and will accept, upon any exchange occurring
pursuant to the provisions of this Plan of Arrangement, the Exchangeable
Share Provisions or the Voting and Exchange Trust Agreement at any time
after the record date for the Capital Reorganization, in lieu of the
Rational Common Shares that the holder would otherwise have been
entitled to receive pursuant to those provisions, the number of shares
or other securities of Rational or of the entity resulting, surviving or
continuing from the Capital Reorganization, or other property, that the
holder would have been entitled to receive as a result of the Capital
Reorganization if, on the record date, the holder had been the
registered holder of the number of Rational Common Shares to which the
holder was then entitled upon the exchange of the holder's Exchangeable
Shares into Rational Common Shares in accordance with the provisions of
this Plan of Arrangement, the Exchangeable Share Provisions or the
Voting and Exchange Trust Agreement, subject to adjustment thereafter in
the same manner, as nearly as may be possible, as is provided for in
those provisions; provided that no Capital Reorganization will be
carried into effect unless all necessary steps have been taken so that
each holder of Exchangeable Shares is thereafter entitled to receive,
upon exchange of the holder's Exchangeable Shares pursuant to the
provisions of this Plan of Arrangement, the Exchangeable Share
Provisions or the Voting and Exchange Trust Agreement, that number of
shares or other securities of Rational or of the other entity resulting,
surviving or continuing from the Capital Reorganization, or other
property.
5.4. Other Change in Rational Common Shares
In the case of any reclassification of, or other change in,
the outstanding Rational Common Shares other than a Capital
Reorganization, changes will be made in the rights attaching to the
Exchangeable Shares, without any action on the part of Acquisition Sub
or the holders of the Exchangeable Shares to the extent permitted by
applicable law, effective immediately following the record date for that
reclassification or other change, to the extent necessary to ensure that
holders of Exchangeable Shares are entitled to receive, upon the
occurrence at any time after that record date of any event whereby they
would receive Rational Common Shares pursuant to the provisions of this
Plan of Arrangement, the Exchangeable Share Provisions or the Voting and
Exchange Trust Agreement, those shares, securities or rights as they
would have received if their Exchangeable Shares had been exchanged for
Rational Common Shares immediately prior to that record date, subject to
adjustment thereafter in the same manner, as nearly as may be possible,
as is provided in the provisions of this Plan of Arrangement, the
Exchangeable Share Provisions and the Voting and Exchange Trust
Agreement.
ARTICLE 6.
AMENDMENTS
6.1. Amendments
6.1.1. ObjecTime reserves the right to amend, modify and/or
supplement this Plan of Arrangement at any time and from time to
time prior to the Effective Date provided that any amendment,
modification, or supplement must be (i) set out in writing,
(ii) approved by Rational, (iii) filed with the Court and, if made
following the ObjecTime Meeting, approved by the Court and
(iv) communicated to holders of ObjecTime Shares and ObjecTime
Options in the manner required by the Court (if so required).
6.1.2. Any amendment, modification or supplement to this Plan of
Arrangement may be proposed by ObjecTime at any time prior to or at
the ObjecTime Meeting (provided that Rational will have consented)
with or without any other prior notice or communication and, if so
proposed and accepted by the Persons voting at the ObjecTime Meeting
(other than as required under the Interim Order), will become part
of this Plan of Arrangement for all purposes.
6.1.3. Any amendment, modification or supplement to this Plan of
Arrangement which is approved or directed by the Court following the
ObjecTime Meeting will be effective only if (i) it is consented to
by ObjecTime and Rational and (ii) if required by the Court, it is
consented to by holders of the ObjecTime Shares and ObjecTime
Options voting in the manner directed by the Court.
APPENDIX 1
PROVISIONS ATTACHING TO THE OBJECTIME CLASS B COMMON SHARES
The Class B Common Shares shall have the following rights, privileges,
restrictions and conditions:
Section 1. Dividends
Subject to the rights of the holders of the Class B Preferred Shares
and any shares ranking prior to the Class B Common Shares, the holders
of the Class B Common Shares shall be entitled to receive dividends as
and when the directors shall in their discretion declare dividends on
the Class B Common Shares and pay the same; the directors may declare
and pay dividends on the Class B Common Shares to the exclusion of any
other class or classes of shares.
Section 2. Dissolution
Subject to the rights of the holders of the Class B Preferred Shares,
Class C Preferred and any shares ranking prior to the Class B Common
Shares, the holders of the Class B Common Shares in the event of any
liquidation, dissolution or winding-up of the Corporation whether
voluntary or involuntary, or other distribution of assets of the
Corporation among its shareholders for the purposes of winding up its
affairs shall for each Class B Common Share held be entitled, after
payment to the Class B Preferred Shares, Class C Preferred Shares and or
any shares ranking in priority to the Class B Common Shares to share in
the remaining property of the Corporation pari passu and without
preference or distinction with the holders of the Class A Common Shares
and any other class of shares ranking on parity with the Class B Common
Shares.
Section 3 Voting
The holders of the Class B Common Shares shall be entitled to receive
notice of and to attend and shall be entitled to one (1) vote at any
meeting of the shareholders of the Corporation for each Class B Common
Share held, except meetings at which only holders of a specified class
of shares are entitled to vote.
APPENDIX 2
PROVISIONS ATTACHING TO THE NEW OBJECTIME COMMON SHARES
The Common shares shall have the following rights, privileges,
restrictions and conditions:
1. Dividends
Subject to the prior rights of the holders of shares of any other
class of shares of the Company ranking senior to the common shares with
respect to priority in the payment of dividends, the holders of the
common shares shall be entitled to receive dividends, if, as and when
declared by the board of directors out of the moneys properly applicable
to the payment of dividends.
2. Liquidation, Dissolution or Winding Up
In the event of the liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, or in the event of any other
distribution of property or assets of the Company among its shareholders
for the purpose of winding up its affairs, the holders of the common
shares shall be entitled to receive all of the property and assets of
the Company remaining after payment to the holders of shares of any
other class of shares of the Company ranking senior to the common shares
with respect to priority in the distribution of property or assets on
such liquidation, dissolution, winding up or other distribution, as the
case may be, of the amounts to which the holders of such shares are
entitled.
3. Voting Rights
The holders of the common shares shall be entitled to receive
notice of, attend at and vote at any and all meetings of the
shareholders of the Company, except meetings at which only the holders
of a class other than the common shares or the holders of one or more
series of shares other than the common shares are entitled to vote, and
shall be entitled to one vote at such meetings in respect of each common
share held.
APPENDIX 3
PROVISIONS ATTACHING TO THE NEW OBJECTIME PREFERENCE SHARES
The preference shares shall have the following rights,
privileges, restrictions and conditions:
1. Ranking
The preference shares shall be entitled to a preference over the
common shares and the shares of any other class or series of shares in
the capital of the Company ranking junior to the preference shares with
respect to the payment of dividends and the distribution of property or
assets in the event of the liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, or any other distribution of
property or assets of the Company among its shareholders for the purpose
of winding up its affairs but shall not have any further right to
participate in profits.
2. Voting Rights
The holders of the preference shares shall not be entitled to
receive notice of or to attend or to vote at any meeting of shareholders
of the Company and shall not be entitled to vote separately as a class
upon any proposal to amend the articles of the Company to change the
maximum number of the shares of any class of shares or series thereof,
or to effect an exchange, reclassification or cancellation of the
preference shares, or to create a new class of shares or series thereof
having rights or privileges equal or superior to the preference shares,
provided, however, that notwithstanding the foregoing provisions of this
section 2, the holders of the preference shares shall be entitled to
vote separately as a class in respect of any matter for which a separate
vote is specifically provided in the Business Corporations Act (Ontario)
(the "OBCA") or any successor statute thereto, other than in respect of
a proposal to amend the articles in a manner as hereinbefore in this
section 2 specified.
3. Dividends
The holders of the preference shares shall be entitled to receive
in each financial year of the Company, if, as and when declared by the
board of directors of the Company out of monies of the Company properly
applicable to the payment of dividends, non-cumulative preferential cash
dividends in the amount of 5 cents ($0.05) per preference share per annum.
If in any financial year of the Company the board of directors in their
discretion shall not declare the preferential dividends or any part
thereof on the preference shares then the right of the holders of the
preference shares to preferential dividends or any greater preferential
dividends than the preferential dividends actually declared for such
financial year shall be forever extinguished. The holders of the
preference shares shall not be entitled to any dividends other than or
in excess of the preferential cash dividends provided for in this
section 3.
4. Redemption by Company
Subject to the provisions of the OBCA, the Company shall be
entitled, upon giving notice as hereinafter provided, at any time from
and after January 21, 2020 to redeem any or all of the preference shares
registered in the name of a holder for an amount per share equal to
(a) U.S.$1.00 per preference share (the "redemption amount") plus (b)
all dividends declared and unpaid thereon to and including the
redemption date (collectively, the "redemption price").
In case a part only of the preference shares is at any time to be
redeemed, the shares so to be redeemed may be selected by lot in such
manner as the board of directors of the Company in their sole discretion
shall by resolution determine or redemption may be effected on a pro
rata basis disregarding fractions. If a part only of the preference
shares represented by any certificate shall be redeemed, a new
certificate representing the balance of such shares shall be issued to
the holder thereof at the expense of the Company upon presentation and
surrender of the first-mentioned certificate.
In any case of redemption of preference shares, the Company shall
at least ten (10) days before the date specified for redemption mail to
each person who at the date of mailing is a registered holder of
preference shares to be redeemed a notice in writing of the intention of
the Company to redeem such preference shares. Such notice shall set out
the number of preference shares held by the person to whom it is
addressed which are to be redeemed, the redemption price and the date on
which redemption is to take place. On or after the date so specified
for redemption, the Company shall pay or cause to be paid to or to the
order of the registered holders of the preference shares to be redeemed
the redemption price (less any tax required to be deducted and withheld
therefrom by the Company) of such shares on presentation and surrender,
at the registered office of the Company or at any other place or places
within Canada as may be specified in such notice, of the certificate(s)
representing the preference shares so called for redemption with such
other documents and instruments as may be required to effect a transfer
of preference shares under the OBCA and the by-laws of the Company and
such additional documents and instruments as the Company may reasonably
require. Payment of the total redemption price for such preference
shares shall be made by delivery to each holder, at the address of the
holder recorded in the securities register of the Company or by holding
for pick up by the holder at the registered office of the Company of a
cheque of the Company in respect of the redemption price (less any tax
required to be deducted and withheld therefrom by the Company) payable
at par at any branch in Canada of the bankers of the Company for the
time being. From and after the date specified for redemption in any
such notice, the preference shares called for redemption shall cease to
be entitled to dividends or any other participation in the property or
assets of the Company and the holders thereof shall not be entitled to
exercise any of the other rights of shareholders in respect thereof
unless payment of the redemption price shall not be made upon
presentation and surrender of the certificate(s) in accordance with the
foregoing provisions, in which case the rights of the holders shall
remain unaffected.
The Company shall have the right at any time after the mailing of
notice of its intention to redeem the preference shares to deposit the
redemption price of the preference shares so called for redemption or of
such of the said shares represented by certificate(s) which have not at
the date of such deposit been surrendered by the holders thereof in
connection with such redemption to a special account in any chartered
bank or any trust company in Canada named in such notice, to be paid
without interest to or to the order of the respective holders of
preference shares called for redemption upon presentation and surrender
to such bank or trust company of the certificate(s) representing such
shares. Upon such deposit being made or upon the date specified for
redemption in such notice, whichever is the later, the preference shares
in respect of which such deposit shall have been made shall be deemed to
be redeemed and the rights of the holders thereof shall be limited to
receiving without interest their proportionate part of the amount so
deposited upon presentation and surrender of the certificate(s) held by
them respectively. Any interest allowed on any such deposit shall
belong to the Company.
Redemption monies which are represented by a cheque which has not
been presented to the Company's bankers for payment or that otherwise
remain unclaimed (including monies held on deposit in a special account
as provided for above) for a period of six years from the date specified
for redemption shall be forfeited to the Company.
5. Liquidation, Dissolution or Winding Up
In the event of the liquidation, dissolution or winding up of the
Company, or any other distribution of property or assets of the Company
among its shareholders for the purpose of winding up its affairs, and
after payment to the holders of the shares of any class or series of
shares in the capital of the Company ranking senior to the preference
shares of amounts they are entitled to, the holders of the preference
shares shall be entitled to receive from the property and assets of the
Company a sum equal to the redemption amount of the preference shares
held by them respectively plus all dividends declared and unpaid thereon
to and including the date of payment and no more, in priority to the
rights of the holders of the common shares and the shares of any other
class or series of shares in the capital of the Company ranking junior
to the preference shares. After payment to the holders of the
preference shares of the amounts so payable to them, they shall not be
entitled to share in any further distribution of the property or assets
of the Company.
6. Notices
Any notice, cheque, notice of redemption or other communication
from the Company herein provided for shall be either sent to the holders
of the preference shares by ordinary unregistered mail, postage prepaid,
or delivered by hand to such holders, at their respective addresses
appearing on the securities register of the Company or, in the event of
the address of any such holder not so appearing, then at the last
address known to the Company of such holder. Accidental failure to give
any such notice, notice of redemption or other communication to one or
more holders of preference shares shall not affect the validity thereof,
but, upon such failure being discovered, a copy of the notice, notice of
redemption or other communication, as the case may be, shall be sent or
delivered forthwith to such holder or holders. Unless otherwise
provided herein, any notice, certificate or other communication from a
holder of preference shares herein provided for shall be either sent to
the Company by ordinary unregistered mail, postage prepaid, or delivered
by hand to the Company, at its registered office. Any notice or other
communication, including without limitation a notice of redemption or
request for redemption, from the Company to the holders of the
preference shares or from a holder of preference shares to the Company
may be waived.
APPENDIX 4
PROVISIONS ATTACHING TO THE
CLASS B NON-VOTING PREFERENCE SHARES
The Class B non-voting preference shares will have the
following rights, privileges, restrictions and conditions:
1. Ranking
The Class B non-voting preference shares will rank junior to
the Class A non-voting preference shares of the Company (the
"Exchangeable Shares"), the Class C non-voting preference shares of the
Company (the "Class C Shares") and the shares of any other class or
series ranking senior to the Class B non-voting preference shares with
respect to the payment of dividends and the distribution of assets in
the event of the liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, or any other distribution of the
assets of the Company among its shareholders for the purpose of winding
up its affairs. The Class B non-voting preference shares will rank
senior to the common shares with respect to the payment of the
Preferential Dividend Amount (as defined below) in respect to each
financial year of the Company but will rank equally with the common
shares with respect to the payment of dividends in any financial year in
excess of the Preferential Dividend Amount and will rank senior to the
common shares with respect to the payment of the Liquidation Amount (as
defined below) in the event of the liquidation, dissolution or winding-
up of the Company, whether voluntary or involuntary, or any other
distribution of the assets of the Company among its shareholders for the
purpose of winding up its affairs.
2. Voting Rights
The holders of the Class B non-voting preference shares will
not be entitled to receive notice of or to attend or to vote at any
meeting of shareholders of the Company and will not be entitled to vote
separately as a class upon any proposal to amend the articles of the
Company to change the maximum number of the shares of any class of
shares or series of shares, or to effect an exchange, reclassification
or cancellation of the Class B non-voting preference shares, or to
create a new class of shares or series of shares having rights or
privileges equal or superior to the Class B non-voting preference
shares, provided, however, that notwithstanding the foregoing provisions
of this section 2, the holders of the Class B non-voting preference
shares will be entitled to vote separately as a class in respect of any
matter for which a separate vote is specifically provided in the
Business Corporations Act (Ontario) or any successor statute, other than
in respect of a proposal to amend the articles in a manner set out above
in this section 2.
3. Dividends
Subject always to the prior rights of the holders of the
Exchangeable Shares, the Class C Shares and of any shares of any other
class or series ranking senior to the Class B non-voting preference
shares, the holders of the Class B non-voting preference shares will be
entitled, prior to the payment of any dividends to the holders of common
shares in any financial year of the Company, to receive in each
financial year of the Company, if, as and when declared by the board of
directors of the Company out of monies of the Company properly
applicable to the payment of dividends, non-cumulative preferential cash
dividends in the amount of 8% of the Liquidation Amount (as defined
below) per Class B non-voting preference share per annum (the
"Preferential Dividend Amount"). If, in any financial year of the
Company, the board of directors in their discretion do not declare the
Preferential Dividend Amount or any part of the Preferential Dividend
Amount on the Class B non-voting preference shares then the right of the
holders of the Class B non-voting preference shares to the Preferential
Dividend Amount or any greater preferential dividends than the
preferential dividends actually declared for that financial year will be
forever extinguished.
After payment of the Preferential Dividend Amount in respect
of each Class B non-voting preference share for a particular financial
year of the Company, the holders of the Class B non-voting preference
shares and common shares will participate equally as to any additional
dividends, if, as and when declared by the board of directors of the
Company and all additional dividends which the directors may determine
to declare and pay in any financial year of the Company will be declared
and paid in equal or equivalent amounts per share, out of money, assets
or property of the Company properly applicable to the payment of
dividends or out of authorized but unissued shares of the Company, as
applicable, on all the Class B non-voting preference shares and common
shares at the time outstanding without preference or distinction.
4. Liquidation, Dissolution or Winding-Up
In the event of the liquidation, dissolution or winding up
of the Company, or any other distribution of the assets of the Company
among its shareholders for the purpose of winding up its affairs, and
after payment to the holders of the Exchangeable Shares, the Class C
Shares and the shares of any other class or series of shares in the
capital of the Company ranking senior to the Class B non-voting
preference shares of amounts they are entitled to, the holders of the
Class B non-voting preference shares will be entitled to receive from
the property and assets of the Company a sum equal to the Liquidation
Amount (as defined below) of each Class B non-voting preference share
held by them respectively plus all dividends declared and unpaid on the
Class B non-voting preference shares to and including the date of
payment and no more, in priority to the rights of the holders of the
common shares and the shares of any other class or series of shares in
the capital of the Company ranking junior to the Class B non-voting
preference shares. The "Liquidation Amount" of a Class B non-voting
preference share is equal to the quotient obtained by dividing:
(a) US$38,700,000 by
(b) the number of issued and outstanding Class B non-voting
preference shares as of the date on which entitlements to
the Liquidation Amount are fixed.
After payment to the holders of the Class B non-voting
preference shares of the Liquidation Amounts so payable to them, they
will not be entitled to share in any further distribution of the
property or assets of the Company.
5. Notices
Any notice, cheque or other communication from the Company
provided for in these share provisions will be sent to the holders of
the Class B non-voting preference shares by ordinary unregistered mail,
postage prepaid, or delivered by hand to the holders, at their
respective addresses appearing on the securities register of the Company
or, in the event of the address of any holder not so appearing, then at
the last address of that holder known to the Company. Accidental
failure to give any notice or other communication to one or more holders
of Class B non-voting preference shares will not affect the validity of
the notice, but, upon the failure being discovered, a copy of the notice
or other communication will be sent or delivered promptly to the holder
or holders. Any notice or other communication from the Company to the
holders of the Class B non-voting preference shares may be waived.
APPENDIX 5
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Class A non-voting preference shares will have the
following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"Act" means the Business Corporations Act (Ontario).
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by"
and "under common control with"), as applied to any Person, means
the possession by another Person, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of that first mentioned Person, whether through the
ownership of voting securities, by contract or otherwise.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario other than a
Saturday, a Sunday or a day observed as a holiday in Toronto,
Ontario under the laws of the Province of Ontario or the federal
laws of Canada or in New York, New York under the laws of the State
of New York or the federal laws of the United States of America.
"Canadian Dollar Equivalent" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency Amount") at
any date, the product obtained by multiplying:
(a) the Foreign Currency Amount by,
(b) the noon spot exchange rate on that date for the
foreign currency expressed in Canadian dollars as
reported by the Bank of Canada or, in the event the
spot exchange rate is not available, any spot exchange
rate on that date for the foreign currency expressed in
Canadian dollars as may be deemed by the Board of
Directors to be appropriate for this purpose.
"Common Shares" means the common shares in the capital of the
Company.
"Company" means 1386501 Ontario Limited, a corporation governed by
the Act.
"Current Market Price" means, in respect of a Rational Common Share
on any date, the Canadian Dollar Equivalent of the average of the
closing bid and ask prices of Rational Common Shares during a
period of 20 consecutive trading days ending not more than three
trading days before that date on NASDAQ, or, if the Rational Common
Shares are not then quoted on NASDAQ, on any other stock exchange
or automated quotation system on which the Rational Common Shares
are listed or quoted, as the case may be, as may be selected by the
Board of Directors for this purpose; provided, however, that if in
the opinion of the Board of Directors the public distribution or
trading activity of Rational Common Shares during that period does
not create a market which reflects the fair market value of a
Rational Common Share, then the Current Market Price of a Rational
Common Share will be determined by the Board of Directors, in good
faith and in its sole discretion, and provided further that any
selection, opinion or determination by the Board of Directors will
be conclusive and binding.
"Dividend Amount" has the respective meanings given to that term in
sections 6.3 or 7.1, as the case may be, for the purposes of
Articles 6 and 7, respectively.
"Escrow Agreement" means the escrow and vesting and release
arrangements established by the escrow agreement attached as
Appendix 6 to the Plan of Arrangement.
"Exchangeable Shares" mean the Class A non-voting preference shares
in the capital of the Company having the rights, privileges,
restrictions and conditions set out in these share provisions.
"Exchangeable Share Support Agreement" means the exchangeable share
support agreement entered into as of January 13, 2000 between
Rational, Holding ULC and the Company.
"Exchangeable Share Voting Event" means any matter in respect of
which holders of Exchangeable Shares are entitled to vote as
shareholders of the Company, other than an Exempt Exchangeable
Share Voting Event, and, for greater certainty, excluding any
matter in respect of which holders of Exchangeable Shares are
entitled to vote (or instruct the Trustee to vote) in their
capacity as beneficiaries under the Voting and Exchange Trust
Agreement.
"Exempt Exchangeable Share Voting Event" means any matter in
respect of which holders of Exchangeable Shares are entitled to
vote as shareholders of the Company in order to approve or
disapprove, as applicable, any change to, or in the rights of the
holders of, the Exchangeable Shares, where the approval or
disapproval, as applicable, of that change would be required to
maintain the equivalence of the Exchangeable Shares and the
Rational Common Shares.
"Holding ULC" means 3037936 Nova Scotia Company, an unlimited
liability company existing under the laws of the Province of Nova
Scotia, and any successor company.
"Liquidation Amount" has the meaning given to that term in
section 5.1.
"Liquidation Call Right" has the meaning given to that term in the
Plan of Arrangement.
"Liquidation Date" has the meaning given to that term in
section 5.1.
"NASDAQ" means the Nasdaq National Market.
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, association, trust, trustee, executor,
administrator, legal personal representative, estate, group, body
corporate, corporation, unincorporated association or organization,
government body, syndicate or other entity, whether or not having
legal status.
"Plan of Arrangement" means the plan of arrangement relating to
the arrangement of ObjecTime Limited under section 182 of the Act
to which these share provisions are attached as Appendix 3 and
which plan (other than Appendix 5) is attached to these share
provisions as Exhibit A.
"Preference Shares" means the Class B non-voting redeemable
preference shares and the Class C non-voting redeemable preference
shares in the capital of the Company.
"Purchase Price" has the meaning given to that term in section 6.3.
"Rational" means Rational Software Corporation, a corporation
existing under the laws of the State of Delaware, and any successor
corporation.
"Rational Call Notice" has the meaning given to that term in
section 6.3.
"Rational Common Shares" mean the shares of common stock, par value
U.S. $0.01, in the capital of Rational, and any other securities
into which those shares may be changed, including shares into which
Rational Common Shares may be changed consequent upon an
amalgamation, merger, reorganization or other transaction affecting
the Rational Common Shares.
"Rational Control Transaction" means any merger or amalgamation
involving Rational, any tender offer for Rational, and any material
sale of securities of or rights or interests in Rational or similar
transactions, or any proposal to do so.
"Rational Dividend Declaration Date" means the date on which the
Board of Directors declares any dividend on the Rational Common
Shares.
"Redemption Call Purchase Price" has the meaning given to that term
in the Plan of Arrangement.
"Redemption Call Right" has the meaning given to that term in the
Plan of Arrangement.
"Redemption Date" means the date, if any, established by the Board
of Directors for the redemption by the Company of all but not less
than all of the outstanding Exchangeable Shares pursuant to
Article 7, which date will be no earlier than the Sunset Date,
unless:
(a) there are fewer than 25% of the number of Exchangeable
Shares originally issued and outstanding on the date of
filing under the Act of articles of arrangement
attaching the Plan of Arrangement (other than
Exchangeable Shares held by Rational and its
Affiliates, and as that original number of shares may
be adjusted as deemed appropriate by the Board of
Directors to give effect to any subdivision or
consolidation of or stock dividend on the Exchangeable
Shares, any issue or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or
convertible into Exchangeable Shares, any issue or
distribution of other securities or rights or evidences
of indebtedness or assets, or any other capital
reorganization or other transaction affecting the
Exchangeable Shares), in which case the Board of
Directors may accelerate the redemption date to any
date prior to the Sunset Date as they may determine,
upon at least six months' prior written notice to the
registered holders of the Exchangeable Shares;
(b) all Exchangeable Shares and Rational Common Shares are
released from the escrow fund and restricted share fund
established by the Escrow Agreement to the persons
entitled to those shares in accordance with the Escrow
Agreement, in which case the Board of Directors may
accelerate the redemption date to any date prior to the
Sunset Date but no less than 12 months after the date
of release as they may determine, upon at least
60 days' prior written notice to the registered holders
of the Exchangeable Shares;
(c) a Rational Control Transaction occurs, in which case,
provided that the Board of Directors determines, in
good faith and in its sole discretion, that it is not
reasonably practicable to substantially replicate the
terms and conditions of the Exchangeable Shares in
connection with that Rational Control Transaction and
that the redemption of all but not less than all of the
outstanding Exchangeable Shares is necessary to enable
the completion of that Rational Control Transaction in
accordance with its terms, the Board of Directors may
accelerate the redemption date to any date prior to the
Sunset Date as they may determine, upon any number of
days' prior written notice to the registered holders of
the Exchangeable Shares as the Board of Directors may
determine to be reasonably practicable in the
circumstances;
(d) an Exchangeable Share Voting Event is proposed, in
which case, provided that the Board of Directors has
determined, in good faith and in its sole discretion,
that it is not reasonably practicable to accomplish the
business purpose intended by the Exchangeable Share
Voting Event, which business purpose must be bona fide
and not for the primary purpose of causing the
occurrence of a Redemption Date, in any other
commercially reasonable manner that does not result in
an Exchangeable Share Voting Event, the redemption date
will be the Business Day prior to the record date for
any meeting or vote of the holders of the Exchangeable
Shares to consider the Exchangeable Share Voting Event
and the Board of Directors will give any number of
days' prior written notice of the redemption to the
registered holders of the Exchangeable Shares as the
Board of Directors may determine to be reasonably
practicable in the circumstances; or
(e) an Exempt Exchangeable Share Voting Event is proposed
and the holders of the Exchangeable Shares fail to take
the necessary action at a meeting or other vote of
holders of Exchangeable Shares, to approve or
disapprove, as applicable, the Exempt Exchangeable
Share Voting Event, in which case the redemption date
will be the Business Day following that the day on
which the holders of the Exchangeable Shares failed to
take that action and the Board of Directors will give
any number of days' prior written notice of the
redemption to the registered holders of the
Exchangeable Shares as the Board of Directors may
determine to be reasonably practicable in the
circumstances,
provided, however, that the accidental failure or omission to give
any notice of redemption under clauses (a), (b), (c), (d) or (e)
above to less than 10% of the holders of Exchangeable Shares will
not affect the validity of any redemption.
"Redemption Price" has the meaning given to that term in
section 7.1.
"Retracted Shares" has the meaning given to that term in
section 6.1(a).
"Retraction Call Right" has the meaning given to that term in
section 6.1(c).
"Retraction Date" has the meaning given to that term in
section 6.1(b).
"Retraction Price" has the meaning given to that term in
section 6.1.
"Retraction Request" has the meaning given to that term in
section 6.1.
"Sunset Date" means January 13, 2005.
"Transfer Agent" means Montreal Trust Company of Canada or any
other Person as may from time to time be appointed by the Company
as the registrar and transfer agent for the Exchangeable Shares.
"Trustee" means the trustee under the Voting and Exchange Trust
Agreement, being a corporation organized and existing under the
laws of the State of New York and authorized to carry on the
business of a trust company in the United States of America, and
any successor trustee appointed under the Voting and Exchange Trust
Agreement.
"Voting and Exchange Trust Agreement" means the voting and exchange
trust agreement entered into as of January 13, 2000 between
Rational, the Company and the Trustee.
1.2 Unless otherwise indicated, references to "Article", "Articles",
"section" and "sections" are to articles and sections in these
share provisions.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares will be entitled to a preference over
the Common Shares, the Preference Shares and any other shares
ranking junior to the Exchangeable Shares with respect to the
payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, or any other
distribution of the assets of the Company among its
shareholders for the purpose of winding up its affairs.
ARTICLE 3.
DIVIDENDS
3.1 Subject to section 3.2, a holder of an Exchangeable Share
will be entitled to receive and the Board of Directors will,
subject to applicable law, on each Rational Dividend
Declaration Date, declare a dividend on each Exchangeable
Share:
(a) in the case of a cash dividend declared on the Rational
Common Shares, in an amount in cash for each Exchangeable
Share in U.S. dollars, or the Canadian Dollar Equivalent on
the Rational Dividend Declaration Date, in each case,
corresponding to the cash dividend declared on each Rational
Common Share;
(b) in the case of a stock dividend declared on the Rational
Common Shares to be paid in Rational Common Shares, in that
number of Exchangeable Shares for each Exchangeable Share as
is equal to the number of Rational Common Shares to be paid
on each Rational Common Share; or
(c) in the case of a dividend declared on the Rational Common
Shares in property other than cash or Rational Common Shares,
in that type and amount of property for each Exchangeable
Share as is the same as or economically equivalent to (to be
determined by the Board of Directors as contemplated by
section 3.5) the type and amount of property declared as a
dividend on each Rational Common Share.
These dividends will be paid out of money, assets or property of the
Company properly applicable to the payment of dividends, or out of
authorized but unissued shares of the Company, as applicable.
3.2 In the case of a stock dividend declared on the Rational
Common Shares to be paid in Rational Common Shares, in lieu
of declaring the stock dividend contemplated by
section 3.1(b) on the Exchangeable Shares, the Board of
Directors may, in its discretion and subject to applicable
law, subdivide, redivide or change (the "subdivision") each
issued and unissued Exchangeable Share on the basis that
each Exchangeable Share before the subdivision becomes a
number of Exchangeable Shares as is equal to the sum of (i)
one Rational Common Share and (ii) the number of Rational
Common Shares to be paid as a stock dividend on each
Rational Common Share. In that instance, and
notwithstanding any other provision, the subdivision will
become effective on the effective date specified in
section 3.4 without any further act or formality on the part
of the Board of Directors or of the holders of Exchangeable
Shares. For greater certainty, no approval of the holders
of Exchangeable Shares to an amendment to the articles of
the Company will be required to give effect to the
subdivision.
3.3 Cheques of the Company payable at par at any branch of the
bankers of the Company will be issued in respect of any cash
dividends contemplated by section 3.1(a) and the sending of
a cheque to each holder of an Exchangeable Share will
satisfy the cash dividend represented by that cheque unless
the cheque is not paid on presentation. Subject to
applicable law, certificates registered in the name of the
registered holder of Exchangeable Shares will be issued or
transferred in respect of any stock dividends contemplated
by section 3.1(b) or any subdivision of shares contemplated
by section 3.2 and the sending of that certificate to each
holder of an Exchangeable Share will satisfy the stock
dividend or share subdivision represented by that
certificate. Any other type and amount of property in
respect of any dividends contemplated by section 3.1(c) will
be issued, distributed or transferred by the Company in any
manner as it determines and the issuance, distribution or
transfer of that property by the Company to each holder of
an Exchangeable Share will satisfy the dividend represented
by the issuance, distribution or transfer of that property.
No holder of an Exchangeable Share will be entitled to
recover by action or other legal process against the Company
any dividend that is represented by a cheque that has not
been duly presented to the Company's bankers for payment or
that otherwise remains unclaimed for a period of six years
from the date on which the dividend was payable.
3.4 The record date for the determination of the holders of
Exchangeable Shares entitled to receive payment of, and the
payment date for, any dividend declared on the Exchangeable
Shares under section 3.1 will be the same dates as the
record date and payment date, respectively, for the
corresponding dividend declared on the Rational Common
Shares. The record date for the determination of the
holders of Exchangeable Shares entitled to receive
Exchangeable Shares in connection with any subdivision of
Exchangeable Shares under section 3.2 and the effective date
of that subdivision will be the same dates as the record
date and payment date, respectively, for the corresponding
stock dividend declared on Rational Common Shares.
3.5 If on any payment date for any dividends declared on the
Exchangeable Shares under section 3.1 the dividends are not
paid in full on all of the Exchangeable Shares then
outstanding, any dividends that remain unpaid will be paid
on a subsequent date or dates determined by the Board of
Directors on which the Company has sufficient moneys, assets
or property properly applicable to the payment of those
dividends.
3.6 The Board of Directors will determine, in good faith and in
its sole discretion, economic equivalence for the purposes
of sections 3.1 and 3.2, and each determination will be
conclusive and binding on the Company and its shareholders.
In making each determination, the following factors will,
without excluding other factors determined by the Board of
Directors to be relevant, be considered by the Board of
Directors:
(a) in the case of any stock dividend or other distribution
payable in Rational Common Shares, the number of those shares
issued in proportion to the number of Rational Common Shares
previously outstanding;
(b) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Rational
Common Shares (or securities exchangeable for or convertible
into or carrying rights to acquire Rational Common Shares),
the relationship between the exercise price of each right,
option or warrant and the current market value (as determined
by the Board of Directors in the manner contemplated above)
of a Rational Common Share;
(c) in the case of the issuance or distribution of any other form
of property (including without limitation any shares or
securities of Rational of any class other than Rational
Common Shares, any rights, options or warrants other than
those referred to in section 3.6(b), any evidences of
indebtedness of Rational or any assets of Rational), the
relationship between the fair market value (as determined by
the Board of Directors in the manner contemplated above) of
the property to be issued or distributed with respect to each
outstanding Rational Common Share and the current market
value (as determined by the Board of Directors in the manner
contemplated above) of a Rational Common Share; and
(d) in all cases, the general taxation consequences of the
relevant event to holders of Exchangeable Shares to the
extent that those consequences may differ from the taxation
consequences to holders of Rational Common Shares as a result
of differences between taxation laws of Canada and the United
States (except for any differing consequences arising as a
result of differing marginal taxation rates and without
regard to the individual circumstances of holders of
Exchangeable Shares).
For purposes of the foregoing determinations, the current
market value of any security listed and traded or quoted on a securities
exchange will be the average of the closing bid and ask prices of that
security during a period of not less than 20 consecutive trading days
ending not more than three trading days before the date of determination
on the principal securities exchange on which those securities are
listed and traded or quoted; provided, however, that if in the opinion
of the Board of Directors the public distribution or trading activity of
those securities during that period does not create a market which
reflects the fair market value of those securities, then the current
market value will be determined by the Board of Directors, in good faith
and in its sole discretion, and provided further that any determination
by the Board of Directors will be conclusive and binding on the Company
and its shareholders.
ARTICLE 4.
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding,
the Company will not at any time without, but, subject to
section 3.2, may at any time with, the approval of the
holders of the Exchangeable Shares given as specified in
section 11.2:
(a) pay any dividends on the Common Shares, the Preference Shares
or any other shares ranking junior to the Exchangeable
Shares, other than stock dividends payable in Common Shares
or any other shares ranking junior to the Exchangeable
Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in
respect of the Common Shares, the Preference Shares or any
other shares ranking junior to the Exchangeable Shares;
(c) redeem or purchase any other shares of the Company ranking
equally with the Exchangeable Shares with respect to the
payment of dividends or on any liquidation distribution;
(d) issue any Exchangeable Shares other than by way of stock
dividend to the holders of Exchangeable Shares contemplated
by section 3.1 or by way of any subdivision of Exchangeable
Shares contemplated by section 3.2; or
(e) issue any shares of the Company ranking equally with, or
superior to, the Exchangeable Shares other than by way of
stock dividends to the holders of Exchangeable Shares.
The restrictions in sections 4.1(a), 4.1(b), 4.1(c) and
4.1.(d) will not apply if all dividends on the outstanding Exchangeable
Shares corresponding to dividends declared and paid to date on the
Rational Common Shares have been declared and paid on the Exchangeable
Shares.
ARTICLE 5.
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up
of the Company or any other distribution of the assets of
the Company among its shareholders for the purpose of
winding up its affairs, subject to the exercise by Holding
ULC of the Liquidation Call Right, a holder of Exchangeable
Shares will be entitled, subject to applicable law, to
receive from the assets of the Company in respect of each
Exchangeable Share held by the holder on the effective date
(the "Liquidation Date") of the liquidation, dissolution or
winding-up, before any distribution of any part of the
assets of the Company among the holders of the Common
Shares, the Preference Shares or any other shares ranking
junior to the Exchangeable Shares, an amount per share equal
to the Current Market Price of a Rational Common Share on
the last Business Day prior to the Liquidation Date (the
"Liquidation Amount"), which will be satisfied in full by
the Company causing to be delivered to the holder one
Rational Common Share, together with all declared and unpaid
dividends on each Exchangeable Share held by the holder on
any dividend record date which occurred prior to the
Liquidation Date.
5.2 On or promptly after the Liquidation Date, the Company will
cause to be delivered to the holders of the Exchangeable
Shares the Liquidation Amount for each Exchangeable Share
upon presentation and surrender of the certificates
representing those Exchangeable Shares, together with any
other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the Act and the by-
laws of the Company and any additional documents and
instruments as the Transfer Agent, Rational or the Company
may reasonably require, at the registered office of the
Company or at any office of the Transfer Agent as may be
specified by the Company by notice to the holders of the
Exchangeable Shares. Payment of the total Liquidation
Amount for each Exchangeable Share will be made by delivery
to each holder, at the address of the holder recorded in the
securities register of the Company for the Exchangeable
Shares or by holding for pick-up by the holder at the
registered office of the Company or at any office of the
Transfer Agent as may be specified by the Company by notice
to the holders of Exchangeable Shares, on behalf of the
Company of certificates representing Rational Common Shares
(which shares will be duly issued as fully paid and non-
assessable and will be free and clear of any lien, claim or
encumbrance) and a cheque of the Company payable at par at
any branch of the bankers of the Company in respect of the
remaining portion, if any, of the total Liquidation Amount
(in each case less any amounts withheld on account of tax
required to be deducted and withheld) (without interest). On
and after the Liquidation Date, the holders of the
Exchangeable Shares will cease to be holders of Exchangeable
Shares and will not be entitled to exercise any of the
rights of holders in respect of Exchangeable Shares, other
than the right to receive their proportionate part of the
total Liquidation Amount, unless payment of the total
Liquidation Amount for those Exchangeable Shares is not made
upon presentation and surrender of share certificates in
accordance with the foregoing provisions, in which case the
rights of the holders will remain unaffected until the total
Liquidation Amount has been paid in the manner provided
above. The Company has the right at any time after the
Liquidation Date to deposit or cause to be deposited the
total Liquidation Amount in respect of the Exchangeable
Shares represented by certificates that have not at the
Liquidation Date been surrendered by the holders in a
custodial account with any chartered bank or trust company
in Canada. Upon that deposit being made, the rights of the
holders of Exchangeable Shares after that deposit will be
limited to receiving their proportionate part of the total
Liquidation Amount (in each case less any amounts withheld
on account of tax required to be deducted and withheld)
(without interest) for those Exchangeable Shares so
deposited, against presentation and surrender of the
certificates held by them, respectively, in accordance with
the foregoing provisions. Upon that payment or deposit of
the total Liquidation Amount, the holders of the
Exchangeable Shares will thereafter be considered and deemed
for all purposes to be holders of the Rational Common Shares
delivered to them or the custodian on their behalf.
5.3 After the Company has satisfied its obligations to pay the
holders of the Exchangeable Shares the Liquidation Amount
per Exchangeable Share pursuant to section 5.1, those
holders will not be entitled to share in any further
distribution of the assets of the Company.
ARTICLE 6.
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares will be entitled at any
time, subject to the exercise by Holding ULC of the
Retraction Call Right and otherwise upon compliance with the
provisions of this Article 6, to require the Company to
redeem any or all of the Exchangeable Shares registered in
the name of that holder for an amount per share equal to the
Current Market Price of a Rational Common Share on the last
Business Day prior to the Retraction Date (the "Retraction
Price"), which will be satisfied in full by the Company
causing to be delivered to that holder one Rational Common
Share for each Exchangeable Share presented and surrendered
by the holder, together with, on the payment date, the full
amount of all declared and unpaid dividends on any
Exchangeable Share held by that holder on any dividend
record date which occurred prior to the Retraction Date. To
effect a redemption, the holder will present and surrender
at the registered office of the Company or at any office of
the Transfer Agent as may be specified by the Company by
notice to the holders of Exchangeable Shares the certificate
or certificates representing the Exchangeable Shares which
the holder desires to have the Company redeem, together with
any other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Act and
the by-laws of the Company and any additional documents and
instruments as the Transfer Agent, Rational or the Company
may reasonably require, together with a duly executed
statement (the "Retraction Request") in the form of
Schedule A to these provisions or in any other form as may
be acceptable to the Company:
(a) specifying that the holder desires to have all or any number
specified of the Exchangeable Shares represented by the
certificate or certificates (the "Retracted Shares") redeemed
by the Company;
(b) stating the Business Day on which the holder desires to have
the Company redeem the Retracted Shares (the "Retraction
Date"), provided that the Retraction Date will be not less
than 10 Business Days nor more than 15 Business Days after
the date on which the Retraction Request is received by the
Company and further provided that, in the event that no
Retraction Date is specified by the holder in the Retraction
Request, the Retraction Date will be deemed to be the 15th
Business Day after the date on which the Retraction Request
is received by the Company; and
(c) acknowledging the overriding right (the "Retraction Call
Right") of Holding ULC to purchase all but not less than all
of the Retracted Shares directly from the holder and that the
Retraction Request will be deemed to be a revocable offer by
the holder to sell the Retracted Shares to Holding ULC in
accordance with the Retraction Call Right on the terms and
conditions set out in section 6.3.
6.2. Subject to the exercise by Holding ULC of the Retraction
Call Right, upon receipt by the Company or the Transfer
Agent in the manner specified in section 6.1 of a
certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have the
Company redeem, together with a Retraction Request, and
provided that the Retraction Request is not revoked by the
holder in the manner specified in section 6.7, the Company
will redeem the Retracted Shares effective at the close of
business on the Retraction Date and will cause to be
delivered to that holder the total Retraction Price with
respect to those shares, provided that all declared and
unpaid dividends for which the record date has occurred
prior to the Retraction Date will be paid on the payment
date for those dividends. If only a part of the Exchangeable
Shares represented by any certificate is redeemed (or
purchased by Holding ULC pursuant to the Retraction Call
Right), a new certificate for the balance of those
Exchangeable Shares will be issued to the holder at the
expense of the Company.
6.3 Upon receipt by the Company of a Retraction Request, the
Company will immediately notify Holding ULC of the
Retraction Request. To exercise the Retraction Call Right,
Holding ULC must notify the Company of its determination to
do so (the "Rational Call Notice") within five Business Days
of notification to Holding ULC by the Company of the receipt
by the Company of the Retraction Request. If Holding ULC
does not so notify the Company within the five Business Day
period, the Company will notify the holder as soon as
possible thereafter that Holding ULC will not exercise the
Retraction Call Right. If Holding ULC delivers the Rational
Call Notice within the five Business Day period, and
provided that the Retraction Request is not revoked by the
holder in the manner specified in section 6.7, the
Retraction Request will then be considered only to be an
offer by the holder to sell the Retracted Shares to Holding
ULC in accordance with the Retraction Call Right. In that
event, the Company will not redeem the Retracted Shares and
Holding ULC will purchase from the holder and the holder
will sell to Holding ULC on the Retraction Date the
Retracted Shares for a purchase price (the "Purchase Price")
per share equal to the Retraction Price per share, plus, on
the designated payment date, to the extent not paid by the
Company on the designated payment date, an additional amount
equivalent to the full amount of all declared and unpaid
dividends on those Retracted Shares held by the holder on
any dividend record date which occurred prior to the
Retraction Date (the "Dividend Amount"). For the purposes of
completing a purchase pursuant to the Retraction Call Right,
Holding ULC will deposit with the Transfer Agent, on or
before the Retraction Date, certificates representing
Rational Common Shares and a cheque or cheques of Holding
ULC payable at par at any branch of the bankers of Holding
ULC representing the aggregate Dividend Amount, less any
amounts withheld on account of tax required to be deducted
and withheld (without interest). Provided that Holding ULC
has complied with the immediately preceding sentence, the
closing of the purchase and sale of the Retracted Shares
pursuant to the Retraction Call Right will be deemed to have
occurred as at the close of business on the Retraction Date
and, for greater certainty, no redemption by the Company of
those Retracted Shares will take place on the Retraction
Date. In the event that Holding ULC does not deliver a
Rational Call Notice within the five Business Day period,
and provided that the Retraction Request is not revoked by
the holder in the manner specified in section 6.7, the
Company will redeem the Retracted Shares on the Retraction
Date and in the manner otherwise contemplated in this
Article 6.
6.4 The Company or Holding ULC, as the case may be, will deliver
or cause the Transfer Agent to deliver to the relevant
holder, at the address of the holder recorded in the
securities register of the Company for the Exchangeable
Shares or at the address specified in the holder's
Retraction Request or by holding for pick-up by the holder
at the registered office of the Company or at any office of
the Transfer Agent as may be specified by the Company by
notice to the holders of Exchangeable Shares, certificates
representing the Rational Common Shares (which shares will
be duly issued as fully paid and non-assessable and will be
free and clear of any lien, claim or encumbrance) registered
in the name of the holder or in any other name as the holder
may request, and, if applicable and on or before the payment
date, a cheque payable at par at any branch of the bankers
of the Company or Holding ULC, as applicable, representing
the aggregate Dividend Amount in payment of the total
Retraction Price or the total Purchase Price, as the case
may be, in each case, less any amounts withheld on account
of tax required to be deducted and withheld (without
interest). The delivery of those certificates and cheques
on behalf of the Company or by Holding ULC, as the case may
be, or by the Transfer Agent will be deemed to be payment of
and will satisfy and discharge all liability for the total
Retraction Price or total Purchase Price, as the case may
be, to the extent that the same is represented by those
share certificates and cheques (plus any tax deducted and
withheld and remitted to the proper tax authority).
6.5 On and after the close of business on the Retraction Date,
the holder of the Retracted Shares will cease to be a holder
of those Retracted Shares and will not be entitled to
exercise any of the rights of a holder in respect of those
Retracted Shares, other than the right to receive the total
Retraction Price or total Purchase Price for the Retracted
Shares, as the case may be, unless upon presentation and
surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the
total Purchase Price, as the case may be, is not made as
provided in section 6.4, in which case the rights of that
holder will remain unaffected until the total Retraction
Price or the total Purchase Price, as the case may be, has
been paid in the manner provided above. On and after the
close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of
the total Retraction Price or the total Purchase Price, as
the case may be, has been made in accordance with the
foregoing provisions, the holder of the Retracted Shares so
redeemed by the Company or purchased by Holding ULC will
thereafter be considered and deemed for all purposes to be a
holder of the Rational Common Shares delivered to that
holder.
6.6 Notwithstanding any other provision of this Article 6, the
Company will not be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent
that redemption of Retracted Shares would be contrary to
solvency requirements or other provisions of applicable law.
If the Company believes that on any Retraction Date it would
not be permitted by any of those requirements and provisions
to redeem the Retracted Shares tendered for redemption on
that date, and provided that Holding ULC has not exercised
the Retraction Call Right with respect to the Retracted
Shares, the Company will only be obligated to redeem
Retracted Shares specified by a holder in a Retraction
Request to the extent of the maximum number that may be so
redeemed (rounded down to a whole number of shares) as would
not be contrary to those requirements and provisions and
will notify the holder at least two Business Days prior to
the Retraction Date as to the number of Retracted Shares
which will not be redeemed by the Company. In any case in
which the redemption by the Company of Retracted Shares
would be contrary to solvency requirements or other
provisions of applicable law, the Company will redeem the
maximum number of Exchangeable Shares which the Board of
Directors determine the Company is, on the Retraction Date,
permitted to redeem, which will be selected as nearly as may
be pro rata (disregarding fractions) in proportion to the
total number of Exchangeable Shares tendered for retraction
by each holder, and the Company will issue to each holder of
Retracted Shares a new certificate, at the expense of the
Company, representing the Retracted Shares not redeemed by
the Company pursuant to section 6.2. Provided that the
Retraction Request is not revoked by the holder in the
manner specified in section 6.7 and provided further that
Holding ULC has not exercised the Retraction Call Right with
respect to the Retracted Shares, the holder of any Retracted
Shares not redeemed by the Company pursuant to section 6.2
as a result of solvency requirements or other provisions of
applicable law will be deemed by giving the Retraction
Request to have instructed the Trustee to require Rational
to purchase those Retracted Shares from that holder on the
Retraction Date or as soon as practicable thereafter on
payment by Rational to that holder of the Purchase Price for
the Retracted Shares, all as more specifically provided in
the Voting and Exchange Trust Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given
by the holder to the Company before the close of business on
the Business Day immediately preceding the Retraction Date,
withdraw its Retraction Request, in which case that
Retraction Request will be null and void and, for greater
certainty, the revocable offer constituted by the Retraction
Request to sell the Retracted Shares to Holding ULC will be
deemed to have been revoked.
ARTICLE 7.
REDEMPTION OF EXCHANGEABLE SHARES BY THE COMPANY
7.1. Subject to applicable law, and provided Holding ULC has not
exercised the Redemption Call Right, the Company will on the
Redemption Date redeem all but not less than all of the then
outstanding Exchangeable Shares for an amount per share
equal to the Current Market Price of a Rational Common Share
on the last Business Day prior to the Redemption Date (the
"Redemption Price"), which will be satisfied in full by the
Company causing to be delivered to each holder of
Exchangeable Shares one Rational Common Share for each
Exchangeable Share held by that holder, together with the
full amount of all declared and unpaid dividends on each
Exchangeable Share held by that holder on any dividend
record date which occurred prior to the Redemption Date (the
"Dividend Amount").
7.2. In any case of a redemption of Exchangeable Shares under
this Article 7, the Company will, at least 60 days before
the Redemption Date (other than a Redemption Date
established in connection with a Rational Control
Transaction, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event), send or cause to be sent
to each holder of Exchangeable Shares a notice in writing of
the redemption by the Company or the purchase by Holding ULC
under the Redemption Call Right, as the case may be, of the
Exchangeable Shares held by that holder. In the case of a
Redemption Date established in connection with a Rational
Control Transaction, an Exchangeable Share Voting Event and
an Exempt Exchangeable Share Voting Event, the written
notice of redemption by the Company or the purchase by
Holding ULC under the Redemption Call Right will be sent on
or before the Redemption Date, on as many days prior written
notice as may be determined by the Board of Directors of the
Company to be reasonably practicable in the circumstances.
In any case, the notice will set out the Redemption Price or
the Redemption Call Purchase Price, as the case may be, the
Redemption Date and, if applicable, particulars of the
Redemption Call Right.
7.3. On or after the Redemption Date and subject to the exercise
by Holding ULC of the Redemption Call Right, the Company
will cause to be delivered to each holder of the
Exchangeable Shares to be redeemed the Redemption Price for
each Exchangeable Share, together with the full amount of
all declared and unpaid dividends on each Exchangeable Share
held by that holder on any dividend record date which
occurred prior to the Redemption Date, upon presentation and
surrender at the registered office of the Company or at any
office of the Transfer Agent as may be specified by the
Company in the notice of the certificates representing those
Exchangeable Shares, together with any other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the
Company and any additional documents and instruments as the
Transfer Agent, Rational or the Company may reasonably
require. Payment of the total Redemption Price for the
Exchangeable Shares, together with payment of any dividends,
will be made by delivery to each holder, at the address of
the holder recorded in the securities register of the
Company or by holding for pick-up by the holder at the
registered office of the Company or at any office of the
Transfer Agent as may be specified by the Company in the
notice, on behalf of the Company of certificates
representing Rational Common Shares (which shares will be
duly issued as fully paid and non-assessable and will be
free and clear of any lien, claim or encumbrance) and, if
applicable, a cheque of the Company payable at par at any
branch of the bankers of the Company in payment of any
dividends, in each case, less any amounts withheld on
account of tax required to be deducted and withheld (without
interest). On and after the Redemption Date, the holders of
the Exchangeable Shares called for redemption will cease to
be holders of those Exchangeable Shares and will not be
entitled to exercise any of the rights of holders in respect
of those Exchangeable Shares, other than the right to
receive their proportionate part of the total Redemption
Price and any dividends, unless payment of the total
Redemption Price and any dividends for those Exchangeable
Shares is not made upon presentation and surrender of
certificates in accordance with the foregoing provisions, in
which case the rights of the holders will remain unaffected
until the total Redemption Price and any dividends have been
paid in the manner provided above. The Company has the right
at any time after the sending of notice of its intention to
redeem the Exchangeable Shares to deposit or cause to be
deposited the total Redemption Price for, and the full
amount of dividends on (except as provided in the preceding
sentence), the Exchangeable Shares so called for redemption,
or of those of the Exchangeable Shares represented by
certificates that have not at the date of the deposit been
surrendered by the holders in connection with the
redemption, in a custodial account with any chartered bank
or trust company in Canada named in the notice, less any
amounts withheld on account of tax required to be deducted
and withheld (without interest). Upon the later of any
deposit being made and the Redemption Date, the Exchangeable
Shares in respect of which the deposit has been made will be
redeemed and the rights of the holders after the deposit or
Redemption Date, as the case may be, will be limited to
receiving their proportionate part of the total Redemption
Price and the dividends for those Exchangeable Shares so
deposited (without interest), against presentation and
surrender of the certificates held by them, respectively, in
accordance with the foregoing provisions. Upon payment or
deposit of the total Redemption Price and the full amount of
the dividends, the holders of the Exchangeable Shares will
thereafter be considered and deemed for all purposes to be
holders of the Rational Common Shares delivered to them or
the custodian on their behalf.
ARTICLE 8.
PURCHASE FOR CANCELLATION
8.1. Subject to applicable law and the articles and by-laws the
Company, the Company may at any time and from time to time
purchase for cancellation all or any part of the outstanding
Exchangeable Shares at any price by tender to all the
holders of record of Exchangeable Shares then outstanding at
any price per share together with an amount equal to all
declared and unpaid dividends for which the record date has
occurred prior to the date of purchase. If in response to an
invitation for tenders under the provisions of this
section 8.1, more Exchangeable Shares are tendered at a
price or prices acceptable to the Company than the Company
is prepared to purchase, the Exchangeable Shares to be
purchased by the Company will be purchased as nearly as may
be pro rata according to the number of shares tendered by
each holder who submits a tender to the Company, provided
that when shares are tendered at different prices, the pro
rating will be effected (disregarding fractions) only with
respect to the shares tendered at the price at which more
shares were tendered than the Company is prepared to
purchase after the Company has purchased all the shares
tendered at lower prices. If part only of the Exchangeable
Shares represented by any certificate are to be purchased, a
new certificate for the balance of those shares will be
issued at the expense of the Company.
ARTICLE 9.
WITHHOLDING RIGHTS
9.1. The Company or Rational will be entitled to deduct and
withhold from any consideration otherwise payable under these
share provisions to any holder of Exchangeable Shares any
amounts as the Company or Rational is required or permitted
to deduct and withhold with respect to that payment under the
Income Tax Act (Canada), the United States Internal Revenue
Code of 1986 or any provision of provincial, state, local or
foreign tax law, in each case as amended or succeeded. To the
extent that amounts are so withheld, the withheld amounts
will be treated for all purposes as having been paid to the
holder of the shares in respect of which the deduction and
withholding was made, provided that the withheld amounts are
actually remitted to the appropriate taxing authority. To the
extent that the amounts so required or permitted to be
deducted or withheld from any payment to a holder exceeds the
cash portion of the consideration otherwise payable to the
holder, Rational and the Company are hereby authorized to
sell or otherwise dispose of any portion of the consideration
as is necessary to provide sufficient funds to Rational or
the Company, as the case may be, to enable it to comply with
the deduction or withholding requirements and Rational or the
Company will notify the holder and remit to the holder any
unapplied balance of the net proceeds of the sale.
ARTICLE 10.
VOTING RIGHTS
10.1. Except as required by applicable law and by Article 11,
section 12.1 and section 13.2, the holders of the
Exchangeable Shares are not entitled to receive notice of or
to attend any meeting of the shareholders of the Company or
to vote at any meeting.
ARTICLE 11.
AMENDMENT AND APPROVAL
11.1. The rights, privileges, restrictions and conditions
attaching to the Exchangeable Shares may be added to,
changed or removed but only with the approval of the holders
of the Exchangeable Shares given as specified in these
provisions.
11.2. Any approval given by the holders of the Exchangeable Shares
to add to, change or remove any right, privilege,
restriction or condition attaching to the Exchangeable
Shares or any other matter requiring the approval or consent
of the holders of the Exchangeable Shares will be deemed to
have been sufficiently given if it has been given in
accordance with applicable law subject to a minimum
requirement that the approval be evidenced by resolution
passed by not less than two-thirds of the votes cast on that
resolution at a meeting of holders of Exchangeable Shares
duly called and held at which the holders of at least 35% of
the outstanding Exchangeable Shares at that time are present
or represented by proxy; provided that if at any meeting the
holders of at least 35% of the outstanding Exchangeable
Shares at that time are not present or represented by proxy
within one-half hour after the time appointed for the
meeting, then the meeting will be adjourned to any date not
less than five days thereafter and to any time and place as
may be designated by the Chairman of the meeting. At the
adjourned meeting, the holders of Exchangeable Shares
present or represented by proxy may transact the business
for which the meeting was originally called and a resolution
passed at the adjourned meeting by the affirmative vote of
not less than two-thirds of the votes cast on the resolution
at that meeting will constitute the approval or consent of
the holders of the Exchangeable Shares.
ARTICLE 12.
RECIPROCAL CHANGES, ETC.
IN RESPECT OF RATIONAL COMMON SHARES
12.1. Each holder of an Exchangeable Share acknowledges that the
Exchangeable Share Support Agreement provides, in part, that
Rational will not without the prior approval of the Company
and the prior approval of the holders of the Exchangeable
Shares given in accordance with section 11.2:
(a) issue or distribute Rational Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire Rational Common Shares) to the holders of all or
substantially all of the then outstanding Rational Common
Shares by way of stock dividend or other distribution, other
than an issue of Rational Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire Rational Common Shares) to holders of Rational Common
Shares who exercise an option to receive dividends in
Rational Common Shares (or securities exchangeable for or
convertible into or carrying rights to acquire Rational
Common Shares) in lieu of receiving cash dividends;
(b) issue or distribute rights, options or warrants to the
holders of all or substantially all of the then outstanding
Rational Common Shares entitling them to subscribe for or to
purchase Rational Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire
Rational Common Shares); or
(c) issue or distribute to the holders of all or substantially
all of the then outstanding Rational Common Shares:
(i) shares or securities of Rational of any class other
than Rational Common Shares (other than shares
convertible into or exchangeable for or carrying rights
to acquire Rational Common Shares);
(ii) rights, options or warrants other than those referred
to in section 12.1(b);
(iii) evidences of indebtedness of Rational; or
(iv) assets of Rational,
unless the economic equivalent on a per share basis of those rights,
options, securities, shares, evidences of indebtedness or other assets is
issued or distributed simultaneously to holders of the Exchangeable
Shares.
12.2. Each holder of an Exchangeable Share acknowledges that the
Exchangeable Share Support Agreement further provides, in
part, that Rational will not without the prior approval of
the Company and the prior approval of the holders of the
Exchangeable Shares given in accordance with section 11.2:
(a) subdivide, redivide or change the then outstanding Rational
Common Shares into a greater number of Rational Common
Shares;
(b) reduce, combine, consolidate or change the then outstanding
Rational Common Shares into a lesser number of Rational
Common Shares; or
(c) reclassify or otherwise change the Rational Common Shares or
effect an amalgamation, merger, reorganization or other
transaction affecting the Rational Common Shares,
unless the same or an economically equivalent change is simultaneously
made to, or in, the rights of the holders of the Exchangeable Shares.
The Exchangeable Share Support Agreement further provides, in part, that
those provisions of the Exchangeable Share Support Agreement will not be
changed without the approval of the holders of the Exchangeable Shares
given in accordance with section 11.2.
ARTICLE 13.
ACTIONS BY THE COMPANY UNDER
EXCHANGEABLE SHARE SUPPORT AGREEMENT
13.1. The Company will take all actions and do all things as are
necessary or advisable to perform and comply with and to
ensure performance and compliance by Rational, Holding ULC
and the Company with all provisions of the Exchangeable
Share Support Agreement applicable to Rational, Holding ULC
and the Company, respectively, in accordance with the terms
of that agreement including, without limitation, taking all
actions and doing all things as are necessary or advisable
to enforce to the fullest extent possible for the direct
benefit of the Company all rights and benefits in favour of
the Company under or pursuant to that agreement.
13.2. The Company will not propose, agree to or otherwise give
effect to any amendment to, or waiver or forgiveness of its
rights or obligations under, the Exchangeable Share Support
Agreement without the approval of the holders of the
Exchangeable Shares given in accordance with section 11.2
other than any amendments, waivers and/or forgiveness as may
be necessary or advisable for the purposes of:
(a) adding to the covenants of any or all parties to that
agreement provided that the Board of Directors of the Company
is of the good faith opinion that those additions will not be
prejudicial to the rights or interests of the holders of the
Exchangeable Shares;
(b) making any provisions or modifications not inconsistent with
that agreement as may be necessary or desirable with respect
to matters or questions arising under that agreement which,
in the good faith opinion of the Board of Directors, it may
be expedient to make, provided that the Board of Directors is
of the good faith opinion, after consultation with counsel,
that those provisions and modifications will not be
prejudicial to the rights or interests of the holders of the
Exchangeable Shares; or
(c) making any changes in or corrections to that agreement
which, on the advice of counsel to the Company, are required
for the purpose of curing or correcting any ambiguity or
defect or inconsistent provision or clerical omission or
mistake or manifest error contained in the agreement,
provided that the Board of Directors is of the good faith
opinion, after consultation with counsel, that those changes
or corrections will not be prejudicial to the rights or
interests of the holders of the Exchangeable Shares.
ARTICLE 14.
LEGEND; CALL RIGHTS
14.1. The certificates evidencing the Exchangeable Shares will
contain or have affixed to them a legend in form and on
terms approved by the Board of Directors, with respect to
the Exchangeable Share Support Agreement and the Voting and
Exchange Trust Agreement (including the provisions with
respect to the voting rights, call rights, exchange right
and automatic exchange under that agreement).
14.2. Each holder of an Exchangeable Share, whether of record or
beneficial, by virtue of becoming and being a holder will be
deemed to acknowledge each of the Liquidation Call Right,
the Retraction Call Right and the Redemption Call Right, in
each case, in favour of Holding ULC, and the overriding
nature of those rights in connection with the liquidation,
dissolution or winding-up of the Company or the retraction
or redemption of Exchangeable Shares, as the case may be,
and to be bound by those rights in favour of Holding ULC.
ARTICLE 15.
NOTICES
15.1. Any notice, request or other communication to be given to
the Company by a holder of Exchangeable Shares will be in
writing and will be valid and effective if given by mail
(postage prepaid) or by telecopy or by delivery to the
registered office of the Company and addressed to the
attention of the President. Any notice, request or other
communication, if given by mail, telecopy or delivery, will
only be deemed to have been given and received upon actual
receipt by the Company.
15.2. Any presentation and surrender by a holder of Exchangeable
Shares to the Company or the Transfer Agent of certificates
representing Exchangeable Shares in connection with the
liquidation, dissolution or winding-up of the Company or the
retraction or redemption of Exchangeable Shares will be made
by ordinary mail (postage prepaid) or by delivery to the
registered office of the Company or to any office of the
Transfer Agent as may be specified by the Company, in each
case, addressed to the attention of the President of the
Company. Any presentation and surrender of certificates will
only be deemed to have been made and to be effective upon
actual receipt by the Company or the Transfer Agent, as the
case may be. Any presentation and surrender of certificates
made by ordinary mail will be at the sole risk of the holder
mailing the same.
15.3. Any notice, request or other communication to be given to a
holder of Exchangeable Shares by or on behalf of the Company
will be in writing and will be valid and effective if given
by mail (postage prepaid) or by delivery to the address of
the holder recorded in the securities register of the
Company or, in the event of the address of any holder not
being so recorded, then at the last known address of that
holder. Any notice, request or other communication, if given
by mail, will be deemed to have been given and received on
the seventh Business Day following the date of mailing and,
if given by delivery, will be deemed to have been given and
received on the date of delivery. Accidental failure or
omission to give any notice, request or other communication
to one or more holders of Exchangeable Shares will not
invalidate or otherwise alter or affect any action or
proceeding to be taken by the Company pursuant to that
notice, request or other communication.
15.4. If the Company determines that mail service is or is
threatened to be interrupted at the time when the Company is
required or elects to give any notice to the holders of
Exchangeable Shares, the Company, notwithstanding these
provisions, may give that notice by means of publication in
The National Post or any other English language daily
newspaper or newspapers of general circulation in Canada and
in a French language daily newspaper of general circulation
in the Province of Quebec, once in each of two successive
weeks, and notice so published will be deemed to have been
given on the latest date on which the first publication has
taken place.
If, by reason of any actual or threatened interruption of
mail service due to strike, lock-out or otherwise, any notice to be
given to the Company would be unlikely to reach its destination in a
timely manner, that notice will be valid and effective only if delivered
personally to the Company in accordance with section 15.1 or 15.2, as
the case may be.
SCHEDULE A
NOTICE OF RETRACTION
To: 1386501 Ontario Limited (the "Company") and 3037936 Nova Scotia
Company ("Holding ULC").
This notice is given pursuant to Article 6 of the provisions
(the "Share Provisions") attaching to the Exchangeable Shares of the
Company represented by this certificate and all capitalized words and
expressions used in this notice that are defined in the Share Provisions
have the meanings given to those words and expressions in the Share
Provisions.
The undersigned hereby notifies the Company that, subject to
the Retraction Call Right referred to below, the undersigned desires to
have the Company redeem in accordance with Article 6 of the Share
Provisions:
_ all share(s) represented by this certificate; or
_ _______ share(s) only.
The undersigned hereby notifies the Company that the Retraction
Date will
be
.
NOTE: The Retraction Date must be a Business Day and must not be less
than 10 Business Days nor more than 15 Business Days after the date
upon which this notice is received by the Company. If no Business
Day is specified above, the Retraction Date will be deemed to be
the 15th Business Day after the date on which this notice is
received by the Company.
The undersigned acknowledges the overriding Retraction Call
Right of Holding ULC to purchase all but not less than all the Retracted
Shares from the undersigned and that this notice is and will be deemed
to be a revocable offer by the undersigned to sell the Retractable
Shares to Holding ULC in accordance with the Retraction Call Right on
the Retraction Date for the Purchase Price and on the other terms and
conditions set out in section 6.3 of the Share Provisions. This notice
of retraction, and this offer to sell the Retracted Shares to Holding
ULC, may be revoked and withdrawn by the undersigned only by notice in
writing given to the Company at any time before the close of business on
the Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of
solvency provisions or applicable law, the Company is unable to redeem
all Retracted Shares, and provided that Holding ULC has not exercised
the Retraction Call Right with respect to the Retracted Shares, the
undersigned will be deemed to have exercised the Exchange Right (as
defined in the Voting and Exchange Trust Agreement) so as to require
Rational to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to Holding
ULC and the Company that the undersigned:
_ is
(select one)
_ is not
a non-resident of Canada for purposes of the Income Tax Act (Canada). The
undersigned acknowledges that in the absence of an indication that the
undersigned is not a non-resident of Canada, withholding on account of
Canadian tax may be made from amounts payable to the undersigned on the
redemption or purchase of the Retracted Shares.
The undersigned hereby represents and warrants to Holding
ULC and the Company that the undersigned has good title to, and owns,
the share(s) represented by this certificate to be acquired by Holding
ULC or the Company, as the case may be, free and clear of all liens,
claims and encumbrances.
(Date) (Signature of Shareholder) (Guarantee of
Signature)
_ Please check box if the securities and any cheque(s) resulting from
the retraction or purchase of the Retracted Shares are to be held
for pick-up by the shareholder from the Transfer Agent, failing
which the securities and any cheque(s) will be mailed to the last
address of the shareholder as it appears on the register.
NOTE: This panel must be completed and this certificate, together with
any additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent. The securities and any cheque(s)
resulting from the retraction or purchase of the Retracted Shares
will be issued and registered in, and made payable to,
respectively, the name of the shareholder as it appears on the
register of the Company and the securities and any cheque(s)
resulting from the retraction or purchase will be delivered to the
shareholder as indicated above, unless the form appearing
immediately below is duly completed.
Date:
Name of Person in Whose Name Securities or Cheque(s)
Are to be Registered, Issued or Delivered (please print):
Street Address or P.O. Box:
Signature of Shareholder:
City, Province and Postal Code:
Signature Guaranteed by:
NOTE: If this notice of retraction is for less than all of the shares
represented by this certificate, a certificate representing the remaining
share(s) of the Company represented by this certificate will be issued
and registered in the name of the shareholder as it appears on the
register of the Company, unless the Share Transfer Power on the share
certificate is duly completed in respect of those share(s).
APPENDIX 6
ESCROW AGREEMENT
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Exhibit B
VOTING AND EXCHANGE TRUST AGREEMENT
THIS AGREEMENT made as of the 13th day of January, 2000.
B E T W E E N:
1386501 ONTARIO LIMITED,
a corporation existing under the laws of
the Province of Ontario,
("Acquisition Sub"),
- and -
RATIONAL SOFTWARE CORPORATION
a corporation existing under the laws of
the
State of Delaware,
("Rational"),
- and -
THE BANK OF NOVA SCOTIA TRUST COMPANY OF
NEW YORK,
a trust company incorporated under the
laws of the State of New York,
("Trustee").
RECITALS:
A. Pursuant to an agreement and plan of acquisition and arrangement
(the "Acquisition Agreement") dated as of December 14, 1999 among
Rational, Rational International, 3037936 Nova Scotia Company,
Acquisition Sub, 1386503 Ontario Limited ("Amalco") and ObjecTime
Limited ("ObjecTime"), and the plan of arrangement (the "Plan of
Arrangement") contemplated by the Acquisition Agreement, ObjecTime
Limited was formed upon the amalgamation of Amalco and ObjecTime
and Acquisition Sub has issued Class B non-voting preference
shares ("Class B Non-Voting Preference Shares") to certain former
holders of shares of ObjecTime.
B. Pursuant to the Acquisition Agreement and the Plan of Arrangement,
Acquisition Sub is to issue its Class A non-voting preference
shares (the "Exchangeable Shares") to certain holders of Class B
Non-Voting Preference Shares in exchange for those Class B Non-
Voting Preference Shares.
C. Pursuant to the Acquisition Agreement and coincident with and as
part of the issue of Exchangeable Shares to certain holders of
Class B Non-Voting Preference Shares, Rational and Acquisition Sub
are to execute a voting and exchange trust agreement substantially
in the form of this trust agreement.
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this trust agreement and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties to this agreement covenant and agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.1. Definitions
In this trust agreement, the following terms have the following
meanings:
"Affiliate" of any person means any other person directly or
indirectly controlling, controlled by, or under control with, that
person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under
common control with"), as applied to any person, means the
possession by another person, directly or indirectly, of the power
to direct or cause the direction of the management and policies of
that first mentioned person, whether through the ownership of
voting securities, by contract or otherwise.
"Automatic Exchange Rights" means the benefit of the obligation of
Rational to effect the automatic exchange of Rational Common Shares
for Exchangeable Shares pursuant to section 5.12.
"Beneficiaries" means the registered holders from time to time of
Exchangeable Shares, other than the Trustee, Rational and Rational
Affiliates.
"Beneficiary Votes" has the meaning given to that term in
section 4.2.
"Business Day" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario other than a
Saturday, a Sunday or a day observed as a holiday in Toronto,
Ontario under the laws of the Province of Ontario or the federal
laws of Canada or in New York, New York under the laws of the State
of New York or the federal laws of the United States of America.
"Canadian Dollar Equivalent" means, in respect of an amount
expressed in a currency other than Canadian dollars (the "Foreign
Currency Amount") at any date, the product obtained by multiplying
(a) the Foreign Currency Amount by (b) the noon spot exchange rate
on that date for that foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event that
spot exchange rate is not available, any exchange rate on that date
for the foreign currency expressed in Canadian dollars as may be
deemed by the Board of Directors of Rational to be appropriate for
that purpose.
"Current Market Price" means, in respect of a Rational Common Share
on any date, the Canadian Dollar Equivalent of the average of the
closing bid and ask prices of Rational Common Shares during a
period of 20 consecutive trading days ending not more than three
trading days before that date on NASDAQ, or, if the Rational Common
Shares are not then quoted on NASDAQ, on any other stock exchange
or automated quotation system on which the Rational Common Shares
are listed or quoted, as the case may be, as may be selected by the
Board of Directors of Rational for this purpose; provided however,
that if in the opinion of the Board of Directors of Rational the
public distribution or trading activity of Rational Common Shares
during that period does not create a market which reflects the fair
market value of a Rational Common Share, then the Current Market
Price of a Rational Common Share will be determined by the Board of
Directors of Rational, in good faith and in its sole discretion,
and provided further that any selection, opinion or determination
by the Board of Directors of Rational will be conclusive and
binding.
"Deposited Shares" means the Rational Common Shares equal to the
number of Exchangeable Shares from time to time issued and
outstanding, which shares are to be issued to, deposited with, and
voted by, the Trustee as described in this trust agreement.
"Dividend Amount" has the meaning given to that term in the Share
Provisions.
"Exchange Right" has the meaning given to that term in section 5.1.
"Exchangeable Share Voting Event" has the meaning given to that
term in the Share Provisions.
"Exchangeable Shares" means the Class A non-voting preference
shares in the capital of Acquisition Sub.
"Exempt Exchangeable Share Voting Event" has the meaning given to
that term in the Share Provisions.
"Holding ULC" means 3037936 Nova Scotia Company, an unlimited
company existing under the laws of Nova Scotia, and being an
indirect wholly-owned subsidiary of Rational.
"Indemnified Parties" has the meaning given to that term in
section 8.1.
"Insolvency Event" means the institution by Acquisition Sub of any
proceeding to be adjudicated a bankrupt or insolvent or to be wound
up, or the consent of Acquisition Sub to the institution of
bankruptcy, insolvency or winding-up proceedings against it, or the
filing of a petition, answer or consent seeking dissolution or
winding-up under any bankruptcy, insolvency or analogous laws,
including without limitation the Companies Creditors' Arrangement
Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and
the failure by Acquisition Sub to contest in good faith any
proceedings commenced in respect of Acquisition Sub within 30 days
of becoming aware of those proceedings, or the consent by
Acquisition Sub to the filing of any petition or to the appointment
of a receiver, or the making by Acquisition Sub of a general
assignment for the benefit of creditors, or the admission in
writing by Acquisition Sub of its inability to pay its debts
generally as they become due, or Acquisition Sub not being
permitted, pursuant to solvency requirements or other provisions of
applicable law, to redeem any Retracted Shares pursuant to
section 6.6 of the Share Provisions.
"Liquidation Call Right" has the meaning given to that term in the
Plan of Arrangement.
"Liquidation Date" has the meaning given to that term in the Share
Provisions.
"Liquidation Event" has the meaning given to that term in
section 5.12(b).
"Liquidation Event Effective Date" has the meaning given to that
term in section 5.12(c).
"List" has the meaning given to that term in section 4.6.
"Officer's Certificate" means, with respect to Rational or
Acquisition Sub, as the case may be, a certificate signed by any
one director or officer of Rational or Acquisition Sub, as the case
may be.
"Plan of Arrangement" means the plan of arrangement relating to
the arrangement of ObjecTime Limited under section 182 of the Act.
"person" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"Rational Affiliates" means Affiliates of Rational.
"Rational Common Share" means a share of common stock, par value
U.S. $0.01, in the capital of Rational.
"Rational Consent" has the meaning given to that term in
section 4.2.
"Rational Control Transaction" has the meaning given to that term
in the Share Provisions.
"Rational Meeting" has the meaning given to that term in
section 4.2.
"Rational Successor" has the meaning given to that term in
section 10.1(a).
"Redemption Call Right" has the meaning given to that term in the
Plan of Arrangement.
"Retracted Shares" has the meaning given to that term in
section 5.7.
"Retraction Call Right" has the meaning given to that term in the
Share Provisions.
"Share Provisions" means the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares.
"Support Agreement" means that exchangeable share support agreement
made as of January 13, 2000 between Acquisition Sub, Holding ULC
and Rational.
"Transfer Agent" means Montreal Trust Company of Canada or any
other person as may from time to time be appointed by Acquisition
Sub as the registrar and transfer agent for the Exchangeable
Shares.
"Trust" means the trust created by this trust agreement.
"Trust Estate" means the Deposited Shares, any other securities,
the Exchange Right, the Automatic Exchange Rights and any money or
other property which may be held by the Trustee from time to time
pursuant to this trust agreement.
"Trustee" means The Bank of Nova Scotia Trust Company of New York
and, subject to the provisions of Article 9, includes any successor
trustee.
"Voting Rights" means the voting rights attached to the Deposited
Shares.
1.2. Interpretation Not Affected by Headings, etc.
The division of this trust agreement into Articles, sections and
other portions and the insertion of headings are for convenience of
reference only and should not affect the construction or interpretation
of this trust agreement. Unless otherwise indicated, all references to an
"Article" or "section" followed by a number and/or a letter refer to the
specified Article or section of this trust agreement. The terms "this
trust agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to this trust agreement and not to any particular
Article, section or other portion of this trust agreement and include any
agreement or instrument supplementary or ancillary to this trust
agreement.
1.3. Number, Gender, etc.
Words importing the singular number only include the plural and
vice versa. Words importing any gender include all genders.
1.4. Date for any Action
If any date on which any action is required to be taken under this
trust agreement is not a Business Day, that action will be required to be
taken on the next succeeding Business Day.
ARTICLE 2.
PURPOSE OF AGREEMENT
2.1. Establishment of Trust
The purpose of this trust agreement is to create the Trust for the
benefit of the Beneficiaries, as provided in this trust agreement. The
Trustee will hold the Deposited Shares to enable the Trustee to exercise
the Voting Rights and will hold the Exchange Right and the Automatic
Exchange Rights to enable the Trustee to exercise those rights, in each
case as trustee for and on behalf of the Beneficiaries as provided in
this trust agreement.
ARTICLE 3.
DEPOSITED SHARES
3.1. Issue and Ownership of the Deposited Shares
Rational hereby issues to and deposits with the Trustee,
359,694 Rational Common Shares and the initial Deposited Shares to be
held of record by the Trustee as trustee for and on behalf of, and for
the use and benefit of, Rational and the Beneficiaries in accordance with
the provisions of this trust agreement. Rational hereby acknowledges
receipt from the Trustee as trustee for and on behalf of the
Beneficiaries of good and valuable consideration (and the adequacy of
that consideration) for the granting of the Voting Rights by Rational to
the Trustee. During the term of the Trust and subject to the terms and
conditions of this trust agreement, the Trustee will possess and be
vested with full legal ownership of the Deposited Shares and will be
entitled to exercise all of the rights and powers of an owner with
respect to the Deposited Shares provided that the Trustee will:
(a) hold the Deposited Shares and the legal title to those shares
as trustee solely for the use and benefit of Rational in
accordance with this trust agreement except with respect to
the Voting Rights which the Trustee holds for and on behalf
of, and for the use and benefit of the Beneficiaries; and
(b) except as specifically authorized by this trust agreement,
have no power or authority to sell, transfer, vote or
otherwise deal in or with the Deposited Shares and the
Deposited Shares will not be used or disposed of by the
Trustee for any purpose other than the purposes for which
this Trust is created pursuant to this trust agreement.
3.2. Legended Share Certificates
Acquisition Sub will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the
Beneficiaries of their right to instruct the Trustee with respect to the
exercise of the Voting Rights in respect of the Exchangeable Shares of
the Beneficiaries.
3.3. Beneficial Ownership of Deposited Shares
Except with respect to the Voting Rights, Rational will remain the
beneficial owner of the Deposited Shares and all rights related to the
Deposited Shares including, without limitation, the right to retain all
dividends declared and paid on, and distributions made in respect of, the
Deposited Shares.
3.4. Safe Keeping of Certificate
The certificate(s) representing the Deposited Shares will at all
times be held in safe keeping by the Trustee or its duly authorized
agent.
3.5. [Intentionally Deleted]
3.6. Release of Deposited Shares
Notwithstanding any other provision of this trust agreement, in
the event that:
(a) a Beneficiary is entitled to receive Rational Common Shares
as a result of a retraction or redemption of Exchangeable
Shares by Acquisition Sub pursuant to either Article 6 or
Article 7 of the Share Provisions and in respect of which a
Retraction Call Right or a Redemption Call Right, as the
case may be, has not been exercised by Holding ULC, Rational
will demand from the Trustee and the Trustee, as the agent
of Rational and Acquisition Sub and on behalf of Rational
and Acquisition Sub, will release and deliver to the
Transfer Agent free from the trusts of this trust agreement
that number of Deposited Shares which are the subject of
each retraction or redemption for immediate delivery to the
Beneficiary, and that delivery will constitute delivery of
those Deposited Shares by or on behalf of Rational and
Acquisition Sub;
(b) a Beneficiary would be entitled to receive Rational Common
Shares as a result of the exercise by Holding ULC of a
Retraction Call Right, Redemption Call Right or Liquidation
Call Right, the Trustee, upon instructions from Rational, as
the agent of Rational and Holding ULC and on behalf of
Rational and Holding ULC, will release and transfer to that
Beneficiary free from the trusts of this trust agreement
that number of Deposited Shares which are the subject of
those rights;
(c) a Beneficiary would be entitled to receive Rational Common
Shares as a result of the exercise by the Trustee on behalf
of the Beneficiary of the Exchange Right or Automatic
Exchange Right, the Trustee, as the agent of Rational and on
behalf of Rational, will release and transfer to that
Beneficiary free from the trusts of this trust agreement
that number of Deposited Shares which are the subject of
those rights; and
(d) upon a release and transfer, legal title to those Deposited
Shares will be transferred to the Beneficiary and Rational
will immediately instruct and authorize its transfer agent
to record that transfer in the stock transfer register of
Rational, to issue and deliver to the Beneficiary one or
more share certificates representing the Deposited Shares
registered in the name of the Beneficiary and to do all
other acts as may be necessary to give effect to the
foregoing.
ARTICLE 4.
EXERCISE OF VOTING RIGHTS
4.1. Voting Rights
The Trustee, as the holder of record of the Deposited Shares, will
be entitled to all of the Voting Rights, including the right to vote in
person or by proxy the Deposited Shares on any matters, questions,
proposals or propositions that may properly come before the shareholders
of Rational at a Rational Meeting or in connection with a Rational
Consent. The Voting Rights will be and remain vested in and exercised by
the Trustee. Subject to section 6.15:
(a) the Trustee will exercise the Voting Rights only on the basis
of instructions received pursuant to this Article 4 from
Beneficiaries appearing on the List as to the voting of the
Voting Rights at the time at which the Rational Meeting is
held or a Rational Consent is sought; and
(b) to the extent that no instructions are received from a
Beneficiary with respect to the Voting Rights to which that
Beneficiary is entitled, the Trustee will not exercise or
permit the exercise of those Voting Rights.
4.2. Number of Votes
With respect to all meetings of shareholders of Rational at which
holders of Rational Common Shares are entitled to vote (each, a "Rational
Meeting") and with respect to all written consents sought by Rational
from its shareholders including the holders of Rational Common Shares
(each, a "Rational Consent"), each Beneficiary will be entitled to
instruct the Trustee to cast and exercise one of the votes comprised in
the Voting Rights for each Exchangeable Share owned of record by that
Beneficiary on the record date established by Rational or by applicable
law for the Rational Meeting or Rational Consent, as the case may be (the
"Beneficiary Votes"), in respect of each matter, question, proposal or
proposition to be voted on at the Rational Meeting or in connection with
the Rational Consent.
4.3. Mailings to Shareholders
With respect to each Rational Meeting and Rational Consent, the
Trustee will use its reasonable efforts to mail or cause to be mailed (or
otherwise communicate in the same manner as Rational utilizes in
communications to holders of Rational Common Shares, subject to the
Trustee being advised in writing of that method and its ability to
provide that method of communication) to each of the Beneficiaries named
in the List referred to in section 4.6, which mailing or communication,
to the extent practicable, will commence on the same day as the mailing
or notice (or other communication) is commenced by Rational to its
shareholders:
(a) a copy of the notice, together with any related materials to
be provided to shareholders of Rational;
(b) a statement that the Beneficiary is entitled to instruct the
Trustee as to the exercise of the Beneficiary Votes with
respect to the Rational Meeting or Rational Consent or,
pursuant to section 4.7, to attend the Rational Meeting and
to exercise personally the Beneficiary Votes at the meeting;
(c) a statement as to the manner in which instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to the Beneficiary or his designee to exercise
personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative
of the management of Rational to exercise the
Beneficiary Votes;
(d) a statement that if no instructions are received from the
Beneficiary, the Beneficiary Votes to which that Beneficiary
is entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and
instruct the Trustee as contemplated in this Article; and
(f) a statement of the time and date by which instructions must
be received by the Trustee in order to be binding upon it,
which in the case of a Rational Meeting will not be earlier
than the close of business on the second Business Day prior
to the meeting, and of the method for revoking or amending
those instructions.
The materials referred to above are to be provided to the Trustee by
Rational.
For the purpose of determining Beneficiary Votes to which a
Beneficiary is entitled in respect of any Rational Meeting or Rational
Consent, the number of Exchangeable Shares owned of record by the
Beneficiary will be determined at the close of business on the record
date established by Rational or by applicable law for purposes of
determining shareholders entitled to vote at the Rational Meeting.
Rational will notify the Trustee of any decision of the Board of
Directors of Rational with respect to the calling of any Rational Meeting
and will provide all necessary information and materials to the Trustee
in each case promptly and in any event in sufficient time to enable the
Trustee to perform its obligations contemplated by this section 4.3.
4.4. Copies of Shareholder Information
Rational will deliver to the Trustee (i) copies of all proxy
materials (including notices of Rational Meetings, but excluding proxies
to vote Rational Common Shares), information statements, reports
(including without limitation, all interim and annual financial
statements) and other written communications that, in each case, are to
be distributed from time to time to holders of Rational Common Shares in
sufficient quantities and in sufficient time so as to enable the Trustee
to send those materials to each Beneficiary at the same time as those
materials are first sent to holders of Rational Common Shares and
(ii) one copy of each proxy to vote Rational Common Shares. The Trustee
will mail or otherwise send to each Beneficiary, at the expense of
Rational, copies of those materials (and all materials specifically
directed to the Beneficiaries or to the Trustee for the benefit of the
Beneficiaries by Rational) received by the Trustee from Rational
contemporaneously with the sending of those materials to holders of
Rational Common Shares. The Trustee will also make available for
inspection by any Beneficiary at the Trustee's principal office in the
City of New York all proxy materials, information statements, reports and
other written communications that are:
(a) received by the Trustee as the registered holder of the
Deposited Shares and made available by Rational generally to
the holders of Rational Common Shares; or
(b) specifically directed to the Beneficiaries or to the Trustee
for the benefit of the Beneficiaries by Rational.
4.5. Other Materials
As soon as reasonably practicable after receipt by Rational or
shareholders of Rational (if that receipt is known by Rational) of any
material sent or given by or on behalf of a third party to holders of
Rational Common Shares generally, including without limitation, dissident
proxy and information circulars (and related information and material)
and tender and exchange offer circulars (and related information and
material), Rational will use its reasonable efforts to obtain and deliver
to the Trustee copies of those materials in sufficient quantities so as
to enable the Trustee to forward the material (unless the same has been
provided directly to Beneficiaries by the third party) to each
Beneficiary as soon as possible. As soon as reasonably practicable after
receipt of those materials, the Trustee will mail or otherwise send to
each Beneficiary, at the expense of Rational, copies of all those
materials received by the Trustee from Rational. The Trustee will also
make available for inspection by any Beneficiary at the Trustee's
principal office in the City of New York copies of all those materials.
4.6. List of Persons Entitled to Vote
Acquisition Sub will, (a) prior to each annual, general and special
Rational Meeting or the seeking of any Rational Consent and (b) promptly
upon each request made at any time by the Trustee in writing, prepare or
cause to be prepared a list (the most current list delivered to the
Trustee being the "List") of the names and addresses of the Beneficiaries
arranged in alphabetical order (and, if requested, broken down by
jurisdiction of residence) and showing the number of Exchangeable Shares
held of record by each Beneficiary, in each case at the close of business
on the date specified by the Trustee in the request or, in the case of a
List prepared in connection with a Rational Meeting or a Rational
Consent, at the close of business on the record date established by
Rational or pursuant to applicable law for determining the holders of
Rational Common Shares entitled to receive notice of and/or to vote at
that Rational Meeting or to give consent in connection with that Rational
Consent. Each List will be delivered to the Trustee promptly after
receipt by Acquisition Sub of a request or the record date for a meeting
or seeking of consent, as the case may be, and in any event within
sufficient time to enable the Trustee to perform its obligations under
this trust agreement. Rational agrees to give Acquisition Sub written
notice (with a copy to the Trustee) of the calling of any Rational
Meeting or the seeking of any Rational Consent, together with the record
dates, sufficiently prior to the date of the calling of the meeting or
seeking of the consent so as to enable Acquisition Sub to perform its
obligations under this section 4.6.
4.7. Entitlement to Direct Votes
Any Beneficiary named in a List prepared in connection with any
Rational Meeting or Rational Consent will be entitled (a) to instruct the
Trustee in the manner described in section 4.3 with respect to the
exercise of the Beneficiary Votes to which that Beneficiary is entitled
or (b) to attend the meeting and personally exercise at the meeting, as
the proxy of the Trustee, the Beneficiary Votes to which the Beneficiary
is entitled.
4.8. Voting by ▇▇▇▇▇▇▇, and Attendance of Trustee Representative at
Meeting
(a) In connection with each Rational Meeting and Rational
Consent, the Trustee will exercise, either in person or by
proxy, in accordance with the instructions received from a
Beneficiary pursuant to section 4.3, the Beneficiary Votes as
to which that Beneficiary is entitled to direct the vote (or
any lesser number of Beneficiary Votes as may be set out in
the instructions); provided, however, that those written
instructions are received by the Trustee from the Beneficiary
prior to the time and date fixed by the Trustee for receipt
of those instructions in the notice given by the Trustee to
the Beneficiary pursuant to section 4.3.
(b) The Trustee will cause a representative who is empowered by
it to sign and deliver, on behalf of the Trustee, proxies for
Voting Rights to attend each Rational Meeting. Upon
submission by a Beneficiary (or its designee) of
identification satisfactory to the Trustee's representative,
and at the Beneficiary's request, the representative will
sign and deliver to that Beneficiary (or its designee) a
proxy to exercise personally the Beneficiary Votes as to
which that Beneficiary is otherwise entitled under this trust
agreement to direct the vote, if that Beneficiary either
(i) has not previously given the Trustee instructions
pursuant to section 4.3 in respect of the meeting or
(ii) submits to the representative written revocation of any
previous instructions. At the meeting, the Beneficiary
exercising those Beneficiary Votes will have the same rights
as the Trustee to speak at the meeting in favour of any
matter, question, proposal or proposition, to vote by way of
ballot at the meeting in respect of any matter, question,
proposal or proposition, and to vote at the meeting by way of
a show of hands in respect of any matter, question or
proposition.
4.9. Distribution of Written Materials
Any written materials distributed by the Trustee pursuant to this
trust agreement will be sent by mail (or otherwise communicated in the
same manner as Rational utilizes in communications to holders of Rational
Common Shares, subject to the Trustee being advised in writing of that
method of communication and its ability to provide that method of
communication) to each Beneficiary at its address as shown on the List.
Acquisition Sub will provide or cause to be provided to the Trustee for
this purpose, on a timely basis and without charge or other expense:
(a) a current List; and
(b) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this trust agreement.
4.10. Termination of Voting Rights
All of the rights of a Beneficiary with respect to the Beneficiary
Votes exercisable in respect of the Exchangeable Shares held by that
Beneficiary, including the right to instruct the Trustee as to the voting
of or to vote personally the Beneficiary Votes, will be deemed to be
surrendered by the Beneficiary to Rational or Holding ULC, as the case
may be, and those Beneficiary Votes and the Voting Rights represented by
those Beneficiary Votes will cease immediately upon the delivery by that
holder to the Trustee of the certificates representing those Exchangeable
Shares in connection with the exercise by the Beneficiary of the Exchange
Right or the occurrence of the automatic exchange of Exchangeable Shares
for Rational Common Shares, as specified in Article 5 (unless, in either
case, Rational has not delivered the requisite Rational Common Shares
issuable in exchange for the Exchangeable Shares to the Trustee for
delivery to the Beneficiaries), or upon the redemption of Exchangeable
Shares pursuant to Article 6 or 7 of the Share Provisions, or upon the
effective date of the liquidation, dissolution or winding-up of
Acquisition Sub pursuant to Article 5 of the Share Provisions, or upon
the purchase of Exchangeable Shares from the holder by Holding ULC
pursuant to the exercise by Holding ULC of the Retraction Call Right, the
Redemption Call Right or the Liquidation Call Right.
ARTICLE 5.
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1. ▇▇▇▇▇ and Ownership of the Exchange Right
Rational hereby grants to the Trustee as trustee for and on behalf
of, and for the use and benefit of, the Beneficiaries (i) the right (the
"Exchange Right"), upon the occurrence and during the continuance of an
Insolvency Event, to require Rational to purchase from each or any
Beneficiary all or any part of the Exchangeable Shares held by the
Beneficiary and (ii) the Automatic Exchange Rights, all in accordance
with the provisions of this trust agreement. Rational hereby
acknowledges receipt from the Trustee as trustee for and on behalf of the
Beneficiaries of good and valuable consideration (and the adequacy of the
consideration) for the grant of the Exchange Right and the Automatic
Exchange Rights by Rational to the Trustee. During the term of the Trust
and subject to the terms and conditions of this trust agreement, the
Trustee will possess and be vested with full legal ownership of the
Exchange Right and the Automatic Exchange Rights and will be entitled to
exercise all of the rights and powers of an owner with respect to the
Exchange Right and the Automatic Exchange Rights, provided that the
Trustee will:
(a) hold the Exchange Right and the Automatic Exchange Rights and
the legal title to those rights as trustee solely for the use
and benefit of the Beneficiaries in accordance with the
provisions of this trust agreement; and
(b) except as specifically authorized by this trust agreement,
have no power or authority to exercise or otherwise deal in
or with the Exchange Right or the Automatic Exchange Rights,
and the Trustee will not exercise those rights for any
purpose other than the purposes for which the Trust is
created pursuant to this trust agreement.
5.2. Legended Share Certificates
Acquisition Sub will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the
Beneficiaries of:
(a) their right to instruct the Trustee with respect to the
exercise of the Exchange Right in respect of the Exchangeable
Shares held by a Beneficiary; and
(b) the Automatic Exchange Rights.
5.3. General Exercise of Exchange Right
The Exchange Right will be and remain vested in and exercisable by
the Trustee. Subject to section 6.15, the Trustee will exercise the
Exchange Right only on the basis of instructions received pursuant to
this Article 5 from Beneficiaries appearing on the List. To the extent
that no instructions are received from a Beneficiary with respect to the
Exchange Right, the Trustee will not exercise or permit the exercise of
the Exchange Right.
5.4. Purchase Price
The total purchase price payable by Rational for each Exchangeable
Share to be purchased by Rational under the Exchange Right will be an
amount per share equal to (a) the Current Market Price of a Rational
Common Share on the last Business Day prior to the day of closing of the
purchase and sale of that Exchangeable Share under the Exchange Right,
which will be satisfied in full by Rational causing to be sent to that
holder one Rational Common Share, plus (b) to the extent not paid by
Acquisition Sub, an additional amount equivalent to the full amount of
all declared and unpaid dividends on each Exchangeable Share held by that
holder on any dividend record date which occurred prior to the closing of
the purchase and sale. In connection with each exercise of the Exchange
Right, Rational will provide to the Trustee an Officer's Certificate
setting out the calculation of the purchase price for each Exchangeable
Share, upon which the Trustee may conclusively rely without any duty to
verify the price. The total purchase price for each Exchangeable Share
so purchased may be satisfied only by the transfer by the Trustee to the
relevant Beneficiary of one Rational Common Share and, on the applicable
payment date, delivery by the Trustee to the relevant Beneficiary of a
cheque of Rational (or, if Rational has delivered sufficient funds to the
Trustee, a cheque of the Trustee) for the balance, if any, of the
purchase price without interest (but less any amounts withheld pursuant
to section 5.13).
5.5. Exercise Instructions
Subject to the terms and conditions set out in this trust
agreement, a Beneficiary will be entitled, upon the occurrence and during
the continuance of an Insolvency Event, to instruct the Trustee to
exercise the Exchange Right with respect to all or any part of the
Exchangeable Shares registered in the name of that Beneficiary on the
books of Acquisition Sub. To cause the exercise of the Exchange Right by
the Trustee, the Beneficiary will deliver to the Trustee, in person or by
mail, at its principal office in New York, New York, the certificates
representing the Exchangeable Shares which that Beneficiary desires
Rational to purchase, duly endorsed in blank for transfer, and
accompanied by any other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the Business Corporations
Act (Ontario) and the by-laws of Acquisition Sub and any additional
documents and instruments as the Trustee, Rational or Acquisition Sub may
reasonably require together with:
(a) a duly completed form of notice of exercise of the Exchange
Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating
(i) that the Beneficiary thereby instructs the Trustee to
exercise the Exchange Right so as to require Rational
to purchase from the Beneficiary the number of
Exchangeable Shares specified in the notice,
(ii) that the Beneficiary has good title to and owns all
Exchangeable Shares to be acquired by Rational free and
clear of all liens, claims, security interests, adverse
claims and encumbrances,
(iii) the names in which the certificates representing
Rational Common Shares issuable in connection with the
exercise of the Exchange Right are to be issued, and
(iv) the names and addresses of the persons to whom those
new certificates should be delivered; and
(b) payment (or evidence satisfactory to the Trustee, Acquisition
Sub and Rational of payment) of the taxes (if any) payable as
contemplated by section 5.8 of this trust agreement.
If only a part of the Exchangeable Shares represented by any certificate
or certificates delivered to the Trustee are to be purchased by Rational
under the Exchange Right, a new certificate for the balance of the
Exchangeable Shares will be issued to the holder at the expense of
Acquisition Sub.
5.6. Delivery of Rational Common Shares; Effect of Exercise
Promptly after receipt of the certificates representing the
Exchangeable Shares which the Beneficiary desires Rational to purchase
under the Exchange Right, together with all documents and instruments of
transfer and a duly completed form of notice of exercise of the Exchange
Right (and payment of taxes, if any, payable as contemplated by
section 5.8 or evidence of payment), duly endorsed for transfer to
Rational, the Trustee will notify Rational and Acquisition Sub of its
receipt of the same, which notice to Rational and Acquisition Sub will
constitute exercise of the Exchange Right by the Trustee on behalf of the
holder of the Exchangeable Shares, and Rational will then promptly
instruct and authorize the Trustee to transfer to the Beneficiary of
those Exchangeable Shares (or to any other persons, if any, properly
designated by the Beneficiary) from the Deposited Shares the number of
Rational Common Shares deliverable in connection with the exercise of the
Exchange Right, and on the applicable payment date cheques for the
balance, if any, of the total purchase price without interest (but less
any amounts withheld pursuant to section 5.13); provided, however, that
no delivery will be made unless and until the Beneficiary making the
request has paid (or provided evidence satisfactory to Acquisition Sub
and Rational of the payment of) the taxes (if any) payable as
contemplated by section 5.8 of this trust agreement. Immediately upon
the giving of notice by the Trustee to Rational and Acquisition Sub of
the exercise of the Exchange Right as provided in this section 5.6, the
closing of the transaction of purchase and sale contemplated by the
Exchange Right will be deemed to have occurred and the holder of those
Exchangeable Shares will be deemed to have transferred to Rational all of
that holder's right, title and interest in and to those Exchangeable
Shares and the related interest in the Trust Estate and will cease to be
a holder of those Exchangeable Shares and will not be entitled to
exercise any of the rights of a holder in respect of those Exchangeable
Shares, other than the right to receive his proportionate part of the
total purchase price for those Exchangeable Shares (together with a
cheque for the balance, if any, of the total purchase price without
interest), unless the requisite number of Rational Common Shares are not
authorized by Rational to be delivered by the Trustee to the Beneficiary
within five Business Days of the date of the giving of notice by the
Trustee, in which case the rights of the Beneficiary will remain
unaffected until the Rational Common Shares are so delivered and any
cheque is delivered and paid. Upon authorization by Rational to the
Trustee of delivery of the Rational Common Shares, the Trustee will
transfer from the Deposited Shares those Rational Common Shares to the
Beneficiary (or to any other persons, if any, properly designated by the
Beneficiary). Concurrently with the Beneficiary ceasing to be a holder of
Exchangeable Shares, the Beneficiary will be considered and deemed for
all purposes to be the holder of the Rational Common Shares delivered to
it pursuant to the Exchange Right.
5.7. Exercise of Exchange Right Subsequent to Retraction
In the event that a Beneficiary has exercised its right under
Article 6 of the Share Provisions to require Acquisition Sub to redeem
any or all of the Exchangeable Shares held by the Beneficiary (the
"Retracted Shares") and is notified by Acquisition Sub pursuant to
section 6.6 of the Share Provisions that Acquisition Sub will not be
permitted as a result of solvency requirements or other provisions of
applicable law to redeem all those Retracted Shares, and provided that
Holding ULC has not exercised the Retraction Call Right with respect to
the Retracted Shares and that the Beneficiary has not revoked the
retraction request delivered by the Beneficiary to Acquisition Sub
pursuant to section 6.1 of the Share Provisions, the retraction request
will constitute and will be deemed to constitute notice from the
Beneficiary to the Trustee instructing the Trustee to exercise the
Exchange Right with respect to those Retracted Shares that Acquisition
Sub is unable to redeem. In that event, Acquisition Sub hereby agrees
with the Trustee and in favour of the Beneficiary to immediately notify
the Trustee of the prohibition against Acquisition Sub redeeming all of
the Retracted Shares and to promptly forward or cause to be forwarded to
the Trustee all relevant materials delivered by the Beneficiary to
Acquisition Sub or to the Transfer Agent (including without limitation, a
copy of the retraction request delivered pursuant to section 6.1 of the
Share Provisions) in connection with the proposed redemption of the
Retracted Shares and the Trustee will then exercise the Exchange Right
with respect to the Retracted Shares that Acquisition Sub is not
permitted to redeem and will request Rational to purchase those shares in
accordance with the provisions of this Article 5.
5.8. Stamp or Other Transfer Taxes
Upon any sale of Exchangeable Shares to Rational pursuant to the
Exchange Right or the Automatic Exchange Rights, the share certificate or
certificates representing Rational Common Shares to be delivered in
connection with the payment of the total purchase price will be issued in
the name of the Beneficiary of the Exchangeable Shares so sold or in any
names as the Beneficiary may otherwise direct in writing without charge
to the holder of the Exchangeable Shares so sold; provided, however, that
the Beneficiary (a) will pay (and none of Rational, Acquisition Sub or
the Trustee will be required to pay) any documentary, stamp, transfer or
other taxes that may be payable in respect of any transfer involved in
the issuance or delivery of those shares to a person other than the
Beneficiary or (b) will provide evidence to the satisfaction of Rational
and Acquisition Sub that those taxes, if any, have been paid.
5.9. Notice of Insolvency Event
As soon as practicable following the occurrence of an Insolvency
Event or any event that with the giving of notice or the passage of time
or both would be an Insolvency Event, Acquisition Sub and Rational will
give written notice of that event to the Trustee. As soon as practicable
following the receipt of notice from Acquisition Sub or Rational of the
occurrence of an Insolvency Event, or upon the Trustee becoming aware of
an Insolvency Event, the Trustee will mail by first class mail to each
Beneficiary, at the expense of Rational, a notice of the Insolvency Event
in the form provided by Rational, which notice will contain a brief
statement of the rights of the Beneficiaries with respect to the Exchange
Right.
5.10. Qualification of Rational Common Shares
Rational covenants that if any Rational Common Shares (or other
shares or securities into which Rational Common Shares may be
reclassified or changed as contemplated by the Support Agreement) to be
transferred and delivered pursuant to the Exchange Right or the
Automatic Exchange Rights require registration or qualification with or
approval of or the filing of any document, including any prospectus or
similar document or the taking of any proceeding with or the obtaining
of any order, ruling or consent from any governmental or regulatory
authority (i) under the Canadian provincial securities or other law or
regulation or pursuant to the rules and regulations of any securities or
other regulatory authority applicable to holders who are resident in the
provinces of Ontario or Quebec or (ii) under any United States federal
or state securities or other law or regulation or pursuant to the rules
and regulations of any United States securities or other regulatory
authority, or the fulfilment of any other United States legal
requirement or Canadian legal requirement applicable to holders who are
resident in the provinces of Ontario or Quebec before those shares (or
those other shares or securities) may be issued, transferred and/or
delivered by Rational at the direction of Acquisition Sub or Holding ULC
to the holder of surrendered Exchangeable Shares or in order that those
shares (or those other shares or securities) may be freely traded
thereafter through the facilities of a stock exchange or market in the
United States or through NASDAQ provided that first trade is made in
accordance with the rules of the stock exchange or market upon which the
trade is made or the rules of NASDAQ in accordance with all laws
applicable to that stock exchange or market or applicable to NASDAQ
(other than any restrictions of general application on transfer by
reason of a holder being a "control person" for purposes of Canadian
provincial securities law or an "affiliate" of Rational for purposes of
United States federal or state securities law), Rational will in good
faith expeditiously take all actions and do all things as are necessary
or desirable to cause those Rational Common Shares (or those other
shares or securities) to be and remain duly registered, qualified or
approved under United States and/or Canadian law, as the case may be.
Rational will in good faith expeditiously take all actions and do all
things as are reasonably necessary or desirable to cause all Rational
Common Shares (or those other shares or securities) to be delivered
under this Agreement to be listed, quoted or posted for trading on all
stock exchanges and quotation systems on which outstanding Rational
Common Shares (or those other shares or securities) have been listed by
Rational and remain listed and are quoted or posted for trading at that
time.
5.11. Rational Common Shares
Rational hereby represents, warrants and covenants that the
Rational Common Shares deliverable as described in this trust agreement
will be duly authorized and validly issued as fully paid and non-
assessable and will be free and clear of any lien, claim or encumbrance.
5.12. Automatic Exchange on Liquidation of Rational
(a) Rational will give the Trustee written notice of each of the
following events at the time set out below:
(i) in the event of any determination by the Board of
Directors of Rational to institute voluntary
liquidation, dissolution or winding-up proceedings with
respect to Rational or to effect any other distribution
of assets of Rational among its shareholders for the
purpose of winding up its affairs, at least 60 days
prior to the proposed effective date of the
liquidation, dissolution, winding-up or other
distribution; and
(ii) as soon as practicable following the earlier of
(A) receipt by Rational of notice of, and (B) Rational
otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings
with respect to the involuntary liquidation,
dissolution or winding-up of Rational or to effect any
other distribution of assets of Rational among its
shareholders for the purpose of winding up its affairs,
in each case where Rational has failed to contest in
good faith the proceeding commenced in respect of
Rational within 30 days of becoming aware of the
proceeding.
(b) As soon as practicable following receipt by the Trustee from
Rational of notice of any event (a "Liquidation Event")
contemplated by section 5.12(a)(i) or 5.12(a)(ii), the
Trustee will give notice of that event to the Beneficiaries.
The notice will be provided by Rational to the Trustee and
will include a brief description of the automatic exchange of
Exchangeable Shares for Rational Common Shares provided for
in section 5.12(c).
(c) In order that the Beneficiaries will be able to participate
on a pro rata basis with the holders of Rational Common
Shares in the distribution of assets of Rational in
connection with a Liquidation Event, on the fifth Business
Day prior to the effective date (the "Liquidation Event
Effective Date") of a Liquidation Event all of the then
outstanding Exchangeable Shares will be automatically
exchanged for Rational Common Shares. To effect this
automatic exchange, Rational will purchase on the fifth
Business Day prior to the Liquidation Event Effective Date
each Exchangeable Share then outstanding and held by
Beneficiaries, and each Beneficiary will sell the
Exchangeable Shares held by it at that time, for a total
purchase price per share equal to (a) the Current Market
Price of a Rational Common Share on the fifth Business Day
prior to the Liquidation Event Effective Date, which will be
satisfied in full by Rational authorizing and directing the
Trustee to transfer to the Beneficiary one Rational Common
Share, and (b) to the extent not paid by Acquisition Sub, an
additional amount equivalent to the full amount of all
declared and unpaid dividends on each Exchangeable Share held
by the holder on any dividend record date which occurred
prior to the date of the exchange. In connection with this
automatic exchange, Rational will provide to the Trustee an
Officer's Certificate setting out the calculation of the
purchase price for each Exchangeable Share, upon which the
Trustee may conclusively rely without any duty to verify the
price.
(d) On the fifth Business Day prior to the Liquidation Event
Effective Date, the closing of the transaction of purchase
and sale contemplated by the automatic exchange of
Exchangeable Shares for Rational Common Shares will be deemed
to have occurred, and each Beneficiary will be deemed to have
transferred to Rational all of the Beneficiary's right, title
and interest in and to that Beneficiary's Exchangeable Shares
and the related interest in the Trust Estate and will cease
to be a holder of the Exchangeable Shares and Rational will
authorize and direct the Trustee to transfer to the
Beneficiary the Rational Common Shares issuable upon the
automatic exchange of Exchangeable Shares for Rational Common
Shares and on the applicable payment date will deliver to the
Trustee for delivery to the Beneficiary a cheque for the
balance, if any, of the total purchase price for the
Exchangeable Shares without interest but less any amounts
withheld pursuant to section 5.13. Concurrently with the
Beneficiary ceasing to be a holder of Exchangeable Shares,
the Beneficiary will be considered and deemed for all
purposes to be the holder of the Rational Common Shares
issued pursuant to the automatic exchange of Exchangeable
Shares for Rational Common Shares and the certificates held
by the Beneficiary previously representing the Exchangeable
Shares exchanged by the Beneficiary with Rational pursuant to
the automatic exchange will then be deemed to represent
Rational Common Shares issued to the Beneficiary by Rational
pursuant to the automatic exchange. Upon the request of a
Beneficiary and the surrender by the Beneficiary of
Exchangeable Share certificates deemed to represent Rational
Common Shares, duly endorsed in blank and accompanied by any
instruments of transfer as Rational may reasonably require,
Rational will deliver or cause to be delivered to the
Beneficiary certificates representing Rational Common Shares
of which the Beneficiary is the holder.
5.13. Withholding Rights
Rational, Acquisition Sub and the Trustee will be entitled to
deduct and withhold from any consideration otherwise payable under this
trust agreement to any holder of Exchangeable Shares or Rational Common
Shares any amounts as Rational, Acquisition Sub or the Trustee is
required or permitted to deduct and withhold with respect to that payment
under the Income Tax Act (Canada), the United States Internal Revenue
Code of 1986 or any provision of provincial, state, local or foreign tax
law, in each case as amended or succeeded. To the extent that amounts are
so withheld, the withheld amounts will be treated for all purposes as
having been paid to the holder of the shares in respect of which the
deduction and withholding was made, provided that the withheld amounts
are actually remitted to the appropriate taxing authority. To the extent
that the amounts so required or permitted to be deducted or withheld from
any payment to a holder exceeds the cash portion of the consideration
otherwise payable to the holder, Rational, Acquisition Sub and the
Trustee are hereby authorized to sell or otherwise dispose of any portion
of the consideration as is necessary to provide sufficient funds to
Rational, Acquisition Sub or the Trustee, as the case may be, to enable
it to comply with the deduction or withholding requirements and Rational,
Acquisition Sub or the Trustee will notify the holder and remit to the
holder any unapplied balance of the net proceeds of the sale.
ARTICLE 6.
CONCERNING THE TRUSTEE
6.1. Powers and Duties of the Trustee
The rights, powers, duties and authorities of the Trustee under
this trust agreement, in its capacity as Trustee of the Trust, will
include:
(a) receipt and deposit of the Deposited Shares from Rational as
Trustee for and on behalf of the Beneficiaries in accordance
with the provisions of this trust agreement;
(b) granting proxies and distributing materials to Beneficiaries
as provided in this trust agreement;
(c) voting the Beneficiary Votes in accordance with the
provisions of this trust agreement;
(d) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from Rational as Trustee for and on behalf of
the Beneficiaries in accordance with the provisions of this
trust agreement;
(e) exercising the Exchange Right and enforcing the benefit of
the Automatic Exchange Rights, in each case in accordance
with the provisions of this trust agreement, and, in
connection with those exercises, receiving from Beneficiaries
Exchangeable Shares and other requisite documents and
transferring and delivering to those Beneficiaries Rational
Common Shares and cheques, if any, to which those
Beneficiaries are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of
the Trust Estate as provided in this trust agreement;
(h) taking action at the direction of a Beneficiary or
Beneficiaries to enforce the obligations of Rational and
Acquisition Sub under this trust agreement in accordance with
the provisions of this trust agreement; and
(i) taking any other actions and doing all other things as are
specifically provided in this trust agreement.
In the exercise of those rights, powers, duties and authorities the
Trustee will have (and is granted) all incidental and additional rights,
powers, duties and authority not in conflict with any of the provisions
of this trust agreement as the Trustee, acting in good faith and in the
reasonable exercise of its discretion, may deem necessary, appropriate or
desirable to effect the purpose of the Trust, provided that the Trustee
will have no obligation to exercise any such discretionary rights,
powers, duties or authorities. Any exercise of these discretionary
rights, powers, duties and authorities by the Trustee will be final,
conclusive and binding upon all persons. This trust agreement expressly
sets out all the duties of the Trustee with respect to all matters
pertinent to this trust agreement. The Trustee will not be bound by the
provisions of any other agreement among the other parties to this trust
agreement. No implied duties will be read into this trust agreement as
against the Trustee.
The Trustee in exercising its rights, powers, duties and
authorities under this trust agreement will act honestly and in good
faith and will exercise the care, diligence and skill that a reasonably
prudent trustee would exercise in comparable circumstances.
6.2. No Conflict of Interest
At the date of execution and delivery of this trust agreement, the
Trustee is not aware of any material conflict of interest in the role of
the Trustee as a fiduciary under this trust agreement and the role of the
Trustee in any other capacity. The Trustee will, within 90 days after it
becomes aware that any material conflict of interest exists in its acting
as Trustee under this trust agreement and its role in any other capacity,
either eliminate the material conflict of interest or resign in the
manner and with the effect specified in Article 9. If, notwithstanding
the foregoing provisions of this section 6.2, the Trustee has a material
conflict of interest, the validity and enforceability of this trust
agreement will not be affected in any manner by reason only of the
existence of the material conflict of interest. If the Trustee
contravenes the foregoing provisions of this section 6.2, any interested
party may apply to the Ontario Superior Court of Justice for an order
that the Trustee be replaced as Trustee under this trust agreement.
6.3. Dealings with Transfer Agents, Registrars, etc.
Rational and Acquisition Sub irrevocably authorize the Trustee,
from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any subsequent
registrar or transfer agent, of the Exchangeable Shares and
Rational Common Shares; and
(b) requisition, from time to time, (i) from those registrar or
transfer agents any information readily available from the
records maintained by them which the Trustee may reasonably
require for the discharge of its duties and responsibilities
under this trust agreement and (ii) from the transfer agent
of Rational Common Shares, and any subsequent transfer agent
of those shares, the share certificates representing shares
issuable or transferable upon the exercise from time to time
of the Exchange Right and pursuant to the Automatic Exchange
Rights in the manner specified in Article 5.
Rational and Acquisition Sub irrevocably authorize their respective
registrars and transfer agents to comply with these requests. Rational
covenants that it will supply its transfer agent with duly executed share
certificates for the purpose of completing the exercise from time to time
of the Exchange Right and the Automatic Exchange Rights in each case
pursuant to Article 5.
6.4. Books and Records
The Trustee will keep available for inspection by Rational and
Acquisition Sub at the Trustee's principal office in New York, New York
correct and complete books and records of account relating to the Trust
created by this trust agreement, including without limitation, all
relevant data relating to mailings and instructions to and from
Beneficiaries and all transactions pursuant to the Exchange Right and the
Automatic Exchange Rights. On or before March 31, 2001 and on or before
March 31 in every following year, so long as the Deposited Shares are on
deposit with the Trustee, the Trustee will transmit to Rational and
Acquisition Sub a brief report, dated as of the preceding December 31,
with respect to:
(a) the property and funds comprising the Trust Estate as of that
date;
(b) the number of exercises of the Exchange Right, if any, and
the aggregate number of Exchangeable Shares delivered by the
Trustee to Beneficiaries in consideration of the transfer of
Rational Common Shares in connection with the Exchange Right,
during the fiscal year ended on that December 31; and
(c) any material actions taken by the Trustee with respect to the
Trust Estate in the performance of its duties under this
trust agreement which it had not previously reported.
6.5. Income Tax Returns and Reports
The Trustee will, to the extent necessary, prepare and file or
cause to be prepared and filed on behalf of the Trust appropriate United
States and Canadian income tax returns and any other returns or reports
as may be required by applicable law or pursuant to the rules and
regulations of any securities exchange or other trading system through
which the Exchangeable Shares are traded and in connection with this may
obtain the advice of and assistance from any experts as the Trustee may
reasonably consider necessary or advisable. If requested by the Trustee,
Rational will retain those experts for providing this advice or
assistance to the Trustee.
6.6. Indemnification Prior to Certain Actions by Trustee
The Trustee will not be obligated to exercise any or all of the
rights, duties, powers or authorities vested in it by this trust
agreement at the request, order or direction of any Beneficiary unless
that Beneficiary has furnished to the Trustee reasonable funding,
security or indemnity against the costs, expenses and liabilities which
may be incurred by the Trustee, provided that no Beneficiary will be
obligated to furnish to the Trustee that funding, security or indemnity
in connection with the exercise by the Trustee of any of its rights,
duties, powers and authorities with respect to the Deposited Shares
pursuant to Article 4, subject to section 6.15, and with respect to the
Exchange Right pursuant to Article 5, subject to section 6.15, and with
respect to the Automatic Exchange Rights pursuant to Article 5, subject
to section 6.15.
None of the provisions contained in this trust agreement will
require the Trustee to expend or risk its own funds or otherwise incur
financial liability in the exercise of any of its rights, powers, duties,
or authorities unless funded, given security or indemnified as set out in
this section.
6.7. Action of Beneficiaries
No Beneficiary will have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this trust
agreement for the purpose of enforcing any of its rights or for the
execution of any trust or power under this trust agreement unless the
Beneficiary has requested the Trustee to take or institute that action,
suit or proceeding and furnished the Trustee with the funds, security or
indemnity referred to in section 6.6 and the Trustee has failed to act
within a reasonable time after the request. In this case, but not
otherwise, the Beneficiary will be entitled to take proceedings in any
court of competent jurisdiction which the Trustee might have taken; it
being understood and intended that no one or more Beneficiaries will have
any right in any manner to affect, disturb or prejudice the rights
created by this trust agreement by any action, or to enforce any right
under this trust agreement or the Voting Rights, the Exchange Rights or
the Automatic Exchange Rights, except subject to the conditions and in
the manner provided in this trust agreement, and that all powers and
trusts under this trust agreement will be exercised and all proceedings
at law will be instituted, had and maintained by the Trustee, except only
as provided in this trust agreement, and in any event for the equal
benefit of all Beneficiaries.
6.8. Reliance Upon Declarations
The Trustee will be fully protected and will not be considered to
be in contravention of any its rights, powers, duties and authorities
under this trust agreement if, when required, it acts and relies in good
faith upon statutory declarations, certificates, opinions, Lists, mailing
labels, reports or other papers or documents furnished pursuant to the
provisions of this trust agreement or required by the Trustee to be
furnished to it in the exercise of its rights, powers, duties and
authorities under this trust agreement if those statutory declarations,
certificates, opinions, Lists, mailing labels, reports or other papers or
documents comply with the provisions of section 6.9, if applicable, and
with any other applicable provisions of this trust agreement. The
Trustee may rely upon any certificate, opinion, List, report or other
document without being required to make any investigation into the facts
or matters stated therein or the correctness of any fact or opinion
stated therein.
6.9. Evidence and Authority to Trustee
Rational and/or Acquisition Sub will furnish to the Trustee
evidence of compliance with the conditions provided for in this trust
agreement relating to any action or step required or permitted to be
taken by Rational and/or Acquisition Sub or the Trustee under this trust
agreement or as a result of any obligation imposed under this trust
agreement, including, without limitation, in respect of the Voting Rights
or the Exchange Right or the Automatic Exchange Rights and the taking of
any other action to be taken by the Trustee at the request of or on the
application of Rational and/or Acquisition Sub promptly if and when:
(a) that evidence is required by any other section of this trust
agreement to be furnished to the Trustee in accordance with
the terms of this section 6.9; or
(b) the Trustee, in the exercise of its rights, powers, duties
and authorities under this trust agreement, gives Rational
and/or Acquisition Sub written notice requiring it to furnish
that evidence in relation to any particular action or
obligation specified in the notice.
The evidence will consist of an Officer's Certificate of Rational
and/or Acquisition Sub or a statutory declaration or a certificate made
by persons entitled to sign an Officer's Certificate stating that the
condition has been complied with in accordance with the terms of this
trust agreement.
Whenever the evidence relates to a matter other than the Voting
Rights or the Exchange Right or the Automatic Exchange Rights or the
taking of any other action to be taken by the Trustee at the request or
on the application of Rational and/or Acquisition Sub, and except as
otherwise specifically provided in this trust agreement, the evidence may
consist of a report or opinion of any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert or any other
person whose qualifications give authority to a statement made by the
person, provided that if the report or opinion is furnished by a
director, officer or employee of Rational and/or Acquisition Sub it will
be in the form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or
report furnished to the Trustee as evidence of compliance with a
condition provided for in this trust agreement will include a statement
by the person giving the evidence:
(a) declaring that the person has read and understands the
provisions of this trust agreement relating to the condition
in question;
(b) describing the nature and scope of the examination or
investigation upon which the person based the statutory
declaration, certificate, statement or opinion; and
(c) declaring that the person has made those examinations or
investigations as the person believes is necessary to enable
the person to make the statements or give the opinions
contained or expressed.
6.10. Experts, Advisers and Agents
The Trustee may:
(a) act and rely on the opinion or advice of or information
obtained from or prepared by any solicitor, attorney,
auditor, accountant, appraiser, valuer, engineer or other
expert, whether retained by the Trustee or by Rational and/or
Acquisition Sub or otherwise, and may retain or employ any
assistant as may be necessary to the proper discharge of its
powers and duties and determination of its rights under this
trust agreement and may pay proper and reasonable
compensation for any legal and other advice or assistance
referred to above; and
(b) retain or employ any agent and other assistant as it may
reasonably require for the proper determination and discharge
of its powers and duties under this trust agreement, and may
pay reasonable remuneration for all services performed for it
(and will be entitled to receive reasonable remuneration for
all services performed by it) in the discharge of the trusts
of this trust agreement and compensation for all
disbursements, costs and expenses made or incurred by it in
the discharge of its duties under this trust agreement and in
the management of the Trust.
6.11. Investment of Moneys Held by Trustee
Unless otherwise provided in this trust agreement, any moneys held
by or on behalf of the Trustee which under the terms of this trust
agreement may or ought to be invested or which may be on deposit with the
Trustee or which may be in the hands of the Trustee may be invested and
reinvested in the name or under the control of the Trustee in securities
stated to mature within two years after their purchase by the Trustee,
and the Trustee will so invest those moneys on the written direction of
Acquisition Sub. Pending the investment of any moneys as provided above,
those moneys may be deposited in the name of the Trustee in any bank in
the United States of America or, with the consent of Acquisition Sub, in
the deposit department of the Trustee or any other chartered bank, loan
or trust company authorized to accept deposits under the laws of the
United States of America or any state at the rate of interest then
current on similar deposits.
6.12. Trustee Not Required to Give Security
The Trustee will not be required to give any bond or security in
respect of the execution of the trusts, rights, duties, powers and
authorities of this trust agreement or otherwise in respect of the
premises.
6.13. Trustee Not Bound to Act on Request
Except as otherwise specifically provided in this trust agreement,
the Trustee will not be bound to act in accordance with any direction or
request of Rational and/or Acquisition Sub or of the directors of those
companies until a duly authenticated copy of the instrument or resolution
containing that direction or request has been delivered to the Trustee
and the Trustee has received such reasonable security or indemnity as it
may request in accordance with the requested action, and the Trustee will
be empowered to act and rely upon any copy purporting to be authenticated
and believed by the Trustee to be genuine.
6.14. Authority to Carry on Business
The Trustee represents to Rational and Acquisition Sub that at the
date of execution and delivery by it of this trust agreement it is
authorized to carry on the business of a trust company in the United
States of America but if, notwithstanding the provisions of this
section 6.14, it ceases to be so authorized to carry on business, it is
the intention of the parties that the validity and enforceability of this
trust agreement and the Voting Rights, the Exchange Right and the
Automatic Exchange Rights will not be affected in any manner by reason
only of that event, and the Trustee will, within 90 days after ceasing to
be authorized to carry on the business of a trust company in the United
States of America, either become so authorized or resign in the manner
and with the effect specified in Article 9.
6.15. Conflicting Claims
If conflicting claims or demands are made or asserted with respect
to any interest of any Beneficiary in any Exchangeable Shares, including
any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Beneficiary
in any Exchangeable Shares, resulting in conflicting claims or demands
being made in connection with that interest, then the Trustee will be
entitled, at its sole discretion, to refuse to recognize or to comply
with any of those claims or demands. In so refusing, the Trustee may
elect not to exercise any Voting Rights, Exchange Rights or Automatic
Exchange Rights subject to those conflicting claims or demands and, in so
doing, the Trustee will not be or become liable to any person on account
of that election or its failure or refusal to comply with any of those
conflicting claims or demands. The Trustee will be entitled to continue
to refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the
Voting Rights, Exchange Right or Automatic Exchange Rights
subject to those conflicting claims or demands have been
adjudicated by a final judgment of a court of competent
jurisdiction and all rights of appeal have expired; or
(b) all differences with respect to the Voting Rights, Exchange
Right or Automatic Exchange Rights subject to those
conflicting claims or demands have been conclusively settled
by a valid written agreement binding on all adverse
claimants, and the Trustee has been furnished with an
executed copy of that agreement certified to be in full force
and effect.
If the Trustee elects to recognize any claim or comply with any
demand made by any adverse claimant, it may in its discretion require
that claimant to furnish a surety bond or other security satisfactory to
the Trustee as it deems appropriate to fully indemnify it as between all
conflicting claims or demands.
6.16. Acceptance of Trust
The Trustee hereby accepts the Trust created and provided for by
and in this trust agreement and agrees to perform upon the terms and
conditions set out in this trust agreement and to hold all rights,
privileges and benefits conferred by this trust agreement in trust for
the various persons who will from time to time be Beneficiaries, subject
to all the terms and conditions set out in this trust agreement.
ARTICLE 7.
COMPENSATION
7.1. Fees and Expenses of the Trustee
Rational and Acquisition Sub jointly and severally agree to pay the
Trustee reasonable compensation for all of the services rendered by it
under this trust agreement and will reimburse the Trustee for all
reasonable expenses (including but not limited to reasonable legal fees
and expenses, taxes other than taxes based on the net income of the
Trustee, compensation paid to experts and advisers, and travel expenses)
and disbursements, including the cost and expense of any suit or
litigation of any character and any proceedings before any governmental
agency reasonably incurred by the Trustee in connection with its duties
under this trust agreement; provided that Rational and Acquisition Sub
will have no obligation to reimburse the Trustee for any expenses or
disbursements paid, incurred or suffered by the Trustee in any suit or
litigation in which the Trustee is determined to have acted in bad faith
or with negligence, recklessness or wilful misconduct.
ARTICLE 8.
INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1. Indemnification of the Trustee
Rational and Acquisition Sub jointly and severally agree to
indemnify and hold harmless the Trustee and each of its directors,
officers, employees and agents appointed and acting in accordance with
this trust agreement (collectively, the "Indemnified Parties") against
all claims, losses, liabilities, damages, reasonable costs, penalties,
fines and reasonable expenses (including reasonable fees and expenses of
the Trustee's legal counsel) which, without fraud, negligence,
recklessness, wilful misconduct or bad faith on the part of the
Indemnified Party, may be paid, incurred or suffered by the Indemnified
Party by reason or as a result of the Trustee's acceptance or
administration of the Trust, its compliance with its duties set out in
this trust agreement, or any written or oral instruction (to be confirmed
in writing) delivered to the Trustee by Rational or Acquisition Sub
pursuant to this trust agreement.
The Trustee will notify Rational and Acquisition Sub of the written
assertion of a claim or of any action commenced against the Indemnified
Parties, promptly after any of the Indemnified Parties has received any
written assertion of a claim or has been served with a summons or other
first legal process giving information as to the nature and basis of the
claim. Subject to (ii) below, Rational and Acquisition Sub will be
entitled to participate at their own expense in the defence and, if
Rational and Acquisition Sub so elect at any time after receipt of the
notice, either of them may assume the defence of any suit brought to
enforce any claim. The Trustee has the right to employ separate counsel
in any suit and participate in the defence of the suit but the fees and
expenses of that counsel will be at the expense of the Trustee unless:
(i) the employment of that counsel has been authorized by Rational or
Acquisition Sub, which authorization will not be unreasonably withheld;
or (ii) the named parties to any suit include both the Trustee and
Rational or Acquisition Sub and the Trustee has been advised by counsel
acceptable to Rational or Acquisition Sub that there may be one or more
legal defences available to the Trustee that are different from or in
addition to those available to Rational or Acquisition Sub and that, in
the judgment of that counsel, would present a conflict of interest were a
joint representation to be undertaken (in which case Rational and
Acquisition Sub will not have the right to assume the defence of that
suit on behalf of the Trustee but will be liable to pay the reasonable
fees and expenses of counsel for the Trustee). This indemnity will
survive the resignation or removal of the Trustee and the termination of
the Trust.
8.2. Limitation of Liability
The Trustee will not be held liable for any loss which may occur by
reason of depreciation of the value of any part of the Trust Estate or
any loss incurred on any investment of funds pursuant to this trust
agreement, except to the extent that the loss is attributable to the
fraud, negligence, recklessness, wilful misconduct or bad faith on the
part of the Trustee.
ARTICLE 9.
CHANGE OF TRUSTEE
9.1. Resignation
The Trustee, or any trustee later appointed, may at any time resign
by giving written notice of the resignation to Rational and Acquisition
Sub specifying the date on which it desires to resign, provided that the
notice is not given less than one month before the desired resignation
date, unless Rational and Acquisition Sub otherwise agree, and provided
further that the resignation will not take effect until the date of the
appointment of a successor trustee and the acceptance of that appointment
by the successor trustee. Upon receiving a notice of resignation,
Rational and Acquisition Sub will promptly appoint a successor trustee by
written instrument in duplicate, one copy of which will be delivered to
the resigning trustee and one copy to the successor trustee. Failing
appointment of a successor trustee by Rational and Acquisition Sub, a
successor trustee may be appointed by an order of a court of competent
jurisdiction upon application of one or more parties to this trust
agreement. Should the retiring trustee apply for the appointment of a
successor trustee by an order of the Ontario Superior of Justice it will
be at the joint and several expense of Rational and Acquisition Sub.
9.2. Removal
The Trustee, or any trustee later appointed, may (provided a
successor trustee is appointed) be removed at any time on not less than
30 days' prior notice by written instrument executed by Rational and
Acquisition Sub, in duplicate, one copy of which will be delivered to the
trustee so removed and one copy to the successor trustee.
9.3. Successor Trustee
Any successor trustee appointed as provided under this trust
agreement will execute, acknowledge and deliver to Rational and
Acquisition Sub and to its predecessor trustee an instrument accepting
the appointment. Upon that acceptance, the resignation or removal of the
predecessor trustee will become effective and the successor trustee,
without any further act, deed or conveyance, will become vested with all
the rights, powers, duties and obligations of its predecessor under this
trust agreement, with the like effect as if originally named as trustee
in this trust agreement. However, on the written request of Rational and
Acquisition Sub or of the successor trustee, the trustee ceasing to act
will, upon payment of any amounts then due it pursuant to the provisions
of this trust agreement, execute and deliver an instrument transferring
to the successor trustee all the rights and powers of the trustee so
ceasing to act. Upon the request of any successor trustee, Rational,
Acquisition Sub and the predecessor trustee will execute any and all
instruments in writing for more fully and certainly vesting in and
confirming to the successor trustee all rights and powers.
9.4. Notice of Successor Trustee
Upon acceptance of appointment by a successor trustee as provided
in this trust agreement, Rational and Acquisition Sub will cause to be
mailed notice of the succession of the trustee under this trust agreement
to each Beneficiary specified in a List. If Rational or Acquisition Sub
fail to cause this notice to be mailed within 10 days after acceptance of
appointment by the successor trustee, the successor trustee will cause
the notice to be mailed at the expense of Rational and Acquisition Sub.
ARTICLE 10.
RATIONAL SUCCESSORS
10.1. Certain Requirements in Respect of Combination, etc.
Rational will not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale,
lease or otherwise) whereby all or substantially all of its undertaking,
property and assets would become the property of any other person or, in
the case of a merger, of the continuing corporation resulting from the
merger unless, but may do so if:
(a) the other person or continuing corporation (the "Rational
Successor"), by operation of law, becomes, without more,
bound by the terms and provisions of this trust agreement or,
if not so bound, executes, prior to or contemporaneously with
the consummation of the transaction, a trust agreement
supplemental to this trust agreement;
(b) the transaction will, in the opinion of legal counsel to
Rational received by the Trustee, be upon those terms and
conditions as substantially preserve and not impair in any
material respect any of the rights, duties, powers and
authorities of the Trustee or of the Beneficiaries under this
trust agreement; and
(c) the Trustee will have received the opinion of legal counsel
to Rational that any trust agreement supplement, all other
instruments necessary or advisable to evidence the assumption
by the Rational Successor of liability for all moneys payable
and property deliverable in accordance with this trust
agreement and the Plan of Arrangement, and the covenant of
the Rational Successor to pay and deliver or cause to be
delivered the same and its agreement to observe and perform
all the covenants and obligations of Rational under this
trust agreement constitute legally binding and enforceable
obligations of the Rational Successor.
10.2. Vesting of Powers in Successor
Whenever the conditions of section 10.1 have been duly observed and
performed, the Trustee and, if required by section 10.1, Rational
Successor and Acquisition Sub will execute and deliver the supplemental
trust agreement provided for in Article 11 and then Rational Successor
will possess and from time to time may exercise each and every right and
power of Rational under this trust agreement in the name of Rational or
otherwise and any act or proceeding by any provision of this trust
agreement required to be done or performed by the Board of Directors of
Rational or any officers of Rational may be done and performed with like
force and effect by the directors or officers of the Rational Successor.
10.3. Wholly-Owned Subsidiaries
Nothing in this trust agreement will be construed as preventing the
amalgamation or merger of any wholly-owned direct or indirect subsidiary
of Rational with or into Rational or the winding-up, liquidation or
dissolution of any wholly-owned subsidiary of Rational provided that all
of the assets of the subsidiary are transferred to Rational or another
wholly-owned direct or indirect subsidiary of Rational and any of these
transactions are expressly permitted by this Article 10.
ARTICLE 11.
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1. Amendments, Modifications, etc.
This trust agreement may not be amended or modified except by an
agreement in writing executed by Rational, Acquisition Sub and the
Trustee and approved by the Beneficiaries in accordance with section 11.2
of the Share Provisions.
11.2. Ministerial Amendments
Notwithstanding the provisions of section 11.1, the parties to this
trust agreement may in writing, at any time and from time to time,
without the approval of the Beneficiaries, amend or modify this trust
agreement for the purposes of:
(a) adding to the covenants of any or all parties to this trust
agreement provided that the Board of Directors of Acquisition
Sub is of the good faith opinion that those additions will
not be prejudicial to the rights or interests of the
Beneficiaries;
(b) making any provisions or modifications not inconsistent with
this trust agreement as may be necessary or desirable with
respect to matters or questions arising under this trust
agreement which, in the good faith opinion of the Board of
Directors of Acquisition Sub and in the opinion of the
Trustee, it may be expedient to make, provided that the Board
of Directors is of the good faith opinion, after consultation
with counsel, that those provisions and modifications will
not be prejudicial to the interests of the Beneficiaries;
(c) making any changes or corrections which, on the advice of
counsel to Acquisition Sub and the Trustee, are required for
the purpose of curing or correcting any ambiguity or defect
or inconsistent provision or clerical omission or mistake or
manifest error, provided that the Board of Directors of
Acquisition Sub is of the good faith opinion, after
consultation with counsel, that those changes or corrections
will not be prejudicial to the rights and interests of the
Beneficiaries;
(d) evidencing the succession of Rational Successors and the
covenants of and obligations assumed by each Rational
Successor in accordance with the provisions of Article 10 and
the successors of any successor trustee in accordance with
the provisions of Article 9.
11.3. Meeting to Consider Amendments
Acquisition Sub, at the request of Rational, will call a meeting or
meetings of the Beneficiaries for the purpose of considering any proposed
amendment or modification requiring approval pursuant to this trust
agreement. Any meeting or meetings will be called and held in accordance
with the by-laws of Acquisition Sub, the Share Provisions and all
applicable laws.
11.4. Changes in Capital of Rational and Acquisition Sub
At all times after the occurrence of any event contemplated
pursuant to section 2.7 or 2.8 of the Support Agreement, sections 5.3
or 5.4 of the Plan of Arrangement or otherwise, as a result of which
either Rational Common Shares or the Exchangeable Shares or both are in
any way changed, this trust agreement will promptly be amended and
modified as necessary in order that it applies with full force and
effect, mutatis mutandis, to all new securities into which Rational
Common Shares or the Exchangeable Shares or both are so changed and the
parties to this trust agreement will execute and deliver a supplemental
trust agreement giving effect to and evidencing the necessary amendments
and modifications.
11.5. Execution of Supplemental Trust Agreements
(a) No amendment to or modification or waiver of any of the
provisions of this trust agreement otherwise permitted under this trust
agreement will be effective unless made in writing and signed by all of
the parties to this trust agreement. From time to time Acquisition Sub
(when authorized by a resolution of its Board of Directors), Rational
(when authorized by a resolution of its Board of Directors) and the
Trustee may, subject to the provisions of this trust agreement, and they
will, when so directed by the provisions of this trust agreement, execute
and deliver by their proper officers, trust agreements or other
instruments supplemental to this trust agreement, which will then form
part of the trust agreement, for any one or more of the purposes
contemplated by this Article 11.
(b) In executing any supplemental trust agreement, the Trustee
will be entitled to receive and will be fully protected in relying upon,
an opinion of legal counsel to Rational stating that the execution of
that supplemental trust agreement is authorized or permitted by this
trust agreement. Subject to the provisions of this trust agreement, the
Trustee may, but will not be obligated to, enter any supplemental trust
agreement which affects the Trustee's own rights, duties or immunities
under this trust agreement or otherwise.
ARTICLE 12.
TERMINATION
12.1. Term
The Trust created by this trust agreement will continue until the
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Beneficiary
(other than Rational and its Affiliates);
(b) each of Rational and Acquisition Sub elects in writing to
terminate the Trust and this termination is approved by the
Beneficiaries in accordance with section 11.2 of the Share
Provisions; and
(c) 21 years from the date of this trust agreement.
12.2. Survival of Agreement
This trust agreement will survive any termination of the Trust and
will continue until there are no Exchangeable Shares outstanding held by
a Beneficiary; provided, however, that the provisions of Articles 7 and 8
will survive any termination of this trust agreement.
ARTICLE 13.
GENERAL
13.1. Severability
If any term or other provision of this trust agreement is invalid,
illegal or incapable of being enforced by any rule or law, or public
policy, all other conditions and provisions of this trust agreement will
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this trust agreement
is not affected in any manner materially adverse to any party. Upon any
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties to this trust agreement will
negotiate in good faith to modify this trust agreement so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
trust agreement are fulfilled to the fullest extent possible.
13.2. Enurement
This trust agreement will be binding upon and enure to the benefit
of the parties to this trust agreement and their respective successors
and permitted assigns and to the benefit of the Beneficiaries.
13.3. Notices to Parties
All notices and other communications between the parties under this
trust agreement will be in writing and will be deemed to have been given
if delivered personally, by courier service or by confirmed telecopy to
the parties at the following addresses (or at any other address for the
party as is specified in like notice):
(a) if to Acquisition Sub:
c/o Rational Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Rational:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Trustee:
The Bank of Nova Scotia Trust Company of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone number.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice or other communication given personally or by courier
service will be deemed to have been given and received upon delivery and
if given by telecopy will be deemed to have been given and received on
the date of receipt unless that day is not a Business Day in which case
it will be deemed to have been given and received upon the immediately
following Business Day.
13.4. Notice to Beneficiaries
Any and all notices to be given and any documents to be sent to any
Beneficiaries may be given or sent to the address of the Beneficiary
shown on the List in any manner permitted by the by-laws of Acquisition
Sub from time to time in force in respect of notices to shareholders and
will be deemed to be received (if given or sent in that manner) at the
time specified in the by-laws, the provisions of which will apply mutatis
mutandis to notices or documents sent to those Beneficiaries as set out
above.
13.5. Counterparts
This trust agreement may be executed in counterparts, each of which
will be deemed an original, but all of which taken together will
constitute one and the same instrument.
13.6. Jurisdiction
This trust agreement will be construed and enforced in accordance
with the laws of the Province of Ontario and the laws of Canada
applicable therein.
13.7. Attornment
Each of Rational and Acquisition Sub agrees that any action or
proceeding arising out of or relating to this trust agreement may be
instituted in the courts of Ontario, waives any objection which it may
have now or later to the venue of that action or proceeding, irrevocably
submits to the jurisdiction of those courts in that action or proceeding,
agrees to be bound by any judgment of those courts and agrees not to
seek, and hereby waives, any review of the merits of any judgment by the
court of any other jurisdiction and hereby appoints Acquisition Sub at
its principal office in the Province of Ontario as Rational's attorney
for service of process.
IN WITNESS WHEREOF the parties hereto have caused this trust
agreement to be duly executed as of the date first written above.
1386501 ONTARIO LIMITED
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
RATIONAL SOFTWARE CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior VP, CFO, Secretary
THE BANK OF NOVA SCOTIA TRUST COMPANY
OF NEW YORK
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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Exhibit C
EXCHANGEABLE SHARE SUPPORT AGREEMENT
THIS AGREEMENT made as of the 13th day of January, 2000.
B E T W E E N:
RATIONAL SOFTWARE CORPORATION,
a corporation existing under the
laws of the
State of Delaware,
("Rational")
- and -
3037936 NOVA SCOTIA COMPANY,
an unlimited liability company
existing under the laws of the
Province of Nova Scotia,
("Holding ULC")
- and -
1386501 ONTARIO LIMITED,
a corporation existing under the
laws of the Province of Ontario
("Acquisition Sub").
RECITALS:
▇. ▇▇▇▇▇▇▇▇ to an agreement and plan of acquisition and arrangement
(the "Acquisition Agreement") dated as of December 14, 1999 among
Rational, Rational International, Holding ULC, Acquisition Sub,
1386503 Ontario Limited ("Amalco") and ObjecTime Limited ("ObjecTime"),
and the plan of arrangement (the "Plan of Arrangement") contemplated by
the Acquisition Agreement, ObjecTime Limited was formed upon the
amalgamation of Amalco and ObjecTime and Acquisition Sub has issued
Class B non-voting preference shares ("Class B Non-Voting Preference
Shares") to certain former holders of shares of ObjecTime.
B. Pursuant to the Acquisition Agreement and the Plan of Arrangement,
Acquisition Sub is to issue its Class A non-voting preference shares
(the "Exchangeable Shares") to certain holders of Class B Non-Voting
Preference Shares in exchange for those Class B Non-Voting Preference
Shares.
C. Pursuant to the Acquisition Agreement and coincident with the
issue of Exchangeable Shares to certain holders of Class B Non-Voting
Preference Shares, Rational, Holding ULC and Acquisition Sub are to
execute a support agreement substantially in the form of this Agreement.
NOW THEREFORE in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties to this Agreement covenant and agree as
follows:
ARTICLE 1.
DEFINITIONS AND INTERPRETATION
1.1. Defined Terms
Each term denoted in this Agreement by initial capital letters and
not otherwise defined in this Agreement will have the meaning given to
that term in the rights, privileges, restrictions and conditions
(collectively, the "Share Provisions") attaching to the Exchangeable
Shares attached as Appendix 4 to the Plan of Arrangement as set out in
the Articles of Arrangement of ObjecTime, unless the context requires
otherwise.
1.2. Interpretation Not Affected by Headings
The division of this Agreement into Articles, sections and other
portions and the insertion of headings are for convenience of reference
only and will not affect the construction or interpretation of this
Agreement. Unless otherwise indicated, all references to an "Article"
or "section" followed by a number and/or a letter refer to the specified
Article or section of this Agreement. The terms "this Agreement",
"hereof", "herein" and "hereunder" and similar expressions refer to this
agreement and not to any particular Article, section or other portion of
this Agreement and include any agreement or instrument supplementary or
ancillary to this Agreement.
1.3. Number, Gender
Words importing the singular number only will include the plural
and vice versa. Words importing any gender includes all genders.
1.4. Date for any Action
If any date on which any action is required to be taken under this
Agreement is not a Business Day, that action will be required to be
taken on the next succeeding Business Day.
ARTICLE 2.
COVENANTS OF RATIONAL AND ACQUISITION SUB
2.1. Covenants Regarding Exchangeable Shares
So long as any Exchangeable Shares not owned by Rational or its
Affiliates are outstanding, Rational will:
(a) not declare or pay any dividend on the Rational Common Shares
unless (i) Acquisition Sub will (w) simultaneously declare or
pay, as the case may be, an equivalent dividend (as provided
for in the Share Provisions) on the Exchangeable Shares (an
"Equivalent Dividend"), and (x) have sufficient money or
other assets or authorized but unissued securities available
to enable the due declaration and the due and punctual
payment, in accordance with applicable law, of any Equivalent
Dividend, or (ii) Acquisition Sub will (y) subdivide the
Exchangeable Shares in lieu of a stock dividend thereon (as
provided for in the Share Provisions) (an "Equivalent Stock
Subdivision"), and (z) have sufficient authorized but
unissued securities available to enable the Equivalent Stock
Subdivision;
(b) advise Acquisition Sub sufficiently in advance of the
declaration by Rational of any dividend on Rational Common
Shares and take any other actions as are reasonably
necessary, in co-operation with Acquisition Sub, to ensure
that (i) the respective declaration date, record date and
payment date for an Equivalent Dividend are the same as the
declaration date, record date and payment date for the
corresponding dividend on the Rational Common Shares or, (ii)
the record date and effective date for an Equivalent Stock
Subdivision are the same as the record date and payment date
for the corresponding stock dividend on the Rational Common
Shares;
(c) ensure that the record date for any dividend declared on
Rational Common Shares is not less than 10 Business Days
after the declaration date of that dividend;
(d) take all actions and do all things as are reasonably
necessary or desirable to enable and permit Acquisition Sub,
in accordance with applicable law, to pay and otherwise
perform its obligations with respect to the satisfaction of
the Liquidation Amount, the Retraction Price or the
Redemption Price in respect of each issued and outstanding
Exchangeable Share upon the liquidation, dissolution or
winding-up of Acquisition Sub, the delivery of a Retraction
Request by a holder of Exchangeable Shares or a redemption of
Exchangeable Shares by Acquisition Sub, as the case may be,
including without limitation all actions and all things as
are necessary or desirable to enable and permit Acquisition
Sub to cause to be delivered Rational Common Shares to the
holders of Exchangeable Shares in accordance with Article 5,
6 or 7, as the case may be, of the Share Provisions;
(e) take all actions and do all things as are reasonably
necessary or desirable to enable and permit Holding ULC, in
accordance with applicable law, to perform its obligations
arising upon the exercise by it of the Liquidation Call
Right, the Retraction Call Right or the Redemption Call
Right, including without limitation all actions and all
things as are necessary or desirable to enable and permit
Holding ULC to cause to be delivered Rational Common Shares
to the holders of Exchangeable Shares in accordance with the
provisions of the Liquidation Call Right, the Retraction Call
Right or the Redemption Call Right, as the case may be; and
(f) if a holder of Exchangeable Shares becomes a "specified
financial institution" (as that term is defined in the Income
Tax Act (Canada)) or does not deal at arm's length with
Acquisition Sub or otherwise requests Holding ULC to acquire
the Exchangeable Shares, take all actions and do all things
as are reasonably necessary or desirable to cause Holding ULC
to exercise the Retraction Call Right if requested to do so
by that holder of Exchangeable Shares making a Retraction
Request.
2.2. Segregation of Funds
Rational will cause Acquisition Sub to deposit a sufficient amount
of funds in a separate account of Acquisition Sub and segregate a
sufficient amount of other assets and property as is necessary to enable
Acquisition Sub to pay dividends when due and to pay or otherwise
satisfy its respective obligations under Article 5, 6 or 7 of the Share
Provisions, as applicable.
2.3. Reservation of Rational Common Shares
Rational hereby represents, warrants and covenants in favour of
Acquisition Sub and Holding ULC that Rational has issued to the Trustee
pursuant to the Voting and Exchange Trust Agreement a number of Rational
Common Shares equal to the number of Exchangeable Shares issued pursuant
to the Plan of Arrangement and will, at all times while any Exchangeable
Shares (other than Exchangeable Shares held by Rational or its
Affiliates) are outstanding, keep available, free from pre-emptive and
other rights, out of its authorized and unissued capital stock or issue
to the Trustee, as the case may be, that number of Rational Common
Shares (or other shares or securities into which Rational Common Shares
may be reclassified or changed as contemplated by section 2.7) as are
now and may later be required to enable and permit Holding ULC to meet
its obligations under the Voting and Exchange Trust Agreement, under
each of the Liquidation Call Right, the Retraction Call Right and the
Redemption Call Right and under any other security or commitment
pursuant to which Rational may now or later be required to issue or
deliver Rational Common Shares and to enable and permit Acquisition Sub
to meet its obligations under this Agreement and under the Share
Provisions.
2.4. Notification of Certain Events
To assist Rational to comply with its obligations under this
Agreement and to permit Holding ULC to exercise the Liquidation Call
Right, the Retraction Call Right and the Redemption Call Right and to
comply with its obligations under this Agreement, Acquisition Sub will
notify Rational and Holding ULC of each of the following events at the
time set out below:
(a) in the event of any determination by the Board of Directors
of Acquisition Sub to institute voluntary liquidation,
dissolution or winding-up proceedings with respect to
Acquisition Sub or to effect any other distribution of the
assets of Acquisition Sub among its shareholders for the
purpose of winding up its affairs, at least 60 days prior to
the proposed effective date of that liquidation, dissolution,
winding-up or other distribution;
(b) promptly, upon the earlier of receipt by Acquisition Sub of
notice of and Acquisition Sub otherwise becoming aware of any
threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of Acquisition Sub or to effect any
other distribution of the assets of Acquisition Sub among its
shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by Acquisition Sub of a Retraction
Request;
(d) on the same date on which notice of redemption is given to
holders of Exchangeable Shares, upon the determination of a
Redemption Date in accordance with the Share Provisions; and
(e) as soon as practicable upon the issuance by Acquisition Sub
of any Exchangeable Shares or rights to acquire Exchangeable
Shares (other than the issuance of Exchangeable Shares and
rights to acquire Exchangeable Shares in exchange for
outstanding Class B Non-Voting Preference Shares pursuant to
the Plan of Arrangement).
2.5. Delivery of Rational Common Shares to Acquisition Sub and Holding
ULC
In furtherance of its obligations under sections 2.1(d) and (e),
upon notice from Acquisition Sub or Holding ULC of any event that
requires Acquisition Sub or Holding ULC to cause to be delivered
Rational Common Shares to any holder of Exchangeable Shares, Rational
will promptly cause to be delivered to Acquisition Sub or Holding ULC
from the Deposited Shares the requisite number of Rational Common Shares
to be received by, and issued to or to the order of, the former holder
of the surrendered Exchangeable Shares, as Acquisition Sub or Holding
ULC directs. All Deposited Shares will be duly authorized and validly
issued as fully paid and non-assessable and will be free and clear of
any lien, claim or encumbrance. In consideration of the issuance and
delivery of each Rational Common Share, Acquisition Sub or Holding ULC
will issue to Rational, or as Rational directs, common shares of
Acquisition Sub or Holding ULC having equivalent value.
2.6. Qualification of Rational Common Shares
If any Rational Common Shares (or other shares or securities into
which Rational Common Shares may be reclassified or changed as
contemplated by section 2.7) to be issued, transferred and/or delivered
under this Agreement require registration or qualification with or
approval of or the filing of any document, including any prospectus or
similar document or the taking of any proceeding with or the obtaining
of any order, ruling or consent from any governmental or regulatory
authority (i) under the Canadian provincial securities or other law or
regulation or pursuant to the rules and regulations of any securities or
other regulatory authority applicable to holders who are resident in the
provinces of Ontario or Quebec or (ii) under any United States federal
or state securities or other law or regulation or pursuant to the rules
and regulations of any United States securities or other regulatory
authority, or the fulfilment of any other United States legal
requirement or Canadian legal requirement applicable to holders who are
resident in the provinces of Ontario or Quebec before those shares (or
those other shares or securities) may be issued by Rational and
delivered by Rational at the direction of Acquisition Sub or Holding ULC
to the holder of surrendered Exchangeable Shares or in order that those
shares (or those other shares or securities) may be freely traded
thereafter through the facilities of a stock exchange or market in the
United States or through NASDAQ provided that first trade is made in
accordance with the rules of the stock exchange or market upon which the
trade is made or the rules of NASDAQ in accordance with all laws
applicable to that stock exchange or market or applicable to NASDAQ
(other than any restrictions of general application on transfer by
reason of a holder being a "control person" for purposes of Canadian
provincial securities law or an "affiliate" of Rational for purposes of
United States federal or state securities law), Rational will in good
faith expeditiously take all actions and do all things as are necessary
or desirable to cause those Rational Common Shares (or those other
shares or securities) to be and remain duly registered, qualified or
approved under United States and/or Canadian law, as the case may be.
Rational will in good faith expeditiously take all actions and do all
things as are reasonably necessary or desirable to cause all Rational
Common Shares (or those other shares or securities) to be delivered
under this Agreement to be listed, quoted or posted for trading on all
stock exchanges and quotation systems on which outstanding Rational
Common Shares (or those other shares or securities) have been listed by
Rational and remain listed and are quoted or posted for trading at that
time.
2.7. Economic Equivalence
(a) Rational will not without prior approval of Acquisition Sub and the
prior approval of the holders of the Exchangeable Shares given in
accordance with section 11.2 of the Share Provisions:
(i) issue or distribute Rational Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Rational Common Shares) to
the holders of all or substantially all of the then
outstanding Rational Common Shares by way of stock
dividend or other distribution, other than an issue of
Rational Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire
Rational Common Shares) to holders of Rational Common
Shares who exercise an option to receive dividends in
Rational Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire
Rational Common Shares) in lieu of receiving cash
dividends; or
(ii) issue or distribute rights, options or warrants to the
holders of all or substantially all of the then
outstanding Rational Common Shares entitling them to
subscribe for or to purchase Rational Common Shares (or
securities exchangeable for or convertible into or
carrying rights to acquire Rational Common Shares); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding Rational
Common Shares (A) shares or securities of Rational of
any class other than Rational Common Shares (other than
shares convertible into or exchangeable for or carrying
rights to acquire Rational Common Shares), (B) rights,
options or warrants other than those referred to in
section 2.7(a)(ii) above, (C) evidences of indebtedness
of Rational or (D) assets of Rational,
unless the economic equivalent on a per share basis of those rights,
options, securities, shares, evidences of indebtedness or other
assets is issued or distributed simultaneously to holders of the
Exchangeable Shares, in which case, for greater certainty, no
approval of the holders of Exchangeable Shares is required other
than those approvals required by applicable law despite the waiver
of those approval rights pursuant to this Agreement; provided that,
for greater certainty, the above restrictions do not apply to any
securities issued or distributed by Rational to give effect to and
to consummate the transactions contemplated by, and in accordance
with, the Acquisition Agreement.
(b) Rational will not without the prior approval of Acquisition Sub
and the prior approval of the holders of the Exchangeable Shares
given in accordance with section 11.2 of the Share Provisions:
(i) subdivide, redivide or change the then outstanding
Rational Common Shares into a greater number of
Rational Common Shares; or
(ii) reduce, combine, consolidate or change the then
outstanding Rational Common Shares into a lesser number
of Rational Common Shares; or
(iii) reclassify or otherwise change Rational Common Shares
or effect an amalgamation, merger, reorganization or
other transaction affecting Rational Common Shares,
unless the same or an economically equivalent change is simultaneously
made to, or in the rights of the holders of, the Exchangeable
Shares, in which case, for greater certainty, no approval of the
holders of Exchangeable Shares is required.
(c) Rational will ensure that the record date for any event referred to
in section 2.7(a) or 2.6(b) above, or (if no record date is
applicable for the event) the effective date for that event, is not
less than five Business Days after the date on which that event is
declared or announced by Rational (with contemporaneous
notification by Rational to Acquisition Sub).
(d) The Board of Directors of Acquisition Sub will determine, in good
faith and in its sole discretion, economic equivalence for the
purposes of any event referred to in section 2.7(a) or 2.6(b) above
and each determination will be conclusive and binding on Rational.
In making each determination, the following factors will, without
excluding other factors determined by the Board of Directors of
Acquisition Sub to be relevant, be considered by the Board of
Directors of Acquisition Sub:
(i) in the case of any stock dividend or other distribution
payable in Rational Common Shares, the number of those
shares issued in proportion to the number of Rational
Common Shares previously outstanding;
(ii) in the case of the issuance or distribution of any
rights, options or warrants to subscribe for or
purchase Rational Common Shares (or securities
exchangeable for or convertible into or carrying rights
to acquire Rational Common Shares), the relationship
between the exercise price of each right, option or
warrant and the current market value (as determined by
the Board of Directors of Acquisition Sub in the manner
above contemplated) of a Rational Common Share;
(iii) in the case of the issuance or distribution of any
other form of property (including without limitation
any shares or securities of Rational of any class other
than Rational Common Shares, any rights, options or
warrants other than those referred to in
section 2.7(d)(ii) above, any evidences of indebtedness
of Rational or any assets of Rational), the
relationship between the fair market value (as
determined by the Board of Directors of Acquisition Sub
in the manner above contemplated) of property to be
issued or distributed with respect to each outstanding
Rational Common Share and the current market value (as
determined by the Board of Directors of Acquisition Sub
in the manner above contemplated) of a Rational Common
Share;
(iv) in the case of any subdivision, redivision or change of
the then outstanding Rational Common Shares into a
greater number of Rational Common Shares or the
reduction, combination, consolidation or change of the
then outstanding Rational Common Shares into a lesser
number of Rational Common Shares or any amalgamation,
merger, reorganization or other transaction affecting
Rational Common Shares, the effect of the change upon
the then outstanding Rational Common Shares; and
(v) in all cases, the general taxation consequences of the
relevant event to holders of Exchangeable Shares to the
extent that those consequences may differ from the
taxation consequences to holders of Rational Common
Shares as a result of differences between taxation laws
of Canada and the United States (except for any
differing consequences arising as a result of differing
marginal taxation rates and without regard to the
individual circumstances of holders of Exchangeable
Shares).
For purposes of the foregoing determinations, the current market value
of any security listed and traded or quoted on a securities
exchange will be the average of the closing bid and ask prices of
that security during a period of not less than 20 consecutive
trading days ending not more than three trading days before the
date of determination on the principal securities exchange on which
that security is listed and traded or quoted; provided, however,
that if in the opinion of the Board of Directors of Acquisition Sub
the public distribution or trading activity of that security during
that period does not create a market which reflects the fair market
value of that security, then the current market value will be
determined by the Board of Directors of Acquisition Sub, in good
faith and in its sole discretion, and provided further that the
determination by the Board of Directors of Acquisition Sub will be
conclusive and binding on Rational.
(e) Acquisition Sub agrees that, to the extent required, upon due
notice from Rational, Acquisition Sub will use its best efforts to
take or cause to be taken all steps as may be necessary for the
purposes of ensuring that appropriate dividends are paid or other
distributions are made by Acquisition Sub, or subdivisions,
redivisions or changes are made to the Exchangeable Shares, in
order to implement the required economic equivalence with respect
to the Rational Common Shares and Exchangeable Shares as provided
for in this section 2.7.
2.8. Tender Offers
In the event that a tender offer, share exchange offer, issuer
bid, take-over bid or similar transaction with respect to Rational
Common Shares (an "Offer") is proposed by Rational or is proposed to
Rational or its shareholders and is recommended by the Board of
Directors of Rational, or is otherwise effected or to be effected with
the consent or approval of the Board of Directors of Rational, and the
Exchangeable Shares are not redeemed by Acquisition Sub or purchased by
Holding ULC pursuant to the Redemption Call Right, Rational will use its
reasonable efforts expeditiously and in good faith to take all actions
and do all things as are necessary or desirable to enable and permit
holders of Exchangeable Shares to participate in the Offer to the same
extent and on an economically equivalent basis as the holders of
Rational Common Shares, without discrimination. Without limiting the
generality of the foregoing, Rational will use its reasonable efforts
expeditiously and in good faith to ensure that holders of Exchangeable
Shares may participate in all Offers without being required to retract
Exchangeable Shares as against Acquisition Sub (or, if so required, to
ensure that the retraction, will be effective only upon, and will be
conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer). Nothing in this Agreement
affects the rights of Acquisition Sub to redeem (or Holding ULC to
purchase pursuant to the Redemption Call Right) Exchangeable Shares, as
applicable, in the event of a Rational Control Transaction.
2.9. Ownership of Outstanding Shares
Without the prior approval of Acquisition Sub and the prior
approval of the holders of the Exchangeable Shares given in accordance
with section 11.2 of the Share Provisions, Rational covenants and agrees
in favour of Acquisition Sub that, as long as any outstanding
Exchangeable Shares are owned by any person or entity other than
Rational or any of its Affiliates, Rational will be and remain the
direct or indirect beneficial and legal owner of all issued and
outstanding securities in the capital of Acquisition Sub and Holding ULC
carrying or entitled to voting rights in any circumstances generally for
the election of directors.
2.10. Rational and Affiliates Not to Vote Exchangeable Shares
Rational covenants and agrees that it will appoint and cause to be
appointed proxyholders with respect to all Exchangeable Shares held by
it and its Affiliates for the sole purpose of attending each meeting of
holders of Exchangeable Shares in order to be counted as part of the
quorum for each meeting. Rational further covenants and agrees that it
will not, and will cause its Affiliates not to, exercise any voting
rights which may be exercisable by holders of Exchangeable Shares from
time to time pursuant to the Share Provisions or pursuant to the
provisions of the Business Corporations Act (Ontario) (or any successor
or other corporate statute by which Acquisition Sub may in the future be
governed) with respect to any Exchangeable Shares held by it or by its
Affiliates in respect of any matter considered at any meeting of holders
of Exchangeable Shares.
2.11. Rule-10b-18 Purchases
For greater certainty, nothing contained in this Agreement,
including without limitation the obligations of Rational contained in
section 2.7, will limit the ability of Rational or Acquisition Sub to
make a "Rule l0b-18 Purchase" of Rational Common Shares pursuant to Rule
10b-18 of the U.S. Securities Exchange Act of 1934, as amended, or any
successor provisions.
ARTICLE 3.
RATIONAL SUCCESSORS
3.1. Certain Requirements in Respect of Combination, etc.
Rational will not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale,
lease or otherwise) whereby all or substantially all of its undertaking,
property and assets would become the property of any other person or, in
the case of a merger, of the continuing corporation resulting from the
merger unless, but may do so if:
(a) the other person or continuing corporation (the "Rational
Successor") by operation of law, becomes, without more, bound
by the terms and provisions of this Agreement or, if not so
bound, executes, prior to or contemporaneously with the
consummation of that transaction, an agreement supplemental
to this Agreement and any other instruments (if any) as are
reasonably necessary or advisable to evidence the assumption
by the Rational Successor of liability for all moneys payable
and property deliverable in accordance with this Agreement
and the Plan of Arrangement and the covenant of the Rational
Successor to pay and deliver or cause to be delivered the
same and its Agreement to observe and perform all the
covenants and obligations of Rational under this Agreement;
and
(b) the transaction will be upon the terms and conditions which
substantially preserve and not impair in any material respect
any of the rights, duties, powers and authorities of the
other parties under this Agreement or the holders of
Exchangeable Shares.
3.2. Vesting of Powers in Successor
Whenever the conditions of section 3.1 have been duly observed and
performed, the parties, if required by section 3.1, will execute and
deliver a supplemental agreement to this Agreement and the Rational
Successor will then possess and from time to time may exercise each and
every right and power of Rational under this Agreement in the name of
Rational or otherwise and any act or proceeding by any provision of this
Agreement required to be done or performed by the Board of Directors of
Rational or any officers of Rational may be done and performed with like
force and effect by the directors or officers of the Rational Successor.
3.3. Who-ly-Owned Subsidiaries
Nothing in this Agreement is to be construed as preventing the
amalgamation or merger of any wholly-owned direct or indirect subsidiary
of Rational with or into Rational or the winding-up, liquidation or
dissolution of any wholly-owned subsidiary of Rational provided that all
of the assets of that subsidiary are transferred to Rational or another
wholly-owned direct or indirect subsidiary of Rational and the
transactions are expressly permitted by this Article 3.
ARTICLE 4.
GENERAL
4.1. Term
This Agreement will come into force and be effective as of the
date of this Agreement and will terminate and be of no further force and
effect when no Exchangeable Shares (or securities or rights convertible
into or exchangeable for or carrying rights to acquire Exchangeable
Shares) are held by any person or entity other than Rational and any of
its Affiliates.
4.2. Changes in Capital of Rational and Acquisition Sub
At all times after the occurrence of any event contemplated
pursuant to sections 2.7 and 2.8, sections 5.3 or 5.4 of the Plan of
Arrangement or otherwise, as a result of which either Rational Common
Shares or the Exchangeable Shares or both are in any way changed, this
Agreement will promptly be amended and modified as necessary in order
that it will apply with full force and effect, mutatis mutandis, to all
new securities into which Rational Common Shares or the Exchangeable
Shares or both are so changed and the parties to this Agreement will
execute and deliver an Agreement in writing giving effect to and
evidencing any necessary amendments and modifications.
4.3. Severability
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule or law, or public
policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Agreement is
not affected in any manner materially adverse to any party. Upon the
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties to this Agreement will
negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated by this Agreement
are fulfilled to the fullest extent possible.
4.4. Amendments, Modifications
This Agreement may not be amended or modified except by an
Agreement in writing executed by Acquisition Sub, Holding ULC and
Rational and approved by the holders of the Exchangeable Shares in
accordance with section 11.2 of the Share Provisions.
4.5. Ministerial Amendments
Notwithstanding section 4.4, the parties to this Agreement may in
writing at any time and from time to time, without the approval of the
holders of the Exchangeable Shares, amend or modify this Agreement for
the purposes of:
(a) adding to the covenants of any or all parties provided that
the Board of Directors of Acquisition Sub is of the good
faith opinion that those additions will not be prejudicial to
the rights or interests of the holders of the Exchangeable
Shares;
(b) making any provisions or modifications not inconsistent with
this Agreement as may be necessary or desirable with respect
to matters or questions arising under this Agreement which,
in the good faith opinion of the Board of Directors of
Acquisition Sub, it may be expedient to make, provided that
the Board of Directors is of the good faith opinion, after
consultation with counsel, that those provisions or
modifications will not be prejudicial to the rights or
interests of the holders of the Exchangeable Shares; or
(c) making any changes in or corrections to this Agreement which,
on the advice of counsel to Acquisition Sub, are required for
the purpose of curing or correcting any ambiguity or defect
or inconsistent provision or clerical omission or mistake or
manifest error, provided that the Boards of Directors of
Acquisition Sub is of the good faith opinion, after
consultation with counsel, that those changes or corrections
will not be prejudicial to the rights or interests of the
holders of the Exchangeable Shares.
4.6. Meeting to Consider Amendments
Acquisition Sub, at the request of Rational, will call a meeting
or meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval
pursuant to section 4.4. Any meeting or meetings will be called and
held in accordance with the by-laws of Acquisition Sub, the Share
Provisions and all applicable laws.
4.7. Amendments Only in Writing
No amendment to or modification or waiver of any of the provisions
of this Agreement otherwise permitted under this Agreement will be
effective unless made in writing and signed by all of the parties to
this Agreement.
4.8. Enurement
This Agreement will be binding upon and enure to the benefit of
the parties to this Agreement and their respective successors and
assigns.
4.9. Notices to Parties
All notices and other communications between the parties to this
Agreement will be in writing and will be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the
following addresses (or at any other address for any party as is
specified in like notice):
(a) if to Acquisition Sub:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Rational or Holding ULC:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice or other communication given personally will be deemed to have
been given and received upon delivery and if given by telecopy will be
deemed to have been given and received on the date of confirmed receipt
unless that day is not a Business Day in which case it will be deemed to
have been given and received upon the immediately following Business Day.
4.10. Counterparts
This Agreement may be executed in counterparts, each of which will
be deemed an original, and all of which taken together will constitute
one and the same instrument.
4.11. Jurisdiction
This Agreement will be construed and enforced in accordance with
the laws of the Province of Ontario and the laws of Canada applicable
therein.
4.12. Attornment
Each of Rational, Holding ULC and Acquisition Sub agrees that any
action or proceeding arising out of or relating to this Agreement may be
instituted in the courts of Ontario, waives any objection which it may
have now or later to the venue of any action or proceeding, irrevocably
submits to the jurisdiction of those courts in any action or proceeding,
agrees to be bound by any judgment of those courts and not to seek, and
hereby waives, any review of the merits of any judgment by the courts of
any other jurisdiction and hereby appoints Acquisition Sub at its
principal office in the Province of Ontario as attorney for service of
process.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date first above written.
RATIONAL SOFTWARE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior VP, CFO, Secretary
3037936 NOVA SCOTIA COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
1386501 ONTARIO LIMITED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
---------------------------------------------------------------------
Exhibit D
FOUNDERS' ADDITIONAL RESTRICTIONS AGREEMENT
This Founders' Additional Restrictions Agreement ("Agreement") is
made and entered into as of December 14, 1999, between Rational
Software Corporation, a Delaware corporation ("Parent"), and the
undersigned founder ("Founder") of ObjecTime Limited, an Ontario
corporation ("Company"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the
Acquisition Agreement (as defined below).
RECITALS
A. Concurrently with the execution of this Agreement, Parent,
Company, Rational International, a California corporation and
subsidiary of Parent ("International Corp."), 3037936 Nova Scotia
Company, a Nova Scotia unlimited liability company and indirect
subsidiary of Parent ("Holding ULC"), 1386501 Ontario Limited, an
Ontario corporation and indirect subsidiary of Parent ("Acquisition
Sub"), and 1386503 Ontario Limited, an Ontario corporation and wholly-
owned subsidiary of Acquisition Sub ("Amalco") have entered into an
Agreement and Plan of Acquisition and Arrangement (the "Acquisition
Agreement"), which contemplates that the Company will execute a Plan of
Arrangement in the form attached to the Acquisition Agreement (the
"Plan of Arrangement"), collectively providing for the amalgamation of
Amalco with and into the Company to form New ObjecTime Corporation, an
Ontario corporation ("New ObjecTime"). Pursuant to the Plan of
Arrangement, shares of capital stock of the Company will be converted
into Class A non-voting preference shares of Acquisition Sub
("Exchangeable Shares") or Common Stock of Parent as set forth in the
Acquisition Agreement (the "Arrangement").
B. Founder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of such number of shares of the outstanding capital stock of the
Company and shares subject to outstanding options as is indicated on
the signature page of this Agreement.
C. In order to induce Parent to execute the Acquisition
Agreement, Founder agrees to additional restrictions on the release of
Exchangeable Shares to each Founder so as to facilitate consummation of
the Arrangement. The execution and delivery of this Agreement is a
material condition to ▇▇▇▇▇▇'s willingness to enter into the
Acquisition Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree
as follows:
1. Agreement to Additional Restrictions.
1.1 Release of Shares. Founder agrees that on the last
calendar day of each calendar month after the Closing Date (the
"Monthly Release Date"), the Depositary Agent shall release and forward
to each Founder that number of Exchangeable Shares equal to one forty-
eighty (1/48th) of the total number of shares designated for receipt by
the Founder at the Closing Date.
1.2 Termination of Employment. Founder agrees that the
receipt of the Exchangeable Shares shall cease in the event that the
Depositary Agent receives a written notice from Parent (the "Blockage
Notice") to the effect that the Founder has been terminated from
employment with the Company with Cause or has resigned Without Good
Reason (as such terms are defined in the Vesting and Release Schedule,
attached hereto as Exhibit A); provided that no such Blockage Notice
may be issued with respect to the account held for: (a) ▇▇▇ ▇▇▇▇▇▇▇▇▇
after the date on which he and Parent mutually agree shall be the date
on which his employment with Parent shall terminate, which date shall
not be later than December 31, 2000; or (b) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ after April
1, 2001, being the mutually agreed upon date on which his employment
with Parent shall terminate. The release of blocked shares may resume
upon the receipt by the Depositary Agent of a written recision of the
Blockage Notice by ▇▇▇▇▇▇. Until such recision of the Blockage Notice,
the Depositary Agent shall distribute all existing and future Monthly
Release Amounts to Parent.
2. Representations, Warranties and Covenants of the Founder.
Founder hereby represents, warrants and covenants to Parent that
Founder (i) is a party to the Unanimous Founding Shareholders'
Agreement dated January 1, 1995 whereby each Founder agreed to
arrangements making them the primary shareholders and founders of the
Company; and (ii) has full power and authority to make, enter into and
carry out the terms of this Agreement.
3. Additional Documents. Founder hereby covenants and agrees
to execute and deliver any additional documents necessary, in the
reasonable opinion of Parent or Founder, as the case may be, to carry
out the intent of this Agreement.
4. Consent and Waiver. Founder hereby gives any consents or
waivers that are reasonably required for the consummation of the
Arrangement under the terms of any agreements to which Founder is a
party or pursuant to any rights Founder may have.
5. Termination. This Agreement shall terminate and shall have
no further force or effect as of the expiration date, which shall be
the earlier of (i) such time and date as the Acquisition Agreement
shall have been validly terminated pursuant to Section 9 thereof or
(ii) the date which is the fourth anniversary of the Closing Date.
6. Appointment of Agent. ▇▇▇▇▇▇▇▇▇▇▇ agrees to appoint ▇▇▇▇▇
▇▇▇▇▇ as agent and attorney-in-fact for and on behalf of Shareholder
for purposes of Section 10.7 of the Acquisition Agreement. Shareholder
further agrees that any decision, act, consent or instruction of the
Company Agent (as defined in the Acquisition Agreement), including,
without limitation, any agreement by the Company Agent for and on
behalf of the holders of Company Shares [(as defined in the Acquisition
Agreement)] to any amendments, modifications and waivers of any term,
condition or other agreement set forth in the Acquisition Agreement,
shall constitute a decision of Shareholder for all purposes of and
under the Acquisition Agreement, and that such decision, act, consent
or instruction shall be final, binding and conclusive upon Shareholder
as if made by Shareholder.
7. Miscellaneous.
7.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
7.2 Binding Effect and Assignment. This Agreement and
all of the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, but, except as otherwise specifically provided
herein, either this Agreement nor any of the rights, interests or
obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
7.3 Amendments and Modification. This Agreement may not
be modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by the parties hereto.
7.4 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Parent will be irreparably harmed and that
there will be no adequate remedy at law for a violation of any of the
covenants or agreement of Founder set forth herein. Therefore, it is
agreed that, in addition to any other remedies that may be available to
Parent upon any such violation, Parent shall have the right to enforce
such covenants and agreements by specific performance, injunctive
relief or by any other means available to Parent at law or in equity.
7.5 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and sufficient if
delivered in person, by cable, telegram or telex, or sent by mail
(registered or certified mail, postage prepaid, return receipt
requested) or overnight courier (prepaid) to the respective parties as
follows:
If to Parent: Rational Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Founder: To the address for notice set forth on
the last page hereof.
or to such other address as any party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
7.6 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of
California without giving effect to any choice or conflict of law
provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California. Shareholder hereby
consents to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or
relating to this Agreement or relating to any arbitration in which the
parties are participants.
7.7 Entire Agreement. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof,
and supersedes all prior negotiations and understandings between the
parties with respect to such subject matter.
7.8 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original, but all of
which together shall constitute one and the same agreement.
7.9 Effect of Headings. The section headings herein are
for convenience only and shall not affect the construction of interpre-
tation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Founders'
Additional Restrictions Agreement to be duly executed on the date and
year first above written.
RATIONAL SOFTWARE CORPORATION
By:
Title:
FOUNDER:
Founder's Address for Notice:
Shares beneficially owned:
___________ shares of Common
Stock
___________ shares of Class A
Preferred Stock
___________ shares of Class B
Preferred Stock
___________ shares of Class 8
Special Stock
Exhibit E
COMPANY AFFILIATE AGREEMENT
THIS COMPANY AFFILIATE AGREEMENT (this "Agreement") is made and
entered into as of December ___, 1999, by and among Rational Software
Corporation, a Delaware corporation ("Parent"), ObjecTime Limited, an
Ontario corporation (the "Company"), and the undersigned shareholder
who may be deemed an affiliate ("Affiliate") of the Company.
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Acquisition Agreement (as defined
below).
RECITALS
A. The Company and Parent have entered into an Agreement and
Plan of Acquisition and Arrangement (the "Acquisition Agreement") which
contemplates that Parent will acquire control of the Company through a
statutory arrangement involving the exchange of all of the issued and
outstanding shares of the Company, other than shares owned by Parent
(the "Excluded Shares"), for shares of Parent or an indirect subsidiary
of Parent ("Acquisition Sub"). In accordance with Section 182 of the
Business Corporations Act (Ontario), a Plan of Arrangement for the
Company and Acquisition Sub will be filed in order to effect the
Arrangement (the "Plan of Arrangement"). Pursuant to the Arrangement,
all of the issued and outstanding securities of the Company, other than
the Excluded Shares, will ultimately be exchanged for (i) Parent Common
Shares or Exchangeable Shares, which may be exchanged for Parent Common
Shares and (ii) redeemable Preferred Shares of Acquisition Sub which
are redeemable for cash.
B. Affiliate is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), of such number of shares of the outstanding capital stock of
the Company and of such outstanding options convertible into Common
Shares as is indicated on the signature page of this Agreement.
C. Affiliate has been advised that Affiliate may be deemed to
be an "affiliate" of the Company, as the term "affiliate" is used for
purposes of Rule 144 of the Rules and Regulations (the "Rules and
Regulations") under the Securities Act of 1933, as amended (the
"Securities Act");
D. Affiliate has been advised that Affiliate may be deemed to
be an "affiliate" of Parent after the Arrangement as the term
"affiliate" is used in Accounting Series Releases 130 and 135, as
amended, although nothing contained herein shall be construed as an
admission by Affiliate that Affiliate is in fact an "affiliate" of
Parent. Affiliate further understands that the representations,
warranties and agreements set forth herein will be relied upon by
Parent, the Company and their respective counsel and independent
auditors; and
E. In consideration of the execution of the Acquisition
Agreement by Parent, Affiliate agrees to be bound by this Agreement and
vote the Shares (as defined below) and other such shares of capital
stock of the Company over which Affiliate has voting power so as to
facilitate consummation of the Arrangement.
AGREEMENT
NOW THEREFORE, intending to be legally bound, the parties agree
as follows:
1. Certain Definitions. Capitalized terms not defined herein
shall have the meanings ascribed to them in the Acquisition Agreement.
For purposes of this Agreement:
(a) "Person" shall mean any (i) individual, (ii)
corporation, limited liability company, partnership or other entity, or
(iii) governmental authority.
(b) "Shares" shall mean: (i) all securities of the
Company (including all Company Common Shares, Class A Preferred Shares,
Class B Preferred Shares, Class C Preferred Shares, Class 8 Special
Shares and all options to acquire Company Common Shares) owned by
Affiliate as of the date of this Agreement; and (ii) all additional
securities of the Company (including all additional Company Common
Shares, Class A Preferred Shares, Class B Preferred Shares, Class C
Preferred Shares, Class 8 Special Shares and all additional options and
other rights to acquire Company Common Shares) of which Affiliate
acquires ownership during the period from the date of this Agreement
through the Voting Expiration Date.
(c) A Person shall be deemed to have effected a
"Transfer" of a security if such person directly or indirectly: (i)
sells, pledges, encumbers, grants an option with respect to, transfers
or disposes of such security or any interest in such security; or (ii)
enters into an agreement or commitment providing for the sale of,
pledge or, encumbrance of, grant of an option with respect to, transfer
of or disposition of such security or any interest therein.
(d) "Voting Expiration Date" shall mean the earlier to
occur of (i) such date and time as the Acquisition Agreement shall have
been validly terminated pursuant to Article IX thereof, or (ii) such
date and time as the Arrangement shall become effective in accordance
with the terms and provisions of the Plan of Arrangement.
2. Acknowledgments by Affiliate. Affiliate acknowledges and
understands that the representations, warranties and covenants by
Affiliate set forth herein will be relied upon by Parent, the Company
and their respective affiliates, counsel and accounting firms, and that
substantial losses and damages may be incurred by these persons if
Affiliate's representations, warranties or covenants are breached.
Affiliate has carefully read this Agreement and the Acquisition
Agreement and has discussed the requirements of this Agreement with
Affiliate's professional advisors, who are qualified to advise
Affiliate with regard to such matters.
3. Beneficial Ownership of Company Capital Stock and Parent
Common Shares. The Affiliate is the sole record and beneficial owner
of the number of Shares set forth next to its name on the signature
page hereto. The Shares are not subject to any claim, lien, pledge,
charge, security interest or other encumbrance or to any rights of
first refusal of any kind. There are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to
which the Affiliate is party or by which it is bound obligating the
Affiliate to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any Shares or
obligating the Affiliate to grant or enter into any such option,
warrant, call, right, commitment or agreement. The Affiliate has the
sole right to transfer such Shares. The Shares constitute all shares
of Company capital stock owned, beneficially or of record, by the
Affiliate. The Shares are not subject to preemptive rights created by
any agreement to which the Affiliate is party. The Affiliate has not
engaged in any sale or other transfer of the Shares in contemplation of
the Arrangement.
Affiliate does not beneficially own any Parent Common Shares or
any other equity securities of Parent or any options, warrants or other
rights to acquire any equity securities of Parent.
4. Full Power and Authority. Affiliate has full power and
authority to make, enter into and carry out the terms of this
Agreement.
5. Compliance with Rule 145 and the Securities Act.
(e) Affiliate has been advised that (i) the resale of
Parent Common Shares and Exchangeable Shares issued in connection with
the Arrangement will be subject to restrictions set forth in Rule 145
under the Securities Act (which will not apply if such shares are
otherwise transferred pursuant to an effective registration statement
under the Securities Act or an appropriate exemption from
registration), and (ii) Affiliate may be deemed to be an affiliate of
the Company. Affiliate accordingly agrees not to sell, transfer or
otherwise dispose of any Parent Common Shares or Exchangeable Shares
issued to Affiliate in connection with the Arrangement or upon exercise
of the Exchangeable Shares unless (i) such sale, transfer or other
disposition is made in conformity with the requirements of Rule 145(d)
promulgated under the Securities Act, (ii) such sale, transfer or other
disposition is made pursuant to an effective registration statement
under the Securities Act or an appropriate exemption from registration,
or (iii) Affiliate delivers to Parent a written opinion of counsel,
reasonably acceptable to Parent in form and substance, or a "no action"
letter from the staff of the Securities and Exchange Commission, that
such sale, transfer or other disposition is otherwise exempt from
registration under the Securities Act.
(f) Parent will give stop transfer instructions to its
transfer agent with respect to any Parent Common Shares or Exchangeable
Shares received by Affiliate pursuant to the Arrangement and there will
be placed on the certificates representing such Parent Common Shares or
Exchangeable Shares, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE
145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH A WRITTEN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, OR A "NO
ACTION" LETTER FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION, THAT
SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED."
The legend set forth above shall be removed (by delivery of a
substitute certificate without such legend) and Parent shall so
instruct its transfer agent, if Affiliate delivers to Parent
(i) satisfactory written evidence that the shares have been sold in
compliance with Rule 145 (in which case, the substitute certificate
will be issued in the name of the transferee), or (ii) an opinion of
counsel, in form and substance reasonably satisfactory to Parent, to
the effect that public sale of the shares by the holder thereof is no
longer subject to Rule 145.
6. Conversion of Shares. The Affiliate agrees that, to the
extent any of the Shares consist of shares of Class A Preferred Shares,
Class B Preferred Shares, Class C Preferred Shares and Class 8 Special
Shares of the Company, Affiliate shall not exercise any conversion
rights in respect of such Shares prior to the record date fixed by the
Board of Directors of the Company for the determination of shareholders
entitled to vote on the Arrangement.
7. Agreement to Vote Shares. At every meeting of the
shareholders of the Company called and at every adjournment thereof,
and on every action or approval by written consent of the shareholders
of the Company, Affiliate shall: (i) cause the Shares to be voted in
favor of approval of the Arrangement; and (ii) not cause the Shares to
be voted against approval of the Arrangement. Affiliate agrees that
during the period from the date of this Agreement through the Voting
Expiration Date, Affiliate shall not deposit (or permit the deposit of)
any Shares in a voting trust or grant any proxy or enter into any
voting agreement or similar agreement in contravention of the
obligations of Affiliate under this Agreement with respect to any of
the Shares.
8. Proxy Solicitation. Affiliate will not, and will not
permit any entity under Affiliate's control to: (i) solicit proxies or
become a "participant" in a "solicitation" (as such terms are defined
in Regulation 14A under the Exchange Act) with respect to an
Acquisition Proposal or otherwise encourage or assist any party in
taking or planning any action that would compete with, restrain or
otherwise serve to interfere with or inhibit the timely consummation of
the Arrangement in accordance with the terms of the Acquisition
Agreement and Plan of Arrangement (other than, in the case of an
Affiliate who is a director of the Company, such actions taken as a
director (and not a shareholder) of the Company in accordance with
Sections 5.7 and 5.8 of the Acquisition Agreement); (ii) initiate a
shareholders' vote or action by consent of the Company shareholders
with respect to an Acquisition Proposal; or (iii) become a member of a
"group" (as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of the Company with respect to an
Acquisition Proposal.
9. Additional Documents. Affiliate hereby covenants and
agrees to execute and deliver any additional documents necessary or
desirable, in the reasonable opinion of Parent, to carry out the intent
of this Agreement.
10. Consent and Waiver. Affiliate (not in his or her capacity
as a director or officer of the Company) hereby gives any consents or
waivers that are reasonably required for the consummation of the
Arrangement under the terms of any agreements to which Affiliate is a
party or pursuant to any rights Affiliate may have.
11. Termination. This Agreement shall be terminated and shall
be of no further force and effect in the event of the termination of
the Acquisition Agreement pursuant to Article 9 of the Acquisition
Agreement.
12. Miscellaneous.
(g) Counterparts. This Agreement shall be executed in
one or more counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same instrument.
(h) Binding Agreement. This Agreement will inure to the
benefit of and be binding upon and enforceable against the parties and
their successors and assigns, including administrators, executors,
representatives, heirs, legatees and devisees of Affiliate and pledgees
of Affiliate holding any shares of the Company's capital stock as
collateral.
(i) Waiver; Severability. No waiver by any party hereto
of any condition or of any breach of any provision of this Agreement
shall be effective unless in writing and signed by each party hereto.
In the event that any provision of this Agreement, or the application
of any such provision to any person, entity or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to
any extent, the remainder of this Agreement, and the application of
such provision to persons, entities or circumstances other than those
as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall
continue to be valid and enforceable to the fullest extent permitted by
law.
(j) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
California without giving effect to any choice or conflict of law
provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
(k) Attorneys' Fees. In the event of any legal actions or
proceeding to enforce or interpret the provisions hereof, the
prevailing party shall be entitled to reasonable attorneys' fees,
whether or not the proceeding results in a final judgment.
(l) Effect of Headings. The Section headings herein are
for convenience only and shall not affect the construction or
interpretation of this Agreement.
(m) Third-Party Reliance. Counsel to and independent
auditors for the parties to the Acquisition Agreement shall be entitled
to rely upon this Affiliate Agreement.
(n) Entire Agreement. This Agreement, the Acquisition
Agreement and the other agreements referred to in the Acquisition
Agreement set forth the entire understanding of Affiliate and Parent
relating to the subject matter hereof and thereof and supersede all
prior agreements and understandings between Affiliate and Parent
relating to the subject matter hereof and thereof.
(o) Amendments. This Agreement may not be amended,
modified, altered, or supplemented other than by means of a written
instrument duly executed and delivered on behalf of Parent and the
Affiliate.
(p) Survival. The representations, warranties, covenants
and other provisions contained in this Agreement shall survive the
Arrangement.
(q) Injunctive Relief. Each of the parties acknowledge
that (i) the covenants and the restrictions contained in this Agreement
are necessary, fundamental, and required for the protection of Parent
and the Company and to preserve for Parent the benefits of the
Arrangement; (ii) such covenants relate to matters which are of a
special, unique, and extraordinary character that gives each of such
covenants a special, unique, and extraordinary value; and (iii) a
breach of any such covenants or any other provision of this Agreement
will result in irreparable harm and damages to Parent and the Company
which cannot be adequately compensated by a monetary award.
Accordingly, it is expressly agreed that in addition to all other
remedies available at law or in equity, Parent and the Company shall be
entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable
relief as may be used by any court of competent jurisdiction to
restrain or enjoin any of the parties hereto from breaching any such
covenant or provision or to specifically enforce the provisions hereof.
(r) Notices. All notices and other communications
pursuant to this Agreement shall be in writing and deemed to be
sufficient if contained in a written instrument and shall be deemed
given if delivered personally, telecopied, sent by nationally-
recognized overnight courier or mailed by registered or certified mail
(return receipt requested), postage prepaid, to the parties at the
following address (or at such other address for a party as shall be
specified by like notice):
If to Parent: Rational Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Affiliate: To the address for notice set forth on the
signature page hereof
IN WITNESS WHEREOF, the parties have caused this Affiliate
Agreement to be duly executed on the day and year first above written.
PARENT
RATIONAL SOFTWARE CORPORATION
By:
Name:
Title:
AFFILIATE
By:
Affiliate's Address for Notice:
Shares beneficially owned:
_______________
________ Company Common Shares or
Class 8 Special Shares
________ Company Preferred Shares
________ Company Shares issuable upon
exercise of outstanding
options
[Signature Page to Company Affiliate Agreement]
Exhibit F
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into
as of December 14, 1999 by and among Rational Software Corporation, a
Delaware corporation ("Parent"), and the undersigned shareholder and/or
option holder (the "Shareholder") of ObjecTime Limited, an Ontario
corporation (the "Company"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the
Acquisition Agreement (as defined below).
RECITALS
A. The Company, Acquisition Sub (as defined below), Amalco (as
defined below) and Parent have entered into an Agreement and Plan of
Acquisition and Arrangement of even date herewith (the "Acquisition
Agreement"), which contemplates that the Company will execute a Plan of
Arrangement in the form attached to the Acquisition Agreement (the
"Plan of Arrangement"), collectively providing for the formation of an
indirect subsidiary of Parent ("Acquisition Sub") which will
incorporate its wholly-owned subsidiary ("Amalco"), which will
amalgamate with and into the Company to form New ObjecTime Corporation,
an Ontario corporation ("New ObjecTime"). Pursuant to the Plan of
Arrangement, all of the issued and outstanding shares of capital stock
of the Company will be converted into (i) exchangeable shares of
Acquisition Sub ("Exchangeable Shares") or Common Shares of Parent and
(ii) cash, as set forth in the Acquisition Agreement (the
"Arrangement");
B. Shareholder is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding capital
stock of the Company and shares subject to outstanding options as is
indicated on the signature page of this Agreement; and
C. In order to induce Parent to execute the Acquisition
Agreement, Shareholder agrees to vote the Shares (as defined below) and
other such shares of capital stock of the Company over which
Shareholder has voting power so as to facilitate consummation of the
Arrangement. The execution and delivery of this Agreement and of the
attached form of proxy is a material condition to ▇▇▇▇▇▇'s willingness
to enter into the Acquisition Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree
as follows:
1. Certain Definitions. Capitalized terms not defined herein
shall have the meanings ascribed to them in the Acquisition Agreement.
For purposes of this Agreement:
1.1 "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Acquisition Agreement shall have been
validly terminated pursuant to Section 9 thereof, or (ii) such date and
time as the Arrangement shall become effective in accordance with the
terms and provisions of the Acquisition Agreement.
1.2 "Person" shall mean any (i) individual, (ii)
corporation, limited liability company, partnership or other entity, or
(iii) governmental authority.
1.3 "Shares" shall mean: (i) all equity securities of the
Company (including all shares of Company shares and all Company Options
) beneficially owned by Shareholder as of the date of this Agreement;
and (ii) all additional equity securities of the Company (including all
additional shares of Company Common Stock or Preferred Stock and all
additional options to acquire shares of Company Common Stock or
Preferred Stock) of which Shareholder acquires beneficial ownership
during the period from the date of this Agreement through the
Expiration Date.
1.4 A Person shall be deemed to have effected a
"Transfer" of a security if such person directly or indirectly: (i)
sells, pledges, encumbers, grants an option with respect to, transfers
or disposes of such security or any interest in such security; or (ii)
enters into an agreement or commitment providing for the sale of,
pledge of, encumbrance of, grant of an option with respect to, transfer
of or disposition of such security or any interest therein.
2. Transfer of Shares.
2.1 Transferee of Shares to be Bound by this Agreement.
Shareholder agrees that, during the period from the date of this
Agreement through the Expiration Date, Shareholder shall not cause or
permit any Transfer of any of the Shares to be effected unless such
Transfer is in accordance with any affiliate agreement between
Shareholder and Parent contemplated by the Acquisition Agreement and
each Person to which any of such Shares, or any interest in any of such
Shares, is or may be transferred shall have: (a) executed a counterpart
of this Agreement and a proxy in the form attached hereto as Exhibit A
(with such modifications not involving additional representations,
warranties or covenants as Parent may reasonably request); and (b)
agreed in writing to hold such Shares (or interest in such Shares)
subject to all of the terms and provisions of this Agreement.
2.2 Transfer of Voting Rights. Shareholder agrees that,
during the period from the date of this Agreement through the
Expiration Date, Shareholder shall not deposit (or permit the deposit
of) any Shares in a voting trust or grant any proxy or enter into any
voting agreement or similar agreement in contravention of the
obligations of Shareholder under this Agreement with respect to any of
the Shares.
3. Conversion of Shares. The Shareholder agrees that, to the
extent any of the Shares consist of shares of Preferred Stock or
Special Stock of the Company, Shareholder shall not exercise any
conversion rights in respect of such Shares prior to the record date
fixed by the Board of Directors of the Company for the determination of
stockholders entitled to vote on the Merger.
4. Agreement to Vote Shares. At every meeting of stockholders
of the Company called with respect to any of the following, and at
every adjournment thereof, and on every action or approval by written
consent of stockholders of the Company with respect to any of the
following, Shareholder shall vote the Shares in favor of approval of
the Arrangement, the execution and delivery by the Company of the
Acquisition Agreement and the adoption and approval of the terms
thereof and in favor of each of the other actions contemplated by the
Acquisition Agreement and any action reasonably required in furtherance
hereof and thereof.
5. Non-Solicitation Agreement. Shareholder covenants and
agrees, prior to the Expiration Date, not to, directly or indirectly,
(i) solicit, initiate or encourage submission of proposals or offers or
engage in negotiations with any persons other than Parent, Acquisition
Sub, or Amalco or take any action intended, designed or reasonably
likely to facilitate the efforts of any persons, other than Parent,
Acquisition Sub and Amalco, relating to (A) the possible acquisition of
the Company (whether by way of merger, purchase of its capital stock,
purchase of assets or otherwise) or any material portion of its capital
stock or assets or (B) any other material transaction (including
without limitation, a joint venture or other similar transaction) (an
"Opposing Proposal"); (ii) furnish any non-public information regarding
the Company to any person in connection with or in response to an
Opposing Proposal or potential Opposing Proposal; (iii) engage in
discussions with any persons with respect to any Opposing Proposal;
(iv) approve, endorse or recommend any Opposing Proposal; or (v) enter
into any letter of intent or other similar document or any contract
contemplating or otherwise relating to any Opposing Proposal.
Shareholder shall immediately cease any existing discussions with any
persons other than Parent and Acquisition Sub that relate to any
Opposing Proposal. In the event that Shareholder receives from any
third party any offer or indication of interest (whether made in
writing or otherwise) regarding any of the transactions referred to in
the foregoing, then Shareholder shall promptly communicate to Parent
the material terms of each such offer, indication of interest, or
request, including the identity of the third party.
6. Irrevocable Proxy. Concurrently with the execution of this
Agreement, ▇▇▇▇▇▇▇▇▇▇▇ agrees to deliver to Parent a proxy in the form
attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable
to the fullest extent permissible by law, with respect to the Shares.
7. Representations and Warranties of the Shareholder.
Shareholder (i) is the beneficial owner of the shares of Common Stock
of the Company, Preferred Stock of the Company and the options to
purchase shares of Common Stock of the Company indicated on the final
page of this Agreement, free and clear of any liens, claims, options
(other than the call option and the put option, if any, contained in a
Shareholder Agreement between the Shareholder and the Company), rights
of first refusal, co-sale rights, charges or other encumbrances; (ii)
does not beneficially own any securities of the Company other than the
shares of Common Stock of the Company, Preferred Stock of the Company
and options to purchase shares of Common Stock of the Company indicated
on the signature page of this Agreement; and (iii) has full power and
authority to make, enter into and, assuming due execution and delivery
thereof by each other party thereto, carry out the terms of this
Agreement and the Proxy.
8. Additional Documents. Shareholder hereby covenants and
agrees to execute and deliver any additional documents not involving
additional representations, warranties or covenants necessary or
desirable, in the reasonable opinion of Parent, to carry out the intent
of this Agreement.
9. Consent and Waiver. Shareholder (not in his capacity as a
director or officer of the Company) hereby gives any consents or
waivers (including waivers of preemptive rights, rights of first
refusal and co-sale rights) that are reasonably required for the
consummation of the Arrangement under the terms of any agreements to
which Shareholder is a party or pursuant to any rights Shareholder may
have.
10. Legending of Shares. If so requested by ▇▇▇▇▇▇,
Shareholder agrees that the Shares shall bear a legend stating that
they are subject to this Agreement and to an irrevocable proxy.
Subject to the terms of Section 2 hereof, Shareholder agrees that
Shareholder will not Transfer the Shares without first having the
aforementioned legend affixed to the certificates representing the
Shares.
11. Termination. This Agreement shall terminate and shall have
no further force or effect as of the Expiration Date.
12. Miscellaneous.
12.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
12.2 Binding Effect and Assignment. This Agreement and
all of the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, but, except as otherwise specifically provided
herein, neither this Agreement nor any of the rights, interests or
obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
12.3 Amendments and Modification. This Agreement may not
be modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by the parties hereto.
12.4 Waiver. No failure on the part of Parent to exercise
any power, right, privilege or remedy under this Agreement, and no
delay on the part of Parent in exercising any power, right, privilege
or remedy under this Agreement, shall operate as a waiver of such
power, right, privilege or remedy; and no single or partial exercise of
any such power, right, privilege or remedy shall preclude any other or
further exercise thereof or of any other power, right, privilege or
remedy. Parent shall not be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of Parent; and any such waiver shall
not be applicable or have any effect except in the specific instance in
which it is given.
12.5 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Parent will be irreparably harmed and that
there will be no adequate remedy at law for a violation of any of the
covenants or agreements of Shareholder set forth herein. Therefore, it
is agreed that, in addition to any other remedies that may be available
to Parent upon any such violation, Parent shall have the right to
enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Parent at law or
in equity.
12.6 Notices. All notices and other communications
required or permitted hereunder shall be in writing, shall be effective
when given, and shall in any event be deemed to be given upon receipt
or, if earlier, (a) five (5) days after deposit with the U.S. Postal
Service, Canada Post or other applicable postal service, if delivered
by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one business day after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid or (d)
one business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class mail,
postage prepaid, and shall be addressed to the intended recipient as
set forth below:
If to Parent: Rational Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Shareholder: To the address for notice set forth on
the signature page hereof.
12.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of
California without giving effect to any choice or conflict of law
provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California. Shareholder hereby
consents to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or
relating to this Agreement or relating to any arbitration in which the
parties are participants.
12.8 Attorneys' Fees and Expenses. If any legal action or
other legal proceeding relating to the enforcement of any provision of
this Agreement is brought against Shareholder, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing
party may be entitled.)
12.9 Entire Agreement. This Agreement and the Proxy
contain the entire understanding of the parties in respect of the
subject matter hereof, and supersede all prior negotiations and
understandings between the parties with respect to such subject matter.
12.10 Effect of Headings. The section headings are for
convenience only and shall not affect the construction or
interpretation of this Agreement.
12.11 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original, but all of
which together shall constitute one and the same agreement.
* * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed on the day and year first above written.
RATIONAL SOFTWARE CORPORATION
By:
Signature of Authorized Signatory
SHAREHOLDER
Signature
Print Name and Title
Print Name
Print Address
Telephone
Facsimile No.
Shares beneficially owned:
________ shares of Company Common
Stock and Class 8 Special Shares
________ shares of Company Preferred
Stock
________ shares of Company Stock
issuable upon exercise of outstanding
options
________ options granted under 1997
Option Plan
________ options granted under 1998
Option Plan
[SIGNATURE PAGE TO VOTING AGREEMENT
Exhibit A
IRREVOCABLE PROXY
The undersigned shareholder of ObjecTime Limited, an Ontario
corporation (the "Company"), hereby irrevocably (to the fullest extent
permitted by law) appoints the directors on the Board of Directors of
Rational Software Corporation, a Delaware corporation ("Parent"), and
each of them, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, to
vote and exercise all voting and related rights (to the full extent
that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of the Company that now are or hereafter may be
beneficially owned by the undersigned, and any and all other shares or
equity securities of the Company issued or issuable in respect thereof
on or after the date hereof (collectively, the "Shares") in accordance
with the terms of this Proxy. The Shares beneficially owned by the
undersigned stockholder of the Company as of the date of this Proxy are
listed on the final page of this Proxy. Upon the undersigned's
execution of this Proxy, any and all prior proxies given by the
undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to
the Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by
law), is coupled with an interest and is granted pursuant to that
certain Voting Agreement of even date herewith by and among Parent and
the undersigned stockholder (the "Voting Agreement"), and is granted in
consideration of Parent entering into that certain Agreement and Plan
of Acquisition and Arrangement (the "Acquisition Agreement"), among
Parent, Company, Acquisition Corporation, an Ontario corporation and a
wholly owned subsidiary of Parent ("Acquisition Sub"), Amalco
Corporation, an Ontario corporation and wholly-owned subsidiary of
Acquisition Sub ("Amalco"), the Company and certain other parties. The
Acquisition Agreement provides for the merger of Acquisition Sub into
the Company in accordance with its terms (the "Arrangement"). As used
herein, the term "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Acquisition Agreement shall have been
validly terminated pursuant to Section 9 thereof or (ii) such date and
time as the Arrangement shall become effective in accordance with the
terms and provisions of the Acquisition Agreement.
The attorneys and proxies named above, and each of them, are
hereby authorized and empowered by the undersigned, at any time prior
to the Expiration Date, to act as the undersigned's attorney and proxy
to vote the Shares, and to exercise all voting, consent and similar
rights of the undersigned with respect to the Shares (including,
without limitation, the power to execute and deliver written consents)
at every annual, special or adjourned meeting of stockholders of the
Company and in every written consent in lieu of such meeting in favor
of approval of the Arrangement, the execution and delivery by the
Company of the Acquisition Agreement and the adoption and approval of
the terms thereof and in favor of each of the other actions
contemplated by the Acquisition Agreement and any action required in
furtherance hereof and thereof including any amendments or variations
reasonably necessary, in the opinion of the attorney and proxy voting
such shares to effect the transactions contemplated by the Acquisition
Agreement and the Arrangement.
The attorneys and proxies named above may not exercise this Proxy
on any other matter except as provided above. The undersigned
stockholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon
the successors and assigns of the undersigned.
This Proxy is irrevocable (to the fullest extent permitted by
law). This Proxy shall terminate, and be of no further force and
effect, automatically upon the Expiration Date.
This Proxy is not solicited by or on behalf of management of the
Company.
Dated: _____________ Signature of Shareholder:
Print Name of Shareholder:
Shares beneficially owned:
_______ shares of the Company
Common Stock and Class 8 Special
Shares
_______ shares of the Company
Preferred Stock
_______ shares of the Company Stock
issuable upon exercise of
outstanding options
_______ options granted under 1997
Option Plan
_______ options granted under 1998
Option Plan
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
Exhibit G
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this 13th day of January, 2000
B E T W E E N:
RATIONAL SOFTWARE CORPORATION, a corporation
incorporated under the laws of Delaware
(the "Corporation")
- and -
______________, of the City of Ottawa, in the
Province of Ontario
(the "Employee")
RECITALS:
A. The Corporation acquired all of the shares, assets and undertaking
of ObjecTime Limited ("ObjecTime") pursuant to the terms of a plan
of arrangement.
B. The Employee was a shareholder of ObjecTime whose shares of
ObjecTime were acquired by the Corporation pursuant to the terms
of the plan of arrangement.
C. The consideration received by the Employee for his shares included
a substantial allowance for goodwill and the future services of
the Employee in the conduct of the Corporation's business.
D. The Employee will be privy to, and will acquire detailed knowledge
of, confidential and business sensitive information about the
Corporation.
E. The Corporation and the Employee wish to enter into this Agreement
to set out the terms and conditions governing the Corporation's
confidential and business sensitive information.
NOW THEREFORE in consideration of the amount received by the
Employee pursuant to the terms of the plan of arrangement as well as the
mutual covenants and agreements contained in this Agreement and other
good and valuable consideration (the receipt and sufficiency of which
are hereby acknowledged), the Corporation and the Employee agree as
follows:
1. The term of this Agreement shall be from the date hereof until the
Employee's employment with the Corporation is terminated, for any
reason, by either the Corporation or the Employee (the "Term").
This agreement shall not grant the Employee any continuing rights
to employment with the Corporation. The Corporation reserves the
right to terminate the employment of the Employee at any time,
with or without cause.
2. The Employee acknowledges that he is privy to, and will continue
to acquire detailed knowledge of, Confidential Information
(defined below) and other business sensitive information about the
Corporation.
3. The parties agree that for purposes of this Agreement
"Confidential Information" means all information that ought to be
considered confidential from its nature, whether or not originated
by the Corporation, which relates to the business or affairs of
the Corporation. Such Confidential Information includes, but is
not limited to, the following types of information and other
information of a similar nature (whether or not reduced to writing
or designated as confidential):
(a) work product resulting from or related to work or projects
performed or to be performed by the Corporation, including
but not limited to the methods, processes, procedures,
analysis, and techniques used in connection therewith;
(b) computer software of any type or form and in any stage of
actual or anticipated development, including but not limited
to ideas, programs, and program modules, routines and
subroutines, procedures, algorithms, design concepts, design
specifications (design notes, annotations, documentation,
flowcharts, coding sheets, and the like), source code,
object code and load modules, programming, program patches
and systems designs;
(c) information relating to Intellectual Property (which means
all legally recognized rights including patents, copyrights,
trade marks, topographies, designs, and trade secrets) which
are held by or related to the business of the Corporation
prior to any public disclosure thereof, including but not
limited to information regarding the nature of the
Intellectual Property, production data, technical and
engineering data, test data and test results, the status and
details of research and development of products and
services, and information regarding acquiring, protecting,
enforcing and licensing proprietary rights;
(d) internal, personnel and financial information, vendor names
and other vendor information, purchasing and internal cost
information, service and operational manuals, and the manner
and method of conducting the Corporation's business;
(e) marketing and development plans and agreements, price and
cost data, price and fee amounts, pricing and billing
policies, quoting procedures, marketing techniques and
methods of obtaining business, forecasts and forecast
assumptions and volumes, and future plans and potential
strategies of the Corporation which have been or are being
discussed;
(f) contracts and their contents, client services, data or any
other information received by the Corporation subject to
obligations of confidentiality and the origin, type,
quantity and specifications of products and services
purchased, leased, licensed or received by clients of the
Corporation;
(g) business plans, customer and client lists and names,
business deals with vendors, customers and clients; and
(h) financing, acquisition, production, development and
distribution agreements and budgets and investment
opportunities and structures.
"Confidential Information" will not include (i) information that is
available to the public or in the public domain at the time of
disclosure or use, without breach of this Agreement, and (ii) the
general skills and experience gained during my employment with or
engagement by the Corporation. The phrase "publicly known" shall
mean readily accessible to the public in written publications
without breach of this or similar agreements. "Confidential
Information" shall also not include information the disclosure of
which is required to be made by any law, regulation, governmental
authority or court, provided that before disclosure is made,
notice of the requirement is provided to the Corporation.
4. The Employee shall not, either during the Term or for a period of
one year following the end of the Term, directly or indirectly, in
any manner whatsoever including, without limitation, either
individually or in partnership, jointly or in concert with any
person (for purposes of this agreement "person" shall include,
without limitation, any partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation)
or as employee, principal, agent, director or shareholder:
(a) be engaged in any undertaking (including the development of
products that would compete with the products that are
either being sold or that are in the process of development
during the Term);
(b) have any financial or other interest (including by way or
royalty or other compensation arrangements) in or in respect
of the business of any person which carries on a business;
or
(c) advise, lend money to, guarantee the debts or obligations
of, or permit the use of the Employee's name or any part
thereof by any person which carries on a business;
which is the same as or substantially similar to or which competes with
or would compete with the business carried on or any product being
designed or developed during the Term by the Corporation.
Notwithstanding the foregoing, nothing herein shall prevent the Employee
from owning not more than 5% of the issued shares of a
corporation, the shares of which are listed on a recognized stock
exchange or traded in over-the-counter markets in Canada or the
United States of America, which carries on a business which is the
same as or substantially similar to or which competes with or
would compete with the business of the Corporation.
5. All memoranda, notes, lists, records and other documents (and all
copies thereof), including, without limitation, all such items
stored in computer memories, on microfiche, on discs or on tapes
or by any other means, made or compiled by or on behalf of the
Employee in the performance of his duties at any time during the
Term concerning the business or affairs of the Corporation are and
shall be the property of the Corporation and shall be delivered to
the Corporation by the Employee promptly upon the termination of
the Employee's employment with the Corporation, or at any time on
request by the Corporation.
6. The Employee shall not, either during the Term or for a period of
one year thereafter, directly or indirectly, contact or solicit
any designated customers of the Corporation for the purpose of
selling to the designated customer any products or services which
are the same as or substantially similar to, or in any way
competitive with, the products or services sold by the Corporation
during the Term. For the purposes of this section a designated
customer means a person who was a customer of the Corporation
during some part of the Term.
7. The Employee shall not, either during the Term or for a period of
one year thereafter, directly or indirectly, employ or retain as
an independent contractor or otherwise use the services of any
employee of the Corporation or induce, solicit, or attempt to
induce, any such person to leave his employment.
8. The Employee acknowledges that a breach or threatened breach by
the Employee of any provision of this agreement will result in
Rational suffering irreparable harm which cannot be calculated or
fully or adequately compensated by recovery of damages alone.
Accordingly, the Employee agrees that, in addition to any other
relief to which Rational may become entitled, Employee shall be
entitled to interim and permanent injunctive relief, specific
performance and other equitable remedies.
9. Each of the provisions contained in this Agreement is distinct and
severable and a declaration of invalidity or unenforceability of
any such provision by a court of competent jurisdiction shall not
affect the validity or enforceability of any provision thereof.
10. This Agreement shall be governed by and construed in accordance
with the laws of the Province of Ontario and the federal laws of
Canada applicable therein.
11. The Employee acknowledges that: (i) the Employee has had
sufficient time to review and consider this Agreement thoroughly;
(ii) the Employee has read and understands the terms of this
Agreement and the Employee's obligations hereunder; (iii) the
Employee has been given an opportunity to obtain independent legal
advice, or such other advice as the Employee may desire,
concerning the interpretation and effect of this Agreement; and
(iv) this Agreement is entered into voluntarily and without any
pressure and the Employee's continued employment has not been made
conditional upon execution of this Agreement by the Employee.
RATIONAL SOFTWARE CORPORATION
c/s
Per: ▇▇▇ ▇▇▇▇▇▇▇
IN WITNESS WHEREOF I have hereunto set my hand and seal this
13th day
of January, 2000.
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
)
)
l/s
Witness Signature ) Employee
)
)
)
Print Name Of Witness )
)
)
)
Address Of Witness )
Exhibit H
ESCROW AGREEMENT
This Escrow Agreement is made as of this 13th of January, 2000
(the "Agreement"), by and among The Bank of Nova Scotia Trust Company
of New York ("Depositary Agent"), Rational Software Corporation, a
Delaware corporation ("Rational") and ▇▇▇▇▇ ▇▇▇▇▇ as agent ("Company
Agent") of the shareholders of ObjecTime Limited, an Ontario
corporation (the "Shareholders"). Terms not otherwise defined herein
shall have the meaning set forth in the Acquisition Agreement (as
defined below).
WITNESSETH
WHEREAS, Rational, Rational International, a California
corporation ("International Corp"), 3037936 Nova Scotia Company
("Holding ULC"), 1386501 Ontario Limited, an Ontario corporation
("Acquisition Sub"), 1386503 Ontario Limited, an Ontario corporation
("Amalco") and ObjecTime Limited ("OTL") have entered into an Agreement
and Plan of Acquisition and Arrangement dated as of December __, 1999
(the "Acquisition Agreement"), providing for the acquisition by
Acquisition Sub of OTL, the issuance of Exchangeable Shares and Parent
Common Stock to the Shareholders and the right to receive a pro rata
portion of the Exchangeable Shares and Parent Common Stock upon the
release of such shares from the Escrow Fund (as defined below);
WHEREAS, pursuant to Article X of the Acquisition Agreement, a
copy of which is attached hereto as Annex A ("Article X"), an escrow
fund (the "Escrow Fund") will be established to compensate Rational for
certain Damages (as defined in Article X) it may incur by reason of any
inaccuracy or breach of the representations and warranties contained in
Article III of the Acquisition Agreement or any failure by OTL to
perform or comply with any covenants contained in the Acquisition
Agreement;
WHEREAS, the Company Agent has been constituted as the agent for
and on behalf of the Shareholders to undertake certain obligations
specified in Article X;
WHEREAS, Section 10.1 of the Acquisition Agreement provides for
an Escrow Fund of a specified number of the Exchangeable Shares held by
the Shareholders listed on Annex C, such escrow to be held by the
Depositary Agent;
WHEREAS, Section 2.1 of the Acquisition Agreement provides for
the creation of subaccounts for each shareholder of OTL by the
Depositary Agent to be distributed in accordance with the Vesting and
Release Schedule attached hereto as Annex B;
WHEREAS, Section 2.2.4.5 of the Plan of Arrangement provides that
holders of Restricted Options (as defined below) shall deliver such
options to the Depository Agent to be deposited in their Holders
Accounts for release in accordance with the Vesting and Release
Schedule;
WHEREAS, the parties hereto desire to set forth further terms and
conditions in addition to those set forth in the Acquisition Agreement
relating to the operation of the Escrow Fund and the Vesting and
Release Schedule; and
WHEREAS, the operation of this agreement has been approved by an
order of the Ontario Superior Court of Justice.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants contained herein, and intending to be legally bound,
hereby agree as follows:
1. Escrow and Escrow Shares. Pursuant to the Acquisition
Agreement, Acquisition Sub and Rational shall deposit in escrow with
the Depositary Agent, as Depositary Agent, stock certificates
representing the number of Exchangeable Shares issuable to the
Shareholders set out in Annex C, having a value of approximately
$3,800,000 (collectively, the "Escrow Shares"), which Escrow Shares
shall be registered in the name of the Depositary Agent as Depositary
Agent under this Agreement and will be beneficially owned by the
Shareholders on a pro rata basis. The Escrow Shares shall be held and
distributed by the Depositary Agent in accordance with the terms and
conditions of Article X and this Agreement. The type and pro rata
portion of Escrow Shares to be released to the Holder's Account (as
defined below) of each Shareholder at the end of the Half-Time Date (as
defined below) and the Escrow Period is set forth in Annex C attached
hereto. The remainder of the Exchangeable Shares and Parent Common
Shares issuable to the Shareholders pursuant to the Acquisition
Agreement and not constituting Escrow Shares (the "Restricted Shares")
shall be deposited with the Depositary Agent, who shall establish
subaccounts for each Holder (a "Holder's Account"), and such shares
shall be released by the Depositary Agent on a monthly basis to each
Holder in accordance with the Vesting and Release Schedule. In the
event that a holder of Restricted Options (as defined below) is
terminated Without Cause by Parent, any Options that were (i) vested at
the time of Closing and (ii) delivered to Parent to be held with
additional restrictions (the "Restricted Options") shall be placed into
such holder's Holder's Account to be held by the Depository Agent and
released pursuant to the Vesting and Release Schedule.
2. Rights and Obligations of the Parties. The Depositary
Agent shall be entitled to such rights and shall perform such duties of
the Depositary Agent as set forth herein (collectively, the "Duties"),
in accordance with the terms and conditions of this Agreement. As among
themselves, Rational and the Company Agent shall be entitled to their
respective rights and shall perform their respective duties and
obligations as set forth herein and in Article X, in accordance with
the terms hereof and thereof. In the event that the terms of this
Agreement conflict in any way with the provisions of Article X, Article
X shall control.
3. Escrow Period.
(a) The period of time during which the Escrow Fund shall
be in existence (the "Escrow Period") shall commence immediately
following the Closing Date, which shall be set forth in a certificate
of Rational delivered to the Depositary Agent, and shall terminate at
5:00 p.m., California time, on the date which is the second anniversary
of the Closing Date, provided that the Escrow Fund will terminate with
respect to 50% of the Escrow Shares on the first anniversary of the
Closing Date (the "Half-Time Date"); provided, however, that a portion
of the Escrow Shares, which is necessary to satisfy any unsatisfied
claims specified in any Officer's Certificate theretofore delivered to
the Depositary Agent prior to termination of the Half-Time Date or
Escrow Period with respect to facts and circumstances existing prior to
expiration of the Half-Time Date or Escrow Period (a "Claim Notice")
shall remain in the Escrow Fund until such claims have been Resolved.
As used herein, "Resolved" shall mean that the Depositary Agent shall
have received either (i) joint written instruction signed by each of
Rational and the Company Agent, giving instruction to the Depositary
Agent with respect to resolution of a claim specified in a Claim Notice
received by the Depositary Agent, which direction identifies such claim
and provides specific instruction to the Depositary Agent with respect
to the distribution of Escrow Shares in respect thereof, or (ii) a
certificate of either Rational or the Company Agent certifying that a
claim specified in a Claim Notice received by the Depositary Agent has
been resolved by a court of competent jurisdiction, for which a final,
non-appealable order has been issued entitling Rational or the
Shareholders, as specified in such certificate, to the release from
escrow of an amount of Escrow Shares, as specified therein, a copy of
which order is attached thereto. The period of time during which the
Holder's Accounts shall be in existence shall commence immediately
following the Closing Date and shall terminate at 5:00 p.m., California
time, on the date which is the fourth anniversary of the Closing Date
(the "Restricted Share Escrow Period")
(b) The Restricted Shares shall be released by the
Depositary Agent in accordance with the Vesting and Release Schedule.
4. Duties of Depositary Agent. Depositary Agent shall have the
following duties:
(a) The Depositary Agent shall hold and safeguard the
Restricted Shares and Escrow Shares during the Restricted Share Escrow
Period and Escrow Period, respectively, shall treat such Escrow Shares
in accordance with the terms of this Agreement and not as the property
of Rational or the Shareholders, and shall hold and dispose of the
Escrow Shares only in accordance with the terms hereof.
(b) Promptly following termination of the Half-Time Date
or Escrow Period as set forth in Section 3 hereof, the Depositary Agent
shall transfer to the Holder's Accounts held by the Depository Agent
for the Shareholders listed on Annex C the proper number and type of
Escrow Shares in the Escrow Fund in excess of any amount of such Escrow
Shares required to be transferred to Parent to satisfy any unsatisfied
claims specified in any Officer's Certificate theretofore delivered to
the Depositary Agent prior to termination of the Half-Time Date or
Escrow Period with respect to facts and circumstances existing prior to
expiration of the Half-Time Date or Escrow Period. In determining or
making any allocation or distribution of Escrow Shares, the Depositary
Agent shall apply the per share price certified to the Depositary Agent
by Rational and the Company Agent pursuant to Section 10.4(b) of
Article X (the "Closing Share Price"). If Rational and the Company
Agent fail to provide such certificate to the Depositary Agent on a
timely basis, the Depositary Agent shall have no duty to make any such
distribution (and shall have no duty to determine the amount of
Damages). As soon as all such claims have been finally resolved
following the Half-Time Date or Escrow Period, the Depositary Agent
shall transfer to the Holder's Accounts held by the Depository Agent
for the Shareholders the Escrow Shares remaining in the Escrow Fund to
be released in accordance with the Vesting and Release Schedule. In
each distribution of Escrow Shares, each Holder's Account held for the
Shareholders shall receive that percentage of the type of Escrow Shares
indicated as owned by such Shareholder on Annex C hereto (and cash in
lieu payments when appropriate), which is the product of (x) the total
number of such type of Escrow Shares in the Escrow Fund and available
for distribution and (y) the percentage interest of such type of Escrow
Shares set forth opposite the name of each such Shareholder on Annex B
hereto, with half of such shares to be transferred on each of the Half-
Time Date and the termination of the Escrow Period. Such distributions
shall occur promptly following the Half-Time Date and the termination
of the Escrow Period.
(c) In making any distribution of Escrow Shares pursuant
to the terms of this Section 4 or Section 5, the Depositary Agent shall
round down (if necessary) to a whole number of shares and pay to each
Shareholder, as appropriate, from funds provided by Rational, cash in
lieu of the fractional interests not distributed equal to the product
of (x) such fractional amount and (y) the Closing Share Price. Any
shares for which Rational has provided cash in lieu of fractional
interests shall be distributed to Rational, which shall be deemed to
have purchased them.
(d) As used herein, "Officer's Certificate" shall mean an
"Officer's Certificate" as defined in Section 10.4(a) of Article X
setting forth the specific amount of each claim or claim addressed
therein.
5. Distribution. Any cash dividends, dividends payable in
securities or other distributions of any kind shall be promptly
distributed by the Depositary Agent to (and for tax reporting purposes
shall be allocable to) the Shareholders, as beneficial owners of the
Escrow Shares, at their addresses set forth in a certificate of the
Company Agent in accordance with their percentage interests set forth
in Annex C. Any Exchangeable Shares or shares of Parent Common Stock,
as the case may be, received by the Depositary Agent upon a stock split
made in respect of any such securities in the Escrow Fund shall be
added to the Escrow Fund and become a part thereof. Any provision
hereof or of Article X shall be adjusted to appropriately reflect any
stock split or reverse stock split.
6. Exculpatory Provisions; Indemnification.
(a) The Depositary Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, as are
set forth in Article X and as are set forth in any additional written
escrow instructions, which instructions shall not expose Depositary
Agent to any liability additional to that assumed by Depositary Agent
hereunder or under Article X, which the Depositary Agent may receive
after the date of this Agreement which are signed by an officer of
Rational and the Company Agent. The Depositary Agent may rely and shall
be protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or presented
by the proper party or parties. The Depositary Agent shall not be
liable for any act done or omitted hereunder as Depositary Agent while
acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith.
(b) The Depositary Agent is hereby expressly authorized
to comply with and obey orders, judgments or decrees of any court of
law, notwithstanding any notices, warnings or other communications from
any party or any other person to the contrary. In case the Depositary
Agent obeys or complies with any such order, judgment or decree of any
court, the Depositary Agent shall not be liable to any of the parties
hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been
entered without jurisdiction.
(c) The Depositary Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties
executing or delivering or purporting to execute or deliver this
Agreement or any documents or papers deposited or called for hereunder.
The Depositary Agent shall not be responsible for the genuineness,
validity, enforceability or sufficiency of title to any Restricted
Shares or Escrow Shares or other property delivered it hereunder.
(d) In performing any duties under or in connection with
this Agreement, the Depositary Agent shall not be liable to any party
for damages, losses, or expenses, except for gross negligence or
willful misconduct on the part of the Depositary Agent. The Depositary
Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement or
affidavit provided for in this Agreement that the Depositary Agent
shall in good faith believe to be genuine, nor will the Depositary
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, the
Depositary Agent may consult with the legal counsel in connection with
Depositary Agent's duties under or in connection with this Agreement
and shall be fully protected in any act taken, suffered, or permitted
by him/her in good faith in accordance with the advice of counsel. The
Depositary Agent is not responsible for determining and verifying the
authority of any person acting or purporting to act on behalf of any
party to this Agreement. In no event shall the Depositary Agent be
liable for special, consequential or indirect damages.
(e) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of
this Agreement, its terms or conditions, the Depositary Agent will not
be required to determine the controversy or to take any action
regarding it. The Depositary Agent may hold all documents and
Restricted Shares and Escrow Shares and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means.
(f) Rational and its successors and assigns agrees to
indemnify and hold Depositary Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that
may be imposed on Depositary Agent or incurred by Depositary Agent in
connection with the performance of his/her duties under or in
connection with this Agreement, including but not limited to any
litigation arising from or in connection with this Agreement or
involving its subject matter.
(g) Rational agrees to assume any and all obligations
imposed now or hereafter by any applicable tax law with respect to the
distribution of Restricted Shares and Escrow Shares under this
Agreement, and to indemnify and hold the Depositary Agent harmless from
and against any taxes, additions for late payment, interest, penalties
and other expenses, that may be assessed against the Depositary Agent
on any such payment or other activities under this Agreement. Rational
and the Company Agent undertake to instruct the Depositary Agent in
writing with respect to the Depositary Agent's responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting
as Depositary Agent under this Agreement. Rational agrees to indemnify
and hold the Depositary Agent harmless from any liability on account of
taxes, assessments or other governmental charges, including without
limitation the withholding or deduction or the failure to withhold or
deduct same, and any liability for failure to obtain proper
certifications or to properly report to governmental authorities, to
which the Depositary Agent may be or become subject in connection with
or which arises out of this Agreement, including costs and expenses
(including reasonable legal fees), interest and penalties.
Notwithstanding the foregoing, no distributions will be made unless the
Depositary Agent is supplied with an original, signed W-9 form or its
equivalent prior to distribution.
(h) Any company into which the Depositary Agent may be
merged or with which it may be consolidated shall be the Successor to
the Depositary Agent without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except that the Depositary
Agent shall provide written notice of such event to each of the parties
hereto.
7. Alteration of Duties. The Duties may be altered, amended,
modified or revoked only by a writing signed by all of the parties
hereto.
8. Resignation and Removal of the Depositary Agent. The
Depositary Agent may resign at any time upon giving at least thirty
(30) days' written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a
successor Depositary Agent which shall be accomplished as follows: the
parties shall use their best efforts to mutually agree on a successor
Depositary Agent within thirty (30) days after receiving such notice.
If the parties fail to agree upon a successor Depositary Agent within
such time, the Depositary Agent shall have the right to appoint a
successor Depositary Agent authorized to do business in the State of
California. The successor Depositary Agent shall execute and deliver
an instrument accepting such appointment and it shall, without further
acts, be vested with all the estates, properties, rights, powers, and
duties of the predecessor Depositary Agent as if originally named as
Depositary Agent. The Depositary Agent shall be discharged from any
further duties and liability under this Agreement.
9. Further Instruments. If the Depositary Agent reasonably
requires other or further instruments in connection with performance of
the Duties, the necessary parties hereto shall join in furnishing such
instruments.
10. Disputes. It is understood and agreed that should any
dispute arise with respect to the delivery, ownership, right of
possession, and/or disposition of the Escrow Shares, or should any
claim be made upon such shares by a third party, the Depositary Agent
upon receipt of written notice of such dispute or claim by the parties
hereto or by a third party, is authorized and directed to retain in its
possession without liability to anyone, all or any of said shares until
such dispute shall have been settled in accordance with the procedures
set forth in Section 10.6 of Article X. The Depositary Agent may, but
shall be under no duty whatsoever to, institute or defend any legal
proceedings which relate to the Escrow Shares.
11. Escrow Fees and Expenses.
All fees of the Depositary Agent for performance of its duties
hereunder shall be paid by Rational, and the Depositary Agent shall be
reimbursed by Rational for all reasonable out-of-pocket expenses
incurred by the Depositary Agent in the preparation, administration or
performance of the Agreement. It is understood that the fees and usual
charges agreed upon for services of the Depositary Agent shall be
considered compensation for the ordinary services as contemplated by
this Agreement. In the event that the conditions of this Agreement are
not promptly fulfilled, or if the Depositary Agent renders any service
not provided for in this Agreement, or if the parties request a
substantial modification of its terms, or if any controversy arises, or
if the Depositary Agent is made a party to, or intervenes in, any
litigation pertaining to this escrow or its subject matter, the
Depositary Agent is made a party to, or intervenes in, any litigation
pertaining to this escrow or its subject matter, the Depositary Agent
shall be reasonably compensated for such extraordinary services and
reimbursed for all costs, attorney's fees, and expenses occasioned by
such default, delay, controversy or litigation. Rational promises to
pay these sums upon demand.
12. General.
(a) Any notice permitted or required hereunder shall be
in writing and shall be deemed to have been given if delivered
personally or if mail certified or registered mail, postage prepaid, to
the parties at their address set forth below or to such other address
as they may hereafter designate:
To Rational:
Rational Software Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Company Agent:
▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
To the Depositary Agent:
The Bank of Nova Scotia Trust Company of New York
Attention:
Telephone No.:
Facsimile No.:
or to such other address as any party may have furnished in writing to
the other parties in the manner provided above. Notwithstanding the
foregoing, notices addressed to the Depositary Agent shall be effective
only upon receipt.
(b) Neither Rational nor the Company Agent nor the
Depositary Agent shall be responsible for delays or failures in
performance resulting from acts beyond its control. Such acts shall
include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the
fact, fire, communication line failures, computer viruses, power
failures, earthquakes or other disasters.
(c) The Officer's Certificate as defined in Article X
shall be signed by the President, Chief Operating Officer, Chief
Financial Officer or the General Counsel of Rational.
(d) The captions in this Escrow Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Escrow
Agreement.
(e) This Escrow Agreement may be executed in any number
of counterparts, each of which when so executed shall constitute an
original copy hereof, but all of which together shall constitute one
agreement.
(f) No party may, without the prior express written
consent of each other party, assign this Escrow Agreement in whole or
in part. This Escrow Agreement shall be binding upon the respective
parties hereto and their heirs, executors, successors and assigns.
(g) This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of California as
applied to contracts made and to be performed entirely within the State
of California. The parties to this Escrow Agreement hereby agree to
submit to personal jurisdiction in the State of California.
(h) This Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card,
miniature photographic or other similar process. The parties agree that
any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made
by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise
be admissible in evidence.
(i) This Agreement may not be altered or modified except
in writing, nor shall the conduct of the parties constitute a waiver of
any of the terms and conditions of this Escrow Agreement, unless such
waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow
Agreement on one occasion shall not constitute a waiver of the other
terms of this Escrow Agreement, or of such terms and conditions on any
other occasion.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties has executed this Escrow
Agreement as of the date first above written.
The Bank of Nova Scotia Trust
Company of New York
as Depositary Agent
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
RATIONAL SOFTWARE CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President, Chief Financial Officer, Secretary
COMPANY AGENT
Name: /s/ ▇▇▇▇▇ ▇▇▇▇▇
ANNEX A
(See Agreement)
ANNEX B
(See Agreement)
ANNEX C
Exchangeable Shares in Escrow and Ownership Thereof
Exchangeable Number of Number of Number of Percentage
Shareholder's Exchangeable Shares Shares Interests
Name and Address Shares in Available Available upon in Exchangeable
Escrow at Half- Termination of Shares in
Time Date Escrow Period Escrow
------------------ ------------- ------------ ------------- ---------------
▇▇▇ ▇▇▇▇▇▇▇▇▇ 18,231 9,116 9,115 23%
P.O. Box 55087
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 18,162 9,081 9,081 23%
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ 27,077 13,539 13,538 35%
22 ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 14,534 7,267 7,267 19%
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OFFICER'S CERTIFICATE
OF
RATIONAL SOFTWARE CORPORATION
The undersigned, pursuant to Section 3 of the Escrow Agreement
dated as of January 13, 2000 (the "Escrow Agreement"), by and among
The Bank of Nova Scotia Trust Company of New York, Rational Software
Corporation, a Delaware corporation, and ▇▇▇▇▇ ▇▇▇▇▇ as Company Agent
of the shareholders of ObjecTime Limited, an Ontario corporation, does
hereby certify as follows:
(a) As used in the Escrow Agreement the term "Closing Date"
means January 13, 2000.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this __ day of __________, 1999
RATIONAL SOFTWARE CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior VP, CFO and Secretary
SCHEDULE A
Founders
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SCHEDULE B
Vesting and Release Schedule
Initially, all Exchangeable Shares and Parent Common Shares (the
"Restricted Shares") shall be deposited with the Depositary Agent, who
shall establish a subaccount for each Holder (a "Holder's Account") and
two-thirds (2/3) of all vested options (the "Restricted Options") shall
be held by Parent, who shall establish a subaccount for each holder (a
"Holder's Option Account").
On the last day of each calendar month after the Closing Date
(the "Monthly Release Date") the Depositary Agent shall release and
forward to each holder an amount of Exchangeable Shares and Parent
Common Shares equal to 1/36th (1/48th in the case of the Founders) of
the number of such shares (rounded down to the nearest whole share)
(the "Monthly Release Amount") initially deposited into the Holders
Account unless the Depositary Agent shall have received a Blockage
Notice. If the Depositary Agent receives a Blockage Notice it shall,
until such Blockage Notice has been rescinded in writing, transfer and
deliver Restricted Shares representing all existing and future Monthly
Release Amounts to Parent.
On the last day of each calendar month after the Closing Date
(the "Monthly Release Date") Parent shall release and forward to each
holder an amount of Restricted Options equal to 1/36th (1/48th in the
case of the Founders) of the number of such options (rounded down to
the nearest whole option) (the "Monthly Option Release Amount")
initially deposited into the Holders Option Account unless such holder
is terminated for Cause or has resigned Without Good Reason (as such
terms are defined below). Any Restricted Options not delivered to such
holder shall be transferred to Parent.
"Blockage Notice" means a written notice by or on behalf of
Parent to the effect that the Holder has resigned from employment with
the Company Without Good Reason or has been terminated from employment
with Cause; provided that a Blockage Notice may only be issued to
Holder who was employed by the Company on or after September 30, 1999.
Termination for "Cause" shall mean a termination for any of the
following reasons: (i) a conviction (excluding a conviction
successfully appealed) for fraud or embezzlement, (ii) willful and
serious dishonesty which has a material adverse effect upon the
business or affairs of the Company or Parent, (iii) repeated failure to
perform the lawful duties, functions and responsibilities of the
Holder's position when reasonably requested to do so, (iv) intentional
unauthorized use or disclosure of material confidential information,
trade secrets or other proprietary information which has a material
adverse effect upon the business or affairs of the Company or Parent,
(v) a material breach of the terms of any agreement between the Holder
and the Company or Parent that is not remedied within fifteen days of
receipt of written notice from the Company, or (vi) any other
intentional misconduct which has a material adverse effect upon the
business or affairs of the Company or Parent.
A resignation shall be "Without Good Reason" unless it is based
on: (1) any reduction in a Holder's base salary, unless such reduction
is pursuant to a change in the Company's or Parent's compensation
policies generally; (2) a substantial diminution of the duties and
responsibilities of a Holder; (3) a relocation of a Holder's principal
place of employment by more than fifty (50) miles; (4) the failure by
the Company to continue in effect for a Holder's benefit any
perquisites or participation in any employee benefit plan to which
other employees of the Company are entitled, to the same extent to
which other similarly situated employees enjoy such benefits; or
(5) any other change which would constitute "constructive dismissal"
under applicable law.
In no event will any change to a Holder's title or reporting
responsibilities effected by reason of the corporate restructuring due
to Parent's acquisition of the Company constitute grounds for a good
cause resignation.
SCHEDULE C
Voting Agreement Shareholders
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SCHEDULE D
Noncompetition Employees
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