EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
By and Among
Infowave Software, Inc.,
Telispark, Inc.
and
The Sellers Named in the First Paragraph
dated
January 7, 2004
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of January 7,
2004, by and among Infowave Software, Inc., a corporation organized under the
laws of Canada ("Buyer"), Deloitte Consulting L.P., a Delaware limited
partnership ("Deloitte Consulting"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual resident
of the state of Virginia, ▇▇▇▇ ▇▇▇▇▇▇, an individual resident of the state of
Virginia, ▇▇▇▇ ▇▇▇▇▇, an individual resident of the state of Virginia, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, an individual resident of the state of Maryland (each a "Seller" and
collectively, the "Sellers"), and Telispark, Inc., a Delaware corporation (the
"Company").
Recitals
WHEREAS, Sellers own all of the outstanding capital stock of the Company.
WHEREAS, Sellers desire to sell, and Buyer desires to buy, all of the
outstanding capital stock of the Company and to otherwise retire all other
outstanding equity interests of the Company on the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, Sellers will be responsible for the cancellation, payment or
contribution to capital of all amounts outstanding, including all accrued
interest, under the Amended and Restated Senior Convertible Line of Credit
Promissory Note, dated December 22, 2003 (the "Deloitte Note"), issued by the
Company to Deloitte Consulting.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
I. Definitions
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act.
"Amended Employment Agreements" means the employment agreements between the
Company and each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇.
"Amendments to Employment Agreements" means the amendments to the
employment agreements between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇, dated as of January 7,
2004.
"Annual Financial Statements" has the meaning set forth in Section 4.6.
"Assumable Option" means an outstanding option to purchase Company Common
Stock issued pursuant to the Telispark, Inc. 2000 Stock Option Plan with an
exercise price of US$0.11 or less, whether or not currently exercisable.
"Basket Amount" has the meaning set forth in Section 10.1(c).
"Business Software" has the meaning set forth in Section 6.8.
"Buyer" has the meaning set forth in the first paragraph of this Agreement.
"Buyer Common Stock" has the meaning set forth in Section 2.2.
"Buyer Common Stock Price" means the volume weighted average price of Buyer
Common Stock on the TSX for the twenty trading days ending on the second trading
day immediately preceding the date of this Agreement as converted into US
dollars using the noon exchange rate in Toronto on the second trading day
immediately preceding the date of this Agreement as reported by the Bank of
Canada.
"Buyer Losses" has the meaning set forth in Section 10.1(a).
"Buyer Option" has the meaning set forth in Section 2.3.
"Buyer Securities Filings" has the meaning set forth in Section 5.8(a).
"Canaccord" has the meaning set forth in Section 7.15.
"Canadian Securities Law" means, collectively, to the extent applicable to
Buyer, the securities laws of each of the provinces of Canada, together with the
rules and regulations promulgated thereunder and the rules and regulations of
the TSX.
"Cash Value Purchase Price" means US$8,400,000.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Circular" means the notice of Special Meeting and accompanying management
information circular of Buyer, including all appendices thereto, to be sent to
Buyer's shareholders in connection with the Special Meeting.
"Closing Expenses" means the expenses incurred by the Company prior to the
First Tranche Closing Date in connection with this Agreement, including, but not
limited to, the Company's 2002 audit, legal fees, accounting fees, any and all
success bonuses earned in connection with this Agreement, and directors and
officers insurance for exiting officers and directors.
"Company" has the meaning set forth in the recitals of this Agreement.
"Company Common Stock" has the meaning set forth in Section 2.1.
"Company Common Stock Price" means (i) the Cash Value Purchase Price,
divided by (ii) the number of outstanding shares of Company Common Stock.
"Company Options" has the meaning set forth in Section 4.4(b).
"Company Plan" means every Plan that is maintained or contributed to by the
Company or any Subsidiary.
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"Confidential Information" has the meaning set forth in Section 6.7(a).
"Consent" means any authorization, consent, approval, filing, waiver,
exemption or other action by or notice to any Person.
"Contributed Shares" has the meaning set forth in Section 2.9.
"Contract" means a contract, agreement, commitment or binding
understanding, whether oral or written, that is in effect as of the date of this
Agreement.
"Conversion Ratio" means the Buyer Common Stock Price divided by the
Company Common Stock Price.
"Deloitte Consulting" has the meaning set forth in the first paragraph of
this Agreement.
"Deloitte Contribution Agreement" means the contribution agreement, dated
the date of this Agreement, between Deloitte Consulting and the Company.
"Deloitte Indemnification Agreement" means the indemnification agreement
dated the date hereof by and between Buyer and Deloitte Consulting.
"Disclosure Schedule" means (i) with respect to Article III, the schedule
delivered by Sellers to Buyer on or prior to the date of this Agreement and (ii)
with respect to any other Article of this Agreement, the schedule delivered by
the Company to Buyer prior to the date of this Agreement.
"Encumbrance" means 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, but excluding those imposed in connection with the sale of services
in the Ordinary Course of Business and payables due in the Ordinary Course of
Business which have been outstanding for less than 90 days.
"Environmental Laws" has the meaning set forth in Section 4.18(a)(i).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.
"Excess Shares" has the meaning set forth in Section 2.9.
"Executive Employee" means the following employees ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
"ERISA Affiliate Plan" means every Plan for which the Company or any
Subsidiary is or may be financially liable as a result of the direct sponsor's
affiliation with the Company, its Subsidiaries or the Company's shareholders
(whether or not such affiliation exists at the date of this Agreement and
notwithstanding that the Plan is not maintained by the Company or any
Subsidiary) for the benefit of its employees or former employees.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"First Tranche Closing" has the meaning set forth in Section 2.6(a).
"First Tranche Closing Date" has the meaning set forth in Section 2.6(a).
"First Tranche Purchase Price" means the number of shares of Buyer Common
Stock issued by Buyer at the First Tranche Closing pursuant to Sections 2.1, 2.2
and 2.4.
"First Tranche Shares" has the meaning set forth in Section 2.1.
"GAAP" means United States generally accepted accounting principles, as in
effect from time to time.
"Governmental Authorization" means any approval, consent, license, permit,
waiver, registration or other authorization issued, granted, given, made
available or otherwise required by any Governmental Entity or pursuant to Law.
"Governmental Entity" means any federal, state, local, foreign,
international or multinational entity or authority exercising executive,
legislative, judicial, regulatory, administrative or taxing functions of or
pertaining to government, including any national or foreign securities exchange.
"Governmental Order" means any judgment, injunction, writ, order, ruling,
award or decree by any Governmental Entity or arbitrator.
"Hazardous Materials" has the meaning set forth in Section 4.18(a).
"Indemnified Party" means, as applicable, each of the Buyer, any Seller,
the Company or its Subsidiaries (including their respective officers, directors,
partners, principals, employees, agents and stockholders) for which
indemnification is available under Article X.
"Indemnified Taxes" has the meaning set forth in Section 10.3(e).
"Indemnifying Party" means, as applicable, the Buyer or any Seller that may
be obligated to provide indemnification to an Indemnified Party under Article X.
"INS" has the meaning set forth in Section 4.20(c).
"Insider" means (i) a shareholder, officer, director or employee of the
Company or any Subsidiary, (ii) any Member of the Immediate Family of any
shareholder, officer, director or employee of the Company or any Subsidiary or
(iii) any entity in which any of the persons described in clause (i) or (ii)
owns any beneficial interest (other than less than one percent of the stock of
any publicly held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market).
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"Intellectual Property" means all rights in patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, Software,
mask works, trade secrets, know-how and other intellectual property rights.
"Intellectual Property Rights" means (i) rights in patents, patent
applications and patentable subject matter, whether or not the subject of an
application, (ii) rights in trademarks, service marks, trade names, trade dress
and other designators of origin, registered or unregistered, (iii) rights in
copyrightable subject matter or protectable designs, registered or unregistered,
(iv) trade secrets, (v) rights in Internet domain names, uniform resource
locators and e-mail addresses, (vi) rights in semiconductor topographies (mask
works), registered or unregistered, (vii) know-how and (viii) all other
intellectual and industrial property rights of every kind and nature and however
designated, whether arising by operation of Law, Contract, license or otherwise.
"IRS" means the United States Internal Revenue Service.
"Knowledge," when used with respect to (i) the Company, means the actual
knowledge of any officer of the Company and (ii) Buyer means the actual
knowledge of any officer of the Buyer.
"Last Fiscal Year End" has the meaning set forth in Section 4.6.
"Latest Balance Sheet" has the meaning set forth in Section 4.6.
"Latest Financial Statements" has the meaning set forth in Section 4.6.
"Law" means any constitution, law, ordinance, principle of common law,
regulation, statute or treaty of any Governmental Entity.
"Leased Real Property" has the meaning set forth in Section 4.10(b).
"Licensed-In Intellectual Property Rights" means Third-Party Intellectual
Property Rights used or held for use by Company or any Subsidiary with the
permission of the owner.
"Line of Credit Agreement" means the agreement, dated as of January 7,
2004, between Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as lender, providing for an irrevocable
demand line of credit in the amount of US$3,000,000 in favor of Buyer.
"Litigation" means any claim, action, arbitration, mediation, audit,
hearing, investigation, proceeding, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any Governmental Entity or
arbitrator or mediator.
"Loss" means any complaint, claim, demand, damage, deficiency, penalty,
fine, cost, amount paid in settlement, liability, obligation, Tax, Encumbrance,
loss, expense or fee, including court costs and attorneys' fees and expenses.
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"Material Adverse Effect" means any change, effect, event or condition,
individually or in the aggregate, that has had, or, with the passage of time, is
reasonably likely to have, a material adverse effect on the business, assets,
properties, condition (financial or otherwise), or results of operations of the
Company or any Subsidiary or Buyer as the case may be; excluding the effects of
changes to the extent arising from or related to (i) the United States or global
economy or capital markets generally, (ii) general changes in conditions and in
the industries in which the Company or Buyer, as the case may be, conducts
business (including as a result of acts of war or terrorism or other hostilities
or threat of war or terrorism) or (iii) this Agreement or the transactions
contemplated hereby.
"Material Contracts" has the meaning set forth in Section 4.14(a).
"Member of the Immediate Family" of a Person means a spouse, parent, child,
sibling, mother- or father-in-law, son- or daughter-in-law, and brother- or
sister-in-law of such Person.
"Net Working Capital" of the Company means the total current assets of the
Company less the total current liabilities of the Company (excluding obligations
of the Company under the Office Lease), on a consolidated basis in accordance
with GAAP.
"Non-Assumable Option" means any option to purchase Company Common Stock or
any security convertible into Company Common Stock other than the Assumable
Options.
"Noncompete Period" has the meaning set forth in Section 6.8.
"Office Lease" means the Lease Agreement, dated as of December 7, 2000,
between the Company and OTR, nominee of the State Teachers Retirement System of
Ohio, as the lessor, as amended April 27, 2001.
"Office Space" has the meaning set forth in Section 6.10.
"Off-the-Shelf Software" means Software that is widely commercially
available.
"Ordinary Course of Business" means with respect to any Person the ordinary
course of business of such Person consistent with past custom and practice
(including with respect to quantity and frequency) as it has been conducted
since the Last Fiscal Year End.
"Organizational Documents" means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership, (iv) the limited liability company agreement and articles or
certificate of formation of a limited liability company, (v) any charter or
similar document adopted or filed in connection with the creation, formation or
organization of a Person and (vi) any amendment to any of the foregoing.
"Owned Intellectual Property Rights" means Intellectual Property Rights
owned by the Company or any Subsidiary.
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"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Entity or other entity.
"Plan" means every plan, fund, contract, program and arrangement (whether
written or not) for the benefit of present or former employees, including those
intended to provide (i) medical, surgical, health care, hospitalization, dental,
vision, workers' compensation, life insurance, death, disability, legal
services, severance, sickness or accident benefits (whether or not defined in
Section 3(1) of ERISA), (ii) pension, profit sharing, stock bonus, retirement,
supplemental retirement or deferred compensation benefits (whether or not tax
qualified and whether or not defined in Section 3(2) of ERISA) or (iii) salary
continuation, unemployment, supplemental unemployment, severance, termination
pay, change-in-control, vacation or holiday benefits (whether or not defined in
Section 3(3) of ERISA), (w) that is maintained or contributed to by the Company
or any Subsidiary, (x) that the Company or any Subsidiary has committed to
implement, establish, adopt or contribute to in the future, (y) for which the
Company or any Subsidiary is or may be financially liable as a result of the
direct sponsor's affiliation with the Company, its Subsidiaries or the Company's
shareholders (whether or not such affiliation exists at the date of this
Agreement and notwithstanding that the Plan is not maintained by the Company or
any Subsidiary for the benefit of its employees or former employees) or (z) for
or with respect to which the Company or any Subsidiary is or may become liable
under any common law successor doctrine, express successor liability provisions
of Law, provisions of a collective bargaining agreement, labor or employment Law
or agreement with a predecessor employer. Plan does not include any arrangement
that has been terminated and completely wound up prior to the date of this
Agreement and for which neither the Company nor any Subsidiary has any present
or potential liability.
"Process Agent" has the meaning set forth in Section 11.14.
"Property" has the meaning set forth in Section 4.18(a).
"Real Property" has the meaning set forth in Section 4.10(b).
"Registered Intellectual Property Rights" means Intellectual Property
Rights that are the subject of a pending application or an issued patent,
trademark, copyright, design right or other similar registration formalizing
exclusive rights.
"Remedies Exception," when used with respect to any Person, means
performance of such Person's obligations except to the extent enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
"Required Consents" has the meaning set forth in Section 6.3.
"Restricted Stock Agreements" means the restricted stock agreements, dated
the date of this Agreement, among the Company and Buyer and each of the
Restricted Stock Recipients, respectively.
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"Restricted Stock Recipients" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇.
"Returns" means all returns, declarations, reports, estimates, information
returns and statements pertaining to any Taxes.
"SEC" means the United States Securities and Exchange Commission.
"Second Tranche Closing" has the meaning set forth in Section 2.6(b).
"Second Tranche Closing Date" has the meaning set forth in Section 2.6(b).
"Second Tranche Purchase Price" means the number of shares of Buyer Common
Stock issued by Buyer at the Second Tranche Closing pursuant to Sections 2.1,
2.2, 2.4 and 2.5.
"Second Tranche Shares" has the meaning set forth in Section 2.1.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Seller Losses" has the meaning set forth in Section 10.2(a).
"Seller's pro rata share" or "Seller's pro rata portion" means, as to any
Seller, a fraction, the numerator of which is the number of shares of Company
Common Stock held by such Seller prior to the First Tranche Closing Date, and
the denominator of which is the aggregate outstanding number of shares of
Company Common Stock.
"Shares" means, collectively, the First Tranche Shares and the Second
Tranche Shares.
"Software" means computer programs or data in computerized form, whether in
object code, source code or other form.
"Special Meeting" means the special meeting of Buyer's shareholders to be
called and held to consider the transactions contemplated by this Agreement.
"Subsidiary" of a Person in which another Person owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such Person. When used without reference to a
particular entity, "Subsidiary" means a Subsidiary of the Company.
"Tax Affiliate" means each of the Company and the Subsidiaries and any
other Person that is or was a member of an affiliated, combined or unitary group
of which the Company or any Subsidiary is or was a member.
"Tax Contest" has the meaning set forth in Section 10.3(e).
8
"Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments imposed by any Governmental Entity upon the Company or any Tax
Affiliate, including all net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, and all interest, penalties on, and additions to
tax or additional amounts imposed in connection with the foregoing amounts.
"Third Party Action" has the meaning set forth in Section 10.3(a).
"Third-Party Intellectual Property Rights" means Intellectual Property
Rights in which a Person other than the Company or a Subsidiary has any
ownership interest (including any Seller).
"Third Party Sale" has the meaning set forth in Section 7.11.
"Treasury Regulations" means the rules and regulations under the Code.
"TSX" means the Toronto Stock Exchange.
"Work Permits" has the meaning set forth in Section 4.20(c).
II. Purchase and Sale of Shares and Closings
2.1 Purchase and Sale. On the terms and subject to the conditions set forth
in this Agreement, Sellers agree to sell to Buyer, and Buyer agrees to purchase
from Sellers, all of the issued and outstanding shares of common stock, par
value US$0.0001 per share, of the Company ("Company Common Stock"). The number
of shares of Company Common Stock (the "First Tranche Shares"), to be purchased
on the First Tranche Closing Date on a pro-rata basis, in accordance with
Section 2.2, shall equal the product of (i) 36,944,127 shares of Buyer Common
Stock (as defined below), which shall include the number of shares of Buyer
Common Stock issued in connection with the Assumable Options, and (ii) the
Conversion Ratio. Subject to the terms of this Agreement, the remaining shares
of Company Common Stock (the "Second Tranche Shares") will be purchased by Buyer
from Sellers on a pro-rata basis, in accordance with Section 2.2, on the Second
Tranche Closing Date. Each Seller waives any co-sale rights, rights of first
refusal or similar rights that such Seller may have relating to Buyer's purchase
of the Company Common Stock, whether conferred by the Company's Organizational
Documents, by Contract or otherwise.
2.2 Purchase Price. Subject to Sections 2.4 and 2.5, the aggregate
consideration to be issued in exchange for the Company Common Stock is that
number of common shares of Buyer ("Buyer Common Stock") rounded to the nearest
whole share having an aggregate value, based on the Buyer Common Stock Price,
equal to the Cash Value Purchase Price. Subject to Section 2.4 and 2.5,
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each share of Company Common Stock shall be exchanged for such portion of one
share of Buyer Common Stock equal to the quotient of one share of Buyer Common
Stock divided by the Conversion Ratio. No fraction of a share of Buyer Common
Stock will be issued, but in lieu thereof, such fraction of a share of Buyer
Common Stock (after aggregating all fractional shares of Buyer Common Stock to
be received by any such holder) will be rounded up to the next whole share of
Buyer Common Stock.
2.3 Company Options. As of the First Tranche Closing Date, each Assumable
Option will be assumed by Buyer and converted into an option (each, a "Buyer
Option") to purchase, on substantially the same terms and conditions as such
Company Option, the number of shares of Buyer Common Stock equal to the number
of shares of Company Common Stock that were issuable upon exercise of such
Company Option immediately prior to the First Tranche Closing Date divided by
the Conversion Ratio (rounded to the nearest whole number of shares of Buyer
Common Stock), at a per share exercise price equal to the exercise price per
share of Company Common Stock at which such Company Option was exercisable
immediately prior to the First Tranche Closing Date multiplied by the Conversion
Ratio (rounded to the nearest whole cent). Furthermore, each Assumable Option
shall continue vesting in accordance with the terms of the Company Option from
which it was converted. In the case of any Company Option to which Section 421
of the Code applies by reason of Section 422 of the Code, the option exercise
price, the number of shares of Buyer Common Stock purchasable pursuant to such
option and the terms and conditions of exercise of such option will be
determined in order to comply with Section 424(a) of the Code. Buyer will
reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Buyer Options.
2.4 Adjustment of Cash Value Purchase Price. At least two days prior to the
First Tranche Closing Date, Sellers will deliver to Buyer an estimated
consolidated balance sheet (the "Estimated Consolidated Balance Sheet") for the
Company and the Subsidiaries as of the close of business on the First Tranche
Closing Date (as determined on a pro forma basis as though the transactions
contemplated by this Agreement had not occurred and prepared on a basis
consistent with the preparation of the Latest Financial Statements). The
Estimated Closing Balance Sheet shall reflect the payment of Closing Expenses
and accrued liability for 50% of the estimated expenses related to the audit for
the 2003 financial statements and review of the 2003 quarterly financials. The
Estimated Closing Date Balance Sheet will include a determination of the Net
Working Capital of the Company and the Subsidiaries as of the close of business
on the First Tranche Closing Date. If the Net Working Capital of the Company
shown on the Estimated Closing Date Balance Sheet is less than negative
US$50,000, the Cash Value Purchase Price will be decreased in an amount equal to
the amount by which the Net Working Capital of the Company reflected on the
Estimated Closing Date Balance Sheet is less than zero.
2.5 Second Tranche Price Protection. If, on the Second Tranche Closing
Date, the volume weighted average price of Buyer Common Stock on the TSX for the
twenty (20) days ending on the second trading day immediately preceding the
Second Tranche Closing Date (the "Second Tranche Stock Price") is lower than the
Buyer Common Stock Price, then solely for purposes of calculating the Conversion
Ratio for the purposes of calculating the Second Tranche Stock Price, the Buyer
Common Stock Price shall be deemed to be the higher of (i) the Second Tranche
Stock Price or (ii) the product of the Buyer Common Stock Price, without
adjustment pursuant to this Section 2.5, multiplied by 0.84.
2.6 Closings.
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(a) The closing of the purchase of the First Tranche Shares (the "First
Tranche Closing") will take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP at
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇., at 9:00 a.m. EST
on January 7, 2004 (the "First Tranche Closing Date") or at such other place and
on such other date as may be mutually agreed by Buyer and Sellers, in which case
"First Tranche Closing Date" means the date so agreed. The First Tranche Closing
will be effective as of the close of business on the First Tranche Closing Date.
(b) The closing of the purchase of the Second Tranche Shares (the "Second
Tranche Closing") will take place at the offices of ▇▇▇▇▇▇ & Whitney LLP at
Suite 400 South, 1001 Pennsylvania Ave. NW, Washington, D.C., at 9:00 a.m. EST
no later than three (3) Business Days after Buyer has conducted the Special
Meeting. The Second Tranche Closing will be effective as of the close of
business on the Second Tranche Closing Date.
(c) Immediately prior to the First Tranche Closing, the Company will cause
all Non-Assumable Options to be canceled.
(d) Subject to the conditions set forth in this Agreement, on the First
Tranche Closing Date:
(i) Sellers and the Company will deliver to Buyer:
(A) certificates representing all of the First Tranche Shares,
free and clear of all Encumbrances other than any Encumbrance created
in favor of Buyer pursuant to this Agreement or otherwise, duly
endorsed or accompanied by duly executed stock powers;
(B) a certificate of each Seller dated the First Tranche Closing
Date stating that the conditions set forth in subsections (a), (b) and
(g) of Section 8.1 have been satisfied;
(C) a certificate of the Company dated the First Tranche Closing
Date stating that the conditions set forth in subsections (a), (b) and
(g) of Section 8.1 have been satisfied;
(D) a copy of the resignations of the members of board of
directors of the Company;
(E) evidence of cancellation by the Company as of or immediately
following the First Tranche Closing of all outstanding Non-Assumable
Options;
(F) evidence satisfactory to Buyer that all amounts outstanding
under the Deloitte Note have been contributed to the capital of the
Company and the Deloitte Note terminated;
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(G) the minute books, stock or equity records, corporate seal and
other materials related to the corporate administration of the Company
or any Subsidiary;
(H) a fully executed assignment of the Office Lease, executed by
the Company and Deloitte Consulting or its affiliates;
(I) statements of non-foreign status for purposes of satisfying
Buyer's obligations under Treasury Regulation Section 1.1445-2(b)(2)
executed by each Seller;
(J) duly executed copies of all Required Consents;
(K) an executed copy of the Amendment to the Maintenance
Agreement between the Company and Nextel;
(L) an executed copy of the Deloitte Contribution Agreement;
(M) executed copies of the Restricted Stock Agreements executed
by the Company and each of the Restricted Stock Recipients;
(N) an executed copy of the Deloitte Indemnification Agreement;
(O) executed copies of the Amendments to Employment Agreements;
and
(P) such other certificates, documents and instruments that Buyer
reasonably requests for the purpose of facilitating the consummation
of the transactions contemplated by this Agreement.
(ii) Buyer will deliver to Sellers:
(A) the First Tranche Purchase Price (allocated among Sellers in
accordance with Exhibit A);
(B) a certificate of Buyer dated the First Tranche Closing Date
stating that the conditions set forth in subsections (a), (b) and (f)
of Section 8.2 have been satisfied;
(C) a copy of the Line of Credit Agreement duly executed by Buyer
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as lender, subject only to approval by a majority,
or such higher threshold as required by applicable Laws or the TSX, of
the shareholders of Buyer;
(D) duly executed copies of the Restricted Stock Agreements
executed by Buyer;
12
(E) a copy of the text of the resolutions adopted by the board of
directors of Buyer authorizing the execution, delivery and performance
of this Agreement, including the issuance of Buyer Common Stock,
certified by an appropriate officer of Buyer;
(F) duly executed copies of irrevocable proxies of the directors
and officers of Buyer who hold shares of Buyer Common Stock, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, and entities controlled by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, approving the
transactions contemplated herein;
(G) an opinion of U.S. counsel to Buyer with respect to the U.S.
securities laws, in form and substance reasonably satisfactory to
Sellers; and
(H) an opinion of Canadian counsel to Buyer with respect to
Canadian securities laws, in form and substance reasonably
satisfactory to Sellers.
(e) On the Second Tranche Closing Date:
(i) Sellers will deliver to Buyer:
(A) certificates representing all of the Second Tranche Shares,
free and clear of all Encumbrances other than any Encumbrance created
in favor of Buyer pursuant to this Agreement or otherwise, duly
endorsed or accompanied by duly executed stock powers;
(B) a certificate of Sellers dated the Second Tranche Closing
Date stating that the conditions set forth in subsections (a) through
(c) of Section 8.3 have been satisfied; and
(C) statements of non-foreign status for purposes of satisfying
Buyer's obligations under Treasury Regulation Section 1.1445-2(b)(2)
executed by each Seller.
All actions to be taken by either party in connection with the consummation
of the transactions contemplated by this Agreement and all certificates,
opinions, instruments and other documents required to effect the
transactions contemplated by this Agreement will be in form and substance
reasonably satisfactory to the other party.
(ii) Buyer will deliver to Sellers:
(A) the Second Tranche Purchase Price allocated among Sellers in
accordance with Exhibit B;
(B) a certificate of Buyer dated the Second Tranche Closing Date
stating that the conditions set forth in subsections (a) through (c)
of Section 8.4 have been satisfied; and
13
(D) a copy of the text of the resolutions adopted by the
shareholders of Buyer authorizing the execution, delivery and
performance of this Agreement, including the issuance of Buyer Common
Stock and approving the Line of Credit Agreement, certified by an
appropriate officer of Buyer.
(f) All items delivered by the parties at the First Tranche Closing and the
Second Tranche Closing, respectively, will be deemed to have been delivered
simultaneously, and no items will be deemed delivered or waived until all have
been delivered.
2.7 Restricted Stock. Immediately after the First Tranche Closing, Deloitte
Consulting will contribute 4,429,863 shares of Company Common Stock to the
capital of the Company pursuant to the Deloitte Contribution Agreement.
Immediately thereafter, the Company will issue 4,429,863 shares of Company
Common Stock to the Restricted Stock Recipients as set forth on Exhibit C,
subject to the Restricted Stock Agreements. As of the Second Tranche Closing
Date, Buyer will assume all rights and obligations of the Company under the
Restricted Stock Agreements.
2.8 Buyer Common Stock.
(a) Upon the original issuance thereof, and until such time as the same is
no longer required under applicable requirements of the Securities Act or
applicable state securities laws, certificates representing shares of Buyer
Common Stock, and all certificates issued in exchange therefor or in
substitution thereof, shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR
THE BENEFIT OF BUYER THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO BUYER, (B) OUTSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH THE
EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY
APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES
NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY
APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF
SECURITIES, AND, WITH RESPECT TO SUBSECTION (C) OR (D), THE HOLDER
HAS, PRIOR TO SUCH SALE, FURNISHED TO BUYER AN OPINION OF COUNSEL, OF
RECOGNIZED STANDING OR OTHER EVIDENCE REASONABLY SATISFACTORY TO
BUYER. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY
IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED
THAT BUYER IS A "FOREIGN ISSUER" WITHIN
14
THE MEANING OF REGULATION S AT THE TIME OF SALE, A NEW CERTIFICATE
BEARING NO LEGEND MAY BE OBTAINED FROM COMPUTERSHARE TRUST COMPANY OF
CANADA, AS REGISTRAR AND TRANSFER AGENT, UPON DELIVERY OF THIS
CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO
COMPUTERSHARE TRUST COMPANY OF CANADA AND BUYER, TO THE EFFECT THAT
SUCH SALE IS BEING MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE 1933 ACT.
(i) if the shares of Buyer Common Stock are being sold under
section (B) of the foregoing legend, and provided that Buyer is a
"foreign issuer" within the meaning of Regulation S at the time of
sale, any such legend may be removed without an opinion of counsel by
providing a declaration to Computershare Trust Company of Canada, as
registrar and transfer agent in a form attached as Exhibit D (or as
Buyer may reasonably prescribe from time to time); and
(ii) if the shares of Buyer Common Stock are being sold under
section (C) of the foregoing legend, the legend may be removed by
delivery to Computershare Trust Company of Canada and Buyer of an
opinion of counsel, of recognized standing reasonably satisfactory to
Buyer, that such legend is no longer required under applicable
requirements of the Securities Act or state securities laws.
(b) For purposes of complying with applicable Canadian Securities Laws and
Multilateral Instrument 45-102, Resale of Securities, Seller understands and
acknowledges that upon the issuance of the shares of Buyer Common Stock, all the
certificates representing shares of Buyer Common Stock, as well as all
certificates issued in exchange for or in substitution of the foregoing
securities, shall bear the following legend:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE
SECURITIES SHALL NOT TRADE THESE SECURITIES BEFORE [INSERT A DATE FOUR
MONTHS AFTER THE DATE THE SHARES ARE ISSUED] .
2.9 Deloitte Consulting Holdings. Buyer and Deloitte Consulting hereby
agree that (i) Deloitte Consulting will not own, at any time, twenty percent
(20%) or more of the issued and outstanding common shares of Buyer, (ii)
Deloitte Consulting will not hold any shares of Buyer for a period of more than
five (5) years from the Second Tranche Closing Date, and (iii) Buyer will not
appoint any officers or directors that are partners, principals or employees of
Deloitte Consulting for a period of five (5) years from the Second Tranche
Closing Date. If, at any time up to and including the Second Tranche Closing
Date, Deloitte Consulting would hold more than 19.9% of the outstanding shares
of Buyer Common Stock (any amount in excess of 19.9% being the "Excess Shares"),
any shares of the Company which would be exchanged for the ExcessShares (the
"Contributed Shares") shall be contributed to the capital of the Company in
order to reduce Deloitte Consulting's holdings to 19.9%. Between the First
Tranche Closing Date and the Second Tranche Closing Date Buyer agrees to not
purchase any of its outstanding common shares (other than pursuant to option
plans or warrants allowing for payment in common shares)
15
or otherwise consolidate its outstanding shares (except for any consolidation
that impacts all shareholders equally).
2.10 Tax Treatment. The parties to this Agreement intend to adopt this
Agreement as a "plan of reorganization" and to treat the acquisition of the
Company Common Stock pursuant to this Agreement as a tax-deferred reorganization
in accordance with the provisions of Section 368(a)(1) of the Code (a
"Reorganization") for U.S. federal income tax purposes. However, Buyer makes no
representation or warranty to the Company, any Seller or any other holder of
Company securities (including, without limitation, stock options or warrants to
acquire Company Common Stock) regarding (a) the qualification of the acquisition
of the Company Common Stock pursuant to this Agreement as a Reorganization or
(b) the U.S. federal income tax consequences to the Company, any Seller or any
such holder of Company securities arising from and relating to (i) this
Agreement, (ii) the acquisition of the Company Common Stock pursuant to this
Agreement or (iii) any other transaction contemplated by this Agreement. The
Company and the Sellers acknowledge that the Company and the Sellers are relying
solely and exclusively on their own financial advisors, accountants or tax
counsel regarding (a) the qualification of the acquisition of the Company Common
Stock pursuant to this Agreement as a Reorganization and (b) the U.S. federal
income tax consequences to the Company and the Sellers arising from and relating
to (i) this Agreement, (ii) the acquisition of the Company Common Stock pursuant
to this Agreement and (iii) any other transaction contemplated by this
Agreement.
III. Representations and Warranties of Sellers
Each Seller, severally and not jointly, represents and warrants to Buyer
that, as to such Seller, except as described in the Disclosure Schedule, as of
the date of this Agreement and as of the First Tranche Closing Date and as of
the Second Tranche Closing Date (as though made then and as though the First
Tranche Closing Date and the Second Tranche Closing Date, respectively, were
substituted for the date of this Agreement):
3.1 Title to Shares. Such Seller owns, of record and beneficially, the
number of shares of Company Common Stock listed opposite such Seller's name on
Schedule 3.1, free and clear of any Encumbrance, other than any Encumbrance
created in favor of Buyer pursuant to this Agreement or otherwise. On the date
of the First Tranche Closing and the Second Tranche Closing, respectively, Buyer
will obtain good and valid title to the First Tranche Shares and the Second
Tranche Shares, respectively, other than any Encumbrance created in favor of
Buyer pursuant to this Agreement or otherwise.
3.2 Incorporation; Power and Authority. If such Seller is not a natural
person, it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Such Seller has all necessary
power and authority to execute, deliver and perform this Agreement.
3.3 Valid and Binding Agreement. If such Seller is not a natural person,
the execution, delivery and performance of this Agreement by such Seller has
been duly and validly authorized by all necessary corporate or equivalent
action. This Agreement has been duly executed and delivered by such Seller and
constitutes the valid and binding obligation of such Seller, enforceable against
it in accordance with its terms, subject to the Remedies Exception.
16
3.4 No Breach; Consents. The execution, delivery and performance of this
Agreement by such Seller will not (a) contravene any provision of the
Organizational Documents, if any, of such Seller; (b) violate or conflict with
any Law, Governmental Order or Governmental Authorization applicable to such
Seller; (c) conflict with, result in any breach of any of the provisions of,
constitute a default (or any event which would, with the passage of time or the
giving of notice or both, constitute a default) under, result in a violation of,
result in the termination, amendment, suspension, modification, abandonment or
acceleration of payment (or any right to terminate) or require a Consent under
any Contract or Governmental Authorization that is either binding upon or
enforceable against such Seller that have a Material Adverse Effect on the
Company; or (d) result in the creation of any Encumbrance upon the Company
Common Stock held by such Seller.
3.5 Brokerage. No Person will be entitled to receive any brokerage
commission, finder's fee, fee for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made by or on behalf of such Seller for which Buyer or the
Company is or could become liable or obligated.
3.6 Adequate Information. Seller has access to all information, if any,
concerning Buyer as it or he has considered necessary in connection with its or
his investment decision to acquire shares of Buyer Common Stock hereunder.
3.7 No Solicitation or Advertising. Seller acknowledges that it or he has
not purchased Buyer Common Stock hereunder as a result of any general
solicitation or general advertising, including advertisements, articles, notices
or other communications published in any newspaper, magazine, or similar media
or broadcast over radio or television, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
3.8 Tax Consequences. Seller acknowledges that, although an investment in
Buyer Common Stock may have certain material U.S. or Canadian federal, state or
provincial tax consequences, neither Buyer nor any of its representatives have
made any representations concerning such tax consequences to Seller, and Seller
has relied solely, if at all, on Seller's own tax advisors in evaluating such
tax aspects of such an investment.
3.9 Absence of Offering Memorandum. Seller acknowledges that none of the
documents provided to it or him by Buyer in connection with the transactions
contemplated hereby constitute an offering memorandum or similar document for
the purposes of the Securities Act or other applicable securities laws.
3.10 Investment Suitability. Seller has such knowledge and experience in
financial and business affairs as to be capable of evaluating the merits and
risks of the investment hereunder in the Buyer Common Stock and is able to bear
the economic risk of the complete loss of such investment.
3.11 Residence. Each Seller that is a natural person is a resident of the
jurisdiction referred to in the first paragraph of this Agreement.
3.12 Purchasing as Principal. Seller is acquiring the Buyer Common Stock
hereunder as principal (as defined under all applicable Canadian Securities
Laws) for its own account, and
17
not for the benefit of any other Person, and such Buyer Common Stock acquired
hereunder has an aggregate acquisition cost to the Seller of at least
Cdn$97,000.
3.13 Purchasing for Investment Only. Seller is acquiring the Buyer Common
Stock hereunder for investment only and not with a view to resale or
distribution in violation of applicable Canadian Securities Laws, the Securities
Act or applicable state securities laws. Seller agrees that certificates
representing the Buyer Common Stock shall contain the legends set forth in
Section 2.8.
IV. Representations and Warranties Regarding the Company
The Company hereby represents and warrants to Buyer that, except as
described in the Disclosure Schedule, as of the date of this Agreement:
4.1 Incorporation; Power and Authority.
(a) Each of the Company and the Subsidiaries is a legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has all necessary power and authority
necessary to own, lease and operate its assets and to carry on its business as
now conducted and presently proposed to be conducted. Each of the Company and
the Subsidiaries is duly qualified to do business as a foreign corporation in
each jurisdiction in which the failure to so qualify would have a Material
Adverse Effect on the Company. Schedule 4.1 lists, for each of the Company and
the Subsidiaries, the jurisdiction of its organization, its form as a legal
entity and each jurisdiction in which it is so qualified. The Company has all
necessary power and authority to execute, deliver and perform this Agreement.
(b) Each of the Company and the Subsidiaries is in material compliance with
all provisions of its Organizational Documents.
4.2 Valid and Binding Agreement. The execution, delivery and performance of
this Agreement by the Company have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to the Remedies Exception.
4.3 No Breach; Consents. The execution, delivery and performance of this
Agreement will not materially (a) contravene any provision of the Organizational
Documents of the Company or any Subsidiary; (b) violate or conflict with any
Law, Governmental Order or Governmental Authorization applicable to the Company;
(c) conflict with, result in any breach of any of the provisions of, constitute
a default (or any event which would, with the passage of time or the giving of
notice or both, constitute a default) under, result in a violation of, result in
the termination, amendment, suspension, modification, abandonment or
acceleration of payment (or any right to terminate) or require a Consent under
any Contract or Governmental Authorization that is either binding upon or
enforceable against the Company or any Subsidiary that have a Material Adverse
Effect on the Company; or (d) result in the creation of any Encumbrance upon the
Company or any Subsidiary or any of the assets of the Company or any Subsidiary,
except for any Encumbrance that may be imposed by any contract or other
agreement to which Buyer is a party or by which any of the assets of Buyer are
bound.
18
4.4 Capitalization.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 20,000 shares of Company Preferred Stock, of
which 44,298,628.348 shares of Company Common Stock and 0 shares of Company
Preferred Stock are issued and outstanding and 55,701,371.652 shares of Company
Common Stock and 20,000 shares of Company Preferred Stock are held in treasury.
Schedule 4.4(a) lists the names and addresses of each record holder of the
issued and outstanding Company Common Stock, the number of shares held by each
such holder and the share certificate numbers, repurchase or redemption rights
for such shares in favor of the Company, the vesting schedule and forfeiture
provisions for any of such shares that are "restricted stock," and the extent to
which vesting will or may be accelerated by the transactions contemplated by
this Agreement and any limitations on the ability of the holder of such capital
stock to vote or dispose of such shares. All issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable, free of preemptive rights granted by the Company or any other
third party rights granted by the Company and in certificated form, and have
been offered, sold and issued by the Company in compliance with applicable
securities and corporate Laws, Contracts applicable to the Company and the
Company's Organizational Documents and in compliance with any preemptive rights,
rights of first refusal or similar rights granted by the Company. To the
Company's Knowledge, the shares of Company Common Stock are not subject to any
preemptive rights or any other third party rights granted by Persons other than
the Company. Except as set forth on Schedule 4.4(a), the rights and privileges
by which the Company Common Stock is bound are set forth in the Company's
Organizational Documents.
(b) As of the date of this Agreement, Assumable Options and Non-Assumable
Options (collectively, "Company Options") with respect to 9,165,595 shares of
Company Common Stock are outstanding. Schedule 4.4(b) lists the name and
addresses of each holder of an outstanding Company Option and whether such
holder is an employee of the Company and, with respect to each Company Option
held, the date of grant of such Company Options, the number of shares of Company
Common Stock subject to such Company Option, the exercise price of such Company
Option, the vesting schedule (and any provisions for acceleration or deferral of
vesting) for such Company Option, the extent vested as of the date of this
Agreement, the extent to which exercisability of such Company Option will or may
be accelerated by the transactions contemplated by this Agreement and whether
such Company Option is an "incentive stock option." All outstanding Company
Options have been offered, sold and delivered in compliance with applicable
securities and corporate Laws, Contracts applicable to the Company and the
Company's Organizational Documents. All shares of Company Common Stock issuable
upon exercise of the Company Options have been offered in compliance with
applicable securities and corporate Laws, Contracts applicable to the Company
and the Company's Organizational Documents and, upon issuance in accordance with
their terms, will be duly authorized, validly issued, fully paid and
nonassessable.
(c) Except for the Company Options listed on Schedule 4.4(c), there is no
option, warrant, call, subscription, convertible security, right (including
preemptive right) or Contract of any character to which the Company is a party
or by which it is bound obligating the Company to issue, exchange, transfer,
sell, repurchase, redeem or otherwise acquire any capital stock of the Company
or obligating the Company to grant, extend, accelerate the vesting of or enter
into any
19
such option, warrant, call, subscription, convertible security, right or
Contract. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to the Company. To the Company's Knowledge,
except as contemplated by this Agreement or set forth on Schedule 4.4(c), there
are no registration rights agreements, no voting trust, proxy or other Contract
and no restrictions on transfer with respect to any capital stock of the
Company.
4.5 Subsidiaries. Except as listed on Schedule 4.5, neither the Company nor
any Subsidiary owns any Subsidiary. For each of the Company's Subsidiaries,
Schedule 4.5 shows the equity interests owned by the Company or any Subsidiary.
Except as listed on Schedule 4.5, all issued and outstanding equity interests of
each Subsidiary of the Company are duly authorized, validly issued, fully paid
and nonassessable, free of preemptive rights or any other third-party right,
free and clear of all Encumbrances, and in certificated form and have been
offered, sold and issued by such Subsidiary in compliance with applicable
securities and corporate Laws, Contracts applicable to such Subsidiary and such
Subsidiary's Organizational Documents and in compliance with any preemptive
rights, rights of first refusal or similar rights. Except as listed on Schedule
4.5, there is no option, warrant, call, subscription, convertible security,
right (including preemptive rights) or Contract of any character to which the
Company or any Subsidiary is a party or by which it is bound obligating any
Subsidiary of the Company or the Company to issue, exchange, transfer, sell,
repurchase, redeem or otherwise acquire any equity interest of such Subsidiary
or obligating the Company or such Subsidiary to grant, extend, accelerate the
vesting of or enter into any such option, warrant, call, subscription,
convertible security, right or Contract.
4.6 Financial Statements. The unaudited consolidated balance sheet as of
September 30, 2003, of the Company and its consolidated Subsidiaries (the
"Latest Balance Sheet") and the unaudited consolidated statements of income,
changes in shareholders' equity and cash flows of the Company and its
consolidated Subsidiaries for the nine month period then ended (such statements
and the Latest Balance Sheet, the "Latest Financial Statements") and the audited
consolidated balance sheet, as of December 31, 2002 (the "Last Fiscal Year End")
and for the each of the prior fiscal year ends, of the Company and its
consolidated Subsidiaries and the audited consolidated statements of income,
shareholders' equity and cash flows, including the notes, of the Company and its
consolidated Subsidiaries for each of the 3 years ended on the Last Fiscal Year
End (collectively, the "Annual Financial Statements") are based upon the books
and records of the Company and the Subsidiaries, have been prepared in
accordance with GAAP consistently applied during the periods indicated and
present fairly in all material respects the financial position, results of
operations and cash flows of the Company and its consolidated Subsidiaries on a
consolidated basis at the respective dates and for the respective periods
indicated, except that the Latest Financial Statements may not contain all notes
and are subject to year-end adjustments, none of which are material.
4.7 Absence of Undisclosed Liabilities. Except as listed on Schedule 4.7
and except as reflected or expressly reserved against in the Latest Balance
Sheet, neither the Company nor any Subsidiary has any material liability or
obligation (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted) and there is no known material Litigation, charge, complaint, claim or
demand against any of them, or to the Company's Knowledge, threatened against
them giving rise to any material liability or obligation, except for such
liabilities or obligations that have
20
arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business, none of which is a liability or obligation for breach of Contract,
breach of warranty, tort, infringement, Litigation or violation of Governmental
Order, Governmental Authorization or Law.
4.8 Books and Records. The books of account of the Company and the
Subsidiaries are complete and correct in all material respects and have been
maintained in accordance with sound business practices and the requirements of
Section 13(b)(2) of the Exchange Act (regardless of whether the Company or any
Subsidiary is subject to that section), including the maintenance of an adequate
system of internal controls. The stock or equity records of each of the Company
and the Subsidiaries, all of which have been made available to Buyer, are
complete and correct. All such books and records are in the possession of
Sellers and are true and correct in all material respects.
4.9 Absence of Certain Developments. Since the Last Fiscal Year End, there
has not been any Material Adverse Effect and:
(a) neither the Company nor any Subsidiary has sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(b) except as reflected on Schedule 4.9, neither the Company nor any
Subsidiary has entered into any Contract (or series of related Contracts) either
involving more than US$1,000,000 or outside the Ordinary Course of Business;
(c) except as reflected on Schedule 4.9, no party (including the Company or
any Subsidiary) has accelerated, suspended, terminated, modified or canceled any
Contract (or series of related Contracts) involving more than US$500,000 to
which the Company or any Subsidiary is a party or by which any of them is bound;
(d) no Encumbrance has been imposed on any assets of the Company or any
Subsidiary;
(e) neither the Company nor any Subsidiary has made any capital expenditure
(or series of related capital expenditures) either involving more than US$50,000
or outside the Ordinary Course of Business;
(f) neither the Company nor any Subsidiary has made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans and acquisitions) either
involving more than US$100,000 or outside the Ordinary Course of Business or
acquired (by merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any Person;
(g) except as listed on Schedule 4.9, neither the Company nor any
Subsidiary has issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any indebtedness for borrowed money (including
advances on existing credit facilities) or capitalized lease obligation either
involving more than US$50,000 in the aggregate;
21
(h) except as listed on Schedule 4.9, neither the Company nor any
Subsidiary has delayed, postponed or accelerated the payment of accounts payable
or other liabilities or the receipt of any accounts receivable, in each case
outside the Ordinary Course of Business;
(i) neither the Company nor any Subsidiary has canceled, compromised,
waived or released any right or claim (or series of related rights or claims)
outside the Ordinary Course of Business;
(j) except as listed on Schedule 4.9, neither the Company nor any
Subsidiary has granted any license or sublicense of any rights under or with
respect to any Intellectual Property outside the Ordinary Course of Business;
(k) there has been no change made or authorized in the Organizational
Documents of the Company or any Subsidiary;
(l) neither the Company nor any Subsidiary has issued, sold or otherwise
disposed of any of its capital stock or equity interests, or granted any
options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock (other than the
issuance of shares of Company Common Stock upon exercise of outstanding Company
Options);
(m) neither the Company nor any Subsidiary has declared, set aside or paid
any dividend or made any distribution with respect to its capital stock or
equity interests (whether in cash or in kind) or redeemed, purchased or
otherwise acquired any of its capital stock or split, combined or reclassified
any outstanding shares of its capital stock;
(n) neither the Company nor any Subsidiary has experienced any damage,
destruction or loss (whether or not covered by insurance) to its property;
(o) neither the Company nor any Subsidiary has made any loan to, or entered
into any other transaction with, any of its directors, officers or employees
outside the Ordinary Course of Business;
(p) neither the Company nor any Subsidiary has entered into any collective
bargaining agreement, written or oral, or modified the terms of any such
existing agreement;
(q) except as listed on Schedule 4.9, neither the Company nor any
Subsidiary has granted any increase in the base compensation or made any other
change in employment terms of any of its directors, officers or employees
outside the Ordinary Course of Business;
(r) except as listed on Schedule 4.9, neither the Company nor any
Subsidiary has adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, Contract or commitment for
the benefit of any of its directors, officers or employees (or taken any such
action with respect to any other Plan);
(s) neither the Company nor any Subsidiary has made or pledged to make any
charitable or other capital contribution;
22
(t) except as listed on Schedule 4.9, neither the Company nor any
Subsidiary has discharged or satisfied any Encumbrance or paid any liability, in
each case with a value in excess of US$25,000 in the aggregate, other than
current liabilities paid in the Ordinary Course of Business;
(u) except in the Ordinary Course of Business or as set forth on Schedule
4.9, neither the Company nor any Subsidiary has disclosed, to any Person other
than Buyer and authorized representatives of Buyer, any proprietary confidential
information, other than pursuant to a confidentiality agreement prohibiting the
use or further disclosure of such information, which agreement is listed on
Schedule 4.9 and is in full force and effect on the date of this Agreement;
(v) except as listed on Schedule 4.9, the Company has not made any change
in accounting principles or practices from those utilized in the preparation of
the Annual Financial Statements; and
(w) neither the Company nor any Subsidiary has committed to take any of the
actions described in this Section 4.9.
4.10 Property.
(a) Neither the Company nor any Subsidiary owns any real property. The real
properties demised by the leases listed on Schedule 4.10 constitute all of the
real property leased (whether or not occupied and including any leases assigned
or leased premises sublet for which the Company remains liable), used or
occupied by the Company or any Subsidiary.
(b) The leases of real property listed on Schedule 4.10 as being leased by
the Company or any Subsidiary (the "Leased Real Property" or the "Real
Property") are, to the Knowledge of the Company, in full force and effect, and
the lessee holds a valid and existing leasehold interest under each of the
leases for the term listed on Schedule 4.10.
(c) To Knowledge of the Company, each parcel of Real Property has access,
sufficient for the conduct of the business as now conducted by the Company or
any Subsidiary on such parcel or Real Property, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business at that
location. To the Knowledge of the Company, the zoning for each parcel of Real
Property permits the presently existing improvements and the continuation of the
business presently being conducted thereon as a conforming use. To the Knowledge
of the Company, neither the Company nor any Subsidiary is in violation of any
applicable zoning ordinance or other Law relating to the Real Property, and
neither the Company nor any Subsidiary has received any notice of any such
violation, or the existence of any condemnation proceeding with respect to any
of the Real Property.
(d) Except as listed on Schedule 4.10, each of the Company and the
Subsidiaries has a valid leasehold interest in, the buildings, machinery,
equipment and other tangible assets and properties material to the conduct of
the business of the Company and the Subsidiaries, located on their premises or
shown in the Latest Balance Sheet or acquired after the date thereof, free and
clear of all Encumbrances, except for Encumbrances listed on Schedule 4.10 and
properties
23
and assets disposed of in the Ordinary Course of Business since the date of the
Latest Balance Sheet.
(e) All of the buildings, machinery, equipment and other tangible assets
and properties material to the conduct of the business of each of the Company
and the Subsidiaries are in usable condition and repair, ordinary wear and tear
excepted, and are usable in the Ordinary Course of Business.
4.11 Accounts Receivable. Except as listed on Schedule 4.11, all notes and
accounts receivable of each of the Company and the Subsidiaries are reflected
properly on their books and records, are valid, have arisen from bona fide
transactions in the Ordinary Course of Business, are subject to no setoff or
counterclaim, and are current and collectible in accordance with their terms
(none of which is beyond 90 days), subject only to the reserve for bad debts on
the Latest Balance Sheet.
4.12 Tax Matters.
(a) Except as listed on Schedule 4.12, each of the Company and any Tax
Affiliate has (i) timely filed (or has had timely filed on its behalf) all
Returns required to be filed or sent by it, all of which Returns were correct
and complete in all material respects and (ii) timely and properly paid (or has
had paid on its behalf) all Taxes shown to be due and payable on such Returns.
(b) Each of the Company and any Tax Affiliate has complied with all Laws
relating to the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Sections 1441-1442 of the Code and
Sections 3401-3406 of the Code), and has timely and properly withheld and paid
over to the proper Governmental Entity all Taxes required to be so withheld and
paid over under applicable Law.
(c) All Taxes of the Company and all Tax Affiliates that will be due and
payable for any period ending on or prior to the First Tranche Closing Date
either (i) will have been paid by or on behalf of the Company (other than Taxes
that are being contested in good faith as listed on Schedule 4.12) or (ii) will
be reflected, in a manner consistent with past practice, on the Company's books
as an accrued Tax liability, either current or deferred.
(d) There are no Encumbrances for Taxes upon any assets of the Company or
any Tax Affiliate, except Encumbrances for Taxes not yet due.
(e) Except as listed on Schedule 4.12, no deficiency for any Taxes has been
proposed, asserted or assessed against the Company or any Tax Affiliate that has
not been resolved and paid in full. No waiver, extension or comparable consent
given by the Company or any Tax Affiliate regarding the application of the
statute of limitations with respect to any Taxes or Returns is outstanding, nor
is any request for any such waiver or consent pending. There has been no Tax
audit or other administrative proceeding or court proceeding with regard to any
Taxes or Returns for any Tax year, no such Tax audit or other proceeding is
pending, neither the Company nor any Tax Affiliate has received any notice from
any Governmental Entity regarding any such Tax audit or other proceeding, and,
to the Knowledge of the Company, no such Tax
24
audit or other proceeding is threatened with regard to any Taxes or Returns.
Neither the Company nor any Tax Affiliate has Knowledge of any unresolved
questions, claims or disputes concerning the liability for Taxes of the Company
or any Tax Affiliate which would exceed the estimated reserves established on
its books and records. No claim has ever been made by a Governmental Entity in a
jurisdiction where neither the Company nor any Tax Affiliate files any Return
that the Company or any Tax Affiliate is or may be subject to taxation in such
jurisdiction.
(f) Schedule 4.12 lists all Returns filed with respect to any of the
Company or any Tax Affiliate for all Tax years, indicates those Returns that
have been audited and indicates those Returns that currently are the subject of
audit.
(g) Except as listed on Schedule 4.12, neither the Company nor any Tax
Affiliate is a party to any Contract (excluding this Agreement and all other
agreements entered into on or about the date of this Agreement or contemplated
by this Agreement including, without limitation, the Amended Employment
Agreements and the Restricted Stock Agreements) that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(h) Except as listed on Schedule 4.12, neither the Company nor any Tax
Affiliate has requested any extension of time within which to file any Return,
which Return has not since been filed.
(i) Neither the Company nor any Tax Affiliate is required to include in
income any adjustment under Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Company or any Tax Affiliate as a
result of the Tax Reform Act of 1986 and neither the Company nor any Tax
Affiliate has knowledge that the IRS has proposed any such adjustment or change
in accounting method.
(j) Neither the Company nor any Tax Affiliate is a party to any Tax
allocation or sharing agreement.
(k) The Company and the Tax Affiliates are, and at all times have been,
corporations or associations taxable as corporations for U.S. federal income tax
purposes.
(l) Except as listed on Schedule 4.12(l), neither the Company nor any
Subsidiary (i) has been a member of an affiliate group filing a consolidated
Return (other than a group the common parent of which was the Company) or (ii)
has any liability for the Taxes of any Person (other than any of the Company or
any Subsidiary) under Section 1.1502-6 of the Treasury Regulation (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise.
(m) Neither the Company nor any Subsidiary constitutes either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of shares qualifying for
tax-free treatment under Section 355 of the Code (i) in the two (2) years prior
to the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the purchase of the
Company Common Stock.
25
4.13 Intellectual Property Rights.
(a) Schedule 4.13(a)(i) lists and describes all Owned Intellectual Property
Rights that are Registered Intellectual Property Rights. Schedule 4.13(a)(ii)
lists and describes all Contracts between the Company or any Subsidiary and a
third party relating to Licensed-In Intellectual Property Rights other than
Software; to the extent there is no written Contract between the Company or any
Subsidiary and a third party covering a Licensed-In Intellectual Property Right,
Schedule 4.13(a)(ii) lists the licensor and describes the Intellectual Property
Rights so licensed. Schedule 4.13(a)(iii) lists and describes the Contracts
between the Company or any Subsidiary and a third party relating to Licensed-In
Intellectual Property Rights that are Software that are not Off-The-Shelf
software; to the extent there is no written Contract covering any Software,
Schedule 4.13(a)(iii) lists the licensor and describes the Software so licensed.
The Owned Intellectual Property Rights and the Licensed-In Intellectual Property
Rights constitute all Intellectual Property Rights necessary for the business of
the Company and its Subsidiaries as now conducted or presently proposed by the
Company or any Subsidiary to be conducted.
(b) Except for payments and other Encumbrances listed on Schedule 4.13(b),
the Company owns all right, title and interest in the Owned Intellectual
Property Rights free and clear of all Encumbrances (including royalty or other
payments to third parties). The Company is the sole owner of record of all
Registered Intellectual Property Rights. Except as set forth on Schedule
4.13(b), to the Knowledge of the Company no Owned Intellectual Property Right is
infringed by any Person. No employee or former employee or independent
contractor of the Company or any Subsidiary has made any claim to the Company
with respect to any Owned Intellectual Property Right of the Company.
(c) All Owned Intellectual Property Rights are subsisting and, neither the
Company nor any Subsidiary has any Knowledge of facts showing, or has received
any notice from any Person asserting, that any Owned Intellectual Property Right
is invalid or not enforceable. All Owned Intellectual Property Rights that are
Registered Intellectual Property Rights are in full force and effect, and all
actions required to keep such rights pending or in effect, including payment of
filing, examination, annuity, and maintenance fees and filing of renewals,
statements of use or working, affidavits of incontestability and other similar
actions, have been taken, and no such Owned Intellectual Property Right that is
a Registered Intellectual Property Right is the subject of any interference,
opposition, cancellation, nullity, re-examination or other proceeding placing in
question the validity or scope of such rights. All products covered by Owned
Intellectual Property Rights that are Registered Intellectual Property Rights
and all usages of Owned Intellectual Property Rights that are Registered
Intellectual Property Rights have been marked with the appropriate patent,
trademark or copyright notice.
(d) The documentation relating to all trade secrets listed on Schedule
4.13(a)(i) is current, accurate and sufficient in detail and content to identify
and explain such trade secrets and to allow its full and proper use without
reliance on the knowledge or memory of any individual. All reasonable
precautions have been taken by the Company or its Subsidiaries to protect the
secrecy, confidentiality and value of the trade secrets and all other
proprietary information used by the Company or any Subsidiary including, without
limitation, the implementation and enforcement of policies requiring each
employee or independent contractor that has access to trade secrets to execute
proprietary information and confidentiality agreements
26
substantially in a standard form, and each current and former employee and
contractor of the Company or any Subsidiary has executed such an agreement.
There has been no breach or other violation of such agreements that could
reasonably be expected to have a Material Adverse Effect on the Company. To the
Knowledge of the Company, each of the Company and its Subsidiaries has an
unqualified right to use all trade secrets and other proprietary information
currently used in its business, subject to any Contract relating to Licensed-In
Intellectual Property Rights. To the Knowledge of the Company, no such trade
secret or other proprietary information is part of the public knowledge or
literature, and no trade secret or other proprietary information has been used,
divulged or appropriated either for the benefit of any Person other than the
Company or a Subsidiary or to the detriment of the Company or any Subsidiary.
(e) Except as listed on Schedule 4.13(e), neither the Company nor any
Subsidiary has taken action, or failed to take an action, that might have the
effect of stopping or otherwise limiting its right to enforce Owned Intellectual
Property Rights against any Person.
(f) Neither the Company nor any Subsidiary has any present expectation or
intention of not fully performing any obligation pursuant to any license, and,
to the Knowledge of the Company, there is no breach, anticipated breach or
default by any other party to any license. Except as listed on Schedule 4.13(f),
there are no renegotiations of, attempts to renegotiate, demands for or
outstanding rights to renegotiate any license to which the Company or any
Subsidiary is a party. Except as listed on Schedule 4.13(f), all rights under
each License to which the Company or any Subsidiary is a party will be fully
available to the Company or a Subsidiary after the Second Tranche Closing.
(g) Except as listed on Schedule 4.13(g), the agreements for each
Licensed-in Intellectual Property Right for which the Company has an exclusive
right are in full force and effect, and all actions required of Company, if any,
under such agreements to keep the Licensed-in Intellectual Property Right
licensed pursuant to such agreements pending or in effect, or to provide full
protection, including payment of filing, examination, annuity, and maintenance
fees and filing of renewals, statements of use or working, affidavits of
incontestability and other similar actions, have been taken. No Licensed-in
Intellectual Property right that is a Registered Intellectual Property Right and
for which Company has an exclusive right and is responsible, pursuant to the
agreement licensing such rights to Company, to maintain and prosecute the
application or registrations for the Registered Intellectual Property Right, is
the subject of any interference, opposition, cancellation, nullity,
re-examination or other proceeding placing in question the validity or scope of
such right.
(h) None of Sellers, the Company or any Subsidiary has received any notice
of any infringement, misappropriation or violation by the Company or any
Subsidiary of any Third-Party Intellectual Property Right, and neither the
Company nor any Subsidiary has infringed, misappropriated or otherwise violated
any Third-Party Intellectual Property Right that could reasonably be expected to
have a Material Adverse Affect on the Company. To the Knowledge of the Company,
no infringement, misappropriation or violation of any Third-Party Intellectual
Property Right has occurred or will occur with respect to products and services
currently being or previously sold by the Company or with respect to the
products or services currently under development or with respect to the conduct
of the business of the Company as now conducted or presently proposed by the
Company or any Subsidiary to be conducted.
27
(i) Except as listed on Schedule 4.13(i), all Software that is necessary to
and that is used by the Company or any Subsidiary is subject to a current
license agreement that covers all use of the Software. Except as listed on
Schedule 4.13(i), each of the Company and the Subsidiaries has the right to use
the Software currently used in its business as it is presently being used, to
the Knowledge of the Company without any conflict with the rights of others.
Neither the Company nor any Subsidiary has received notice that it is in breach
of any license to, or license of, any Software. The Company and its Subsidiaries
do not use, rely on or contract with any Person to provide services bureau,
outsourcing or other computer processing services to the Company or any
Subsidiary, in lieu of or in addition to their respective use of the Software.
Except as listed on Schedule 4.13(i), following the First Tranche Closing, each
of the Company and the Subsidiaries will have sufficient rights to all necessary
Software, as a result of its licensing of the applicable Software to operate its
business as it is currently being conducted.
4.14 Material Contracts.
(a) Schedule 4.14 lists the following Contracts to which the Company or any
Subsidiary is a party or subject or by which it is bound (the "Material
Contracts"):
(i) all employment, agency or consulting Contracts;
(ii) all stock purchase, stock option and stock incentive plans (other
than Plans);
(iii) all Contracts (A) with any Insider other than Deloitte
Consulting and its affiliates or (B) between or among any Insiders relating
in any way to the Company or any Subsidiary;
(iv) all distributor, reseller, OEM, dealer, manufacturer's
representative, sales agency or advertising agency, finder's and
manufacturing or assembly Contracts, which are either cancelable upon 60
days notice or are in excess of aggregate annual payments of US$75,000;
(v) any Contracts or group of related Contracts with the same party
for the purchase of products or services with a undelivered balance in
excess of aggregate annual payment of US$75,000;
(vi) any Contract or group of related Contracts with the same party
for the sale of products or services with an undelivered balance in excess
of aggregate annual payments of US$75,000;
(vii) all leases of real or personal property (excluding any lease
with aggregate annual payments of US$75,000 or less for pagers, telephone
equipment, copy machines and the like entered into in the Ordinary Course
of Business);
(viii) any Contract for the sale of any capital assets;
(ix) any Contract for capital expenditures in excess of aggregate
annual payments of US$75,000;
28
(x) all Contracts relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any of the assets of the Company or
any Subsidiary;
(xi) each written warranty, guaranty or other similar undertaking with
respect to contractual performance extended by the Company or any
Subsidiary other than in the Ordinary Course of Business;
(xii) all Contracts relating to any surety bond or letter of credit
required to be maintained by the Company or any Subsidiary;
(xiii) any Contract that contains or provides for an express
undertaking by the Company or any Subsidiary to be responsible for
consequential damages;
(xiv) all license agreements, transfer or joint-use agreements or
other agreements related to Intellectual Property;
(xv) any Contract concerning a partnership or joint venture other than
informal partnerships created by OEM or similar agreements;
(xvi) any Contract providing for the development of any products,
software or Intellectual Property or the delivery of any services by, for
or with any third party;
(xvii) any Contracts containing exclusivity, noncompetition or
nonsolicitation provisions or that would otherwise prohibit the Company or
any Subsidiary from freely engaging in business anywhere in the world or
prohibiting the solicitation of the employees or contractors of any other
entity;
(xviii) all Contracts pertaining to confidentiality or non-disclosure;
(xix) all Contracts terminable by any other party upon a change of
control of the Company or any Subsidiary or upon the failure of the Company
or any Subsidiary to satisfy financial or performance criteria specified in
such Contract;
(xx) any power of attorney that is currently effective; and
(xxi) any and all other Contracts of the Company or any Subsidiary not
entered into in the Ordinary Course of Business or that are material to the
business, financial condition, or results of operations of the Company and
the Subsidiaries taken as a whole
(b) To the Knowledge of the Company, each Material Contract is valid and
binding, currently in force and enforceable against the Company in accordance
with its terms, subject to the Remedies Exception. Except as listed on Schedule
4.14(b), each of the Company and the Subsidiaries has performed all obligations
required to be performed in all material respects by it in connection with each
Material Contract. Except as set forth on Schedule 4.14(b), neither the Company
nor any Subsidiary has received any notice of any claim of default by it under
or termination of any Material Contract. Neither the Company nor any Subsidiary
has any present expectation or intention of not fully performing any obligation
pursuant to any Material Contract,
29
and, to the Knowledge of the Company, there is no breach, anticipated breach or
default by any other party to any Material Contract. There are no renegotiations
of, to the Knowledge of the Company attempts to renegotiate or outstanding
rights to renegotiate any material terms of any Material Contract and no Person
has made written demand for such renegotiation. Neither the Company nor any
Subsidiary has received any request or is currently refunding payments received
for work not yet performed under a Material Contract where the percentage of
work completed is less than the percentage of revenues received to date.
4.15 Litigation. Except as listed on Schedule 4.15, no Litigation is
pending or, to the Knowledge of the Company, threatened against the Company or
any Subsidiary. Neither the Company nor any Subsidiary is subject to any
outstanding Governmental Order.
4.16 Insurance.
(a) Each of the Company and the Subsidiaries has at all times maintained
insurance relating to its business and covering property, fire, casualty,
liability, workers' compensation and all other forms of insurance customarily
obtained by businesses in the same industry. Such insurance (i) is in full force
and effect, (ii) is sufficient for compliance with all requirements of
applicable Law and of any Contract to which the Company or any Subsidiary is
subject, (iii) is valid and enforceable, (iv) insures against risks of the kind
customarily insured against and in amounts customarily carried by businesses
similarly situated and (v) and is believed by the Company to provide adequate
insurance coverage for the activities of each of the Company and the
Subsidiaries.
(b) Schedule 4.16 lists by year for the current policy year and each of the
two (2) preceding policy years (i) the name of the claimant, (ii) a description
of the policy by insurer, type of insurance and period of coverage and (iii) the
amount and a brief description of the claim. During the current policy year and
each of the two (2) preceding policy years the Company has had no loss
experience.
4.17 Compliance with Laws; Government Authorizations.
(a) Each of the Company and the Subsidiaries has complied in all material
respects with all applicable Laws and Governmental Orders.
(b) Each of the Company and the Subsidiaries has in full force and effect
all Governmental Authorizations necessary to conduct its business and own and
operate its properties. Schedule 4.17(b) lists each Governmental Authorization
held by the Company or any Subsidiary. Each of the Company and the Subsidiaries
has complied in all material respects with all Governmental Authorizations
applicable to it.
(c) Neither the Company nor any Subsidiary has offered, authorized,
promised, made or agreed to make gifts of money, other property or similar
benefits (other than incidental gifts of articles of nominal value) to any
actual or potential customer, supplier, governmental employee, political party,
political party official or candidate, official of a public international
organization or any other Person in a position to assist or hinder the Company
or any Subsidiary in connection with any actual or proposed transaction, other
than payments required or permitted by the Laws of the applicable jurisdiction
and in compliance with the U.S. Foreign Corrupt Practices Act.
30
(d) Each of the Company and the Subsidiaries has conducted its export
transactions in accordance with applicable provisions of export control Laws,
including any Laws relating to the export of technology.
(e) Neither the Company nor any Subsidiary has now, or has had in the past,
any legal obligation to file any form, report, schedule, proxy statement or
other document with the SEC, and the Company has not filed with the SEC any such
form, report, schedule, proxy statement or other document.
4.18 Environmental Matters.
(a) As used in this Section 4.18, the following terms have the following
meanings:
(i) "Environmental Laws" means all federal, state, local and foreign
laws, rules, regulations, codes, ordinances, orders, decrees, directives,
permits, licenses and judgments in effect as of the date of this Agreement
and relating to pollution, contamination or protection of the environment.
(ii) "Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as hazardous, radioactive, or
toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law that poses a present or potential hazard to human health
or the environment. .
(iii) "Property" means real property now or previously owned, leased,
controlled or occupied by the Company or any Subsidiary.
(b) The Company is in material compliance with all applicable Environmental
Laws and no claim, action, or enforcement is pending or, to the Knowledge of the
Company, threatened against the Company with respect to Environmental Laws. To
the Knowledge of the Company, no expenditure will be required in order for Buyer
or the Company to comply with any Environmental Laws in effect at the time of
the First Tranche Closing in connection with the operation or continued
operation of the Property in a manner consistent with the present operation
thereof.
(c) The Company has not received any written notice alleging in any manner
that the Company is responsible for any release of Hazardous Materials on, in,
or under the Property. To the Knowledge of the Company, no Hazardous Materials
have been generated, treated, contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited or stored on, under or about any part
of the Property. To the Knowledge of the Company, the Property contains no
asbestos, urea, formaldehyde, radon at levels above natural background, PCBs or
pesticides.
4.19 Warranties. Schedule 4.19 lists all claims pending or, to the
Knowledge of the Company, threatened for breach of any warranty relating to any
products sold or services performed by the Company or any Subsidiary prior to
the date of this Agreement. Such claims in the aggregate are not in excess of
the reserve for product warranty claims set forth on the face of the Latest
Balance Sheet as adjusted for the passage of time through the First Tranche Date
in the Ordinary Course of Business. Schedule 4.19 describes the unexpired
warranties for products
31
sold or services performed by each of the Company and the Subsidiaries. No
product manufactured, sold, leased or delivered by the Company or any Subsidiary
is subject to any guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Except as listed on Schedule
4.19, none of the products manufactured, sold, leased or delivered by the
Company or any Subsidiary has been the subject of any product recall or return
(whether voluntary or involuntary) during the past five years.
4.20 Employees.
(a) Schedule 4.20(a) lists the names of the employees of the Company and
all Subsidiaries as of the date of this Agreement, and indicates for each such
employee, full-time, part-time and temporary status.
(b) Schedule 4.20(b) lists each current salaried employee of the Company
and all Subsidiaries as of the date of this Agreement and shows for each such
employee annual salary, any other compensation payable (including compensation
payable pursuant to bonus, deferred compensation or commission arrangements),
date of employment and position. To the Knowledge of the Company, no Executive
Employee of the Company and no group of employees of the Company or any
Subsidiary has any plans to terminate his or her employment. Each of the Company
and the Subsidiaries has complied in all material respects with all applicable
Laws relating to employment and employment practices and those relating to the
calculation and payment of wages, including but not limited to overtime, maximum
hours of work, equal employment opportunity (including Laws prohibiting
discrimination and/or harassment on the basis of race, national origin,
religion, gender, disability, age or otherwise), affirmative action and other
hiring practices, occupational safety and health, workers compensation,
unemployment, the payment of social security and other Taxes, and unfair labor
practices under the National Labor Relations Act. Neither the Company nor any
Subsidiary has any labor relations lawsuits pending or, to the Knowledge of the
Company, threatened and its labor relations are satisfactory. There are no
workers' compensation claims pending against the Company or any Subsidiary, nor
does the Company have any Knowledge of any facts that would give rise to such a
claim. To the Knowledge of the Company, no employee of the Company or any
Subsidiary is subject to any secrecy or noncompetition agreement or any other
agreement or restriction of any kind that would impede in any way the ability of
such employee to carry out fully all activities of such employee in furtherance
of the business of the Company.
(c) Schedule 4.20(c) sets forth a list of all employees of the Company who
hold a temporary work authorization, including without limitation H-1B, F-1 or
J-1 visas or work authorizations (the "Work Permits"), setting forth the name of
the employees, the type of Work Permit and the length of time remaining on such
Work Permit. With respect to each Work Permit, all of the information that the
Company provided to the U.S. Department of Labor and the Immigration and
Naturalization Service (the "INS") in the application for such Work Permit was,
to the Knowledge of the Company, true and complete at the time of filing and is,
to the Knowledge of the Company, true and complete as of the date hereof. The
Company received the appropriate notice of approval from the INS with respect to
each such Work Permit. The Company has not received any notice from the INS or
any other Governmental Entity that any Work Permit has been revoked. There is no
action pending or, to the Knowledge of the Company, threatened to revoke or
adversely modify the terms of any of the Work Permits.
32
(d) Except as set forth on Schedule 4.20(d), the employment of any
terminated former employee of the Company or any Subsidiary has been terminated
in accordance with any applicable contractual terms and applicable Law, and
neither the Company nor any Subsidiary has any liability under any contract or
applicable Law toward any such terminated employee. Except as set forth on
Schedule 4.20(d), the sale of the Company Common Stock or the other transactions
contemplated by this Agreement will not cause the Company or any Subsidiary to
incur or suffer any liability relating to, or obligation to pay, severance,
termination or other payments to any Person.
(e) Neither the Company nor any Subsidiary has made any loans (except
advances against accrued salaries or for business travel, lodging or other
expenses in the Ordinary Course of Business) to any employee of the Company or
any Subsidiary.
(f) None of the employees of the Company or any Subsidiary is covered by
any collective bargaining agreement, no collective bargaining agreement is
currently being negotiated and to the Knowledge of the Company no attempt is
currently being made or threatened or during the past five years has been made
to organize any of its employees to form or enter into any labor union, employee
association or similar organization. There are no strikes, slowdowns, work
stoppages or other labor controversies pending or, to the Knowledge of any
Seller, threatened against or otherwise affecting the employees or facilities of
the Company or any Subsidiary. None of the Company or any Subsidiary has
experienced any labor strike, slowdown, work stoppage or other material labor
controversy involving its employees within the past two (2) years.
(g) Except as listed on Schedule 4.20(g), each of the Company and the
Subsidiaries has paid in full to all employees all wages, salaries and
commissions due and payable to such employees and have fully reserved on the
Latest Financial Statements all amounts for wages, salaries and commissions due
but not yet payable to such employees.
(h) Except as listed on Schedule 4.20(h), there have been no lay-offs of
employees or work reduction programs undertaken by or on behalf of the Company
or any Subsidiary in the past two (2) years, and no such programs have been
adopted by the Company or any Subsidiary or publicly announced.
4.21 Employee Benefits.
(a) Schedule 4.21 lists all Company Plans by name and provides a brief
description identifying (i) the type of each such Plan, (ii) the funding
arrangements for each such Plan, (iii) the sponsorship of each such Plan, (iv)
the participating employers in each such Plan and (v) any one or more of the
following characteristics that may apply to each such Plan: (A) defined
contribution plan as defined in Section 3(34) of ERISA or Section 414(i) of the
Code, (B) defined benefit plan as defined in Section 3(35) of ERISA or Section
414(j) of the Code, (C) plan which is or is intended to be tax qualified under
Section 401(a) or 403(a) of the Code, (D) plan which is or is intended to be an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code (and
whether or not such plan has entered into an exempt loan), (E) nonqualified
deferred compensation arrangement, (F) employee welfare benefit plan as defined
in Section 3(1) of ERISA, (G) multiemployer plan as defined in Section 3(37) of
ERISA or Section 414(f)
33
of the Code, (H) multiple employer plan maintained by more than one employer as
defined in Section 413(c) of the Code, (I) plan providing benefits after
separation from service or termination of employment, (J) plan that owns any
Company or other employer securities as an investment, (K) plan that provides
benefits (or provides increased benefits or vesting) as a result of a change in
control of the Company, (L) plan that is maintained pursuant to collective
bargaining and (M) plan that is funded, in whole or in part, through a voluntary
employees' beneficiary association exempt from Tax under Section 501(c)(9) of
the Code. Schedule 4.21 lists each ERISA Affiliate Plan that is a defined
benefits plan or a multiemployer plan.
(b) Schedule 4.21 lists, to the extent applicable, (i) the most recent
determination letter received by the Company from the IRS regarding each Company
Plan, (ii) the most recent determination or opinion letter ruling from the IRS
that each trust established in connection with Company Plans that are intended
to be tax exempt under Section 501(a) or (c) of the Code are so tax exempt,
(iii) all pending applications for rulings, determinations, opinions, no action
letters and the like with respect to Company Plans filed with any governmental
agency (including but not limited to the Department of Labor, IRS, Pension
Benefit Guaranty Corporation and the SEC), (iv) the financial statements for
each Company Plan for the two (2) most recent fiscal or plan years (in audited
form if required by ERISA) and, where applicable, Annual Report/Return (Form
5500) with disclosure schedules, if any, and attachments for each Company Plan,
(v) the most recently prepared actuarial valuation report for each Company Plan
(including but not limited to reports prepared for funding, deduction and
financial accounting purposes), (vi) plan documents, trust agreements, insurance
contracts, service agreements and all related contracts and documents (including
any employee summaries and material employee communications) with respect to
each Company Plan and (vii) collective bargaining agreements (including side
agreements and letter agreements) relating to the establishment, maintenance,
funding and operation of any Company Plan.
(c) Schedule 4.21 lists each employee of the Company or any Subsidiary who
is (i) absent from active employment due to short or long term disability, (ii)
absent from active employment on a leave pursuant to the Family and Medical
Leave Act or a comparable state Law, (iii) absent from active employment on any
other leave or approved absence (together with the reason for each leave or
absence) or (iv) absent from active employment due to military service (under
conditions that give the employee rights to re-employment).
(d) With respect to continuation rights arising under federal or state Law
as applied to Company Plans that are group health plans (as defined in Section
601 et seq. of ERISA), Schedule 4.21 lists (i) each employee, former employee or
qualifying beneficiary who has elected and is currently receiving continuation
coverage and (ii) each employee, former employee or qualifying beneficiary who
has not elected continuation coverage but is still within the period in which
such election may be made.
(e) (i) All Company Plans intended to be Tax qualified under Section 401(a)
or Section 403(a) of the Code have received a favorable determination letter, or
opinion letter in the case of a prototype plan, (ii) to the extent required
either as a matter of Law or to obtain the intended Tax treatment and Tax
benefits, all Company Plans comply in all material respects with the
requirements of ERISA and the Code, (iv) all Company Plans have been
administered in accordance with the documents and instruments governing the
Company Plans in all material
34
respects, (v) all reports and filings with Governmental Entities (including but
not limited to the Department of Labor, the IRS, Pension Benefit Guaranty
Corporation and the SEC) required in connection with each Company Plan have been
timely made, except for such failure as would not result in a material liability
to the Company, (vi) all disclosures and notices required by Law or Company Plan
provisions to be given to participants and beneficiaries in connection with each
Company Plan have been properly and timely made, except for such failure as
would not result in a material liability to the Company, and (vii) each of the
Company and the Subsidiaries has made a good faith effort to comply with the
reporting and taxation requirements for FICA taxes with respect to any deferred
compensation arrangements under Section 3121(v) of the Code.
(f) (i) All contributions, premium payments and other payments required to
be made in connection with the Company Plans as of the date of this Agreement
have been made, (ii) a proper accrual has been made on the books of the Company
for all contributions, premium payments and other payments due in the current
fiscal year but not made as of the date of this Agreement, (iii) no
contribution, premium payment or other payment has been made in support of any
Company Plan that is in excess of the allowable deduction for federal income tax
purposes for the year with respect to which the contribution was made (whether
under Section 162, Section 280G, Section 404, Section 419, Section 419A of the
Code or otherwise) and (iv) with respect to each Company Plan that is subject to
Section 301 et seq. of ERISA or Section 412 of the Code, the Company is not
liable for any "accumulated funding deficiency" as that term is defined in
Section 412 of the Code and the projected benefit obligations determined as of
the date of this Agreement do not exceed the assets of the Company Plan.
(g) Except as listed on Schedule 4.21, the consummation of the transactions
contemplated by this Agreement will not (i) cause any Company Plan to increase
benefits payable to any participant or beneficiary, (ii) entitle any current or
former employee of the Company or any Subsidiary to severance pay, unemployment
compensation or any other payment, benefit or award or (iii) accelerate or
modify the time of payment or vesting, or increase the amount of any benefit,
award or compensation due any such employee.
(h) (i) No Litigation is pending with regard to any Company Plan other than
routine uncontested claims for benefits, (ii) no Company Plan is currently under
examination or audit by the Department of Labor, the IRS or the Pension Benefit
Guaranty Corporation, (iii) the Company has no actual or potential liability
arising under Title IV of ERISA as a result of any Company Plan that has
terminated or is in the process of terminating, (iv) the Company has no actual
or potential liability under Section 4201 et seq. of ERISA for either a complete
withdrawal or a partial withdrawal from a multiemployer plan, (v) with respect
to the Company Plans, the Company has no liability (either directly or as a
result of indemnification) for (and the transactions contemplated by this
Agreement will not cause any liability for): (A) any excise Taxes under Section
4971 through Section 4980B, Section 4999, Section 5000 or any other Section of
the Code, (B) any penalty under Section 502(i), Section 502(l), Part 6 of Title
I or any other provision of ERISA or (C) any excise Taxes, penalties, damages or
equitable relief as a result of any prohibited transaction, breach of fiduciary
duty or other violation under ERISA or any other applicable Law, (vi)(i) All
accruals required under FAS 106 and FAS 112 have been properly accrued on the
Latest Financial Statements, (vii) to the Knowledge of the Company, there have
not been any communications to or agreements with Company Plan participants that
would limit the right of the Company to amend, cut back or terminate any Company
Plan (except
35
to the extent such limitation arises under ERISA), and (viii) the Company has no
liability for life insurance, death or medical benefits after separation from
employment other than (A) death benefits under the Company Plans and (B) health
care continuation benefits described in Section 4980B of the Code.
(i) Neither the Company nor any Subsidiary has committed to implement,
establish, adopt or contribute to in the future any Plan that is not currently a
Company Plan. Neither the Company nor any Subsidiary has any material liability
with respect to any ERISA Affiliate Plan.
4.22 Customers. Schedule 4.22 lists the six (6) largest customers of the
Company and the Subsidiaries on a consolidated basis for each of the last two
(2) fiscal years and for the interim period ended on the date of the Latest
Balance Sheet and sets forth opposite the name of each such customer the
percentage of net sales by the Company and the Subsidiaries attributable to such
customer for each such period. Except as indicated on Schedule 4.22, no customer
listed on Schedule 4.22 has indicated in writing that it will stop or decrease
the rate of business done with the Company or any Subsidiary.
4.23 Suppliers. Schedule 4.23 lists the three (3) largest suppliers of the
Company and the Subsidiaries on a consolidated basis for each of the last two
(2) fiscal years and for the interim period ended on the date of the Latest
Balance Sheet and sets forth opposite the name of each such supplier the
approximate percentage of purchases by the Company and the Subsidiaries
attributable to such supplier for each such period. No supplier listed on
Schedule 4.23 is a sole source of supply for the Company and the Subsidiaries.
No supplier listed on Schedule 4.23 has indicated in writing that it will stop
or decrease the rate of business done with the Company or any Subsidiary.
4.24 Affiliate Transactions. To the Knowledge of the Company, except for
Deloitte Consulting and its affiliates and as listed on Schedule 4.24, no
Insider has any Contract with the Company or any Subsidiary (other than
employment not represented by a written Contract and terminable at will) or any
interest in any assets (whether real, personal or mixed, tangible or intangible)
used in or pertaining to the business of the Company or any Subsidiary (other
than ownership of capital stock of the Company). To the Knowledge of the
Company, except as listed on Schedule 4.24, no Insider has any direct or
indirect interest in any competitor, supplier or customer of the Company or any
Subsidiary or in any Person from whom or to whom the Company or any Subsidiary
leases any property, or in any other Person with whom the Company or any
Subsidiary otherwise transacts business of any nature. To the Knowledge of the
Company, Schedule 4.24 lists all transactions between the Company or any
Subsidiary and each Insider except for Deloitte Consulting and its affiliates
for each of the last two (2) fiscal years and since the Last Fiscal Year End.
4.25 Brokerage. Except as listed on Schedule 4.25, no Person will be
entitled to receive any brokerage commission, finder's fee, fee for financial
advisory services or similar compensation in connection with the transactions
contemplated by this Agreement based on any Contract made by or on behalf of the
Company for which Buyer or the Company is or could become liable or obligated.
36
4.26 Availability of Documents. Sellers have delivered to Buyer correct and
complete copies of the items referred to in the Disclosure Schedule or in this
Agreement (and in the case of any items not in written form, a written
description thereof).
V. Representations and Warranties of Buyer
Buyer represents and warrants to Sellers that as of the date of this
Agreement and as of the First Tranche Closing Date and as of the Second Tranche
Closing Date (as though made then and as though the First Tranche Closing Date
and the Second Tranche Closing Date, respectively, were substituted for the date
of this Agreement):
5.1 Incorporation; Power and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, with all necessary power and authority to execute,
deliver and perform this Agreement.
5.2 Valid and Binding Agreement. The execution, delivery and performance of
this Agreement by Buyer have been duly and validly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by Buyer
and constitutes the valid and binding obligation of Buyer, enforceable against
it in accordance with its terms, subject to the Remedies Exception.
5.3 No Breach; Consents. The execution, delivery and performance of this
Agreement by Buyer will not materially (a) contravene any provision of the
Organizational Documents of Buyer; (b) violate or conflict with any Law,
Governmental Order or Governmental Authority applicable to Buyer; (c) conflict
with, result in any breach of any of the provisions of, constitute a default (or
any event which would, with the passage of time or the giving of notice or both,
constitute a default) under, result in a violation of, result in the
termination, amendment, suspension, modification, abandonment or acceleration of
payment (or any right to terminate) or require a Consent, including any Consent
under any Contract or Governmental Authorization that is either binding upon or
enforceable against Buyer; or (d) require any Governmental Authorization that
have a Material Adverse Effect.
5.4 Brokerage. No Person will be entitled to receive any brokerage
commission, finder's fee, fee for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any Contract made by or on behalf of Buyer for which any Seller is or
could become liable or obligated.
5.5 Investment Intent. Buyer is purchasing the Company Common Stock for its
own account for investment purposes, and not with a view to the distribution
thereof.
5.6 Buyer Common Stock. The shares of Buyer Common Stock will, when issued
and delivered in accordance with this Agreement, be duly authorized, validly
issued, fully paid and nonassessable.
5.7 Buyer Options. The Buyer Options will, when issued and delivered in
accordance with this Agreement, be duly authorized, validly issued and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms,
subject to the Remedies Exception, and any Buyer Common Stock issued upon
exercise thereof in accordance with the terms of the
37
relevant option plan and option agreement will, when issued, be duly authorized,
validly issued, fully paid and nonassessable.
5.8 Securities Filings; Financial Statements.
(a) Buyer has filed all forms, reports, schedules, statements and other
documents required to be filed by it during the 12 months immediately preceding
the date of this Agreement (collectively, as supplemented and amended since the
time of filing, the "Buyer Securities Filings") with the SEC or applicable
securities regulatory authorities in Canada. The Buyer Securities Filings (i)
were prepared in all material respects in accordance with all applicable
requirements of the Securities Act, the Exchange Act and applicable Canadian
Securities Laws, as applicable, and (ii) did not, at the time they were filed,
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 representation in clause (ii) of the preceding sentence does not
apply to any misstatement or omission in any Buyer Securities Filing which was
superseded by subsequent Buyer Securities Filings.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements of Buyer and its consolidated
Subsidiaries included or incorporated by reference in the Buyer Securities
Filings have been prepared in accordance with GAAP consistently applied during
the periods indicated (except as may otherwise be indicated in the notes) and
present fairly the financial position, results of operations and cash flows of
Buyer and its consolidated Subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated (except interim
financial statements may not contain all notes and are subject to year-end
adjustments).
5.9 Absence of Undisclosed Liabilities. Except as reflected or expressly
reserved against in the Buyer Securities Filings, Buyer has no liability or
obligation (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted which should be reflected in the Buyer Securities Filings and are not
so reflected) and there is no known Litigation, charge, complaint, claim or
demand against any of them giving rise to any liability or obligation, except
liabilities and obligations that have arisen after the date of the last filed
Buyer Securities Filing in the Ordinary Course of Business, none of which is a
liability of obligation for breach of Contract, breach of warranty, tort,
infringement, Litigation or violation of Governmental Order or Law.
5.10 Litigation. Except as listed on Schedule 5.10 or included in Buyer
Securities Filings, no Litigation is pending or, to the Knowledge of Buyer,
threatened against Buyer or, to the extent involving the business of Buyer or
involving criminal proceedings, any officer, director or 5% or greater
shareholder of Buyer. No Governmental Order or settlement agreement requires or
prohibits future activities of Buyer or, to the extent involving the business of
Buyer, of any officer, director or 5% or greater shareholder.
5.11 Foreign Private Issuer. Buyer is a "foreign private issuer" as such
term is defined in Rule 3b-4(c) promulgated under the Exchange Act.
38
5.12 Press Releases. The press releases issued by the Buyer within the 12
months prior to the First Tranche Closing Date are true and correct in all
material respects as of the date issued and the Buyer does not have any
confidential filings with any securities authority or the TSX.
5.13 Regulatory Matters.
(a) The Buyer has no knowledge of any material change (actual, anticipated,
contemplated or threatened, whether financial or otherwise) in the business,
affairs, operations, assets or liabilities (contingent or otherwise) or capital
of the Buyer, which has not been generally disclosed and reported to the
applicable securities authorities or the TSX and the Buyer does not have any
Knowledge of any material adverse information in regard to the operations of the
Buyer, which has not been generally disclosed.
(b) No consent, approval, permit, authorization, order or filing with any
court or Governmental Entity is required by the Buyer or necessary for the
execution, delivery and the performance by the Buyer of its obligations under
this Agreement and the transactions contemplated herein other than such
consents, approvals, authorizations, registrations or qualifications, as may be
required under the Laws, including the consent of the TSX with respect to the
issuance to and the acquisition by the Sellers of the shares of Buyer Common
Stock, all of which will be obtained by the Buyer prior to the First Tranche
Closing Date, or thereafter within the time periods required therefore under
applicable Laws.
(c) Approval of: (i) the issuance of Buyer Common Stock to be delivered to
Sellers pursuant to Section 2.6(b) of this Agreement by the affirmative vote of
a majority of the votes cast at the Special Meeting, and (ii) the Line of Credit
Agreement by the affirmative vote of a majority of the votes cast at the Special
Meeting (excluding for purposes of such vote, any shares held or controlled by
the lender under such agreement or its affiliates) are the only votes or
approvals of the holders of any class or series of securities of Buyer
(including pursuant to the Laws or as required by the TSX) necessary to approve
the transactions contemplated by this Agreement (including the issuance of the
Buyer Common Stock to be delivered to Sellers), provided that Sellers
acknowledge that they will not be entitled to vote any Buyer Common Stock held
by them at the Special Meeting on any resolution approving the transactions
contemplated by this Agreement.
(d) Except as provided in Section 5.13(c), no "majority of the minority"
shareholder approval or formal valuation is required in connection with the
transactions contemplated by this Agreement (including the issuance of the Buyer
Common Stock to be delivered to Sellers) under any applicable Law (including,
without limitation, Ontario Securities Commission Rule 61-501 or its equivalent
in any jurisdiction) or pursuant to the requirements of the TSX.
(e) The Buyer is and will be on the Closing Date a "qualifying issuer"
within the meaning of Multilateral Instrument 45-102--Resale of Securities.
(f) The definitive form of certificate for the Buyer Common Stock is in due
and proper form under the laws governing the Buyer and complies with the
requirements of the TSX.
(g) The Buyer is a reporting issuer (or the equivalent) in compliance with
the bylaws, rules and regulations of the TSX.
39
(h) Computershare Trust Company of Canada, at its principal offices in
Vancouver, British Columbia, has been duly appointed transfer agent and
registrar for the Common Shares of the share capital of the Buyer.
(i) No order ceasing or suspending trading in any security of the Buyer or
prohibiting the sale of securities of the Buyer has been issued and to the
Knowledge of the Buyer no proceedings for this purpose have been instituted or
are to the Knowledge of the Buyer pending, contemplated or threatened.
VI. Agreements of Sellers and Company
Sellers, severally, and the Company agree with Buyer that:
6.1 Waivers; Payment of Indebtedness. To assure that Buyer obtains the full
benefit of this Agreement, effective as of the First Tranche Closing Date, each
Seller, in its capacity as a shareholder of the Company and solely in such
capacity, waives any claim it might have against the Company or any Subsidiary,
whether arising out of this Agreement or otherwise. For purposes of
clarification, the provisions of the previous sentence do not apply to any claim
Sellers may have with respect to employee benefits, severance or wages. Sellers
will cause each Seller, the Members of the Immediate Family of each Seller and
any Person controlled by any Seller to repay, in full, prior to the First
Tranche Closing, all indebtedness owed to the Company or any Subsidiary by such
Person.
6.2 Conditions. Sellers will use commercially reasonable efforts to cause
the conditions set forth in Section 8.1 to be satisfied in any event prior to
the First Tranche Closing Date. Sellers and the Company will use commercially
reasonable efforts to cause the conditions set forth in Section 8.3 to be
satisfied and to consummate the transactions contemplated by this Agreement as
soon as reasonably possible and in any event prior to the Second Tranche Closing
Date.
6.3 Consents and Authorizations; Regulatory Filings. The Company will use
commercially reasonable efforts to obtain, or will cause each of its
Subsidiaries to use commercially reasonable efforts to obtain, all Consents and
Governmental Authorizations required for the consummation of the transactions
contemplated by this Agreement or which could, if not obtained, materially
adversely affect the conduct of the business of the Company or any Subsidiary as
it is presently conducted, including those listed on Schedule 6.3 (the "Required
Consents"). The Company will obtain all consents set forth on Schedule 6.3.
6.4 No Sale. Prior to the Second Tranche Closing, no Seller will sell,
pledge, transfer or otherwise place any Encumbrance on any Shares owned by such
Seller.
6.5 Nondisparagement. During the period that commences on the First Tranche
Closing Date and ends on the first anniversary of the First Tranche Closing
Date, no Seller will take any action, other than in the good faith performance
of services (attest, non-attest or otherwise) in connection with the business of
such Seller, that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of the Company
or any Subsidiary from maintaining the same business relationships with each of
the
40
Company and the Subsidiaries after the First Tranche Closing as it maintained
with each of the Company and the Subsidiaries prior to the First Tranche
Closing.
6.6 Non-Solicitation. During the period that commences on the First Tranche
Closing Date and ends on the first anniversary of the Second Tranche Closing
Date, each Seller agrees that neither it nor any of its subsidiaries will
solicit to hire any employee of the Company or any Subsidiary; provided,
however, that nothing in this Section 6.6 will prohibit any Seller or any of its
Subsidiaries from hiring an individual who has approached such Seller or any of
its Subsidiaries (x) on his or her own initiative and without encouragement or
solicitation by such Seller or any of its subsidiaries, or (y) as a result of
published advertisements or a general public solicitation. No Seller shall be in
breach of this Section if those responsible for the solicitation or hiring of
any such employee of the Company or any Subsidiary were not directly involved in
the negotiation of this Agreement or otherwise had actual knowledge of the
prohibition contained in this Section.
6.7 Confidentiality.
(a) Sellers will keep confidential and protect, and will not divulge, allow
access to or use in any way, (i) Intellectual Property Rights, including product
specifications, formulae, compositions, processes, designs, sketches,
photographs, graphs, drawings, samples, inventions and ideas, past, current and
planned research and development, current and planned manufacturing and
distribution methods and processes, customer lists, current and anticipated
customer requirements, price lists, market studies, business plans, Software,
database technologies, systems, structures, architectures and data (and related
processes, formulae, compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information), (ii) any and
all information concerning the business and affairs (including historical
financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds
of key personnel, personnel training and techniques and materials), however
documented, and (iii) any and all notes, analyses, compilations, studies,
summaries and other material containing or based, in whole or in part, on any
information included in the foregoing ("Confidential Information") of the
Company or any Subsidiary. Sellers acknowledge that such Confidential
Information constitutes a unique and valuable asset of the Company or a
Subsidiary and represents a substantial investment of time and expense by the
Company or a Subsidiary, and that any disclosure or other use of such
Confidential Information other than for the sole benefit of the Company or a
Subsidiary would be wrongful and would cause irreparable harm to the Company or
a Subsidiary. Each Seller will deliver promptly to Buyer or destroy, at the
request and option of Buyer, all tangible embodiments (and all copies) of such
Confidential Information that are in the possession of such Seller. The
foregoing obligations of confidentiality will not apply to any Confidential
Information that is now or subsequently becomes generally publicly known, other
than as a direct or indirect result of the breach of this Agreement by Sellers.
(b) Sellers agree that the provisions and restrictions contained in this
Section 6.7 are necessary to protect the legitimate continuing interests of
Buyer in acquiring the Company Common Stock, that this Section 6.7 has been
specifically bargained for, that any violation or breach of such provisions and
restrictions will result in irreparable injury to Buyer for which a remedy at
Law would be inadequate and that, in addition to any relief at Law which may be
41
available to Buyer for such violation or breach and regardless of any other
provision contained in this Agreement, Buyer will be entitled to injunctive and
other equitable relief restraining such violation or breach (without any
requirement that Buyer provide any bond or other security).
(c) In the event that any Seller is requested or required (by oral question
or request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose any
Confidential Information, that Seller will notify Buyer promptly of the request
or requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6.7. If, in the absence of a
protective order or the receipt of a waiver hereunder, any Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller will use commercially reasonable efforts to obtain, at the request of
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as
Buyer designates.
6.8 Deloitte Consulting Covenant Not to Compete. Deloitte Consulting agrees
that for a period of five (5) years (the "Noncompete Period") after the First
Tranche Closing Date neither Deloitte Consulting nor any of its subsidiaries
will, for its own benefit or as an agent for another, engage in the Business in
the United States. For purposes of this Section 6.8, "Business" means the
business of primarily selling stand-alone mobile field service software to
end-users of the type the Company sells as of the date hereof ("Business
Software"). Nothing in this Section 6.8 shall preclude Deloitte Consulting or
any of its subsidiaries during the Noncompete Period from: (i) selling or
reselling Business Software in connection with the provision of other services;
(ii) engaging in any business which does not have all of the characteristics
described in the preceding sentence; and (iii) directly or indirectly acquiring
any Person which includes a business unit or entity in the Business, provided,
that a majority of the revenue of such acquired Person is not attributable to
the Business.
6.9 Assignment of Confidentiality Agreements. Effective upon the First
Tranche Closing, each Seller will assign to the Company all of such Seller's
right, title and interest in and to any confidentiality agreements to which the
Company may be a party pertaining to the confidentiality of information
pertaining to the Company after the First Tranche Closing Date or the hiring of
employees.
6.10 Office Lease. The Company's rights and obligations under the Office
Lease will be assigned to Deloitte Consulting or an affiliate of Deloitte
Consulting prior to the First Tranche Closing Date. Buyer, Deloitte Consulting
and the Company hereby agree that, pursuant to the terms of the letter agreement
to be mutually agreed upon, for a period not to exceed ninety (90) days from the
First Tranche Closing Date, Deloitte Consulting or its affiliates will license a
portion of the office space covered by the Office Lease (the "Office Space") to
the Company at a rate of twenty thousand dollars (US$20,000) per month. After
the expiration of such ninety (90) day period, the Company may continue to
license the Office Space on the same terms set forth in the letter agreement on
a month to month basis for a period not to exceed three (3) additional months.
In any event, the Company will provide thirty (30) days written notice to
Deloitte Consulting or its affiliates of its intention to terminate the license.
42
VII. Agreements of Buyer
Buyer agrees with Sellers that:
7.1 Conditions. Buyer will use commercially reasonable efforts to cause the
conditions set forth in Section 8.2 to be satisfied as soon as reasonably
possible and in any event prior to the First Tranche Closing Date. Buyer will
use commercially reasonable efforts to cause the conditions set forth in Section
8.4 to be satisfied and to consummate the transactions contemplated by this
Agreement as soon as reasonably possible and in any event prior to the Second
Tranche Closing Date.
7.2 Regulatory Filings. Buyer will make or cause to be made all filings and
submissions required by it under any Law applicable to Buyer required for the
consummation of the transactions contemplated by this Agreement within a
reasonable time, and in any event within the time required by such Law.
7.3 Confidentiality.
(a) Buyer will keep confidential and protect, and will not divulge, allow
access to or use in any way, Confidential Information of Sellers. Buyer
acknowledges that such Confidential Information constitutes a unique and
valuable asset of Sellers and represents a substantial investment of time and
expense by Sellers, and that any disclosure or other use of such Confidential
Information other than for the sole benefit of the Subsidiary would be wrongful
and would cause irreparable harm to Sellers. Buyer will deliver promptly to
Sellers or destroy, at the request and option of Seller, all tangible
embodiments (and all copies) of such Confidential Information that are in the
possession of Buyer. The foregoing obligations of confidentiality will not apply
to any Confidential Information that is now or subsequently becomes generally
publicly known, other than as a direct or indirect result of the breach of this
Agreement by Sellers.
(b) Buyer agrees that the provisions and restrictions contained in this
Section 7.3 are necessary to protect the legitimate continuing interests of
Sellers in selling the Company Common Stock, that this Section 7.3 has been
specifically bargained for, that any violation or breach of such provisions and
restrictions will result in irreparable injury to Sellers for which a remedy at
Law would be inadequate and that, in addition to any relief at Law which may be
available to Sellers for such violation or breach and regardless of any other
provision contained in this Agreement, Sellers will be entitled to injunctive
and other equitable relief restraining such violation or breach (without any
requirement that Sellers provide any bond or other security).
(c) In the event that Buyer is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose any
Confidential Information, that Buyer will notify Sellers promptly of the request
or requirement so that Sellers may seek an appropriate protective order or waive
compliance with the provisions of this Section 7.3. If, in the absence of a
protective order or the receipt of a waiver hereunder, Buyer is, on the advice
of counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for
43
contempt, Buyer may disclose the Confidential Information to the tribunal;
provided, however, that the Buyer will use its commercially reasonable efforts
to obtain, at the request of Sellers, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as Sellers designate.
7.4 Use of Deloitte Consulting's Name. Neither Buyer nor the Company nor
any of their subsidiaries have any right, title or interest in or to the names
"Deloitte," "Touche," "Deloitte Consulting" and "Deloitte & Touche" and any
variant thereof. Buyer acknowledges that the "Deloitte Consulting" name may have
been used to market and promote services of the Company to date and will be
unavailable for that purpose after the First Tranche Closing Date. Buyer
acknowledges that the inability to use such name for such purpose could
negatively impact the business of the Company.
On a case by case basis, Buyer may request the consent of Deloitte
Consulting for the use of its name, which request shall include a description of
the proposed use, the context in which it will appear and other relevant
information.
7.5 Special Meeting. Subject to the terms of conditions of this Agreement:
(a) Buyer shall, in a manner acceptable to Sellers acting reasonably, call
and hold the Special Meeting as soon as reasonably practicable, and in any event
before ninety (90) days.
(b) After having called the Special Meeting, Buyer shall not, without the
prior written consent of Sellers (such consent not to be unreasonably withheld
or delayed), adjourn, postpone or cancel the Special Meeting except as may be
required to meet quorum requirements or to comply with Buyer's bylaws.
7.6 Circular. Buyer shall, subject to the prior review and written approval
of Sellers (such approval not to be unreasonably withheld or delayed), prepare
the Circular (including supplements or amendments thereto) in accordance with
applicable Law and cause the Circular (including supplements or amendments
thereto) to be filed and distributed in accordance with applicable Law. The
Company shall furnish to Buyer all information regarding itself, its
subsidiaries and its directors, officers and shareholders as may reasonably be
required to be included in the Circular pursuant to applicable law. Each of
Buyer and the Company shall:
(a) ensure that all information provided by it or on its behalf that is
contained in the Circular does not contain any misrepresentation or any untrue
statement of a material fact or omit to state a material fact required to be
stated in the Circular and necessary to make any statement that it contains not
misleading in light of the circumstances in which it is made; and
(b) promptly notify the other if, at any time before the effective time of
the Circular, it becomes aware that the Circular, any other document delivered
to Buyer shareholders in connection with the Special Meeting contains a
misrepresentation, an untrue statement of material fact, omits to state a
material fact required to be stated in those documents that is necessary to make
any statement it contains not misleading in light of the circumstances in which
it is made or otherwise requires an amendment or a supplement to those
documents.
44
7.7 Board Recommendation. The board of directors of Buyer shall recommend
to the Buyer's shareholders that they approve the transaction contemplated by
this Agreement at the Special Meeting.
7.8 Waiver of Conflict. Buyer for itself and, after the First Tranche
Closing, for the Company, acknowledges that from time to time (i) ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP has represented Deloitte Consulting and the Company and
(ii) ▇▇▇▇▇▇ Godward LLP has represented the Company. Buyer acknowledges that it
has been advised of this representation and the implications of such
representation, including, without limitation, the advantages and risks
involved. From and after the First Tranche Closing, Buyer, for itself, and for
the Company hereby waives any and all past or future, actual or potential
conflicts of interest arising from or relating to such representations or any
other past or future representations of any Seller or any of their affiliates by
either of such firms.
7.9 Reliance by the Buyer. Buyer acknowledges that it has relied solely
upon the specific representations and warranties of the Sellers and the Company
set forth in Article III and Article IV, and has not relied on any other
information, including any projections which have been provided by either the
Company or any Seller, except as such projections are contained within the
specific representations and warranties set forth in Article III and Article IV.
7.10 Indemnification and Directors' and Officers' Insurance. (c) From and
after the First Tranche Closing Date, the Company will fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its directors and officers as of or prior to
the date hereof (or indemnification agreements in the Company's customary form
for directors joining the Company's Board of Directors prior to the First
Tranche Closing Date) and any indemnification provisions under the Company's
organizational documents as in effect immediately prior to the First Tranche
Closing Date.
(a) Effective upon the First Tranche Closing Date, the Company has obtained
a two-year "tail" insurance policy for directors and officers liability with
AIG, a copy of which has been provided to Sellers and the beneficiaries thereof.
The premium payments for the "tail" insurance policy shall be paid by the
Company before or as of the First Tranche Closing. Such "tail" insurance policy
shall provide that no cancellation, modification, interruption or unavailability
of benefits shall be effective until thirty (30) days after the receipt of
written notice to the beneficiaries thereof.
(b) The provisions of this Section 7.10 are intended to be for the benefit
of, and will be enforceable by, each person entitled to indemnification
hereunder and the heirs and representatives of such person. The Company will
not, and Buyer will not permit the Company to, merge or consolidate with any
other entity unless the Company will ensure that the surviving or resulting
entity assumes the obligations imposed by this Section 7.10. The Company and the
Buyer shall take all actions necessary to maintain the "tail" insurance policy
in full force and effect for its full term. Further, neither the Company nor the
Buyer will otherwise take any action to cancel, modify, interrupt or otherwise
make unavailable the benefits of the "tail" insurance policy referenced in
Section 7.10(a).
45
7.11 Assistance Regarding Third Party Sale. Buyer agrees that it will, upon
the reasonable request of any Seller use its commercially reasonable efforts to
facilitate and assist such Seller in selling its Buyer Common Stock representing
at least 5% of Buyer's outstanding common shares to a third party (a "Third
Party Sale"). In particular, Buyer agrees that in connection with any proposed
Third Party Sale it will provide reasonable access to its properties, books and
records to the proposed purchaser of the Buyer Common Stock and make its
officers available to discuss Buyer's affairs, finances and accounts with the
proposed purchaser of the Buyer Common Stock, all at such reasonable times as
may be requested by the Seller, but only to the extent that such proposed
purchaser has executed a customary confidentiality agreement with Buyer covering
the information and documents to be provided to the proposed purchaser.
7.12 Foreign Private Issuer. Buyer shall use its commercially reasonable
efforts to ensure that, for a period of two (2) years from the Second Tranche
Closing Date, it will at all times qualify as a "foreign private issuer" as
defined in Rule 3b-4 under the Exchange Act and will promptly notify the Sellers
if at any time Buyer becomes aware that it no longer qualifies as a foreign
private issuer.
7.13 Registration Rights. If within one year following the date of this
Agreement Buyer grants registration or similar rights to any Person holding
Buyer Common Stock or securities convertible into Buyer Common Stock, then Buyer
shall grant the same rights, subject to the same limitations, to Sellers, with
respect to the shares of Buyer Common Stock issued in exchange for the First
Tranche Shares and the Second Tranche Shares only. As of the date of this
Agreement, there are no outstanding registration or similar rights with respect
to any shares of Buyer Common Stock or any securities convertible into Buyer
Common Stock.
7.14 Registration Statement. Following the First Tranche Closing Date,
Buyer will file a registration statement on Form S-8 with the SEC covering the
shares underlying the Assumed Options and the shares of Buyer Common Stock
issuable pursuant to the Amended Employment Agreements.
7.15 Actions against Canaccord. Buyer shall take no action against
Canaccord Capital Corporation ("Canaccord") that would give rise to a liability
by Sellers to Canaccord pursuant to the certificate given by the Company to
Canaccord in connection with the fairness opinion delivered by Canaccord in
connection with the transactions contemplated in this Agreement. Buyer
acknowledges that such certificate shall be deemed not to be a document
delivered in connection with the transactions contemplated by or related to this
Agreement and shall not be the basis of any rights or remedies of Buyer or its
affiliates.
VIII. Conditions to Closings
8.1 Conditions to Buyer's First Tranche Obligations. The obligation of
Buyer to take the actions required to be taken by it at the First Tranche
Closing is subject to the satisfaction or waiver, in whole or in part, in
Buyer's sole discretion (but no such waiver will waive any rights or remedy
otherwise available to Buyer), of each of the following conditions at or prior
to the First Tranche Closing:
46
(a) The representations and warranties set forth in Articles III and IV
will be true and correct (without taking into account any supplemental
disclosures after the date of this Agreement by Sellers or the Company or the
discovery of information by Buyer);
(b) Sellers and the Company will have performed and complied with each of
their agreements contained in this Agreement in all material respects;
(c) No Litigation is pending or threatened (i) challenging or seeking to
prevent or delay consummation of the transactions contemplated by this
Agreement, (ii) asserting the illegality of or seeking to render unenforceable
any material provision of this Agreement, (iii) seeking to prohibit direct or
indirect ownership, combination or operation by Buyer of any portion of the
business or assets of the Company or any Subsidiary, or to compel Buyer or any
of its Subsidiaries or the Company or any Subsidiary to dispose of, or to hold
separately, or to make any change in any portion of the business or assets of
Buyer or its Subsidiaries or of the Company or its Subsidiaries, as a result of
the transactions contemplated by this Agreement, or incur any burden, (iv)
seeking to require direct or indirect transfer or sale by Buyer of, or to impose
material limitations on the ability of Buyer to exercise full rights of
ownership of, any of the Company Common Stock or (v) imposing or seeking to
impose material damages or sanctions directly arising out of the transactions
contemplated by this Agreement on Buyer or the Company or any of their
respective officers or directors;
(d) No Person asserted or threatened that, other than as set forth in the
Disclosure Schedule, such Person (i) is the owner of, or has the right to
acquire or to obtain ownership of, any capital stock of, or any other voting,
equity or ownership interest in, the Company or any Subsidiary or (ii) is
entitled to all or any portion of the Cash Value Purchase Price or the Buyer
Common Stock issued hereunder;
(e) Company will have effectively assigned its obligations under the Office
Lease to Deloitte Consulting or any affiliate, subject to letter agreement
referenced in Section 6.10;
(f) Neither the Company nor any Subsidiary has been, or has been threatened
to be, materially adversely affected in any way as a result of fire, explosion,
disaster, accident, labor dispute, any action by any Governmental Entity, flood,
act of war, terrorism, civil disturbance or act of nature; and
(g) Sellers and the Company will have provided Buyer with the deliveries
required by Section 2.6(d)(i).
8.2 Conditions to Sellers' First Tranche Obligations. The obligation of
Sellers to take the actions required to be taken by them at the First Tranche
Closing is subject to the satisfaction or waiver, in whole or in part, in
Sellers' sole discretion (but no such waiver will waive any right or remedy
otherwise available under this Agreement), of each of the following conditions
at or prior to the First Tranche Closing:
(a) The representations and warranties set forth in Article V will be true
and correct;
(b) Buyer will have performed and complied with each of its agreements
contained in this Agreement in all material respects;
47
(c) No Law or Governmental Order will have been enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated by
this Agreement by any Governmental Entity that prohibits the First Tranche
Closing or the Second Tranche Closing; and
(d) Buyer has not been, nor has been threatened to be, materially adversely
affected in any way as a result of fire, explosion, disaster, accident, labor
dispute, any action by any Governmental Entity, flood, act of war, terrorism,
civil disturbance or act of nature;
(e) All rights of ▇▇▇▇▇ ▇▇▇▇▇▇▇ to future payments of cash or equity
pursuant to his employment agreement with the Company will have ceased or will
have been terminated; and
(f) Buyer will have provided Sellers with the deliveries required by
Section 2.6(d)(ii).
8.3 Conditions to Buyer's Second Tranche Obligations. The obligation of
Buyer to take the actions required to be taken by it at the Second Tranche
Closing (as to (a) and (c) below as to any particular Seller) is subject to the
satisfaction or waiver, in whole or in part, in Buyer's sole discretion (but no
such waiver will waive any rights or remedy otherwise available to Buyer), of
each of the following conditions at or prior to the Second Tranche Closing:
(a) The representations and warranties of such Seller set forth in Article
III will be true and correct;
(b) Buyer will have obtained the required approval of its shareholders to
the transactions set forth in this Agreement, including the issuance of the
Buyer Common Stock to the Sellers and the approval of the Line of Credit
Agreement; and
(c) Such Seller will have provided Buyer with the deliveries required by
Section 2.6(e)(i).
8.4 Conditions to Sellers' Second Tranche Obligations. The obligation of
Sellers to take the actions required to be taken by them at the Second Tranche
Closing is subject to the satisfaction or waiver, in whole or in part, in
Sellers' sole discretion (but no such waiver will waive any rights or remedy
otherwise available to Sellers), of each of the following conditions on or prior
to the Second Tranche Closing:
(a) The representations and warranties set forth in Article V will be true
and correct; and
(b) The transactions set forth in this Agreement, including the issuance of
the Buyer Common Stock to be delivered to Sellers and the approval of the Line
of Credit Agreement, will have been approved by the shareholders of Buyer as
required by applicable law; and
(c) Buyer will have provided Sellers with the deliveries required by
Section 2.6(e)(ii).
48
IX. Termination
9.1 Termination Prior to Second Tranche Closing. This Agreement may be
terminated prior to the Second Tranche Closing:
(a) by mutual written consent of Buyer and Seller; and
(b) by either Buyer or Sellers if Buyer does not obtain approval of its
shareholders to the transactions contemplated by this Agreement, including the
issuance of the Buyer Common Stock and the approval of the Line of Credit
Agreement.
Notwithstanding the inability or refusal of any Seller to sell its Second
Tranche Shares, Buyer shall not have the right to terminate this Agreement with
respect to any other Seller. Buyer is not waiving any of its rights with respect
to any Seller that is unable or refuses to sell its or his Second Tranche Shares
as required pursuant to this Agreement.
9.2 Effect of Termination. The right of termination under Section 9.1 is in
addition to any other rights Buyer or Sellers may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies and will not preclude an action for breach of this Agreement. If this
Agreement is terminated, all continuing obligations of the parties under this
Agreement will terminate except that Sections 6.7 and 7.3 (confidentiality),
11.1 (press releases), 11.2 (expenses), 11.12 (governing law), 11.14
(jurisdiction) and 11.15 (waiver of jury trial) will survive indefinitely unless
sooner terminated or modified by the parties in writing.
X. Indemnification
10.1 Indemnification by Sellers. The representations and warranties of the
parties contained in this Agreement shall survive the First Tranche Closing Date
and shall continue in full force and effect until the due date for filing
Buyer's Quarterly Report on Form 10-Q with the SEC for the quarter ended June
30, 2004 (without regard to any extension of time granted by the SEC or
otherwise available). Notwithstanding the foregoing, any representation or
warranty in respect of which indemnity may be sought hereunder shall survive the
time at which it would otherwise terminate pursuant to this Section 10 if notice
of the breach thereof shall have been given to the party against whom such
indemnity may be sought prior to the expiration of the survival period.
(a) Subject to Section 10.1(b) and 10(c), each Seller agrees, severally and
not jointly, to indemnify in full and hold harmless Buyer, each of the Company
and the Subsidiaries (collectively, for purposes of this Article X only,
"Buyer") against any Loss arising from, relating to or constituting (i) any
breach or inaccuracy in any of the representations and warranties of such Seller
contained in Article III, or (ii) any breach or inaccuracy in the
representations and warranties or agreements of the Company contained in Article
IV or VI (collectively, "Buyer Losses").
49
(b) In the case of Buyer Losses arising from, relating to or constituting
any breach or inaccuracy in any of the representations and warranties of each
Seller contained in Article III, each Seller will be liable to Buyer for Buyer
Losses due to such Seller's breach or inaccuracy in the representations and
warranties of such Seller in an amount not to exceed such Seller's pro rata
portion of the Cash Value Purchase Price; provided that each Seller may satisfy
its obligations pursuant to this Article X by delivering to Buyer such number of
shares of Buyer Common Stock as have a value equal to such Seller's obligations
hereunder determined in accordance with Section 10.1(f).
(c) In the case of Buyer Losses other than those covered by Section
10.1(b), (i) each Seller will be liable to Buyer for such Seller's pro rata
portion of such Buyer Losses only if the aggregate amount of all such Buyer
Losses exceeds US$500,000 (the "Basket Amount"), in which case Sellers will be
liable for the aggregate amount of all Buyers Losses, and (ii) each Seller will
be liable to Buyer for such Seller's pro rata share of such Buyer Losses in an
amount not to exceed such Seller's pro rata portion of fifteen percent (15%) of
the Cash Value Purchase Price; provided that each Seller may satisfy its
obligations pursuant to this Article X by delivering to Buyer such number of
shares of Buyer Common Stock as have a value equal to such Seller's obligations
hereunder determined in accordance with Section 10.1(f). The provisions of
Section 2.4 shall not be subject to the Basket Amount.
(d) If Buyer has a claim for indemnification under this Section 10.1, Buyer
will deliver to Sellers one or more written notices of Buyer Losses prior to the
due date for filing of Buyer's Quarterly Report on Form 10-Q with the SEC for
the quarter ended June 30, 2004 (without regard to any extension of time granted
to Buyer by the SEC or otherwise available). Sellers will have no liability
under this Section 10.1 unless the written notices required by the preceding
sentence are given in a timely manner. Any written notice will state in
reasonable detail the basis for such Buyer Losses to the extent then known by
Buyer and the nature of the Buyer Loss for which indemnification is sought, and
it may state the amount of the Buyer Loss claimed. If such written notice (or an
amended notice) states the amount of the Buyer Loss claimed and Sellers notify
Buyer that Sellers do not dispute the claim described in such notice or fails to
notify Buyer within 10 business days after delivery of such notice by Buyer
whether Sellers dispute the claim described in such notice, the Buyer Loss in
the amount specified in Buyer's notice will be admitted by Sellers, and Sellers
will pay the amount of such Buyer Loss to Buyer. If Sellers have timely disputed
the liability of Sellers with respect to such claim, Sellers and Buyer will
proceed in good faith to negotiate a resolution of such dispute. If a written
notice does not state the amount of the Buyer Loss claimed, such omission will
not preclude Buyer from recovering from Sellers the amount of the Buyer Loss
with respect to the claim described in such notice if any such amount is
promptly provided after it is determined. In order to assert its right to
indemnification under this Article X, Buyer will not be required to provide any
notice except as provided in this Section 10.1(d).
(e) Sellers will pay the amount of any Buyer Loss to Buyer within ten (10)
business days following the determination of Sellers' liability for and the
amount of a Buyer Loss (whether such determination is made pursuant to the
procedures set forth in this Section 10.1, by agreement between Buyer and
Sellers, by arbitration award or by final adjudication).
50
(f) For purposes of determining the value of the Buyer Common Stock under
Section 10.1(b) and 10.1(c), such Buyer Common Stock shall be deemed to have a
value equal to the greater of (i) the volume weighted average price of Buyer
Common Stock on the TSX for the ten trading days prior to date notice is given
to Sellers that payment is due pursuant to this Article X or (ii) the Buyer
Common Stock Price.
(g) Any claim against Deloitte Consulting shall be offset and satisfied
first by an amount equal to the number of Excess Shares, multiplied by the value
of the Buyer Common Stock as determined in accordance with Section 10.1(f).
10.2 Indemnification by Buyer.
(a) Subject to Section 10.2(b), Buyer agrees to indemnify in full and hold
harmless Sellers against any Loss, whether or not actually incurred prior to the
date referred to in Section 10.2(c), arising from, relating to or constituting
(i) any breach or inaccuracy in any of the representations and warranties of
Buyer contained in this Agreement or any closing certificate delivered by or on
behalf of Buyer pursuant to this Agreement (any such breach or inaccuracy to be
determined without regard to any qualification as to "materiality," "in all
material respects" or similar qualifications) or (ii) any breach of any of the
agreements of Buyer contained in this Agreement ("Sellers Losses").
(b) Buyer will be liable to Sellers for Sellers Losses only if the
aggregate amount of all Sellers Losses exceeds the Basket Amount, in which case
Buyer will be liable for the aggregate amount of all Sellers Losses.
Notwithstanding the preceding sentence or any other provision of this Article X
to the contrary, Buyer will be liable to Sellers for Sellers Losses in an amount
not to exceed fifteen percent (15%) of the Cash Value Purchase Price.
(c) If Sellers have a claim for indemnification under this Section 10.2,
Sellers will deliver to Buyer one or more written notices of Sellers Losses
prior to the due date for filing of Buyer's Quarterly Report on Form 10-Q with
the SEC for the quarter ended June 30, 2004 (without regard to any extension of
time granted by the SEC). Buyer will have no liability under this Section 10.2
unless the written notices required by the preceding sentence are given in a
timely manner. Any written notice will state in reasonable detail the basis for
such Sellers Losses to the extent then known by Sellers and the nature of
Sellers Loss for which indemnification is sought, and it may state the amount of
Sellers Loss claimed. If such written notice (or an amended notice) states the
amount of Sellers Loss claimed and Buyer notifies Sellers that Buyer does not
dispute the claim described in such notice or fails to notify Sellers within 10
business days after delivery of such notice by Sellers whether Buyer disputes
the claim described in such notice, Sellers Loss in the amount specified in
Sellers' notice will be admitted by Buyer, and Buyer will pay the amount of such
Sellers Loss to Sellers. If Buyer has timely disputed its liability with respect
to such claim, Buyer and Sellers will proceed in good faith to negotiate a
resolution of such dispute. If a written notice does not state the amount of
Sellers Loss claimed, such omission will not preclude Sellers from recovering
from Buyer the amount of Sellers Loss with respect to the claim described in
such notice if any such amount is promptly provided once determined. In order to
assert its right to indemnification under this Article X, Sellers will not be
required to provide any notice except as provided in this Section 10.2(c).
51
(d) Buyer will pay the amount of any Sellers Loss to Sellers within 10 days
following the determination of Buyer's liability for and the amount of a Sellers
Loss (whether such determination is made pursuant to the procedures set forth in
this Section 10.2, by agreement between Sellers and Buyer, by arbitration award
or by final adjudication).
10.3 Indemnification Procedures.
(a) In connection with any action brought by a third party for which
indemnification is available pursuant to Section 10.1 or Section 10.2 (a "Third
Party Action"), the Indemnified Party will give the Indemnifying Party prompt
written notice of the commencement of a Third Party Action. The complaint or
other papers pursuant to which the third party commenced such Third Party Action
will be attached to such written notice. The failure to give prompt written
notice will not affect any Indemnified Party's right to indemnification unless
such failure has materially and adversely affected the Indemnified Party's
ability to defend successfully such Third Party Action.
(b) The Indemnifying Party will contest and defend any Third Party Action
on behalf of any Indemnified Party if the Indemnified Party so requests the
Indemnifying Party to defend the Third Party action in writing within twenty
(20) business days after the Indemnified Party's notice of such Third Party
Action (but, in all events, at least five (5) business days prior to the date
that a response to such Third Party Action is due to be filed). Such contest and
defense will be conducted by attorneys retained by the Indemnifying Party and
reasonably satisfactory to the Indemnified Party. Notwithstanding the foregoing,
the Indemnifying Party may not assume the defense of any such Third Party Action
if it does not demonstrate to the reasonable satisfaction of the Indemnified
Party that it has adequate financial resources to defend such claim and pay any
and all Losses that may result therefrom, or if the claim (i) is reasonably
likely to result in imprisonment of the Indemnified Party, (ii) is reasonably
likely to result in an equitable remedy which would materially impair the
Indemnified Party's ability to exercise its rights under this Agreement, or
(iii) names both the Indemnifying Party and the Indemnified Party (including
impleaded parties) and representation of both parties by the same counsel would,
based on the advice of counsel, create a conflict of interest. An Indemnified
Party will be entitled at any time, at its own cost and expense, to participate
in such contest and defense and to be represented by attorneys of its own
choosing. If the Indemnified Party elects to participate in such defense, the
Indemnified Party will cooperate with the Indemnifying Party to the extent
reasonably requested by the Indemnifying Party in the contest and defense of
such Third Party Action, including providing reasonable access (upon reasonable
notice) to the books, records and employees of the Indemnified Party if relevant
to the defense of such Third Party Action; provided, that such cooperation will
not unduly disrupt the operations of the business of the Indemnified Party or
cause the Indemnified Party to waive any statutory or common law privileges,
breach of confidentiality obligations owed to third parties or otherwise cause
any Confidential Information to such Indemnified Party to become public.
(c) If any Indemnified Party does not request that the Indemnifying Party
contest and defend a Third Party Action or if an Indemnified Party reasonably
determines that the Indemnifying Party is not adequately representing or,
because of a conflict of interest, may not adequately represent any interests of
the Indemnified Party at any time after requesting the Indemnifying Party to do
so, a Indemnified Party will be entitled to conduct its own defense and
52
to be represented by attorneys of its own choosing all at such Indemnified
Party's cost and expense. The Indemnifying Party will pay as incurred (no later
than 25 days after presentation) the reasonable fees and expenses of the counsel
retained by such Indemnified Party.
(d) Neither an Indemnified Party nor an Indemnifying Party may concede,
settle or compromise any Third Party Action without the consent of the other
party, which consents will not be unreasonably withheld or delayed.
Notwithstanding the foregoing, (i) if a Third Party Action seeks the issuance of
an injunction, the specific election of an obligation or similar remedy or (ii)
if the subject matter of a Third Party Action relates to the ongoing business of
any Indemnified Party, which Third Party Action, if decided against any
Indemnified Party, would materially adversely affect the ongoing business or
reputation of any Indemnified Party, the Indemnified Party alone will be
entitled to settle such Third Party Action in the first instance and, if the
Indemnified Party does not settle such Third Party Action, the Indemnifying
Party will then have the right to contest and defend (but not settle) such Third
Party Action.
(e) Buyer shall promptly notify Sellers in writing of the receipt by Buyer
of notice of any Tax audit of or assessment against the Company or any Tax
Affiliate which may affect Taxes for which Buyer would have the right to
indemnification from Sellers pursuant to this Agreement ("Indemnified Taxes").
The failure of the Buyer to give prompt written notice will not affect the
Buyer's right to indemnification for Indemnified Taxes unless such failure has
materially and adversely affected the Sellers' ability to defend successfully
the related Tax Contest (as defined below). Notwithstanding anything to the
contrary contained in this Section 10.3, (i) the Sellers will control the
contest and defense of, and make all decisions in connection with, any claim,
audit, proceeding or suit (a "Tax Contest") relating to Indemnified Taxes so
long as the amount of Taxes asserted to be due and payable by the Company or any
Tax Affiliate in such Tax Contest does not exceed the amount for which Sellers
may be liable to Buyer under this Article X, (ii) Buyer and Sellers will jointly
control the contest and defense of, and make all decisions in connection with,
any Tax Contest relating to Indemnified Taxes if the amount of Taxes asserted to
be due and payable by the Company or any Tax Affiliate in such Tax Contest
exceeds the amount for which Sellers may be liable to Buyer under this Article X
and (iii) Buyer alone will have the sole right to control the contest and
defense of, and make all decisions in connection with, any Tax Contest relating
solely to Taxes other than Indemnified Taxes.
10.4 Sole and Exclusive Remedy. Each party hereto acknowledges and agrees
that its sole and exclusive remedy with respect to any and all claims relating
to this Agreement and the transactions contemplated hereby shall be pursuant to
the indemnification provisions set forth in this Article X. In furtherance of
the foregoing, each party hereto waives, to the fullest extent permitted under
applicable law, any and all rights, claims and causes of action Buyer or the
Company after the First Tranche Closing Date may have against any Seller, on the
one hand, and any and all rights, claims and causes of action any Seller may
have against Buyer or the Company after the First Tranche Closing Date on the
other hand, arising under or based upon any Federal, state, local or foreign
statute, law, ordinance, rule or regulation or otherwise. Notwithstanding the
foregoing, each party hereto agrees that the limitation on remedies described in
the first sentence of this Section 10.4 and the waiver of rights, claims and
causes of action described in the second sentence of this Section 10.4 shall not
apply to the extent that the other party has engaged in fraud.
53
10.5 Tax Adjustment. Any payment to Buyer under this Article X will be, for
tax purposes, to the extent permitted by Law, an adjustment to the Cash Value
Purchase Price.
XI. General
11.1 Press Releases and Announcements. Any public announcement, including
any announcement to employees, or similar publicity with respect to this
Agreement or the transactions contemplated by this Agreement, will be issued, if
at all, at such time and in such manner as the parties hereto mutually determine
and approve. All parties will have the right to be present for any in-person
announcement. Unless consented to by Buyer or required by Law, each party will
keep, and will cause each of its Subsidiaries to keep, this Agreement and the
transactions contemplated by this Agreement confidential. Buyer has consented to
the issuance of a customary "tombstone" announcement by Decision Point
International, LLC.
11.2 Expenses. Except as otherwise expressly provided for in this
Agreement, each party will each pay all expenses incurred in connection with the
transactions contemplated by this Agreement, including legal, accounting,
investment banking and consulting fees and expenses incurred in negotiating,
executing and delivering this Agreement and the other agreements, exhibits,
documents and instruments contemplated by this Agreement (whether the
transactions contemplated by this Agreement are consummated or not). Sellers
agree that neither the Company nor any Subsidiary has borne or will bear any of
Sellers' expenses in connection with the transactions contemplated by this
Agreement. The Company will pay all of its Closing Expenses incurred, or
reasonably anticipated to be incurred, in connection with the transactions
contemplated by this Agreement prior to the First Tranche Closing Date.
11.3 Further Assurances. On and after the First Tranche Closing Date,
Sellers will take all appropriate action and execute any documents, instruments
or conveyances of any kind that may be reasonably requested by Buyer to carry
out any of the provisions of this Agreement.
11.4 Amendment and Waiver. This Agreement may not be amended, nor may any
provision of this Agreement or any default, misrepresentation, or breach of
warranty or agreement under this Agreement be waived, except in a writing
executed by the party against which such amendment or waiver is sought to be
enforced. Neither the failure nor any delay by any Person in exercising any
right, power or privilege under 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. In
addition, no course of dealing between or among any persons having any interest
in this Agreement will be deemed effective to modify or amend any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement. The rights and remedies of the parties to this Agreement are
cumulative and not alternative.
11.5 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given (i) when delivered if personally
delivered by hand (with written confirmation of receipt), (ii) when received if
sent by a nationally recognized overnight courier service (receipt requested),
(iii) five business days after being mailed, if sent by first class mail, return
receipt
54
requested, or (iv) when receipt is acknowledged by an affirmative act of the
party receiving notice, if sent by facsimile, telecopy or other electronic
transmission device (provided that such an acknowledgement does not include an
acknowledgment generated automatically by a facsimile or telecopy machine or
other electronic transmission device). Notices, demands and communications to
Buyer and Sellers will, unless another address is specified in writing, be sent
to the address indicated below:
If to Buyer:
Infowave Software, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CFO
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & Whitney LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No: (206)
903-8820
If to Sellers:
Deloitte & Touche USA LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Office of General Counsel
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
Cooley Godward LLP
One Freedom Square
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
11.6 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any party to this Agreement without the
prior written consent of the other parties to this Agreement, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer, so
long as it remains responsible for the performance of all of its obligations
under this Agreement. Subject to the foregoing, this Agreement and all of the
provisions of this Agreement will be binding upon and inure to the benefit of
the parties to this Agreement and their respective successors and permitted
assigns.
11.7 No Third Party Beneficiaries. Nothing expressed or referred to in this
Agreement confers any rights or remedies upon any Person that is not a party or
permitted assign of a party to this Agreement.
11.8 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable Law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.9 Complete Agreement. This Agreement contains the complete agreement
between the parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral.
11.10 Sections in Disclosure Schedule. The section numbers in the
Disclosure Schedule correspond to the Section numbers in the Agreement;
provided, however, that any information disclosed in the Disclosure Schedule
under any section number will be deemed to be disclosed and incorporated into
any other section number under this Agreement if the Buyer could reasonably
determine that such disclosure would be appropriate.
11.11 Signatures; Counterparts. This Agreement may be executed in one or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and the
same instrument. A facsimile signature will be considered an original signature.
11.12 GOVERNING LAW. THE DOMESTIC LAW, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, OF THE STATE OF DELAWARE WILL GOVERN ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE PERFORMANCE
OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT.
11.13 Specific Performance. Each of the parties acknowledges and agrees
that the subject matter of this Agreement, including the business, assets and
properties of the Company and the Subsidiaries, is unique, that the other
parties would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific
56
terms or otherwise are breached, and that the remedies at law would not be
adequate to compensate such other parties not in default or in breach.
Accordingly, each of the parties agrees that the other parties will be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions of this Agreement in addition to any other remedy to which they may
be entitled, at law or in equity. The parties waive any defense that a remedy at
law is adequate and any requirement to post bond or provide similar security in
connection with actions instituted for injunctive relief or specific performance
of this Agreement.
11.14 Jurisdiction. Subject to the procedures governing purchase price
adjustment in Article II, each of the parties submits to the exclusive
jurisdiction of any state or federal court sitting in Wilmington, Delaware, in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect to any such
action or proceeding. Each party appoints Corporation Service Company (the
"Process Agent") as its agent to receive on its behalf service of copies of the
summons and complaint and any other process that might be served in the action
or proceeding. Any party may make service on any other party by sending or
delivering a copy of the process (i) to the party to be served or (ii) to the
party to be served in care of the Process Agent at the following address:
Corporation Services Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇. Nothing in this Section 11.14 will affect the right of any party to serve
legal process in any other manner permitted by or at equity.
11.15 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE IT IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 11.15.
11.16 Construction. The parties and their respective counsel have
participated jointly in the negotiation and drafting of this Agreement. In
addition, each of the parties acknowledges that it is sophisticated and has been
advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with the negotiation and drafting of this Agreement. In
57
the event an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties and no
presumption or burden of proof will arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. The parties
intend that each representation, warranty and agreement contained in this
Agreement will have independent significance. If any party has breached any
representation, warranty or agreement in any respect, the fact that there exists
another representation, warranty or agreement relating to the same subject
matter (regardless of the relative levels of specificity) that the party has not
breached will not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or agreement. Any reference to any Law
will be deemed to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The headings preceding the text of
articles and sections included in this Agreement and the headings to the
schedules and exhibits are for convenience only and are not be deemed part of
this Agreement or given effect in interpreting this Agreement. References to
sections, articles, schedules or exhibits are to the sections, articles,
schedules and exhibits contained in, referred to or attached to this Agreement,
unless otherwise specified. The word "including" means "including without
limitation." The use of the masculine, feminine or neuter gender or the singular
or plural form of words will not limit any provisions of this Agreement. A
statement that an item is listed, disclosed or described means that it is
correctly listed, disclosed or described, and a statement that a copy of an item
has been delivered means a true and correct copy of the writing has been
delivered.
[Signature pages immediately follow]
58
IN WITNESS WHEREOF, Buyer and Sellers have executed this Stock Purchase
Agreement as of the date first above written.
BUYER: SELLERS:
INFOWAVE SOFTWARE, INC. DELOITTE CONSULTING L.P.
By: ------------------------- By: Deloitte Consulting (Holding Sub) LLC,
Name: ------------------------ its General Partner
Title: -----------------------
By: Deloitte Consulting LLP,
Sole Member
COMPANY:
By: ---------------------------
TELISPARK, INC. Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Principal
By: --------------------------
Name: ------------------------
Title: ----------------------- ----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
59
Exhibit A
Seller Number of shares of Buyer Common Stock
------ --------------------------------------
Deloitte Consulting L.P. 31,641,848
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 884,109
▇▇▇▇ Clearly 838,768
▇▇▇▇ ▇▇▇▇▇ 838,768
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 838,768
60
Exhibit B
Seller Number of shares of Buyer Common Stock
------ --------------------------------------
Deloitte Consulting L.P. 5,426,432
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 280,609
▇▇▇▇ Clearly 266,218
▇▇▇▇ ▇▇▇▇▇ 266,218
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 266,218
61
Exhibit C
Restricted Stock Recipient Number of Shares
-------------------------- ----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 3,224,491
▇▇▇▇ ▇▇▇▇▇ 436,110
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 436,110
▇▇▇▇▇ ▇▇▇▇▇ 102,824
▇▇▇▇▇▇ ▇▇▇▇▇ 49,355
▇▇▇ ▇▇▇▇▇ 180,971
62
Exhibit D
FORM OF DECLARATION FOR REMOVAL OF LEGEND
TO: INFOWAVE SOFTWARE, INC.
AND TO: COMPUTERSHARE TRUST COMPANY OF CANADA
The undersigned: (a) acknowledges that the sale of the securities of Infowave
Software, Inc. (the "Company") to which this declaration relates is being made
in reliance on Rule 904 of Regulation S under the United States Securities Act
of 1933, as amended (the "1933 Act") and (b) certifies that: (1) the undersigned
is not an affiliate of the Company as that term is defined in the 1933 Act, (2)
the offer of such securities was not made to a person in the United States and
either (A) at the time the buy order was originated, the buyer was outside the
United States, or the seller and any person acting on its behalf reasonably
believed that the buyer was outside the United States, or (B) the transaction
was executed in, on or through the facilities of the Toronto Stock Exchange or
any other designated offshore securities market as defined in Regulation S under
the 1933 Act and neither the seller nor any person acting on its behalf knows
that the transaction has been prearranged with a buyer in the United States, (3)
neither the seller nor any affiliate of the seller nor any person acting on any
of their behalf has engaged or will engage in any directed selling efforts in
the United States in connection with the offer and sale of such securities, (4)
the sale is bona fide and not for the purpose of "washing off" the resale
restrictions imposed because the securities are "restricted securities" (as such
term is defined in Rule 144(a)(3) under the 1933 Act), (5) the seller does not
intend to replace the securities sold in reliance on Rule 904 of the 1933 Act
with fungible unrestricted securities and (6) the contemplated sale is not a
transaction, or part of a series of transactions which, although in technical
compliance with Regulation S, is part of a plan or scheme to evade the
registration provisions of the 1933 Act. Terms used herein have the meanings
given to them by Regulation S.
Dated:
---------------------- ------------------------------------
Name of Seller
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
63