EXHIBIT 2.1
COMBINATION AGREEMENT
BY AND BETWEEN
PRI AUTOMATION, INC.
1325949 ONTARIO INC.
AND
PROMIS SYSTEMS CORPORATION LTD.
DATED AS OF NOVEMBER 24, 1998
TABLE OF CONTENTS
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RECITALS........................................................................................................ B-8
ARTICLE 1 CERTAIN DEFINITIONS................................................................................... B-8
ARTICLE 2 GENERAL............................................................................................... B-12
2.1. Plan of Arrangement.................................................................................... B-12
2.2. Exchange Ratio......................................................................................... B-12
2.2.1. Initial Exchange Ratio........................................................................... B-12
2.2.2. Adjustment for Alterations of Equity Capital..................................................... B-12
2.2.3. Adjustment for Fluctuations in Market Price...................................................... B-12
2.2.4. Calculation of Adjustments....................................................................... B-13
2.3. Dissenting Shares...................................................................................... B-13
2.4. Other Effects of the Arrangement....................................................................... B-13
2.5. Voting and Exchange Trust Agreement.................................................................... B-13
2.6. Support Agreement...................................................................................... B-13
2.7. Certificate of Designation............................................................................. B-13
2.8. Company Shareholder Meeting............................................................................ B-13
2.9. Information Circular and Registration Statement........................................................ B-13
2.9.1. Information Circular............................................................................. B-13
2.9.2. Registration Statement........................................................................... B-14
2.9.3. Approval of Canadian Authorities................................................................. B-14
2.9.4. Provision of Information......................................................................... B-14
2.9.5. Blue Sky Laws.................................................................................... B-14
2.10. Listings.............................................................................................. B-15
2.11. Closing............................................................................................... B-15
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... B-15
3.1. Corporate Status of the Company and its Subsidiaries................................................... B-15
3.2. Articles of Incorporation, By-Laws, Directors and Officers............................................. B-15
3.3. Authority for Agreement; Noncontravention.............................................................. B-15
3.3.1. Authority........................................................................................ B-15
3.3.2. No Conflict...................................................................................... B-16
3.4. Governmental Consents.................................................................................. B-16
3.5. Capitalization......................................................................................... B-17
3.5.1. Authorized Share Capital of the Company.......................................................... B-17
3.5.2. Options and Convertible Securities of the Company................................................ B-17
3.5.3. Subsidiaries..................................................................................... B-17
3.5.4. Rights Agreement................................................................................. B-18
3.6. Securities Reports; Financial Statements............................................................... B-18
3.7. Absence of Material Adverse Changes and Undisclosed Liabilities........................................ B-18
3.7.1. Changes.......................................................................................... B-18
3.7.2. Liabilities...................................................................................... B-19
3.8. Litigation and Audits.................................................................................. B-19
3.9. Compliance with Applicable Law, Articles of Incorporation and By-Laws.................................. B-19
3.10. Books and Records; Accounting Matters................................................................. B-20
3.11. Tax Matters........................................................................................... B-20
3.11.1. Filing of Returns............................................................................... B-20
3.11.2. Payment of Taxes................................................................................ B-20
3.11.3. Withholding..................................................................................... B-20
3.11.4. Assessments..................................................................................... B-20
3.11.5. Elections and Consents.......................................................................... B-21
3.11.6. Access to Returns............................................................................... B-21
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3.12. Employee Benefit Plans................................................................................ B-21
3.12.1. List of Plans................................................................................... B-21
3.12.2. ERISA Compliance................................................................................ B-21
3.12.3. Plan Determinations............................................................................. B-22
3.12.4. Claims.......................................................................................... B-22
3.12.5. Contributions................................................................................... B-22
3.12.6. Welfare Plans................................................................................... B-22
3.12.7. Canadian Benefit Plans.......................................................................... B-22
3.13. Employment-Related Matters............................................................................ B-23
3.14. Environmental......................................................................................... B-23
3.14.1. Environmental Laws.............................................................................. B-23
3.14.2. Environmental Claims............................................................................ B-24
3.14.3. No Basis for Claims............................................................................. B-24
3.15. Assets Other Than Real Property....................................................................... B-24
3.15.1. Title........................................................................................... B-24
3.15.2. Inventory....................................................................................... B-24
3.15.3. Condition....................................................................................... B-24
3.16. Real Property......................................................................................... B-24
3.16.1. Company Real Property........................................................................... B-24
3.16.2. Company Leases.................................................................................. B-24
3.16.3. Condition....................................................................................... B-25
3.17. Intellectual Property................................................................................. B-25
3.17.1. Right to Intellectual Property.................................................................. B-25
3.17.2. List of Company Proprietary Rights.............................................................. B-25
3.17.3. Royalties....................................................................................... B-25
3.17.4. Licenses........................................................................................ B-25
3.17.5. Status of Registrations......................................................................... B-26
3.17.6. No Conflict..................................................................................... B-26
3.17.7. Employee Agreements............................................................................. B-26
3.17.8. Year 2000 Readiness............................................................................. B-26
3.18. Agreements, Contracts and Commitments................................................................. B-27
3.18.1. Company Agreements.............................................................................. B-27
3.18.2. Validity, Violation and Consent................................................................. B-28
3.19. Insurance Contracts................................................................................... B-29
3.20. Banking Relationships................................................................................. B-29
3.21. Suppliers, Distributors and Customers................................................................. B-29
3.22. Product Warranty...................................................................................... B-29
3.23. Investment Canada..................................................................................... B-29
3.24. Acquired Business..................................................................................... B-29
3.25. Director Approval..................................................................................... B-30
3.26. Vote Required......................................................................................... B-30
3.27. No Broker's or Finder's Fees.......................................................................... B-30
3.28. Pooling Matters....................................................................................... B-30
3.29. Fairness Opinion...................................................................................... B-30
3.30. Full Disclosure....................................................................................... B-30
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBCO.................................................... B-30
4.1. Corporate Status of Parent and Subco................................................................... B-31
4.2. Articles and By-Laws................................................................................... B-31
4.3. Authority for Agreement; Noncontravention.............................................................. B-31
4.3.1. Authority........................................................................................ B-31
4.3.2. No Conflict...................................................................................... B-31
4.4. Governmental Consents.................................................................................. B-31
4.5. Capitalization......................................................................................... B-32
4.5.1. Authorized Capital Stock of Parent............................................................... B-32
4.5.2. Options and Convertible Securities of Parent..................................................... B-32
4.5.3. Authorized Share Capital of Subco................................................................ B-33
4.5.4. Options and Convertible Securities of Subco...................................................... B-33
4.6. Securities Reports; Financial Statements............................................................... B-33
4.7. Absence of Material Adverse Changes and Undisclosed Liabilities........................................ B-33
4.7.1. Changes.......................................................................................... B-33
4.7.2. Liabilities...................................................................................... B-33
4.8. Litigation and Audits.................................................................................. B-33
4.9. No Broker's or Finder's Fees........................................................................... B-34
4.10. Pooling Matters....................................................................................... B-34
4.11. Fairness Opinion...................................................................................... B-34
4.12. Subco................................................................................................. B-34
ARTICLE 5 COVENANTS OF THE COMPANY AS TO CONDUCT OF BUSINESS.................................................... B-34
5.1. Ordinary Course........................................................................................ B-34
5.2. Corporate Organization................................................................................. B-34
5.3. Capital Structure...................................................................................... B-34
5.4. Options and Warrants................................................................................... B-34
5.5. Compliance with Applicable Laws........................................................................ B-35
5.6. Investments and Acquisitions........................................................................... B-35
5.7. Capital Expenditures................................................................................... B-35
5.8. Indebtedness........................................................................................... B-35
5.9. Litigation............................................................................................. B-35
5.10. Properties............................................................................................ B-35
5.11. Contracts............................................................................................. B-35
5.12. Books and Records..................................................................................... B-35
5.13. Taxes................................................................................................. B-36
5.14. Company Benefit Plans................................................................................. B-36
5.15. Insurance............................................................................................. B-36
5.16. Employee Matters...................................................................................... B-36
5.17. Proprietary Rights.................................................................................... B-36
5.18. Confirmatory License Agreements....................................................................... B-36
5.19. Pooling Matters....................................................................................... B-36
5.20. General............................................................................................... B-36
ARTICLE 6 COVENANTS OF PARENT AS TO CONDUCT OF BUSINESS......................................................... B-36
6.1. Ordinary Course........................................................................................ B-36
6.2. Corporate Organization................................................................................. B-37
6.3. Capital Structure...................................................................................... B-37
6.4. Compliance with Applicable Laws........................................................................ B-37
6.5. Investments and Acquisitions........................................................................... B-37
6.6. Pooling Matters........................................................................................ B-37
6.7. General................................................................................................ B-37
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ARTICLE 7 ADDITIONAL COVENANTS.................................................................................. B-37
7.1. Further Assurances; Consents........................................................................... B-37
7.2. Consultation........................................................................................... B-38
7.3. Access to Information.................................................................................. B-38
7.4. Confidentiality........................................................................................ B-38
7.4.1. Confidential Information......................................................................... B-38
7.4.2. Actions of Representatives....................................................................... B-38
7.4.3. Survival......................................................................................... B-39
7.5. Public Disclosure...................................................................................... B-39
7.6. Takeover and Other Laws................................................................................ B-39
7.7. Pooling Accounting..................................................................................... B-39
7.8. Comfort Letters........................................................................................ B-39
7.8.1. Company.......................................................................................... B-39
7.8.2. Parent........................................................................................... B-39
7.9. Notice of Certain Matters.............................................................................. B-39
7.10. Stock Options and Warrants............................................................................ B-40
7.10.1. Exchange of Stock Options....................................................................... B-40
7.10.2. Exchange of Warrants............................................................................ B-40
7.10.3. Notice to Holders............................................................................... B-40
7.10.4. Reservation and Registration of Parent Common Stock............................................. B-40
7.10.5. Cooperation of the Company...................................................................... B-40
7.11. Continuation of Indemnification and Insurance......................................................... B-40
7.11.1. Indemnification................................................................................. B-40
7.11.2. Insurance....................................................................................... B-40
7.11.3. Third-Party Beneficiaries....................................................................... B-40
7.12. Employee Benefit Matters.............................................................................. B-41
7.13. Obligations of Subco.................................................................................. B-41
7.14. Company Option........................................................................................ B-41
7.15. Affiliate Agreements.................................................................................. B-41
7.16. Shareholder Agreements................................................................................ B-41
7.17. Employment Agreements................................................................................. B-42
7.18. Election of Officer................................................................................... B-42
7.19. Covenants Regarding Non-Solicitation.................................................................. B-42
7.19.1. Non-Solicitation................................................................................ B-42
7.19.2. Compliance with Fiduciary Obligations........................................................... B-42
7.19.3. Notice to Parent of Acquisition Proposals....................................................... B-42
7.19.4. Procedures...................................................................................... B-43
7.19.5. Actions of Representatives...................................................................... B-43
7.20. Procedures following Superior Proposal Determination.................................................. B-43
7.20.1. Notice of Superior Proposal Determination....................................................... B-43
7.20.2. Opportunity to Bid.............................................................................. B-43
7.21. Mutual Standstill and Non-Solicitation Agreement...................................................... B-43
7.22. Expenses.............................................................................................. B-44
7.22.1. General......................................................................................... B-44
7.22.2. Reimbursement................................................................................... B-44
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ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS................................................................... B-44
8.1. Conditions Precedent to Obligations of Each Party...................................................... B-44
8.1.1. Securityholder Approval.......................................................................... B-44
8.1.2. No Legal Action.................................................................................. B-44
8.1.3. Court Approval................................................................................... B-45
8.1.4. Expiration of Waiting Periods and Related Matters................................................ B-45
8.1.5. Securities Matters............................................................................... B-45
8.1.6. Listings......................................................................................... B-45
8.1.7. Tax Opinions..................................................................................... B-45
8.1.8. Voting and Exchange Trust Agreement.............................................................. B-45
8.1.9. Support Agreement................................................................................ B-45
8.2. Conditions Precedent to Obligations of the Company..................................................... B-45
8.2.1. Representations and Warranties................................................................... B-45
8.2.2. Covenants and Agreements......................................................................... B-46
8.2.3. No Material Adverse Change....................................................................... B-46
8.2.4. Certificate...................................................................................... B-46
8.2.5. Opinion of Parent Counsel........................................................................ B-46
8.2.6. Fairness Opinion................................................................................. B-46
8.2.7. Comfort Letter................................................................................... B-46
8.2.8. Affiliates Agreements............................................................................ B-46
8.2.9. Certificate of Designation....................................................................... B-46
8.2.10. Certificates and Resolutions.................................................................... B-46
8.3. Conditions Precedent to Obligations of Parent and Subco................................................ B-46
8.3.1. Representations and Warranties................................................................... B-46
8.3.2. Covenants and Agreements......................................................................... B-46
8.3.3. No Material Adverse Change....................................................................... B-46
8.3.4. Redemption of Rights............................................................................. B-46
8.3.5. Dissent Rights................................................................................... B-47
8.3.6. Consents of Third Parties........................................................................ B-47
8.3.7. Certificate...................................................................................... B-47
8.3.8. Customer and Product List........................................................................ B-47
8.3.9. Opinion of Company Counsel....................................................................... B-47
8.3.10. Fairness Opinion................................................................................ B-47
8.3.11. Pooling Matters................................................................................. B-47
8.3.12. Comfort Letter.................................................................................. B-47
8.3.13. Affiliates Agreements........................................................................... B-47
8.3.14. Employment Agreements........................................................................... B-47
8.3.15. Certificates and Resolutions.................................................................... B-47
ARTICLE 9 TERMINATION........................................................................................... B-48
9.1. Termination............................................................................................ B-48
9.2. Notice of Termination.................................................................................. B-49
9.3. Effect of Termination.................................................................................. B-49
9.4. Termination Fee........................................................................................ B-49
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ARTICLE 10 MISCELLANEOUS........................................................................................ B-50
10.1. Non-Survival of Representations and Warranties........................................................ B-50
10.2. Amendments and Supplements............................................................................ B-50
10.3. Waiver................................................................................................ B-50
10.4. Governing Law......................................................................................... B-50
10.5. Notice................................................................................................ B-50
10.6. Entire Agreement...................................................................................... B-51
10.7. Binding Effect; Assignability......................................................................... B-51
10.8. Interpretation........................................................................................ B-51
10.9. Validity.............................................................................................. B-51
10.10. Counterparts......................................................................................... B-51
EXHIBITS
Exhibit A Plan of Arrangement (See Exhibit 99.1 of this Registration Statement)
Exhibit B Voting and Exchange Trust Agreement (See Exhibit 99.2 of this Registration Statement)
Exhibit C Support Agreement (See Exhibit 99.3 of this Registration Statement)
Exhibit D Certificate of Designation
Exhibit E Company Option (Omitted)
Exhibit F Parent Affiliate Agreement (Omitted)
Exhibit G Company Affiliate Agreement
Exhibit H Shareholder Agreement (Omitted)
Exhibit I Employment Agreement (Omitted)
SCHEDULES
Company Disclosure Schedule (Omitted)
Parent Disclosure Schedule (Omitted)
Certain exhibits and schedules have been omitted in accordance with
Item 601(b)(2) of Regulation S-K. PRI will furnish supplementally a copy of
any omitted exhibit or schedule to the Securities and Exchange Commission upon
request.
COMBINATION AGREEMENT
This Combination Agreement (the "Agreement") is entered into as of November
24, 1998, by and between PRI Automation, Inc., a Massachusetts corporation
("Parent"), 1325949 Ontario Inc., an Ontario corporation and a wholly owned
subsidiary of Parent ("Subco"), and Promis Systems Corporation Ltd., a Canadian
corporation (the "Company").
RECITALS
WHEREAS, each of the Boards of Directors of Parent, Subco and the Company
have deemed it advisable and in the best interests of their respective
securityholders to combine their respective businesses through an acquisition by
Subco of shares of the capital stock of the Company pursuant to this Agreement
and the Plan of Arrangement (as hereinafter defined);
WHEREAS, in furtherance of such acquisition, the respective Boards of
Directors of Parent, Subco and the Company have approved the transactions
contemplated hereby and the Board of Directors of the Company has agreed to
submit the Plan of Arrangement and the other transactions contemplated hereby to
its shareholders and the Ontario Court of Justice (General Division) (the
"Court") for approval;
WHEREAS, the respective Boards of Directors of Parent, Subco and the Company
have approved and adopted this Agreement and the Plan of Arrangement as a plan
of reorganization under Section 368(a) of the United States Internal Revenue
Code of 1986, as amended (the "Code"), and as a reorganization of capital of the
Company under Section 86 of the Income Tax Act (Canada) (the "ITA") for those
Company shareholders who hold Company Common Shares (as hereinafter defined) on
capital account;
WHEREAS, it is intended that the transactions contemplated hereby will be
treated as a pooling of interests for accounting purposes; and
WHEREAS, to induce Parent to enter into this Agreement, contemporaneously
herewith certain shareholders of the Company and each of the Company's
directors, officers and their investment affiliates have entered into
Shareholder Agreements (as hereinafter defined) pursuant to which they have
agreed to support the Plan of Arrangement and the other transactions
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the following
meanings unless otherwise specified:
AFFILIATE shall mean with respect to any Person, any Person which, directly
or indirectly, Controls, is Controlled by, or is under common Control with, such
Person.
ACQUISITION PROPOSAL shall mean any reorganization, recapitalization,
reclassification, combination, merger, consolidation, amalgamation, plan of
arrangement, take-over bid, sale of material assets (or any lease, long-term
supply agreement or other arrangement having the same economic effect as a
sale), any material sale of shares or rights or interests therein or thereto or
similar transactions involving the Company or any of its Subsidiaries, or a
proposal to do so, excluding the Arrangement.
BANKRUPTCY LAWS shall mean (i) all bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other Laws of general application
affecting the rights and remedies of creditors and (ii) general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
BUSINESS DAY shall mean any day on which commercial banks are open for
business in ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ other than a Saturday,
Sunday or a day observed as a holiday in Boston, Massachusetts under the Laws of
the City of Boston, the Commonwealth of Massachusetts or the United States
or in Toronto, Ontario under the Laws of the City of Toronto, the Province of
Ontario or the federal Laws of Canada.
CBCA shall mean the Canada Business Corporations Act.
COMMERCIAL SOFTWARE shall mean packaged commercial software programs
generally available to the public through retail computer software dealers or
directly from the manufacturer which have been licensed to the Company or any of
its Subsidiaries pursuant to End-User Licenses and which are used in the
business of the Company and its Subsidiaries but are in no way a component of or
incorporated in or specifically required to develop or support any of the
products and related trademarks, technology and know-how of the Company and its
Subsidiaries.
COMPANY BENEFIT PLANS shall mean all employee benefit plans of any Company
Entity, including employee benefit plans within the meaning of Section 3(3) of
ERISA, and any related or separate contracts, plans, trusts, programs, policies,
arrangements, practices, customs and understandings, in each case whether formal
or informal, written or oral, and whether maintained by or binding upon any
Company Entity, that provide rights or benefits of economic value to any current
or former employee of any Company Entity or current or former beneficiary,
dependent or assignee of any such employee or former employee.
COMPANY END-USER LICENSES shall mean End-User Licenses, substantially in the
form of the Company's standard Master Software License Agreement previously
provided to Parent (or any another software license agreement not materially
different from such Master Software License Agreement), under which the Company
or one of its Subsidiaries is the licensor and which provides for payments to
the Company or any of its Subsidiaries of less than $250,000.
COMPANY ENTITY shall include any corporation that is a member of any
controlled group of corporations (as defined in Section 414(b) of the Code) that
includes the Company, any trade or business (whether or not incorporated) that
is under common control (as defined in Section 414(c) of the Code) with either
the Company, any organization (whether or not incorporated) that is a member of
an affiliated service group (as defined in Section 414(m) of the Code) that
includes the Company and any other entity required to be aggregated with the
Company pursuant to the regulations issued under Section 414(o) of the Code.
COMPANY LEASES shall mean each lease, sublease, license or other agreement
under which the Company or any of its Subsidiaries uses, occupies or has the
right to occupy any real property or interest therein that (a) provides for
future minimum payments of $10,000 or more (ignoring any right of cancellation
or termination) or (b) the cancellation or termination of which would have a
Company Material Adverse Effect.
COMPANY MATERIAL ADVERSE EFFECT shall mean any event, change or effect that
is or is reasonably expected to be materially adverse to (a) the financial
condition, business, operations, assets, properties, personnel, or results of
operations of the Company and its Subsidiaries, taken as a whole or (b) the
ability of the Company to perform its obligations under this Agreement or to
consummate the Arrangement or any of the other transactions contemplated hereby;
PROVIDED, that a Company Material Adverse Effect shall not include any adverse
effect resulting from changes in general economic conditions or conditions
generally affecting the industry in which the Company operates.
CONTRACT shall mean any written or oral agreement, contract, instrument,
guarantee or commitment to which a Person or any of its Subsidiaries is a party
or by which it, any of its Subsidiaries or any of its or their material assets
or properties is bound or which is applicable to it, any of its Subsidiaries or
any of its or their material assets or properties.
CONTROL (INCLUDING WITH CORRELATIVE MEANING, CONTROLLED BY AND UNDER COMMON
CONTROL WITH) shall mean, with respect to any Person, the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.
DOLLAR or "$" shall mean United States dollars.
ENCUMBRANCE shall mean any mortgage, pledge, lien, claim, charge, security
interest, lease, conditional sale or other title retention agreement, easement,
servitude, refusal, claim of infringement, condition or other
restriction or encumbrance of any kind, including any restriction on use, voting
(in the case of any security), transfer, receipt of income or exercise of any
other attribute of ownership on assets.
END-USER LICENSES shall mean any object code end-user licenses, providing
for payments to the licensor of less than $25,000, granted to end-users in the
ordinary course of business that permit use of software products without a right
to modify, distribute or sublicense the same. The term "End-User Licenses" shall
not include any Company End-User Licenses.
ENVIRONMENTAL CLAIM shall mean any notice alleging potential liability
(including potential liability for investigatory costs, cleanup costs, response
or remediation costs, natural resources damages, property damages, personal
injuries, fines or penalties) arising out of, based on or resulting from (a) the
presence or release of any Material of Environmental Concern, whether or not the
Material of Environmental Concern is present on or has been released from
property owned by that party or any of its Affiliates or (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
ENVIRONMENTAL LAWS shall mean any and all Laws relating to the protection of
public health, safety or the environment.
ERISA shall mean the United States Employee Retirement Income Security Act
of 1974, as amended.
EXCHANGE ACT shall mean the United States Securities Exchange Act of 1934,
as amended.
EXCHANGEABLE SHARES shall have the meaning given to such term in the Plan of
Arrangement.
GOVERNMENTAL ENTITY shall mean (a) any United States, Canadian,
multinational, foreign, federal, provincial, state, regional, territorial,
municipal, local or other government, governmental or public department, central
bank, court, tribunal, arbitral body, commission, board, bureau or agency, (b)
any subdivision, agent, commission, board, authority or instrumentality of any
of the foregoing or (c) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the foregoing. The term "Governmental Entity" shall include the SEC, the OSC,
the Nasdaq and the TSE.
HSR ACT shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
INDEBTEDNESS shall mean (a) all items (except items of capital stock,
stockholders' equity, surplus or retained earnings, and general contingency
reserves) that in accordance with generally accepted accounting principles would
be included in determining total liabilities of the Company and its Subsidiaries
as of the date as of which Indebtedness is to be determined, (b) indebtedness
secured by any Encumbrance to which any property or asset owned or held by
Company or any of its Subsidiaries is subject, whether or not the indebtedness
secured thereby shall have been assumed, and (c) indebtedness of others which
the Company or any of its Subsidiaries has directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), sold or discounted with recourse or (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which Company or
any of its Subsidiaries has agreed to supply or advance funds (whether by way of
loan, stock purchase, capital contribution or otherwise) or otherwise become
directly or indirectly liable.
LAWS shall mean all laws, statutes, ordinances, regulations, rules,
published policies and guidelines of any Governmental Entity, and the terms and
conditions of any Permit, judgment, order or decree of any Governmental Entity.
APPLICABLE LAWS shall mean, with respect to any Person, all Laws by which such
Person, any of its Subsidiaries or any of its or their securities or material
assets or properties is bound or which is applicable to it, any of its
Subsidiaries or any of its or their securities or material assets or properties.
MATERIALS OF ENVIRONMENTAL CONCERN shall mean petroleum and its by-products,
all hazardous substances and all substances or constituents that are regulated
by, or form the basis of liability under, any Environmental Law.
NASDAQ shall mean The Nasdaq Stock Market, Inc.
OSC shall mean the Ontario Securities Commission.
PARENT MATERIAL ADVERSE EFFECT shall mean any event, change or effect that
is or is reasonably expected to be materially adverse to (a) the financial
condition, business, operations, assets, properties, personnel, or results of
operations of Parent and its Subsidiaries, taken as a whole or (b) the ability
of Parent and Subco to perform their
obligations under this Agreement or to consummate the Arrangement or any of the
other transactions contemplated hereby; PROVIDED, that a Parent Material Adverse
Effect shall not include any adverse effect resulting from changes in general
economic conditions or conditions generally affecting the industry in which
Parent operates.
PERMIT shall mean any permit, concession, approval, permission,
authorization, certificate or license from any Governmental Entity.
PERMITTED ENCUMBRANCES shall mean (a) liens for current taxes and other
statutory liens and trusts not yet due and payable or that are being contested
in good faith, (b) liens that were incurred in the ordinary course of business,
such as carriers', warehousemen's, landlords' and mechanics' liens and other
similar liens arising in the ordinary course of business, (c) liens on personal
property leased under operating leases, (d) liens, pledges or deposits incurred
or made in connection with workmen's compensation, unemployment insurance and
other social insurance and social security benefits, or securing the performance
of bids, tenders, leases, contracts (other than for the repayment of borrowed
money), statutory obligations, progress payments, surety and appeal bonds and
other obligations of like nature, in each case incurred in the ordinary course
of business, (e) pledges of or liens on manufactured products as security for
any drafts or bills of exchange drawn in connection with the importation of such
manufactured products in the ordinary course of business, (f) liens under
Article 2 of the Uniform Commercial Code or under applicable Canadian provincial
personal property security Laws that are special property interests in goods
identified as goods to which a contract refers, and (g) liens under Article 9 of
the Uniform Commercial Code or under applicable Canadian provincial personal
property security Laws that are purchase money security interests, none of which
are material in the aggregate or individually.
PERSON shall mean any individual, corporation, association, partnership,
limited liability company, estate, trust or other entity or organization.
SEC shall mean the United States Securities and Exchange Commission.
SECURITIES ACT shall mean the United States Securities Act of 1933, as
amended.
SPECIAL VOTING SHARE shall mean the share of Special Voting Stock of Parent
having the rights, privileges, restrictions and conditions described in the
Certificate of Designation.
SUBSIDIARY shall mean any corporation, association, or other business entity
a majority (by number of votes on the election of directors or persons holding
positions with similar responsibilities) of the shares of capital stock (or
other voting interests) of which is owned by Parent, the Company or their
respective Subsidiaries, as the case may be.
TAX shall mean any Canadian, United States, multinational, foreign, federal,
provincial, state, regional, territorial, municipal and local capital, capital
stock, disability, customs duties, employment, environmental (including taxes
under Section 59A of the Code), estimated, excise, franchise, capital gains,
employer health, income, license, alternative or add-on minimum, occupation,
payroll, premium, profits, windfall profits, personal property, real property,
gross receipts, registration, gross revenue, sales, goods and services,
severance, social security (or similar), stamp, transfer, turnover,
unemployment, use, value added, withholding, net worth, or other tax of any kind
whatsoever, including employment insurance and Canada Pension Plan premiums, as
well as any interest or penalty in respect thereof and any addition thereto,
whether disputed or not.
TAX RETURN shall mean any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto and any amendment thereof.
TRUSTEE shall mean a Canadian trust company to be reasonably selected by
Parent and the Company to act as trustee under the Voting and Exchange Trust
Agreement.
TSE shall mean The Toronto Stock Exchange.
VIOLATION shall mean, with respect to any provision, with or without the
giving of notice or the lapse of time, or both, (a) any conflict with, violation
or breach of, or default under, such provision, (b) the arising of any right of
termination, amendment, cancellation or acceleration of any obligation contained
in, or the loss of any material benefit under, such provision or (c) the arising
of any Encumbrance upon any of the properties or assets of the Person subject to
the provision or any of its Subsidiaries.
ARTICLE 2
GENERAL
2.1. PLAN OF ARRANGEMENT.
2.1.1. As promptly as practicable, the Company shall apply to the Court
pursuant to Section 192 of the CBCA for an interim order in form and
substance reasonably satisfactory to Parent (the "Interim Order") providing
for, among other things, the calling and holding of a special meeting of the
shareholders of the Company (the "Company Shareholder Meeting") for the
purpose of considering and, if deemed advisable, approving the arrangement
(the "Arrangement") under Section 192 of the CBCA and pursuant to this
Agreement and the Plan of Arrangement substantially in the form of EXHIBIT
A, with such changes, modifications and additions thereto as the parties may
reasonably agree upon (the "Plan of Arrangement"). The notice of motion for
the application for the Interim Order shall request that the Interim Order
provide (a) for the class of Persons to whom notice shall be provided in
respect of the Arrangement and the Company Shareholder Meeting and for the
manner in which such notice shall be provided, (b) that the requisite
shareholder approval for the special resolution approving the Arrangement
shall be 66 2/3% of the votes cast on such special resolution by holders of
Company Common Shares present in person or by proxy at the Company
Shareholder Meeting, (c) that, in all other respects, the terms,
restrictions and conditions of the Articles of Incorporation and By-Laws of
the Company, including quorum requirements and all other matters, shall
apply in respect of the Company Shareholder Meeting: and (d) for the grant
of the rights of dissent in respect of the Arrangement described in Section
3.1 of the Plan of Arrangement.
2.1.2. If the shareholders of the Company shall approve the Arrangement
in accordance with the Interim Order, and subject to the satisfaction or
waiver of the other conditions set forth in Article 8, the Company shall as
promptly as practicable (a) take all necessary steps to submit the
Arrangement to the Court and apply for a final order of the Court approving
the Arrangement in such fashion as the Court may direct (the "Final Order"),
and (b) send to the Director appointed under Section 260 of the CBCA (the
"CBCA Director") for endorsement and filing by the CBCA Director, the
Articles of Arrangement and such other documents as may be required in
connection therewith under the CBCA to give effect to the Arrangement. At
12:01 a.m. (the "Effective Time") on the date (the "Effective Date") shown
on the Certificate of Arrangement issued by the Director giving effect to
the Arrangement, the reorganization of capital and other transactions set
out in clauses (a) through (k), inclusive, of Section 2.1 of the Plan of
Arrangement shall occur and shall be deemed to occur in the order set forth
in such Section 2.1 without any further act or formality.
2.2. EXCHANGE RATIO.
2.2.1. INITIAL EXCHANGE RATIO. For purposes of the Plan of
Arrangement, the "Exchange Ratio" shall be 0.1691 Exchangeable Shares for
each Company Common Share, subject to adjustment in accordance with this
Section 2.2.
2.2.2. ADJUSTMENT FOR ALTERATIONS OF EQUITY CAPITAL. The Exchange
Ratio shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Shares),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Common Shares occurring after the date hereof and
prior to the Effective Time.
2.2.3. ADJUSTMENT FOR FLUCTUATIONS IN MARKET PRICE. The Exchange Ratio
shall also be adjusted pursuant to the following:
(a) if the average of the per share closing prices on the Nasdaq National
Market of shares of Parent Common Stock during the 20 consecutive
trading days before the second Business Day before the Closing Date
(as hereinafter defined) (the "Pre-Closing Average Price") shall be
less than $25.375 per share, the Exchange Ratio shall be adjusted to
equal the product of 0.1691 and a fraction, the numerator of which is
$25.375 and the denominator of which is the greater of (i) $20.93 and
(ii) the Pre-Closing Average Price; and
(b) if the Pre-Closing Average Price shall be greater than $25.375 per
share, the Exchange Ratio shall be adjusted to equal the product of
0.1691 and a fraction, the numerator of which is $25.375 and the
denominator of which is the lesser of (i) $31.72 and (ii) the
Pre-Closing Average Price.
2.2.4. CALCULATION OF ADJUSTMENTS. Any adjustment of the Exchange
Ratio pursuant to this Section 2.2 shall be rounded to four decimal places.
2.3. DISSENTING SHARES. Holders of Company Common Shares may exercise
rights of dissent with respect to such shares in connection with the Arrangement
pursuant to and in the manner set forth in Section 190 of the CBCA and Section
3.1 of the Plan of Arrangement. The Company shall give Parent (a) prompt oral
and written notice of any written demands of a right of dissent, withdrawals of
such demands, and any other instruments served pursuant to the CBCA or otherwise
and received by the Company and (b) the opportunity to participate in all
negotiations and proceedings with respect to such rights. Without the prior
written consent of Parent, except as required by Applicable Laws, the Company
shall not make any payment with respect to any such rights or offer to settle or
settle any such rights.
2.4. OTHER EFFECTS OF THE ARRANGEMENT. At the Effective Time: (a) the
directors of the Company shall be such persons as Parent shall designate by
written notice to the Company prior to the Effective Time); (b) the officers of
the Company shall be as designated by the Board of Directors of the Company
prior to the Effective Time, subject to later removal and appointment of other
officers; (c) each Company Common Share and each Company Option outstanding
immediately prior to the Effective Time shall be exchanged as provided in the
Plan of Arrangement; and (d) the Arrangement shall, from and after the Effective
Time, have all of the effects provided by Applicable Laws, including the CBCA.
2.5. VOTING AND EXCHANGE TRUST AGREEMENT. On or before the Effective Date,
Parent, Subco, the Company and the Trustee shall authorize, execute and deliver
a Voting and Exchange Trust Agreement in substantially the form of EXHIBIT B
hereto, with such changes, modifications and additions thereto as may reasonably
be requested by the Trustee together with such other changes, modifications and
additions thereto as the parties may reasonably agree upon (the "Voting and
Exchange Trust Agreement"). On or before the Effective Date, Parent shall issue
and deposit with the Trustee, for the benefit of the holders of Exchangeable
Shares, the Special Voting Share to be held in accordance with the Voting and
Exchange Trust Agreement.
2.6. SUPPORT AGREEMENT. On or before the Effective Date, Parent, Subco and
the Company shall authorize, execute and deliver a Support Agreement in
substantially the form of EXHIBIT C hereto, with such changes, modifications and
additions thereto as the parties may reasonably agree upon (the "Support
Agreement").
2.7. CERTIFICATE OF DESIGNATION. On or before the Effective Date, Parent
shall file a Certificate of Vote of Directors Establishing a Class or Series of
Stock with the Secretary of State of the Commonwealth of Massachusetts in
substantially the form of EXHIBIT D hereto, with such changes, modifications and
additions thereto as the parties may reasonably agree upon (the "Certificate of
Designation").
2.8. COMPANY SHAREHOLDER MEETING. As promptly as practicable, the Company
shall take all action necessary in accordance with Applicable Laws and its
Articles of Incorporation and By-Laws to call and hold the Company Shareholder
Meeting as promptly as practicable for the purpose of voting upon the
Arrangement and such other matters as shall require approval of the shareholders
of the Company in order to consummate the Arrangement and the other transactions
contemplated hereby. Unless the Company shall have complied with Sections 7.19
and 7.20, the Board of Directors of the Company shall give its unqualified
recommendation to the shareholders of the Company that they approve the
Arrangement and such other matters, and the Company shall use its reasonable
best efforts to obtain such approval.
2.9. INFORMATION CIRCULAR AND REGISTRATION STATEMENT.
2.9.1. INFORMATION CIRCULAR. As promptly as practicable and in any
event within 30 days following the execution of this Agreement, Parent and
the Company shall prepare a notice and management information circular of
the Company with respect to the Company Shareholder Meeting (as amended from
time to time, the "Information Circular"), together with any other documents
required by Applicable Laws in connection with the Arrangement and the other
transactions contemplated hereby, and the Company shall cause the
Information Circular and such other required documents to be sent to each
shareholder of the Company entitled to vote at the Company Stockholder
Meeting and filed as required by the Interim Order and Applicable Laws. The
Company shall ensure that the Information Circular provides its shareholders
entitled to vote with information in sufficient detail to permit them to
form a reasoned judgment concerning the matters to be placed before them at
the Company Shareholder Meeting and that the Information Circular is
accurate and complete in all material respects.
2.9.2. REGISTRATION STATEMENT. As promptly as practicable and in any
event within 30 days following the execution of this Agreement, Parent shall
file with the SEC a registration statement (the "Registration Statement") to
register the Parent Common Stock to be issued from time to time after the
Effective Time upon exchange of the Exchangeable Shares, and Parent and the
Company shall use their reasonable best efforts to cause the Registration
Statement to become effective and to maintain the effectiveness of such
Registration Statement for the period that such Exchangeable Shares shall
remain outstanding. Parent, Subco and the Company agree not to knowingly
take any action that would render unavailable the exemption provided by
Section 3(a)(10) of the Securities Act with respect to the issuance of the
Exchangeable Shares under the terms of the Plan of Arrangement.
2.9.3. APPROVAL OF CANADIAN AUTHORITIES. Parent and the Company shall
use their reasonable best efforts to obtain all orders required from the
applicable Canadian securities authorities to permit the issuance and first
resale of (a) the Exchangeable Shares to be issued pursuant to the
Arrangement, (b) the shares of Parent Common Stock issuable upon exchange of
the Exchangeable Shares from time to time, and (c) the shares of Parent
Common Stock issuable from time to time upon the exercise of the Company
Options and the Company Warrants, in each case without qualification with or
approval of or the filing of any document, including any prospectus or
similar document, or the taking of any proceeding with, or the obtaining of
any further order, ruling or consent from, any Governmental Entity under
Applicable Laws, or the fulfilment of any other legal requirement in any
such jurisdiction (other than, with respect to such first resales, any
restrictions on transfer by reason of, among other things, a holder being a
"control person" of Parent or the Company for purposes of Canadian federal,
provincial or territorial securities Laws).
2.9.4. PROVISION OF INFORMATION. Each party shall promptly furnish to
the other party all information concerning such party and its
securityholders as may be reasonably required in connection with any action
contemplated by this Section 2.9. The Information Circular, the Registration
Statement and the other documents required by Applicable Laws in connection
with the Arrangement and the other transactions contemplated hereby shall
comply in all material respects with the requirements of Applicable Laws. No
information provided by Parent or the Company for inclusion in the
Information Circular, the Registration Statement or any other documents to
be filed with the SEC, the OSC (or other applicable Canadian provincial
securities regulators (together with the OSC, the "Commissions")) or the TSE
or to be mailed to the securityholders of the Company in connection with the
Arrangement and the other transactions contemplated hereby shall contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Each of Parent and the Company shall notify the other promptly of the
receipt of any comments from the SEC, the Commissions or the TSE and of any
request by the SEC, the Commissions or the TSE for amendments or supplements
to the Information Circular or the Registration Statement or for additional
information, and shall supply the other with copies of all correspondence
with the SEC, the Commissions and the TSE with respect to the Information
Circular and the Registration Statement. Whenever any event shall occur that
should be set forth in an amendment or supplement to the Information
Circular or the Registration Statement, Parent or the Company, as the case
may be, shall promptly inform the other of such occurrence and cooperate in
filing with the SEC, the Commissions and/or the TSE, and/or mailing to
securityholders of the Company entitled to vote, such amendment or
supplement.
2.9.5. BLUE SKY LAWS. Parent and the Company shall promptly take all
action required to be taken under any Applicable state or provincial
securities Laws (including "blue sky" Laws) in connection with the
Arrangement and the issuance of the Exchangeable Shares and shares of Parent
Common Stock thereunder; PROVIDED, HOWEVER, that with respect to Canadian
provincial qualifications, neither Parent nor
the Company shall be required to register or qualify as a foreign
corporation or reporting issuer where either such corporation is not now so
registered or qualified.
2.10. LISTINGS. Parent shall take such action as shall be necessary to
authorize for listing on the Nasdaq National Market the shares of Parent Common
Stock issuable upon exchange of the Exchangeable Shares and the shares of Parent
Common Stock otherwise reserved for issuance in connection with the Arrangement.
Parent and the Company shall take such action as shall be necessary to authorize
for listing on the TSE the Exchangeable Shares as of and from the Effective
Time.
2.11. CLOSING. The closing of the Arrangement and the other transactions
contemplated hereby (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, at a time and on a date (the
"Closing Date") to be specified by Parent and the Company, which date shall not
be later than two Business Days after the later of (a) the issuance of the Final
Order and (b) the satisfaction or waiver of the conditions set forth in Article
8. Concurrently with the Closing, the parties shall cause to be filed with the
CBCA Director the Articles of Arrangement and such other documents as may be
required in connection therewith under the CBCA to give effect to the
Arrangement and the other transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subco that the statements
in this Article 3 are true and correct, except as set forth in the disclosure
schedule delivered by the Company to Parent on the date hereof (the "Company
Disclosure Schedule"). The Company Disclosure Schedule shall be arranged in
sections and paragraphs corresponding to the numbered and lettered sections and
paragraphs in this Article 3. The disclosure in any section or paragraph of the
Company Disclosure Schedule shall qualify other sections and paragraphs in this
Article 3 only to the extent that it is reasonably apparent from a reading of
such disclosure that it also qualifies or applies to such other sections or
paragraphs.
3.1. CORPORATE STATUS OF THE COMPANY AND ITS SUBSIDIARIES. Each of the
Company and its Subsidiaries is a corporation or other organization duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization, with the requisite corporate
or organizational power and authority to carry on its business as currently
being conducted and to own, lease and operate the properties currently owned,
leased and operated by it. Each of the Company and its Subsidiaries is duly
qualified or licensed to do business and is in good standing as an
extra-provincial or foreign corporation or organization authorized to do
business in all jurisdictions in which the character of the properties owned or
held under lease by it or the nature of the business transacted by it makes such
qualification or licensing necessary, except in jurisdictions in which the
failure to be so qualified or licensed would not result in a Company Material
Adverse Effect. Section 3.1 of the Company Disclosure Schedule sets forth a
complete list of the Company's Subsidiaries, their jurisdictions of
incorporation or organization, and a complete list of each jurisdiction in which
each of the Company and its Subsidiaries is duly qualified and in good standing
to do business.
3.2. ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS. The
Company has delivered to Parent true and complete copies of the Articles of
Incorporation and by-laws of the Company, including all amendments thereto, as
in effect on the date hereof (the "Articles of Incorporation" and the "By-Laws,"
respectively). Each of the minute books of the Company and its Subsidiaries made
available to Parent and/or its agents contains accurate records of all meetings
and consents in lieu of meetings of the Board of Directors (or similar governing
body) of the Company or the Subsidiary, as the case may be, (and any committees
thereof, whether permanent or temporary) and of its securityholders (or other
equity holders having rights to vote or consent) since the date of its
incorporation or organization, and such records accurately reflect all
transactions referred to in such minutes and consents. Section 3.2 of the
Company Disclosure Schedule sets forth a list of the directors and officers of
the Company and the respective offices held by them.
3.3. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
3.3.1. AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and the other agreements contemplated
hereby to be signed by it and, subject to approval of the Company's
shareholders and the Court as provided in this Agreement, to consummate the
Arrangement
and the other transactions contemplated hereby and by the other agreements
contemplated hereby. The execution and delivery by the Company of this
Agreement and such other agreements and the consummation by the Company of
the Plan of Arrangement and the other transactions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors of
the Company. Except for the approval of the Company's shareholders as
provided in this Agreement, no other corporate proceedings on the part of
the Company are necessary to authorize the execution and delivery by the
Company of this Agreement and such other agreements and the consummation by
the Company of the Plan of Arrangement and the other transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by the Company and constitutes valid and binding obligations of
the Company, enforceable against the Company in accordance with its terms,
subject to the qualifications that (a) enforcement of the rights and
remedies created hereby are subject to Bankruptcy Laws and (b) the
consummation of the Arrangement is subject to the approval of the Company's
shareholders and the Court as provided in this Agreement. On or before the
Effective Date, the other agreements contemplated hereby to be executed and
delivered by the Company on or before the Effective Date will have been
executed and delivered by the Company, and, upon such execution and
delivery, will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to the qualifications that (a) enforcement of the rights and
remedies created thereby will be subject Bankruptcy Laws and (b) the
consummation of the Arrangement is subject to the approval of the Company's
shareholders and the Court as provided in this Agreement.
3.3.2. NO CONFLICT. None of the execution and delivery by the Company
of this Agreement, the Plan of Arrangement and the other agreements
contemplated hereby, the performance by the Company of its obligations
hereunder and thereunder, and the consummation by the Company of the
transactions contem-plated hereby and thereby will cause a Violation of any
term, condition or provision of the Articles of Incorporation or By-Laws of
the Company or any other organizational document of the Company or any
Subsidiary, or any credit agreement, indenture, bond, debenture, note,
mortgage, lease, instrument or other agreement, permit, concession, grant,
franchise, license, judgment, order or decree to which the Company or any of
its Subsidiaries is a party or by which it, any of its Subsidiaries or any
of its or their material assets or properties is bound or which is
applicable to it, any of its Subsidiaries or any of its or their material
assets or properties, or, to the knowledge of the Company, any Applicable
Laws, other than such Violations which, individually or in the aggregate,
would not result in a Company Material Adverse Effect.
3.4. GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration or filing with, or declaration or notice to, any
Governmental Entity, is required to be obtained by the Company or any of its
Subsidiaries in connection with the execution and delivery by the Company of
this Agreement or the other agreements contemplated hereby, the performance by
the Company of its obligations hereunder and thereunder, or the consummation by
the Company of the Plan of Arrangement and the other transactions contemplated
hereby or thereby, except (a) the filing with the Commissions and the Court and
the mailing to shareholders of the Company of the Information Circular relating
to the Company Shareholder Meeting, (b) the filing with the SEC of such
registration statements, reports and information under the Securities Act and
the Exchange Act and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby; (c) approval by the Court of the Arrangement
and the filing of the Articles of Arrangement and other arrangement or other
documents as required by the CBCA; (d) such filings, authorizations, orders and
approvals as may be required under state or provincial "control share
acquisition," "anti-takeover" or other similar statutes, and any other approvals
required under applicable federal, provincial or state securities Laws and the
rules of the Nasdaq and the TSE (including those referred to in Section 2.9.3);
(e) such filings and notices as may be necessary under the HSR Act; (f) such
filings and notices as may be necessary under the Investment Canada Act and
under the Competition Act (Canada); and (g) where the failure to obtain or make
such consents, approvals, orders, authorizations, registrations, filings,
declarations or notices would not prevent or delay the consummation of the
Arrangement or the other transactions contemplated hereby or otherwise prevent
the Company from performing its obligations under this Agreement, the Plan of
Arrangement or the other agreements contemplated hereby and would not result in
a Company Material Adverse Effect.
3.5. CAPITALIZATION.
3.5.1. AUTHORIZED SHARE CAPITAL OF THE COMPANY. On the date hereof,
the authorized share capital of the Company consists of an unlimited number
of common shares of the Company ("Company Common Shares," which term shall
include for all purposes of this Agreement the related Company Common Share
purchase rights issued or issuable under that certain Shareholder Rights
Plan Agreement dated as of January 27, 1997 (the "Rights Agreement"),
between the Company and Montreal Trust Company of Canada, as Rights Agent)
and an unlimited number of preference shares of the Company ("Company
Preference Shares"). As of November 24, 1998, there were 10,257,194 Company
Common Shares issued and outstanding. As of that date, there were no Company
Preference Shares issued and outstanding. All of the issued Company Common
Shares have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has reserved for issuance under the Rights
Agreement the number of Company Common Shares required to be issued upon the
exercise of the rights provided by the Rights Agreement in accordance with
the terms and conditions thereof. None of the issued Company Common Shares
was issued in violation of the terms of any agreement or other understanding
binding upon the Company, and all of the issued Company Common Shares were
issued in compliance with all applicable charter documents of the Company
and all Applicable securities Laws. There are, and have been, no preemptive
rights with respect to the issuance of the Company Common Shares or any
other capital stock of the Company.
3.5.2. OPTIONS AND CONVERTIBLE SECURITIES OF THE COMPANY. Section
3.5.2 of the Company Disclosure Schedule sets forth a complete list of (a)
each stock option plan, stock purchase plan and each other plan, arrangement
or agreement under which the Company or any of its Subsidiaries has reserved
shares of capital stock, or any securities or obligations convertible into,
or exercisable or exchangeable for, any shares of capital stock, to any
employee, director, consultant, service provider or other Person
(collectively, the "Company Plans") and (b) the number of shares, securities
or obligations reserved for issuance under such plan, arrangement or
agreement. All such plans, arrangements and agreements are in compliance
with all Applicable Laws and have been approved by the TSE. Except as set
forth in Section 3.5.2 of the Company Disclosure Schedule, there are no
outstanding subscriptions, options, warrants or conversion rights or other
rights, securities, agreements, calls or commitments (contingent or
otherwise) that obligate the Company to issue, sell, deliver or otherwise
dispose of shares of its capital stock, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of its
capital stock. None of the execution and delivery by the Company of this
Agreement and the other agreements contemplated hereby, the performance by
the Company of its obligations hereunder and thereunder, and the
consummation by the Company of the Plan of Arrangement and the other
transactions contemplated hereby and thereby, and any other event that
occurred on or prior to the date hereof, will accelerate the vesting under
any item set forth in Section 3.5.2 of the Company Disclosure Schedule.
There are no voting trusts or other agreements or understandings to which
the Company or, to the knowledge of the Company, any securityholder of the
Company is a party with respect to the voting of the Company Common Shares.
Except as set forth in Section 3.5.2 of the Company Disclosure Schedule, the
Company is not a party to or bound by any outstanding restrictions, puts,
options or other obligations, agreements or commitments to repurchase,
redeem or otherwise acquire any outstanding Company Common Shares or other
equity securities of the Company.
3.5.3. SUBSIDIARIES. Section 3.5.3 of the Company Disclosure Schedule
sets forth the capitalization of each of the Company's Subsidiaries,
including the number of securities authorized, issued, outstanding and held
in treasury. All of the issued shares of capital stock of each of the
Company's Subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable. None of the issued securities of any of the
Company's Subsidiaries was issued in violation of the terms of any agreement
or other understanding binding upon the issuing Subsidiary, and all of such
issued securities were issued in compliance with all applicable charter
documents of the issuing Subsidiary and all Applicable securities Laws.
There are no outstanding subscriptions, options, warrants or conversion
rights or other rights, securities, agreements, calls or commitments
(contingent or otherwise) that obligate any of the Company's Subsidiaries to
issue, sell, deliver or otherwise dispose of shares of its capital stock, or
any securities or obligations convertible into, or exercisable or
exchangeable for, any shares of its capital stock. There are, and have been,
no
preemptive rights with respect to the issuance of any securities of any of
the Company's Subsidiaries. The Company owns beneficially and of record all
of the outstanding securities of each of its Subsidiaries, free and clear of
all Encumbrances. Other than the Company's Subsidiaries, the Company does
not own, directly or indirectly, any shares or other equity interest or
securities in any Person.
3.5.4. RIGHTS AGREEMENT. The Company has waived the application of the
Rights Agreement with respect to this Agreement, the Plan of Arrangement and
the other transactions contemplated hereby, and, except in connection with
the acceptance of a Superior Proposal pursuant to Sections 7.19 and 7.20,
the Company will not waive, terminate or otherwise render the Rights
Agreement inoperative or inapplicable with respect to any other Acquisition
Proposal. At the Effective Time, the Rights Agreement will have been
terminated, all rights will be canceled or redeemed pursuant to the Rights
Agreement, and no Person shall have any rights thereunder.
3.6. SECURITIES REPORTS; FINANCIAL STATEMENTS. The Company has timely
filed all forms, reports and documents (including prospectuses, offering
memoranda and TSE filing statements) with the Commissions, the TSE and the SEC
required to be filed by it pursuant to Applicable Laws (collectively, the
"Company Securities Reports"). The Company has delivered or made available to
Parent true and complete copies of (a) its Annual Information Forms for the
years ended December 31, 1993, 1994, 1995, 1996 and 1997, (b) all Proxy
Circulars relating to meetings of the Company's shareholders (whether annual or
special) held since January 1, 1993, (c) all other Shareholders' Reports and
other documents filed by it with the TSE or the Commissions since January 1,
1993, and (d) all amendments and supplements to all such forms, reports and
documents filed by the Company with the TSE or the Commissions. As of their
respective dates, the Company Securities Reports complied in all material
respects with Applicable Laws, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements (including any
related notes) of the Company included in the Company Securities Reports
complied in all material respects with applicable accounting requirements and
with Applicable Laws, were prepared in conformity with Canadian generally
accepted accounting principles applied on a consistent basis (except as
otherwise stated in the financial statements), and present fairly the
consolidated financial position, results of operations, stockholders' equity,
liabilities (contingent or otherwise) and cash flows, as the case may be, of the
Company and its consolidated Subsidiaries as of the dates and for the periods
indicated, subject, in the case of unaudited interim consolidated financial
statements, to (i) the absence of certain notes thereto and (ii) normal year-end
audit adjustments. The information to be contained in the Information Circular
(including any information referred to therein or incorporated therein by
reference) relating to the Company will be accurate and complete in all material
respects as of the date thereof and will not contain a misrepresentation (as
defined in the Securities Act (Ontario)) as of such date.
3.7. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES.
3.7.1. CHANGES. Since the date of the most recent consolidated balance
sheet filed by the Company with the Commissions (the "Company Balance
Sheet"), the Company has not experienced a Company Material Adverse Effect.
Without limiting the generality of the foregoing, except as set forth in
Section 3.7.1 of the Company Disclosure Schedule, since the date of the
Company Balance Sheet, neither the Company nor any of its Subsidiaries has:
(a) sold, leased, transferred or assigned any of its assets, tangible or
intangible, other than in the ordinary course of business;
(b) accelerated, terminated, modified, or canceled any contract, lease,
sublease, license, or sublicense (or series of related contracts,
leases, subleases, licenses, and sublicenses) involving more than
$25,000 to which the Company or such Subsidiary is a party;
(c) canceled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than
$25,000 or outside the ordinary course of business;
(d) granted any license or sublicense of any rights under or with respect
to any Company Proprietary Rights other than (i) pursuant to Company
End-User Licenses and (ii) to the Company's
distributors, resellers and other licensees under agreements
disclosed in Section 3.17.4 of the Company Disclosure Schedule;
(e) experienced material damage, destruction, or loss (whether or not
covered by insurance) to its material property (other than ordinary
wear and tear not caused by neglect);
(f) created or suffered to exist any Encumbrance (other than Permitted
Encumbrances) upon any of the assets, tangible or intangible, of the
Company or any Subsidiary;
(g) issued, sold, delivered or otherwise disposed of any capital stock,
or any securities or obligations convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company or any
of its Subsidiaries, or undergone any reorganization,
recapitalization, reclassification, stock split or reverse stock
split;
(h) accelerated, amended, repriced or changed the period of
exercisability of any outstanding Company Option or Company Warrant
or authorized cash payments in exchange for any options granted under
any of the Company Plans;
(i) declared, set aside, or paid any dividend or distribution with
respect to its capital stock (whether in cash or in kind) or directly
or indirectly redeemed, purchased, or otherwise acquired any of its
capital stock;
(j) entered into financial arrangements for the benefit of any of
director, officer or securityholder of the Company, other than in
connection with such Person's employment by the Company in the
ordinary course of its business and consistent with past practice;
(k) made or committed to make any capital expenditures or entered into
any other material transaction outside the ordinary course of
business or involving an expenditure in excess of $100,000;
(l) amended or modified in any respect any employment contract or
arrangement or any profit sharing, bonus, incentive compensation,
severance, employee benefit or multi-employer plans;
(m) entered into any employment agreement or collective bargaining
agreement or increased the compensation of any of its employees other
than in the ordinary course of its business and consistent with past
practice; or
(n) committed (orally or in writing) to do any of the foregoing.
3.7.2. LIABILITIES. Neither the Company nor any of its Subsidiaries
has any liabilities or obligations, fixed, accrued, contingent or otherwise
(collectively, "Liabilities"), that are not fully reflected or provided for
on, or disclosed in the notes to, the Company Balance Sheet, nor has any
knowledge of any potential material Liabilities, except Liabilities incurred
since the date of the Company Balance Sheet in the ordinary course of its
business and consistent with past practice, none of which Liabilities,
individually or in the aggregate, has resulted in a Company Material Adverse
Effect.
3.8. LITIGATION AND AUDITS. Except as set forth in Section 3.8 of the
Company Disclosure Schedule, there is no investigation or inquiry by any
Governmental Entity with respect to the Company or any of its Subsidiaries
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened, nor has any Governmental Entity indicated to the Company or any of
its Subsidiaries an intention to conduct the same. Except as set forth in
Section 3.8 of the Company Disclosure Schedule, there is no claim, action, suit,
arbitration or proceeding pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened against or involving the Company, any of its
Subsidiaries, or any of its or their assets or properties, at law or in equity,
or before any arbitrator or Governmental Entity, which, if determined adversely
to the Company or such Subsidiary, could result in a Company Material Adverse
Effect. There are no judgments, decrees, injunctions, orders or rulings of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries.
3.9. COMPLIANCE WITH APPLICABLE LAW, ARTICLES OF INCORPORATION AND
BY-LAWS. Each of the Company and its Subsidiaries has all requisite Permits
necessary to carry on its business as currently being conducted and to own,
lease and operate the properties currently owned, leased and operated by it in
the manner currently owned,
leased and operated, except where the failure to have such Permits would not
result in a Company Material Adverse Effect. There are no proceedings pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened,
which may result in the revocation, cancellation, suspension, or adverse
modification of any such Permit. The business of the Company and its
Subsidiaries has not been conducted in Violation of Applicable Laws, except for
Violations which, individually or in the aggregate, would not result in a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is in Violation of, nor has any event occurred that has resulted or will result
any Violation of any term, condition or provision of the Articles of
Incorporation or By-Laws of the Company or any other organizational document of
the Company or any Subsidiary.
3.10. BOOKS AND RECORDS; ACCOUNTING MATTERS. The books, records and
accounts of the Company and its Subsidiaries (a) have been maintained in
accordance with good business practices on a basis consistent with prior years,
(b) are stated in reasonable detail and accurately and fairly reflect in all
material respects the transactions and dispositions of the assets of the Company
and its Subsidiaries and (c) accurately and fairly reflect in all material
respects the basis for the Company's consolidated financial statements. The
Company has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (d) transactions are executed
in accordance with management's general or specific authorizations; (e)
transactions are recorded as necessary (i) to permit preparation of accurate
financial statements in conformity with Canadian and United States generally
accepted accounting principles or any other criteria applicable to such
statements and (ii) to maintain accountability for assets; (f) access to assets
is permitted only in accordance with management's general or specific
authorization; and (g) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. There has been no change in the Company's accounting
policies or the methods of making accounting estimates or changes in estimates
that are material to the Company's financial statements, except as described in
the notes thereto.
3.11. TAX MATTERS.
3.11.1. FILING OF RETURNS. Each of the Company and its Subsidiaries
has prepared and timely filed with all appropriate Governmental Entities all
Tax Returns that it was required to file. All such Tax Returns were correct
and complete in all respects. Neither the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return, other than extensions for which the Company or
any of its Subsidiaries has filed a request, which request has resulted in
the automatic granting of such extension. No Governmental Entity in any
jurisdiction in which any of the Company and its Subsidiaries does not file
Tax Returns has ever claimed that the Company or any of its Subsidiaries is
or may be subject to taxation by that jurisdiction.
3.11.2. PAYMENT OF TAXES. All Taxes payable or owed by the Company and
its Subsidiaries (whether or not shown on any Tax Return) have been paid
when due, and all Taxes due on or before the Effective Date will be paid
when due. In the case of Taxes accruing on or before the date hereof that
are not due on or before date hereof, the Company has made adequate
provision in its books and records and financial statements for such
payment. There are no security interests on any of the assets of any of the
Company and its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
3.11.3. WITHHOLDING. Each of the Company and its Subsidiaries has
withheld from each payment made to any of its present or former employees,
officers, directors, stockholders, non-residents and other Persons all
amounts required by Law to be withheld and has, where required, remitted
such amounts within the applicable periods to the appropriate Governmental
Entity.
3.11.4. ASSESSMENTS. Neither the Company nor any of its Subsidiaries
expects any authority to assess any additional Taxes in excess of tax
reserves provided for in the Company's financial statements against the
Company or any of its Subsidiaries for any period for which Tax Returns have
been filed. No Tax Return of the Company or any of its Subsidiaries has been
audited or currently is the subject of audit. No Governmental Authority has
raised any dispute or claim concerning any Tax liability of any of the
Company and its Subsidiaries. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
3.11.5. ELECTIONS AND CONSENTS. Neither the Company nor any of its
Subsidiaries has filed a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations, nor has the Company or any of its
Subsidiaries agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code). Neither the Company nor any of its Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code. Neither
the Company nor any of its Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code. Each of the Company and its Subsidiaries has disclosed on its
United States income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. Neither the Company nor any of its
Subsidiaries is a party to any Tax allocation or Tax sharing agreement. None
of the Company and its Subsidiaries has been a member of an affiliated group
filing a consolidated United States income Tax Return. Neither the Company
nor any of its Subsidiaries has any material liability for the Taxes of any
Person (other than the Company and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of any other
Applicable Law), as a transferee or successor, by contract, or otherwise.
3.11.6. ACCESS TO RETURNS. The Company has provided Parent with a copy
of or access to all Canadian, United States and other federal, provincial,
state, and local income and capital Tax returns filed by the Company and its
Subsidiaries after January 1, 1994. The Company has provided Parent with a
copy of or access to all assessments, extensions and waivers resulting from
any examinations or audits of the Company or any of its Subsidiaries by a
Governmental Entity in respect of Taxes, and all such assessments and
related penalties and interest have been paid in full unless being contested
in good faith by the Company or any of its Subsidiaries and described in
Section 3.11 of the Company Disclosure Schedule.
3.12. EMPLOYEE BENEFIT PLANS.
3.12.1. LIST OF PLANS. Section 3.12 of the Company Disclosure Schedule
sets forth a complete list of all Company Benefit Plans sponsored or
maintained by any Company Entity or under which any Company Entity is
obligated. The Company has delivered to Parent (a) accurate and complete
copies of all Company Benefit Plan documents and all other material
documents relating thereto, including (if applicable) all summary plan
descriptions, summary annual reports and insurance contracts, (b) accurate
and complete detailed summaries of all unwritten Company Benefit Plans, (c)
accurate and complete copies of the most recent financial statements and
actuarial reports with respect to all Company Benefit Plans for which
financial statements or actuarial reports are required or have been
prepared, and (d) accurate and complete copies of all information returns
and annual reports for all Company Benefit Plans (for which information
returns or annual reports are required) prepared within the last three
years, (e) all material professional opinions relating to the Company
Benefit Plans and (f) accurate and complete copies of material
correspondence with all regulatory authorities. No material changes have
occurred or are expected to occur which would affect the actuarial reports
or financial statements delivered to Parent pursuant to this Section 3.12.1.
No Company Entity sponsors a defined benefit plan subject to Title IV of
ERISA, nor does any Company Entity have a current or contingent obligation
to contribute to any multiemployer plan (as defined in Section 3(37) of
ERISA). No Company Entity has any liability with respect to any employee
benefit plan (as defined in Section 3(3) of ERISA) other than with respect
to the Company Benefit Plans.
3.12.2. ERISA COMPLIANCE. All Company Benefit Plans conform (and at
all times have conformed) in all material respects to, and are being
administered and operated (and have at all time been administered and
operated) in material compliance with, the requirements of ERISA, the Code
and all other Applicable Laws. All returns, reports and disclosure
statements required to be made under ERISA and the Code with respect to all
Company Benefit Plans have been timely filed or delivered. There have not
been any "prohibited transactions," as such term is defined in Section 4975
of the Code or Section 406 of ERISA, involving any of the Company Benefit
Plans that could subject any Company Entity to any material penalty or tax
imposed under ERISA or the Code.
3.12.3. PLAN DETERMINATIONS. Any Company Benefit Plan that was or is
intended to be qualified under Section 401(a) of the Code and exempt from
tax under Section 501(a) of the Code has been determined by the Internal
Revenue Service to be so qualified or an application for such determination
is pending. Any such determination that has been obtained remains in effect
and has not been revoked, and with respect to any application that is
pending, no Company Entity has any reason to suspect that such application
for determination will be denied. Nothing has occurred since the date of any
such determination that is reasonably likely to affect adversely such
qualification or exemption, or result in the imposition of excise taxes or
income taxes on unrelated business income under ERISA or the Code with
respect to any Company Benefit Plan.
3.12.4. CLAIMS. There are no pending or, to the knowledge of any
Company Entity, threatened claims by or on behalf of any Company Benefit
Plans, or by or on behalf of any individual participants or beneficiaries of
any Company Benefit Plans, alleging any breach of fiduciary duty on the part
of any Company Entity or any of its officers, directors or employees under
ERISA or any other applicable regulations, or claiming benefit payments
(other than those made in the ordinary operation of such plans), nor is
there, to the knowledge of any Company Entity, any basis for such claim. The
Company Benefit Plans are not the subject of any pending, or, to the
knowledge of any Company Entity, threatened investigation or audit by the
Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC").
3.12.5. CONTRIBUTIONS. Each Company Entity has timely made all
required contributions under the Company Benefit Plans, including the
payment of any premiums payable to the PBGC and other insurance premiums.
3.12.6. WELFARE PLANS. With respect to any Company Benefit Plan that
is an employee welfare benefit plan (within the meaning of Section 3(1) of
ERISA) (a "Welfare Plan") (a) each Welfare Plan for which contributions are
claimed by any Company Entity as deductions under any provision of the Code
is in material compliance with all applicable requirements pertaining to
such deduction, (b) with respect to any welfare benefit fund (within the
meaning of Section 419 of the Code) related to a Welfare Plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the
Code, (c) any Company Benefit Plan that is a group health plan (within the
meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material requirements of
Section 4980B of the Code, ERISA, Title XXII of the Public Health Service
Act and the Social Security Act, and (d) all Welfare Plans may be amended or
terminated at any time on or after the Effective Date. No Company Benefit
Plan provides any health, life or other welfare coverage to employees of any
Company Entity beyond termination of their employment with the Company or
any of its Subsidiaries by reason or retirement or otherwise, other than
coverage as may be required under Section 4980B of the Code or Part 6 of
ERISA, or under the continuation of coverage provisions of the Laws of any
state, province, territory or locality.
3.12.7. CANADIAN BENEFIT PLANS. All of the Company Benefit Plans in
which Canadian employees of the Company Entities participate or are eligible
to participate (the "Canadian Plans") are and have been established,
registered, qualified, invested and administered in all respects in
accordance with all laws, regulations, orders or other legislative,
administrative or judicial promulgations applicable to the Canadian Plans.
No fact or circumstance exists that could adversely affect the tax-exempt
status of a Canadian Plan. All obligations regarding the Canadian Plans have
been satisfied and there are no actions, outstanding defaults or violations
by any party to any Canadian Plan that could subject any Company Entity
(including any Canadian Plan or fund held in connection therewith) to any
material penalty or Tax, and no Tax, penalty or fee is owing or exigible
under or in respect of any Canadian Plan. A Company Entity may unilaterally
amend, modify, vary revoke or terminate, in whole or in part, any Canadian
Plan maintained by it and take contribution holidays under or withdraw
surplus from such Canadian Plans, subject only to approvals required by
Applicable Laws. Subject to Applicable Laws, a Company Entity may amend,
revise or merge any Canadian Plan or transfer or merge the assets or
liabilities of any Canadian Plan with any other arrangement, plan or fund.
No Canadian Plan, nor any related trust or other funding medium thereunder,
is subject to any pending investigation, examination or other proceeding,
action or claim initiated by any Governmental Entity, or by any other party
(other than routine claims for benefits), and there exists no
state of facts which after notice or lapse of time or both could reasonably
be expected to give rise to any such investigation, examination or other
proceeding, action or claim or to affect the registration of any Canadian
Plan required to be registered. All contributions or premiums required to be
made by a Company Entity under the terms of a Canadian Plan or by Applicable
Laws have been made in a timely fashion in accordance with Applicable Laws
and the terms of the Canadian Plan, and no Company Entity has, and as of the
Effective Time will not have, any liability (other than liabilities accruing
after the Effective Time) with respect to any of the Canadian Plans.
Contributions or premiums will be paid by the applicable Company Entity on
an accrual basis for the period up to the Effective Time even though not
otherwise required to be made until a later date. No amendments have been
made to any Canadian Plan and no improvements to any Canadian Plan have been
promised and no amendments or improvements to any Canadian Plan will be made
or promised by a Company Entity before the Effective Time. There have been
no improper withdrawals, applications or transfers of assets from any
Canadian Plan or the trusts or other funding media relating thereto, and no
Company Entity or any agent of a Company Entity has been in breach of any
fiduciary obligation with respect to the administration of the Canadian
Plans or the trusts or other funding media relating thereto. Each Canadian
Plan is fully funded or fully insured on both an ongoing and solvency basis.
No Canadian Plan enjoys any special tax status under Applicable Laws, nor
have any advance tax rulings or interpretations been sought or received in
respect of the Canadian Plans. All employee data necessary to administer
each Canadian Plan has been provided to the Parent and is true and correct.
No insurance policy or other contract or agreement affecting any Canadian
Plan requires or permits a retroactive increase in premiums or payments due
thereunder. The level of insurance reserves under each insured Canadian Plan
is reasonable and sufficient to provide for all incurred claims. No Canadian
Plan provides benefits to retired employees or to the beneficiaries or
dependents of retired employees. No Canadian Plan is a plan or arrangement
to which more than one employer that is not a Company Entity is required or
permitted to contribute and no Canadian Plan is a multi-employer plan.
3.13. EMPLOYMENT-RELATED MATTERS. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other contract
or agreement with any labor organization or other representative of any of the
employees of the Company or any of its Subsidiaries, nor are any of such
contracts or agreements pending or contemplated. There is no labor strike,
dispute, slowdown, work stoppage or lockout that is pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened against or otherwise
affecting the Company or any of its Subsidiaries, and neither the Company nor
any of its Subsidiaries has experienced the same since January 1, 1992. Except
as set forth in Section 3.13 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has closed any plant or facility,
effectuated any layoffs of employees or implemented any early retirement or
separation program at any time from or after January 1, 1992, nor has the
Company or any of its Subsidiaries planned or announced any such action or
program for the future with respect to which the Company or any of its
Subsidiaries may have any liability. All salaries, wages, vacation pay, bonuses,
commissions and other compensation payable by the Company or any of its
Subsidiaries to the employees of the Company or any of its Subsidiaries before
the date hereof have been paid in all material respects as of the date hereof.
No Person has asserted any claim, or, to the knowledge of the Company or any of
its Subsidiaries, has any reasonable basis to assert any valid claim, against
the Company or any of its Subsidiaries that either the continued employment by,
or association with, the Company or any of its Subsidiaries of any of the
present officers or employees of, or consultants to, the Company or any of its
Subsidiaries contravenes any agreements or Laws applicable to unfair
competition, trade secrets or proprietary information.
3.14. ENVIRONMENTAL.
3.14.1. ENVIRONMENTAL LAWS. The Company and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws.
Neither the Company nor any of its Subsidiaries has received any
communication that alleged that the Company or any of its Subsidiaries was
or is not in compliance in all respects with or has any liability under any
applicable Environmental Law. To the knowledge of the Company or any of its
Subsidiaries, there are no circumstances that may prevent or interfere with
compliance in the future with all applicable Environmental Laws. All Permits
currently held by the Company or any of its Subsidiaries pursuant to
Environmental Laws are in full force and effect. The Company and its
Subsidiaries are in compliance in all material respects with all of the
terms of such Permits, and, to the knowledge of the Company or any of its
Subsidiaries, no other Permits are required by
the Company or any of its Subsidiaries for the conduct of its or their
business. The management, handling, storage, transportation, treatment, and
disposal by the Company and its Subsidiaries of all Materials of
Environmental Concern have been in compliance in all material respects with
all applicable Environmental Laws.
3.14.2. ENVIRONMENTAL CLAIMS. There is no Environmental Claim pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened
against or involving the Company or any of its Subsidiaries or against any
Person whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
3.14.3. NO BASIS FOR CLAIMS. To the knowledge of the Company or any of
its Subsidiaries, there are no past or present actions or activities by the
Company or any of its Subsidiaries, or any circumstances, conditions, events
or incidents, including the storage, treatment, release, emission,
discharge, disposal or arrangement for disposal of any Material of
Environmental Concern, that could reasonably form the basis of any
Environmental Claim against the Company or any of its Subsidiaries or
against any Person whose liability for any Environmental Claim the Company
or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
3.15. ASSETS OTHER THAN REAL PROPERTY.
3.15.1. TITLE. The Company and its Subsidiaries have good and
marketable title to all of the tangible assets shown on the Company Balance
Sheet, in each case, free and clear of any Encumbrances, except for (a)
assets disposed of since the date of the Company Balance Sheet in the
ordinary course of business and in a manner consistent with past practices
and not material in amount, (b) liabilities, obligations and Encumbrances
reflected in the Company Balance Sheet or otherwise in the most recent
consolidated financial statements filed by the Company with the Commissions,
(c) Permitted Encumbrances, and (d) liabilities, obligations and
Encumbrances set forth in Section 3.15 of the Company Disclosure Schedule,
none of which, individually or in the aggregate, would result in a Company
Material Adverse Effect.
3.15.2. INVENTORY. The inventory of the Company and its Subsidiaries
contains no material amount of slow-moving or obsolete items that have not
been reserved for. The values at which such inventories are carried on the
books of the Company and its Subsidiaries reflect the normal inventory
valuation policies of the Company.
3.15.3. CONDITION. Except as set forth in Section 3.15.3 of the
Company Disclosure Schedule, all receivables shown on the Company Balance
Sheet and all receivables accrued by the Company and its Subsidiaries since
the date of the Company Balance Sheet have been collected or are collectible
in the aggregate amount shown. All material plant, equipment and personal
property owned by the Company and its Subsidiaries and regularly used in its
or their business are in good operating condition and repair, ordinary wear
and tear excepted.
3.16. REAL PROPERTY.
3.16.1. COMPANY REAL PROPERTY. The Company does not own any real
property.
3.16.2. COMPANY LEASES. Section 3.16.2 of the Company Disclosure
Schedule lists all of the Company Leases. The Company has delivered to
Parent complete copies of the Company Leases and all material amendments
thereto (which are identified in Section 3.16.2 of the Company Disclosure
Schedule). The Company Leases grant to the Company or to one of its
Subsidiaries leasehold estates free and clear of all Encumbrances, except
Permitted Encumbrances. The Company Leases are in full force and effect and
are binding and enforceable against each of the parties thereto in
accordance with their respective terms. Neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company or any of its
Subsidiaries, any other party to a Company Lease, is in material Violation
of any Company Lease, nor are there any facts or circumstances that would
reasonably indicate that the Company or any of its Subsidiaries is likely to
be in material Violation of any Company Lease. Section 3.16.2 of the Company
Disclosure Schedule correctly identifies each Company Lease that requires
the consent of any Person in connection with the transactions contemplated
hereby. No material construction, alteration or other leasehold improvement
work with respect to the real property covered by any of the Company Leases
remains to be paid for or to be performed by the Company or any of its
Subsidiaries.
3.16.3. CONDITION. All buildings, structures and fixtures, or parts
thereof, used by the Company or any of its Subsidiaries in the conduct of
its or their business are in good operating condition and repair, ordinary
wear and tear excepted, and are insured with all coverages that are usual
and customary for similar properties and similar businesses and that are
required, pursuant to the terms of the Company Leases, to be insured by
third parties.
3.17. INTELLECTUAL PROPERTY.
3.17.1. RIGHT TO INTELLECTUAL PROPERTY. Except as set forth in Section
3.17.1 of the Company Disclosure Schedule, the Company and its Subsidiaries
own, or have perpetual, fully paid, worldwide rights to use, all patents,
industrial designs, trademarks, trade names, service marks, copyrights, and
any applications therefor, maskworks, net lists, schematics, technology,
inventions, know-how, trade secrets, algorithms, computer software programs
or applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are used in the business
of the Company and its Subsidiaries as currently conducted by the Company
and its Subsidiaries (the "Company Proprietary Rights"), free and clear of
any and all Encumbrances. To the knowledge of the Company or any of its
Subsidiaries, there is no reason why the Company and its Subsidiaries will
not be able to continue to own or have perpetual, fully paid, worldwide
rights to use all Company Proprietary Rights necessary for the lawful
conduct of its or their business as currently conducted and as currently
proposed to be conducted, without any infringement or conflict with the
rights of others. Except as set forth in Section 3.17.1 of the Company
Disclosure Schedule, all of the rights of the Company and its Subsidiaries
in and to the Company Proprietary Rights are freely assignable in the name
of the Company or one of its Subsidiaries, including the right to create
derivatives, and the Company and its Subsidiaries are under no obligation to
obtain any approval or consent for use of any of the Company Proprietary
Rights.
3.17.2. LIST OF COMPANY PROPRIETARY RIGHTS. Section 3.17.2 of the
Company Disclosure Schedule sets forth a complete list of all patents,
industrial designs, trademarks, trade names, service marks, registered
copyrights, and any applications therefor and registrations thereof, and
computer software programs or applications (excluding Commercial Software)
included in the Company Proprietary Rights, specifying, where applicable,
the jurisdictions in which each such Company Proprietary Right has been
issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers and the names of all registered owners and inventors, as
applicable. None of the products of the Company and its Subsidiaries that
the Company and its Subsidiaries currently market or support has been
registered for patent protection with the United States Commissioner of
Patents or any foreign offices or for copyright protection with the United
States Register of Copyrights or any foreign offices, nor has the Company or
any of its Subsidiaries been requested to make any such registration.
3.17.3. ROYALTIES. Except as set forth in Section 3.17.3 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is obligated to pay any royalties or other compensation to any Person in
respect of its ownership, use or license of any of the Company Proprietary
Rights.
3.17.4. LICENSES. Section 3.17.4 of the Company Disclosure Schedule
sets forth a complete list of all material licenses, sublicenses and other
agreements to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to
use any Company Proprietary Right (excluding End-User Licenses). The Company
Proprietary Rights include all trademarks, trade names, service marks, trade
secrets and software and all patent rights and industrial design rights that
are necessary for the Company and its Subsidiaries to satisfy and perform
such licenses, sublicenses and agreements. None of the Company, any of its
Subsidiaries and the other contracting parties is in violation of any
license, sublicense or agreement included in such list, except for
violations that do not materially impair the rights of the Company or any of
its Subsidiaries under such license, sublicense or agreement. Such licenses,
sublicenses and agreements are in full force and effect and are binding and
enforceable against each of the parties thereto in accordance with their
respective terms. The execution and delivery by the Company of this
Agreement, the Plan of Arrangement and the other agreements contemplated
hereby, the performance by the Company of its obligations hereunder and
thereunder, and the consummation by the Company of the transactions
contemplated hereby and thereby will not cause the Company or any of its
Subsidiaries to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement.
3.17.5. STATUS OF REGISTRATIONS. All of the Company Proprietary Rights
set forth in Section 3.17.2 of the Company Disclosure Schedule as having
been issued by, registered with or filed with the United States Patent and
Trademark Office or Register of Copyrights or the corresponding offices of
other countries listed in Section 3.17.2 of the Company Disclosure Schedule
have been duly so issued, registered or filed, as the case may be, and have
been properly maintained and renewed in accordance with all Applicable Laws
in the United States and each such other country. The Company and its
Subsidiaries have diligently protected their rights in the Company
Proprietary Rights in such countries and have diligently maintained the
confidentiality of their trade secrets, know-how and other confidential
Company Proprietary Rights, and, to the knowledge of the Company or any of
its Subsidiaries, there have been no acts or omissions by the Company or any
of its Subsidiaries, the result of which has been or would be to compromise
the rights of the Company or any of its Subsidiaries to apply for or enforce
appropriate legal protection of such Company Proprietary Rights. Without
limiting the generality of the foregoing, the products, packaging and
documentation of the Company and its Subsidiaries contain copyright notices
sufficient to maintain copyright protection on the copyrighted portions of
the Company Proprietary Rights.
3.17.6. NO CONFLICT. Except as set forth in Section 3.17.6 of the
Company Disclosure Schedule, no claims with respect to the Company
Proprietary Rights are pending, have been asserted or, to the knowledge of
the Company or any of its Subsidiaries, are threatened by any Person nor, to
the knowledge of the Company or any of its Subsidiaries, are there any valid
grounds for any BONA FIDE claims (a) to the effect that the development,
sale, licensing or use of any of the products of the Company and its
Subsidiaries as now developed, sold, licensed or used or proposed for
development, sale, licensing or use by the Company and its Subsidiaries
infringes on any patent, industrial design, trademark, trade name, service
▇▇▇▇, copyright, trade secret or other proprietary right of any Person, (b)
against the use by the Company or any of its Subsidiaries of any patents,
industrial designs, trademarks, trade names, service marks, copyrights, and
any applications therefor, maskworks, net lists, schematics, technology,
know-how, trade secrets, algorithms, computer software programs or
applications, and tangible or intangible proprietary information or material
used in the business of the Company and its Subsidiaries as currently
conducted or as proposed to be conducted by the Company and its
Subsidiaries, or (c) challenging the ownership by the Company or any of its
Subsidiaries of, the validity of any registration for, any application
relating to, or the effectiveness any of the Company Proprietary Rights. To
the knowledge of the Company or any of its Subsidiaries, there is no
unauthorized use, infringement or misappropriation of any of the Company
Proprietary Rights by any third party, including any employee or former
employee of the Company or any of its Subsidiaries. No Company Proprietary
Right or product of the Company or any of its Subsidiaries is subject to any
outstanding decree, order, judgment, or stipulation restricting in any
manner the use or licensing thereof by the Company or any of its
Subsidiaries.
3.17.7. EMPLOYEE AGREEMENTS. Each present and former employee, officer
and consultant of the Company and its Subsidiaries has executed and
delivered a confidentiality agreement in substantially the form attached
hereto as Section 3.17.7 of the Company Disclosure Schedule. The
confidentiality agreements executed and delivered by such employees,
officers and consultants and Applicable Laws provide the Company and its
Subsidiaries with title and ownership to the Company Proprietary Rights
developed by such employees, officers and consultants, including the waiver
of their moral rights in favor of the Company or its Subsidiaries and their
respective successors and assigns, and obligate such employees, officers and
consultants to maintain the confidentiality of the Company Proprietary
Rights and the other confidential information of the Company and its
Subsidiaries. To the knowledge of the Company or any of its Subsidiaries, no
employee, officer or consultant of the Company or any of its Subsidiaries is
in violation of any term of any employment or consulting contract,
proprietary information and inventions agreement, non-competition agreement,
or any other contract or agreement relating to the relationship of any such
employee, officer or consultant with the Company, any of its Subsidiaries or
any previous employer.
3.17.8. YEAR 2000 READINESS. Section 3.17.8 of the Company Disclosure
Schedule identifies each "year 2000" audit, report or investigation that has
been performed by or on behalf of the Company or any
of its Subsidiaries with respect to its business and operations, and the
Company has provided to Parent true and correct copies of all such audits,
reports or investigations. Except as set forth in such audits, reports and
investigations or in Section 3.17.8 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is aware of any failure to
be Year 2000 Compliant of (a) any software products sold or licensed by the
Company or any of its Subsidiaries or (b) any computer software or hardware
products used by or licensed to the Company or its Subsidiaries from third
parties for internal use by the Company or its Subsidiaries. For purposes of
this Agreement, "Year 2000 Compliant" means, with respect to each product
referred to in the prior sentence, that such product (c) will accurately
receive, record, store, provide, recognize and process all date and time
data from, during, into and between the twentieth and twenty-first
centuries; (d) will accurately perform all date-dependent calculations and
operations (including mathematical operations, sorting, comparing and
reporting) from, during, into and between the twentieth and twenty-first
centuries; and (e) will not malfunction, cease to function or provide
invalid or incorrect results as a result of (i) the change of century, (ii)
date data, including date data which represents or references different
centuries or more than one century or (iii) the occurrence of any particular
date; in each case without human intervention, other than original data
entry; PROVIDED, in each case, that all applications, hardware and other
systems used in conjunction with such system which are not owned or licensed
by the Company or any of its Subsidiaries correctly exchange date data with
or provide data to such system. Except as set forth in Section 3.17.8 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has provided any guarantee or warranty for any product sold or licensed, or
services provided, by the Company or any of its Subsidiaries to the effect
that such product or service (f) complies with or accounts for the fact of
the arrival of the year 2000 or (g) will not be adversely affected with
respect to functional interoperability, performance or volume capacity
(including the processing and reporting of data) by virtue of the arrival of
the year 2000.
3.18. AGREEMENTS, CONTRACTS AND COMMITMENTS.
3.18.1. COMPANY AGREEMENTS. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to or has:
(a) any pension, profit sharing, retirement, deferred compensation,
welfare, legal services, medical, dental or other employee benefit or
health insurance plans, life insurance or other death benefit plans,
disability, stock option, stock purchase, stock compensation, bonus,
vacation pay, severance pay or other similar plans, programs or
agreements, or material personnel policy;
(b) any employment agreement with any present employee, officer, director
or consultant (or former employees, officers, directors or
consultants to the extent there remain at the date hereof obligations
to be performed by the Company or any of its Subsidiaries);
(c) any agreement for personal services or employment with a term of
service or employment specified in the agreement or any agreement for
personal services or employment in which the Company or any of its
Subsidiaries has agreed to make, upon the termination of such
agreement, any payments greater than those that would otherwise be
imposed by law;
(d) any agreement of guarantee or indemnification;
(e) any agreement or commitment containing a covenant limiting or
purporting to limit the freedom of the Company or any of its
Subsidiaries (i) to compete with any Person in any geographic area,
(ii) to engage in any line of business, or (iii) to hire or solicit
any individual for employment or consulting services;
(f) any lease, other than the Company Leases, under which the Company or
any of its Subsidiaries is a lessee or lessor that involves payments
of $25,000 or more per annum or is material to the conduct of the
business of the Company or any of its Subsidiaries;
(g) any joint venture or profit-sharing agreement;
(h) except for trade indebtedness incurred in the ordinary course of
business and reflected on the Company Balance Sheet, any loan or
credit agreements providing for the extension of credit to the
Company or any instrument evidencing or related in any way to
indebtedness incurred in the
acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, lease, guarantee, or
otherwise that individually is in the amount of $25,000 or more;
(i) any license or royalty agreement (other than (A) those disclosed in
Section 3.17 of the Company Disclosure Schedule, (B) with respect to
Commercial Software or (C) Company End-User Licenses);
(j) any distribution, VAR or OEM agreement (identifying any that contain
exclusivity provisions);
(k) any agreement or arrangement with any third party to develop any
intellectual property or other asset expected to be used or currently
used or useful in the business of the Company or any of its
Subsidiaries;
(l) any agreement or arrangement for the Company or any of its
Subsidiaries to develop any intellectual property or other asset for
any third party;
(m) any agreement or arrangement providing for the payment of any
commission based on sales other than in the ordinary course of
business and consistent with past practice;
(n) any agreement for the sale or license by or to the Company or any of
its Subsidiaries of materials, products, services or supplies that
involves future payments to the Company or any of its Subsidiaries of
more than $25,000;
(o) any agreement for the purchase by the Company or any of its
Subsidiaries of any materials, equipment, services, or supplies, that
either (i) involves a binding commitment by the Company or such
Subsidiary to make future payments in excess of $25,000 and cannot be
terminated by the Company or such Subsidiary without penalty upon
less than three months' notice or (ii) was not entered into in the
ordinary course of business;
(p) any agreement or commitment for the acquisition, construction or sale
of fixed assets owned or to be owned by the Company or any of its
Subsidiaries that involves future payments by it of more than
$25,000;
(q) any agreement or commitment to which present or former directors or
officers (or their Affiliates or members of their immediate families)
or Affiliates (or directors or officers of an Affiliate) are also
parties;
(r) any agreement not described above (ignoring, solely for this purpose,
any dollar amount thresholds in those descriptions) involving the
payment or receipt by the Company or any of its Subsidiaries of more
than $100,000, other than the Company Leases; or
(s) any agreement not described above that was not made in the ordinary
course of business and that is material to the financial condition,
business, operations, assets, results of operations or prospects of
the Company or any of its Subsidiaries.
3.18.2. VALIDITY, VIOLATION AND CONSENT. The contracts, leases,
instruments, licenses and other agreements or documents listed in the
Company Disclosure Schedule (the "Company Documents"), including those
listed in Section 3.18 of the Company Disclosure Schedule, are valid and in
full force and effect. Neither the Company nor any of its Subsidiaries is in
Violation of any term, condition or provision of any Company Document or any
other credit agreement, indenture, bond, debenture, note, mortgage, lease,
instrument or other agreement, permit, concession, grant, franchise, or
license to which the Company or any of its Subsidiaries is a party or by
which it, any of its Subsidiaries or any of its or their material assets or
properties is bound or which is applicable to it, any of its Subsidiaries or
any of its or their material assets or properties, except for such
Violations which, individually or in the aggregate, would not result in a
Company Material Adverse Effect. Section 3.18.2 of the Company Disclosure
Schedule identifies each Company Document that requires the consent of a
third party in connection with the transactions contemplated hereby.
3.19. INSURANCE CONTRACTS. Section 3.19 of the Company Disclosure Schedule
lists all material contracts of insurance and indemnity (other than those
identified as such in other sections of the Company Disclosure Schedule) in
force at the date hereof with respect to the Company or any of its Subsidiaries.
Such contracts of insurance and indemnity and those identified as such in other
sections of the Company Disclosure Schedule (collectively, the "Company
Insurance Contracts") insure against such risks, and are in such amounts, as are
reasonable and appropriate considering the Company and its Subsidiaries and
their property, business and operations. Except as set forth in Section 3.19 of
the Company Disclosure Schedule, all of the Company Insurance Contracts are in
full force and effect, with no default thereunder by the Company or any of its
Subsidiaries which could permit the insurer to deny payment of claims
thereunder. The execution and delivery by the Company of this Agreement and the
other agreements contemplated hereby, the performance by the Company of its
obligations hereunder and thereunder, and the consummation by the Company of the
Plan of Arrangement and the other transactions contemplated hereby and thereby
will not cause the Company or any of its Subsidiaries to be in Violation of any
Company Insurance Contracts, nor entitle any other party thereto to terminate or
modify a Company Insurance Contract. Neither the Company nor any of its
Subsidiaries has received notice from any of their insurance carriers that any
insurance premiums will be materially increased in the future or that any
insurance coverage provided under the Company Insurance Contracts will not be
available in the future on substantially the same terms as now in effect.
Neither the Company nor any of its Subsidiaries has received or given a notice
of cancellation with respect to any of the Company Insurance Contracts.
3.20. BANKING RELATIONSHIPS. Section 3.20 of the Company Disclosure
Schedule sets forth the names and locations of all banks and trust companies in
which the Company or any of its Subsidiaries has accounts, lines of credit or
safety deposit boxes.
3.21. SUPPLIERS, DISTRIBUTORS AND CUSTOMERS. The relationships of the
Company and its Subsidiaries with their suppliers, distributors and customers
are satisfactory commercial working relationships. Except as set forth in
Section 3.21 of the Company Disclosure Schedule, since the date of the Company
Balance Sheet, no material supplier, distributor or customer of the Company or
any of its Subsidiaries has canceled or otherwise adversely modified its
relationship with the Company or any of its Subsidiaries and, to the knowledge
of the Company or any of its Subsidiaries, no supplier, distributor or customer
of the Company or any of its Subsidiaries has any intention to do so, and, to
the knowledge of the Company or any of its Subsidiaries, none of the execution
and delivery by the Company of this Agreement and the other agreements
contemplated hereby, the performance by the Company of its obligations hereunder
and thereunder, and the consummation by the Company of the Plan of Arrangement
and the other transactions contemplated hereby and thereby will materially
adversely affect any such relationship.
3.22. PRODUCT WARRANTY. Each product sold, leased, licensed or delivered
by the Company or any of its Subsidiaries has been in material conformity with
all applicable contractual commitments and all express and implied warranties,
and neither the Company nor any of its Subsidiaries has any Liability,
individually or in the aggregate (and, to the knowledge of the Company or any of
its Subsidiaries, there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand giving
rise to any Liability, individually or in the aggregate, that could reasonably
be expected to result in a Company Material Adverse Effect) for replacement or
repair thereof or other damages in connection therewith that could result in a
Company Material Adverse Effect. Section 3.22 of the Company Disclosure Schedule
includes copies of the standard terms and conditions of license and sale for the
Company and its Subsidiaries (containing applicable warranty and indemnity
provisions). No product sold, leased, licensed or delivered by the Company or
any of its Subsidiaries is subject to any guaranty, warranty, or other indemnity
that is materially different than the applicable standard terms and conditions
of license and sale and such other indemnities and warranties disclosed in
Section 3.22 of the Company Disclosure Schedule.
3.23. INVESTMENT CANADA. The Company and its Subsidiaries do not carry on
a business of the publication, distribution or sale of books, magazines or
periodicals in print or machine readable form. The Company and its Subsidiaries
produce and distribute the books and manuals listed in Section 3.23 of the
Company Disclosure Schedule in connection with or relating to their software and
other products.
3.24. ACQUIRED BUSINESS. Upon consummation of the Plan of Arrangement,
Subco will, through the Plan of Arrangement, acquire the entire business of the
Company and its Subsidiaries as heretofore conducted and as
proposed to be conducted, and Parent will then own and have the right to use all
tangible and intangible assets and properties heretofore used or necessary for
the normal continued conduct of the business of the Company and its Subsidiaries
as now conducted and as proposed to be conducted.
3.25. DIRECTOR APPROVAL. The Board of Directors of the Company has (a)
determined unanimously that the Arrangement is fair to the holders of Company
Common Shares and is in the best interests of the Company, (b) determined to
recommend that the holders of Company Common Shares vote in favor of the
Arrangement and (c) advised the Company that the members of the Board of
Directors will vote the Company Common Shares held by them in favor of the
Arrangement and will so represent in the Information Circular.
3.26. VOTE REQUIRED. Except as may be provided in the Interim Order, at
the Company Shareholder Meeting at which a quorum is present, the affirmative
vote of two-thirds of the votes actually cast by all Company shareholders
present is required to approve this Agreement, the Arrangement and the
consummation of the transactions contemplated hereby and thereby. For these
purposes, each Company Common Share carries one vote.
3.27. NO BROKER'S OR FINDER'S FEES. Except for ▇▇ ▇▇▇▇▇ & Co. and
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Partners, none of the Company, any of its Subsidiaries and
its and their directors, officers, employees and agents has employed any broker,
finder, financial advisor or intermediary or has paid or incurred any liability
for any fee or commission to any broker, finder, financial advisor or
intermediary in connection with this Agreement, the Arrangement or any other
transaction contemplated hereby. Section 3.27 of the Company Disclosure Schedule
sets forth a complete and correct copy of any engagement letter or other
agreement or arrangement between ▇▇ ▇▇▇▇▇ & Co. or ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Partners, on the one hand, and the Company or any of its Subsidiaries and its
and their directors, officers, employees and agents, on the other hand.
3.28. POOLING MATTERS. Neither the Company nor any of its Affiliates has
knowingly taken or agreed to take any action that, without giving effect to any
action taken or agreed to be taken by Parent or any of its Affiliates, would
prevent Parent from accounting for the business combination to be effected by
the Arrangement as a pooling of interests. The Company's Board of Directors has
received a letter from Ernst & Young LLP to the effect that, based on its
evaluation of the information provided by the Company with respect to the
business combination to be effected by the Arrangement, Ernst & Young LLP
expects to be able to deliver on the Effective Date a written report (the
"Company Pooling Opinion") generally to the effect that Ernst & Young LLP
concurs with management's conclusions that no condition exists that would
preclude the Company from being a party to a business combination for which the
pooling of interests method of accounting would be available.
3.29. FAIRNESS OPINION. The Company's Board of Directors has received the
written opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Partners (the "Company Fairness
Opinion") to the effect that the Exchange Ratio is fair from a financial point
of view to the securityholders of the Company. The Company has delivered a copy
of the Company Fairness Opinion to Parent.
3.30. FULL DISCLOSURE. This Agreement, read together with the Company
Disclosure Schedule, does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained herein
and therein not false or misleading. To the knowledge of the Company or any of
its Subsidiaries, there is no fact existing on the date hereof that the Company
has not disclosed to Parent in writing that could result in a Company Material
Adverse Effect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBCO
Parent and Subco, jointly and severally, represent and warrant to the
Company that the statements in this Article 4 are true and correct, except as
set forth in the disclosure schedule delivered by Parent to the Company on the
date hereof (the "Parent Disclosure Schedule"). The Parent Disclosure Schedule
shall be arranged in sections and paragraphs corresponding to the numbered and
lettered sections and paragraphs in this Article 4. The disclosure in any
section or paragraph of the Parent Disclosure Schedule shall qualify other
sections and paragraphs in this Article 4 only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other sections or paragraphs.
4.1. CORPORATE STATUS OF PARENT AND SUBCO. Parent is a corporation duly
organized, validly existing and in good standing under the Laws of the
Commonwealth of Massachusetts, with the requisite corporate power to carry on
its business as currently being conducted and to own, lease and operate the
properties currently owned, leased and operated by it. Subco is a corporation
duly organized, validly existing and in good standing under the Laws of the
Province of Ontario, with the requisite corporate power to carry on its business
as currently being conducted and to own, lease and operate the properties
currently owned, leased and operated by it. Each of Parent and Subco is duly
qualified or licensed to do business and is in good standing as an
extra-provincial or foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or held under lease
by it or the nature of the business transacted by it makes qualification or
licensing necessary, except in jurisdictions in which the failure to be so
qualified or licensed would not result in a Parent Material Adverse Effect.
4.2. ARTICLES AND BY-LAWS. Parent has delivered or made available to the
Company true and complete copies of the Articles and by-laws of Parent and
Subco, including all amendments thereto, as in effect on the date hereof.
4.3. AUTHORITY FOR AGREEMENT; NONCONTRAVENTION.
4.3.1. AUTHORITY. Each of Parent and Subco has all requisite corporate
power and authority to enter into this Agreement and the other agreements
contemplated hereby to be signed by Parent or Subco and, subject to approval
of the Court as provided in this Agreement, to consummate the Arrangement
and the transactions contemplated by this Agreement and the other agreements
contemplated hereby. The execution and delivery by Parent and Subco of this
Agreement and such other agreements and the consummation by Parent and Subco
of the Plan of Arrangement and the other transactions contemplated hereby
and thereby have been duly and validly authorized by the Boards of Directors
of Parent and Subco. No other corporate proceedings on the part of Parent or
Subco are necessary to authorize the execution and delivery by Parent and
Subco of this Agreement and such other agreements and the consummation by
Parent and Subco of the Plan of Arrangement and the other transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by Parent and Subco and constitutes valid and binding obligations
of Parent and Subco, enforceable against Parent and Subco in accordance with
its terms, subject to the qualifications that (a) enforcement of the rights
and remedies created hereby are subject to Bankruptcy Laws and (b) the
consummation of the Arrangement is subject to the approval of the Court as
provided in this Agreement. On or before the Effective Date, the other
agreements contemplated hereby to be executed and delivered by Parent and
Subco on or before the Effective Date will have been executed and delivered
by Parent and Subco and, upon such execution and delivery, will constitute
valid and binding obligations of Parent and Subco, enforceable against
Parent and Subco in accordance with their respective terms, subject to the
qualifications that (a) enforcement of the rights and remedies created
thereby will be subject to Bankruptcy Laws and (b) the consummation of the
Arrangement is subject to the approval of the Court as provided in this
Agreement.
4.3.2. NO CONFLICT. None of the execution and delivery by Parent and
Subco of this Agreement and the other agreements contemplated hereby, the
performance by Parent and Subco of their respective obligations hereunder
and thereunder, and the consummation by Parent and Subco of the Plan of
Arrangement and the other transactions contemplated hereby and thereby will
cause a Violation of any term, condition or provision of the Articles of
Organization or By-Laws of Parent or the Articles and By-Laws of Subco, or
any credit agreement, indenture, bond, debenture, note, mortgage, lease,
instrument or other agreement, permit, concession, grant, franchise,
license, judgment, order or decree to which Parent or Subco is a party or by
which either of them or any of their material assets or properties is bound
or which is applicable to either of them or any of their material assets or
properties, or, to the knowledge of Parent or Subco, any Applicable Law,
other than such Violations which, individually or in the aggregate, would
not result in a Parent Material Adverse Effect.
4.4. GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration or filing with, or declaration or notice to, any
Governmental Entity is required to be obtained by Parent or Subco in connection
with the execution and delivery by Parent and Subco of this Agreement or the
other agreements contemplated hereby, the performance by Parent and Subco of
their obligations hereunder and thereunder, or
the consummation by Parent and Subco of the Plan of Arrangement and the other
transactions contemplated hereby or thereby, except (a) the filing with the
Commissions and the Court of the Information Circular relating to the Company
Shareholder Meeting, (b) the filing with the SEC of such registration
statements, reports and information under the Securities Act and the Exchange
Act and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement and the transactions contemplated
hereby; (iii) approval by the Court of the Arrangement and the filing of the
Articles of Arrangement and other arrangement or other documents as required by
the CBCA; (iv) such filings, authorizations, orders and approvals as may be
required under state or provincial "control share acquisition," "anti-takeover"
or other similar statutes, and any other approvals required under applicable
federal, provincial or state securities Laws and the rules of Nasdaq or the TSE
(including those referred to in Section 2.9.3); (v) such filings and notices as
may be necessary under the HSR Act; (vi) such filings and notices as may be
necessary under the Investment Canada Act and under the Competition Act
(Canada); and (vii) where the failure to obtain or make such consents,
approvals, orders, authorizations, registrations, filings, declarations or
notices would not prevent or delay the consummation of the Arrangement or the
other transactions contemplated hereby or otherwise prevent Parent or Subco from
performing their respective obligations under this Agreement, the Plan of
Arrangement or the other agreements contemplated hereby and would not reasonably
be expected to result in a Parent Material Adverse Effect.
4.5. CAPITALIZATION.
4.5.1. AUTHORIZED CAPITAL STOCK OF PARENT. On the date hereof, the
authorized capital stock of Parent consists of 50,000,000 shares of common
stock, par value $.01 per share ("Parent Common Stock"), and 400,000 shares
of Preferred Stock, par value $.01 per share ("Parent Preferred Stock"). As
of November 23, 1998, there were 19,875,246 shares of Parent Common Stock
issued and outstanding and no shares held by Parent in its treasury. As of
that date, there were no shares of Parent Preferred Stock issued and
outstanding or held by Parent in its treasury. All of the issued shares of
Parent Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. None of the issued shares of Parent Common
Stock were issued in violation of the terms of any agreement or other
understanding binding upon Parent, and all of the issued shares of Parent
Common Stock were issued in compliance with all applicable charter documents
of Parent and all Applicable securities Laws. There are, and have been, no
preemptive rights with respect to the issuance of the shares of Parent
Common Stock or any other capital stock of Parent. Each share of Parent
Common Stock to be issued pursuant to the Arrangement will, upon the
surrender for exchange of an Exchangeable Share pursuant to the terms of the
Arrangement, be validly issued, fully paid and nonassessable.
4.5.2. OPTIONS AND CONVERTIBLE SECURITIES OF PARENT. Section 4.5.2 of
the Parent Disclosure Schedule sets forth a complete list of (a) each stock
option plan, stock purchase plan and each other plan, arrangement or
agreement under which Parent has reserved shares of capital stock, or any
securities or obligations convertible into, or exercisable or exchangeable
for, any shares of capital stock, to any employee, director, consultant,
service provider or other Person and (b) the number of shares, securities or
obligations reserved for issuance under such plan, arrangement or agreement.
Except as set forth in Section 4.5.2 of the Parent Disclosure Schedule,
there are no outstanding subscriptions, options, warrants or conversion
rights or other rights, securities, agreements, calls or commitments
(contingent or otherwise) that obligate Parent to issue, sell, deliver or
otherwise dispose of shares of its capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any shares
of its capital stock. None of the execution and delivery by Parent of this
Agreement, the Plan of Arrangement and the other agreements contemplated
hereby, the performance by Parent of its obligations hereunder and
thereunder, and the consummation by Parent of the transactions contemplated
hereby and thereby, and any other event that occurred on or prior to the
date hereof, will accelerate the vesting under any item set forth in Section
4.5.2 of the Parent Disclosure Schedule. There are no voting trusts or other
agreements or understandings to which Parent or, to the knowledge of Parent,
any securityholder of Parent is a party with respect to the voting of the
shares of Parent Common Stock. Parent is not a party to or bound by any
outstanding restrictions, puts, options or other obligations, agreements or
commitments to repurchase, redeem or otherwise acquire any outstanding
shares of Parent Common Stock or other equity securities of Parent.
4.5.3. AUTHORIZED SHARE CAPITAL OF SUBCO. On the date hereof, the
authorized share capital of Subco consists of an unlimited number of common
shares of Subco ("Subco Common Shares"). As of November 24, 1998, there was
one Subco Common Share issued and outstanding. All of the issued Subco
Common Shares have been duly authorized and validly issued and are fully
paid and nonassessable. None of the issued Subco Common Shares were issued
in violation of the terms of any agreement or other understanding binding
upon Subco, and all of the issued Subco Common Shares were issued in
compliance with all applicable charter documents of Subco and all Applicable
securities Laws. There are, and have been, no preemptive rights with respect
to the issuance of Subco Common Shares or any other capital stock of Subco.
Parent is the record and beneficial owner of all of the issued and
outstanding Subco Common Shares.
4.5.4. OPTIONS AND CONVERTIBLE SECURITIES OF SUBCO. Subco has no stock
option plan, stock purchase plan or any other plan, arrangement or agreement
under which Subco has reserved shares of capital stock, or any securities or
obligations convertible into, or exercisable or exchangeable for, any shares
of capital stock, to any employee, director, consultant, service provider or
other Person. There are no outstanding subscriptions, options, warrants or
conversion rights or other rights, securities, agreements, calls or
commitments (contingent or otherwise) that obligate Subco to issue, sell,
deliver or otherwise dispose of shares of its capital stock, or any
securities or obligations convertible into, or exercisable or exchangeable
for, any shares of its capital stock. There are no voting trusts or other
agreements or understandings to which Subco or Parent is a party with
respect to the voting of the Subco Common Shares. Subco is not a party to or
bound by any outstanding restrictions, puts, options or other obligations,
agreements or commitments to repurchase, redeem or otherwise acquire any
outstanding Subco Common Shares or other equity securities of Subco.
4.6. SECURITIES REPORTS; FINANCIAL STATEMENTS. Parent has timely filed all
forms, reports and documents with the SEC required to be filed by it pursuant to
Applicable Laws (collectively, the "Parent Securities Reports"). Parent has
delivered or made available to the Company true and complete copies of (a) its
Annual Reports on Form 10-K for the fiscal years ended September 30, 1995, 1996
and 1997, (b) all proxy statements relating to Parent's meetings of stockholders
(whether annual or special) held since October 13, 1994, (c) all other Forms
10-K and 10-Q filed by it with the SEC since October 13, 1994, and (d) all
amendments and supplements to all such forms, reports and documents filed by
Parent with the SEC. As of their respective dates, the Parent Securities Reports
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements (including any related notes) of Parent
included in the Parent Securities Reports complied in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis (except
as otherwise stated in the financial statements), and present fairly the
consolidated financial position, results of operations, stockholders' equity,
liabilities (contingent or otherwise) and cash flows, as the case may be, of
Parent and its consolidated Subsidiaries as of the dates and for the periods
indicated, subject, in the case of unaudited interim consolidated financial
statements, to (i) the absence of certain notes thereto and (ii) normal year-end
audit adjustments.
4.7. ABSENCE OF MATERIAL ADVERSE CHANGES AND UNDISCLOSED LIABILITIES.
4.7.1. CHANGES. Since the date of the most recent consolidated balance
sheet filed by Parent with the SEC (the "Parent Balance Sheet"), Parent has
not experienced a Parent Material Adverse Effect.
4.7.2. LIABILITIES. Neither Parent nor any of its Subsidiaries has any
Liabilities that are not fully reflected or provided for on, or disclosed in
the notes to, the Parent Balance Sheet, nor has any knowledge of any
potential material Liabilities, except Liabilities incurred since the date
of the Parent Balance Sheet in the ordinary course of its business and
consistent with past practice, none of which Liabilities, individually or in
the aggregate, has resulted in a Parent Material Adverse Effect.
4.8. LITIGATION AND AUDITS. There is no investigation or inquiry by any
Governmental Entity with respect to Parent or Subco pending or, to the knowledge
of Parent or Subco, threatened, nor has any Governmental Entity
indicated to Parent or Subco an intention to conduct the same. There is no
claim, action, suit, arbitration or proceeding pending or, to the knowledge of
Parent or Subco, threatened against or involving Parent or Subco, or any of
their assets or properties, at law or in equity, or before any arbitrator or
Governmental Entity, which, if determined adversely to Parent or Subco, could
result in a Parent Material Adverse Effect. There are no judgments, decrees,
injunctions, orders or rulings of any Governmental Entity or arbitrator
outstanding against Parent or Subco.
4.9. NO BROKER'S OR FINDER'S FEES. Except for ▇▇▇▇▇▇ Brothers, none of
Parent, Subco and their directors, officers, employees and agents has employed
any broker, finder, financial advisor or intermediary or has paid or incurred
any liability for any fee or commission to any broker, finder, financial advisor
or intermediary in connection with this Agreement, the Arrangement or any other
transaction contemplated hereby.
4.10. POOLING MATTERS. Neither Parent nor any of its Affiliates has taken
or agreed to take any action that, without giving effect to any action taken or
agreed to be taken by the Company or any of its Affiliates, would prevent Parent
from accounting for the business combination to be effected by the Arrangement
as a pooling of interests. Parent's Board of Directors has received a letter
from PricewaterhouseCoopers LLP to the effect that PricewaterhouseCoopers LLP is
prepared to issue on the Effective Date, upon receipt of an unqualified opinion
from Ernst & Young LLP with respect to the business combination to be effected
by the Arrangement, a letter (the "Parent Pooling Opinion") generally to the
effect that PricewaterhouseCoopers LLP concurs with management's conclusions
that no condition exists that would preclude Parent from accounting for the
business combination to be effected by the Arrangement as a pooling of
interests.
4.11. FAIRNESS OPINION. Parent's Board of Directors has received the
written opinion of ▇▇▇▇▇▇ Brothers (the "Parent Fairness Opinion") to the effect
that the Exchange Ratio is fair from a financial point of view to the
stockholders of Parent.
4.12. SUBCO. Subco has been formed solely for purposes of the Arrangement.
Subco does not have, and until immediately before the Effective Time of the
Arrangement will not have, any material Liabilities, nor will Subco agree before
the Effective Time to assume any material Liabilities other than as contemplated
hereby and by the Arrangement.
ARTICLE 5
COVENANTS OF THE COMPANY AS TO CONDUCT OF BUSINESS
During the period from the date of this Agreement and continuing until the
Closing, the Company agrees that, except as expressly contemplated hereby or as
consented to by Parent in writing:
5.1. ORDINARY COURSE. The Company and its Subsidiaries shall carry on
their business in the ordinary course consistent with prior practice, including
the payment of all debts and taxes owed by them, in substantially the same
manner as heretofore, and shall use all reasonable efforts to preserve intact
their present business organization and keep available the services of their
directors, officers, employees, consultants and others having business dealings
with them to the end that their goodwill and business shall be maintained.
5.2. CORPORATE ORGANIZATION. The Company shall not cause, permit or
propose any amendment to its Articles of Incorporation or By-Laws or merge,
consolidate, amalgamate or otherwise combine with any Person.
5.3. CAPITAL STRUCTURE. The Company shall not (a) declare or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, (b) issue, deliver or
sell, or authorize the issuance, delivery or sale of, any shares of capital
stock of any class (except upon the exercise of the Company Options and Company
Warrants), or any options, warrants, calls, rights or agreements that obligate
the Company to issue, deliver or sell any shares of capital stock of any class
or to grant, extend or enter into any such option, warrant, call, right or
agreement, (c) split, combine or reclassify any shares of its capital stock, or
(d) purchase, redeem or otherwise acquire, directly or indirectly, any shares of
its capital stock.
5.4. OPTIONS AND WARRANTS. Neither the Company nor any of its Subsidiaries
shall accelerate, amend, reprice or change the period of exercisability of any
outstanding Company Options or Company Warrants or authorize cash payments in
exchange for any options granted under any of the Company Plans.
5.5. COMPLIANCE WITH APPLICABLE LAWS. The Company and its Subsidiaries
shall duly comply in all material respects with all Applicable Laws.
5.6. INVESTMENTS AND ACQUISITIONS. Neither the Company nor any of its
Subsidiaries shall (a) acquire any equity interest in or make any investment in
the equity capital of any Person, (b) acquire by merging or consolidating with,
by purchasing a substantial portion of the assets of, or by any other manner,
any Person, (c) otherwise acquire or license any assets that are material,
individually or in the aggregate, to the Company except in the ordinary course
of business consistent with prior practice or (d) enter into any partnership,
joint venture, joint development, strategic alliance, voluntary association,
cooperative or business trust agreement or arrangement.
5.7. CAPITAL EXPENDITURES. Neither the Company nor any of its Subsidiaries
shall make or enter any commitments or agreements with respect to capital
expenditures in excess of $100,000 (in the aggregate).
5.8. INDEBTEDNESS. Neither the Company nor any of its Subsidiaries shall,
or shall propose to, incur any Indebtedness for borrowed money, incur any other
Indebtedness except in the ordinary course of business, or guarantee any
Indebtedness of others. Neither the Company nor any of its Subsidiaries shall
pay, discharge or satisfy, in an amount in excess of $50,000 (in the aggregate),
any claims, liabilities or obligations reflected or reserved against in the
Company Balance Sheet except in the ordinary course of business consistent with
past practice or except with the prior written approval of Parent, which
approval shall not be unreasonably withheld or delayed.
5.9. LITIGATION. Neither the Company nor any of its Subsidiaries shall
commence any litigation other than for the routine collection of bills. The
Company and its Subsidiaries shall cooperate and consult with Parent with
respect to all matters regarding any proceeding set forth in the Company
Disclosure Schedule, including any settlement proposed by any Person (including
Parent), and neither the Company nor any of its Subsidiaries shall take any
significant actions with respect to such proceedings (including the entering
into of any such settlement) without the prior written approval of Parent, which
approval shall not be unreasonably withheld or delayed.
5.10. PROPERTIES. The Company and its Subsidiaries shall maintain all of
their properties and assets in customary repair, order and condition, reasonable
wear and tear excepted. Neither the Company nor any of its Subsidiaries shall
sell, lease, license, encumber or otherwise dispose of any of its property or
assets, except in the ordinary course of business consistent with prior
practice.
5.11. CONTRACTS. Neither the Company nor any of its Subsidiaries shall (a)
enter into any Contract or engage in any transaction not in the ordinary course
of business consistent with past practice, (b) amend or otherwise modify any
Contract pursuant to which any other party is granted marketing, distribution or
similar rights of any type or scope with respect to any products of the Company
or any of its Subsidiaries, (c) amend or otherwise modify any Contract except in
the ordinary course of business consistent with past practice, or (d) do or omit
to do any act or permit any act or omission to act, which act or omission shall
result in a Violation of any material provision of any material Contract.
5.12. BOOKS AND RECORDS. The Company and its Subsidiaries shall maintain
their books and records in the usual course of business consistent with past
practice and shall prepare its financial statements in accordance with generally
accepted accounting principles applied on a consistent basis. The Company and
its Subsidiaries shall not revalue any of their assets, including writing down
the value of inventory or writing off notes or accounts receivable, except in
the ordinary course of business consistent with past practice.
5.13. TAXES. Neither the Company nor any of its Subsidiaries shall make or
change any material election in respect of Taxes, file any material Tax Return
or any amendment to a material Tax Return, adopt or change any accounting method
in respect of Taxes, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes,
except with the prior written approval of Parent, which approval shall not be
unreasonably withheld or delayed.
5.14. COMPANY BENEFIT PLANS. Neither the Company nor any of its
Subsidiaries shall adopt any Company Benefit Plan or amend any Company Benefit
Plan.
5.15. INSURANCE. The Company and its Subsidiaries shall maintain insurance
of the types, in the amounts and with deductibles and exclusions consistent with
past practice.
5.16. EMPLOYEE MATTERS. Neither the Company nor any of its Subsidiaries
shall (a) adopt any collective bargaining agreement, (b) grant any severance or
termination pay to any director, officer or other employee of the Company or any
of its Subsidiaries, (c) grant any general or uniform increase in the rates of
pay of employees of the Company or any of its Subsidiaries or in the benefits
under any bonus plan or other compensation arrangements, (d) increase the
compensation payable or to become payable to any officer or key salaried
employee or (e) enter into or amend any employment agreement.
5.17. PROPRIETARY RIGHTS. Neither the Company nor any of its Subsidiaries
shall transfer or license to any Person, or otherwise extend, amend or modify
any rights to the Company Proprietary Rights or enter into grants to future
patent rights, except for Company End-User Licenses. For purposes of this
Section 5.17 only, the term "Company End-User Licenses" shall be determined
without reference to the amount of any payment thereunder.
5.18. CONFIRMATORY LICENSE AGREEMENTS. The Company shall use its
reasonable best efforts to obtain at least ten Business Days before the
Effective Date confirmatory license agreements executed by each of the Company's
customers covering all software programs and/or modules, and accompanying
documentation, sold or licensed by the Company to, or used by, such customers
(exclusive of any specifically customized software and third-party software), in
form and substance reasonably satisfactory to Parent. On or before December 31,
1998, the Company shall provide Parent a list of all customers that shall not
have signed confirmatory license agreements prior to that date. The Company
shall update such list not less than once every five Business Days and shall
describe in reasonable detail in an accompanying memorandum the Company's
efforts to date to obtain each such confirmatory license agreement.
5.19. POOLING MATTERS. Neither the Company nor any of its Subsidiaries
shall take any action, including the acceleration of vesting of any options,
warrants, restricted stock or other rights to acquire any shares of capital
stock, that would be likely to interfere with Parent's ability to account for
the Arrangement as a pooling of interests.
5.20. GENERAL. Neither the Company nor any of its Subsidiaries shall take,
propose to take, or agree in writing or otherwise to take any of the actions
that it or they agreed in this Article not to take, nor shall the Company or any
of its Subsidiaries fail to take, propose not to take, or agree in writing or
otherwise not to take any of the actions it or they agreed in this Article to
take, nor shall the Company or any of its Subsidiaries take or fail to take any
other action that would prevent the Company or any of its Subsidiaries from
performing, or cause the Company or any of its Subsidiaries not to perform, its
or their covenants and other obligations in this Agreement, the Arrangement or
any other agreement contemplated hereby.
ARTICLE 6
COVENANTS OF PARENT AS TO CONDUCT OF BUSINESS
During the period from the date of this Agreement and continuing until the
Closing, Parent agrees that, except as expressly contemplated hereby or as
consented to by the Company in writing:
6.1. ORDINARY COURSE. Parent and its Subsidiaries shall carry on their
business in the ordinary course consistent with prior practice, including the
payment of all debts and taxes owed by them, in substantially the same manner as
heretofore, and shall use all reasonable efforts to preserve intact their
present business
organization and keep available the services of their directors, officers,
employees, consultants and others having business dealings with them to the end
that their goodwill and business shall be maintained.
6.2. CORPORATE ORGANIZATION. Parent shall not cause, permit or propose any
amendment to its articles of organization or its by-laws or merge, consolidate,
amalgamate or otherwise combine with any other Person; PROVIDED, HOWEVER, that
Parent may amend its articles of organization to increase the number of shares
of Parent Common Stock that Parent is authorized to issue and to file the
Certificate of Designation.
6.3. CAPITAL STRUCTURE. Parent shall not (a) declare or pay any dividend
or other distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, (b) issue, deliver or sell, or
authorize the issuance, delivery or sale of, any shares of capital stock of any
class, or any options, warrants, calls, rights or agreements that obligate
Parent to issue, deliver or sell additional shares of capital stock, or to
grant, extend or enter into any such option, warrant, call, right or agreement,
other than in the ordinary course of Parent's business pursuant to any of the
plans, arrangements or agreements set forth in Section 4.5.2 of the Parent
Disclosure Schedule, (c) split, combine or reclassify any of its capital stock
or (d) purchase, redeem or otherwise acquire, directly or indirectly, any shares
of its capital stock.
6.4. COMPLIANCE WITH APPLICABLE LAWS. Parent and its Subsidiaries shall
duly comply in all material respects with all Applicable Laws.
6.5. INVESTMENTS AND ACQUISITIONS. Parent shall not engage in any
acquisition of the equity capital or assets of any Person in a transaction
requiring the approval of the stockholders of Parent.
6.6. POOLING MATTERS. Neither Parent nor any of its Subsidiaries shall
take any action, including the acceleration of vesting of any options, warrants,
restricted stock or other rights to acquire any shares of capital stock, that
would be likely to interfere with Parent's ability to account for the
Arrangement as a pooling of interests.
6.7. GENERAL. Neither Parent nor Subco shall take, propose to take, or
agree in writing or otherwise to take any of the actions that they agreed in
this Article not to take, nor shall Parent or Subco fail to take, propose not to
take, or agree in writing or otherwise not to take any of the actions they
agreed in this Article to take, nor shall Parent or Subco take or fail to take
any other action that would prevent Parent or Subco from performing, or cause
Parent or Subco not to perform, their covenants and other obligations in this
Agreement, the Arrangement or any other agreement contemplated hereby.
ARTICLE 7
ADDITIONAL COVENANTS
7.1. FURTHER ASSURANCES; CONSENTS. During the term of this Agreement, each
of Parent, Subco and the Company shall use its reasonable best efforts to
satisfy or cause to be satisfied all the conditions precedent that are set forth
in Article 8 hereof, and each of Parent, Subco and the Company shall use its
reasonable best efforts to cause the Arrangement and the other transactions
contemplated hereby to be consummated. The parties shall cooperate with each
other to provide such information, to execute and deliver such other documents,
instruments of transfer or assignment, files, books and records, and to do all
such further acts and things, as may be reasonably required to carry out the
transactions contemplated hereby. The parties shall use all reasonable efforts
to comply promptly with all legal requirements that may be imposed on them with
respect to the consummation of the Arrangement and the other transactions
contemplated hereby and to obtain any consent, authorization, order or approval
of, or any exemption by, and to make any registration, declaration or filing
with, any Governmental Entity or other third party, required to be obtained or
made by such party in connection with the taking of any action contemplated
hereby. Without limiting the generality of the foregoing, as promptly as
practicable after the execution of this Agreement, each party shall make all
required filings, and provide such other information as may be required, under
the HSR Act, the Investment Canada Act and the Competition Act (Canada). No
party shall take or fail to take any action that would, or would be reasonably
likely to, result in any of its representations and warranties set forth in this
Agreement being untrue. The parties covenant and agree to proceed diligently, in
a coordinated fashion, to apply for and obtain all necessary approvals.
7.2. CONSULTATION. The Company and its Subsidiaries shall consult on an
ongoing basis with senior officers of Parent in order that Parent shall become
more familiar with the philosophy and techniques of the Company and its
Subsidiaries, as well as with their business and financial affairs and in order
to provide experience as a basis for ongoing relationships in connection with
the business combination contemplated hereby. These consultations shall include
discussions of any commitments, arrangements or transactions proposed to be
entered into by the Company or any of its Subsidiaries that could give rise to a
material liability or commitment of any kind where such liability or commitment
is unusual or inconsistent with the past practice of the Company and its
Subsidiaries. Parent and the Company shall develop procedures such that these
consultations will be carried out quickly and effectively without materially
impairing the ability of the Company and its Subsidiaries to arrive at decisions
in a timely manner.
7.3. ACCESS TO INFORMATION. The Company shall afford to Parent, and Parent
and Subco shall afford to the Company, and each shall cause its independent
accountants to afford to the other party and the officers, directors, employees,
financial advisors, counsel, accountants, agents and other representatives of
such party and such party's Subsidiaries (each, a "Representative"), reasonable
access during normal business hours during the period prior to the Closing to
all of such party's and its Subsidiaries' properties, books, contracts,
commitments and records. During such period, each party shall use reasonable
efforts to furnish promptly to the other party all other information concerning
the business, properties and personnel of such party and its Subsidiaries as the
other party may reasonably request, including such information as may be
necessary to verify the representations and warranties of the other party or
parties.
7.4. CONFIDENTIALITY.
7.4.1. CONFIDENTIAL INFORMATION. For purposes of this Section 7.4, a
"party" shall refers to (i) collectively, the Company and its Subsidiaries
and (ii) collectively, Parent and its Subsidiaries. Each party shall treat
as confidential, and shall cause its Representatives to treat as
confidential, all documents and information concerning the other party
furnished by the other party or its Representatives to such party or its
Representatives (including documents and information furnished prior to the
date hereof) in connection with the transactions contemplated hereby, except
to the extent that such document or information: (a) at the time of its
disclosure to the receiving party or its Representatives by the disclosing
party or its Representatives is already known or available to the receiving
party or its Representatives (but this Agreement shall not relieve the
receiving party from any obligations of confidentiality owed to third
parties with respect to such information); (b) is or becomes known or
available to the public other than as a result of an unauthorized disclosure
by the receiving party or its Representatives; (c) is or becomes known or
available to the receiving party or its Representatives without restrictions
of confidentiality similar to those set forth herein from a source other
than the disclosing party or its Representatives, PROVIDED that the
receiving party does not know, after reasonable inquiry, that such source is
bound by a confidentiality agreement with, or other obligation of secrecy
to, the disclosing party or its Representatives that would prohibit such
disclosures to the receiving party or its Representatives by such source;
(d) is independently generated by the receiving party or its Representatives
and not derived from confidential information; or (e) is required to be
disclosed by the receiving party or its Representatives by Applicable Law or
other legal process. Subject to the foregoing, each party and its
Representatives shall not release or disclose such documents or information
to any Person other than those Representatives of such party that need to
review such documents or know such information in order to perform their
duties in connection with this Agreement and shall not use such documents or
information for purposes other than as contemplated hereby. In the event of
the termination of this Agreement, (f) each party shall, and shall cause its
Representatives to, deliver to the other party the originals of all
documents obtained by such party or its Representatives from the other party
or its Representatives in connection with this Agreement, whether so
obtained before or after the execution hereof, (g) such party shall, and
shall cause its Representatives to, destroy all copies thereof and (h)
within 30 days of such termination, such party shall certify to the other in
writing that such party and its Representatives shall have complied with
their obligations in this sentence.
7.4.2. ACTIONS OF REPRESENTATIVES. Each party shall ensure that its
Representatives are aware of the provisions of this Section 7.4, and it
shall be responsible for any breach of this Section 7.4 by any of its
Representatives.
7.4.3. SURVIVAL. The agreements contained in this Section 7.4 shall
survive any termination of this Agreement and remain in effect for a period
of one year from the date hereof.
7.5. PUBLIC DISCLOSURE. Any press release or other public disclosure of
information regarding the transactions contemplated hereby (including the
existence and terms of this Agreement) shall be developed jointly by Parent and
the Company; PROVIDED, HOWEVER, that if Applicable Law shall require either
party to disclose publicly any such information, such party may disclose
publicly such information after reasonable consultation with the other party.
7.6. TAKEOVER AND OTHER LAWS. If any takeover Law or other Law shall
become applicable to the transactions contemplated hereby, the Company and its
Board of Directors or Parent and its Board of Directors, as the case may be,
shall use their reasonable best efforts to obtain such approvals and take such
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effects of such takeover Law or other Law on the
transactions contemplated hereby.
7.7. POOLING ACCOUNTING. Each of Parent and the Company shall use its
reasonable best efforts to cause the business combination to be effected by the
Arrangement to be accounted for as a pooling of interests and to cause their
respective Affiliates not to take any action that would adversely affect the
ability of Parent to account for such business combination as a pooling of
interests.
7.8. COMFORT LETTERS.
7.8.1. COMPANY. The Company shall use its reasonable best efforts to
cause Ernst & Young LLP to deliver to Parent a letter addressed to Parent
with respect to the financial information of the Company contained in the
Information Circular (the "First Company Comfort Letter") and, if financial
information of the Company shall be included in the Registration Statement,
a second letter addressed to Parent with respect to the financial
information of the Company contained in the Registration Statement (the
"Second Company Comfort Letter," and together with the First Company Comfort
Letter, the "Company Comfort Letters"). The First Company Comfort Letter
shall be dated as of a date within five days before the date the Information
Circular is first mailed to the Company's securityholders. If the Second
Company Comfort Letter shall be required, the Second Company Comfort Letter
shall be dated as of a date within five days before the date on which the
Registration Statement shall become effective. The Company Comfort Letters
shall be in form and substance reasonably satisfactory to Parent and
customary in scope and substance for "comfort" letters delivered by
independent public accountants in connection with proxy statements and
registration statements similar to the Information Circular and the
Registration Statement, as the case may be.
7.8.2. PARENT. Parent shall use its reasonable best efforts to cause
PricewaterhouseCoopers LLP to deliver to the Company a letter addressed to
the Company with respect to the financial information of Parent contained in
the Information Circular (the "First Parent Comfort Letter") and, if
financial information of Parent shall be included in the Registration
Statement, a second letter addressed to the Company with respect to the
financial information of Parent contained in the Registration Statement (the
"Second Parent Comfort Letter," and together with the First Parent Comfort
Letter, the "Parent Comfort Letters"). The First Parent Comfort Letter shall
be dated as of a date within five days before the date the Information
Circular is first mailed to the Company's securityholders. If the Second
Parent Comfort Letter shall be required, the Second Parent Comfort Letter
shall be dated as of a date within five days before the date on which the
Registration Statement shall become effective. The Parent Comfort Letters
shall be in form and substance reasonably satisfactory to the Company and
customary in scope and substance for "comfort" letters delivered by
independent public accountants in connection with proxy statements and
registration statements similar to the Information Circular and the
Registration Statement, as the case may be.
7.9. NOTICE OF CERTAIN MATTERS. Each of Parent (including Subco) and the
Company shall promptly notify the other in writing (i) if such party shall
become aware that any of such party's representations and warranties in this
Agreement is untrue or inaccurate in any material respect, (ii) if there shall
have been, or is reasonably
expected to be, a Material Adverse Effect on such party and (iii) if there shall
have been, or is reasonably expected to be, any material breach of any covenant
or agreement of such party contained in this Agreement.
7.10. STOCK OPTIONS AND WARRANTS.
7.10.1. EXCHANGE OF STOCK OPTIONS. At the Effective Time, each
outstanding option to purchase Company Common Shares (a "Company Option")
shall be exchanged in accordance with the Plan of Arrangement. After the
Effective Time, except as provided in the Plan of Arrangement, each Company
Option shall have, and be subject to, the same terms and conditions of such
Company Option as before the Effective Time. Any adjustments pursuant to the
Plan of Arrangement are intended to comply with Section 424(a) of the Code
with respect to any options which are incentive stock options and shall be
construed consistent with Section 424(a) of the Code.
7.10.2. EXCHANGE OF WARRANTS. At the Effective Time, each outstanding
warrant to purchase Company Common Shares (a "Company Warrant") shall be
exchanged in accordance with the Plan of Arrangement. After the Effective
Time, except as provided in the Plan of Arrangement, each Company Warrant
shall have, and be subject to, the same terms and conditions of such Company
Warrant as before the Effective Time.
7.10.3. NOTICE TO HOLDERS. Promptly after the Effective Time, Parent
shall deliver (or cause the Company to deliver) to each holder of a Company
Option or a Company Warrant appropriate notice setting forth such
participants' rights pursuant thereto.
7.10.4. RESERVATION AND REGISTRATION OF PARENT COMMON STOCK. Parent
shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon
exercise of the Company Options and Company Warrants exchanged in accordance
with the Plan of Arrangement. Within five Business Days after the Effective
Date, Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate forms), or another appropriate form with
respect to the shares of Parent Common Stock subject to the Company Options
as so exchanged, and shall maintain, in the same manner as Parent's
registration statements for its stock plans, the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for as long as
such exchanged Company Options shall remain outstanding.
7.10.5. COOPERATION OF THE COMPANY. The Company's Board of Directors
shall, prior to or as of the Effective Time, take any necessary actions
within its control, pursuant to and in accordance with the terms of the
instruments evidencing the Company Options (and any related plans or other
documents) and the Company Warrants, to provide for the exchange of the
Company Options and Company Warrants into options and warrants to acquire
Parent Common Stock in accordance with the Plan of Arrangement.
7.11. CONTINUATION OF INDEMNIFICATION AND INSURANCE.
7.11.1. INDEMNIFICATION. Parent and the Company agree that the
indemnification obligations set forth in the Company's Articles of
Incorporation and By-Laws and similar documents of any of the Company's
Subsidiaries in effect on the date of this Agreement shall, with respect to
matters occurring prior to the Effective Time, survive after the Effective
Time and, for a period of not less than the statutes of limitations
applicable to such matters, shall not be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of
the individuals entitled to indemnification thereunder immediately before
the Effective Time (the "Beneficiaries").
7.11.2. INSURANCE. For a period of three years after the Effective
Time, Parent shall continue in effect the Company's director and officer
liability insurance (or obtain other insurance which is comparable in all
material respects) for the benefit of the persons presently entitled to
coverage thereunder in such amounts, and with such deductibles, retained
amounts, coverages and exclusions as the Company shall provide for its
directors and officers on the date hereof; PROVIDED, that in no event shall
Parent or the Company be required to expend in excess of 150% of the annual
premium currently paid by the Company for such coverage or such coverage as
shall be available for 150% of such annual premium.
7.11.3. THIRD-PARTY BENEFICIARIES. After the Effective Time, Parent
shall cause the Company and its Subsidiaries to perform its and their
obligations under this Section 7.11 and to fulfill its and their
indemnification obligations under its and their respective organizational
documents. The obligations of Parent and the Company under this Section 7.11
shall not be amended, terminated or modified in any manner that would
adversely affect the rights of any Beneficiary without the consent of such
Beneficiary. Parent and the Company agree that each such Beneficiary shall
be a third-party beneficiary of this Section 7.11.
7.12. EMPLOYEE BENEFIT MATTERS. To the extent permitted under the terms of
the applicable Company Benefit Plans, Parent shall maintain the Company Benefit
Plans until December 31, 1999 and shall provide any notices required under
Applicable Law with respect to changes thereto; PROVIDED, HOWEVER, that Parent
may discontinue a Company Benefit Plan if Parent shall provide or make available
benefits to the beneficiaries of such Company Benefit Plan that are not
materially less favorable than the benefits available under such Company Benefit
Plan. To the extent permitted under the terms of the applicable Parent benefit
plans, all employees of the Company and its Subsidiaries shall be eligible,
after the Effective Time, to participate in the various benefit plans and
programs maintained for Parent employees or in substantially similar programs,
including any of the following benefit plans maintained by Parent as of the
Effective Time: health/medical/ dental/vision care, life insurance, disability
income, sick pay, holiday and vacation pay, 401(k) plan coverage, Section 125
benefit arrangements, Group RRSP, bonus, profit-sharing or other incentive
plans, pension or retirement programs, dependent care assistance, and employee
stock option and stock purchase plans, to the extent the employees of the
Company and its Subsidiaries meet the eligibility requirements for each such
plan or program. To the extent permitted under the terms of such plans, the
employees of the Company and its Subsidiaries shall be given credit, for
purposes of any service requirements for establishing eligibility for
participation or benefits (and not for purposes of calculating benefits) for
their period of service with the Company and its Subsidiaries prior to the
Effective Time, and the employees of the Company and its Subsidiaries shall
also, with respect to any Parent plans or programs which have co-payment,
deductible or other co-insurance features, receive credit for any amounts such
employees have paid as of the Effective Time in the plan year of the Arrangement
in co-payments, deductibles or co-insurance under comparable programs maintained
by the Company or any of its Subsidiaries prior to the Effective Time. To the
extent permitted under the terms of such plans, no employee of the Company and
its Subsidiaries who participates in any health/ medical/dental/vision plan of
the Company or any of its Subsidiaries at the Effective Time shall be denied
coverage under the Parent health/medical/dental/vision plans by reason of any
pre-existing condition exclusions. Notwithstanding the foregoing, this Section
7.12 shall not require Parent to take any action, or refrain from taking any
action, that would adversely affect its ability to account for the business
combination to be effected by the Arrangement as a pooling of interests.
7.13. OBLIGATIONS OF SUBCO. Parent shall take all action necessary to
cause Subco to perform its obligations under this Agreement and to consummate
the Arrangement on the terms and conditions set forth in this Agreement.
7.14. COMPANY OPTION. Simultaneously with the execution of this Agreement,
the Company shall deliver to Parent an executed option agreement in the form of
EXHIBIT E.
7.15. AFFILIATE AGREEMENTS. Simultaneously with the execution of this
Agreement, each of Parent and the Company shall provide the other with a list of
each Person who is, or may be deemed to be, an Affiliate of Parent (a "Parent
Affiliate") or the Company (a "Company Affiliate"), as the case may be, and
shall cause each such Parent Affiliate or Company Affiliate, respectively, to
deliver, simultaneously with the execution of this Agreement, to the other an
executed agreement in the form of EXHIBIT F (a "Parent Affiliate Agreement") or
EXHIBIT G (a "Company Affiliate Agreement") hereto, respectively. Each of Parent
and the Company shall notify the other if any Person not on the list provided to
the other pursuant to this Section 7.15 shall become, or shall be deemed to be,
a Parent Affiliate or a Company Affiliate, respectively, and shall cause each
such Person to deliver to the other an executed Parent Affiliate Agreement or a
Company Affiliate Agreement, respectively.
7.16. SHAREHOLDER AGREEMENTS. Simultaneously with the execution of this
Agreement, the Company shall cause certain shareholders of the Company
identified by Parent and each of the Company's directors, officers and their
investment affiliates to deliver to Parent an executed Shareholder Agreement in
the form of EXHIBIT H (collectively, the Shareholder Agreements") (including the
irrevocable proxy attached thereto).
7.17. EMPLOYMENT AGREEMENTS. Simultaneously with the execution of this
Agreement, the Company shall cause each employee designated by Parent to deliver
to Parent an executed Amendment to Employment Agreement in the form of EXHIBIT I
(collectively, the "Employment Agreements").
7.18. ELECTION OF OFFICER. On or before the Effective Date, Parent shall
take such action as shall be necessary to elect Mr. ▇▇▇ ▇▇▇▇▇▇▇▇ as Vice
President and General Manager of Parent's Software Division, such election to be
effective on the Effective Date or as soon thereafter as practicable.
7.19. COVENANTS REGARDING NON-SOLICITATION.
7.19.1. NON-SOLICITATION. Until the Effective Time, neither the
Company nor any of its Subsidiaries shall, directly or indirectly, through
any Representative or otherwise, (a) solicit, initiate, encourage or take
any other action to facilitate (including by way of disclosing information,
affording access to the properties, books or records of the Company or any
of its Subsidiaries, or entering into any agreement, arrangement or
understanding) the making of any inquiry, proposal or offer that constitutes
or could be expected to lead to an Acquisition Proposal, (b) participate in
any discussions or negotiations regarding any Acquisition Proposal, (c)
withdraw, or modify in a manner adverse to Parent, the approval of the
Company's Board of Directors of the transactions contemplated hereby or make
or authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal, (d) approve or accept any Acquisition Proposal or (e)
cause the Company to enter into any agreement related to any Acquisition
Proposal. The Company and its Subsidiaries shall immediately cease any and
all existing solicitations, initiations, encouragements, activities,
discussions or negotiations with any Person (other than Parent and Subco)
with respect to the foregoing. Notwithstanding the foregoing, the Company
may, in response to an unsolicited tender or exchange offer, comply with its
obligations under Applicable securities Laws relating to the provision of
directors' circulars and disclosures to the Company's securityholders.
7.19.2. COMPLIANCE WITH FIDUCIARY OBLIGATIONS. Subject to compliance
with the terms of Sections 7.19.3, 7.19.4 and 7.20 and notwithstanding any
other provision of this Agreement, the Company, its Subsidiaries and its
Representatives may, at any time prior to the approval of the Arrangement by
the Company's securityholders, take any action with respect to an
Acquisition Proposal received by the Company that would otherwise be
prohibited by Section 7.19.1 if, and only to the extent that, (a) the
Acquisition Proposal shall be an unsolicited BONA FIDE written Acquisition
Proposal, (b) after receiving the written advice of the Company's financial
advisors and after receiving a written opinion of outside counsel to the
effect that the fiduciary duties of the Company's Board of Directors require
such Board to take such action in order to discharge properly its fiduciary
duties, the Company's Board of Directors shall have reasonably determined in
good faith that such Acquisition Proposal (i) would result in a transaction
that (A) is more favorable from a financial point of view to the Company's
securityholders than the transactions contemplated hereby and (B) has a
value per Company Common Share greater than the value per Company Common
Share of the transactions contemplated hereby, (ii) is a transaction for
which financing, to the extent required, is then committed or which, in the
good faith reasonable judgment of the Company's Board of Directors (based
upon the good faith written advice of the Company's financial advisors), is
capable of being financed by the Person or Persons making the Acquisition
Proposal and (iii) if accepted by the Company, would be more likely than not
to be consummated (any such Acquisition Proposal being referred to herein as
a "Superior Proposal").
7.19.3. NOTICE TO PARENT OF ACQUISITION PROPOSALS. The Company shall
immediately notify Parent, at first orally and then in writing, of (a) all
Acquisition Proposals of which any Representative of the Company and its
Subsidiaries shall become aware, (b) any amendments to any Acquisition
Proposal, (c) any request for information relating to the Company or any of
its Subsidiaries or for access to the properties, books or records of the
Company or any of its Subsidiaries by any Person that any Representative of
the Company and its Subsidiaries knows, believes or suspects is considering
making, or has made, an Acquisition Proposal (each, a "Bidder"). Such notice
shall include a description of all of the terms and conditions of any
proposal and provide such details of the proposal, request, inquiry or
contact as Parent may request, including the identity of the Bidder. The
Company shall keep Parent informed on a current basis of the status of any
terms, discussions and negotiations in respect of each Acquisition Proposal.
7.19.4. PROCEDURES. The Company shall not, pursuant to Section 7.19.2,
take any action prohibited by Section 7.19.1, unless at the time of the
taking of such action the Company shall have (a) complied with Section
7.19.3, (b) obtained from the Bidder a confidentiality agreement containing
provisions substantially similar to those set forth in Section 7.4 of this
Agreement, (c) delivered via facsimile a copy of such confidentiality
agreement to Parent immediately upon its execution and (d) provided Parent
with the same information and documents provided to the Bidder at the same
time and in the same manner so provided (unless such information or
documents shall have been previously provided to Parent, in which case the
Company shall have provided Parent with a list of the information and
documents provided to the Bidder).
7.19.5. ACTIONS OF REPRESENTATIVES. The Company shall ensure that its
Representatives are aware of the provisions of this Section 7.19, and it
shall be responsible for any breach of this Section 7.19 by any such
Representative.
7.20. PROCEDURES FOLLOWING SUPERIOR PROPOSAL DETERMINATION.
7.20.1. NOTICE OF SUPERIOR PROPOSAL DETERMINATION. None of the
Company, its Subsidiaries and its Representatives shall accept, approve,
recommend or enter into any agreement in respect of any Acquisition Proposal
(other than the confidentiality agreement contemplated by Section 7.19.4) on
the basis that it would constitute a Superior Proposal unless (a) the
Company shall have provided Parent with a copy of the Acquisition Proposal
document that the Company's Board of Directors shall have determined would
be a Superior Proposal, and (b) five Business Days shall have elapsed from
the later of (i) the date Parent shall have received notice of the Company's
proposed determination to accept, approve, recommend or enter into an
agreement in respect of such Acquisition Proposal and (ii) the date Parent
shall have received a copy of the Acquisition Proposal document.
7.20.2. OPPORTUNITY TO BID. During such five Business Day period, the
Company shall afford Parent the opportunity, in Parent's discretion, to
offer to amend the terms of this Agreement and the Arrangement. The
Company's Board of Directors shall convene a meeting to review in good faith
any offer by Parent to amend the terms of this Agreement and the Arrangement
in order to determine, in its discretion in the exercise of its fiduciary
duties, whether Parent's offer upon acceptance by the Company would result
in the Acquisition Proposal not being a Superior Proposal. If the Company's
Board of Directors shall so determine, the Company shall enter into an
amended agreement with Parent reflecting Parent's offer. If after such five
Business Day period the Company's Board of Directors shall conclude, in good
faith and after consultation with the Company's financial advisors and
outside counsel, that the Acquisition Proposal is nonetheless a Superior
Proposal and shall therefore reject Parent's offer, the Company shall pay to
Parent the break-up fee payable to Parent under Section 9.4 as required
thereunder. Each successive material amendment to any Acquisition Proposal
shall constitute a new Acquisition Proposal for purposes of this Section
7.20 and shall thereby initiate an additional five Business Day period under
this Section 7.20.
7.21. MUTUAL STANDSTILL AND NON-SOLICITATION AGREEMENT. For a period of
twelve months after the termination of this Agreement, if any, pursuant to
Article 9 of this Agreement, each of Parent and the Company agrees that it and
its Subsidiaries shall not (and each party and its Subsidiaries shall not assist
or encourage others to), and its Representatives shall not on its behalf (and
its Representatives shall not assist or encourage others on its behalf to),
directly or indirectly, unless specifically requested to do so by the other
party's Board of Directors (a) acquire, or agree or offer to acquire, or cause
to be acquired, ownership (including beneficial ownership as defined in Rule
13d-3 under the Exchange Act) of any of the other party's assets (other than in
the ordinary course of business) or businesses or any voting securities issued
by the other party, or any rights or options to acquire such ownership,
including from a third party; (b) make, or in any way participate in, any
solicitation of proxies or consents with respect to any securities of the other
party which are, or may be, entitled to vote in the election of the other
party's directors ("Voting Securities"), become a "participant" in any "election
contest" (as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to the other party, or to seek to advise, encourage or
influence any Person with respect to the voting of any Voting Securities; or
demand a copy of the other party's stock ledger, list of its stockholders or
other books and records; or call or attempt to call any meeting of the
stockholders of the other party; (c) enter into any discussions, negotiations,
arrangements or understandings with any third party (other than such party's
Representatives) with
respect to any of the matters described in clauses (a) or (b) of this Section
7.21; or (d) induce or attempt to induce, directly or indirectly, any employee
or consultant of the other party to terminate his or her employment or
professional relationship with such other party (except by means of a general
solicitation of employees or consultants); PROVIDED, HOWEVER, that, nothing in
this Section 7.21 shall prevent the exercise of the Company Option or the taking
of any other action in accordance with the terms thereof.
7.22. EXPENSES.
7.22.1. GENERAL. Except as set forth in this Section 7.22, all fees
and expenses incurred in connection with this Agreement, the Arrangement and
the other transactions contemplated hereby, including fees and disbursements
of consultants, investment bankers and other financial advisors, counsel and
accountants, the costs incurred in seeking necessary consents, financial
printer expenses and filing fees, shall be paid by the party incurring such
expenses, whether or not the Arrangement and the other transactions
contemplated hereby are consummated.
7.22.2. REIMBURSEMENT. If this Agreement shall be terminated pursuant
to Section 9.1.2, 9.1.5, 9.1.7 or 9.1.9, the Company shall reimburse Parent
for all of its reasonable out-of-pocket expenses, including fees and
disbursements of consultants, investment bankers and other financial
advisors, counsel and accountants, the costs incurred in seeking necessary
consents, financial printer expenses and filing fees, incurred in connection
with this Agreement, the Arrangement and the other transactions contemplated
hereby ("Out-of-Pocket Expenses"), not to exceed $500,000. If this Agreement
shall be terminated pursuant to Section 9.1.3 or 9.1.8, Parent shall
reimburse the Company for all of its reasonable Out-of-Pocket Expenses, not
to exceed $500,000. If this Agreement shall be terminated pursuant to
Section 9.1.4 and the failure of a party to fulfill any material obligation
under this Agreement shall have been the cause of, or shall have resulted
in, the failure of the Effective Time to occur on or before the date
specified in Section 9.1.4, then such party shall reimburse the other party
for all of its reasonable Out-of-Pocket Expenses, not to exceed $500,000.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
8.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY. The obligations of
each party to consummate and effect the Arrangement and the other transactions
contemplated hereby shall be subject to the satisfaction or waiver on or before
the Effective Date of each of the following conditions:
8.1.1. SECURITYHOLDER APPROVAL. The Arrangement and such other matters
as shall require approval of the securityholders of the Company in order to
consummate the Arrangement and the other transactions contemplated hereby
shall have been approved and adopted by the securityholders of the Company
in accordance with the Interim Order, Applicable Laws and the Company's
Articles of Incorporation and By-Laws.
8.1.2. NO LEGAL ACTION. There shall not be in effect, nor shall there
be pending or threatened any action or proceeding by or before any
Governmental Entity that in the good faith judgment of the Board of
Directors of Parent or the Company shall have a reasonable probability of
resulting in, any temporary restraining order, preliminary injunction,
permanent injunction or other order or decree, nor shall there have been any
Law enacted, promulgated, issued or deemed applicable to the Arrangement or
any of the other transactions contemplated hereby by any Governmental
Entity, or any other action taken by any Governmental Entity, that would (a)
prevent or make illegal the consummation of the Arrangement or any of the
other transactions contemplated hereby, (b) prohibit Parent's ownership or
operation of all or a material portion of the business of the Company or any
of its Subsidiaries, or (c) compel Parent to dispose of or hold separate all
or a material portion of the business or assets of the Company or Parent as
a result of the Arrangement or such other transactions.
8.1.3. COURT APPROVAL. The Court shall have issued the Interim Order
and the Final Order approving the Arrangement in form and substance
reasonably satisfactory to Parent and the Company and reflecting the terms
hereof, and such Final Order shall not have been set aside or modified in
any manner unacceptable to Parent and the Company on appeal or otherwise.
8.1.4. EXPIRATION OF WAITING PERIODS AND RELATED MATTERS. All waiting
periods required by the HSR Act shall have expired with respect to the
transactions contemplated hereby, or early termination with respect thereto
shall have been obtained. Each of Parent and the Company shall have filed
all notices and information (if any) required under Part IX of the
Competition Act (Canada) and the applicable waiting periods and any
extensions thereof shall have expired or the parties shall have received an
Advance Ruling Certificate pursuant to Section 102 of the Competition Act
(Canada) setting out that the Director under such Act is satisfied that he
or she would not have sufficient grounds on which to apply for an order in
respect of the Arrangement. The Arrangement shall have received the
allowance or approval or deemed allowance or approval by the responsible
Minister under the Investment Canada Act in respect of the Arrangement, to
the extent such allowance or approval is required, on terms and conditions
satisfactory to Parent and the Company.
8.1.5. SECURITIES MATTERS. All necessary orders shall have been
obtained from the Commissions and other relevant United States and Canadian
securities regulatory authorities (including the TSE) in connection with the
Arrangement and the other transactions contemplated hereby. The Registration
Statement shall have been declared effective under the Securities Act on or
before the Effective Date, and the Registration Statement shall not at its
effective date or on the Closing Date be the subject of any stop order or
proceedings seeking a stop order. The Information Circular shall not on the
Closing Date be subject to any similar proceedings commenced or threatened
by the Commissions or the SEC.
8.1.6. LISTINGS. The Parent Common Stock to be issued from time to
time after the Effective Time upon exchange of the Exchangeable Shares and
upon exercise of the Company Options and Company Warrants shall have been
approved for listing on the Nasdaq National Market, subject only to notice
of issuance. The Exchangeable Shares issuable pursuant to the Arrangement
shall have been listed on the TSE as at the Effective Time, subject only to
notice of issuance.
8.1.7. TAX OPINIONS. Parent and the Company shall have received
substantially identical opinions, dated as of the Effective Date, from their
counsel, Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
respectively, in form and substance reasonably satisfactory to them, to the
effect that the Arrangement shall be generally treated for Canadian federal
income tax purposes as a reorganization of capital of the Company under
Section 86 of the ITA (as amended to the Effective Date) for those Company
shareholders who hold Company Common Shares on capital account.
8.1.8. VOTING AND EXCHANGE TRUST AGREEMENT. The other parties to the
Voting and Exchange Trust Agreement shall have executed and delivered the
Voting and Exchange Trust Agreement to such party.
8.1.9. SUPPORT AGREEMENT. The other parties to the Support Agreement
shall have executed and delivered the Support Agreement to such party.
8.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate and effect the Arrangement and the other
transactions contemplated hereby shall be subject to the satisfaction or waiver
on or before the Effective Date of each of the following conditions, any of
which may be waived only in writing by the Company:
8.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Subco in this Agreement shall have been true and
correct on the date hereof and shall also be true and correct on and as of
the Effective Date, with the same force and effect as if made on and as of
the Effective Date, except (a) for changes specifically contemplated hereby,
(b) for representations and warranties that address matters only as of a
particular date (which representations and warranties shall remain true and
correct as of such date) and (c) where the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually and in the
aggregate, shall not have resulted in a Parent Material Adverse Effect (only
after including Parent's ownership of the Company and its Subsidiaries after
the Arrangement).
8.2.2. COVENANTS AND AGREEMENTS. Parent and Subco shall have performed
and complied, in all material respects, with all covenants and agreements
required by this Agreement to be performed or complied with by them on or
before the Effective Date.
8.2.3. NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
Parent shall not have experienced a Parent Material Adverse Effect.
8.2.4. CERTIFICATE. The Company shall have received from Parent a
certificate, dated the Effective Date and signed by its chief executive
officer and its chief financial officer, in form and substance reasonably
satisfactory to the Company, to the effect set forth in Sections 8.2.1,
8.2.2 and 8.2.3.
8.2.5. OPINION OF PARENT COUNSEL. The Company shall have received
opinions, dated as of the Effective Date, from ▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP,
United States counsel for Parent, and Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Canadian
counsel for Parent, each in form and substance reasonably satisfactory to
the Company.
8.2.6. FAIRNESS OPINION. The Company Fairness Opinion shall have been
confirmed by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Partners in writing to the Company's Board
of Directors as of the date the Information Circular was first mailed to the
securityholders of the Company and shall not have been subsequently
withdrawn.
8.2.7. COMFORT LETTER. The Company shall have received the First
Parent Comfort Letter and, if required, the Second Parent Comfort Letter.
The Company shall have received an additional letter from
PricewaterhouseCoopers LLP, dated the Effective Date, in form and substance
reasonably satisfactory to the Company, stating that nothing shall have come
to their attention, as of a date no earlier than five days prior to the
Effective Date, that would require any change in either the First Parent
Comfort Letter or, if required, the Second Parent Comfort Letter, if such
Parent Comfort Letter were required to be dated and delivered on the
Effective Date.
8.2.8. AFFILIATES AGREEMENTS. The Company shall have received executed
copies of the Parent Affiliate Agreements referred to Section 7.15, and all
such agreements shall be in full force and effect.
8.2.9. CERTIFICATE OF DESIGNATION. Parent shall have filed the
Certificate of Designation with the Secretary of State of the Commonwealth
of Massachusetts and shall have issued the Special Voting Share to the
Trustee.
8.2.10. CERTIFICATES AND RESOLUTIONS. The Company shall have received
such other certificates, resolutions and other documents of Parent and Subco
as may be reasonably required in connection with the consummation of the
transactions contemplated hereby.
8.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUBCO. The
obligations of Parent and Subco to consummate and effect the Arrangement and the
other transactions contemplated hereby shall be subject to the satisfaction or
waiver on or before the Effective Date of each of the following conditions, any
of which may be waived only in writing by Parent.
8.3.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company in this Agreement shall have been true and correct
on the date hereof and shall also be true and correct on and as of the
Effective Date, with the same force and effect as if made on and as of the
Effective Date, except (a) for changes specifically contemplated hereby, (b)
for representations and warranties that address matters only as of a
particular date (which representations and warranties shall remain true and
correct as of such date) and (c) where the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually and in the
aggregate, shall not have resulted in a Company Material Adverse Effect.
8.3.2. COVENANTS AND AGREEMENTS. The Company shall have performed and
complied, in all material respects, with all covenants and agreements
required by this Agreement to be performed or complied with by the Company
on or before the Effective Date.
8.3.3. NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
the Company shall not have experienced a Company Material Adverse Effect.
8.3.4. REDEMPTION OF RIGHTS. The Company shall have given a binding
notice of redemption or termination of the Rights (as therein defined) under
the Rights Agreement in accordance with Article 6 of
the Rights Agreement, and shall have taken any other action required under
the Rights Agreement and Applicable Laws such that at the Effective Time and
thereafter the only right of the holders of Rights shall be to receive the
Redemption Price (as defined in the Rights Agreement) for each Right so
held.
8.3.5. DISSENT RIGHTS. The Company shall not have received on or prior
to the Effective Date notice from the holders of more than five percent of
the issued and outstanding Company Common Shares of their intention to
exercise their rights of dissent under Section 190 of the CBCA with respect
to the Arrangement.
8.3.6. CONSENTS OF THIRD PARTIES. The Company and its Subsidiaries
shall have received and delivered to Parent all written consents,
assignments, waivers, authorizations or other certificates necessary to
provide for the continuation in full force and effect of all its and their
material contracts and leases and for the Company and its Subsidiaries to
consummate the transactions contemplated hereby (including those set forth
in Section 3.18.2 of the Company Disclosure Schedule), except where, in the
opinion of Parent, the failure to receive such consents, assignments,
waivers, authorizations or other certificates would not have a Company
Material Adverse Effect.
8.3.7. CERTIFICATE. Parent shall have received from the Company a
certificate, dated the Effective Date and signed by its chief executive
officer and its chief financial officer, in form and substance reasonably
satisfactory to Parent, to the effect set forth in Sections 8.3.1, 8.3.2,
8.3.3, 8.3.4, 8.3.5 and 8.3.6.
8.3.8. CUSTOMER AND PRODUCT LIST. Parent shall have received on or
before December 31, 1998 a list, certified by the chief executive officer
and chief financial officer of the Company, of all of the Company's
customers and of all of the software programs and/or modules sold or
licensed by the Company to, or used by, such customers up to and including
that date, in form and substance reasonably satisfactory to the Parent.
8.3.9. OPINION OF COMPANY COUNSEL. Parent shall have received
opinions, dated as of the Effective Date, from Wilson, Sonsini, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation, United States counsel for the Company, and
from ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Canadian counsel for the Company, each in
form and substance reasonably satisfactory to Parent.
8.3.10. FAIRNESS OPINION. The Parent Fairness Opinion shall have been
confirmed by ▇▇▇▇▇▇ Brothers in writing to Parent's Board of Directors as of
the date the Information Circular was first mailed to the securityholders of
the Company and shall not have been subsequently withdrawn.
8.3.11. POOLING MATTERS. No event shall have occurred that would
establish with reasonable certainty that the Arrangement would not be
treated as a pooling of interests for accounting purposes.
PricewaterhouseCoopers LLP shall have issued the Parent Pooling Opinion to
Parent's Board of Directors on the Effective Date. Ernst & Young LLP shall
have issued the Company Pooling Opinion to the Company's Board of Directors
on the Effective Date.
8.3.12. COMFORT LETTER. Parent shall have received the First Company
Comfort Letter and, if required, the Second Company Comfort Letter. Parent
shall have received an additional letter from Ernst & Young LLP, dated the
Effective Date, in form and substance reasonably satisfactory to Parent,
stating that nothing shall have come to their attention, as of a date no
earlier than five days prior to the Effective Date, that would require any
change in either the First Company Comfort Letter or, if required, the
Second Company Comfort Letter, if such Company Comfort Letter were required
to be dated and delivered on the Effective Date.
8.3.13. AFFILIATES AGREEMENTS. Parent shall have received executed
copies of the Company Affiliate Agreements referred to Section 7.15, and all
such agreements shall be in full force and effect.
8.3.14. EMPLOYMENT AGREEMENTS. Parent shall have received executed
copies of the Employment Agreements referred to in Section 7.17, all such
agreements shall be in full force and effect, and the employees subject to
such agreements shall continue to serve as employees of the Company or its
Subsidiaries.
8.3.15. CERTIFICATES AND RESOLUTIONS. Parent shall have received such
other certificates, resolutions and other documents of the Company as may be
reasonably required in connection with the consummation of this Agreement.
ARTICLE 9
TERMINATION
9.1. TERMINATION. This Agreement may be terminated at any time on or
before the Effective Date, whether before or after approval of the transactions
contemplated hereby by the securityholders entitled to vote of the Company, as
follows:
9.1.1. By mutual written agreement of Parent and the Company;
9.1.2. By Parent, if there shall have been a material breach of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of the Company, or if any representation or warranty of the
Company shall have become untrue and the Company shall have failed to cure
such breach within 5 Business Days after written notice thereof to the
Company (PROVIDED that Parent is not in material breach of any
representation, warranty, covenant or agreement set forth in this Agreement;
AND PROVIDED FURTHER, that no cure period shall be provided for a breach
which by its nature cannot be cured);
9.1.3. By the Company, if there shall have been a material breach of
any representation, warranty, covenant or agreement set forth in this
Agreement on the part of Parent, or if any representation or warranty of
Parent shall have become untrue and Parent shall have failed to cure such
breach within 5 Business Days after written notice thereof to Parent
(PROVIDED that the Company is not in material breach of any representation,
warranty, covenant or agreement set forth in this Agreement; AND PROVIDED
FURTHER, that no cure period shall be provided for a breach which by its
nature cannot be cured);
9.1.4. By either party, if the Arrangement and the other transactions
contemplated hereby shall not have been consummated on or before 5:00 p.m.,
Boston time on March 31, 1999; PROVIDED, HOWEVER, that if the Arrangement
and the other transactions contemplated hereby shall not have been
consummated solely due to the waiting period (or any extension thereof)
under the HSR Act, the Investment Canada Act or the Competition Act
(Canada), then such date shall be extended to April 30, 1999; AND PROVIDED
FURTHER, that the right to terminate this Agreement under this Section 9.1.4
shall not be available to any party whose failure to fulfill any material
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Effective Time to occur on or before such
date;
9.1.5. By either party if at the Company Shareholder Meeting the
shareholders of the Company do not approve the Arrangement and all such
other matters as shall require approval of the shareholders of the Company
in order to consummate the Arrangement and the other transactions
contemplated hereby; PROVIDED, HOWEVER, that the Company may not terminate
this Agreement pursuant to this Section 9.1.5 if it is in material breach of
any representation, warranty, covenant or agreement set forth in this
Agreement;
9.1.6. By either party if (a) a final, non-appealable order shall have
been entered in any action or proceeding before any Governmental Entity that
shall prevent or make illegal the consummation of the Arrangement or any of
the other transactions contemplated hereby or (b) there shall be any final
action taken, or any Law enacted, promulgated, issued or deemed applicable
to the Arrangement or any of the other transactions contemplated hereby by
any Governmental Entity that would prevent or make consummation of the
Arrangement or any of such other transactions illegal or that would prohibit
Parent's ownership or operation of all or a material portion of the business
of the Company or any of its Subsidiaries, or compel Parent to dispose of or
hold separate all or a material portion of the business or assets of the
Company or Parent as a result of the Arrangement or such other transactions;
9.1.7. By Parent if the Company's Board of Directors or any committee
of the Company's Board of Directors (a) shall withdraw or modify in any
adverse manner its approval or recommendation of this Agreement, the
Arrangement and the other transactions contemplated hereby, (b) within two
Business Days after Parent's request, shall fail to reaffirm such approval
and recommendation, (c) shall approve or recommend any Acquisition Proposal,
other than with Parent or an Affiliate thereof, or (d) shall resolve to take
any of the actions specified in this Section 9.1.7;
9.1.8. By the Company if Parent's Board of Directors or any committee
of Parent's Board of Directors (a) shall withdraw or modify in any adverse
manner its approval of this Agreement, the Arrangement and the other
transactions contemplated hereby, (b) within two Business Days after the
Company's request, shall fail to reaffirm such approval or (c) shall resolve
to take any of the actions specified in this Section 9.1.8; or
9.1.9. By the Company, prior to the approval of the transactions
contemplated hereby by the securityholders entitled to vote of the Company,
if, after the Company's Board of Directors shall have determined that an
Acquisition Proposal is a Superior Proposal, (a) the Company shall have
complied with Sections 7.19 and 7.20 and (b) the Company's Board of
Directors shall thereafter conclude in good faith that the Acquisition
Proposal is a Superior Proposal.
9.2. NOTICE OF TERMINATION. Any termination of this Agreement pursuant to
Section 9.1 (other than pursuant to Section 9.1.1) shall be effected by the
delivery of written notice of termination by the terminating party to the other
party hereto, which notice shall state the grounds for termination and the
subsection of Section 9.1 pursuant to which such terminating party shall be
terminating this Agreement.
9.3. EFFECT OF TERMINATION. If either Parent or the Company shall
terminate this Agreement pursuant to Section 9.1, and the terminating party
shall have provided the notice required under Section 9.2 and paid the fee, if
any, required under Section 9.4, then this Agreement shall forthwith become void
and have no effect, and there shall be no liability or obligation under this
Agreement on the part of Parent, Subco or the Company or their respective
Representatives and stockholders, except that (a) the provisions of Section 7.4,
this Article 9 and Article 10 (and any defined terms used therein) shall survive
any such termination, and (b) no party shall be released or relieved from any
liability to the extent that such termination shall result from the breach by
such party of any of its representations, warranties, covenants or agreements in
this Agreement.
9.4. TERMINATION FEE.
9.4.1. If this Agreement shall be terminated pursuant to Section 9.1.5,
9.1.7(a) or (b) (unless such action is a direct result of and in direct
response to a material breach by Parent of any representation, warranty,
covenant or agreement set forth in this Agreement or the occurrence of a
Parent Material Adverse Effect), 9.1.7(c), 9.1.7(d) (unless, with respect to
resolutions to take any of the actions specified in 9.1.7(a) or (b), such
action is a direct result of and in direct response to a material breach by
Parent of any representation, warranty, covenant or agreement set forth in
this Agreement or the occurrence of a Parent Material Adverse Effect) or
9.1.9, then the Company shall pay to Parent a cash termination fee of
$1,330,000 (the "Termination Fee") at the time of such termination.
9.4.2. If this Agreement shall be terminated pursuant to Section 9.1.8
(unless such action is a direct result of and in direct response to a
material breach by the Company of any representation, warranty, covenant or
agreement set forth in this Agreement or the occurrence of a Company
Material Adverse Effect), then Parent shall pay to the Company the
Termination Fee at the time of such termination.
9.4.3. Any Termination Fee payable pursuant to this Section 9.4 shall
be paid not later than two Business Days after the delivery of written
notice of termination pursuant to Section 9.2. Payment shall be made by wire
transfer of immediately available funds to an account designated by the
payee.
9.4.4. The payment by a party of any Termination Fee pursuant to this
Section 9.4 shall be deemed to include payment of any expenses required to
be paid by such party pursuant to Section 7.22.2.
9.4.5. Parent and the Company agree that it may be difficult and
impractical to measure in money the damages that will accrue upon the
termination of this Agreement pursuant to any provision of Section 9.1 that
shall require the payment of a Termination Fee pursuant to this Section 9.4.
Accordingly, Parent and the Company agree that payment of any Termination
Fee payable pursuant to this Section 9.4 (together with any other amounts
payable pursuant to this Section 9.4) shall (a) constitute liquidated
damages and not a penalty, (b) be the sole and exclusive remedy of the payee
of the Termination Fee for the breach of any representation, warranty,
covenant or agreement in this Agreement by the payor and (c) constitute an
irrevocable waiver and release by the payee of any other remedy against the
payor for the breach of any representation, warranty, covenant or agreement
in this Agreement by the payor.
9.4.6. Each of Parent and the Company agrees that the terms of Section
7.22 and this Section 9.4 are an integral part of the transactions
contemplated hereby. If either party fails to pay promptly the other party
any fee due under such Sections, it shall also pay the other party's costs
and expenses (including fees and disbursements of counsel) in connection
with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the unpaid
amounts at the publicly announced prime rate of Fleet National Bank from the
date such amounts were first due.
ARTICLE 10
MISCELLANEOUS
10.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent, Subco and the Company in this Agreement shall
terminate at the Effective Time, and only the covenants and agreements that by
their terms survive the Effective Time shall survive the Effective Time.
10.2. AMENDMENTS AND SUPPLEMENTS. This Agreement may not be amended,
modified or supplemented by the parties hereto in any manner, except by an
instrument in writing signed on behalf of each party hereto.
10.3. WAIVER. The terms and conditions of this Agreement may be waived
only by a written instrument signed by the party waiving compliance. The failure
of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be construed
to be a waiver of any other or subsequent breach or non-compliance.
10.4. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive Laws of the Commonwealth of
Massachusetts, without regard to its principles of conflicts of laws. Each of
the parties hereto irrevocably consents to the exclusive jurisdiction of any
state or federal court within the Commonwealth of Massachusetts in connection
with any matter based upon or arising out of this Agreement, the Arrangement or
the other transactions contemplated hereby, agrees that process may be served
upon them in any manner authorized by the Commonwealth of Massachusetts for such
Persons and waives, and covenants not to assert or plead, any objection which
such party might otherwise have to such jurisdiction and such service of
process.
10.5. NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed given to a party if delivered by hand, sent by
facsimile transmission with confirmation of transmission, sent via a reputable
overnight delivery service with confirmation of receipt requested, or mailed by
registered or certified mail (postage prepaid and return receipt requested) to
the party at the following address and facsimile number (or at such other
address or facsimile number for the party as the party shall specify by like
notice), and shall be deemed given on the date on which delivered by hand or
otherwise on the date of confirmation of receipt or transmission:
TO PARENT OR SUBCO:
PRI Automation, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
FACSIMILE NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO:
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
FACSIMILE NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
AND
Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Box 25, Commerce Court West
Toronto, Ontario ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
FACSIMILE NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
TO THE COMPANY:
Promis Systems Corporation Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: Chief Executive Officer
FACSIMILE NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
Scotia Plaza, Suite 2100
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
FACSIMILE NUMBER: (▇▇▇) ▇▇▇-▇▇▇▇
10.6. ENTIRE AGREEMENT. This Agreement, the Company Disclosure Schedule,
the Parent Disclosure Schedule and the other documents and instruments and other
agreements among the parties hereto and referred to herein constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, including (a) the
letter agreement dated April 10, 1998 between Parent and the Company and (b) the
letter agreement dated November 3, 1998 between Parent and the Company. Each
party hereto acknowledges that, in entering into this Agreement and completing
the transactions contemplated hereby, such party is not relying on any
representation, warranty, covenant or agreement not expressly stated in this
Agreement or in the schedules, documents and instruments and other agreements
among the parties hereto and referred to herein.
10.7. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Except as expressly stated in Section 7.11, this
Agreement is not intended to confer upon any Person other than the parties
hereto (and such parties' respective successors and permitted assigns) any
rights or remedies hereunder. Neither this Agreement nor any of the rights and
obligations of the parties hereunder shall be assigned or delegated, whether by
operation of law or otherwise, without the written consent of all parties
hereto, except that the rights and obligations of Subco may be assigned and
delegated to any other wholly owned Subsidiary of Parent.
10.8. INTERPRETATION. The table of contents and headings in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of any provision of this Agreement. The word "include" and its
derivatives when used in this Agreement shall be deeded to be followed by the
words "without limitation." The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and therefore waive the application of any Law, holding or rule of construction
providing that ambiguities in an agreement or other document shall be construed
against the party that drafted such agreement or document.
10.9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
10.10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same agreement
and shall become effective when one or more counterparts shall have been signed
by each party hereto and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Combination Agreement to be
executed as an agreement under seal as of the date first above written.
PRI AUTOMATION, INC.
By: __________________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
CHIEF EXECUTIVE OFFICER
1325949 ONTARIO INC.
By:___________________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
CHIEF EXECUTIVE OFFICER
PROMIS SYSTEMS CORPORATION LTD.
By:___________________________________
▇▇▇ ▇▇▇▇▇▇▇▇,
CHIEF EXECUTIVE OFFICER
EXHIBIT D
FORM OF CERTIFICATE OF DESIGNATION
TERMS OF SPECIAL VOTING PREFERRED STOCK
1. DESIGNATION; NUMBER OF SHARES. The class of Preferred Stock known
as "Special Voting Preferred Stock" shall consist of one (1) share.
2. VOTING. On all matters submitted to a vote of stockholders of the
Corporation, the holder of the share of Special Voting Preferred Stock shall
be entitled at any relevant date to the number of votes determined in
accordance with a certain Voting and Exchange Trust Agreement, dated as of
, 1999, by and among the Corporation, 1325949 Ontario Inc., a
corporation organized and existing under the laws of the Province of Ontario
and a wholly owned subsidiary of the Corporation, Promis Systems Corporation
Ltd., a corporation organized and existing under the laws of Canada
("Promis"), and Montreal Trust Company of Canada, a trust company
incorporated under the laws of Canada. Except as required by law or by the
Articles of Organization of the Corporation, the holder of the share of
Special Voting Preferred Stock and the holders of the Common Stock of the
Corporation shall vote together as a single class in the election of
directors and on all matters submitted to a vote of the stockholders of the
Corporation. In the event that the Special Voting Preferred Stock is
required by law or by the Articles of Organization of the Corporation to
vote separately as a class or series on a proposal, the holder of the share
of Special Voting Preferred Stock shall in addition to voting separately as
a class or series on such proposal, also be entitled to vote with the
holders of the Corporation's Common Stock together as a single class.
3. DIVIDENDS. The holder of the share of Special Voting Preferred
Stock shall not be entitled to receive any dividends.
4. LIQUIDATION. In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or
involuntary, the holder of the share of Special Voting Preferred Stock shall
be entitled to be paid out of the net assets of the Corporation available
for distribution, before any distribution or payment is made upon any stock
of the Corporation ranking on liquidation junior to the Special Voting
Preferred Stock, an amount equal to $1.00, subject to equitable adjustment
in the event of stock splits, stock dividends, combinations and the like
involving the Special Voting Preferred Stock (the "Special Voting Preferred
Stock Liquidation Payment"). Upon any such dissolution, liquidation or
winding up of the affairs of the Corporation, after the holder of the share
of Special Voting Preferred Stock shall have been paid the amount to which
it shall be entitled, the remaining net assets of the Corporation may be
distributed to the holders of stock ranking on liquidation junior to the
Special Voting Preferred Stock. Whenever the distribution provided for in
this paragraph shall be paid in property other than cash, the value of such
distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation. Written notice
of such dissolution, liquidation or winding up of the affairs of the
Corporation, stating a payment date, the amount of the Special Voting
Preferred Liquidation Payment and the place where said Special Voting
Preferred Stock Liquidation Payment shall be payable, shall be given by
mail, postage prepaid, not less than 5 days prior to the payment date stated
therein, to the holder of record of Special Voting Preferred Stock, such
notice to be addressed to such holder at its address as shown by the records
of the Corporation. For purposes hereof, the Common Stock shall rank on
liquidation junior to the Special Voting Preferred Stock. A merger or
consolidation of the Corporation with or into any other corporation or a
sale or conveyance of all or any part of the assets of the Corporation
(which shall not in fact result in the liquidation of the Corporation and
the distribution of assets to stockholders) shall not be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation within the meaning of this paragraph 4.
5. REDEMPTION. (a) The shares of Special Voting Preferred Stock shall
be redeemed by the Corporation as described herein, at a price of $1.00,
subject to equitable adjustment in the event of stock splits, stock
dividends, combinations and the like involving the Special Voting Preferred
Stock (the "Redemption Price"). Such redemption shall occur automatically
and simultaneously, but only, upon the issuance by the Corporation of its
Common Stock or delivery by 1325949 Ontario Inc. of the Corporation's
Common Stock for the last outstanding Exchangeable Share of Promis
("Exchangeable Share") held by a person other than the Corporation or any of
its subsidiaries.
(b) Promptly after the issuance by the Corporation of its Common Stock or
delivery by 1325949 Ontario Inc. of the Corporation's Common Stock for the last
outstanding Exchangeable Share held by a person other than the Corporation or
any of its subsidiaries, the Corporation shall give written notice (the
"Redemption Notice") by mail, postage prepaid, to the holder of record (at the
close of business on the business day next preceding the day on which the
Redemption Notice is given) of the share of Special Voting Preferred Stock
notifying such holder of the redemption and specifying the Redemption Price, the
date on which the last outstanding Exchangeable Share held by a person other
than the Corporation or any of its subsidiaries was acquired by the Corporation
or any of its subsidiaries (the "Redemption Date") and the place and date (not
to exceed 20 days from the date such notice is given) where said Redemption
Price shall be payable. The Redemption Notice shall be addressed to such holder
at the address of the holder as shown by the records of the Corporation. From
and after the close of business on the Redemption Date, unless there shall have
been a default in the payment of the Redemption Price, all rights of the holder
of the share of Special Voting Preferred Stock (including the right to vote as
provided in paragraph 2 above) shall cease with respect to such share (except
the right to receive the Redemption Price), and such share shall not thereafter
be transferred on the books of the Corporation or be deemed to be outstanding
for any purpose whatsoever. If the Corporation does not have funds legally
available for redemption of the share of Special Voting Preferred Stock on the
Redemption Date, the share of Special Voting Preferred Stock shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when the Corporation has legally available funds for the
redemption of such share of Special Voting Preferred Stock, such funds will be
used to redeem such share.
(c) The share of Special Voting Preferred Stock redeemed pursuant to this
paragraph 5 or otherwise acquired by the Corporation in any manner whatsoever
shall upon any such reacquisition by the Corporation, be automatically restored
to the status of authorized but unissued shares of Preferred Stock of the
Corporation.
EXHIBIT G
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT, dated as of November 24, 1998 (the "Agreement"),
is by and between (i) PRI Automation, Inc., a Massachusetts corporation
("Parent"), and (ii) the undersigned affiliate ("Affiliate") of Promis Systems
Corporation Ltd., a Canada Business Corporation Act corporation (the "Company").
RECITALS
WHEREAS, pursuant to a Combination Agreement dated as of the date hereof
(the "Combination Agreement") by and among (i) Parent, (ii) 1325949 Ontario
Inc., an Ontario corporation and wholly-owned subsidiary of Parent ("Newco"),
and (iii) the Company, the parties thereto have agreed, subject to the terms and
conditions set forth therein, to combine Parent, Newco and the Company pursuant
to an arrangement (the "Arrangement") under Section 192 of the Canada Business
Corporations Act;
WHEREAS, as a result of the Arrangement, Affiliate will receive Exchangeable
Shares (as defined in the Combination Agreement) in the capital stock of the
Company in exchange for Company Common Shares (as defined in the Combination
Agreement) owned by Affiliate at the Effective Time (as defined in the
Combination Agreement) pursuant to the Exchangeable Share Provisions (the
"Exchangeable Share Provisions") of the Plan of Arrangement attached as Exhibit
A to the Combination Agreement (the "Plan of Arrangement");
WHEREAS, the Exchangeable Shares Affiliate receives pursuant to the Plan of
Arrangement will be exchangeable for shares of common stock, $.01 par value, of
Parent ("Parent Common Stock"); and
WHEREAS, Affiliate understands that, because the Arrangement will be
accounted for using the "pooling-of-interests" accounting method and Affiliate
may be deemed, as of the date hereof, to be an "affiliate" of the Company, as
such term is (i) defined for purposes of paragraphs (c) and (d) of Rule 145 of
the rules and regulations of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), and (ii) used in and for purposes of Accounting Series Releases 130 and
135, as amended, of the Commission, the Exchangeable Shares beneficially owned
by Affiliate may only be disposed of in conformity with the limitations
described herein.
NOW THEREFORE, the parties agree as follows:
1. AGREEMENT TO RETAIN SHARES. (a) Affiliate agrees not to transfer, sell,
pledge or otherwise dispose of or direct or cause the sale, transfer or other
disposition of, or reduce Affiliate's risk relative to, (i) any Company Common
Shares (except for the conversion of Company Common Shares into Exchangeable
Shares as contemplated by the Combination Agreement and the Plan of
Arrangement), (ii) any Exchangeable Shares (except for the exchange of
Exchangeable Shares into shares of Parent Common Stock pursuant to the
Exchangeable Share Provisions) or (iii) any shares of Parent Common Stock held
by Affiliate or on Affiliate's behalf, whether owned on the date hereof or
acquired hereafter, during the period beginning on the date hereof and ending on
the date (the "Expiration Date") Parent shall have publicly released a report in
the form of a quarterly earnings report, registration statement filed with the
Commission, a report filed with the Commission on Form 10-K, 10-Q or 8-K or any
other public filing, statement or public announcement which includes the
combined financial results (including combined sales and net income) of the
Company for a period of at least 30 days of combined operations of Parent and
the Company following the Effective Date.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF AFFILIATE. Affiliate
represents, warrants and covenants as follows:
(a) Affiliate has full power and authority to execute this Agreement, to
make the representations, warranties and covenants herein contained
and to perform Affiliate's obligations hereunder.
(b) Affiliate has carefully read this Agreement and the Combination
Agreement and discussed its requirements and other applicable
limitations upon its ability to sell, transfer or otherwise dispose
of Company Common Shares, Exchangeable Shares, and shares of Parent
Common Stock to the extent Affiliate felt necessary, with its counsel
or counsel for the Company.
(c) Affiliate will not engage in a sale, exchange, transfer, distribution
(including a distribution by a partnership to its partners or by a
corporation to its stockholders), redemption or reduction in any way
of Affiliate's risk of ownership by short sale or otherwise, or other
disposition, directly or indirectly (such actions being collectively
referred to herein as a "Sale") of Exchangeable Shares or shares of
Parent Common Stock in violation of the Act or the Rules and
Regulations thereunder.
(d) In addition to the Agreements contained in Section 1 above, Affiliate
will not sell, transfer, or otherwise dispose of, or make any offer
or agreement relating to any of the foregoing with respect to, any
Exchangeable Shares or shares of Parent Common Stock, except: (i) in
a transaction described in Rule 145(d) under the Securities Act; (ii)
in a transaction that is otherwise exempt from the registration
requirements of the Securities Act; or (iii) pursuant to an effective
registration statement under the Securities Act.
(e) Affiliate currently is the beneficial owner of that number of shares
of Company Common Shares set forth in Appendix A hereto (the "Company
Securities") and, except as otherwise set forth in Appendix A, did
not acquire any of the Company Securities in contemplation of the
Arrangement.
(f) Except as otherwise set forth in Appendix A hereto, Affiliate has not
engaged in a Sale of any Company Common Shares (including the Company
Securities) in contemplation of the Arrangement.
(g) Except to the extent written notification to the contrary is received
by Parent from Affiliate prior to the Arrangement, the
representations contained herein shall be true and correct at all
times from the date hereof through the Effective Time.
(h) Affiliate understands that Parent, Newco, the Company, and their
respective stockholders, as well as legal counsel to the Company and
Parent, will be relying on (a) the truth and accuracy of the
representations contained herein and (b) Affiliate's performance of
the obligations set forth herein.
(i) Except for the Company Securities and options to purchase that number
of Company Common Shares set forth in Appendix A hereto, Affiliate
does not beneficially own any Company Common Shares or any other
equity securities of the Company or any options, warrants or other
rights to acquire any equity securities of the Company.
3. LEGENDS.
Affiliate also understands and agrees that stop transfer instructions will
be given to Parent's transfer agent with respect to certificates evidencing the
Parent Common Stock of Affiliate and that there will be placed on the
certificates evidencing the Exchangeable Shares and the Parent Common Stock of
Affiliate issued pursuant to the terms of the Exchangeable Share Provisions
legends stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT, PRIOR TO THE PUBLICATION AND
DISSEMINATION OF FINANCIAL STATEMENTS BY PARENT WHICH INCLUDE THE RESULTS
OF AT LEAST THIRTY (30) DAYS OF COMBINED OPERATIONS OF PARENT AND THE
COMPANY.
and
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES
AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IN COMPLIANCE WITH THE
REQUIREMENTS OF RULE 145 OR PURSUANT TO A REGISTRATION STATEMENT UNDER
SAID ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
4. TERMINATION. This Agreement shall be terminated and shall be of no
further force and effect upon the termination of the Combination Agreement
pursuant to its terms.
5. MISCELLANEOUS.
(a) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same
instrument.
(b) BINDING AGREEMENT. This Agreement will inure to the benefit of and
be binding upon and enforceable against the parties and their
successors and assigns, including administrators, executors,
representatives, heirs, legatees and devisees of Affiliate and
pledgees of Affiliate holding Exchangeable Shares or shares of Parent
Common Stock as collateral.
(c) WAIVER. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement or any amendment of this
Agreement shall be effective unless in writing and signed by each
party hereto.
(d) GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the Commonwealth of
Massachusetts without regard to its principles of conflicts of laws.
(e) SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Agreement is not enforceable or enforceable
only if limited in time and/or scope, this Agreement shall continue
in full force and effect with such provision stricken or so limited.
(f) THIRD PARTY RELIANCE. Counsel to and independent auditors for the
parties shall be entitled to rely upon this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
PRI AUTOMATION, INC.
By: ------------------------------------------
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QA INVESTMENTS INC.
By: ------------------------------------------
QUORUM GROWTH PARTNERS I,
LIMITED PARTNERSHIP
by its general partner Quorum Growth
Funding Limited
By: ------------------------------------------
By: ------------------------------------------
APPENDIX A
Shareholder:____________________________________________________________________
Entity:_________________________________________________________________________
(individual, corporation, partnership, other -- please specify)
Total Number of Company Common Shares owned on the date hereof:_________________
Total Number of Company Common Shares disposed of in a Sale in contemplation of
the Arrangement:________________________________________________________________
Total Number of Company Common Shares acquired in contemplation of the
Arrangement:____________________________________________________________________
Total Number of options to purchase Company Common Shares owned on the date
hereof:_________________________________________________________________________