Document/Exhibit Description Pages Size
1: 8-K Current Report 4 13K
2: EX-2.1 Plan of Acquisition, Reorganization, Arrangement, 76 332K
Liquidation or Succession
3: EX-99.1 Miscellaneous Exhibit 3 18K
4: EX-99.2 Miscellaneous Exhibit 2± 10K
EX-2.1 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
EXHIBIT 2.1
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SHARE EXCHANGE AGREEMENT
BY AND AMONG
8X8, INC.
UFORCE INC.
AND ALL OF THE SHAREHOLDERS
OF UFORCE
AND INDIRECT
OWNERS OF UFORCE SHARES
DATED AS OF MAY __, 2000
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TABLE OF CONTENTS
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ARTICLE I THE ACQUISITION........................................................................4
1.1 Closing; Closing Date.............................................................4
1.2 Implementation Steps by the Shareholders and the Company..........................4
1.3 Implementation Steps by the Parent Companies......................................7
1.4 Covenants on Closing..............................................................7
1.5 Adjustments to Exchange Ratio....................................................10
1.6 Indemnification Shares...........................................................10
1.7 Tax and Accounting Treatment.....................................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND EXCHANGECO..................10
2.1 Organization of the Company and Exchangeco.......................................11
2.2 Company Share Capital............................................................11
2.3 Subsidiaries.....................................................................12
2.4 Authority........................................................................12
2.5 Company Financial Statements.....................................................13
2.6 No Undisclosed Liabilities.......................................................13
2.7 No Changes.......................................................................13
2.8 Tax and Other Returns and Reports................................................15
2.9 Restrictions on Business Activities..............................................18
2.10 Title to Properties; Absence of Liens............................................18
2.11 Intellectual Property............................................................19
2.12 Agreements, Contracts and Commitments............................................23
2.13 Interested Party Transactions....................................................24
2.14 Compliance with Laws.............................................................25
2.15 Litigation.......................................................................25
2.16 Insurance........................................................................25
2.17 Minute Books.....................................................................25
2.18 Environmental Matters............................................................25
2.19 Brokers' and Finders' Fees; Third Party Expenses.................................27
2.20 Employee Matters and Benefit Arrangements........................................27
2.21 Employees........................................................................30
2.22 Governmental Authorizations and Licenses.........................................30
2.23 Competition Act..................................................................30
2.24 Employee Accruals................................................................31
2.25 Major Customers..................................................................31
2.26 Product Warranties...............................................................31
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TABLE OF CONTENTS
(CONTINUED)
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2.27 Representations of Shareholders..................................................31
2.28 Hart-Scott-Rodino Classification.................................................34
2.29 Full Disclosure..................................................................34
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES..................................34
3.1 Organization.....................................................................34
3.2 Authority........................................................................34
3.3 Capital Structure................................................................35
3.4 SEC Documents; Parent Financial Statements.......................................36
3.5 No Material Adverse Change.......................................................36
3.6 Acquisition Subsidiaries.........................................................36
3.7 Eligibility to Use Forms S-3 and S-8.............................................37
3.8 Legal Proceedings................................................................37
3.9 Intellectual Property............................................................37
3.10 Full Disclosure..................................................................37
3.11 Compliance With Laws.............................................................37
ARTICLE IV CONDUCT PRIOR TO THE CLOSING.........................................................37
4.1 Conduct of Business of the Company and Exchangeco................................38
4.2 Conduct of the Parent Companies..................................................40
4.3 Shareholder Conduct..............................................................40
4.4 No Solicitation..................................................................41
ARTICLE V ADDITIONAL AGREEMENTS.................................................................42
5.1 Sale and Registration of Shares; Shareholder Matters.............................42
5.2 Confidentiality..................................................................42
5.3 Expenses.........................................................................42
5.4 Commercially Reasonable Efforts..................................................42
5.5 Agreement to Vote Shares.........................................................43
5.6 Notification of Certain Matters..................................................43
5.7 Transition.......................................................................43
5.8 Access to Information............................................................43
5.9 Termination of Shareholders' Agreements..........................................44
5.10 Form S-8.........................................................................44
5.11 Line of Credit...................................................................44
5.12 Exchangeco Commitment to Quebec Operations and Related Lock Up...................44
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE VI CONDITIONS TO THE PURCHASE...........................................................45
6.1 Conditions to Obligations of Each Party to Effect the Purchase...................46
6.2 Additional Conditions to Obligations of the Company and the Shareholders.........46
6.3 Additional Conditions to the Obligations of Parent Companies.....................47
ARTICLE VII INDEMNIFICATION; ESCROW.............................................................48
7.1 Survival of Representations, Warranties and Agreements...........................48
7.2 Indemnification..................................................................48
7.3 Indemnification Threshold and Limitations........................................49
7.4 Escrow Arrangements..............................................................50
7.5 Shareholders' Representative.....................................................50
ARTICLE VIII GUARANTEE OF PERFORMANCE BY HOLDING COMPANIES AND OTHER ASSET PROTECTION
VEHICLES................................................................................52
8.1 Affirmation of Representations and Warranties....................................52
8.2 Further Assurances...............................................................52
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER....................................................52
9.1 Termination......................................................................52
9.2 Effect of Termination............................................................54
9.3 Amendment........................................................................54
9.4 Extension; Waiver................................................................54
ARTICLE X GENERAL PROVISIONS....................................................................54
10.1 Notices..........................................................................54
10.2 Interpretation...................................................................56
10.3 Counterparts.....................................................................56
10.4 Entire Agreement; Assignment.....................................................56
10.5 Severability.....................................................................56
10.6 Other Remedies...................................................................57
10.7 Governing Law....................................................................57
10.8 Arbitration......................................................................57
10.9 Rules of Construction............................................................58
10.10 Specific Performance.............................................................58
10.11 English Language Only............................................................59
10.12 Certain Defined Terms............................................................59
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[Download Table]
INDEX OF EXHIBITS
Description Exhibit
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Classification of Shareholders A
Form of Exchangeable Share Provisions B
Form of Voting, Exchange and Support Agreement C
Form of Parent Multiple Voting Share D
Form of Escrow Agreement E
Managers to Sign Employment and Noncompetition Agreements F
Form of Employment Agreement G
Form of Noncompetition Agreement H
Form of Stock Restriction Agreement I
Form of Registration Rights Agreement J
Form of Credit Agreement K
Form of Opinion of Wilson Sonsini Goodrich & Rosati L
Form of Opinion of Lafleur Brown M
Form of Logibro Termination Agreement N
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INDEX OF SCHEDULES
Description Schedule
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Company Issued and Outstanding Shares 2.2(a)
Share Commitments 2.2(b)
Required Company Consents and Waivers 2.4
Company Financial Statements 2.5
Certain Company Liabilities 2.6
Changes 2.7
Company Tax Returns, Audits 2.8
Tax Sharing and Allocation Agreements 2.8(b)(xiv)
Circumstances Subject to Application of Sections 79-80.04 of the
Income Tax Act (Canada) 2.8(b)(xvi)
Elections Pursuant to Section 83 or 85 of the Income Tax Act
(Canada) or Quebec Taxation Act 2.8(b)(xvii)
Restrictions on Business Activities 2.9
Leased Real or Immovable Property 2.10(a)
Liens 2.10(b)
Registered Intellectual Property 2.11(b)
Third Party Licensed Trademarks 2.11(c)
Transferred Ownership of Intellectual Property 2.11(e)(i)
Standard License Agreements 2.11(e)(ii)
IP Contracts, Licenses and Agreements with Individuals 2.11(g)
Software Program Contracts, Licenses and Agreements 2.11(h)
Actions with Respect to IP that Must be Taken Within 60 Days of
Closing 2.11(j)
Employees, Consultants and Contractors not Executing
Confidentiality Agreements 2.11(m)(i)
Proprietary Information, Confidentiality and Assignment Agreements 2.11(m)(ii)
Year 2000 Compliance 2.11(p)
Royalties and Compensation Payable for use of IP 2.11(q)
Binding IP Agreements, Contracts and Commitments 2.12(a)
Breaches, Violations and Defaults 2.12(b)
Interested Party Transactions 2.13
Litigation 2.15
Insurance Policies 2.16
Brokers' and Finders' Fees Agreements 2.19
Employee Benefit Plans 2.20(a)
Post-employment Obligations 2.20(b)
Labor Disputes and Litigation 2.20(e)
Documents not Provided to Parent in respect of Canadian Benefit 2.20(f)(1)
Arrangements
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INDEX OF SCHEDULES (CONT.)
Description Schedule
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Amendments to Canadian Benefit Arrangements 2.20(f)(ii)
CSST Assessments 2.20(g)
Major Customers 2.25
Consents and Waivers 3.2
Options, Warrants and Convertible Securities 3.3
Legal Proceedings 3.8
Intellectual Property 3.9
Fees Assumed by Parent Companies 5.3
Officers and Directors to Tender Resignations 6.3(i)
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SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement (this "AGREEMENT") is made and entered
into as of May __, 2000, by and among 8x8, Inc., a Delaware corporation doing
business as Netergy Networks ("PARENT"), UForce Inc., a corporation existing
under the federal laws of Canada (the "Company"), the individuals or entities
identified as "Management Shareholders" on Exhibit A (collectively the
"MANAGEMENT SHAREHOLDERS"), the individuals or entities identified as "Employee
Shareholders" on Exhibit A (collectively, the "EMPLOYEE SHAREHOLDERS"), and the
party identified as the "Non-Employee Shareholder" on Exhibit A (the
"NON-EMPLOYEE SHAREHOLDER" and together with the Management Shareholders and the
Employee Shareholders, the "SHAREHOLDERS"). The persons identified as "Indirect
Owners" on Exhibit A (the "INDIRECT OWNERS"), are parties to this Agreement to
ensure the performance of certain of the obligations of the Shareholders under
this Agreement.
RECITALS
A. The Boards of Directors of each of the Company and the Parent believe
it is in the best interests of each company and their respective stockholders
that the Parent acquire the Company (the "ACQUISITION"), the whole in accordance
with, and subject to the terms and conditions of, this Agreement, and in
furtherance thereof, have approved the Acquisition.
B. In anticipation of the execution of this Agreement, the shareholdings
of the Company have been reorganized.
C. Contemporaneously with the execution of this Agreement, Parent and
Logibro Inc. ("LOGIBRO") are entering into an agreement in the form attached as
Exhibit N (the "LOGIBRO TERMINATION AGREEMENT"), among other things, providing
for the cancellation on the Closing Date (as defined below) of an agreement
between Logibro and the Company in exchange for the delivery of Parent Common
Stock to Logibro as set forth in the Logibro Termination Agreement.
D. In furtherance of the Acquisition, among other things, and subject to
the terms and conditions of this Agreement, the following will occur prior to
the date that the Acquisition will be consummated (the "CLOSING DATE"):
(i) The Company will be continued (the "CONTINUANCE") from the
Canada Business Corporations Act (Canada) to the Companies Act (Nova Scotia)
(the "COMPANIES ACT");
(ii) The Company will form a wholly-owned unlimited liability
company under the Companies Act ("UFORCE ULC SUB");
(iii) Parent will incorporate Netergy Networks Canada Holding
Company, a Delaware corporation and wholly-owned subsidiary of Parent ("PARENT
SUB"), UForce Holding Company, a Delaware corporation and wholly-owned
subsidiary of Parent Sub ("HOLDING") and, as a wholly-owned subsidiary of
Holding, an unlimited liability company under the Companies Act to
be given a numbered name under the Companies Act ("HOLDING ULC" and, together
with Parent, Parent Sub and Holding, the "PARENT COMPANIES");
(iv) Calsub will form a wholly-owned company limited by shares
under the Companies Act ("EMPLOYEE HOLDCO") with an authorized capital of a
limited number of common shares (of which, one (1) will be issued to Calsub for
one dollar US (US$1.00)) and a limited number of non-voting exchangeable shares
("EMPLOYEE HOLDCO EXCHANGEABLE SHARES") having the rights, privileges,
restrictions and conditions substantially as set forth in substantially the form
attached as Exhibit B (the "EXCHANGEABLE SHARE PROVISIONS");
(v) Each of Michael Cook, John Hennessy, Jean-Luc Parenteau,
Jean-Charles Phaneuf, Alain Provencher, Danny Deschenes, Alexandre Garneau,
Farid Lahdiri, Majed Haj Mohamad, Marcel St-Amant, Mario Dorion and Martin
Leclerc will transfer his shares in the Company to Employee Holdco in exchange
for such number of Employee Holdco Exchangeable Shares as is equal to the number
of common shares in the Company held by such Shareholder multiplied by the
Exchange Ratio (as defined below), rounded to the next whole share;
E. Pursuant to the Acquisition, among other things, and subject to the
terms and conditions of this Agreement (and, in the case of Logibro, subject to
the terms and conditions of the Logibro Termination Agreement) the following
will occur at closing ("CLOSING") on the Closing Date in the following order:
(i) Holding ULC will acquire all of the shares of the Company
held by the Non-Employee Shareholder and Logibro in exchange for a number of
shares of common stock, par value US$0.001 per share, in the capital of Parent
("PARENT COMMON STOCK") as computed using the Exchange Ratio (as defined below);
(ii) Holding ULC will deliver shares of Parent Common Stock to
Logibro under the terms of the Logibro Termination Agreement.
(iii) The Company will amalgamate with UForce ULC Sub (the
"AMALGAMATION") to form a Nova Scotia unlimited liability company ("EXCHANGECO")
such that all of the Company's outstanding assets and liabilities shall become
the assets and liabilities of Exchangeco and all outstanding equity interests in
the Company will be converted into equity interests in Exchangeco;
(iv) Pursuant to the Amalgamation, all pre-Amalgamation Class A
shares, Class B shares and Class C shares of the Company held by Holding ULC and
Employee Holdco will be converted into an equivalent number of fully
participating, voting common shares of Exchangeco (the "EXCHANGECO COMMON
SHARES") and all of the pre-Amalgamation Class C shares of the Company
beneficially held by Calsub, Thilco, CTco A and CTco B will be converted into an
equivalent number of preferred shares of Exchangeco (the "EXCHANGECO PREFERRED
SHARES");
(v) Immediately following the Amalgamation, Exchangeco will
effect a recapitalization (the "RECAPITALIZATION") pursuant to which the
memorandum and articles of
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association of Exchangeco will be amended to provide that all Exchangeco
Preferred Shares will be converted into a number of non-voting exchangeable
shares of Exchangeco in accordance with the Exchangeable Share Provisions
("EXCHANGECO EXCHANGEABLE SHARES" and, together with the Employee Holdco
Exchangeable Shares, the "EXCHANGEABLE Shares") as is determined by multiplying
the number of Exchangeco Preferred Shares by the Exchange Ratio (as defined
below), rounded to the nearest whole share;
(vi) Holding ULC will acquire from Calsub for one dollar US
(US$1.00) the one (1) common share held by it in Employee Holdco;
(vii) Subsequently, a voting, exchange and support agreement will
be entered into among Parent, Holding ULC, Exchangeco, Employee Holdco and the
holders of Exchangeable Shares (the "VOTING, EXCHANGE AND SUPPORT AGREEMENT") in
substantially the form attached as Exhibit C;
(viii) Parent shall have filed a Certificate of Designation under
Delaware law creating a series of Preferred Stock of Parent designated as
"Special Voting Stock," par value US$0.001 per share, and authorizing one share
of such stock having the rights, privileges, restrictions and conditions
substantially as set forth in Exhibit D (the "PARENT MULTIPLE VOTING SHARE")
and, at Closing on the Closing Date, Parent will issue to each holder of
Exchangeable Shares a fractional interest in the Parent Multiple Voting Share
equal to the fraction obtained by dividing the number of Exchangeable Shares
held by such holder at such time by the total number of Exchangeable Shares
issued and outstanding at such time, and such fractional interest shall entitle
the holder thereof to the voting rights as set forth in the Parent Multiple
Voting Share;
(ix) The Company will have taken all such steps as are necessary
to ensure that all holders of existing outstanding options ("COMPANY OPTIONS")
for the purchase of Company common shares (the "OPTION HOLDERS" and together
with the Shareholders and Logibro, the "SECURITY HOLDERS") under the "UForce
Inc. Stock Option Plan - Regime d'options d'achat d'actions" (the "UFORCE STOCK
OPTION PLAN") will have consented to the conversion of such Company Options into
options for the purchase of Parent Common Stock, and each of Parent and the
Company will take all necessary regulatory, contractual and other steps to
ensure that each such outstanding Company Option is converted into an option for
the purchase of Parent Common Stock at the same exercise price, on the same
vesting dates and for a number of shares of Parent Common Stock equal to the
number of Company common shares otherwise issuable under the UForce Stock Option
Plan multiplied by the Exchange Ratio (as defined below), either by direct
assumption by Parent of the UForce Stock Option Plan, with any necessary
amendments to reflect such assumption, or by substitution of the UForce Stock
Option Plan with a substantially equivalent new stock option plan of Parent;
(x) In the event of any disallowance of stock option grants made
by the Company ("DISALLOWED OPTIONS"), Parent shall issue in replacement of the
Disallowed Options new options (the "REPLACEMENT OPTIONS") for a number of
shares of Parent Common Stock equal to the number of Company shares that would
have been issuable under the Disallowed Options multiplied by the Exchange Ratio
(as defined below). The Replacement Options, if any, shall have the same vesting
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schedule as the Disallowed Options and shall have an exercise
price equal to the closing price of Parent Common Stock on the Nasdaq National
Market on the trading day preceding the Closing Date (the "CLOSING PRICE").
F. A portion of the Exchangeable Shares issued in connection with the
Acquisition will be placed in escrow pursuant to an escrow agreement (the
"ESCROW AGREEMENT") in substantially the form attached as Exhibit E, the release
of which will be contingent upon certain events and conditions.
G. As a condition to the Closing and an inducement to the Parent to
enter into this Agreement, (1) the persons identified on Exhibit F (the
"MANAGERS") shall enter into employment and stock restriction agreements in
substantially the form attached hereto as Exhibit G, (the "EMPLOYMENT
AGREEMENTS") and noncompetition agreements in substantially the form attached
hereto as Exhibit H (the "NONCOMPETITION AGREEMENTS") and (2) Dorion and Leclerc
shall each enter into a stock restriction agreement in substantially the form
attached hereto as Exhibit I, (the "STOCK RESTRICTION AGREEMENTS").
H. As a condition to the Closing and an inducement to the Shareholders
to enter into this Agreement, Parent shall provide the parties receiving Parent
Common Stock and Exchangeable Shares in the Acquisition certain rights with
respect to the registration of resale of Parent Common Stock issued or issuable
as a result of the Acquisition on the terms as set forth in a registration
rights agreement (the "REGISTRATION RIGHTS AGREEMENT") in substantially the form
attached hereto as Exhibit J.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE ACQUISITION
1.1 CLOSING; CLOSING DATE. Unless this Agreement is terminated earlier
pursuant to Article IX, the Closing shall take place as promptly as practicable,
but no later than five (5) Business Days following satisfaction or waiver of the
conditions set forth in Article VI, at the offices of Stikeman Elliott, 1155
Rene-Levesque Blvd. West, Suite 4000, Montreal, Quebec, unless another place or
time is agreed to in writing by Parent, by Jean-Luc Calonne on behalf of the
Management Shareholders and Employee Shareholders, and by the Non-Employee
Shareholder.
1.2 IMPLEMENTATION STEPS BY THE SHAREHOLDERS AND THE COMPANY. The
Management and Employee Shareholders, the Indirect Owners and the Company
covenant in favor of the Parent Companies that:
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(a) The Company will adopt or cause to be adopted all directors'
and shareholders' resolutions that are necessary to approve the Continuance, the
incorporations of UForce ULC Sub and Employee Holdco, the Amalgamation and the
Recapitalization including, without limitation, the adoption of an Amalgamation
Agreement with UForce ULC Sub in a form agreed to by the parties acting
reasonably to give effect to the Amalgamation (the "AMALGAMATION AGREEMENT" and
together with the Employment Agreements, Stock Restriction Agreements,
Noncompetition Agreements, Escrow Agreement, Registration Rights Agreement, and
Voting, Exchange and Support Agreement, the "RELATED AGREEMENTS").
(b) The Company will cause any information required to complete
the transactions contemplated hereby to be sent to the directors and
shareholders of the Company so that such Persons can approve the Continuance,
the Amalgamation, the Amalgamation Agreement, the Recapitalization and all other
transactions contemplated by this Agreement.
(c) As soon as practicable following execution of this Agreement,
but before Closing on the Closing Date:
(i) The Company will immediately seek the consent of the
Option Holders to the conversion of all outstanding Company Options issued under
the UForce Stock Option Plan into options for the purchase of Parent Common
Stock in the manner specified in the recitals to this Agreement.
(ii) The Company will apply for a certificate of
continuance (the "CERTIFICATE OF CONTINUANCE") continuing the Company to the
Companies Act and obtain such Certificate of Continuance from the Nova Scotia
Registrar of Joint Stock Companies (the "REGISTRAR").
(iii) The Company will form UForce ULC Sub.
(iv) Calsub will form Employee Holdco and will subscribe
for one (1) common share thereof for one dollar US (US$1.00).
(v) Each of Michael Cook, John Hennessy, Jean-Marc
Parenteau, Jean-Charles Phaneuf, Alain Provencher, Danny Deschenes, Alexandre
Garneau, Farid Lahdiri, Majed Haj Mohamad, Marcel St-Amant, Mario Dorion and
Martin Leclerc will transfer his shares in the Company to Employee Holdco in
exchange for such number of Employee Holdco Exchangeable Shares as is equal to
the number of Class B shares or Class C shares in the Company held by such
Shareholder multiplied by the Exchange Ratio (as defined below), the whole as
further specified below:
[Enlarge/Download Table]
NUMBER OF CLASS B SHARES OR
CLASS C SHARES NUMBER OF EMPLOYEE
OF THE COMPANY TRANSFERRED HOLDCO EXCHANGEABLE
SHAREHOLDER TO EMPLOYEE HOLDCO SHARES ISSUED
----------------------------------------- ---------------------------- ---------------------
Michael Cook ......................... 547,991 101,690
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NUMBER OF CLASS B SHARES OR
CLASS C SHARES NUMBER OF EMPLOYEE
OF THE COMPANY TRANSFERRED HOLDCO EXCHANGEABLE
SHAREHOLDER TO EMPLOYEE HOLDCO SHARES ISSUED
----------------------------------------- ---------------------------- ---------------------
John Hennessy ........................ 547,991 101,690
Jean-Marc Parenteau .................. 547,991 101,690
Jean-Charles Phaneuf ................. 547,991 101,690
Alain Provencher ..................... 182,664 33,897
Danny Deschenes ...................... 28,842 5,352
Alexandre Garneau .................... 28,842 5,352
Farid Lahdiri ........................ 14,421 2,676
Majed Haj Mohamad .................... 9,614 1,784
Marcel St-Amant ...................... 9,614 1,784
Mario Dorion ......................... 121,725 22,588
Martin Leclerc ....................... 121,725 22,588
The total number of shares of Holdco Exchangeable Shares issued to the
Shareholders shall be referred to in this Agreement as the "TOTAL EMPLOYEE
SHARES."
(d) Each of the Indirect Owners that holds Company Options
hereby agrees to convert their Company Options into options for the purchase of
Parent Common Stock in the manner contemplated in this Agreement. In the event
that within seven (7) days of the date hereof less than all of the holders of
Company Options consent to convert their Company Options into options for the
purchase of Parent Common Stock in the manner contemplated in this Agreement,
the Company shall take all reasonable measures to ensure that any remaining
unconverted Company Options are either converted, terminated or subject to
purchase by the Parent Companies in the Acquisition on substantially the same
terms and conditions as are applicable to Logibro. The parties hereto
acknowledge that Parent's obligations under this Agreement to purchase the
Company are conditional upon there being no holders of securities of Exchangeco
on the completion of the transactions contemplated at Closing, including the
holders of shares, options, warrants, debentures or otherwise, other than
Holding ULC, the holders of Exchangeco Exchangeable Shares and Employee Holdco
as specifically contemplated in this Agreement.
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1.3 IMPLEMENTATION STEPS BY THE PARENT COMPANIES. Parent covenants in
favor of the Shareholders that:
(a) It will adopt and will cause the Parent Companies to adopt
all resolutions of their respective directors and, to the extent required,
shareholders necessary to approve this Agreement and the Related Agreements and
all other transactions or agreements contemplated hereby and thereby.
(b) As soon as practicable following execution of this Agreement
but before Closing on the Closing Date:
(i) Parent will form or cause to be formed each of Parent
Sub, Holding and Holding ULC.
(ii) Parent will cause a Certificate of Designation to be
filed with the appropriate corporate authority in Delaware to create the Parent
Multiple Voting Share.
(iii) Parent will take all such regulatory and corporate
steps required in order to be in a position to assume at Closing the Company
Options issued under the UForce Stock Option Plan in the manner specified in the
recitals to this Agreement.
1.4 COVENANTS ON CLOSING. Subject to the satisfaction or waiver of the
conditions to Closing in favor of such party contemplated by Sections 6.1
through 6.3, at Closing each party shall take the following actions ascribed to
it in the following order:
(a) Logibro Subscription. Holding ULC will deliver shares of
Parent Common Stock to Logibro on the terms as set forth in the Logibro Exchange
Agreement.
(b) Payments to Non-Employee Shareholder. The Non-Employee
Shareholder shall sell to Holding ULC, and Parent shall cause Holding ULC to
purchase from the Non-Employee Shareholder all of the outstanding Class A shares
of the Company held by the Non-Employee Shareholder in consideration of the
delivery by Holding ULC of a number of shares of Parent Common Stock that is
equal to the number of outstanding Class A shares of the Company held by the
Non-Employee Shareholder multiplied by 0.18556964 (the "EXCHANGE RATIO"), with
the result rounded to the nearest whole share, the whole as further specified
below:
[Enlarge/Download Table]
NUMBER OF CLASS A SHARES
OF THE COMPANY SOLD TO NUMBER OF PARENT COMMON
SHAREHOLDER HOLDING ULC STOCK ISSUED
----------------------------------------- ---------------------------- -----------------------
SGF................................... 7,600,000 1,410,329
The total number of shares of Parent Common Stock issued to the Non-Employee
Shareholder shall be referred to in this Agreement as the "TOTAL NON-EMPLOYEE
SHARES."
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(c) Amalgamation. Parent shall cause Holding ULC to, Calsub shall
cause Employee Holdco to, and each of Calsub, Thilco, CTco A, and CTco B shall
adopt all required shareholders' resolutions to cause the Company to, and the
Company shall immediately do all such things and provide all such documents
necessary to, approve the Amalgamation, the Amalgamation Agreement and apply to
the appropriate Nova Scotia court under the Companies Act (the "COURT") for an
order approving the Amalgamation ("APPROVAL ORDER") and, upon receipt thereof,
the Company will file with the Registrar the Amalgamation Agreement and the
Approval Order, together with proof of compliance with any terms and conditions
that may have been imposed by the Court in the Approval Order. Pursuant to the
Amalgamation, all of the Class A shares, Class B shares and Class C shares of
the Company held by Holding ULC and Employee Holdco prior to the Amalgamation
will be converted into an equivalent number of Exchangeco Common Shares and all
of the Class C shares of the Company held by Calsub, Thilco, CTco A, and CTco B
will be converted into an equivalent number of Exchangeco Preferred Shares.
(d) Recapitalization. Parent shall cause Holding ULC to, and each
of Calsub, Thilco, CTco A, and CTco B shall adopt (and Calsub shall cause
Employee Holdco to adopt) all required shareholders' resolutions to cause
Exchangeco to, and Exchangeco shall immediately do all such things and provide
all such documents necessary to, approve and effect the Recapitalization such
that the memorandum and articles of association of Exchangeco are amended to
provide that all Exchangeco Preferred Shares will be converted into a number of
Exchangeco Exchangeable Shares as is determined by multiplying the number of
Exchangeco Preferred Shares by the Exchange Ratio, with the result rounded to
the nearest whole share, the whole as further specified below:
[Download Table]
PERSON NUMBER AND CLASS OF SHARES OF EXCHANGECO
--------------------------------- ----------------------------------------------
Holdco ULC ...................... 7,600,000 Common Shares
Employee Holdco ................. 2,709,411 Common Shares
Calsub .......................... 1,148,056 Exchangeco Exchangeable Shares
Thilco .......................... 373,135 Exchangeco Exchangeable Shares
CTco A........................... 65,251 Exchangeco Exchangeable Shares
CTco B........................... 18,557 Exchangeco Exchangeable Shares
The total number of shares of Exchangeco Exchangeable Shares issued in
connection with the Recapitalization shall be referred to in this Agreement as
the "TOTAL MANAGEMENT SHARES."
(e) Transfer of Common Share of Employee Holdco. Calsub shall
sell to Holding ULC, and Parent shall cause Holding ULC to purchase from Calsub,
the one (1) outstanding common share of Employee Holdco for a purchase price of
one dollar US (US$1.00).
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(f) Parent Multiple Voting Share. Parent shall issue to each
holder of Exchangeable Shares a fractional interest in the Parent Multiple
Voting Share for an nominal sum of one dollar US (US$1.00) payable by each such
holder.
(g) Assumed Options. Parent shall assume each outstanding
unexercised Company Option such that each such outstanding Company Option is
converted into an option for the purchase of Parent Common Stock at the same
exercise price, on the same vesting dates and for a number of shares of Parent
Common Stock equal to the number of Company shares otherwise issuable under the
UForce Stock Option Plan multiplied by the Exchange Ratio (rounded to the
nearest whole share), either by direct assumption by Parent of the UForce Stock
Option Plan, with any necessary amendments to reflect such assumption, or by
substitution of the UForce Stock Option Plan with a substantially equivalent new
stock option plan of Parent. As soon as practicable after the Closing Date,
Parent shall deliver to such Option Holders appropriate notice or substitution
agreements setting forth such Option Holders' rights pursuant hereto. The total
number of shares of Parent Common Stock issuable to holders of Options is
referred to hereinafter as the "TOTAL OPTION SHARES."
(h) Replacement Options. In the event that there are any
Disallowed Options, Parent shall issue to each holder of Disallowed Options a
Replacement Option for a number of shares of Parent Common Stock equal to the
number of Company shares that would have been issuable under the Disallowed
Option multiplied by the Exchange Ratio. The Replacement Options, if any, shall
have the same vesting schedule as the Disallowed Options and shall have an
exercise price equal to the Closing Price.
(i) Related Agreements. The following agreements shall then be
entered into by the following parties hereto:
(i) Voting, Exchange and Support Agreement among Parent,
Holding ULC, Exchangeco, Employee Holdco and the holders of Exchangeable Shares,
the rights under which agreement to be granted to the holders of Exchangeable
Shares for one Canadian dollar (Cdn$1.00) and other valuable consideration
payable to such holders;
(ii) Registration Rights Agreement among Parent, Logibro
and each Shareholder;
(iii) Employment Agreements among the Company, Parent,
each Manager and the related Shareholder of each Manager;
(iv) Noncompetition Agreements between Parent and the
Managers;
(v) Stock Restriction Agreements between the Company,
Parent, and Dorion and Leclerc; and
(vi) Escrow Agreement between Parent and the Management
Shareholder.
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1.5 ADJUSTMENTS TO EXCHANGE RATIO. If on or after the date of this
Agreement, but on or prior to Closing, Parent recapitalizes through a stock
split, reverse stock split, or reorganizes, reclassifies or otherwise changes
its outstanding shares into the same or a different number of shares of other
classes, or declares a dividend on its outstanding shares payable in shares or
securities convertible into shares, the Exchange Ratio will be immediately
adjusted by Parent appropriately so as to maintain the proportionate interests
of the Security Holders.
1.6 INDEMNIFICATION SHARES. The Parent Companies shall be entitled to
withhold ten percent (10%) of the Exchangeable Shares (or Parent Common Stock
issuable under the Exchangeable Share Provisions or the Voting, Exchange and
Support Agreement) issued to the Management Shareholders (the "INDEMNIFICATION
SHARES") and such shares shall be delivered and held on the terms and conditions
contained in the Escrow Agreement to partially secure the indemnification
obligations of the Management Shareholders as set forth in Article VII. The
Indemnification Shares shall be taken from the portion of Exchangeable Shares
(or Parent Common Stock issuable under the Exchangeable Share Provisions or the
Voting, Exchange and Support Agreement) that are considered Unvested Shares
under the terms of the Employment Agreements and Stock Restriction Agreements
and shall be the last shares to vest under such agreements.
1.7 TAX AND ACCOUNTING TREATMENT. The business combination to be
effected by the Acquisition is intended to be treated as a purchase for
accounting purposes. The parties intend that the Acquisition shall (i)
constitute a taxable exchange for United States federal income tax purposes (not
qualifying under Section 368 or 351 of the United States Internal Revenue Code
of 1986, as amended) to Shareholders who are subject to taxation in the United
States, and (ii) a tax deferred transfer in accordance with the provisions of
Section 85 of the Income Tax Act (Canada), in the case of Michael Cook, John
Hennessy, Jean-Marc Parenteau, Jean-Charles Phaneuf, Alain Provencher, Danny
Deschenes, Alexandre Garneau, Farid Lahdiri, Majed Haj Mohamad, Marcel St-Amant,
Mario Dorion and Martin Leclerc and a tax-deferred reorganization in accordance
with the provisions of Section 86 of the Income Tax Act (Canada), in the case of
Calsub, Thilco, CTco A and CTco B.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND EXCHANGECO
Except as disclosed in a document dated as of the date hereof referring
specifically to the representations, warranties or covenants in this Agreement
that reasonably identifies the basis for an exception to a representation,
warranty or covenant in this Agreement and that is delivered by the Company to
Parent prior to the execution of this Agreement (the "COMPANY SCHEDULES"), the
Company and each of the Management Shareholders represents and warrants to the
Parent Companies as of the date of this Agreement and as of the Closing as set
forth below. Each Shareholder individually represents and warrants to the Parent
Companies as of the date of this Agreement and as of the Closing the matters set
forth in Section 2.27. The breach of a representation or warranty in Section
2.27 shall only result in liability for the Shareholder breaching
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such representation or warranty and shall not result in liability for any other
non-breaching Shareholder. Unless the context clearly indicates otherwise, all
representations and warranties related to the Company shall be deemed to be
representations and warranties as to Exchangeco as of the Closing.
2.1 ORGANIZATION OF THE COMPANY AND EXCHANGECO.
(a) The Company is a corporation duly incorporated and validly
existing under the federal laws of Canada. The Company has the corporate power
to own its properties and to carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing as a foreign
corporation or extra-provincial corporation in each jurisdiction where it does
business and/or owns or leases property. The Company has delivered a true and
correct copy of its Articles of Incorporation and Bylaws (or equivalent
organizational documents), each as amended to date, to Parent.
(b) Upon the Amalgamation, Exchangeco (i) will be an unlimited
liability company duly amalgamated and validly existing under the laws of Nova
Scotia, (ii) will have the corporate power to own its properties and to carry on
its business as now being conducted by the Company and (iii) will be duly
qualified to do business and be in good standing as a foreign corporation or
extra-provincial corporation in each jurisdiction where it does business and/or
owns or leases property.
2.2 COMPANY SHARE CAPITAL.
(a) The authorized share capital of the Company consists of an
unlimited number of Common Shares ("COMMON SHARES") designated into Class A,
Class B and Class C. As of the date of this Agreement the issued and outstanding
shares of Common Stock will be 7,600,000 Class A, 243,450 Class B, and
11,114,999 Class C. The issued and outstanding shares of the Company will be
held of record by the Persons, with the addresses of record and in the amounts,
set forth on Schedule 2.2(a). All issued and outstanding Common Shares will be
owned by the Shareholders or entities controlled by the Shareholders, or Logibro
free and clear of any Liens, other than Liens created by such parties by
agreement, through default or otherwise (and to the Company's Knowledge, no such
Liens exist), and have been duly authorized and validly issued and are fully
paid and non-assessable and not subject to preemptive rights or rights of first
refusal created by statute, the Articles of Incorporation or Bylaws of the
Company or any agreement to which the Company is a party or by which it is bound
or by which the Shareholders or Logibro are party or by which any of them are
bound. All such issuances of securities have been made in compliance with
applicable securities and other laws. Schedule 2.2(a) sets forth the
capitalization of the Company as it will stand immediately prior to the Closing.
(b) Except as set forth on Schedule 2.2(b) there are no options,
warrants, call rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound, obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold repurchased or redeemed, any shares of the Company or obligating
the Company to grant, extend, accelerate the vesting of, change the price of,
otherwise
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amend or enter into any such option, warrant, call right commitment or
agreement. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting shares of the Company. As a result of
the Acquisition, Holding ULC and Employee Holdco will be the sole record holders
and beneficial owners of all issued and outstanding voting shares of Exchangeco
and all rights to acquire or receive any shares of Exchangeco, whether or not
such shares are outstanding.
2.3 SUBSIDIARIES. Except for Services conseils Von Neumann Inc. the
Company has not in the past had and does not currently have any subsidiaries or
affiliated companies and does not otherwise own any shares or any interest in,
or control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity. Unless the context clearly
indicates otherwise, for purposes of this Agreement, all representations as to
the Company shall mean the Company and its Subsidiary taken together as a whole.
2.4 AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies. The execution and delivery of this Agreement by the Company does not,
and, as of the Closing, the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "CONFLICT") (i) any provision of the Articles
of Incorporation or Bylaws of the Company or Exchangeco (as amended) or any
shareholders agreement or resolution of the Company or Exchangeco's board of
directors or (ii) any mortgage, hypothec, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation, or any judgment,
decree, order or award of any court, governmental authority or arbitrator having
jurisdiction over the Company or Exchangeco applicable to the Company or
Exchangeco or their properties or assets, except where such failure or conflict
would not have or could not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 2.4 no consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Authority or any third party (so as not to trigger any Conflict) is
required by or with respect to the Company or Exchangeco in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable provincial, federal and state securities laws, such other consents,
waivers, authorizations, filings, approvals and registrations which are set
forth on Schedule 2.4; (ii) such other consents, waivers, authorizations,
filings, approvals and registrations the absence of which would not have or
could not reasonably be expected to have a Material Adverse Effect; and (iii)
such other consents, waivers, authorizations, filings, approvals and
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registrations identified as "Unobtained Consents" on Schedule 2.4 that the
parties have agreed shall not be sought in advance of Closing (the "UNOBTAINED
CONSENTS").
2.5 COMPANY FINANCIAL STATEMENTS. Schedule 2.5 sets forth the Company's
audited balance sheet as of June 30, 1999, and the related audited statement of
earnings, of deficits and of changes in the financial position for the period
ended June 30, 1999 (the "FINANCIAL STATEMENTS"). The Financial Statements
present fairly in all material respects the financial position and the results
of operations of the Company as of June 30, 1999 and during the periods
indicated therein in accordance with Canadian GAAP. Schedule 2.5 also sets forth
the Company's unaudited statement of net assets (total assets less total
liabilities) as of March 31, 2000 (the "NET ASSETS"). The Net Assets of the
Company as of March 31, 2000 will not be lower, in all material respects than
two million five hundred and eighty-three thousand dollars (Cdn$2,583,000)
indicated therein in accordance with Canadian GAAP, except for those
liabilities, indebtedness, obligations, expenses, claims, deficiencies,
guaranties or endorsements set forth in Schedule 2.6.
2.6 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.6, the
Company has no liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement of any type, and immediately prior to the Closing
Exchangeco will not have any such obligation, which individually or in the
aggregate exceeds Cdn$50,000, whether accrued, absolute, contingent, matured,
unmatured or other (where required to be reflected in financial statements in
accordance with Canadian GAAP), except for those liabilities which are reflected
in the Net Assets or those liabilities incurred after March 31, 2000 in the
ordinary course of business consistent with past practice.
2.7 NO CHANGES. Except as set forth in Schedule 2.7, since the date of
the Net Assets, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Net Assets and consistent with past
practices which individually or in the aggregate exceeds Cdn$10,000;
(b) amendments or changes to the Articles of Incorporation or
Bylaws or other constating documents of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding Cdn$10,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) claim of wrongful discharge or dismissal or other unlawful
labor practice or action or, to Company's Knowledge, any union, collective
bargaining or labor organizing activity;
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(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company, or any
disagreement between the Company and its auditors;
(g) revaluation by the Company of any of its assets which
individually or in the aggregate would be material, including without limitation
any write down of the value of any inventory or any write off of any accounts or
notes receivable or any portion thereof in amounts exceeding Cdn$50,000 in the
aggregate;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the shares of the Company or any direct or indirect
redemption, purchase or other acquisition by the Company of any shares in the
share capital of the Company;
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of the Company's officers, directors,
employees, consultants or advisors, or the declaration, payment or commitment or
obligation of any kind for the payment of a bonus or other additional salary,
compensation or change-of-control award to any such Person except as otherwise
contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company, except in the ordinary course of business
as conducted on that date and consistent with past practices;
(k) amendment or termination of any Contract (as defined in
Section 2.12);
(l) loan by the Company to any Person, incurring by the Company
of any indebtedness, guaranteeing by the Company of any indebtedness, issuance
or sale of any debt securities of the Company or guaranteeing of any debt
securities of others, except for advances to employees for travel and business
expenses in the ordinary course of business, consistent with past practices;
(m) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any account receivable
of the Company which has or could be reasonably expected to constitute a
Material Adverse Effect;
(n) notice of any claim of ownership by a third party of any
Company Intellectual Property (as defined in Section 2.11 below) or notice of
infringement by the Company of any third party's intellectual property rights;
(o) issuance or sale by the Company of any shares in the share
capital of the Company, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(p) change in pricing or royalties set or charged by the Company
to its customers or licensees or in pricing or royalties set or charged by
Persons who have licensed Company
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Intellectual Property to the Company except in the ordinary course of business
as conducted on that date, consistent with past practices;
(q) payment, discharge or satisfaction of any encumbrance,
liability or obligation of the Company (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) other than payment of accounts
payable, scheduled loan payments and Tax liabilities incurred in the ordinary
course of business as conducted on that date, consistent with past practices;
(r) forward purchase contracts or forward sales commitments,
other than in the ordinary course of business as conducted on that date,
consistent with past practices;
(s) event or condition of any character that would have a
Material Adverse Effect on the Company; or
(t) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with Parent, the Shareholders, Logibro and
their representatives regarding the transactions contemplated by this Agreement
and the Logibro Termination Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) Definition of Taxes. For the purposes of this Agreement,
"TAX" or, collectively, "TAXES," means any and all provincial, federal, state,
local, municipal and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities, including Canada Pension Plan ("CPP") and
Quebec Pension Plan ("QPP") contributions and employment insurance contributions
including taxes based upon or measured by gross receipts, income, profits,
capital, sales, goods and services, use and occupation, workers' compensation,
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, customs, excise and property taxes, together with all assessments
and reassessments, interest, penalties and additions imposed with respect to
such amounts and any obligations under any agreements or arrangements with any
other Person with respect to such amounts and including any liability for taxes
of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) The Company as of the Closing will have prepared and
filed all required provincial, federal, state, local and foreign returns,
schedules, forms, estimates, declarations, information statements and reports or
other documents ("RETURNS") required to be filed before the Closing with any
Governmental Authority in respect of the determination, assessment, collection
or payment of or in connection with the administration, implementation or
enforcement of any legal requirement relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns are true and
correct and have been completed in accordance with applicable law, the Company
having correctly computed all Taxes and prepared and duly and timely filed all
Tax Returns required to be filed.
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(ii) The Company, as of the Closing: (A) will have timely
paid or accrued all Taxes it is required to pay or accrue, (B) will have made
adequate and timely installments of Taxes required to be made, and (C) will have
withheld from each payment made to its past or present employees, officers,
directors and independent contractors, creditors, shareholders or other third
parties all Taxes and other material deductions required to be withheld and
have, within the time and in the form required by law, paid such withheld
amounts to the proper Governmental Authorities.
(iii) The Company has not been delinquent in the payment
of any Tax. There is no Tax deficiency outstanding nor, to the Company's
Knowledge, assessed against the Company. The Company has not executed any waiver
of any statute of limitations on or extensions of the period for the assessment
or collection of any Tax nor has the Company executed any agreements providing
for an extension of time for the filing of any return or the payment of any Tax
by the Company. There are no matters relating to Taxes under discussion between
any Governmental Authority and the Company or any subsidiary, including any
objections to any assessment or reassessment of Taxes.
(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination, nor is any taxing authority
asserting, or to Company's Knowledge, threatening to assert against the Company
any claim for Taxes.
(v) The Company has no liabilities as of the date hereof
for unpaid Taxes which have not been accrued or reserved against in accordance
with Canadian GAAP and accounted for in the Net Assets, whether asserted or
unasserted, contingent or otherwise, and the Company has no Knowledge of any
basis, including, but without limitation, aggressive treatment of income,
expenses, deductions, credits or other amounts in the filing of earlier or
current Returns, for the assertion of any such liability attributable to the
Company, its assets or operations. Since March 31, 2000, the Company has not
incurred any liability for Taxes other than in the ordinary course of business.
(vi) To the best of the Company's Knowledge, all tax
credit receivables included in the Net Assets, or previously claimed by the
Company, have been calculated in accordance with the Income Tax Act (Canada) and
the relevant provincial legislation and the Company satisfied at all times the
relevant criteria and conditions entitling it to such tax credits. All refunds
of tax credits received or receivable by the Company in any financial year to
June 30,1999, were claimed in accordance with the Income Tax Act (Canada) and
the relevant criteria and conditions entitling it to claim a refund of such tax
credits.
(vii) The Company has provided to Parent copies of all
federal, provincial and state income, all goods and services and all provincial
and state sales and use Tax Returns for the Company filed for all periods since
its incorporation.
(viii) The Company has collected and remitted to the
appropriate Tax Authority in the form and at the time required by law all
amounts required to be collected and
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remitted by it on account of Taxes under Part IX of the Excise Tax Act (Canada)
and any similar provincial legislation and in respect of retail sales tax.
(ix) There are (and as of immediately following the
Closing there will be) no Liens on the assets of the Company relating to or
attributable to Taxes except for Liens for Taxes not yet due and payable.
(x) The Company has no Knowledge of any basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(xi) Except as set forth in the Employment Agreements,
there are no agreements, commitments, employment policies, plans or arrangements
binding on the Company or Exchangeco pursuant to which any severance payments or
other amounts may become payable by the Company or Exchangeco (whether currently
or in the future) to current or former officers, directors or employees of the
Company or Exchangeco or others as a result of or in connection with the
Acquisition, including any termination of employment relating to or within one
year following the Acquisition.
(xii) Except as set forth in Schedule 2.8(b)(xii), the
Company is not a party to a Tax sharing or allocation agreement and is not
liable for the Taxes of any other Person, whether as a transferee or successor
or by contract or otherwise, nor does the Company owe any amount under any such
agreement.
(xiii) The Company's tax basis in its assets (and the
undepreciated capital cost of such assets) for purposes of determining its
future amortization, depreciation and other federal and provincial income Tax
deductions is accurately reflected on Company's Tax books and records and Tax
Returns.
(xiv) No power of attorney has been granted by the Company
with respect to any matter relating to Taxes.
(xv) The Company has not requested or received a ruling
from any taxing authority or entered into a settlement or compromise with any
taxing authority.
(xvi) Except as set forth in Schedule 2.8(b)(xvi), to
Company's Knowledge, no circumstances exist which would make the Company or any
subsidiary subject to the application of any of sections 79 to 80.04 of the
Income Tax Act (Canada) or a similar provision under a provincial taxing
statute. The Company has not acquired property or services from or disposed of
property or provided services to, a Person with whom it does not deal at arm's
length (within the meaning of the Income Tax Act (Canada) and the equivalent
provisions of the Quebec Taxation Act) for an amount that is other than the fair
market value of such property or services, or has been deemed to have done so
for purposes of the Income Tax Act (Canada) and the equivalent provisions of the
Quebec Taxation Act.
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(xvii) Except as set forth in Schedule 2.8(b)(xvii), the
Company has not filed or been party to any election pursuant to Section 83 or 85
of the Income Tax Act (Canada) or the corresponding provisions of the Quebec
Taxation Act.
(xviii) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by the Company as an expense under the Income Tax Act
(Canada) or the Quebec Taxation Act other than reimbursements of a reasonable
amount of entertainment expenses and other nondeductible expenses that are
commonly paid by similarly situated businesses in reasonable amounts.
(xix) The Company has not deducted any material amounts in
computing its income in a taxation year which may be included in a subsequent
taxation year under Section 78 of the Income Tax Act (Canada) or a similar
provision under a provincial taxing statute.
(xx) The Company has not been and is not currently
required to file any Returns with any taxation authority located in any
jurisdiction outside Canada or outside the province of Quebec.
(xxi) None of the Shareholders is a non-resident of Canada
for the purposes of the Income Tax Act (Canada) and none of them (or their asset
protection vehicles, as the case may be) shall be a non-resident of Canada for
the purposes of the Income Tax Act (Canada) at Closing.
(xxii) The Company has (a) never been a member of an
affiliated group (within the meaning of Code Section 1504(a)) filing a
consolidated U.S. federal income Tax Return (other than a group the common
parent of which was the Company), (b) no liability for the Taxes of any Person
(other than the Company) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, or otherwise and (c) never been a party to any joint venture,
partnership or other agreement that could be treated as a partnership for Tax
purposes.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in Schedule
2.9, there is no agreement (non-compete or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products to, or performing services for, any
class of customers, in any geographic area, during any period of time or in any
segment of the market.
2.10 TITLE TO PROPERTIES; ABSENCE OF LIENS.
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(a) The Company does not own any real or immovable property, nor
has the Company ever owned any real or immovable property. Schedule 2.10(a) sets
forth a list of all real or immovable property currently leased by the Company,
the name of the lessor, the date of the lease and each amendment thereto and the
aggregate annual rental and/or other fees payable under any such lease. Except
as disclosed in Schedule 2.10(a), the Company occupies such leased property and
to Company's Knowledge, has the exclusive right to occupy such leased property.
All such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default by the Company).
(b) The Company has good and valid title to or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, Personal, immovable, movable and mixed, used or
held for use in its business, free and clear of any Liens, except as reflected
in Schedule 2.10(b) or in respect of leases disclosed in Schedule 2.12(a) and
except for Liens for Taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
2.11 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
"INTELLECTUAL PROPERTY" means any or all of the following and all rights
in, arising out of, or associated therewith: (i) all Canadian, United States and
foreign patents and applications and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof
("PATENTS"); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, Trade Secrets, Proprietary Information, know how and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor and all other rights
corresponding thereto throughout the world; (iv) all mask works, mask work
registrations and applications; (v) all industrial designs and any registrations
and applications therefor throughout the world; (vi) all trade names, logos,
common law trademarks, service marks and domain names; trademark and service
mark registrations and applications therefor and all goodwill associated
therewith throughout the world; (vii) all licenses and registered user
agreements; (viii) all computer software including all source code, object code,
firmware, development tools, files, records and data, as well as all media on
which any of the foregoing is recorded; (ix) all documentation related to any of
the foregoing.
"TRADE SECRETS" shall mean information, including a formula, pattern,
compilation, program, device, method, technique, or process, that: (i) derives
independent economic value, actual or potential, from not being generally known
to the public or to other Persons who can obtain economic value from its
disclosure or use; and (ii) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
-19-
"PROPRIETARY INFORMATION" shall mean (i) all files, data, engineering
drawings, concepts, methods, processes, manufacturing methods, computer programs
(considered as Trade Secrets or not), source codes or native machine codes,
specifications inherent to products sold or developed by the Company, system
configurations; and (ii) client lists and all other information relating to
clientele, costs and prices, supplier lists and all other information that has
not been disclosed relating to Company activities and projects, including
without limitation, the marketing plans, strategies and forecasts.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that (i) is owned by (ii) or exclusively licensed to the Company and its
Subsidiary.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all Canadian, United
States, and other foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered user agreements; (iv) registered
copyrights and applications for copyright registration; (v) any mask work
registrations and applications to register mask works; and (vi) any other
Company Intellectual Property that is subject of an application, certificate,
filing, registration or other document issued by, filed with, or registered or
recorded by, any state, government or other public legal authority.
(b) Schedule 2.11(b) lists all Registered Intellectual Property
owned by, or filed in the name of, the Company (the "COMPANY REGISTERED
INTELLECTUAL PROPERTY") and lists any prior or pending proceedings or actions
taken by or against the Company or, to the Company's Knowledge, which involves
the Company, before any court, tribunal (including the Canadian or United States
Patent and Trademark Offices or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property.
(c) To the best of the Company's Knowledge and belief, each item
of Company Intellectual Property, including all Company Registered Intellectual
Property listed in Schedule 2.11(b), is free and clear of any Liens except as
reflected in Schedule 2.11(c). The Company (i) is the owner of all trademarks
and trade names used in connection with the operation or conduct of the business
of the Company, including the sale of any products or technology or the
provision of any services by the Company, except as set forth on Schedule
2.11(c) and (ii) to the best of the Company's Knowledge and belief owns and has
good title to, all copyrighted works that are products of the Company or other
works of authorship that the Company otherwise purports to own other than the
third party licensed trade marks, trade names, copyrighted works and other works
listed in Schedule 2.11(c).
(d) To the extent that any Company Intellectual Property has been
developed or created by any Person other than the Company, the Company has a
written agreement with such Person with respect thereto and the Company thereby
has obtained ownership of, is the exclusive owner of, or is authorized to use
all rights in such Intellectual Property.
(e) Except as set forth in Schedule 2.11(e)(i), the Company has
not transferred ownership of or granted any license of or right to use any
Intellectual Property that is Company
-20-
Intellectual Property, to any other Person, other than pursuant to agreements
entered into in the ordinary course of business which are substantially
identical to Company's standard form of license agreement attached hereto as
Schedule 2.11(e)(ii) ("STANDARD LICENSE AGREEMENTS").
(f) The Company owns, has rights in or has a written license to
all Intellectual Property necessary to the conduct of its business as it is
currently conducted and to all products, technology or services currently under
development except as would not have a material adverse effect on such
development.
(g) Other than "shrink-wrap" and similar widely available
commercial end-user licenses (each, an "END-USER LICENSE"), the contracts,
licenses and agreements listed in Schedule 2.11(g) include all contracts,
licenses and agreements to which the Company is a party with respect to any
Intellectual Property of any Person other than the Company. To the Company's
Knowledge, no Person other than the Company has rights in improvements made by
the Company in Intellectual Property which has been licensed to the Company.
(h) Except for End-User Licenses, Schedule 2.11(h) lists all
contracts, licenses and agreements in respect of software programs owned by
third parties (whether or not such contract, license or agreement is with such
third parties) between the Company and any other Person wherein or whereby the
Company has agreed to, or assumed, any material obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
material obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other Person of
the Intellectual Property of any Person other than the Company.
(i) (X) To the best of the Company's Knowledge and belief, the
operation of the Company's business does not infringe or misappropriate the
Intellectual Property (other than Patents) of any Person, violate the rights of
any Person (including rights to privacy or publicity), or constitute unfair
competition or trade practices under the laws of any jurisdiction, and the
Company has not received notice from any Person claiming that such operation or
any act, product, technology or service (including products, technology or
services currently under development) of the Company infringes or
misappropriates the Intellectual Property (other than Patents) of any Person or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(Y) To the best of the Company's Knowledge and belief, the
operation of Company's business does not infringe or misappropriate the Patents
of any Person, and the Company has not received notice from any Person claiming
that such operation or any act, product, technology or service (including
products, technology or services currently under development) of the Company
infringes or misappropriates the Patents of any Person (nor is the Company aware
of any basis therefor). The representations and warranties of this Section
2.11(i)(Y) shall only apply to claims of infringement or misappropriation or
violations arising from (i) the products or technology of the Company existing
as of the Closing and (ii) products or technology under development as of the
Closing.
-21-
(j) The Company Registered Intellectual Property is in good
standing, all necessary registration, maintenance and renewal fees in connection
with such Company Registered Intellectual Property have been paid and all
necessary documents and certificates in connection with such Company Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States, Canada or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Schedule 2.11(j) lists all actions that must
be taken by the Company within sixty (60) days of the Closing, including the
payment of any registration, maintenance or renewal fees or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Intellectual Property.
(k) There are neither contracts, licenses nor agreements between
either the Company, on the one hand, and any other Person on the other, the
subject matter of which relates primarily to Company Intellectual Property under
which there is any dispute known to the Company regarding the scope of such
agreement or performance under such agreement including with respect to any
payments to be made or received by the Company thereunder. Furthermore, none of
such contracts, licenses or agreements can be terminated solely by reason of the
Company being subject to the transactions contemplated by this Agreement.
(l) To the Company's Knowledge, no Person is infringing or
misappropriating any Company Intellectual Property.
(m) The Company has taken reasonable steps in accordance with
normal industry practice to protect the rights of the Company in confidential
information and Trade Secrets of the Company or provided by any other Person to
the Company. Without limiting the foregoing, except as set forth in Schedule
2.11(m)(i), all current and former employees, consultants and contractors have
executed Proprietary Information, confidentiality and assignment agreements and
moral rights waivers substantially in the Company's standard forms, attached
hereto as Schedule 2.11(m)(ii).
(n) No Company Intellectual Property or product, technology or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(o) To the Company's Knowledge, no (i) publication of the
Company, or (ii) material distributed by the Company constitutes obscene
material, a defamatory statement or material, false advertising or otherwise
violates any law or regulation which would result in a Material Adverse Effect.
(p) Except as set forth in Schedule 2.11(p), the Company has
taken reasonable steps to ensure that Company's products will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information dependent
-22-
on or relating to such dates (collectively, "YEAR 2000 COMPLIANT"). Except as
set forth in Schedule 2.11(p), the Company has taken reasonable steps to ensure
that its products will lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000. Except as set
forth in Schedule 2.11(p), the Company has taken reasonable steps to ensure that
all of Company's internal computer and technology products and systems are Year
2000 Compliant.
(q) Except as set forth in Schedule 2.11(q), the Company is not
obligated to pay any royalties or other compensation to any Person in respect of
its ownership, use or license of any of the Company Intellectual Property.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except for payment under
End-User Licenses and as set forth on Schedule 2.12(a), the Company does not
have, and is not a party or bound by:
(a) any collective bargaining agreements,
(b) any agreements or arrangements that contain any severance pay
change of control or post-employment liabilities or obligations, other than
reasonable notice provisions at law,
(c) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(d) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company,
(e) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(f) any fidelity or surety bond or completion bond,
(g) any lease of Personal property having a value individually in
excess of Cdn$50,000,
(h) any agreement of indemnification or guaranty,
(i) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or to
compete with any Person,
(j) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of Cdn$50,000,
-23-
(k) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the business of the Company,
(l) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause (h)
hereof,
(m) any purchase order or contract for the purchase of raw
materials involving Cdn$35,000 or more,
(n) any construction contracts,
(o) any distribution, joint marketing or development agreement,
(p) any agreement pursuant to which the Company has granted or
may grant in the future, to any party, a source-code license or option or other
right to use or acquire source-code, or
(q) any other agreement, contract or commitment that involves
Cdn$50,000 or more or is not cancelable without penalty within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events
that would constitute a material breach, violation or default with the lapse of
time, giving of notice, or both, as are all noted in Schedule 2.12(b), the
Company has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any End-User License or any agreement, contract or commitment required to be set
forth on Schedule 2.12(a) (any such End-User License or any agreement, contract
or commitment, a "CONTRACT," it being understood that this representation
applies to license agreements, service agreements and management agreements in
Company's standard form, which shall constitute Contracts for purposes of this
Agreement, but need not be included in Schedule 2.12(a)). Each Contract is in
full force and effect and, except as otherwise disclosed in Schedule 2.12(b), is
not subject to any material default thereunder of which the Company has
Knowledge by any party obligated to the Company pursuant thereto. The Company
has no agreements with customers or suppliers involving credit terms of more
than one year.
2.13 INTERESTED PARTY TRANSACTIONS. Except as set forth on Schedule
2.13, no officer, director or shareholder of the Company, and no officer,
director or direct or indirect shareholder of a shareholder nor any relative or
spouse of any of such Persons, or any trust, partnership or corporation in which
any of such Persons has or has had an interest, has or has had, directly or
indirectly, (i) an economic interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells, or
proposes to furnish or sell, (ii) an economic interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any contract or agreement set forth in Schedule
2.12(a) or Schedule 2.11(b); provided, that ownership of no more than one
percent (1%) of the outstanding
-24-
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
2.14 COMPLIANCE WITH LAWS. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any Canadian, U.S., foreign, provincial, federal,
state or local statute, law or regulation.
2.15 LITIGATION. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or, to Company's Knowledge,
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such nor has the Company received
any notice of commencement of any lawsuit or proceeding against, or
investigation of, the Company or its affairs. Except as set forth in Schedule
2.15, there is no investigation pending or, to Company's Knowledge, threatened
against the Company, its properties or any of its officers or directors by or
before any Governmental Authority. Schedule 2.15 sets forth, with respect to any
such action, suit, proceeding or investigation identified therein, to the extent
known, the forum, the parties thereto, the subject matter thereof and the amount
of damages claimed or other remedy requested. To the Company's Knowledge, no
Governmental Authority has at any time challenged or questioned the legal right
of the Company to develop, manufacture, offer or sell any of its products in the
present manner or style thereof.
2.16 INSURANCE. The Company maintains valid insurance with insurance
companies of good repute, and each policy is identified in Schedule 2.16 and
contains provisions which are reasonable and customary in the Company's
industry. There is no claim by the Company pending under any of such insurance
as to which coverage has been questioned, denied or disputed by the underwriters
of such insurance. True and complete copies of such insurance together with the
most recent inspection reports, if any, received from insurance underwriters or
others as to the condition of the property and assets of the Company have been
provided to Parent. All premiums due and payable under all such insurance have
been paid, and the Company is otherwise in material compliance with the terms of
such insurance (or other policies and bonds providing substantially similar
insurance coverage). The Company has no Knowledge of any threatened termination
of, or material premium increase with respect to, any of such insurance.
2.17 MINUTE BOOKS. The minute books of the Company made available to
counsel for Parent are the complete minute books of the Company and contain the
accurate text of all resolutions passed by the Company's board of directors (or
committees thereof) and shareholders either at meetings or by written consent
since the incorporation of the Company.
2.18 ENVIRONMENTAL MATTERS.
(a) Hazardous Materials. The Company has not operated any
underground storage tanks, and has no Knowledge of the existence, without
further inquiry, at any time, of any underground storage tank (or related piping
or pumps), at any property that the Company has at any time owned, operated,
occupied or leased. No Hazardous Materials (as defined below) are present as a
result of the actions or omissions of the Company, or, to the Company's
Knowledge, without further inquiry, as a result of any actions of any third
party or otherwise, in, on or under any
-25-
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, or released or exposed its
employees or others to Hazardous Materials in violation of any Environmental
Laws as defined below in effect on or before the Closing, nor has the Company
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (any or all of the foregoing being collectively referred to
as "HAZARDOUS MATERIALS ACTIVITIES") in violation of any Environmental Laws (as
defined below) or any rule, regulation, treaty or statute promulgated by any
Governmental Authority in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, orders, registrations, manifests, licenses, clearances and
consents (the "ENVIRONMENTAL PERMITS") necessary for the conduct of the
Hazardous Material Activities of the Company and other businesses of the Company
as and to the extent that such activities and businesses are currently being
conducted.
(d) Compliance with Environmental Laws. The Company, the
operation of its business, the property and assets owned, leased or used by the
Company and the use, maintenance and operation thereof have been and are in
compliance with all Environmental Laws. The Company has complied in all material
respects with all reporting and monitoring requirements under all Environmental
Laws. The Company has not received any notice of any non-compliance with any
Environmental Laws, and the Company has not ever been convicted of an offense
for non-compliance with any Environmental Laws or been fined or otherwise
sentenced or settled such prosecution short of conviction.
(e) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's Knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
(f) Definition of "Hazardous Materials". As used herein,
"HAZARDOUS MATERIALS" shall mean any substance that has been designated by any
Governmental Authority or by any Environmental Law to be a pollutant,
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and petroleum
products, urea-formaldehyde and all substances listed as a "hazardous
substance," "hazardous waste," "hazardous material," "contaminants" or "toxic
substance" or words of similar import, under any Environmental Law.
(g) Definition of "Environmental Laws". As used herein,
"ENVIRONMENTAL LAWS" shall mean all applicable statutes, regulations,
ordinances, by-laws, and codes and all
-26-
international treaties and agreements, now or hereafter in existence in Canada
(whether federal, provincial or municipal) and, to the extent applicable to the
conduct of Company's business, in the United States (whether federal, state or
local) or any other jurisdiction in which the Company carries on business
relating to the protection and preservation of the environment, occupational
health and safety, product safety or product liability.
2.19 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth on Schedule 2.19, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Schedule 2.19 lists any agreement, written or
oral, with respect to such fees.
2.20 EMPLOYEE MATTERS AND BENEFIT ARRANGEMENTS.
(a) Compliance. Schedule 2.20(a) contains a true and complete
list of each employee benefit plan or arrangement, and any plan, agreement or
program providing for fringe benefits, supplemental employment benefits,
severance or termination pay, change of control payments, pension, retirement,
health, welfare, medical, dental, disability, life, deferred compensation,
profit-sharing, bonuses, change-of-control stock options, stock appreciation or
other forms of incentive compensation that (i) is sponsored, maintained or
funded, as the case may be, by the Company and (ii) covers any current, former
or retired employee, consultant or director of the Company (collectively
"BENEFIT ARRANGEMENTS"). Each Benefit Arrangement, including Canadian Benefit
Arrangements (as defined herein) has been established, registered, maintained
and administered in material compliance with its terms and with the requirements
prescribed by any and all statutes, laws, ordinances and regulations which are
applicable to such Benefit Arrangements including all Tax laws where such is
required for preferential treatment. No Benefit Arrangement has unfunded
liabilities that, as of the Closing Date, will not be offset by insurance or
which are not fully accrued or reserved against in the computation of the Net
Assets.
(b) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(b), no Benefit Arrangement, including Canadian Benefit
Arrangements (as defined herein) provides, or has any liability to provide, life
insurance, medical or other employee benefits to any current, former, or retired
employee, consultant or director of the Company or any affiliate of the Company
("EMPLOYEE") upon his or her retirement or termination of employment for any
reason, except as may be required by statute or by law in respect of the
termination of an employee without cause, and the Company has never represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute or by law in respect of the termination of an employee without cause.
(c) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not constitute an
event under any Benefit Arrangement, trust or loan that will or may result in
any payment (whether of severance pay
-27-
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
(d) Employment Matters. The Company (i) is in compliance in all
material respects with all applicable provincial, federal, state, foreign and
local laws, rules and regulations respecting employment, employment practices,
terms and conditions of employment and wages and hours, in each case, with
respect to Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any Taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any Governmental Authority,
with respect to employment compensation benefits, social security or other
benefits or obligations for Employees (other than routine payments to be made in
the normal course of business and consistent with past practice).
(e) Labor. No work stoppage or labor strike against the Company
is pending or, to the Company's Knowledge, threatened nor has there been any
such work stoppage or labor strike since the incorporation of the Company.
Except as set forth in Schedule 2.20(e), the Company is not involved in or, to
the Company's Knowledge, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, constitute a Material Adverse Effect. Except as set forth
in Schedule 2.20(e), the Company is not presently, nor has it been in the past,
a party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees, and no collective bargaining agreement is being
negotiated by the Company. Without limiting the generality of the foregoing, the
Company is in material compliance with and there are no legal proceedings or
proceedings of any kind under the Labour Standards Act (Quebec), the Pay Equity
Act (Quebec), the Labour Code (Quebec), the Manpower Act (Quebec), the Act
respecting Occupational Health & Safety (Quebec), the Act respecting Industrial
Accidents and Occupational Diseases (Quebec) and the Charter of Human Rights and
Freedoms (Quebec).
(f) In addition to and without limiting the generality of the
foregoing, with respect to each Benefit Agreement that has been sponsored,
maintained or funded by the Company or any affiliates of the Company for the
benefit of Employees in Canada ("CANADIAN BENEFIT ARRANGEMENTS"):
(i) Except as provided on Schedule 2.20(f)(1), correct and
complete copies of the following have been provided to the Parent in respect of
Canadian Benefit Arrangements:
(1) Applicable plan documents amended as of the
date hereof together with funding and investment management agreements, summary
plan descriptions, the most recent actuarial reports, financial statements and
material correspondence with Governmental Authorities;
-28-
(2) Detailed description of current administration
policies and conduct regarding pension and non-pension benefits and their
improvements;
(3) To the extent permitted by law, complete
employee data including years of service/plan membership, earnings, and any
other data relevant to determining benefits and necessary to administer the
Canadian Benefit Arrangements;
(ii) No amendments have been made to the Canadian Benefit
Arrangements and no improvements have been promised, and no such amendments or
improvements will be made or promised prior to the Closing except as disclosed
in Schedule 2.20(f)(ii);
(iii) All employee data provided is true and correct and
Parent will be notified of any changes thereto;
(iv) All contributions or premiums required to be paid
under each of the Canadian Benefit Arrangements have been paid in a timely
fashion in accordance with the Plan and any applicable legislation;
contributions or premiums for the period up to the Closing Date will have been
paid by the Company by the Closing Date except otherwise required to be paid
until a later date;
(v) Each Canadian Benefit Arrangement which is a funded
plan is fully funded as of the Closing Date on both a going-concern and a
solvency basis pursuant to the actuarial assumptions and methodology used in the
most recent actuarial valuations thereof;
(vi) There have been no improper withdrawals, applications
or transfers of assets from any Canadian Benefit Arrangement or related fund;
(vii) All material obligations regarding each of the
Canadian Benefit Arrangements have been satisfied and there are no outstanding
defaults or violations by any party thereto;
(viii) No material changes have occurred or are expected
to occur that would affect the actuarial valuation reports (with respect to
pension plans) or financial statements (with respect to pension and non-pension
plans) provided to Parent;
(ix) There are no participating employers under any of the
Canadian Benefit Arrangements, other than the Company;
(x)No insurance policy or other contract or agreement
affecting any Canadian Benefit Arrangement requires or permits a retroactive
increase in premiums or payments due thereunder;
(xi) The level of insurance reserves under each Canadian
Benefit Arrangement that is insured is reasonable and sufficient to provide for
all incurred but unreported claims,
-29-
(xii) There are no Canadian Benefit Arrangements that are
pension plans, and to the Company's Knowledge no Canadian Benefit Arrangement is
subject to any pending investigation, examination or other proceeding, action or
claims initiated by any regulatory authority, or by any other party (other than
routine claims for benefits), and there exists no state of facts that 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
Benefit Arrangement required to be registered.
(g) CSST Matters.
(i) The Company has been duly assessed for employers'
contributions by the Commission de la Sante et Securite du Travail ("CSST"); the
business activities of the Company have been correctly classified by the CSST;
the payroll amount has been correctly stated and assessed; and all demerit
assessments have been fully disclosed to the Parent Companies, a copy of the
assessments by the CSST for the last three (3) years being attached hereto in
Schedule 2.20(g).
(ii) The Company has not received any demerit assessments
from the CSST pursuant to the Act Respecting Industrial and Occupational
Diseases (or any successor legislation) for injuries or events that occurred
prior to the Closing Date, nor will the Company be assessed for demerits in
respect of injuries or events that shall have occurred prior to such date.
2.21 EMPLOYEES. To Company's Knowledge, no employee of the Company is in
violation of any term of any employment contract, patent disclosure agreement,
non-competition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by the Company because
of the nature of the business conducted or presently proposed to be conducted by
the Company or to the use of Trade Secrets or proprietary information of others.
No notice has been given to the Company, nor is the Company otherwise aware,
that any Management Shareholder intends to terminate his or her employment with
the Company.
2.22 GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Company possesses all
material consents, licenses, permits, grants or other authorizations issued to
the Company by a Governmental Authority (i) pursuant to which the Company
currently operates or holds any interest in any of its properties or (ii) which
is required for the operation of its business or the holding of any such
interest therein (collectively called "COMPANY AUTHORIZATIONS"), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company to operate or conduct its business
or hold any interest in its properties or assets.
2.23 COMPETITION ACT. The aggregate value of the assets in Canada,
determined as of such time and in such manner as is prescribed by the
Competition Act (Canada) and the regulations thereto, that are owned by the
Company, does not exceed Cdn$35 million, and the gross revenues from sales in or
from Canada, determined for such annual period and in such manner as is
prescribed by the Competition Act (Canada) and the regulations thereto,
generated from the assets referred to above, do not exceed Cdn$35 million
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2.24 EMPLOYEE ACCRUALS. All accruals for unpaid vacation pay, premiums
for employment insurance, health premiums, pension plan premiums, CPP, QPP,
accrued wages, salaries and commissions and Employee Plan payments have been
reflected on the books and records of the Company in accordance with Canadian
GAAP.
2.25 MAJOR CUSTOMERS. Schedule 2.25 sets out the names of all customers
of the Company with contracts with a commitment of more than six months or are
party to contracts that involve amounts in excess of Cdn$10,000 (the "MAJOR
CUSTOMERS") and, except as set forth in Schedule 2.25. there has been no, and
the Company has no reason to believe that after the Closing Date there will be,
any termination or cancellation of, and no material impairment in the business
relationship between the Company and any such Major Customer.
2.26 PRODUCT WARRANTIES. There are no outstanding warranty claims that
would have a Material Adverse Effect on the Company, nor to Company's Knowledge,
have any such claims been threatened.
2.27 REPRESENTATIONS OF SHAREHOLDERS. Each Shareholder represents and
warrants separately to the Parent as follows on the date hereof and as of the
Closing Date.
(a) Formation and Status of Shareholder. If the Shareholder is an
entity, the Shareholder is duly incorporated or formed and validly existing
under the laws of its jurisdiction of incorporation or formation.
(b) Access to Information. Each Shareholder acknowledges that
such Shareholder has received and has had an opportunity to read copies of the
Share Exchange Agreement and the Related Agreements and copies of all reports
filed by Parent with the United States Securities and Exchange Commission (the
"SEC") from the beginning of its 1998 fiscal year to the present.
(c) Due Authorization. This Agreement has been duly and validly
executed and delivered by, or on behalf of, the Shareholder and, assuming the
due authorization, execution and delivery by Parent, constitutes a valid and
binding obligation of the Shareholder enforceable against the Shareholder in
accordance with its terms except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
If the Shareholder is a business entity, the execution and delivery of this
Agreement has been duly authorized by all necessary action on the part of such
entity and constitutes a valid and binding obligation of such entity,
enforceable against it in accordance with its terms. All other documents and
Related Agreements to be executed and delivered by the Shareholder will be duly
executed and delivered by the Shareholder and will be valid and binding
obligations of the Shareholder enforceable in accordance with their respective
terms, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
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(d) No Violation. Neither the execution and delivery of this
Agreement nor the performance by the Shareholder of its, his or her obligations
hereunder or under the Related Agreements will conflict with any agreement or
commitment to which the Shareholder is a party, or violate any statute or law or
any judgment, decree, order, regulation or rule of any court or other
Governmental Authority applicable to the Shareholder. There are no legal
proceedings pending, or to the Shareholder's Knowledge, threatened, against such
Shareholder that would prevent consummation of the transactions contemplated by
this Agreement.
(e) No Consent Needed. No consent, waiver, approval, order or
authorization of, or declaration, filing or registration with, any Governmental
Authority or any third party is required to be made or obtained by the
Shareholder in connection with the execution and delivery by the Shareholder of
this Agreement or the Related Agreements or the performance by the Shareholder
of his, her or its obligations hereunder or the consummation by the Shareholder
of the transactions contemplated herein or in the Related Agreements.
(f) Tax and Legal Matters. The Shareholder has had an opportunity
to review with its own tax and legal advisors the tax and legal consequences to
the Shareholder of the Acquisition and the transactions contemplated by this
Agreement and the Related Agreements, including the sale of his, her or its
ownership interests in Company or Exchangeco to the Parent Companies. The
Shareholder understands that he, she or it must rely solely on his, her or its
advisors and not on any statements or representations by the Parent Companies,
or any of their agents. The Shareholder further understands that he, she or it
(and not the Parent Companies) shall be responsible for his, her or its own tax
liability that may arise as a result of the Acquisition or the transactions
contemplated by this Agreement and the Related Agreements. The Shareholder
acknowledges that shareholders of an unlimited liability company (such as
Exchangeco) have unlimited liability for the debts and obligations of that
company and that the Shareholder has been advised to seek its own legal advice
regarding the consequences of that unlimited liability on a person who holds
shares of an unlimited liability directly or through a holding company.
(g) Ownership of Company Shares. Such Shareholder is the sole
record and beneficial owner of the number and class of Company shares as set
forth next to his, her or its name on Schedule 2.2(a), and such shares are not
and will not at any time prior to or at the Closing be subject to any lien or to
any rights of first refusal of any kind. Except as set forth in this Agreement
or a schedule hereto, there are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which the Shareholder is a
party or by which he, she or it is bound obligating the Shareholder to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold
repurchased or redeemed, any Company or Exchangeco shares or obligating the
Shareholder to grant or enter into any such option, warrant, call, right,
commitment or agreement and there will be no such agreements at any time prior
to or at the Closing. The Shareholder has or prior to the Closing will have good
and valid title to, and has the sole right to transfer such Company or
Exchangeco shares. Such interests constitute all of Company shares owned,
beneficially or of record, by the Shareholder. Holding ULC and Employee Holdco
will receive good and valid title to such Company or Exchangeco shares in
accordance with the transactions contemplated in Article I, subject to no claim,
or Lien retained, granted or permitted by the Shareholder. Except as
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contemplated in this Agreement, the Shareholder has not engaged in any sale or
other transfer of its Company or Exchangeco shares in contemplation of the
Acquisition.
(h) Absence of Claims by the Shareholder. As of the Closing Date
the Shareholder will have no claim against Company whether present or future,
contingent or unconditional, fixed or variable under any contract or on any
other legal basis whatsoever except for unpaid salaries, fees, bonuses and
expenses incurred in the normal course of business.
(i) Acknowledgment of Restrictions. The Shareholder understands
that the Parent Common Stock and Exchangeable Shares have not been registered
under the U.S. Securities Act of 1933 (the "SECURITIES ACT") on the basis that
the issuance of the securities hereunder, and the Parent Common Shares upon
exchange of the Exchangeable Shares is exempt from registration under the
Securities Act pursuant to Regulation S and that the Parent Companies' reliance
on such U.S. exemption is based on each Shareholder's representations set forth
in this Agreement. The Shareholder further understands that the issuance of
Parent Common Stock to it will not be qualified by prospectus under Canadian
provincial securities legislation and that the Company and Parent will promptly
after the date hereof seek all appropriate prospectus, registration and related
exemptions, the conditions of which to likely include resale restrictions in
Canada.
(j) Non-U.S. Person. Each Shareholder is not a "U.S. Person" as
that term is defined in Regulation S promulgated under the Securities Act and is
not acquiring the Shares for the account or benefit of a U.S. Person. Under
Regulation S, with certain exceptions, "U.S. Person" means: (i) any natural
person resident in the U.S.; (ii) any partnership or corporation organized or
incorporated under the laws of the U.S.; (iii) any estate of which any executor
or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S.
person; (v) any agency or branch of a foreign entity located in the U.S.; (vi)
any non discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. person;
(vii) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the U.S.; and (viii) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign jurisdiction; and
(B) formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act, unless it is organized or
incorporated and owned by accredited investors (as defined in Rule 501(a) under
the Securities Act) who are not natural persons, estates or trusts.
(k) Escrow. Each Management Shareholder acknowledges that 10% of
the Exchangeable Shares that would otherwise be issuable to such Shareholder on
the Closing Date will be deemed to have been received by such Shareholder and
deposited into escrow, without any act of the Shareholder, and that the amounts
deposited into escrow shall be available to satisfy Losses incurred by the
Parent Companies or their officers, directors or affiliates. The terms and
conditions upon which the such Exchangeable Shares are to be held in escrow
shall be set forth more fully in the Escrow Agreement. Each Management
Shareholder also acknowledges that neither the Employee Shareholders, the
Non-Employee Shareholder nor Logibro will contribute Parent Common Stock or
Exchangeable Share to any escrow account and such shareholders shall not be
subject to the same indemnification obligations as the Management Shareholders.
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2.28 HART-SCOTT-RODINO CLASSIFICATION. The Company is its own "ultimate
parent entity" within the meaning of the Hart-Scott-Rodino Antitrust Improvement
Act of 1976 and the U.S. Federal Trade Commission Regulations promulgated
thereunder.
2.29 FULL DISCLOSURE. This Agreement (including the Company Schedules),
and any schedule or certificate furnished by the Company or Shareholders
pursuant to this Agreement, does not (i) contain any representation, warranty or
information that is false or misleading with respect to any material fact, or
(ii) omit to state any material fact necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not materially
false or misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES
For purposes of the representations and warranties in this Article III,
unless the context clearly indicates otherwise, all representations and
warranties concerning Parent shall mean Parent and all of its Subsidiaries taken
together as a whole. Except as disclosed in a document dated as of the date
hereof referring specifically to the representations, warranties or covenants in
this Agreement that reasonably identifies the basis for an exception to a
representation, warranty or covenant in this Agreement and that is delivered by
the Parent to the Company prior to the execution of this Agreement (the "PARENT
SCHEDULES"), Parent represents and warrants to the Shareholders as of the date
of this Agreement and as of the Closing as set forth below.
3.1 ORGANIZATION. Parent is a corporation duly incorporated and validly
existing under the laws of the State of Delaware. As of the Closing, Parent Sub
and Holding will be corporations duly incorporated and validly existing under
the laws of the State of Delaware. As of the Closing, Holding ULC will be a
company duly incorporated and validly existing under the laws of Nova Scotia.
Parent has the corporate power to own its properties and to carry on its
business as now being conducted and as of the Closing, each of the Parent
Companies will have the corporate power to own its properties and to carry on
its businesses as then being conducted. Parent is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have, or would reasonably be expected to
have, a material adverse effect on its ability to consummate the transactions
contemplated hereby, and as of the Closing each of the Parent Companies will be
duly qualified to do business and will be in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have, or would reasonably be expected to have, a material adverse effect on
their ability on its ability to consummate the transactions contemplated hereby.
3.2 AUTHORITY. Parent has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
and as of the Closing, each of the Parent Companies will have all requisite
corporate power and authority to enter into the Related Agreements. The
execution and delivery of this Agreement and the consummation of the
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transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Parent. This Agreement has been duly
executed and delivered by the Parent and constitutes the valid and binding
obligation of Parent, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. The execution and
delivery of this Agreement by Parent does not, and, as of the Closing, the
consummation of the transactions contemplated hereby will not result in a
Conflict under: (i) any provision of the Articles or Certificate of
Incorporation or Bylaws of the Parent Companies or resolution of the boards of
directors of the Parent Companies or (ii) any mortgage, hypothec, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation,
applicable to the Parent Companies or their properties or assets, except where
such failure or conduct would not have or could not reasonably be expected to
have a Material Adverse Effect. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority or any third party (so as not to trigger any Conflict) is required by
or with respect to the Parent Companies in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable provincial, federal and state securities laws, (ii) the filing with
Investment Canada of a notice of investment under the Investment Canada Act
within thirty (30) days of the Closing Date, (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 3.2 and (iv) such other consents, waivers, authorizations, filings,
approvals and registrations the absence of which would not have or could not
reasonably be expected to have a material adverse effect on the Parent
Companies.
3.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 40,000,000 shares
of Common Stock, par value $.001 per share, of which 22,986,570 shares were
issued and outstanding as of May 12, 2000, and 5,000,000 shares of Preferred
Stock, $0.001 par value. All such shares are duly authorized, validly issued,
fully paid and nonassessable and are free of any Liens other than any Liens
created by the holders thereof. Schedule 3.3 contains a summary of all options
and warrants and any other securities convertible into Parent Common Stock
outstanding as of the date of this Agreement. No shares of Preferred Stock are
issued or outstanding as of the date of this Agreement and as of Closing the
only share of Preferred Stock to be outstanding will be the Parent Multiple
Voting Share. As of the Closing, all shares of capital stock of each of Parent
Sub, Holding and Holding ULC will be beneficially owned by Parent, Parent Sub
and Holding, respectively.
(b) The shares of Parent Common Stock to be issued in connection
with the Closing will, when issued in accordance with the terms of this
Agreement, be duly authorized, validly issued, fully paid and non-assessable,
free and clear of any Liens other than any Liens created by the holders thereof.
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(c) The shares of Parent Common Stock to be issued pursuant to
the Exchangeable Share Provisions and the Voting, Exchange and Support Agreement
will be validly reserved, and, when issued in accordance with, the terms of the
Exchangeable Share Provisions and the Voting, Exchange and Support Agreement
will be duly authorized, validly issued, fully paid and nonassessable, free and
clear of any Liens other than any Liens created by the holders thereof.
3.4 SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the SEC under the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT") for all periods since June 30,
1997, all in the form so filed (all of the foregoing being collectively referred
to as the "SEC DOCUMENTS"). As of their respective filing dates, the SEC
Documents were timely filed and complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. The financial statements of Parent, including
the notes thereto, included in the SEC Documents (the "PARENT FINANCIAL
STATEMENTS") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with United States
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) and present fairly the consolidated financial
position of Parent at the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal audit adjustments). There has been no change in
Parent accounting policies except as described in the notes to the Parent
Financial Statements.
3.5 NO MATERIAL ADVERSE CHANGE. Since the date of the balance sheet
included in the Parent's most recently filed report on Form 10-Q or Form 10-K,
Parent has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in the financial condition,
liabilities, assets or business of Parent; (b) any amendment or change in the
Certificate of Incorporation or Bylaws of Parent, or (c) any damage to,
destruction or loss of any assets of the Parent (whether or not covered by
insurance) that materially and adversely affects the financial condition or
business of Parent.
3.6 ACQUISITION SUBSIDIARIES. As of the Closing, each of Parent Sub,
Holding, and Holding ULC will not have engaged in or transacted any business or
activity of any nature other than activities related to their corporate
organization and as contemplated by this Agreement and the Related Agreements.
Immediately prior to the Closing, Parent Sub, Holding, and Holding ULC will have
no assets (other than shares of other Parent Companies) or liabilities or
obligations of any kind whatsoever, and other than as contemplated in this
Agreement and the Related Agreements, and will not be a party to any other
contract, agreement or undertaking of any nature.
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3.7 ELIGIBILITY TO USE FORMS S-3 AND S-8. Parent is entitled to register
the Parent Common Stock on Forms S-3 and S-8.
3.8 LEGAL PROCEEDINGS. Except as set forth on Schedule 3.8, Parent
warrants that: (a) there is no pending or, to the Parent's Knowledge, threatened
claim, action, lawsuit, administrative proceeding, arbitration, labor dispute or
governmental investigation to which Parent is a party or by which any of
Parent's material assets may be bound, which, if adversely determined, could
have a Material Adverse Effect, and (b) to Parent's Knowledge, no facts exist
that give rise to a valid claim against Parent for breach of an obligation, or
for violation of applicable law, rule or regulation, where such claim could have
a Material Adverse Effect. Parent is not subject to any judgment, order, writ,
injunction or decree of any court, arbitrator or other competent Governmental
Authority. Parent has not been permanently or temporarily enjoined by any order,
judgment or decree of any court or other competent Governmental Authority from
engaging in or continuing any conduct or practice in connection with its
business, nor requiring Parent to take any action of any kind with respect to
its business.
3.9 INTELLECTUAL PROPERTY. Except as set forth in Schedule 3.9, to
Parent's Knowledge, Parent and its Subsidiaries, own or possess adequate
licenses or other valid rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
service marks, Trade Secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of the Parent and its subsidiaries as currently
conducted and as proposed to be conducted, and Parent and its Subsidiaries have
no Knowledge of any assertion or claim challenging the validity of any of the
foregoing. To the Parent's Knowledge, the conduct of Parent's and its
Subsidiaries' businesses as currently conducted do not infringe upon any valid
intellectual property rights of other Persons. To Parent's Knowledge, no other
Persons are materially infringing upon any material proprietary rights owned by
or licensed by or to Parent or any of its Subsidiaries.
3.10 FULL DISCLOSURE. None of the representations or warranties made by
Parent, nor any statement made in any schedule or certificate furnished by
Parent pursuant to this Agreement and the Related Agreements, nor the SEC
Documents, taken together, contains or will contain at the Closing, any untrue
statement of a material fact, or omits or will omit at the Closing to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstance under which they were made, not
misleading.
3.11 COMPLIANCE WITH LAWS. The Parent Companies have complied in all
material respects with, are not in material violation of, and have not received
any notices of violation with respect to U.S. or foreign, federal, state or
local statute, laws or regulations.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
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Unless the context clearly indicates otherwise, all references to the
Company in this Article shall also mean Exchangeco.
4.1 CONDUCT OF BUSINESS OF THE COMPANY AND EXCHANGECO. Except as
contemplated herein and in the Related Agreements, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement and the Closing the Company agrees (except to the extent that
Parent shall otherwise consent in writing), to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts in substantially the same manner as
heretofore conducted and Taxes when due, unless being contested in good faith,
to pay or perform other obligations when due, unless being contested in good
faith, and, to the extent consistent with such business, to use all reasonable
efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired its goodwill and
ongoing businesses at and after the Closing. The Company agrees to promptly
notify Parent of any event or occurrence or emergency not in the ordinary course
of its business, and any material event involving or adversely affecting the
Company or its business. Except as expressly contemplated by this Agreement, the
Company agrees, not to take any of the following actions without the prior
written consent of Parent, such consent not to be unreasonably withheld or
delayed:
(a) Enter into any commitment, activity or transaction not in the
ordinary course of business;
(b) Transfer to any Person or entity any rights to any Company
Intellectual Property, other than pursuant to Standard License Agreements;
(c) Enter into or amend any agreements pursuant to which any
other party is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of the Company, except in the
ordinary course of business;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate in any material respect, the terms of,
any of the agreements set forth or described in the Company Schedules;
(e) Commence any litigation except injunction proceedings or
proceedings to enforce this Agreement or any of the Related Agreements;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of the
shares in its share capital, or split, combine or reclassify any of the shares
in its share capital or issue or authorize the issuance of any other securities
(including Company Options) in respect of, in lieu of or in substitution for
shares in the share capital of the Company, or repurchase, redeem or otherwise
acquire, directly or indirectly, any shares in the share capital of the Company
(or options, warrants or other rights exercisable therefor);
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(g) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its share capital or securities convertible into, or
subscriptions, rights, warrants or options (including Company Options) to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities;
(h) Cause or permit to be made any amendments to its articles of
incorporation or bylaws, as amended;
(i) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practice;
(k) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others other than fluctuations under existing
loan facilities, excluding amounts loaned to the Company by Parent;
(l) Grant any severance, change of control award or termination
pay to any director, officer employee or consultant, except pursuant to existing
agreements set forth in Schedule 2.12(a) or as required by applicable laws;
(m) Adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, extend any employment offer
for any management position, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the salaries
or wage rates of its employees, except in the ordinary course of business;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable,
other than in the ordinary course of business and consistent with past practice;
(o) Excluding payroll obligations performed in the ordinary
course, pay, discharge or satisfy, in an amount in excess of Cdn$50,000, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against in
the Net Assets or incurred in the ordinary course of business consistent with
past practice;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into a
settlement or compromise, settle any claim or
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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;
(q) Enter into any strategic alliance, joint development or joint
marketing arrangement or agreement, except in the ordinary course of business;
(r) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(s) Waive or commit to waive any rights with a value in excess of
Cdn$25,000, in any one case, or Cdn$50,000, in the aggregate;
(t) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business;
(u) Alter, or enter into any commitment to alter, its interest in
any corporation, association, joint venture, partnership or business entity in
which the Company directly or indirectly holds any interest on the date hereof;
(v) Except under the conditions set forth in Section 1.2,
accelerate vesting of any Options; or
(w) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (v) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 CONDUCT OF THE PARENT COMPANIES.
(a) The Parent and its Subsidiaries shall promptly notify the
Company and the Shareholders of any event or occurrence which may be reasonably
likely to prevent or materially delay the Parent and its Subsidiaries from
carrying out any of its obligations under this Agreement or that may be
reasonably likely to cause a Material Adverse Effect upon Parent.
(b) Prior to Closing the Parent and its Subsidiaries shall not
engage in discussions or make efforts to resell the Company.
4.3 SHAREHOLDER CONDUCT.
(a) Transfer and Encumbrance. Each Shareholder agrees not to
transfer, sell, exchange, pledge or otherwise dispose of or encumber the shares
of Company owned by such Shareholder, or any New Shares (as defined below)
acquired by such Shareholder, or to discuss, negotiate, or make any offer or
agreement relating thereto, at any time prior to the Closing Date or termination
of this Agreement (the "EXPIRATION DATE"); provided, however, that the
Shareholders may transfer any or all its, his or her Shares (i) with the prior
written consent of Parent or (ii) as contemplated in this Agreement.
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(b) New Shares. Each Shareholder agrees that any shares of the
Company that the Shareholder purchases or with respect to which the Shareholder
otherwise acquires beneficial ownership after the date of this Agreement and
prior to the Expiration Date ("NEW SHARES") shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares.
4.4 NO SOLICITATION. Until the earlier of the Closing or the date of
termination of this Agreement pursuant to the provisions of Section 9.1 hereof,
the Company and each Shareholder will not (nor will the Company or any
Shareholder permit any of its officers, directors, shareholders, agents,
representatives or affiliates to), directly or indirectly, take any of the
following actions with any party other than the Parent Companies and their
respective designees: (a) solicit, initiate, entertain or encourage any
proposals or offers from, or conduct discussions with or engage in negotiations
with, any Person relating to any possible acquisition of the Company (whether by
way of amalgamation, purchase of shares, purchase of assets or otherwise), any
material portion of its share capital or assets or any equity interest in the
Company, (b) provide except as may be otherwise required by law or judgment,
order or decree of any Governmental Authority information with respect to it to
any Person, other than the Parent Companies, or any Governmental Authority,
relating to, or otherwise cooperate with, facilitate or encourage any effort or
attempt by any such Person with regard to, any possible acquisition of the
Company (whether by way of amalgamation, purchase of shares, purchase of assets
or otherwise), any material portion of its share capital or assets or any equity
interest in the Company, (c) enter, except as contemplated hereby, into an
agreement with any Person, other than the Parent Companies, providing for the
acquisition of the Company (whether by way of amalgamation, purchase of shares,
purchase of assets or otherwise), any material portion of its share capital or
assets or any equity interest in the Company, or (d) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of the Company (whether by way of amalgamation, purchase of shares, purchase of
assets or otherwise), any material portion of its share capital or assets or any
equity interest in the Company by any Person, other than by the Parent
Companies. The Company and each Shareholder shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties relating to
any such transaction or proposed transaction. In addition to the foregoing, if
the Company or any Shareholder other than the Non Employee Shareholder receives
prior to the Closing or the termination of this Agreement any offer or proposal
relating to any of the above, the Company or such Shareholder shall immediately
notify the Parent Companies thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as the Parent Companies may reasonably request. Except as
contemplated by this Agreement, disclosure by the Company or any Shareholder of
the terms of this Agreement (other than the prohibition of this section or as
otherwise required by law, judgement, order or decree of a Governmental
Authority) shall be deemed to be a violation of this Section 4.4.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 SALE AND REGISTRATION OF SHARES; SHAREHOLDER MATTERS.
(a) Sale of Shares. The parties hereto acknowledge and agree that
the securities to be issued by the Parent Companies pursuant to this Agreement
shall constitute "restricted securities" within the meaning of Rule 144 (such
rule and any correlative rule such as Rule 144A as in effect from time to time
being referred to herein as "RULE 144") promulgated under the Securities Act.
Except as otherwise provided in the Registration Rights Agreement the
certificates representing Parent Company shares issued in connection with this
Agreement shall bear appropriate legends to identify such privately placed
shares as being restricted under the Securities Act. It is acknowledged and
understood that the Parent Companies are relying upon the representations made
by each Shareholder under this Agreement.
(b) Registration Rights. Parent shall grant each Shareholder and
Logibro limited registration rights, as set forth in the Registration Rights
Agreement.
5.2 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
such information or Knowledge obtained pursuant to the negotiation, execution
and delivery of this Agreement or the effectuation of the transactions
contemplated hereby, confidential, and also agree not to use such Knowledge or
information; provided, however, that the foregoing shall not apply to
information or Knowledge which (a) a party can demonstrate was already lawfully
in its possession on a non-confidential basis prior to the disclosure thereof by
the other party, (b) is generally known to the public and did not become so
known through any violation of law, (c) became known to the public through no
fault of such party, (d) is later lawfully acquired by such party from other
sources, (e) is required to be disclosed by order of court or government agency
with subpoena powers or (f) which is disclosed in the course of any litigation
between any of the parties hereto.
5.3 EXPENSES. Whether or not the Acquisition is consummated, all fees
and expenses incurred in connection with the Acquisition including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties ("THIRD PARTY EXPENSES") incurred by a party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby shall be the
obligation of the respective party incurring such fees and expenses.
Notwithstanding the foregoing, if the Acquisition is consummated, the Parent
Companies shall assume professional fees in the amounts set forth on Schedule
5.3 incurred by the Company and the Non Employee Shareholder that are directly
related to the transaction in amounts not to exceed $192,500 and regardless of
whether the Acquisition is consummated the Parent Companies shall assume all
fees and other costs directly related to the Continuance and Amalgamation.
5.4 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to ensure that
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its representations and warranties remain true and correct in all material
respects, and to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
5.5 AGREEMENT TO VOTE SHARES. At every meeting of the shareholders of
the Company or Exchangeco or of the shareholders or partners of entities holding
shares of the Company or Exchangeco called with respect to any of the following,
and at every adjournment thereof, and on every action or approval by written
consent of the shareholders of the Company or Exchangeco, or of the shareholders
or partners of entities holding shares of the Company or Exchangeco, with
respect to any of the following, each Shareholder shall vote its, his or her
Shares and any New Shares: (i) in favor of approval of the Acquisition and any
matter that could reasonably be expected to facilitate the Acquisition, and (ii)
against approval of any proposal made in opposition to or in competition with
the consummation of the Acquisition, against any merger, consolidation, sale of
assets, reorganization or recapitalization with any party other than Parent and
its affiliates and against any liquidation or winding up of the Company or
Exchangeco, except as contemplated in this Agreement.
5.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of any such party
contained in this Agreement to be untrue or inaccurate at or prior to the
Closing and (b) any failure of any such party, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.5 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
5.7 TRANSITION. The Company will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing.
5.8 ACCESS TO INFORMATION. The Company and Parent shall afford each
other and their accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Closing to
(a) all of its properties, books, contracts, commitments and records, and (b)
all other information concerning the business, properties and personnel (subject
to restrictions imposed by applicable law) of it as the other may reasonably
request subject to reasonable limits on access to Company's source codes. No
information or Knowledge obtained in any investigation pursuant to this Section
5.9 shall affect or be deemed to modify any representation
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or warranty contained herein or the conditions to the obligations of the parties
to consummate the transactions contemplated hereby.
5.9 TERMINATION OF SHAREHOLDERS' AGREEMENTS.
(a) Each Shareholder and the Company agrees to terminate
effective as of the Closing any shareholders' agreements (including, without
limitation, the unanimous shareholders agreement dated June 29, 1999 among the
Company and various shareholders at such time, and the agreements dated November
2, 1999, between the Company and each of Mario Dorion and Martin Leclerc) to
which it is a party that relates to the Company, Holding U.F. Inc. and I.P.
Capital Inc., and further agrees to waive any transfer restrictions, pre-emptive
rights or any notice, consent or other approval requirements contained in such
agreements with respect to the Acquisition and the transactions contemplated in
this Agreement and any other of the Related Agreements.
(b) SGF hereby confirms that it will release before Closing the
moveable hypothec in its favor on shares of the Company held by Holding U.F.
Inc. pursuant to the moveable hypothec dated June 29, 1999.
(c) Each of SGF and the Company hereby agree to waive at Closing
the various put and call options on the shares of the Company set forth in
Section 2.6 of the subscription agreement dated June 29, 1999 among SGF, the
Company, Holding U.F. Inc., Uniforce Informatique Inc., Groupe Multiforce
Informatique Inc., Jean-Luc Calonne and Cyrille Thilloy, or any other agreement
entered into by SGF or the Company and referred to in said subscription
agreement.
5.10 FORM S-8. Parent shall file, if available for use by Parent, a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to the assumed Options.
5.11 LINE OF CREDIT. Simultaneously with the execution of this Agreement
the Company and Parent shall enter into a secured lending arrangement using
substantially the forms attached hereto as Exhibit K, whereby Parent shall loan
the Company operating funds in an amount not to exceed $1.5 million.
5.12 EXCHANGECO COMMITMENT TO QUEBEC OPERATIONS AND RELATED LOCK UP.
(a) SGF Lock Up. So long as Parent satisfies the employment
targets for Quebec as set forth in Section 5.12(b), SGF agrees not to make any
offering, sale, short sale or other disposition (the "SGF LOCK UP") of the
shares of Parent Common Stock that it receives in connection with the
Acquisition (the "SGF SHARES") either directly or indirectly without the prior
written consent of Parent until the time that such shares are freed from such
restriction as follows: 50% of the SGF Shares shall become freely tradable upon
the six month anniversary of the Closing date and 1/12th of the total SGF Shares
shall become freely tradable each monthly anniversary date thereafter until all
SGF Shares become freely tradable.
(b) Quebec Employment Commitments. In consideration of SGF's
agreement to the SGF Lock Up of the SGF Shares, Parent commits to SGF that it
will increase, either through new
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hiring or transfers, the number of persons that it and its Subsidiaries employ
in Quebec on a full time basis (the "QUEBEC EMPLOYEES"). The total number of
Quebec Employees, including but not limited to persons employed in the current
Montreal and Hull offices, except as provided in Section 5.12(c) below, shall
equal or exceed the following numbers on the following dates:
[Download Table]
Quarter Ending Number of Quebec Employees
-------------- --------------------------
June 30, 2000 80
September 30, 2000 90
December 31, 2000 110
March 31, 2001 130
June 30, 2001 150
Parent will submit to SGF a report of the number of Quebec Employees within 30
days following the close of each fiscal quarter, starting with the quarter
ending June 30, 2000. The SGF Lock Up shall terminate as to all SGF shares in
the event that Parent does not meet the Quebec employment targets set forth
above, provided however, that in no case shall the SGF Lock Up terminate earlier
than the six month anniversary of the Closing Date.
(c) Additional Acceleration Events. The SGF Lock Up shall
terminate immediately upon the closing of or the occurrence of the following
events:
(i) A transaction or series of transactions, including by
merger or consolidation of Parent into or with any other entity or corporation
or the merger or consolidation of any other corporation into or with Parent, in
which any person, entity or group of persons and/or entities acquire(s) shares
of Parent stock representing 35% or more of the outstanding voting power of
Parent, including voting shares issued or issuable upon conversion of any
convertible security outstanding on the date of such transaction including
without limitation stock options;
(ii) A change in the composition of Parent's Board of
Directors as a result of an appointment or election (or series of related
appointments or elections intended to effect a change in the Board) such that a
majority of the members following such election(s) or appointment(s) were not
members of the Board prior to such election(s) or appointment(s);
(iii) A sale of all or substantially all of the assets of
Parent;
(iv) A sale of all or substantially all of the assets or
stock of the Company;
(v) The price of Parent Common Stock as reported on the
Nasdaq National Market closing at a price in excess of $80.
ARTICLE VI
CONDITIONS TO THE PURCHASE
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6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE PURCHASE. The
respective obligations of each party to this Agreement to effect the Acquisition
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Acquisition shall be in effect.
(b) Canadian Securities Compliance. The Quebec Securities
Commission (and any other applicable provincial securities commission, if
required) shall have issued orders approving the trades and distributions in
securities contemplated herein (including trades and distributions in securities
pursuant to the exercise of rights associated with the Exchangeable Shares) in
form and substance reasonably satisfactory to Parent and to the Company.
(c) Delivery at the Closing. The Parent Companies or the
Shareholders shall have delivered the following items:
(i) The Company shall deliver to Parent Companies evidence
reasonably satisfactory to it that the Agreement and the Acquisition shall have
been adopted and approved by the Board of Directors of the Company by the
requisite vote under applicable law and Company's Articles of Incorporation and
by-laws.
(ii) The Company shall deliver to Parent evidence
satisfactory to it that the Company has obtained the consents, approvals and
waivers set forth in Schedule 2.4 (including, without limitation, any consents,
waivers or approvals required under any contract or agreement to which the
Company is a party or by which it is bound and which are necessary in connection
with the Acquisition to maintain all rights of the Company thereunder subsequent
to the Closing).
(iii) Each of the parties to the Related Agreements shall
execute and deliver a copy of such Related Agreements to the other parties
thereto.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS. The obligations of the Company and the Shareholders to consummate
the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by the Shareholders:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement shall be true and correct in
all material respects (except for those representations and warranties which are
by their terms qualified by a standard of materiality, which representations and
warranties shall be true in all respects) on and as of the Closing Date, except
for changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date; and the Shareholders shall
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have received a certificate to such effect signed on behalf of the Parent by a
duly authorized officer of Parent.
(b) Agreements and Covenants. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Closing; and the Shareholders shall have received a certificate to such effect
signed on behalf of Parent by a duly authorized officer of Parent.
(c) Legal Opinion. The Shareholders shall have received a legal
opinion from Wilson Sonsini Goodrich & Rosati, P.C., legal counsel to the
Parent, and from local counsel to the Parent Companies, in substantially the
form attached hereto as Exhibit L.
(d) Option Assumptions and Grants. Parent shall have assumed the
Options as set forth in Section 1.4(g) and (h).
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT COMPANIES. The
obligations of Parent to consummate the Acquisition and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company and the Shareholders contained in this Agreement shall
be true and correct in all material respects (except for those representations
and warranties which are by their terms qualified by a standard of materiality,
which representations and warranties shall be true in all respects) on and as of
the Closing Date, except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with the
same force and effect as if made on and as of the Closing Date; and Parent shall
have received certificates to such effect signed by a duly authorized officer on
behalf of the Company and each Shareholder.
(b) Agreements and Covenants. The Company and each Shareholder
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
or them on or prior to the Closing; and Parent shall have received certificates
to such effect signed by a duly authorized officer on behalf of each
Shareholder.
(c) Logibro Termination. Logibro shall have performed or complied
in all material respects with all agreements and covenants required by it in the
Logibro Termination Agreement to be performed or complied with by it on or prior
to the Closing.
(d) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company and the Shareholders have obtained
any and all the consents, approvals and waivers except for those that would not
have a Material Adverse Effect on the Company.
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(e) Legal Opinion. Parent shall have received a legal opinion
from Lafleur Brown, legal counsel to the Company, in substantially the form
attached hereto as Exhibit M.
(f) Fees and Expenses. Parent shall have received a written
acknowledgement and general release from each of (i) Lafleur Brown, (ii)
Satterlee Stephens Burke & Burke LLP, (iii) Raymond Chabot Grant Thornton and
(iv) service providers to SGF Tech Inc. to the effect that following the
Closing, except for the obligations set forth on Schedule 5.3 (which shall not
exceed $192,000 in the aggregate and will be assumed by Exchangeco), (1) no
amounts have not been paid by Company or are owing by Company in respect of
accounts which have been rendered relating to, or work in progress in respect
of, the transactions contemplated in this Agreement; (2) such Persons shall not
provide services to Exchangeco after the Closing in respect of matters arising
under this Agreement without the prior written approval of Exchangeco.
(g) Resignation of Officers and Directors. All directors and
those executive officers of the Company set forth in Schedule 6.3(i) shall have
tendered their resignation effective as of the Closing.
(h) Material Adverse Effect. Since the date of the computation of
Net Assets, no event or condition of any character shall have occurred that has
or could be reasonably expected to have a Material Adverse Effect on the
Company.
(i) Company Options. All Option Holders shall have consented to
the assumption of their Company Options or the Company shall have taken other
appropriate actions such that as of the Closing there will be no holders of
securities of Exchangeco, other than Holding ULC, the holders of Exchangeco
Exchangeable Shares and Employee Holdco as specifically contemplated in this
Agreement.
ARTICLE VII
INDEMNIFICATION; ESCROW
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties, covenants and agreements of the Company, the
Management Shareholders, the Shareholders and the Parent Companies in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing Date and shall terminate eighteen (18) months after the
Closing Date; provided, however, that (i) the representations and warranties
contained in Section 2.8 shall terminate only on the 90th day after the last
date the relevant Tax authority is entitled to assess or reassess the relevant
Person with respect to such Tax matter, (ii) the representations, warranties,
covenants and agreements in Section 2.27(c) and (g) shall not terminate.
7.2 INDEMNIFICATION.
(a) The Management Shareholders agree to indemnify and hold the
Parent Companies, their officers, directors, and affiliates (including the
Company and Exchangeco)
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harmless for, from and against any claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses, and expenses of investigation and defense incurred or accrued by the
Parent Companies, their officers, directors, or affiliates (including the
Company and Exchangeco) directly or indirectly as a result of any inaccuracy or
breach of a representation or warranty of the Management Shareholders, the
Company or Exchangeco contained in Article II herein (as modified by the Company
Schedules, without giving effect to any update thereto), or any failure by the
Shareholders or the Company to perform or comply with any covenant contained
herein (hereinafter individually a "LOSS" and collectively "LOSSES"). After
completion of the Closing, the Shareholders shall not be entitled to seek or
obtain any contribution or compensation from the Company (or Exchangeco) with
respect to breaches of representations and warranties given hereunder by, or
breach of covenants hereunder of, the Company at or prior to Closing.
(b) Each Shareholder individually agrees to indemnify and hold
the Parent Companies, their officers, directors, and affiliates (including the
Company and Exchangeco) harmless for, from and against any claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses, and expenses of investigation and defense incurred
or accrued by the Parent Companies, their officers, directors, or affiliates
(including the Company and Exchangeco) directly or indirectly as a result of any
inaccuracy or breach of a representation or warranty of such Shareholder
contained in Section 2.27 herein (hereinafter individually an "INDIVIDUAL LOSS"
and collectively "INDIVIDUAL LOSSES").
(c) Parent agrees to indemnify and hold the Shareholders, their
officers, directors, and affiliates harmless for, from and against any claims,
losses, liabilities, damages, deficiencies, costs and expenses, including
reasonable attorneys' fees and expenses, and expenses of investigation and
defense incurred or accrued by the Shareholders, their officers, directors, or
affiliates directly or indirectly as a result of any inaccuracy or breach of a
representation or warranty of the Parent Companies contained in Article III
herein (as modified by the Parent Schedules, without giving effect to any update
thereto), or any failure by Parent to perform or comply with any covenant
contained herein (hereinafter individually a "SHAREHOLDER LOSS" and collectively
"SHAREHOLDER LOSSES").
(d) The amount of any Loss, Individual Loss or Shareholder Loss
shall be reduced by the amount of any net tax savings and any insurance proceeds
recovered by the indemnified party directly or indirectly from or in relation to
the applicable Loss or Shareholder Loss, as the case may be.
7.3 INDEMNIFICATION THRESHOLD AND LIMITATIONS.
(a) There shall be no liability under Section 7.2 unless the
aggregate amount of Losses, Individual Losses or Shareholder Losses exceed
$250,000 (the "INDEMNIFICATION THRESHOLD") and then only to the extent of such
excess. For purposes of determining whether the Indemnification Threshold has
been reached, claims for Losses, Individual Losses or Shareholder Losses may be
aggregated. The Indemnification Threshold shall not apply with respect to (i)
Losses based on (1) claims based on fraud and (2) breaches of the
representations and warranties contained in Sections 2.2 and 2.4, (ii)
Individual Losses based on (1) claims based on fraud and (2) breaches of
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the representations and warranties contained in Sections 2.27(c) and (g) or
(iii) Shareholder Losses based on (1) claims based on fraud and (2) breaches of
the representations and warranties contained in Sections 3.2 and 3.3.
(b) The maximum liability of any Management Shareholder for
Losses and Shareholders for Individual Losses shall not exceed an amount equal
to the Total Consideration (as defined below) received by such Shareholder;
provided however, that if a claim is based on fraud or on breaches of the
representations and warranties contained in Sections 2.2 and 2.4 that are
committed by a Management Shareholder, such Management Shareholder shall be
liable for the total amount of such Losses. In addition, except in the case of a
breach by a Management Shareholder of representations in Section 2.27, each
Management Shareholder's indemnification obligation shall be limited to a
percentage of the Losses equal to its, his or her pro rata portion ownership of
Exchangeco immediately prior to the Closing. For purposes of this Agreement
"TOTAL CONSIDERATION" shall be determined for each Shareholder on the date that
a Loss is to be paid by a Shareholder (the "PAYMENT DATE") and shall equal the
value of: (i) total cash received by the Shareholder from any sales preceding
the Payment Date ("SALES") of Parent Common Stock received as a result of the
Acquisition, plus (ii) the value of Parent Common Stock (or Exchangeable Shares)
held by such Shareholder that were received in connection with the Acquisition
determined by multiplying such number of shares by the Share Price (as defined
below), less (iii) the amount of commissions, fees and taxes paid or payable by
such Shareholder as a result of the Acquisition and any Sales. The term "SHARE
PRICE" shall mean the closing price per share of the Parent Common Stock on the
Nasdaq National Market on the trading day immediately prior to the date a Loss
or Shareholder Loss becomes payable.
(c) Except for claims based on fraud, the maximum aggregate
liability of the Parent Companies for Shareholder Losses shall not exceed an
amount equal to the result of the product of the number of shares of Parent
Common Stock or Exchangeable Shares received by the Shareholders multiplied by
the average closing price per share of the Parent Common Stock on the Nasdaq
National Market over the thirty (30) trading days immediately prior to the
Closing Date.
7.4 ESCROW ARRANGEMENTS. Concurrent with the Closing, as partial
security for the indemnity provided in Section 7.2, the Management Shareholders
will be deemed to have received and deposited the Indemnification Shares (plus
any additional shares as may be issued upon any stock split, stock dividend or
recapitalization effected by Parent after the Closing) into escrow. The terms
and conditions upon which the Indemnification Shares are to be held shall be set
forth more fully in the Escrow Agreement.
7.5 SHAREHOLDERS' REPRESENTATIVE.
(a) Appointment of Representative. Each Management Shareholder
and Employee Shareholder by signing this Agreement, designates Jean-Luc Calonne
to be the Shareholders' Representative for purposes of this Agreement and the
Related Agreements. In the event Jean-Luc Calonne is unable or unwilling to
serve, the Shareholders' Representative shall be selected by the holders of a
majority of the shares of the Company or Exchangeco outstanding immediately
prior to the Closing. Each Management Shareholder and Employee Shareholder
agrees
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to be bound by any and all actions taken by the Shareholders' Representative on
his, her or its behalf under or otherwise relating to this Agreement and the
transactions contemplated thereby. The Parent Companies shall be entitled to
rely upon any communication or writings given or executed by the Shareholders'
Representative. All communications or writings to be sent to the Management
Shareholders and Employee Shareholders pursuant to this Agreement may be
addressed to the Shareholders' Representative and any communication or writing
so sent shall be deemed notice to all of the Management Shareholders and
Employee Shareholders hereunder. The Management Shareholders and Employee
Shareholders hereby consent and agree that the Shareholders' Representative is
authorized to accept deliveries, including any notice, on behalf of the
Shareholders pursuant hereto. The Shareholders' Representative shall not receive
compensation for his or her services.
(b) Attorney-in-Fact.
(i) The Shareholders' Representative is hereby appointed
and constituted the true and lawful attorney-in-fact of each Shareholder, except
the Non Employee Shareholder, with full power in his, her or its name and on
his, her or its behalf to act according to the terms of this Agreement and the
Escrow Agreement in the absolute discretion of the Shareholders' Representative;
and in general to do all things and to perform all acts including, without
limitation:
(1) executing and delivering all agreements,
certificates, receipts, instructions, notices and other instruments contemplated
by or deemed advisable in connection with Article VII of the this Agreement
(including execution of the Escrow Agreement);
(2) executing and delivering any other agreements
contemplated to be delivered pursuant to this Agreement, including the
Registration Rights Agreement.
(ii) This power of attorney and all authority hereby
conferred is granted and shall be irrevocable and shall not be terminated by any
act of any Shareholder, except the Non Employee Shareholder, by operation of
law, whether by such Shareholder's death, disability protective supervision or
any other event. Without limitation to the foregoing, this power of attorney is
to ensure the performance of a special obligation and, accordingly, each
Shareholder, except the Non Employee Shareholder, hereby renounces its, his or
her right to renounce this power of attorney unilaterally any time before the
Expiration Date.
(iii) Each Management Shareholder and Employee Shareholder
hereby waives any and all defenses which may be available to contest, negate or
disaffirm the action of the Shareholders' Representative taken in good faith
under this Agreement or any of the Related Agreements.
(iv) Notwithstanding the power of attorney granted in this
Section 7.5, no agreement, instrument, acknowledgement or other act or document
shall be ineffective by reason only of the Management Shareholders and Employee
Shareholders having signed or given such directly instead of the Shareholders'
Representative.
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(c) Indemnification of Shareholders' Representative. The
Shareholders' Representative shall not be liable for any act done or omitted
hereunder as Shareholders' Representative while acting in good faith and in the
exercise of reasonable judgment. The Management Shareholders on whose behalf the
Indemnification Shares were contributed shall severally indemnify the
Shareholders' Representative and hold the Shareholders' Representative harmless
against any loss, liability or expense incurred without negligence or bad faith
on the part of the Shareholders' Representative and arising out of or in
connection with the acceptance or administration of the Shareholders'
Representative's duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Shareholders' Representative.
ARTICLE VIII
GUARANTEE OF PERFORMANCE BY HOLDING COMPANIES AND OTHER ASSET
PROTECTION VEHICLES
Each of the Indirect Owners will beneficially own Exchangeable Shares or
Parent Common Stock as a result of the Acquisition indirectly through one or
more holding companies or other asset protection vehicles. As an inducement to
the Parent Companies willingness to enter into this Agreement, such individuals
hereby agree as follows:
8.1 AFFIRMATION OF REPRESENTATIONS AND WARRANTIES. Each Indirect Owner
hereby affirms in all respects the representations and warranties made by the
Shareholder that directly holds the Company shares.
8.2 FURTHER ASSURANCES. Each Indirect Owner hereby agrees to execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of the
Acquisition and the transactions contemplated by this Agreement and the Related
Agreements, including any actions that may be necessary to ensure that the
Shareholder that directly holds the Company shares on behalf of such Indirect
Owner fully performs its obligations under the Agreement and Related Agreements.
8.3 LIMITATION OF LIABILITY. Each Indirect Owner shall be individually
responsible for amounts owed by the Shareholder that received Exchangeable
Shares pursuant to this Agreement only to the extent of the amount of the Total
Consideration received by such Indirect Owner through dividends, distributions
or otherwise from such Shareholder.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. Except as provided in Section 9.2 below, this Agreement
may be terminated and the Acquisition abandoned at any time prior to the
Closing.
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(a) by mutual written consent of the Company and the Parent;
(b) by Parent or Shareholders representing a majority of the
interests in the Company (including the Non Employee Shareholder) if: (i) the
Acquisition has not occurred before 5:00 p.m. (California time) on June 30, 2000
(provided that the right to terminate this Agreement under this clause 9.1(b)(i)
shall not be available to any party whose willful failure to fulfill any
obligation hereunder has been the cause of, or resulted in, the failure of the
Amalgamation to occur on or before such date); (ii) there shall be a final
nonappealable order of a federal, provincial or state court in effect preventing
consummation of the Amalgamation; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Acquisition by any Governmental Authority that would make consummation of the
Amalgamation illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Amalgamation, by any Governmental Authority after the date hereof, which
would: (i) prohibit Parent's, the Company's or Exchangeco's ownership or
operation of all or any portion of the business of the Company or (ii) compel
Parent, the Company or Exchangeco to dispose of or hold separate all or a
portion of the business or assets of the Company, Exchangeco or Parent as a
result of the Acquisition;
(d) by Parent if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company or the Shareholders and (i) such breach has not been
cured within ten (10) business days (of the breaching party) after written
notice to the Company or the Shareholders, as the case may be, (provided that,
no cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b), as the case may be, would not then be satisfied;
(e) by the Company or the Shareholders representing a majority of
the interests in the Company (including the Non Employee Shareholder) if they
are not in material breach of its or their obligations under this Agreement and
there has been a material breach of any representation, warranty, covenant or
agreement contained in this Agreement on the part of Parent and (i) such breach
has not been cured within thirty (30) business days (of the breaching party)
after written notice to Parent (provided that, no cure period shall be required
for a breach which by its nature cannot be cured), and (ii) as a result of such
breach the conditions set forth in Section 6.2(a) or 6.2(b), as the case may be,
would not then be satisfied.
(f) by the Company or the Shareholders representing a majority of
the interests in the Company (including the Non Employee Shareholder) if a
hostile take-over bid is made to purchase Common Shares of the Parent and
initiated during the period starting on the execution date hereof and ending on
June 30, 2000. For the purpose of this Section, "hostile take-over bid" shall
mean an unsolicited offer made to purchase at least 35% of the Common Shares of
the Parent for a cash consideration, for a part cash part non-cash or for a
non-cash consideration, which offer shall be prepared in accordance with
applicable securities laws and which is not recommended for approval by the
Board of Directors to its shareholders.
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Where action is taken to terminate this Agreement pursuant to this
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, the Company or the
Shareholders, or their respective officers, directors or stockholders, provided
that each party shall remain liable for any breaches of this Agreement prior to
its termination; and provided further that, the provisions of Sections 5.2, 5.3,
9.2, 9.3, 9.4 and Article IX of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
9.3 AMENDMENT. Except as is otherwise required by applicable law, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
9.4 EXTENSION; WAIVER. At any time prior to the Closing, the Parent
Companies, on the one hand, and the Company and Shareholders, on the other, may,
to the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent Companies:
Netergy Networks
2445 Mission College Blvd.
Santa Clara, CA 95054
Attn: Chief Executive Officer
Telephone No.: (408) 727-1885
Facsimile No.: (408) 980-0432
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with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: John T. Sheridan, Esq.
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(b) if to the Company, to:
UFORCE Inc.
1001, de Maisonneuve Blvd West 5th floor
Montreal, Quebec, Canada H3A 3C8
Attention: Jean-Luc Calonne
Telephone: 514-282-8484
Facsimile: 514-282-9898
with a copy to:
Lafleur Brown
1 Place Ville-Marie, 37th Floor
Montreal, Quebec, Canada H3B 384
Attention: Paul Bedard
Telephone No.: 514-878-9641
Facsimile No.: 514-878-1450
(c) if to the Shareholders' Representative:
Jean-Luc Calonne
1001, de Maisonneuve Blvd. West, 5th floor
Montreal, Quebec, H3A 3C8
Telephone No.: (514) 282-8484
Facsimile No.: (514) 282-9898
With a required copy to:
Lafleur Brown
1 Place Ville Marie, 37th Floor
Montreal, Quebec, H3A 3C8
Attention: Paul Bedard
Telephone No.: (514) 878-9641
Facsimile No.: (514) 878-1450
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(d) Societe Generale de Financement du Quebec
600 de la Gauchetiere Ouest, Suite 1700
Montreal, Quebec, Canada H3B 4L8
Attention: Richard Tarte Esq.
Telephone No: 514 876-9290
Facsimile No: 514 395-8055
With a required copy to:
Fasken Martineau DuMoulin
Tour de la Bourse
800 Place Victoria, Suite 3400
Montreal, Quebec, Canada H4Z 1E9
Attention: Michel Boislard Esq.
Telephone No: 514 397-7400
Facsimile No: 514 397-7600
10.2 INTERPRETATION. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement, provided however, that the Recitals
shall be deemed part of this Agreement.
10.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other Person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Parent may assign its rights and delegate its obligations hereunder to an
affiliate provided it remains jointly and severally liable with any such
affiliate for its obligations hereunder.
10.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve,
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to the extent possible, the economic, business and other purposes of such void
or unenforceable provision.
10.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
10.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such Persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.8 ARBITRATION.
(a) In the event a dispute, claim or controversy ("DISPUTE")
arises under this Agreement, the parties hereto agreed to resolve such Dispute
in accordance with the arbitration provisions hereinafter set forth. The party
alleging any claim hereunder (the "CLAIMANT") shall issue a notice (the "DISPUTE
NOTICE") to each of the other parties hereto in accordance with the notice
provisions hereof. The Dispute Notice will set forth in reasonable detail the
basis of the Claimant's claim ("CLAIM") and shall be deemed notice of the
Claimant's election to assert its right to arbitration as herein provided. If
after a period of ten (10) days after receipt of the Dispute Notice (the
"MEDIATION PERIOD") the parties are unable to resolve their differences, the
parties agree to arbitrate their differences in the City of Santa Clara,
California in accordance with the rules of the American Arbitration Association
("AAA") then obtaining (except to the extent modified hereby) before a panel of
three arbitrators (the "ARBITRATORS"). The indemnifying party shall select one
arbitrator and the Claimant, or if there are more than one Claimant asserting
the same Claim, a majority of the Claimants, shall select one arbitrator. Each
of the parties shall each make their selection of an arbitrator within fifteen
(15) days after the expiration of the Mediation Period (the "ARBITRATOR
SELECTION PERIOD"). The two arbitrators shall select a third arbitrator within
fifteen (15) days after the expiration of the Arbitrator Selection Period and
upon his selection, the third arbitrator shall act as the Chair of all
proceedings under the arbitration. In the event the two arbitrators fail to
select the third arbitrator within such fifteen (15) day period, either party
may apply to a California Court of general jurisdiction sitting in Santa Clara
County to have such Court appoint such third arbitrator.
(b) With respect to all pre-hearing matters, the arbitration
shall be governed by the California Code of Civil Procedure (the "CCP") and the
parties shall be deemed to have all of the rights and responsibilities as are
provided for therein. In connection therewith, to the extent permitted by law,
the Arbitrators shall be vested with such authority and discretion as if they
were presiding as a California State Court Judge and as if this were a civil
action pending before him. This shall include, inter alia, the authority to
entertain and decide dispositive motions under the
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CCP; provided, however, nothing in the foregoing shall entitle the Arbitrators
to amend the express terms of the Agreement.
(c) The losing party shall pay the fees of the Arbitrators. Each
party shall bear its own costs and attorneys' fees in connection with the
arbitration.
(d) As soon as Arbitrators have been appointed, the parties shall
have the right to commence and conduct discovery pursuant to all means available
under the CCP. The parties agree that each side will be limited to three (3)
depositions. In addition, each party may depose the other parties' designated
expert(s). The Arbitrators shall have the power to limit discovery which they
deem not to be in compliance with the CCP.
(e) All discovery shall be completed within thirty (30) days
of the appointment of the Arbitrators. The matter shall be set for hearing on a
date as soon as practical but no later than thirty (30) days after the
completion of discovery. The hearing shall be completed as quickly as possible
and in no event later than sixty (60) days after the first day of the hearing.
The Arbitrators' award (the "ARBITRAL AWARD") shall be rendered in writing
within thirty (30) days of the completion of the hearing on the merits. Any
delays in the foregoing schedule shall not prejudice the rights of the parties.
(f) The Arbitral Award shall be final and conclusive on the
parties.
(g) In the event that one or more of the Arbitrators named above
refuse to act, or become incapable, incompetent or unfit to act before the
hearing on the merits has been completed or before an award has been entered, a
successor arbitrator shall be appointed by agreement of the parties or by
application by either party to a California Court of general jurisdiction
sitting in Santa Clara County.
(h) The Arbitrators shall be governed by the Agreement and by and
apply the substantive law of the State of Delaware in making their award. Any
dispute arising between the parties during the course of the arbitration
concerning the interpretation and enforcement of these arbitration provisions
shall be resolved by the Arbitrators in accordance with the provisions hereof.
10.9 RULES OF CONSTRUCTION. 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, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States,
Canada or any state or province having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
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10.11 ENGLISH LANGUAGE ONLY. The parties hereto confirm that is their
wish that this Agreement, as well as all other documents related hereto,
including legal notices, have been and shall be drawn up in the English language
only. Les parties confirment leur desir que cet accord ainsi que tous les
documents, y compris tous les avis qui s'y rattachent, soient rediges en langue
anglaise.
10.12 CERTAIN DEFINED TERMS. As used in this Agreement, in addition to
the terms defined elsewhere in the Agreement (including in the Recitals), the
following terms will have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"AAA" has the meaning set forth in Section 10.8(a).
"ACQUISITION" has the meaning set forth in the Recitals.
"AGREEMENT" has the meaning set forth on page 1.
"AMALGAMATION" has the meaning set forth in the Recitals.
"AMALGAMATION AGREEMENT" has the meaning set forth in Section
1.2(a).
"APPROVAL ORDER" has the meaning set forth in Section 1.4(c).
"ARBITRAL AWARD" has the meaning set forth in Section 10.8(e).
"ARBITRATORS" has the meaning set forth in Section 10.8(a).
"ARBITRATOR SELECTION PERIOD" has the meaning set forth in
Section 10.8(a).
"BENEFIT ARRANGEMENTS" has the meaning set forth in Section
2.20(a).
"BUSINESS DAY" shall mean a day that Parent's principal bank is
open for business and shall be deemed to end at 5:00 p.m. Pacific Standard Time.
"CALCO" means Investissements Calonne Inc., an entity wholly
owned by Jean-Luc Calonne.
"CALSUB" means 9090-1208 Quebec inc. a wholly owned subsidiary of
Calco.
"CANADIAN BENEFIT ARRANGEMENTS" has the meaning set forth in
Section 2.20(f).
"CANADIAN GAAP" means generally accepted accounting principles in
Canada, including those set out in the Handbook of the Canadian Institute of
Chartered Accountant, applied on a consistent basis.
"CCP" has the meaning set forth in Section 10.8(b).
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"CERTIFICATE OF CONTINUANCE" has the meaning set forth in Section
1.2(c)(ii).
"CLAIM" has the meaning set forth in Section 10.8(a).
"CLAIMANT" has the meaning set forth in Section 10.8(a).
"CLOSING" has the meaning set forth in the Recitals.
"CLOSING DATE" has the meaning set forth in the Recitals.
"CLOSING PRICE" has the meaning set forth in the Recitals.
"COMMON SHARES" has the meaning set forth in Section 2.2(a).
"COMPANIES ACT" has the meaning set forth in the Recitals.
"COMPANY" means UForce Inc., a corporation existing under the
federal laws of Canada.
"COMPANY AUTHORIZATIONS" has the meaning set forth in Section
2.22.
"COMPANY INTELLECTUAL PROPERTY" has the meaning set forth in
Section 2.11(a).
"COMPANY OPTIONS" has the meaning set forth in the Recitals.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" has the meaning set
forth in Section 2.11(b).
"COMPANY SCHEDULES" has the meaning set forth in introductory
paragraph of Article II.
"CONFLICT" has the meaning set forth in Section 2.4.
"CONTINUANCE" has the meaning set forth in the Recitals.
"CONTRACT" has the meaning set forth in Section 2.12.
"COURT" has the meaning set forth in Section 1.4(c).
"CPP" has the meaning set forth in Section 2.8(a).
"CSST" has the meaning set forth in Section 2.20(g).
"CTCO A" means 9090-1133 Quebec Inc., and entity jointly owned by
Thilco and Calco.
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"CTCO B" means 9090-1166 Quebec Inc., and entity jointly owned by
Thilco and Calco.
"DISALLOWED OPTIONS" has the meaning set forth in the Recitals.
"DISPUTE" has the meaning set forth in Section 10.8(a).
"DISPUTE NOTICE" has the meaning set forth in Section 10.8(a).
"EMPLOYEE" has the meaning set forth in Section 2.20(b).
"EMPLOYEE HOLDCO" has the meaning set forth in the Recitals.
"EMPLOYEE HOLDCO EXCHANGEABLE SHARES" has the meaning set forth
in the Recitals.
"EMPLOYEE SHAREHOLDERS" means Danny Deschenes, Alexandre Garneau,
Farid Lahdiri, Majed Haj Mohamad and Marcel St-Amant.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in the
Recitals.
"END-USER LICENSE" has the meaning set forth in Section 2.11(g).
"ENVIRONMENTAL LAWS" has the meaning set forth in Section
2.18(g).
"ENVIRONMENTAL PERMITS" has the meaning set forth in Section
2.18(c).
"ESCROW AGREEMENT" has the meaning set forth in the Recitals.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning set forth in the
Recitals.
"EXCHANGEABLE SHARES" has the meaning set forth in the Recitals.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC promulgated
from time to time thereunder.
"EXCHANGECO" has the meaning set forth in the Recitals.
"EXCHANGECO COMMON SHARES" has the meaning set forth in the
Recitals.
"EXCHANGECO PREFERRED SHARES" has the meaning set forth in the
Recitals.
"EXCHANGECO EXCHANGEABLE SHARES" has the meaning set forth in the
Recitals.
"EXCHANGE RATIO" has the meaning set forth in Section 1.4(b).
"EXPIRATION DATE" has the meaning set forth in Section 4.3(a).
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"FINANCIAL STATEMENTS" has the meaning set forth in Section 2.5
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"HAZARDOUS MATERIALS" has the meaning set forth in Section
2.18(f).
"HAZARDOUS MATERIALS ACTIVITIES" has the meaning set forth in
Section 2.18(b).
"HOLDING" has the meaning set forth in the Recitals.
"HOLDING ULC" has the meaning set forth in the Recitals.
"INDEMNIFICATION SHARES" has the meaning set forth in Section
1.6.
"INDEMNIFICATION THRESHOLD" has the meaning set forth in Section
7.3(a).
"INDIRECT OWNERS" has the meaning set forth in the first
paragraph of the Agreement.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section
2.11(a).
"KNOWLEDGE" an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (i) such individual is actually aware of
such fact or other matter; or (ii) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably investigation concerning the existence of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter."
"LIEN" means any mortgage, hypothec, pledge, prior claim,
assignment, encumbrance, lien (statutory or other), security interest or other
security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement or any
financing lease having substantially the same economic effect as any of the
foregoing) or any restriction on transfer.
"LOGIBRO" has the meaning set forth in the recitals.
"LOGIBRO TERMINATION AGREEMENT" has the meaning set forth in the
recitals.
"LOSS" and "LOSSES" has the meaning set forth in Section 7.2(a).
"MAJOR CUSTOMERS" has the meaning set forth in Section 2.25 and
are identified on Schedule 2.25.
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"MANAGEMENT SHAREHOLDERS" means CalSub, Cyrille Thilloy, Michael
Cook, John Hennessy, Jean-Marc Parenteau, Jean-Charles Phaneuf, Alain
Provencher, Mario Dorion and Martin Leclerc.
"MANAGERS" has the meaning set forth in the Recitals.
"MATERIAL ADVERSE EFFECT" (a) as used with respect to Company and
Exchangeco means a material adverse effect on the following: (i) the business,
financial condition, results of operations, assets (including intangible
assets), liabilities or prospects of the Company or Exchangeco or their
subsidiaries taken as a whole, or (ii) the ability of Company to consummate the
transactions contemplated by this Agreement or the Related Agreements or perform
its obligations hereunder or thereunder, or (iii) the ability of the Parent
Companies to exercise their rights under this Agreement or the Related
Agreements or as a shareholder of Company and (b) as used with respect to Parent
Companies means a material adverse effect on the following: (i) the business,
financial condition, results of operations, assets (including intangible
assets), liabilities or prospects of the Parent or its subsidiaries taken as a
whole, (ii) the ability of Parent to consummate the transactions contemplated by
this Agreement or the Related Agreements or perform their obligations hereunder
or thereunder or (iii) the ability of the Shareholders to exercise their rights
under this Agreement or the Related Agreements.
"MEDIATION PERIOD" has the meaning set forth in Section 10.8(a).
"NET ASSETS" has the meaning set forth in Section 2.5.
"NEW SHARES" has the meaning set forth in Section 4.3(b).
"NONCOMPETITION AGREEMENTS" has the meaning set forth in the
Recitals.
"NON-EMPLOYEE SHAREHOLDER" means SGF Tech Inc.
"OPTION HOLDERS" has the meaning set forth in the Recitals.
"PARENT" means 8x8, Inc. a Delaware corporation doing business as
Netergy Networks, Inc.
"PARENT COMMON STOCK" has the meaning set forth in the Recitals.
"PARENT COMPANIES" has the meaning set forth in the Recitals.
"PARENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.4.
"PARENT MULTIPLE VOTING SHARE" has the meaning set forth in the
Recitals.
"PARENT SCHEDULES" has the meaning set forth in introductory
paragraph of Article III.
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"PARENT SUB" has the meaning set forth in the Recitals.
"PATENTS" has the meaning set forth in Section 2.11(a).
"PAYMENT DATE" has the meaning set forth in Section 7.3(b).
"PERSON" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
limited liability company, Governmental Authority or other entity of whatever
nature.
"PROPRIETARY INFORMATION" has the meaning set forth in Section
2.11(a).
"QPP" has the meaning set forth in Section 2.8(a).
"QUEBEC EMPLOYEES" has the meaning set forth in Section 5.12(b).
"RECAPITALIZATION" has the meaning set forth in the Recitals.
"REGISTERED INTELLECTUAL PROPERTY" has the meaning set forth in
Section 2.11(a).
"REGISTRAR" has the meaning set forth in Section 1.2(c)(ii).
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in the
Recitals.
"RELATED AGREEMENTS" means collectively each agreement entered
into by the Parent Companies, the Company and the Shareholders in connection
with this Agreement, including without limitation the Amalgamation Agreement,
Employment Agreements, Stock Restriction Agreements, Noncompetition Agreements,
Escrow Agreement, Registration Rights Agreement, and Voting, Exchange and
Support Agreement.
"REPLACEMENT OPTIONS" has the meaning set forth in the Recitals.
"RETURNS" has the meaning set forth in Section 2.8(b)(i).
"RULE 144" has the meaning set forth in Section 5.1(a).
"SALES" has the meaning set forth in Section 7.3(b).
"SEC" means the United States Securities and Exchange Commission.
"SEC DOCUMENTS" means each statement or report filed by Parent
under the Exchange Act, each registration statement (including amendments
thereto), and any other document filed by Company or any of its Subsidiaries
with the SEC pursuant to the Securities Act or the Exchange Act, including all
schedules and Company-prepared exhibits thereto.
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"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"SECURITY HOLDERS" has the meaning set forth in the Recitals.
"SGF" shall mean SGF Tech Inc. or 9091-1215 Quebec Inc., a wholly
owned subsidiary of SGF Tech Inc.
"SGF LOCK UP" has the meaning set forth in Section 5.12(a).
"SGF SHARES" has the meaning set forth in Section 5.12(a).
"SHARE PRICE" has the meaning set forth in Section 7.3(b).
"SHAREHOLDERS" means collectively the Employee Shareholders, the
Management Shareholders and the Non-Employee Shareholders.
"SHAREHOLDER LOSS" and "SHAREHOLDER LOSSES" have the meanings set
forth in Section 7.2(b).
"STANDARD LICENSE AGREEMENTS" has the meaning set forth in
Section 2.11(e).
"STOCK RESTRICTION AGREEMENTS" has the meaning set forth in the
Recitals.
"SUBSIDIARY" means, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.
"TAX" or "TAXES" has the meaning set forth in Section 2.8(a).
"THILCO" means 9090-1109 Quebec Inc., and entity wholly owned by
Cyrille Thilloy.
"THIRD PARTY EXPENSES" has the meaning set forth in Section 5.3.
"TOTAL CONSIDERATION" has the meaning set forth in Section
7.3(b).
"TOTAL EMPLOYEE SHARES" has the meaning set forth in Section
1.2(c)(v).
"TOTAL MANAGEMENT SHARES" has the meaning set forth in Section
1.4(e).
"TOTAL NON-EMPLOYEE SHARES" has the meaning set forth in Section
1.4(b).
"TOTAL OPTION SHARES" has the meaning set forth in Section
1.4(g).
-65-
"TRADE SECRETS" has the meaning set forth in Section 2.11(a).
"UFORCE STOCK OPTION PLAN" has the meaning set forth in the
Recitals.
"UFORCE ULC SUB" has the meaning set forth in the Recitals.
"UNOBTAINED CONSENTS" has the meaning set forth in Section 2.4.
"VOTING, EXCHANGE AND SUPPORT AGREEMENT" has the meaning set
forth in the Recitals.
"YEAR 2000 COMPLIANT" has the meaning set forth in Section
2.11(p).
[Remainder of Page Intentionally Left Blank]
-66-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
8x8, INC.
By: /s/ Paul Voois
-----------------------------------------
Name: Paul Voois
Title: Chief Executive Officer
UFORCE INC.
By: /s/ Jean-Luc Calonne
-----------------------------------------
Name: Jean-Luc Calonne
Title: Chief Executive Officer
9091-1215 Quebec Inc.
By: /s/ Richard Tarte and Richard Fredette
-----------------------------------------
Name: Richard Tarte and Richard Fredette
---------------------------------------
Title:
--------------------
9090-1208 Quebec Inc.
By: /s/ Jean-Luc Calonne
-----------------------------------------
Name: Jean-Luc Calonne
Title:
--------------------
9090-1109 Quebec Inc.
By: /s/ Cyrille Thilloy
-----------------------------------------
Name: Cyrille Thilloy
---------------------
Title:
--------------------
[Signature Page 1 of 3 to Share Exchange Agreement]
-67-
9090-1133 Quebec Inc.
By: /s/ Jean-Luc Calonne
-----------------------------------------
Name: Jean-Luc Calonne
---------------------
Title:
--------------------
9090-1166 Quebec Inc.
By: /s/ Jean-Luc Calonne
-----------------------------------------
Name: Jean-Luc Calonne
---------------------
Title:
--------------------
/s/ Michael Cook
--------------------------------------------
Michael Cook
/s/ John Hennessy
--------------------------------------------
John Hennessy
/s/ Jean-Marr Parenteau
--------------------------------------------
Jean-Marc Parenteau
/s/ Jean-Charles Phaneuf
--------------------------------------------
Jean-Charles Phaneuf
/s/ Alain Provencher
--------------------------------------------
Alain Provencher
/s/ Mario Dorion
--------------------------------------------
Mario Dorion
/s/ Martin Leclerc
--------------------------------------------
Martin Leclerc
[Signature Page 2 of 3 to Share Exchange Agreement]
/s/ Danny Deschenes
--------------------------------------------
Danny Deschenes
/s/ Alexandre Garneau
--------------------------------------------
Alexandre Garneau
/s/ Farid Lahdiri
--------------------------------------------
Farid Lahdiri
/s/ Majed Haj Mohamad
--------------------------------------------
Majed Haj Mohamad
/s/ Marcel St-Amant
--------------------------------------------
Marcel St-Amant
/s/ Jean-Luc Calonne
--------------------------------------------
Jean-Luc Calonne
Investissements Calonne Inc.
By: /s/ Jean-Luc Calonne
-----------------------------------------
Name: Jean-Luc Calonne
Title:
------------------
/s/ Cyrille Thilloy
--------------------------------------------
Cyrille Thilloy
[Signature Page 3 of 3 to Share Exchange Agreement]
Dates Referenced Herein and Documents Incorporated by Reference
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