AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000
REGISTRATION NO. 333-94371
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-3/A
--------------------
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PERFORMANCE TECHNOLOGIES, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 16-1158413
(State Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
315 SCIENCE PARKWAY
ROCHESTER, NEW YORK 14620
(716) 256-0200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-----------------
DONALD L. TURRELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PERFORMANCE TECHNOLOGIES, INCORPORATED
315 SCIENCE PARKWAY
ROCHESTER, NEW YORK 14620
(716) 256-0200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copy to:
JEFFREY H. BOWEN, ESQ.
HARTER, SECREST & EMERY LLP
700 MIDTOWN TOWER
ROCHESTER, NEW YORK 14604
(716) 232-6500
----------------
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
2,165,732 SHARES
PERFORMANCE TECHNOLOGIES, INCORPORATED
COMMON STOCK
--------------------
This Prospectus relates to the public offering of 2,165,732 shares of
our Common Stock, par value $.01 per share. This offering will not be
underwritten. All 2,165,732 shares may be offered by certain of our stockholders
or by pledgees, donees, transferees or other successors in interest who receive
the shares as a gift, partnership distribution or other non-sale related
transfer. All of these shares were originally issued in connection with the
acquisition of MicroLegend Telecom Systems Inc., a Canadian company, through the
acquisition of MicroLegend's outstanding capital stock. As part of the
acquisition, MicroLegend became a wholly-owned subsidiary of 3688283 Canada
Inc., which is our wholly-owned Canadian subsidiary. The issuance of the shares
was exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended. We are registering the shares pursuant to Section 7.1 of the Share
Acquisition Agreement by and among us, our subsidiary, MicroLegend and two of
the principal stockholders of MicroLegend.
The shares we are registering may be offered by the selling
stockholders from time to time in transactions in the over-the-counter market,
in negotiated transactions, or in a combination of such methods of sale. The
shares may be offered at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The selling stockholders may effect such transactions by
selling the shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of the shares for whom such
broker-dealers act as agents or to whom they sell as principals, or both. This
compensation might be in excess of customary commissions. For further
information, see the section entitled "Plan of Distribution" below.
We will not receive any of the proceeds from the sale of these shares.
We have agreed to bear certain expenses in connection with the registration of
the shares being offered and sold by the selling stockholders. Our Common Stock
is quoted on the Nasdaq National Market under the symbol "PTIX." On January 7,
2000 the average of the high and low bid price for the Common Stock was $16.469.
Our principal executive office is located at 315 Science Parkway,
Rochester, New York 14620. Our telephone number is (716) 256-0200.
-------------------
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the distribution of the shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933, and any commissions received by them and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This offering of our Common Stock involves certain risks. For further
information, please see the section entitled "Risk Factors."
The date of this Prospectus is February 1, 2000
<PAGE>
RISK FACTORS
We Must Successfully Manage Technological Change and the Introduction
of New Products. The market for the SS7 inter-networking products produced by
MicroLegend are characterized by rapid technological change and frequent
introduction of products based on new technologies. As these products are
introduced, the standards of the industry change. Additionally, the overall
computer networking industry is volatile as the effects of new technologies, new
standards, new products and short life cycles contribute to changes in the
industry and the performance of industry participants. Our future revenue in
this market will depend upon our ability to anticipate technological change and
to develop and introduce enhanced products on a timely basis that meet or exceed
new industry standards. New product introductions could contribute to quarterly
fluctuations in operating results as orders for new products commence and orders
for existing products decline. Moreover, significant delays can occur between a
product's introduction and commencement of volume production. If we are not able
to develop and manufacture new products in a timely manner, if we have problems
with reliability, quality or availability of our products or their component
parts, or if we fail to achieve market acceptance for our products, our revenues
and operating results may be adverse effected.
We Must Deal Effectively with Competition. The SS7 inter-networking
business is extremely competitive. We face competition from a number of
established and emerging computer communications and inter-networking device
companies. While MicroLegend is currently the leading SS7 inter-networking
provider, many of our principal competitors also have established brand name
recognition and market positions and may have greater experience and financial
resources to spend for promotion, advertising, research and product development
than we have. Several of these competitors have recently introduced or announced
their intentions to introduce new competitive products. In addition, as we
broaden our product offerings, we may face competition from new competitors.
Companies in related markets could offer products with functionality similar or
superior to that offered by our products. Increased competition could result in
price reductions, reduced margins and loss of market share, all of which would
materially and adversely affect our revenue and operating results. There can be
no assurance that we will be able to compete successfully with our existing or
new competitors or that competitive pressures we face in this industry will not
have a material adverse effect on our revenue and operating results.
We are Dependent on Several Key Customers in the SS7 Inter-networking
Market. There can be no assurance that the principal customers of MicroLegend
will continue to purchase products from us at current levels. Customers
typically did not enter into long-term volume purchase contracts with
MicroLegend. In addition, MicroLegend's customers have certain rights to extend
or delay the shipment of their orders. The loss of one or more of MicroLegend's
major customers, and the reduction, delay or cancellation of orders or a delay
in shipment of products to such customers would have a material adverse effect
on our revenue and operating results.
We May Experience Fluctuations in Annual and Quarterly Results. In
relation to the product lines and business acquired as a result of the
MicroLegend acquisition, our annual and quarterly operating results may in the
future vary significantly depending on factors such as the timing and shipment
of significant orders, new product introductions by us and our competitors,
market acceptance of new and enhanced versions of our products, changes in our
pricing policies and those of our competitors, the mix of distribution channels
through which our products are sold, our inability to obtain sufficient supplies
of sole or limited source components for our products, seasonal and general
economic conditions.
We are Dependent on Third Party Component Suppliers. Certain components
used in MicroLegend's products are currently available only from one or a
limited number of sources. Although prior to the acquisition MicroLegend was
generally able to obtain adequate supplies of these components, there can be no
assurance that future supplies will be adequate for our needs or will be
available on acceptable prices and terms. Our inability in the future to obtain
sufficient limited-source components, or to develop alternative sources, could
result in delays in product introduction or shipments, and increased component
prices could negatively affect our gross margins, either of which will have a
material adverse effect on our revenue and operating results.
We are Dependent on Proprietary Technology. Our success in the SS7
inter-networking business depends upon our proprietary technologies. Prior to
the acquisition, MicroLegend relied principally upon trademark, copyright and
trade secret laws to protect its proprietary technologies. MicroLegend generally
entered into confidentiality or license agreements with its distributors,
customers and potential customers and limited access to and distribution of the
source code to its software and other proprietary information. MicroLegend's
employees were subject to its employment policy regarding confidentiality. We
will maintain similar standards and enforce similar safeguards of former
MicroLegend proprietary technology in the future. However, there can be no
assurance that the steps taken in this regard by MicroLegend in the past or us
in the future will be adequate to prevent misappropriation of our technologies
or to provide an effective remedy in the event of a misappropriation by others.
Although our management believes that our products and those produced
by MicroLegend do not infringe on the proprietary rights of third parties, there
can be no assurance that infringement claims will not be asserted, resulting in
costly litigation in which we may not ultimately prevail. Adverse determinations
in such litigation could result in the loss of our proprietary rights, subject
us to significant liabilities, require us to seek licenses from third parties or
prevent us from manufacturing or selling our products, any of which will have a
material adverse effect on our revenue and operating results.
Because of the existence of a large number of patents in the computer
networking industry and the rapid rate of issuance of new patents or new
standards or to obtain important new technology, it may be necessary for us to
enter into technology licenses from others. There can be no assurance that these
third party technology licenses will be available to us on commercially
reasonable terms. The loss of or inability to obtain any of these technology
licenses could result in delays or reductions in product shipments. Any such
delays or reductions in product shipments will have a material adverse effect on
the our revenue and operating results.
We are Dependent on Certain Key MicroLegend Personnel. Our success in
the SS7 inter-networking business depends on the continued contributions of
certain key MicroLegend personnel, many of whom would be difficult to replace.
It will also depend on our ability to attract and retain skilled employees.
Although our employees are subject to our employment policy regarding
confidentiality and ownership of inventions, employees are not otherwise subject
to employment agreements or non-competition covenants. Changes in personnel
could adversely affect our operating results.
AVAILABLE INFORMATION
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
this offering of our Common Stock. If any such information or representations
are given or made, such information or representations must not be relied upon
as having been authorized by us, by any selling stockholder or by any other
person. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that information herein
is correct as of any time subsequent to the date hereof. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Common Stock covered by this Prospectus, nor does it
constitute an offer to or solicitation of any person in any jurisdiction in
which such offer or solicitation may not lawfully be made.
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. As a result, we files reports, proxy
statements, information statements and other information with the Securities and
Exchange Commission (the "SEC"). You may inspect and copy any reports, proxy
statements and other information that we file at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
obtain copies of such materials by mail from the Public Reference Room of the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
SEC's web site is http://www.sec.gov. Our Common Stock is quoted on the Nasdaq
National Market, and such material may also be inspected at the offices of
Nasdaq Operations, 1735 K Street N.W. Washington, D.C. 20006.
We have filed with the SEC a Registration Statement on Form S-3
(together with all amendments and exhibits, referred to in this Prospectus as
the "Registration Statement") under the Securities Act of 1933 with respect to
the Common Stock we are offering. This Prospectus does not contain, nor is it
required to contain, all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information regarding us and our Common
Stock, you should refer to the Registration Statement and its exhibits and
schedules. The Registration Statement, including its exhibits and schedules, may
be inspected as described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC (File No. 0-27460) pursuant
to the Securities Exchange Act of 1934 are incorporated herein by reference:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
filed March 30, 1999; 2. Our Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1999; 3. Our Current Report on Form
8-K filed on December 21, 1999; 4. The description of our Common Stock, par
value $.01 per share, contained in our Registration Statement on Form S-1 filed
on January 18, 1996 including any amendment or report filed for the purpose of
updating such description; and 5. All reports and other documents filed by us
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 subsequent to the date of this Prospectus and prior to the termination of
this offering.
Any statement contained in a document incorporated by reference herein
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing of such documents. Any statement modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. We will provide to you upon written or
oral request and without charge a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written requests for copies should be directed to
Dorrance W. Lamb, Vice President of Finance, at our principal executive offices:
Performance Technologies, Incorporated 315 Science Parkway, Rochester, New York
14620. Our telephone number is (716) 256-0200.
THE COMPANY
Our principal executive offices are located at 315 Science Parkway,
Rochester, New York 14620. Our telephone number is (716) 256-0200.
PLAN OF DISTRIBUTION
We will receive no proceeds from this offering. The shares offered by
this Prospectus may be sold by the selling stockholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or in a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The selling stockholders may effect such
transactions by selling the shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of the shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both. This compensation might be in excess of customary
commissions. The shares we are offering may be sold either pursuant to this
Registration Statement or pursuant to Rule 144 issued by the SEC under the
Securities Act of 1933.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in the distribution of the shares may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions received by them and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under federal law.
Under applicable federal rules and regulations, any person engaged in
the distribution of our Common Stock may not simultaneously engage in market
making activities with respect to our Common Stock for a period of two business
days prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each selling stockholder will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
of the SEC promulgated thereunder. These rules include, without limitation,
Rules 10b-6 and 10b-7, which may limit the timing of purchases and sales of
shares of our Common Stock by the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
owned by each of the selling stockholders. Except for Thomas Blain and Reginald
T. Cable, each of whom is an officer of MicroLegend Telecom Systems Inc., a
company which is now one of our affiliates, none of these selling stockholders
has had a material relationship with us within the past three years other than
as a result of the ownership of our Common Stock. Because the selling
stockholders may offer all or some of the Common Stock which they hold pursuant
to the offering contemplated by this Prospectus, and because there are currently
no agreements, arrangements or understandings with respect to the sale of any of
the shares, no estimate can be given as to the amount of shares that will be
held by the selling stockholders after completion of this offering. The shares
offered by this Prospectus may be offered from time to time by the selling
stockholders named below or by pledgees, donees, transferees or other successors
in interest who receive the shares as a gift, partnership distribution or other
non-sale related transfer.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Shares Percent of Number of Shares
Name of Selling Beneficially Outstanding Registered for
Stockholder Owned Shares Sale Hereby (1)
- ------------------ ---------------- ----------- -----------------
3414850 Canada Inc. 994,294 7.4% 994,294
2384434 Canada Inc. 994,293 7.4% 994,293
Thomas Blain 60,059 * 60,059
Reginald T. Cable 60,059 * 60,059
Philippe Tanguay 2,267 * 2,267
Louis C. Ferland 5,086 * 5,086
Kerry Keirstead 932 * 932
Yuqiang Zhang 1,012 * 1,012
R. Michael Hasson 10,490 * 10,490
Peter Butler 1,881 * 1,881
Normand Glaude 10,490 * 10,490
Michael Gaines 3,496 * 3,496
Marc Labonte 4,874 * 4,874
Kim Keirstead 4,238 * 4,238
Eric A. Schmidt 1,958 * 1,958
Egan Cheung 456 * 456
Jean Brisard 2,575 * 2,575
Songling Yang 834 * 834
Brian Gregory Holmes 710 * 710
Cindi Viegas 477 * 477
Robert G. Mason 2,119 * 2,119
Kelly W. Porter 318 * 318
Clark Lee 1,033 * 1,033
Paulette Gregory 318 * 318
Michael Whiten 668 * 668
Lee Christensen 371 * 371
Andrew L. Booth 424 * 424
--------- -------- ---------
Total 2,165,732 16.4% 2,165,732
========= ======== =========
</TABLE>
* Represents beneficial ownership of less than 1%.
(1) This Registration Statement shall also cover any additional shares of our
Common Stock which become issuable in connection with the Common Stock
registered for sale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt of
consideration which results in an increase in the number of our outstanding
shares of Common Stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for
us by Harter, Secrest & Emery LLP, Rochester, New York.
EXPERTS
Our consolidated balance sheets as of December 31, 1997 and December
31, 1998 and our consolidated statements of income, retained earnings, and cash
flow for each of the three years in the period ended December 31, 1998
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of PriceWaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Performance Technologies,
Incorporated (the "Company") in connection with the sale of Common Stock being
registered. All amounts are estimates except the SEC registration fee.
SEC Registration Fee $ 9,690
Legal fees and expenses 15,000
Accounting fees and expenses 10,000
Miscellaneous 5,000
------
Total $39,690
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
With respect to indemnification of directors and officers, Section 145
of the Delaware General Corporation Law ("DGCL") provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding, if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. Under this provision of the DGCL, the termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that the person's conduct was unlawful.
Furthermore, the DGCL provides that a corporation shall have the power
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
The Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") and By-laws, as amended (the "By-laws") provide for limitation
of the liability of directors to the Company and its stockholders and for
indemnification of directors, officers, employees and agents of the Company,
respectively, to the maximum extent permitted by the DGCL.
The Certificate of Incorporation provides that directors are not liable
to the Company or its stockholders for monetary damages for breaches of
fiduciary duty as a director, except for liability (a) for any breach of the
director's duty of loyalty to the Company or its stockholders, (b) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (c) for dividend payments or stock repurchases in violation of
Delaware law, or (d) for any transaction from which the director derived any
improper personal benefit.
The By-laws include provisions by which the Company will indemnify its
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement with respect to threatened, pending or completed
suits or proceedings against such persons by reason of serving or having served
the Company as officers, directors or in other capacities, except in relation to
matters with respect to which such persons shall be determined not to have acted
in good faith, lawfully or in the best interests of the Company. With respect to
matters to which the Company's officers, directors, employees, agents or other
representatives are determined to be liable for misconduct or negligence in the
performance of their duties, the By-laws provide for indemnification only to the
extent that the Company determines that such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company.
ITEM 16. EXHIBITS
(2.1) Share Acquisition Agreement.
(2.2) Amendment to Share Acquisition Agreement
(5) Opinion of Harter, Secrest & Emery LLP.
(23.1) Independent Accountants' Consent.
(23.2) Consent of Harter, Secrest & Emery LLP (included in the
Opinion of Counsel filed as Exhibit 5)
(24) Power of Attorney
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes (subject to the proviso
contained in Item 512(a) of Regulation S-K):
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that is has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Rochester, State of New York, on this ____ day of
January 10, 2000.
PERFORMANCE TECHNOLOGIES, INCORPORATED
Dated: January 28, 2000
By: /s/ DONALD L. TURRELL
--------------------------
Donald L. Turrell,
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
/s/Donald L. Turrell
- ----------------------- President, Chief Executive January 28, 2000
Donald L. Turrell Officer and Director
(Principal Executive Officer)
/s/Dorrance W. Lamb
- ----------------------- Vice President of Finance January 28, 2000
Dorrance W. Lamb and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/Charles E. Maginness*
- ----------------------- Chairman of the Board January 28, 2000
Charles E. Maginness and Director
/s/John M. Slusser*
- ----------------------- Director January 28, 2000
John M. Slusser
/s/Bernard Kozel*
- ----------------------- Director January 28, 2000
Bernard Kozel
/s/John E. Mooney*
- ----------------------- Director January 28, 2000
John E. Mooney
/s/Paul L. Smith*
- ----------------------- Director January 28, 2000
Paul L. Smith
*Pursuant to Power of Attorney previously filed.
<PAGE>
INDEX TO EXHIBITS
(2.1)* Share Acquisition Agreement
(2.2)* Amendment to Share Acquisition Agreement
(5)+ Opinion of Harter, Secrest & Emery LLP
(23.1)* Independent Accountants' Consent
(23.2)+ Consent of Harter, Secrest & Emery LLP (included in the Opinion
of Counsel filed as Exhibit (5))
(24)+ Power of Attorney
*Filed herewith
+Previously filed
<PAGE>
SHARE ACQUISITION AGREEMENT
between
PERFORMANCE TECHNOLOGIES, INCORPORATED
3688283 CANADA INC.
and
MICROLEGEND TELECOM SYSTEMS INC.
THOMAS BLAIN
REGINALD T. CABLE
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS.........................................................1
1.1 Definitions...............................................................1
1.2 Interpretation............................................................7
ARTICLE 2. THE ACQUISITION.....................................................7
2.1 The Acquisition...........................................................7
2.2 Acquisition Structure.....................................................7
2.3 Closing...................................................................8
ARTICLE 3. ADJUSTMENTS RE EXCHANGEABLE SHARES; EXCHANGE OF CERTIFICATES........8
3.1 Adjustments re Exchangeable Shares........................................8
3.2 Exchange of Certificates..................................................8
(a) Exchange Agent............................................................8
(b) Exchange Procedures.......................................................8
(c) Termination of Exchange Fund..............................................9
(d) No Liability..............................................................9
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MICROLEGEND.......................9
4.1 Incorporation, Standing and Power........................................10
4.2 Capital Structure........................................................10
4.3 Authority, Etc...........................................................11
4.4 No Conflict; Consents....................................................11
4.5 Financial Statements.....................................................12
4.6 No Additional Material Liabilities.......................................12
4.7 Information Supplied.....................................................12
4.8 MicroLegend Permits; Compliance with Legal Requirements..................12
4.9 Real Property............................................................13
4.10 Assets; Title; Absence of Liens and Encumbrances........................13
4.11 Covenants and Restrictions; Zoning......................................14
4.12 Condition of Occupied Real Property.....................................14
4.13 Equipment; Personal Property............................................15
4.14 Environmental Matters...................................................15
4.15 Employee Plans..........................................................16
4.16 Employment Matters......................................................18
4.17 Material Agreements.....................................................19
4.18 Litigation..............................................................21
4.19 Taxes...................................................................21
4.20 Absence of Certain Changes or Events....................................22
4.21 Minute Books............................................................22
4.22 Books and Records.......................................................22
4.23 Insurance...............................................................23
4.24 Intellectual Property...................................................23
4.25 Accounts Receivable and Accounts Payable................................25
4.26 Inventory and Backlog ..................................................25
4.27 Customers and Suppliers.................................................25
4.28 Product Warranties......................................................26
4.29 Year 2000...............................................................26
4.30 Banking Relationships...................................................26
4.31 Disclosure..............................................................26
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PTI..............................27
5.1 Incorporation, Standing and Power........................................27
5.2 Authority................................................................27
5.3 No Conflict..............................................................27
5.4 SEC Documents............................................................28
5.5 Information Supplied.....................................................28
5.6 Capital Structure........................................................28
5.7 Acquisition Consideration................................................29
5.8 Absence of Certain Changes or Events.....................................29
5.9 Litigation...............................................................29
5.10 Compliance with Legal Requirements......................................29
5.11 Disclosure..............................................................30
ARTICLE 6. COVENANTS OF MICROLEGEND...........................................30
6.1 Ordinary Course..........................................................30
6.2 Dividends; Changes in Stock..............................................31
6.3 Issuance of Securities...................................................31
6.4 MicroLegend Permits......................................................31
6.5 Advice of Changes........................................................31
6.6 Access...................................................................31
6.7 No Solicitations.........................................................32
6.8 Cooperation in Preparation of Registration Statement, Etc................32
6.9 Preparation of Additional Financial Statements...........................33
6.10 Letter of MicroLegend's Accountants.....................................33
6.11 Affiliates..............................................................33
6.12 Transaction Expenses....................................................33
6.13 Shareholders'Representation Agreements..................................33
6.14 Tangible Net Worth......................................................33
6.15 Pooling Opinion.........................................................34
ARTICLE 7. COVENANTS OF PTI...................................................34
7.1 Preparation of Registration Statement, Etc...............................34
7.2 NASDAQ Listing...........................................................34
7.3 Employees................................................................34
ARTICLE 8. ADDITIONAL COVENANTS OF EACH PARTY.................................35
8.1 Additional Agreements; Best Efforts......................................35
8.2 Expenses.................................................................35
8.3 Brokers or Finders.......................................................35
8.4 Pooling..................................................................35
8.5 Cooperation re Canadian Taxes............................................35
8.6 Other Actions............................................................36
8.7 Confidentiality..........................................................36
8.8 Publicity................................................................37
ARTICLE 9. CONDITIONS PRECEDENT TO PARTIES'OBLIGATIONS........................37
9.1 Conditions to Each Party's Obligation to Effect the Acquisition..........37
(a) Governmental Approvals...................................................37
(b) No Injunctions or Restraints.............................................37
9.2 Conditions of Obligations of PTI and Sub.................................37
(a) Representations and Warranties...........................................37
(b) Performance of Obligations of MicroLegend................................37
(c) No Amendments to Resolutions.............................................38
(d) Articles of Incorporation, Certificate of
Incorporation and Good Standing Certificates.............................38
(e) MicroLegend Permits......................................................38
(f) Consents Under Agreements................................................38
(g) Real Estate Matters......................................................38
(h) Letter and Opinion of MicroLegend's Accountants..........................38
(i) Affiliates'Agreements....................................................39
(j) Shareholders'Representation Agreements...................................39
(k) Pooling Opinion..........................................................39
(l) Financial Advisor's Opinion..............................................39
(m) Legal Opinion of LaBarge Weinstein ......................................39
(n) Employment Agreements....................................................39
(o) Surrender of Name........................................................39
(p) Other Evidence...........................................................39
9.3 Conditions of Obligations of MicroLegend and Record Holders..............39
(a) Representations and Warranties...........................................39
(b) Performance of Obligations of PTI and Sub................................40
(c) No Amendments to Resolutions.............................................40
(d) Legal Opinion of Harter, Secrest & Emery LLP and Nelligan Power, LLP.....40
(e) Voting and Exchange Trust Agreement......................................40
(f) Other Evidence...........................................................40
ARTICLE 10. COVENANTS AS TO POST-CLOSING MATTERS..............................40
10.1 Support Agreement.......................................................40
10.2 Escrow and Indemnification..............................................40
(a) Escrow Fund..............................................................41
(b) Escrow Period............................................................41
(c) Indemnification by MicroLegend Shareholders..............................41
(d) Limitation ..............................................................41
(e) Damage Threshold ........................................................42
(f) Claims Upon Escrow Fund..................................................42
(g) Objections to Claims.....................................................42
(h) Resolution of Conflicts; Arbitration.....................................43
(i) Representatives of the Shareholders......................................44
(j) Third Party Claims.......................................................45
(k) Indemnification By PTI...................................................45
ARTICLE 11. TERMINATION.......................................................46
11.1 Termination.............................................................46
11.2 Effect of Termination...................................................46
ARTICLE 12. IN GENERAL........................................................47
12.1 Survival of Representations, Warranties and Agreements..................47
12.2 Amendment; Waiver.......................................................47
12.3 Notices.................................................................47
12.4 Schedules and Other Instruments.........................................49
12.5 Inferences..............................................................49
12.6 Governing Law...........................................................49
12.7 Assignment..............................................................49
12.8 Benefit.................................................................49
12.9 Entire Agreement; Rights of Ownership...................................49
12.10 Counterparts...........................................................49
<PAGE>
SHARE ACQUISITION AGREEMENT
This Share Acquisition Agreement (this "Agreement") has been made as of
December 2, 1999, by and between PERFORMANCE TECHNOLOGIES, INCORPORATED, a
Delaware corporation ("PTI"), 3688283 CANADA INC., a CBCA corporation ("Sub"),
MICROLEGEND TELECOM SYSTEMS INC., a CBCA corporation ("MicroLegend") and Thomas
Blain ("Blain") and Reginald T. Cable ("Cable") (Blain and Cable collectively
referred to as the "Principal Shareholders").
Recitals
PTI, MicroLegend and the Principal Shareholders have executed and
delivered a non-binding Memorandum of Understanding executed by PTI on October
4, 1999 (the "MOU") setting forth the general terms and conditions on which PTI
would acquire MicroLegend.
The respective Boards of Directors of PTI and MicroLegend have approved
the acquisition of MicroLegend, pursuant and subject to the terms and conditions
of this Agreement (the "Acquisition"), whereby all of the issued and outstanding
shares of the capital stock of MicroLegend will be acquired by Sub in
consideration for Sub's issuance of Exchangeable Shares of Sub which will be
exchangeable into shares of PTI Common Stock on a one-for-one basis, and the
parties each desire to make certain representations, warranties and agreements
in connection with the Acquisition and also to prescribe various conditions to
the Acquisition.
The parties recognize and acknowledge that it is critical to PTI and a
condition precedent to its obligation to close the Acquisition, that PTI will be
able to account for the Acquisition as a Pooling. The parties recognize that it
is critical to the shareholders of MicroLegend that they receive Exchangeable
Shares without the recognition of any gain or loss pursuant to applicable income
tax laws and that such holders upon conversion of the Exchangeable Shares will
receive freely tradable PTI Common Stock.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, the parties agree to
effect the Acquisition on the terms and conditions herein provided and further
agree as follows:
Article 1.........DEFINITIONS
1.1 Definitions. In addition to the other definitions contained in the heading
paragraph of this Agreement, the foregoing recitals and Section 1.2, the
following terms will, when used in this Agreement, have the following respective
meanings:
"Acquisition" has the meaning given it in the Recitals.
"Acquisition Consideration" has the meaning given it by Section 2.1.
"Acquisition Transaction" has the meaning given it by Section 6.7.
"Affiliate" means a Person which, directly or indirectly, controls, is
controlled by, or is under common control with, the referenced party.
"Affiliates' Agreements" has the meaning given it by Section 6.11.
"American GAAP" means generally accepted accounting principles approved
from time to time by the American Institute of Certified Public Accountants, or
any successor institute, applied on a consistent basis.
"Canadian GAAP" means generally accepted accounting principles approved
from time to time by the Canadian Institute of Chartered Accountants, or any
successor institute, applied on a consistent basis.
"Canadian Tax Act" means the Income Tax Act (Canada), as in effect on
the date of this Agreement.
"CBCA" means the Canada Business Corporations Act.
"Certificates" has the meaning given it by Section 3.2(b).
"Certifying Officers" means: (a) in the case of MicroLegend, its Chief
Executive Officer and its Secretary/Treasurer; and (b) in the case of PTI,
either its President and Chief Executive Officer or any one of its Vice
Presidents.
"Closing" means the consummation of the Acquisition.
"Closing Date" has the meaning given it by Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended, together
with all rules and regulations promulgated thereunder, as in effect on the date
of this Agreement.
"Confidential Information" has the meaning given it by Section 8.7.
"Contracts" means and includes all contracts, subcontracts, agreements,
leases, options, notes, bonds, mortgages, indentures, deeds of trust, collateral
assignments, obligations, instruments, concessions, guarantees, licenses,
franchises, permits, purchase orders, arrangements, transactions, commitments,
undertakings and understandings of every kind, written or oral.
"Damages" has the meaning given it by Section 10.2(c).
"date of this Agreement" or "date hereof" means December 2, 1999.
"Employee Plans" has the meaning given it by Section 4.15(a).
"Employees" has the meaning given it by Section 7.3.
"Employment Agreements" has the meaning given it by Section 7.3.
"Environmental Laws" means, collectively, all federal, state,
provincial and local statutes, regulations, ordinances, codes, published
guidelines and policies, directives and orders (including all amendments
thereto) pertaining to occupational health and safety, transportation and
environmental matters (which includes air, water vapor, surface water,
groundwater, soil, natural resources, chemical use, health, safety and
sanitation), including the Comprehensive Environmental Response, Compensation
and Liability Act, the Medical Waste Tracking Act, the Resource Conservation and
Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Safe Water Drinking Act, the Toxic Substance Control Act, the Occupational
Safety and Health Act and the Environmental Protection Act (Ontario).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all rules and regulations promulgated thereunder, as in
effect on the date of this Agreement.
"Escrow Agent" means First Union National Bank.
"Escrow Agreement" has the meaning given it by Section 10.2(a).
"Escrow Fund" has the meaning given it by Section 10.2(a).
"Escrow Shares" has the meaning given it by Section 10.2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with all rules and regulations promulgated thereunder.
"Exchange Agent" means First Union National Bank or such other bank or
trust company as PTI may designate.
"Exchange Fund" has the meaning given it by Section 3.2(a).
"Exchangeable Shares" has the meaning given it by Section 2.1.
"Expenses" has the meaning given it by Section 6.7.
"Financial Advisor" means Tucker Anthony Cleary Gull, the financial
advisor of PTI.
"Financial Statements" has the meaning given it by Section 4.5.
"First Party" has the meaning given it by Section 8.7.
"Governmental Entity" means any federal, provincial, state or local
court, legislative body, governmental or quasigovernmental body, municipality,
political subdivision, department, commission, board, bureau, department,
administration, council, agency, authority or other instrumentality.
"Hazardous Substances" means and includes: any hazardous materials,
hazardous wastes, hazardous substances and toxic substances as those or similar
terms are defined under any Environmental Law; any solid waste generated in the
diagnosis, treatment or immunizations of human beings or animals or in research
pertaining thereto, including special waste from health care facilities or
providers which if improperly treated or handled may serve to transmit
infectious diseases and which is composed of animal waste, bulk blood and blood
products, microbiological waste, pathological waste or sharps; any asbestos or
any material that contains any hydrated mineral silicate, including chrysolite,
amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable
or non-friable; any polychlorinated biphenyls or polychlorinated
biphenyl-containing materials or fluids; radon; any other hazardous,
radioactive, toxic or noxious substance, material, pollutant, contaminant or
solid, liquid or gaseous waste; any petroleum, petroleum hydrocarbons, petroleum
products, crude oil or any fractions thereof, natural gas or synthetic gas; and
any substance that, whether by its nature or its use, is or becomes subject to
regulation under any Environmental Laws or with respect to which any
Environmental Laws or Governmental Entity requires or will require environmental
investigation, monitoring or remediation.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"including" or "includes" means, with respect to any matter or thing,
including but not limited to such matter or thing.
"Indemnified Person" has the meaning given it by Section 10.2(c).
"Intellectual Property" has the meaning given it by Section 4.24.
"IRS" means the United States Internal Revenue Service.
"knowledge" means with reference to any Party, such Party's actual
knowledge after due and diligent inquiry of officers, directors and other
employees of such Party reasonably believed, or should reasonably be believed,
to have knowledge of such matters.
"Legal Requirements" means, collectively, all laws, statutes, rulings,
rules, regulations, judgments, orders, decrees, awards, injunctions, writs,
requirements, permits, certificates and ordinances of any Governmental Entity,
as in effect from time to time.
"material" means with respect to any entity, any material event,
change, condition or effect related to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations, results of operations of such entity and its Subsidiaries, taken as
a whole.
"Material Adverse Effect" means any event, change or effect that,
individually or when taken together with all other such events, changes or
effects that have occurred prior to the time of determination of the occurrence
of the Material Adverse Effect, is or is reasonably likely to be materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, business, operations or results of operations of the applicable
entity and its Subsidiaries, taken as a whole.
"Material Agreements" has the meaning given it by Section 4.17.
"MicroLegend Permits" has the meaning given it by Section 4.8(a).
"MOU" has the meaning given it in the Recitals.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"OBCA" means the Ontario Business Corporation Act.
"Officer's Certificate" has the meaning given it by Section 10.2(f).
"OSA" means the Ontario Securities Act.
"Other Party" has the meaning given it by Section 8.7.
"Party" means any one of the Persons identified in the caption to this
Agreement.
"Permitted Encumbrances" has the meaning given it by Section 4.10(a).
"Person" means and includes any individual, partnership, corporation,
trust, company, unincorporated organization, joint venture or other entity, and
any Governmental Entity.
"Pooling" means pooling-of-interests accounting treatment of a business
combination that meets the conditions and requirements set forth in Accounting
Principles Board Statement No. 16, paragraphs 45 through 48 and 50 through 60,
promulgated by the American Institute of Certified Public Accountants.
"Pre-Closing Balance Sheet" has the meaning given it by Section 6.14.
"Principal Shareholder Employment Agreements" has the meaning given it
by Section 7.3.
"Principal Shareholders" has the meaning given it in the caption of
this Agreement.
"Prospectus" has the meaning given it by Section 5.5.
"PTI SEC Documents" has the meaning given it by Section 5.4.
"Real Property" has the meaning given it by Section 4.9.
"Record Holder" means a holder of record of MicroLegend capital stock
as shown on the regularly maintained stock transfer records of MicroLegend, who
as a result of the Acquisition becomes a holder of Exchangeable Shares.
"Registration Statement" has the meaning given it by Section 4.7.
"Release" has the same meaning as given it by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
the regulations promulgated thereunder.
"Remaining Employment Agreements" has the meaning given it by
Section 7.3.
"Representatives of the Shareholder" means Thomas Blain and Reginald J.
Cable, acting in their capacities as such pursuant to the provisions of this
Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, together
with all rules and regulations promulgated thereunder.
"Shareholder's Representation Agreement" has the meaning given it by
Section 6.13.
"Stock Rights" has the meaning given it by Section 4.2.
"Sub" means 3688283 Canada Inc., a CBCA corporation.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture, trust or other entity of which such Person, directly
or indirectly through an Affiliate, owns an amount of voting securities, or
possesses other ownership interests, having the power, direct or indirect, to
elect a majority of the Board of Directors or other governing body thereof.
"Support Agreement" has the meaning given it by Section 10.1.
"Tangible Net Worth" means an amount equal to the book value of the
tangible assets of MicroLegend minus the book value of the liabilities
(excluding Transaction Expenses) of MicroLegend, determined in accordance with
Canadian GAAP as of the date of the Pre-Closing Balance Sheet.
"Taxes" means, collectively, federal, provincial, state and local
income, payroll, withholding, employment, health, goods and services, excise,
sales, use, real and personal property, use and occupancy, business and
occupation, gross receipts, mercantile, real estate, capital stock and franchise
or other taxes, duties or assessments of any nature whatsoever, including all
penalties and interest thereon and estimated taxes.
"Technology" has the meaning given it by Section 4.29.
"Transaction Expenses" has the meaning given it by Section 6.12.
"Violation" means that the referenced event: (a) conflicts with, or
results in any violation of, or a default (with or without notice or lapse of
time, or both) under, or gives rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other encumbrance on assets in
connection with, the referenced Contract or other document; or (b) conflicts
with, or results in any violation (with or without notice or lapse of time, or
both) under, or gives rise to any damages, penalty or remedial action under, the
referenced Legal Requirement.
1.2 Interpretation. In this Agreement, unless the context otherwise requires,
references to "Articles" and "Sections" are to the Articles or Sections of this
Agreement, and references to "Exhibits" and "Schedules" are to the Exhibits and
Schedules annexed hereto; references to any party to this Agreement include
references to its respective successors and permitted assigns; references to a
judgment include references to any order, writ, injunction, decree,
determination or award of any court or tribunal; references to any dollar
amounts are all in U.S. dollars; any of the terms defined herein may, unless the
context requires otherwise, be used in the singular or the plural depending on
the reference; and the masculine pronoun includes the feminine and the neuter,
as appropriate in the context. The divisions of this Agreement into articles,
sections and subsections and the use of captions and headings in connection
therewith are solely for convenience and have no legal effect in construing the
provisions of this Agreement.
Article 2 THE ACQUISITION
2.1 The Acquisition. On the Closing Date and subject to the terms and conditions
of this Agreement and the CBCA, Sub shall acquire all of the issued and
outstanding shares of MicroLegend capital stock for 2,165,732 exchangeable
shares of Sub having the rights, privileges, restrictions and conditions more
particularly set forth on Exhibit A attached hereto (the "Exchangeable Shares"),
which Exchangeable Shares shall be issued to the MicroLegend shareholders as
more particularly set forth on Schedule 2.1. Each Exchangeable Share will be
exchangeable into one fully-paid and non-assessable share of PTI Common Stock
(such number of fully-paid and non-assessable shares of PTI Common Stock per
Exchangeable Share being called the "Acquisition Consideration").
2.2 Acquisition Structure.
(a) Immediately following the Closing of the Acquisition, and subject to the
provisions of this Agreement, the capitalization of MicroLegend shall be as
follows:
(i) 18,000,000 Class A Common Shares shall be owned by Sub;
(ii) 1,671,850 Class C Common Shares shall be owned by Sub; and
(iii) 2,475,000 First Preferred Shares shall be owned by Sub.
(b) Immediately following the Closing of the Acquisition, and subject to the
provisions of this Agreement, the capitalization of Sub shall be as follows:
(i) all of the issued and outstanding shares of Common Stock of Sub will be
owned by PTI; and
(ii) all of the issued and outstanding Exchangeable Shares will be owned as more
particularly set forth on Schedule 2.1.
2.3 Closing. The Closing will take place at 6:00 p.m., local time, on the
earliest date practicable after all of the conditions set forth in Article 9 are
satisfied or waived by the appropriate party, but in no event later than the
applicable date referred to in Section 11.1(f) (the "Closing Date"), at the
offices of Nelligan Power, LLP, 66 Slater, Suite 1900, Ottawa, Ontario, Canada
K1P 5H1, unless another date or place is agreed to in writing by the parties.
The Parties agree that they currently contemplate that the Closing will occur
one week following the date of this Agreement.
Article 3. ADJUSTMENTS RE EXCHANGEABLE SHARES; EXCHANGE OF CERTIFICATES
3.1 Adjustments re Exchangeable Shares. In the event of any stock dividend,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like affecting shares of PTI Common Stock between the date of this
Agreement and the time at which any Exchangeable Shares are tendered for shares
of PTI Common Stock, the Acquisition Consideration will be appropriately
adjusted so that each Record Holder will receive in the Acquisition for his
Exchangeable Shares the amount of PTI Common Stock he would have been entitled
to receive had such Record Holder exchanged his Exchangeable Shares for shares
of PTI Common Stock immediately prior to such event.
3.2 Exchange of Certificates.
(a) Exchange Agent. PTI will deposit with the Exchange Agent on the Closing
Date, for exchange in accordance with this Article 3, subject to the Escrow Fund
provisions of Section 10.2(a) through the Exchange Agent, certificates
representing the aggregate Acquisition Consideration for the Exchangeable Shares
(collectively, the "Exchange Fund").
(b) Exchange Procedures. On the Closing Date, PTI will cause Sub to deliver to
the Representatives of the Shareholders one or more certificates which at the
Closing Date represent the Exchangeable Shares less any Exchangeable Shares to
be deposited pursuant to the escrow provisions of Section 10.2(a) (the
"Certificates"), a letter of transmittal (which will specify that delivery of
the Certificates will be effected and that risk of loss and title to the
Certificates will pass, only upon delivery of the Certificates to the Exchange
Agent), which Certificates will be in such form and have such other provisions
as set forth in Exhibit A, and instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of PTI
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by PTI, together with
such letter of transmittal, duly executed, the Record Holder of such Certificate
will be entitled to receive in exchange therefor one or more certificates
representing the Acquisition Consideration which such Record Holder has the
right to receive pursuant to the provisions of this Article 3, together with a
check representing the cash, if any, referred to in Sections 3.2(c), and the
Certificate so surrendered will forthwith be cancelled. PTI will pay any
transfer or similar taxes, but will not pay any income taxes, required by reason
of the issuance of a certificate representing shares of PTI Common Stock
provided that such certificate is issued in the name of the Record Holder of the
Certificate surrendered in exchange therefor. PTI will not pay or be responsible
for any transfer or other tax, including income taxes, if the obligation to pay
such tax is solely that of the shareholder. In the event of a transfer of
ownership of Exchangeable Shares which is not registered in the transfer records
of Sub, one or more certificates representing the proper amount of Acquisition
Consideration may be issued to the transferee if the Certificate representing
such Exchangeable Shares is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. In the case of any lost, stolen
or destroyed Certificate, the Record Holder thereof may be required, as a
condition precedent to delivery to him of the Acquisition Consideration, to
deliver to PTI such affidavit and personal indemnity as PTI may reasonably
request with respect to the Certificate alleged to have been lost, stolen or
destroyed. Until surrendered as contemplated by this Section 3.2, each
Certificate will be deemed at any time after the Closing Date to represent only
the right to exercise such rights as set forth in Exhibit A and to receive upon
such surrender the Acquisition Consideration and the cash, if any, referred to
in Section 3.2(c).
(c) Termination of Exchange Fund. Any portion of the Exchange Fund which remains
undistributed to holders of Certificates at the end of five years after the
Closing Date will be delivered to PTI upon demand by PTI, and any holders of
Certificates who have not theretofore complied with this Article 3 will
thereafter look only to PTI for payment of their claim for Acquisition
Consideration and the cash, if any, referred to in Section 3.2(c).
(d) No Liability. Neither PTI, MicroLegend nor Sub will be liable to any holder
of shares of MicroLegend capital stock or PTI Common Stock or Exchangeable
Shares, as the case may be, for the Acquisition Consideration (and cash in lieu
of fractional shares and dividends or distributions with respect thereto, if
any) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Article 4. REPRESENTATIONS AND WARRANTIES OF MICROLEGEND
MicroLegend and each Principal Shareholder represents and warrants to
PTI and to Sub, as of the date hereof and as of the Closing Date, as follows:
4.1 Incorporation, Standing and Power. Each of MicroLegend and its Subsidiaries
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction in which it was organized. Each of MicroLegend and
its Subsidiaries has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
and as proposed to be conducted and is duly qualified to do business and in good
standing in each other jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
MicroLegend has heretofore made available to PTI true, correct and complete
copies of the Articles of Incorporation and By-laws, as currently in effect, of
MicroLegend and each of its Subsidiaries, and has made available to PTI true,
correct and complete minute books and stock records of MicroLegend and each of
its Subsidiaries. Set forth in Schedule 4.1 is a complete list of the
Subsidiaries of MicroLegend and its ownership percentage thereof, the
jurisdictions in which the nature of the business of MicroLegend or any of its
Subsidiaries, or the ownership or leasing of their properties, makes
qualification as a foreign corporation necessary, and the joint ventures,
partnerships and corporations (other than Subsidiaries) in which MicroLegend or
any of its Subsidiaries has an equity interest, and the ownership percentage
thereof in each such entity. Except as set forth in Schedule 4.1, all of the
outstanding capital stock of, or other ownership interests in, each Subsidiary
of MicroLegend is owned directly or indirectly by MicroLegend, free and clear of
all title defects, liens, encumbrances and restrictions.
4.2 Capital Structure. The authorized capital stock of MicroLegend consists of
the following: an unlimited number of First Preferred Shares; an unlimited
number of Second Preferred Shares; an unlimited number of Third Preferred
Shares; an unlimited number of Fourth Preferred Shares; an unlimited number of
Class A Common Shares; an unlimited number of Class B Common Shares; and an
unlimited number of Class C Common Shares. As of the date hereof, there are
2,475,000 First Preferred Shares issued and outstanding, 18,000,000 Class A
Common Shares issued and outstanding and 1,671,850 Class C Common Shares issued
and outstanding. As of the date hereof, there are not any Second Preferred
Shares, Third Preferred Shares, Fourth Preferred Shares, or Class B Common
Shares issued and outstanding. Except as disclosed in Schedule 4.2, there are no
options, warrants, calls, rights, claims, commitments or Contracts to which
MicroLegend or any of its Subsidiaries is a party or by which any of them is
bound obligating MicroLegend or any of its Subsidiaries to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed additional shares of capital stock of MicroLegend or any of its
Subsidiaries, or obligating MicroLegend or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or Contract
(collectively, "Stock Rights"). Except as disclosed in Schedule 4.2, no shares
of MicroLegend capital stock are or will be reserved for issuance for any
purpose. Schedule 4.2 sets forth a true, complete and accurate list of all
options granted after December 31, 1998 including the date of grant by the
MicroLegend Board of Directors, the identity of the recipient of the stock
option, the number of shares of MicroLegend capital stock subject to issuance on
exercise of the stock option, the exercise price of the stock option, the term
of the stock option and any vesting provisions of the stock option. Except for
this Agreement, no Person will have any Stock Rights, and no shares of
MicroLegend capital stock will be reserved for issuance for any purpose. On the
date hereof, and on the Closing Date, no shares of MicroLegend capital stock are
or will be held by MicroLegend in its treasury, no shares of MicroLegend capital
stock are or will be held by any of MicroLegend's Subsidiaries, no voting debt
is or will be issued or outstanding, all outstanding shares of MicroLegend
capital stock are and will be validly issued, fully paid and non-assessable and
MicroLegend has not granted any preemptive rights or any rights of first refusal
with respect to MicroLegend capital stock. Other than the Affiliate and as
disclosed in Schedule 4.2, there are no contracts, commitments or agreements
relating to voting, purchase or sale of MicroLegend's capital stock (i) between
or among MicroLegend and any of its shareholders and (ii) to the best of
MicroLegend's knowledge, between or among any of MicroLegend's shareholders.
4.3 Authority, Etc. MicroLegend has all requisite corporate power and authority
to enter into this Agreement and, subject to Shareholder Approval, 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 MicroLegend.
The Board of Directors of MicroLegend has duly adopted resolutions which approve
and adopt this Agreement and the consummation of the Acquisition. This Agreement
has been duly executed and delivered by MicroLegend and, subject to Shareholder
Approval, constitutes the valid and binding obligation of MicroLegend,
enforceable in accordance with its terms, except as the enforceability hereof
may be limited by bankruptcy, insolvency or other laws relating to or affecting
creditors' rights generally, and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
4.4 No Conflict; Consents. The execution and delivery of this Agreement by
MicroLegend does not, and the consummation of the transactions contemplated
hereby and the fulfillment of the obligations and undertakings hereunder will
not, result in any Violation of any provision of the Articles of Incorporation
or By-laws of MicroLegend or any of its Subsidiaries, any Material Agreement
applicable to MicroLegend, any of its Subsidiaries or any of their respective
assets, or any Legal Requirement applicable to MicroLegend, any of its
Subsidiaries or any of their respective assets; except, in the case of Material
Agreements and Legal Requirements, for Violations which could not reasonably be
expected, individually or in the aggregate, to have any adverse effect on the
validity or enforceability of this Agreement or a Material Adverse Effect the
operations or financial condition of MicroLegend and its Subsidiaries taken as a
whole. Except as set forth in Schedule 4.4 and except for (i) applicable
requirements of the Securities Act (Ontario) (the "OSA") and other relevant
Canadian securities statutes; (ii) a notification under Section 12 of the
Investment Canada Act; (iii) the filing, if required, of a pre-merger
notification report by MicroLegend and PTI under the HSR Act, and (iv) such
other consents, approvals, orders, authorizations or registrations the failure
to obtain which could not reasonably be expected, individually or in the
aggregate, to have any adverse effect on the validity or enforceability of this
Agreement or a Material Adverse Effect on the operations or financial condition
of MicroLegend and its Subsidiaries taken as a whole, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to MicroLegend or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
MicroLegend or the consummation by MicroLegend of the transactions contemplated
hereby.
4.5 Financial Statements. MicroLegend has heretofore made available to PTI true,
correct and complete copies of its audited consolidated financial statements for
the year ended July 31, 1998 and its draft audited consolidated financial
statements for the year ended July 31, 1999, and its unaudited consolidated
financial statements for the year ended July 31, 1997, and for the nine months
ended September 30, 1999, together with all notes thereto (collectively, the
"Financial Statements"). The audited Financial Statements and, subject to normal
year-end adjustments, lack of footnotes and other presentation items, the
unaudited Financial Statements have been stated in Canadian dollars, have been
prepared in accordance with Canadian GAAP (except for the September 30, 1999
Financial Statements which were stated in U.S. dollars and prepared in
accordance with American GAAP) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of MicroLegend and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
4.6 No Additional Material Liabilities. Except as set forth in the Financial
Statements or in Schedule 4.6 neither MicroLegend nor any of its Subsidiaries
had, as of July 31, 1999, any material liabilities, whether accrued, absolute,
contingent or otherwise, of a kind or character which would be required (in
accordance with Canadian or American GAAP) to be reflected in the consolidated
balance sheet of MicroLegend as of July 31, 1999, including any such liabilities
related to any facility previously owned, leased or operated. Since July 31,
1999, except for trade payables, liabilities or obligations incurred in the
ordinary course of business and consistent with past practice, neither
MicroLegend nor any of its Subsidiaries has incurred any such liabilities. All
liabilities of MicroLegend and its Subsidiaries incurred since July 31, 1999
will have been and, as of the Closing Date, will be properly recorded in their
respective books and records in accordance with the accounting policies and
procedures of MicroLegend consistently applied.
4.7 Information Supplied. The information supplied or to be supplied by
MicroLegend for inclusion in any registration statement filed with the SEC by
PTI in connection with the registration of shares of PTI Common Stock issued in
the Acquisition, including all amendments thereto (the "Registration
Statement"), will, at the time the Registration Statement becomes effective
under the Securities Act, not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make such information not misleading. Notwithstanding the foregoing, MicroLegend
makes no representation or warranty with respect to any information contained in
the Proxy Statement or Registration Statement which was furnished by PTI.
4.8 MicroLegend Permits; Compliance with Legal Requirements.
(a) MicroLegend and its Subsidiaries duly hold all licenses, permits,
certificates, registrations, accreditations, orders, franchises, authorizations,
approvals and all consents, variances and exemptions, of any Governmental Entity
which are necessary for the conduct of the business of MicroLegend and its
Subsidiaries and utilization of the Real Property (collectively, the
"MicroLegend Permits"). Schedule 4.8 contains a complete and accurate list of
all MicroLegend Permits, all of which are in full force and effect. Each of
MicroLegend and its Subsidiaries is in compliance with the terms of each of the
MicroLegend Permits, except for failures of compliance which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the operations or financial condition of MicroLegend and its
Subsidiaries taken as a whole. No action is pending or, to the knowledge of
MicroLegend, threatened or recommended by any Governmental Entity to revoke,
withdraw or suspend any MicroLegend Permit.
(b) The businesses of each of MicroLegend and its Subsidiaries are being, and
since July 31, 1999 have been, conducted in compliance with all Legal
Requirements, except for such Violations that could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect on the
operations or financial condition of MicroLegend and its Subsidiaries taken as a
whole. To the knowledge of MicroLegend, no investigation or review by any
Governmental Entity with respect to MicroLegend or any of its Subsidiaries is
pending or threatened, nor has any Governmental Entity indicated an intention to
conduct the same. There is no Material Agreement, judgment, injunction, order or
decree binding upon MicroLegend or any of its Subsidiaries which has or
reasonably could be expected to have the effect of prohibiting or materially
impairing any current or future business practice of MicroLegend or any of its
Subsidiaries, any acquisition of property by MicroLegend or any of its
Subsidiaries or the conduct of business by MicroLegend or any of its
Subsidiaries as currently conducted or as proposed to be conducted.
4.9 Real Property. Schedule 4.9 is a true, correct and complete list of and a
true, correct and complete description of all real property owned, leased,
operated or used by MicroLegend or any of its Subsidiaries (collectively, the
"Real Property"). MicroLegend has heretofore delivered to PTI true, correct and
complete original or certified copies of all existing title insurance policies,
exception documents, title reports, opinions, transfers, mortgages and surveys
with respect to each parcel of the Real Property.
4.10 Assets; Title; Absence of Liens and Encumbrances.
(a) MicroLegend and its Subsidiaries collectively own or validly lease all
properties and assets, real, personal and mixed, tangible and intangible,
comprising and employed in the operation of or associated with the MicroLegend
business. Except for leased assets, each of MicroLegend and its Subsidiaries has
good and marketable title to all of the Real Property and all of their
respective other assets, including those reflected in the consolidated balance
sheet of MicroLegend as of July 31, 1999, free and clear of all title defects,
liens, pledges, security interests, claims, encumbrances and restrictions
except, with respect to all such assets, the following encumbrances
(collectively, "Permitted Encumbrances"): mortgages and liens securing debt
reflected as liabilities in the Financial Statements; mechanics', construction,
carriers', workers', repairmen's, statutory or common law liens being contested
in good faith and by appropriate proceedings, which contested liens are listed
in Schedule 4.10(a); liens for current Taxes not yet due and payable which have
been fully reserved against, or which, if due, are being contested in good faith
and by appropriate proceedings, which contested liens are listed in Schedule
4.10(a); and such imperfections of title, easements, encumbrances and other
liens, if any, as are set forth in the deeds or leases covering the Real
Property or the surveys heretofore delivered to PTI or which are not substantial
in character, amount or extent, and do not, singly or in the aggregate,
materially detract from the value, or interfere with the present use, of the
properties and assets subject thereto or affected thereby or otherwise
materially impair the operations of MicroLegend or any of its Subsidiaries as
presently conducted.
(b) All leases pursuant to which MicroLegend or any of its Subsidiaries leases
the Real Property or personal property are valid, binding and enforceable
against MicroLegend in accordance with their respective terms, subject to
applicable bankruptcy, insolvency and other laws of general application
affecting the enforcement of creditors' rights generally and to the fact that
the availability of equitable remedies is in the discretion of a court of
competitive jurisdiction, and there is not, under any of such leases, any
existing default on the part of MicroLegend or any of its Subsidiaries or, to
the knowledge of MicroLegend, any existing default on the part of any other
party thereto, or any event which, with notice or lapse of time or both, would
constitute such a default. Schedule 4.10(b) sets forth a true, correct and
complete list of all such leases and to the extent any such leases are oral,
sets forth a true, correct and complete summary of such leases.
(c) Except as set forth in Schedule 4.10(c), no Real Property is located within
or adjacent to a flood or lakeshore erosion hazard area, fresh water wetlands as
defined under applicable Legal Requirements, coastal zone management area,
conservation authority area or any other parcel protected, regulated or
controlled by any Legal Requirements. Neither the whole nor any portion of any
parcel of the Real Property has been condemned, expropriated, requisitioned or
otherwise taken by any public authority, no notice of any such condemnation,
expropriation, requisition or taking has been received by MicroLegend or any of
its Subsidiaries and, to the knowledge of MicroLegend, no such condemnation,
expropriation, requisition or taking is threatened or contemplated. MicroLegend
has no knowledge of any public improvements which may result in special
assessments against or otherwise affecting the Real Property.
4.11 Covenants and Restrictions; Zoning. The Real Property currently conforms to
and complies with, all covenants, conditions, restrictions, reservations, land
use, zoning, health, fire, water and building codes and other applicable Legal
Requirements, except for failures of conformance or compliance which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect the operations or financial condition of MicroLegend and its
Subsidiaries taken as a whole, and no such Legal Requirements prohibit or limit
or condition the use or operation of any facility occupied by MicroLegend or the
Real Property as currently used and operated. There is no pending or, to the
knowledge of MicroLegend, contemplated, threatened or anticipated change in the
zoning classification of any of the facilities or any portion thereof.
4.12 Condition of Occupied Real Property. MicroLegend owns no Real Property. To
the knowledge of MicroLegend, except for the items set forth in Schedule 4.12,
all of such Real Property occupied by MicroLegend is in good state of repair and
condition, ordinary wear and tear excepted; there are no dangerous conditions or
defects existing upon or in any such Real Property, there are no structural
defects in any such Real Property that would adversely affect the operation of
such Real Property as presently conducted, and there are no safety code or other
survey requirements which are not subject to waiver or currently the subject of
a plan of correction which is being implemented. Except as set forth in Schedule
4.12, all gas, electric power, storm sewer, sanitary sewer, water and other
utility services necessary for the current operation and use of such Real
Property are available at the boundaries of each facility located on such Real
Property and when necessary direct connection has been made to all such utility
facilities. All of such Real Property has access to public roads sufficient for
MicroLegend and its Subsidiaries to operate their business and, to the knowledge
of MicroLegend, there are no plans, studies or efforts by any Governmental
Entity that would modify or realign any street or highway adjacent to any such
Real Property.
4.13 Equipment; Personal Property. MicroLegend has heretofore delivered to PTI a
depreciation schedule listing, as of July 31, 1999, all of the equipment owned
by MicroLegend or any of its Subsidiaries. Each MicroLegend facility contains
all equipment, inventories and other personal property in sufficient condition
and in quantities to operate such facility at the capacity for which it is
currently operated. None of such equipment relating to, used in or held for use
in the business of MicroLegend, is subject to any mortgage, pledge, lien,
conditional sale agreement, security agreement, encumbrance or other charge
except as specifically disclosed is Schedule 4.13. Except as otherwise disclosed
in Schedule 4.13, all leasehold improvements, furnishings, machinery and
equipment of MicroLegend related to, used in or held for use in the business of
MicroLegend are in good repair, have been well maintained, and substantially
comply with all Legal Requirements, and such machinery and equipment is in good
working order. To the knowledge of MicroLegend, there is no pending or
threatened change of any Legal Requirement relating to the equipment or personal
property of MicroLegend which could have a Material Adverse Effect on the
operations or financial condition of MicroLegend and its Subsidiaries taken as a
whole.
4.14 Environmental Matters. Except as disclosed in Schedule 4.14, none of the
facilities occupied by MicroLegend is in Violation of any Environmental Laws,
except for Violations which could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on the operations or financial
condition of MicroLegend and its Subsidiaries taken as a whole, neither
MicroLegend nor any of its Subsidiaries has Released any Hazardous Substances in
a manner that has Violated any Environmental Laws and, to the knowledge of
MicroLegend, there has been no such Release by any previous owner or operator of
any of the Real Property, and to the knowledge of MicroLegend, none of the
facilities occupied by MicroLegend or the Real Property has ever had any
underground storage tanks, as defined in 42 U.S.C. 6991(1)(A)(I), whether empty,
filled or partially filled with any substance, or any asbestos or any material
that contains any hydrated mineral silicate, including chrysolite, amosite,
crocidolite, tremolite, anthophylite and/or actinolite, whether friable or
non-friable; neither MicroLegend, any of its Subsidiaries nor any of the
facilities of MicroLegend has received any request for information, notice or
order alleging that it may be a potentially responsible party under any
Environmental Laws for the investigation or remediation of a Release or
threatened Release of Hazardous Substances, no event has occurred with respect
to any of the facilities occupied by MicroLegend or the Real Property which,
with the passage of time or the giving of notice, or both, would constitute a
Violation of or non-compliance with any applicable Environmental Law or
MicroLegend Permit, and there is no lien, notice, litigation or, to the
knowledge of MicroLegend, threat of litigation relating to an alleged
unauthorized Release of any Hazardous Substance on, about or beneath the Real
Property (or any portion thereof), or the migration of any Hazardous Substance
to or from property adjoining or in the vicinity of the Real Property, or
alleging any obligation under Environmental Laws. MicroLegend will immediately
notify PTI should MicroLegend, any of its Subsidiaries or any of the facilities
occupied by MicroLegend receive any such request for information, notice or
order, or become aware of any lien, notice, litigation or threat of litigation
relating to an alleged unauthorized Release of any Hazardous Substance on, about
or beneath the Real Property (or any portion thereof) or any other environmental
contamination or liability with respect to the Real Property (or any portion
thereof). MicroLegend and its Subsidiaries hold all MicroLegend Permits required
under any Environmental Law in connection with the use of the Real Property or
the operation of the facilities.
4.15 Employee Plans.
(a) Schedule 4.15 lists all employment agreements, all union, guild, labor or
collective bargaining agreements, all employee benefit plans, and all other
arrangements or understandings, explicit or implied, written or oral, whether
for the benefit of one or more Persons, relating to employment, compensation or
benefits, to which MicroLegend or any of its Subsidiaries is a party or is
obligated to contribute, or by which MicroLegend or any of its Subsidiaries is
bound, including all "employee benefit plans" within the meaning of Section 3(3)
of ERISA, all pension plans or group registered retirement savings plans within
the meaning of the Canadian Tax Act; all deferred compensation, bonus, stock
option, stock purchase, stock incentive, stock appreciation rights, restricted
stock, severance or incentive compensation plans, agreements or arrangements;
plans, agreements or arrangements providing for "fringe benefits" or perquisites
to employees, officers, directors or agents; and all employment, consulting,
termination or indemnification agreements (collectively, "Employee Plans").
MicroLegend has delivered to or made available for inspection by PTI true,
correct and complete copies of all Employee Plans, all related summary plan
descriptions, the most recent financial reports and summary annual reports and,
where applicable, summary descriptions of any Employee Plans not otherwise
reduced to writing. Except as set forth on Schedule 4.15, there are no
negotiations, demands or proposals that are pending or have been made since the
respective dates of the Employee Plans which concern matters now covered, or
that would be covered, by any Employee Plan.
(b) MicroLegend and each of its Subsidiaries and each of the Employee Plans have
complied and are in compliance in all material respects with the applicable
provisions of the Code, ERISA, the Canadian Tax Act and all other applicable
Legal Requirements. MicroLegend and each of its Subsidiaries have performed all
of their obligations under all of the Employee Plans, including the full payment
when originally due of all amounts required to be made as contributions thereto
or otherwise.
(c) None of the Employee Plans nor any fiduciary thereof has been the direct or
indirect subject of an audit, investigation or examination by any Governmental
Entity within the last five years. There are no actions, suits, penalties or
claims (other than routine undisputed claims for benefits) pending or threatened
against or arising out of any of the Employee Plans or the respective assets
thereof and, to the knowledge of MicroLegend, no facts exist which could give
rise to any such actions, suits, penalties or claims which might have a Material
Adverse Effect on any Employee Plan or on MicroLegend and its Subsidiaries taken
as a whole.
(d) Each Employee Plan that is intended to qualify under Section 401(a) of the
Code or the Canadian Tax Act is so qualified and has received a favorable
determination letter. There have been no developments since the respective dates
of such determination letters that would create a material risk of causing the
loss of qualification of the subject Employee Plan.
(e) Neither MicroLegend nor any of its Subsidiaries maintains or has at any time
maintained, or has or could have any liability with respect to, an Employee Plan
subject to Title IV of ERISA. No Employee Plan is or ever has been a
"multiemployer plan" within the meaning of Section 3(37) of ERISA. Neither
MicroLegend nor any of its Subsidiaries has or could have any liability with
respect to a "multiemployer plan" as defined under Section 3(37) of ERISA. No
Employee Plan now holds or has heretofore held any stock or other securities
issued by MicroLegend or any of its Subsidiaries. Neither MicroLegend nor any of
its Subsidiaries has established or contributed to, is required to contribute to
or has or could have any liability with respect to any "voluntary employees'
beneficiary association" within the meaning of Section 501(c)(9) of the Code,
any "welfare benefit fund" within the meaning of Section 419 of the Code, any
"qualified asset account" within the meaning of Section 419A of the Code or any
"multiple employer welfare arrangement" within the meaning of Section 3(40) of
ERISA.
(f) All group health plans of MicroLegend and its Subsidiaries have been
operated in compliance with the group health plan continuation coverage
requirements of any applicable state law, Sections 601 through 608 of ERISA and
Section 4980B of the Code, Title XXII of the Public Health Service Act and the
provisions of the Social Security Act, to the extent such requirements are
applicable. Except to the extent required under Section 4980B of the Code,
neither MicroLegend nor any of its Subsidiaries provides health or welfare
benefits (through the purchase of insurance or otherwise) for any retired
employee or any former employee.
(g) No provision of any Employee Plan restricts the ability of PTI or
MicroLegend to terminate the future accruals of obligations thereunder after the
Closing Date; provided, however, that no such representation or warranty is made
with respect to liabilities already accrued at the time of such termination.
(h) Except as set forth in Schedule 4.15, each return or report required to be
filed by MicroLegend or any of its Subsidiaries has been filed in accordance
with all applicable Legal Requirements.
(i) There has been no act or omission by MicroLegend or any of its Subsidiaries
that has given rise or may give rise to fines, penalties, Taxes or related
charges under Sections 4980D, 502(c) or 502(l) of ERISA, Chapters 43, 46 or 47
of Subtitle D of the Code, or Chapter 68 of Subtitle F of the Code, or any other
applicable provisions of the Code or ERISA.
(j) Neither MicroLegend nor any of its Subsidiaries has engaged in any
prohibited transaction described in Section 4975 of the Code or Section 406 of
ERISA affecting any Emloyee Plan or the trusts created thereunder which could
subject any such Employee Plan or trust to a tax or penalty.
(k) Solely for purposes of this Section 4.15, all references to MicroLegend or
any of its Subsidiaries includes any Person which, together with MicroLegend or
any of its Subsidiaries, is considered an affiliated organization within the
meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the Code or Sections
3(5) or 4001(b)(1) of ERISA.
4.16 Employment Matters.
(a) Except as disclosed in Schedule 4.16, each of MicroLegend and its
Subsidiaries is in compliance in all material respects with all Legal
Requirements respecting employment and employment practices, terms and
conditions of employment, wages and hours, neither MicroLegend nor any of its
Subsidiaries is engaged in any unfair labor or unlawful employment practice,
there is no unlawful employment practice discrimination charge pending before
any regulatory agency, there is no unfair labor practice charge or complaint
against MicroLegend or any of its Subsidiaries pending before any regulatory
authority, there is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of MicroLegend, threatened against or involving or
affecting MicroLegend, any of its Subsidiaries or any of the Facilities, and no
representation question exists respecting any of their respective employees, and
no grievance or arbitration proceeding is pending against MicroLegend or any of
its Subsidiaries and no written claim therefor exists. Except as disclosed in
Schedule 4.16, MicroLegend and its Subsidiaries are not parties to any written
contracts of employment with any of its employees or any oral contracts of
employment which are not terminable on the giving of reasonable notice and/or
severance pay in accordance with applicable Legal Requirements and no
inducements to accept employment with MicroLegend or its Subsidiaries were
offered to any such employees which have the effect of increasing the period of
notice of termination to which any such employee is entitled. All levies under
the Workers' Compensation Act (Ontario), or under the Workers' Compensation
legislation of any other jurisdiction where MicroLegend and its Subsidiaries
carry on business, have been paid in full.
(b) Without limiting the generality of the foregoing, except as disclosed in
Schedule 4.16, there is no:
(i) unfair labor practice complaint under the Canada Labour Code or the Ontario
Labour Relations Act against MicroLegend or any of its Subsidiaries pending
before the federal or provincial labour tribunals or any similar agency or body
having jurisdiction therefor;
(ii) labor strike threatened against or involving MicroLegend or its
Subsidiaries;
(iii) certification application outstanding respecting MicroLegend's employees;
(iv) grievance or arbitration proceeding or governmental proceeding related to
MicroLegend's employees pending, nor is there any such proceeding threatened
against MicroLegend or any of its Subsidiaries which might have a Material
Adverse Effect on MicroLegend or its Subsidiaries or on the conduct of their
business taken as a whole;
(v) proceeding in which MicroLegend or any of its Subsidiaries is involved
before any federal or provincial human rights tribunal; and
(vi) collective bargaining agreement with any employees of MicroLegend or its
Subsidiaries nor is there currently a collective bargaining agreement being
negotiated by MicroLegend or any of its Subsidiaries.
4.17 Material Agreements. Schedule 4.17 contains a true, correct and, to the
knowledge of MicroLegend, complete list of all Contracts, to which MicroLegend
or any of its Subsidiaries or any of the facilities occupied by MicroLegend is a
party which are not cancelable by MicroLegend or its Subsidiaries upon notice of
30 days or less except any Contract which involves or may reasonably be expected
to involve the payment to or by MicroLegend of less than $25,000 over the term
of the Contract (collectively, the "Material Agreements"). Except for the
Material Agreements, neither MicroLegend nor any of its Subsidiaries is a party
to or subject to any of the following, in each case to the extent that such
contracts, commitments, plans, agreements and/or licenses relate to the conduct,
activities, operation or products of the business of MicroLegend:
(a) any plan or contract providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union not specifically disclosed elsewhere under this Agreement;
(b) any employment contract or contract for services;
(c) any contract or agreement for the purchase of any commodity, material or
equipment except to purchase orders in the ordinary course of business for less
than $10,000 each, such orders not exceeding $50,000 in the aggregate;
(d) any other contracts or agreements creating any obligations of MicroLegend or
its Subsidiaries of $25,000 or more with respect to any such contract or
agreement not specifically disclosed elsewhere under this Agreement;
(e) any contract or agreement providing for the purchase of all or substantially
all of its requirements of a particular product from a supplier;
(f) any contract or agreement involving more than $25,000 which by its terms
does not terminate or is not terminable without penalty by MicroLegend or any of
its subsidiaries or any successor or assign within one year after the date
hereof;
(g) any contract or agreement for the sale or lease of its products not made in
the ordinary course of business;
(h) any contract which, as a result of the execution, delivery and performance
of this Agreement and each agreement, document and instrument executed and
delivered by MicroLegend pursuant to this Agreement will give rise to or permit
any third party to exercise additional rights under any contract or agreement to
which MicroLegend or any of its Subsidiaries is a party, including, without
limitation, any contract which provides for the transfer of any intellectual
property, such as source code or other information, upon a change in control of
MicroLegend;
(i) any contract with any sales agent or distributor of products of MicroLegend;
(j) any contract containing covenants limiting the freedom of MicroLegend or any
of its Subsidiaries or their respective assignees or successors to compete in
any line of business or with any person or entity;
(k) any contract or agreement for the purchase of any fixed asset for a price in
excess of $25,000 whether or not such purchase is in the ordinary course of the
business of MicroLegend;
(l) any license agreement (as licensor or licensee);
(m) any indenture, mortgage, promissory note, loan agreement, guaranty or other
agreement or commitment for the borrowing of money; or
(n) any contract or agreement with any officer, employee, director or
shareholder of MicroLegend or any of its Subsidiaries or with any persons or
organizations controlled by or affiliated with any of such persons not
specifically disclosed elsewhere under this Agreement.
True, correct and complete copies of all Material Agreements, and true,
correct and complete summaries of all Material Agreements which have not been
reduced to writing, have been delivered or made available to PTI. Each Material
Agreement constitutes the valid and legally binding obligation of MicroLegend or
its Subsidiary, as the case may be, and is enforceable against MicroLegend or
its Subsidiary, as the case may be, in accordance with its terms subject to
applicable bankruptcy, insolvency and other laws of general application
affecting the enforcement of creditors' rights generally and to the fact that
the availability of equitable remedies is in the discretion of a court of
competent jurisdiction. To the knowledge of MicroLegend, each Material Agreement
constitutes the valid and legally binding obligation of the other party thereto
and is enforceable against such party in accordance with its terms. Each of the
Material Agreements constitutes the entire agreement between the respective
parties thereto relating to the subject matter thereof. To the knowledge of
MicroLegend, in all material respects all obligations required to have been
performed under the terms of the Material Agreements have been performed, no act
or omission has occurred or failed to occur which, with the giving of notice,
the lapse of time or both would constitute a default under any of the Material
Agreements, and each of the Material Agreements is in full force and effect
without default on the part of any party thereto. Except as set forth in
Schedule 4.17, each of the Material Agreements is with a party who is neither a
director, officer, employee or Affiliate of MicroLegend, nor, to the knowledge
of MicroLegend, an Affiliate of any of the foregoing; was entered into on an
arm's length basis in the ordinary course of business; and has not been amended.
Except as noted in Schedule 4.17, none of the Material Agreements requires
consent for or is otherwise affected by the Acquisition.
4.18 Litigation. Except as disclosed in Schedule 4.18, there is no action, suit,
proceeding, arbitration or investigation pending or, to the knowledge of
MicroLegend, threatened against or affecting MicroLegend, any of its
Subsidiaries or any facility occupied by MicroLegend (or any of their respective
officers or directors in connection with the business of MicroLegend or any of
its Subsidiaries), nor is there any judgment, injunction, decree, rule or order
of any Governmental Entity or arbitrator outstanding against MicroLegend, any of
its Subsidiaries or any Facility.
4.19 Taxes.
(a) MicroLegend and its Subsidiaries have timely filed all tax returns required
to be filed by any of them and have paid all Taxes required to be paid as shown
on such returns. The Financial Statements reflect, and the financial statements
of MicroLegend at the Closing Date will reflect, an adequate accrual, based on
the facts and circumstances existing as of the respective dates thereof, for all
Taxes payable by MicroLegend and its Subsidiaries (whether or not shown in any
return) through the respective dates thereof. All such filed tax returns are in
all material respects correct, complete and accurate. Neither MicroLegend nor
any of its Subsidiaries has taken, plans or intends to take any action which
would result in any liability to MicroLegend or any of its Subsidiaries for
Taxes as a result of the transactions contemplated by this Agreement. To the
knowledge of MicroLegend, there are no material deficiencies for any Taxes
proposed, asserted or assessed against MicroLegend or any of its Subsidiaries.
The tax returns of MicroLegend and its Subsidiaries consolidated in such returns
have not been examined by and settled with any taxing authority, or the statute
of limitations with respect to such years has expired, for all fiscal years
through the fiscal year ended July 31, 1998, except with respect to claims for
refunds. Neither MicroLegend nor any of its Subsidiaries is a party to any tax
sharing or tax allocation agreement nor does MicroLegend or any of its
Subsidiaries owe any amount under any such agreement.
(b) Without limiting the generality of the foregoing, MicroLegend and its
Subsidiaries have filed all reports or returns with respect to income, capital,
sales (including goods and services tax, provincial sales tax and Ontario
employer health tax reports), excise, business and property taxes and all other
taxes and customs duties which are required to be filed by it up to the date of
this Agreement (and all such returns and reports are correct and complete in all
material respects) and have paid, or where permitted by law, provided security
for, all taxes and duties as shown on such reports or returns to the extent such
taxes or duties are payable or may become due and have paid, or where permitted
by law, provided security for, all assessments received by them. MicroLegend and
its Subsidiaries have withheld from any amounts payable, including without
limiting the generality of the foregoing, from any salaries, bonuses or
dividends paid by them, all deductions required by law to be made therefrom
(including without limitation, withholding under the Canadian Tax Act relating
to personal income tax, unemployment insurance contributions, Canada Pension
Plan contribution, and provincial employer health tax remittances) and have
remitted the same to the proper tax or other authorities.
4.20 Absence of Certain Changes or Events. Except as disclosed in the Schedules
or in the Financial Statements and except as contemplated by this Agreement,
since July 31, 1999, MicroLegend and its Subsidiaries have conducted their
respective businesses only in the ordinary and usual course, and there has not
been any material adverse change in the operations, assets or financial
condition of MicroLegend or any of its Subsidiaries, any material damage,
destruction, loss or casualty to any assets of MicroLegend or any of its
Subsidiaries, whether or not covered by insurance, which assets are material to
the ongoing operations or business of MicroLegend or any of its Subsidiaries as
presently conducted, any sale, assignment, transfer or disposition of any item
of plant, property or equipment of the facilities occupied by MicroLegend having
a net book value in excess of $25,000 (other than supplies), except in the
ordinary course of business, any material change in any method of accounting or
accounting practice by MicroLegend or any of its Subsidiaries (other than those
requested by PTI as contemplated by this Agreement), any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of MicroLegend's capital stock, or any
transaction, commitment, dispute or other event or condition individually or in
the aggregate having or which, insofar as reasonably can be foreseen, in the
future is reasonably likely to have, a Material Adverse Effect on the
operations, assets or financial condition of MicroLegend and its Subsidiaries.
4.21 Minute Books. The minute books of MicroLegend and its Subsidiaries have
been made available to PTI and contain a complete and accurate summary of all
meetings of directors and shareholders or actions taken by written consent since
the date of incorporation of MicroLegend and its Subsidiaries through the date
of this Agreement, and accurately reflect all transactions identified in such
minutes in all material respects, subject to the provision that no omission from
the minute books will have an adverse effect on PTI's ability to account for the
Acquisition as a Pooling or will cause MicroLegend and the Principal
Shareholders to breach any of their other representations and warranties in this
Agreement.
4.22 Books and Records. MicroLegend has provided PTI with complete access to all
of the books and records of MicroLegend and its Subsidiaries. All of such books
and records are true, correct and complete in all material respects, and are and
have been maintained in substantial compliance with all applicable Legal
Requirements.
4.23 Insurance. MicroLegend has heretofore provided to PTI a true, correct and
complete list of the current insurance coverages of MicroLegend and its
Subsidiaries, including names of carriers and amounts of coverage. MicroLegend
and each of its Subsidiaries has been and is insured by financially sound and
reputable insurers with respect to its properties and the conduct of its
business in such amounts and against such risks as are reasonable in relation to
their respective businesses, and each shall maintain such insurance at least
through the Closing Date. There is no material claim pending under any of such
policies as to which coverage has been questioned, denied or disputed by the
insurers. All premiums due and payable under all such insurance have been paid
and MicroLegend and its Subsidiaries are otherwise in compliance in all material
respects with the terms of such insurance. To the knowledge of MicroLegend,
there is no threatened termination of, or material premium increase proposed,
with respect to any such insurance.
4.24 Intellectual Property. Except as set forth in Schedule 4.24, MicroLegend
and its Subsidiaries have exclusive ownership of, or are licensed or otherwise
possess legally enforceable rights to use, all patents, copyrights, trade
secrets, trademarks, service marks and any applications therefor, mask works,
net lists, schematics, technology, know-how, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material used or proposed to be used in the business of MicroLegend and its
Subsidiaries as currently conducted or as proposed to be conducted by
MicroLegend and its Subsidiaries (collectively, the "Intellectual Property").
Except as set forth in Schedule 4.24, MicroLegend's rights in all of such
Intellectual Property are freely transferable. There are no claims or demands of
any other Person pertaining to any of such Intellectual Property and no
proceedings have been instituted, or are pending or, to the knowledge of
MicroLegend, threatened, which challenge the rights of MicroLegend or its
Subsidiaries in respect thereof. MicroLegend has the right to use, free and
clear of claims or rights of other Persons, all customer lists, designs,
manufacturing or other processes, computer software, systems, data compilations,
research results and other information required for or incidental to
MicroLegend's business as presently conducted or contemplated.
(a) Schedule 4.24 lists all patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to MicroLegend or any of its Subsidiaries related to or used or to be
used in MicroLegend's business as presently conducted or contemplated, and all
other items of intellectual property which are used in MicroLegend's business.
All of such patents, patent applications, trademark registrations, trademark
applications and registered copyrights have been duly registered in, filed in or
issued by the United States Patent and Trademark Office and the Canadian
Intellectual Property Office, the United States Register of Copyrights and the
Canadian Register of Copyrights, or the corresponding offices of other
jurisdictions as identified on Schedule 4.24, and have been properly maintained
and renewed in accordance with all Legal Requirements.
(b) All licenses or other agreements under which MicroLegend or any of its
Subsidiaries is granted rights in Intellectual Property that are related to,
used or to be used in MicroLegend's business are set forth in Schedule 4.24. All
said licenses or other agreements are in full force and effect, there is no
material default thereunder by any party thereto, and, except as set forth on
Schedule 4.24, all of MicroLegend's rights thereunder are freely assignable. To
the knowledge of MicroLegend, the licensors under said licenses and other
agreements have and had all requisite power and authority to grant the rights
purported to be conferred thereby. True and complete copies of all such licenses
or other agreements, and any amendments thereto, have been made available to
PTI.
(c) All licenses or other agreements under which MicroLegend or any of its
Subsidiaries have granted rights to others in Intellectual Property owned or
licensed by MicroLegend that are related to, used or to be used in MicroLegend's
business, are set forth in Schedule 4.24. All of said licenses or other
agreements are in full force and effect, there is no material default by any
party thereto, and except as set forth on Schedule 4.24, all of MicroLegend's
rights thereunder are freely assignable. True and complete copies of every
license or other agreement, and any amendments thereto, have been made available
to PTI.
(d) MicroLegend and each of its Subsidiaries have taken all steps required to
establish and preserve their ownership of all Intellectual Property rights with
respect to the services and technology employed in, and the products produced
and generated by, MicroLegend's business. Without limiting the generality of the
foregoing, MicroLegend and its Subsidiaries have required all of their
professional and technical employees employed in connection with MicroLegend's
business, and other employees having access to valuable non-public information
of MicroLegend concerning or related to MicroLegend's business, to execute
agreements under which such employees are required to convey to MicroLegend or
its Subsidiaries, as applicable, ownership of all inventions and developments
conceived or created by them and to maintain the confidentiality of all such
information of MicroLegend. MicroLegend has not made any such information
available to any person other than employees of MicroLegend employed in
connection with MicroLegend's business except pursuant to written agreements
requiring the recipients to maintain the confidentiality of such information and
appropriately restricting the use thereof, which written agreements are listed
on Schedule 4.24. To the knowledge of MicroLegend, no person has infringed any
of its Intellectual Property rights.
(e) To the knowledge of MicroLegend, the present and contemplated business,
activities and products of MicroLegend do not infringe any Intellectual Property
of any other person. No proceeding charging MicroLegend with infringement of any
adversely-held Intellectual Property has been filed or, to the knowledge of
MicroLegend, is threatened to be filed. To the knowledge of MicroLegend, there
exists no unexpired patent or patent application owned by any Person (including,
without limitation, any Affiliate of MicroLegend) which includes claims that
would be infringed by or otherwise adversely affect MicroLegend's business or
products produced or generated thereby. To the knowledge of MicroLegend,
MicroLegend is not making unauthorized use of any confidential information or
trade secrets of any Person, including without limitation any former employer of
any past or present employee of MicroLegend. Except as set forth in Schedule
4.24, with respect to MicroLegend's business, neither MicroLegend nor any of its
Affiliates nor, to the knowledge of MicroLegend, any of their employees employed
with respect to MicroLegend's business have any agreements or arrangements with
any Persons other than MicroLegend relating to confidential information or trade
secrets of such Persons or restricting any such employee's ability to engage in
business activities. The activities of MicroLegend's employees on behalf of
MicroLegend do not violate any such agreements or arrangements known to
MicroLegend which any such employees have with other Persons.
4.25 Accounts Receivable and Accounts Payable. Except as set forth in Schedule
4.25, all accounts receivable of MicroLegend, whether reflected on the Financial
Statements or otherwise, represent sales actually made in the ordinary course of
MicroLegend's business or valid claims as to which full performance has been
rendered, and the reserves against the Accounts Receivable for returns and bad
debts are commercially reasonable and have been determined in accordance with
Canadian GAAP, consistently applied. Except to the extent reserved against the
Accounts Receivable, no counterclaims or off-setting claims with respect to the
Accounts Receivable are pending or, to the knowledge of MicroLegend, threatened.
Except as set forth in Schedule 4.25, the accounts payable of MicroLegend
reflected on the Financial Statements arose from bona fide transactions in the
ordinary course of business, and all such accounts payable have been paid, are
not yet due and payable under MicroLegend's payment policies and procedures
(copies of which have been previously been provided to PTI), or are being
contested by MicroLegend in good faith and by appropriate measures.
4.26 Inventory and Backlog. The inventories of MicroLegend and its Subsidiaries
as of the date hereof consist of raw materials, goods in process and finished
goods saleable or usable in the normal course of MicroLegend's business, and
such inventories are, and shall be at Closing, at levels consistent with past
practices of MicroLegend's business. All such inventories are carried on the
books of MicroLegend and its Subsidiaries pursuant to the normal inventory
valuation policies of MicroLegend, which are in accordance with Canadian GAAP,
as reflected in the Financial Statements. Any expected losses on customer
contracts in progress are recognized and recorded in the period in which such
losses are determined. Schedule 4.26 sets forth the locations of all inventories
of MicroLegend and the amount of inventory at each location as of July 31, 1999.
Except as set forth in Schedule 4.26, no items included in inventories of
MicroLegend and its Subsidiaries are or will be pledged as collateral or held by
MicroLegend on consignment from others. MicroLegend is not committed to purchase
inventories in amounts greater than are reasonably expected to be useable in the
ordinary course of MicroLegend's business as presently conducted. With respect
to inventories in the hands of suppliers for which MicroLegend will be committed
on the Closing Date, such inventories on the Closing Date will be reasonably
expected to be useable in the ordinary course of business as presently being
conducted. At July 31, 1999, the backlog of firm orders from MicroLegend was
$1,105,223.50. Schedule 4.26 sets forth each order of such backlog in excess of
$50,000 and the scheduled or committed delivery date thereof.
4.27 Customers and Suppliers. Schedule 4.27 sets forth a correct and complete
list of the ten largest (by dollar volume) customers and suppliers of
MicroLegend during the most recently completed fiscal year, indicating the
existing contractual arrangements, if any, with each such customer or supplier.
Except as set forth on Schedule 4.27, there are no outstanding disputes with any
customer or supplier listed thereon and no customer or supplier listed thereon
has refused to continue to do business with MicroLegend or has stated to
MicroLegend its intention not to continue to do business with MicroLegend or to
materially change the amount or terms of the business done with MicroLegend.
Since July 31, 1999, there has not been any material shortage or unavailability
of the raw materials necessary to manufacture the products sold by MicroLegend
and, to the knowledge of MicroLegend, there is no current shortage or
unavailability which leads it to believe that any such shortages will occur.
4.28 Product Warranties. True and correct copies of all written warranties and
guarantees applicable to MicroLegend and its products and services have been
made available to PTI. The amounts reflected as warranty reserves in the
Financial Statements are commercially reasonable and have been determined in
accordance with Canadian GAAP, consistently applied. There are no existing or,
to the knowledge of MicroLegend, threatened product liability, warranty or other
similar claims with respect to the business of MicroLegend, or any facts upon
which a material claim of such nature could be based, against MicroLegend or any
of its Subsidiaries or their products for products or services which are
defective or fail to meet any product or service warranties except as disclosed
on Schedule 4.28. As relates to the business of MicroLegend, no claim has been
asserted against MicroLegend for renegotiation or price redetermination of any
business transaction, and there are no facts upon which any such claim could be
based.
4.29 Year 2000. MicroLegend's Technology will correctly differentiate between
years in different centuries, which years end in the same two digits, will
accurately and consistently receive, provide, store and process date and time
data before, during and after January 1, 2000, including, but not limited to,
accepting, calculating, comparing, providing, and sequencing date and time data,
from, into and between the 20th and 21st centuries, including the years 1999 and
2000 and leap year calculations, and will not, malfunction (in whole or in part
at any time and for any length of time, and whether or not causing the
Technology, in whole or in part, to become or remain inoperable for any length
of time), cease to function, or provide or product invalid or incorrect results
as a result of date and time data. Schedule 4.29 sets forth a description of
MicroLegend's program of obtaining Year 2000 certification from its suppliers
and other third parties with whom MicroLegend transacts business. For purposes
of this Section 4.29, "Technology" means any and all software, hardware,
firmware, embedded micro controllers in non-computer equipment or other
information technology owned by, leased, licensed or loaned to, or otherwise
used by MicroLegend, or licensed, sold or otherwise distributed to others by
MicroLegend, in the course of its business
4.30 Banking Relations. All of the arrangements which MicroLegend and its
Subsidiaries have with any banking institution or similar commercial credit
facility are completely and accurately described in Schedule 4.30, indicating
with respect to each of such arrangements the type of arrangement maintained
(such as checking account, borrowing arrangements, safe deposit box, etc.) and
the person or persons authorized to act on behalf of MicroLegend with respect
thereto.
4.31 Disclosure. Neither the provisions of this Agreement with respect to
MicroLegend and its Subsidiaries, nor the Schedules nor any other document or
written information furnished to PTI or its representatives by or on behalf of
MicroLegend or any of its Subsidiaries pursuant hereto, includes any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements made herein and therein not misleading.
Article 5. REPRESENTATIONS AND WARRANTIES OF PTI
PTI represents and warrants to MicroLegend as follows:
5.1 Incorporation, Standing and Power. PTI is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
Sub is a CBCA corporation duly incorporated, validly existing and in good
standing under the laws of the Dominion of Canada. Each of PTI and Sub has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on PTI and its Subsidiaries taken as a
whole. Pursuant to the provisions of its Amended and Restated Certificate of
Incorporation, PTI is precluded from obtaining any stockholder approval by
written consent.
5.2 Authority. Each of PTI and Sub 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 PTI and Sub. This Agreement has
been duly executed and delivered by PTI and Sub and constitutes the valid and
binding obligation of PTI and Sub, enforceable against them in accordance with
its terms, except as the enforceability hereof may be limited by bankruptcy,
insolvency or other laws relating to or affecting creditors' rights generally
and general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 No Conflict. The execution and delivery of this Agreement by PTI and by Sub
does not, and the consummation of the transactions contemplated hereby and the
fulfillment of the obligations and undertakings hereunder will not, result in
any Violation of any provision of the Certificate of Incorporation or By-laws of
PTI or of Sub, any Contract applicable to PTI, Sub or any of their respective
assets, or any Legal Requirement applicable to PTI, Sub or any of their
respective assets, except, in the case of Contracts and Legal Requirements, for
Violations which could not reasonably be expected, individually or in the
aggregate, to have any adverse effect on the validity or enforceability of this
Agreement or a Material Adverse Effect on the operations or financial condition
of PTI and its Subsidiaries taken as a whole. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to PTI or Sub in connection with the
execution and delivery of this Agreement by PTI and Sub or the consummation by
PTI and Sub of the transactions contemplated hereby, except for the filing of a
premerger notification report by PTI, if required, under the HSR Act, the filing
with the SEC of the Registration Statement and such reports under the Exchange
Act as may be required in connection with this Agreement and the consummation of
the transactions contemplated hereby, and the obtaining from the SEC of such
orders as may be so required, the filing of such documents with, and the
obtaining of such orders from, state authorities, including state securities
authorities, and Canadian securities authorities that are required in connection
with the transactions contemplated by this Agreement, the filing contemplated by
Section 2.2, and such consents, approvals, orders, authorizations or
registrations the failure to obtain which could not reasonably be expected,
individually or in the aggregate, to have any adverse effect on the validity or
enforceability of this Agreement or a Material Adverse Effect on the operations
or financial condition of PTI and its Subsidiaries taken as a whole.
5.4 SEC Documents. PTI has made available to MicroLegend a true, correct and
complete copy of PTI's Annual Report on Form 10-K for the year ended December
31, 1998, quarterly reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999, and definitive proxy statement for the
Annual Meeting of Stockholders of PTI held on June 8, 1999, all as filed by PTI
with the SEC (collectively, the "PTI SEC Documents"). As of their respective
dates, the PTI SEC Documents complied in all material respects with the
requirements of the Securities Act and Exchange Act, and none of the PTI 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 therein, in light of the circumstances under which they were made,
not misleading. The financial statements of PTI included in the PTI SEC
Documents are complete, accurate and comply 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 American
GAAP applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of PTI and its consolidated Subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.
5.5 Information Supplied. The Registration Statement and the prospectus forming
a part thereof (the "Prospectus") will, at the time the Registration Statement
becomes effective under the Securities Act, not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. At the time it
becomes effective under the Securities Act, the Registration Statement will
comply as to form in all material respects with the provisions of the Securities
Act. Notwithstanding the foregoing, PTI makes no representation or warranty with
respect to any information contained in the Registration Statement which was
furnished by MicroLegend.
5.6 Capital Structure. The authorized capital stock of PTI consists of
15,000,000 shares of PTI Common Stock, and 1,000,000 shares of Preferred Stock,
par value $.01 per share. At the close of business on November 29, 1999,
11,205,218 shares of PTI Common Stock were issued; 936,168 shares of PTI Common
Stock were subject to issuance upon exercise of outstanding rights under PTI's
stock option plan; 112,500 shares of PTI Common Stock were subject to issuance
upon exercise of outstanding warrants; 140,439 shares of PTI Common Stock were
held by PTI in its treasury; and no shares of such Preferred Stock were issued
or outstanding. All outstanding shares of PTI Common Stock are validly issued,
fully paid and non-assessable and not subject to preemptive rights.
5.7 Acquisition Consideration. The PTI Common Stock constituting the Acquisition
Consideration has been duly authorized and, when issued and delivered against
receipt of the Exchangeable Shares exchanged therefor pursuant to this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights of any security holder of PTI.
5.8 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, since September 30, 1999, PTI and its Subsidiaries have conducted
their respective businesses only in the ordinary and usual course, and there has
not been any material adverse change in the operations, assets or financial
condition of PTI or any of its Subsidiaries, any material damage, destruction,
loss or casualty to any assets of PTI or any of its Subsidiaries, whether or not
covered by insurance, which assets are material to the ongoing operations or
business of PTI or any of its Subsidiaries as presently conducted, any sale,
assignment, transfer or disposition of any item of plant, property or equipment
of the facilities occupied by PTI or its Subsidiaries having a net book value in
excess of $500,000 (other than supplies), except in the ordinary course of
business; any material change in any method of accounting or accounting practice
by PTI or any of its Subsidiaries, any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of PTI's capital stock; or any transaction, commitment, dispute
or other event or condition individually or in the aggregate having or which,
insofar as reasonably can be foreseen, in the future is reasonably likely to
have, a Material Adverse Effect on the operations, assets or financial condition
of PTI and its Subsidiaries taken as a whole.
5.9 Litigation. There is no action, suit, proceeding, arbitration or
investigation pending or, to the knowledge of PTI, threatened against or
affecting PTI, any of its subsidiaries or any facility occupied by PTI (or any
of their respective officers or directors in connection with the business of PTI
or any of its Subsidiaries), which if adversely determined could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the operation or financial condition of PTI and its Subsidiaries taken as a
whole, nor is there any judgment, injunction, decree, rule or order of any
Governmental Entity or arbitrator outstanding against PTI, any of its
Subsidiaries or any facility occupied by PTI which could reasonably be expected,
individually or in the aggregate, to have such an effect.
5.10 Compliance with Legal Requirements. The businesses of PTI and its
subsidiaries are being, and since September 30, 1999, have been, conducted in
compliance with all Legal Requirements, except for such violations that could
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on the operations or financial condition of PTI and its
Subsidiaries taken as a whole. To the knowledge of PTI, no investigation or
review by any Governmental Entity with respect to PTI or any of its Subsidiaries
is pending or threatened, nor has any Governmental Entity indicated an intention
to conduct the same.
5.11 Disclosure. Neither the provisions of this Agreement with respect to PTI
and Sub nor any other document or written information furnished to MicroLegend
or its representatives by or on behalf of PTI or Sub pursuant hereto, includes
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements made herein and therein not
misleading.
Article 6. COVENANTS OF MICROLEGEND
During the period from the date of this Agreement and continuing until
the Closing Date, and where applicable after the Closing Date, MicroLegend
agrees, for itself and its Subsidiaries, to perform as follows (except as
otherwise expressly contemplated or permitted by this Agreement, or to the
extent that PTI otherwise consents in writing):
6.1 Ordinary Course. Each of MicroLegend and its Subsidiaries will carry on its
business in substantially the same manner as has heretofore been conducted and
not make any material change in its Articles of Incorporation or By-laws (except
as contemplated by the Acquisition), the personnel, operations, finance,
accounting practices or policies or assets, maintain its properties and assets
and all parts thereof in good working order and condition, ordinary wear and
tear excepted, perform all of its obligations under the Material Agreements and
not enter into, amend or terminate any Material Agreement except in the ordinary
course of business, take all reasonable actions necessary and appropriate to
obtain appropriate releases, consents, estoppels and other instruments as PTI
may reasonably request, neither cancel, nor allow to lapse nor make any material
change in the coverage of any insurance policy applicable to MicroLegend or any
of its Subsidiaries, pay all Taxes as they become due, confer with PTI prior to
the filing of any tax return, protest or notice of objection by it or any of its
Subsidiaries and not take any position with respect to Taxes to which PTI
reasonably objects, use its best efforts to maintain and preserve its business
organization intact, retain employees at the facilities occupied by MicroLegend
(except for employment terminations in accordance with past practices), maintain
relationships with suppliers, customers and others having business relations
with MicroLegend consistent with the terms of such relationships, and take such
other actions as are necessary to cause the smooth, efficient and successful
transition of such business operations and employee and other relations at the
Closing Date, neither make offers of employment to any Persons for periods
subsequent to the Closing Date (except for offers made in the ordinary course
for employment on an at will basis), nor enter into any Employee Plan with
respect thereto, nor incur or agree to incur any liability not in the ordinary
course of business, except for those offers, Employee Plans and liabilities
currently under negotiation and identified in Schedule 6.1, neither adopt nor
amend in any material respect any Employee Plan, not increase the compensation,
in any form, payable or to become payable to any director, officer, employee,
consultant or agent, except for employees' compensation increases in the
ordinary course of business in accordance with existing personnel policies,
except as set forth in Schedule 6.1, not incur any indebtedness or guarantee any
indebtedness except in the ordinary course of business consistent with past
practices, nor issue any debt securities, not create or assume any mortgage,
pledge or other lien or encumbrance upon any of its assets, irrespective of when
acquired, other than Permitted Encumbrances, neither acquire nor agree to
acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any Person, neither make nor authorize any purchase order or capital expenditure
in excess of $10,000 except in the ordinary course of business or except as
identified in Schedule 6.1, neither sell, lease, assign nor otherwise transfer
or dispose of any assets (other than supplies), except in the ordinary course of
business, not amend, terminate or waive any right related to the MicroLegend
business, except in the ordinary course of business, and not take any other
action outside the ordinary course of business that would materially adversely
affect the business operations of MicroLegend or any of its Subsidiaries.
6.2 Dividends; Changes in Stock. MicroLegend will not declare or pay any
dividends, whether in cash, stock or otherwise, nor make any other distributions
in respect of the MicroLegend capital stock, split, combine, reclassify or
recapitalize the MicroLegend capital stock or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of MicroLegend capital stock, or repurchase or otherwise acquire, or
permit any of its Subsidiaries to purchase or otherwise acquire, any shares of
MicroLegend capital stock.
6.3 Issuance of Securities. MicroLegend will not, nor will it permit any of its
Subsidiaries to issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its or their capital stock or any securities
convertible into any such shares, or convertible securities, or grant any Stock
Rights.
6.4 MicroLegend Permits. MicroLegend and its Subsidiaries will maintain all
MicroLegend Permits in full force and effect, will cooperate and take all action
reasonably necessary to assist Sub and PTI in obtaining the benefit of the
MicroLegend Permits, and will promptly provide PTI with copies of all filings
made with any Governmental Entity.
6.5 Advice of Changes. MicroLegend will confer on a regular and frequent basis
with PTI, report on operational matters and promptly advise PTI orally and in
writing of any change or event having, or which, insofar as can reasonably be
foreseen, could have, a Material Adverse Effect on MicroLegend or any of its
Subsidiaries or on the ability of MicroLegend to perform its obligations
hereunder. Except as may otherwise be set forth in writing signed by the
parties, MicroLegend acknowledges that PTI does not and will not waive any
rights it may have under this Agreement as a result of such consultations, nor
will PTI be responsible for any decisions made by MicroLegend's officers and
directors with respect to matters which are the subject of such consultation.
6.6 Access. MicroLegend and its Subsidiaries will afford to the authorized
representatives, agents and legal counsel of PTI full and complete access to the
staff, employees and other personnel of MicroLegend and its Subsidiaries, and to
the facilities occupied by MicroLegend, the assets and the books, records and
other information of MicroLegend and its Subsidiaries, including the right to
inspect the same and conduct audits and verifications thereof, (provided,
however, PTI has first provided reasonable notice of such access and inspection
and conducts the same during normal business hours and in such a manner as not
to interfere unreasonably with the conduct of the business of MicroLegend and
its Subsidiaries), and no such inspections will have taken place, and no
employees or other personnel of MicroLegend will have been contacted by PTI,
without PTI first having coordinating such inspection or contact with the
MicroLegend's Chief Executive Officer; and provided further that no such access
or inspection by PTI will limit the effect of MicroLegend's representations and
warranties contained in this Agreement.
6.7 No Solicitations. MicroLegend will not, prior to the consummation of the
transactions contemplated by this Agreement or the termination of this
Agreement, whichever occurs first, nor will it permit any of its Subsidiaries
to, nor will it authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or by any of its Subsidiaries to, initiate,
solicit, encourage (by way of furnishing non-public information or otherwise),
negotiate or take any other action to facilitate any inquiries or the making of
any proposal which constitutes, or may reasonably be expected to lead to, any
proposal or offer to acquire all or any substantial part of the business or
assets of MicroLegend and its Subsidiaries, or a controlling portion of the
capital stock of MicroLegend, whether by merger, consolidation, amalgamation,
purchase of assets, tender offer, exchange offer or otherwise, whether for cash,
securities or any other consideration or combination thereof (any such
transaction being called an "Acquisition Transaction"), nor entertain, agree to,
endorse, participate in any discussions or negotiations or recommend any
Acquisition Transaction, unless PTI has terminated this Agreement for any reason
or unless MicroLegend has terminated their Agreement in accordance with the term
hereof. In the event that MicroLegend, any of its Subsidiaries or any of its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants or other representatives receives any inquiries,
proposals or offers as contemplated by this Section 6.7, MicroLegend will
promptly inform PTI as to that fact and furnish to PTI the specifics thereof. In
the event that MicroLegend breaches its promise contained in this Section 6.7,
PTI may terminate this Agreement and, if it does so, then at PTI's request
MicroLegend shall immediately pay to PTI a cancellation fee of $150,000 plus an
amount equal to its out-of-pocket expenses (including legal, accounting and
investment banking fees and expenses) incurred by PTI with respect to the
Acquisition ("Expenses"), which Cancellation Fee and Expenses shall be PTI's
sole remedy for a breach by MicroLegend of this Section 6.7 and the aggregate
potential liability of MicroLegend for any such breach shall be so limited.
6.8 Cooperation in Preparation of Registration Statement, Etc. MicroLegend will
promptly cooperate with PTI in its preparation and filing with the SEC of the
Registration Statement and the Prospectus, will cause its independent auditors
to cooperate in the preparation of financial statements for the Registration
Statement and Prospectus, and PTI will use its best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and prior to January 31, 2000. PTI shall keep
such Registration Statement and Prospectus effective until the earlier of five
years from the Closing Date or the date on which the Representatives of the
Shareholders shall inform PTI that the Registration Statement and Prospectus are
no longer required.
6.9 Preparation of Additional Financial Statements. At PTI's expense,
MicroLegend will cause Ernst and Young LLP, its certified public accountants, to
prepare and deliver to PTI unaudited financial statements of MicroLegend for
each of the twelve months ended December 31, 1995, 1996, 1997 and 1998 and for
each calendar quarter during 1998 and 1999, which financial statements shall be
stated in US dollars and prepared in accordance with American GAAP.
6.10 Letter of MicroLegend's Accountants. At PTI's expense, MicroLegend will
cause to be delivered to PTI a letter of Ernst & Young LLP, MicroLegend's
independent auditors, dated a date within two business days before the date on
which the Registration Statement becomes effective and addressed to PTI, in form
and substance reasonably satisfactory to PTI and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
6.11 Affiliates. Prior to the Closing Date, MicroLegend will deliver to PTI a
letter identifying all Persons who are, as of the date of this Agreement,
Affiliates of MicroLegend for purposes of Rule 145 under the Securities Act.
MicroLegend will use its best efforts to cause each such Person to deliver to
PTI on or prior to the Closing Date a written agreement substantially in the
form of Exhibit C attached hereto (the "Affiliates' Agreements").
6.12 Transaction Expenses. The aggregate expenses not paid in the ordinary
course by MicroLegend in connection with this Agreement and the consummation of
all of the transactions contemplated hereby ("Transaction Expenses"), including
fees and expenses paid to MicroLegend's directors, officers, attorneys,
accountants and advisors, will not, commencing August 31, 1999 and continuing
through the Closing Date, exceed $25,000. The Transaction Expenses shall not be
booked on the Pre-Closing Balance Sheet as hereinafter defined as a liability in
accordance with Canadian GAAP, but rather, to the extent paid by MicroLegend,
shall be added back to the assets of MicroLegend.
6.13 Shareholders' Representation Agreements. MicroLegend will cause all
MicroLegend shareholders to execute and deliver to PTI a Shareholder's
Representation Agreement substantially in the form of Exhibit D attached hereto
(the "Shareholder's Representation Agreement") which imposes certain
restrictions regarding the resale of PTI Common Stock received upon the exercise
of rights of holders of Exchangeable Shares. PTI shall be entitled to place the
legends as set forth in the Shareholder Representation Agreement on the
certificates representing any PTI Common Stock or Exchangeable Shares to be
received by such shareholders of MicroLegend pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to PTI's transfer
agent regarding PTI's Common Stock, consistent with the terms of the
Shareholder's Representation Agreements.
6.14 Tangible Net Worth. MicroLegend shall cause Ernst & Young LLP,
MicroLegend's certified public accountants, to prepare and deliver to PTI prior
to Closing a balance sheet of MicroLegend as of a date within five (5) business
days prior to the Closing Date (the "Pre-Closing Balance Sheet"), which balance
sheet shall be accompanied by a review of Ernst & Young LLP, stating that the
Pre-Closing Balance Sheet has been prepared in accordance with American GAAP,
and by a statement of Ernst & Young LLP setting forth the Tangible Net Worth of
MicroLegend as of the date of the Pre-Closing Balance Sheet.
6.15 Pooling Opinion. Ernst & Young LLP, MicroLegend's certified public
accountants, shall furnish to PTI and its legal counsel on or before the Closing
Date their opinion in form and substance satisfactory to PTI and its certified
public accountants to the effect that prior to the Closing Date there were no
events, conditions or circumstances involving MicroLegend, its Subsidiaries and
its shareholders that would, or could reasonably be deemed to, prevent the
Acquisition from qualifying as a Pooling.
Article 7. COVENANTS OF PTI
During the period from the date of this Agreement and continuing until
the Closing Date, PTI agrees to perform as follows:
7.1 Preparation of Registration Statement, Etc. Within thirty (30) days after
the Closing Date, PTI will promptly prepare the Registration Statement and the
Prospectus and file the same, and will use its best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and prior to January 31, 2000. PTI will also
take any action (other than qualifying to conduct business in any jurisdiction
in which it is now not so qualified) required to be taken under any applicable
state or provincial securities laws in connection with the issuance of PTI
Common Stock and Exchangeable Shares in the Acquisition.
7.2 NASDAQ Listing. As soon as practicable after the Closing Date, but in no
event later than December 31, 1999, PTI will use its best efforts to cause the
shares of PTI Common Stock to be issued in the Acquisition to be listed on the
NASDAQ National Market, subject only to official notice of issuance.
7.3 Employees. PTI and MicroLegend have identified key management and technical
employees of MicroLegend as identified on Schedule 7.3 (the "Employees"). As a
condition of Closing, each of such Employees shall have executed and delivered
to PTI or its legal counsel an executed Employment Agreement substantially in
the form of Exhibit E-1 attached to this Agreement (the "Employment Agreement").
PTI intends to expand the organization of MicroLegend. On or before Closing,
MicroLegend shall offer continued employment to all of the remaining employees
of MicroLegend. As a condition precedent to such employment, such remaining
employees shall be required to execute an Employment Agreement substantially in
the form of Exhibit E-2 attached to this Agreement (the "Remaining Employee
Employment Agreement"). In addition, and notwithstanding the generality of the
foregoing, it shall be a condition of Closing that MicroLegend will enter into
employment agreements with each of Thomas Blain and Reginald T. Cable,
substantially in the form of Exhibit F attached to this Agreement (the
"Principal Shareholder Employment Agreements"). PTI shall grant options for
50,000 shares of PTI Common Stock to each of the Principal Shareholders and
options up to an aggregate 80,000 shares of PTI Common Stock to all other
employees of MicroLegend as agreed upon by PTI and the Principal Shareholders.
Article 8. ADDITIONAL COVENANTS OF EACH PARTY
8.1 Additional Agreements; Best Efforts. Subject to the terms and conditions of
this Agreement, each of the parties agrees to use its best efforts to take or
cause to be taken all action, and to do or cause to be done all things
necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this Agreement,
including cooperating fully with the other parties, providing information and
making all necessary filings in connection with, among other things, the HSR Act
if required, the Securities Act, the Investment Canada Act and state securities
Legal Requirements. Each of the parties will take or cause to be taken all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party, required to
be obtained or made by any of them in connection with the Acquisition or the
taking of any action contemplated by this Agreement.
8.2 Expenses. PTI and MicroLegend will each bear its respective Expenses in
connection with the transactions contemplated hereby, whether or not the
Acquisition is consummated; provided, however, that PTI shall pay up to $20,000
of MicroLegend's legal expenses incurred in connection with the MOU and up to an
additional $30,000 of MicroLegend's legal expenses after the execution of the
MOU if the Acquisition is not consummated for any reason.
8.3 Brokers or Finders. Each party represents, as to itself and its Affiliates,
that no agent, broker, investment banker, financial advisor or other Person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except Tucker Anthony Cleary Gull, whose fees and expenses will be
paid by PTI in accordance with PTI's agreement with such firm and except for
LaBarge Weinstein and Prescient Advisory Services, whose fees and expenses will
be paid by MicroLegend in accordance with MicroLegend's agreement with such firm
(a true, correct and complete copy of which has been delivered to PTI prior to
the date hereof).
8.4 Pooling. From and after the date hereof and until the Closing Date, neither
PTI nor MicroLegend nor any of their respective Subsidiaries or other Affiliates
will knowingly take any action, or knowingly fail to take any action, which
would jeopardize PTI's ability to account for the Acquisition as a Pooling or
enter into any Contract with respect to the foregoing. Following the Closing
Date, PTI will use its best efforts to conduct the business of MicroLegend, and
will cause MicroLegend to use its best efforts to conduct its business, in a
manner which would not jeopardize PTI's ability to account for the Acquisition
as a Pooling.
8.5 Cooperation re Canadian Taxes. The parties hereto shall cause Sub to jointly
elect with each Record Holder in Department of National Revenue Form T2057, and
shall file such form within the prescribed time pursuant to Section 85(1) of the
Canadian Tax Act, as to the amount they have agreed upon to be the Record
Holder's proceeds of the disposition of the shares of MicroLegend capital stock
to Sub pursuant to this Agreement and Sub's cost of those shares. The Principal
Shareholders and Sub agree that the amount that shall be deemed to be the
proceeds of the disposition of the shares and Sub's cost of the shares in
respect of which such election is made shall be the "cost amount" within the
meaning of the Canadian Tax Act, or such other amount as requested by a Record
Holder between the "cost amount" and the fair market value of the shares of
MicroLegend capital stock being sold by such Record Holder pursuant to this
Agreement.
8.6 Other Actions. Neither MicroLegend nor PTI will, nor will they permit any of
their respective Subsidiaries to, knowingly take any action that would or is
reasonably likely to cause any of its representations and warranties set forth
in this Agreement to be untrue as of the date made or any of the conditions to
the Acquisition set forth in Article 9 not to be satisfied. Prior to the Closing
Date, each of the parties agrees to use its best efforts to obtain the
satisfaction of its conditions to Closing as set forth in Article 9 as soon as
practicable, facilitate contacts, negotiations and communications with any
Persons reasonably necessary to insure a smooth transition of control of the
business operations of MicroLegend, and assist one another in obtaining any
consents required or desirable from any Person to effect the consummation of the
transactions contemplated hereby.
8.7 Confidentiality. PTI and Sub (treated as one party for this purpose) and
MicroLegend and its Subsidiaries (each, the "First Party") will, and each First
Party will use its best efforts to cause its Affiliates, employees,
representatives and agents to, hold in strict confidence all Confidential
Information of the other party (each, the "Other Party"), unless compelled to
disclose the same by judicial or administrative process; provided, however, that
in either such case the First Party will provide the Other Party with prompt
prior notice thereof so that the Other Party may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of this
Section 8.7. In the event that such protective order or other remedy is not
obtained, or the Other Party waives compliance with the provisions hereof, the
First Party will furnish only that portion of Confidential Information which, in
the written opinion of the First Party's counsel, is required, and the First
Party will exercise best efforts to obtain reliable assurance that confidential
treatment will be accorded such of the disclosed Confidential Information as the
Other Party so designates. The First Party will not otherwise disclose
Confidential Information to any person, except with the consent of the Other
Party. In the event that the Acquisition is not consummated, the First Party
will promptly return all Confidential Information to the Other Party. For the
purposes hereof, "Confidential Information" means all information of any kind
concerning the Other Party or any of its Affiliates, obtained directly or
indirectly from the Other Party or any of its Affiliates, employees,
representatives or agents in connection with the transactions contemplated
hereby, except information (a) ascertainable or obtained from public or
published sources, (b) received from a third party not known by the First Party
to be under an obligation to keep such information confidential, (c) which is or
becomes known to the public (other than through a breach of this Agreement), or
(d) which was in the First Party's possession prior to disclosure thereof to the
First Party and which was not subject to any obligation to keep such information
confidential. The First Party recognizes that any breach of the provisions of
this Section 8.7 would result in irreparable harm to the Other Party and its
Affiliates and, therefore, that the Other Party will be entitled to an
injunction to prohibit any such breach or anticipated breach, without the
necessity of posting a bond, cash or otherwise, in addition to all of its other
legal and equitable remedies.
8.8 Publicity. Subject to Legal Requirements, the rules of the SEC and NASDAQ
and the provisions of this Agreement, so long as this Agreement is in effect,
each party will use its best efforts to assure that the timing and content of
any press release or other public statement with respect to the transactions
contemplated by this Agreement will be determined by prior mutual agreement of
the parties.
Article 9. CONDITIONS PRECEDENT TO PARTIES' OBLIGATIONS
9.1 Conditions to Each Party's Obligation to Effect the Acquisition. The
respective obligations of MicroLegend, PTI and Sub to effect the Acquisition are
subject to the satisfaction prior to the Closing Date of each of the following
conditions:
(a) Governmental Approvals. Other than the filing provided for by Section 2.2,
all licenses, franchises, certificates, permits, accreditations, authorizations,
consents, orders or approvals of, or registrations, declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity the
failure to obtain which would have a Material Adverse Effect on the consummation
of the Acquisition, will have occurred, been filed or been obtained, including
any authorizations required under the HSR Act.
(b) No Injunctions or Restraints. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Acquisition will be in effect, and no shareholder of MicroLegend shall
have instituted any proceeding alleging that the Acquisition was oppressive to
that shareholder or attempting to prevent the Closing.
9.2 Conditions of Obligations of PTI and Sub. The obligations of PTI and Sub to
effect the Acquisition are subject to the satisfaction of the following
additional conditions, unless waived by PTI:
(a) Representations and Warranties. The representations and warranties of
MicroLegend set forth in this Agreement will be true and correct in all respects
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except as otherwise contemplated by this Agreement,
and PTI will have received a certificate signed on behalf of MicroLegend by its
Certifying Officers to such effect.
(b) Performance of Obligations of MicroLegend. MicroLegend will have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and PTI will have received a
certificate signed on behalf of MicroLegend by its Certifying Officers to such
effect.
(c) No Amendments to Resolutions. Neither the Board of Directors of MicroLegend
nor any committee thereof will have amended, modified, rescinded or repealed the
resolutions heretofore adopted by the Board of Directors which approve this
Agreement, the consummation of the Acquisition and the performance of all of
MicroLegend's and the Board of Directors' obligations hereunder, and will not
have adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions, and PTI
will have received a certificate signed on behalf of MicroLegend by its
Certifying Officers to such effect.
(d) Articles of Incorporation, Certificate of Incorporation and Good Standing
Certificates. PTI will have received a copy, certified by the appropriate public
official of the Government of Canada as of a date reasonably proximate to the
Closing Date, of the complete Articles of Incorporation of MicroLegend and a
copy, certified by the appropriate public official of the jurisdiction of
incorporation of any Subsidiary, of the complete Certificate of Incorporation of
such Subsidiary. PTI will have received certificates of good standing from the
appropriate public official of each jurisdiction of MicroLegend's and each
Subsidiary's incorporation and of each jurisdiction where MicroLegend and each
of its Subsidiaries is qualified to do business.
(e) MicroLegend Permits. MicroLegend and its Subsidiaries will have all
MicroLegend Permits that are necessary or appropriate to permit the use,
ownership and operation of the MicroLegend business by Sub after Closing in
substantially the same manner as conducted by MicroLegend immediately prior to
Closing, and all such MicroLegend Permits will be in full force and effect and
not subject to any pending or threatened proceedings to revoke, make conditional
or adversely modify, limit, or otherwise affect the authority, rights,
privileges or permissions conveyed thereby.
(f) Consents Under Agreements. MicroLegend will have obtained the consent or
approval of each Person whose consent or approval is required in order to permit
the continuation or succession by MicroLegend pursuant to the Acquisition to any
obligation, right or interest of MicroLegend or any of its Subsidiaries under
any Contract, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of PTI, individually or in the
aggregate, have a Material Adverse Effect on the operations or financial
condition of MicroLegend and its Subsidiaries taken as a whole or upon
consummation of the transactions contemplated hereby.
(g) Real Estate Matters. PTI will have received estoppel certificates in form
satisfactory to PTI and its counsel from each landlord of a lease identified on
Schedule 4.10(b) to the effect that MicroLegend, or any MicroLegend Subsidiary,
as applicable, is not in default under such lease.
(h) Letter of and Opinion of MicroLegend's Accountants. PTI will have received
the letter of Ernst & Young LLP referred to in Section 6.10 and the opinion of
Ernst & Young LLP referred to in Section 6.16.
(i) Affiliates' Agreements. PTI will have received from each Person named in the
letter referred to in Section 6.11 an executed copy of an agreement
substantially in the form of Exhibit C.
(j) Shareholders' Representation Agreements. PTI shall have received from each
MicroLegend shareholder an executed Shareholder's Representation Agreement
substantially in the form of Exhibit D.
(k) Pooling Opinion. PTI will have received the opinion of
PriceWaterhouseCoopers LLP, in form and substance reasonably satisfactory to it,
that the Acquisition will qualify as a Pooling.
(l) Financial Advisor's Opinion. PTI will have received a final form of opinion
from Tucker Anthony Cleary Gull that the consideration to be provided to
MicroLegend's shareholders in connection with the Acquisition is fair to PTI's
stockholders from a financial point of view.
(m) Legal Opinion of LaBarge Weinstein. LaBarge Weinstein, counsel to
MicroLegend, will have furnished to PTI their written opinion, dated the Closing
Date, in form acceptable to counsel for PTI.
(n) Employment Agreements. Each of the employees of MicroLegend shall have
executed and delivered an Employment Agreement substantially in the form of
Exhibit E-1 or E-2, as applicable, attached hereto and each of the Principal
Shareholders shall have executed and delivered his Principal Shareholder
Employment Agreement substantially in the form of Exhibit F attached hereto.
(o) Surrender of Name. The Principal Shareholders shall cause any Affiliate
other than MicroLegend to change its name so as not to conflict, resemble or in
any way appear to be associated with the name "MicroLegend."
(p) Other Evidence. PTI will have received such other certificates, instruments
and documents as it may reasonably require to demonstrate the satisfaction of
the conditions set forth in this Section 9.2 or to be satisfied that MicroLegend
and/or any of its Subsidiaries comply with all applicable Legal Requirements and
the terms of this Agreement.
9.3 Conditions of Obligations of MicroLegend and Record Holders. The obligation
of MicroLegend and its Record Holders to effect the Acquisition is subject to
the satisfaction of the following conditions unless waived by MicroLegend and
the Record Holders:
(a) Representations and Warranties. The representations and warranties of PTI
and Sub set forth in this Agreement will be true and correct in all respects as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except as otherwise contemplated by this Agreement, and
MicroLegend will have received a certificate signed on behalf of PTI by its
Certifying Officer to such effect.
(b) Performance of Obligations of PTI and Sub. PTI and Sub will have performed
in all material respects all obligations required to be performed by them under
this Agreement at or prior to the Closing Date, and MicroLegend will have
received a certificate signed on behalf of PTI by its Certifying Officer to such
effect.
(c) No Amendments to Resolutions. Neither the Board of Directors of PTI nor any
committee thereof will have amended, modified, rescinded or repealed the
resolutions heretofore adopted by the Board of Directors which approve this
Agreement, the consummation of the Acquisition and the performance of all of
PTI's obligations hereunder, and will not have adopted any other resolutions in
connection with this Agreement and the transactions contemplated hereby
inconsistent with such resolutions, and MicroLegend will have received a
certificate signed on behalf of PTI by its Certifying Officer to such effect.
(d) Legal Opinion of Harter, Secrest & Emery LLP and Nelligan Power, LLP.
Harter, Secrest & Emery LLP and Nelligan Power, LLP, general counsel and
Canadian counsel to PTI, respectively, will have furnished to MicroLegend their
written opinions, dated the Closing Date, in form acceptable to counsel for
MicroLegend.
(e) Voting and Exchange Trust Agreement. PTI and a suitable Trustee of PTI's
choosing shall have executed a Voting and Exchange Trust Agreement substantially
in the form of Exhibit G attached hereto.
(f) Support Agreement. PTI and Sub shall have executed and delivered the Support
Agreement.
(g) Other Evidence. MicroLegend will have received such other certificates,
instruments and documents as it may reasonably require to demonstrate the
satisfaction of the conditions set forth in this Section 9.3.
Article 10. COVENANTS AS TO POST-CLOSING MATTERS
From and after the Closing Date, and until such time as is expressly
provided by this Agreement, PTI agrees, for itself and Sub, and MicroLegend
agrees, for the Record Holders as follows:
10.1 Support Agreement. For so long as there are any Exchangeable Shares
outstanding, PTI will cause Sub pursuant to the Support Agreement substantially
in the form attached hereto as Exhibit H (the "Support Agreement"), to the
extent permitted by corporate law, to pay to each Record Holder thereof, such
amounts as will allow Sub to satisfy its obligations relative to the terms and
provisions of the Exchangeable Shares with respect to dividends, etc.
10.2 Escrow and Indemnification.
(a) Escrow Fund. On the Closing Date, 216,573 Exchangeable Shares (the "Escrow
Shares") shall be registered in the name of, and be deposited with, the Exchange
Agent as Escrow Agent, such deposit to constitute the Escrow Fund and to be
governed by the terms set forth in the Escrow Agreement substantially in the
form attached hereto as Exhibit I (the "Escrow Agreement"). The Escrow Fund
shall be available to compensate PTI pursuant to the indemnification obligations
of the shareholders of MicroLegend. Subject to the provisions herein and in the
Escrow Agreement, the Escrow Fund shall be held for one year pursuant to the
Escrow Agreement, and the claims procedures established by the Escrow Fund shall
be followed by all parties in connection with the settlement of any claims.
(b) Escrow Period. The Escrow Period shall terminate at the expiration of one
year after the Effective Date; provided, however, that a portion of the Escrow
Shares, which, in the reasonable judgment of PTI, subject to the objection of
the Representative of the Shareholders and the subsequent arbitration of the
matter in the manner provided in Section 10.2(h) hereof, is necessary to satisfy
any unsatisfied claims specified in any Officer's Certificate theretofore
delivered to the Escrow Agent prior to termination of the Escrow Period with
respect to facts and circumstances existing prior to expiration of the Escrow
Period, shall remain in the Escrow Fund until such claims have been resolved.
(c) Indemnification by MicroLegend Shareholders. Subject to the limitations set
forth in this Section 10.2, the Principal Shareholders of MicroLegend will
severally, and all other MicroLegend Shareholders will severally, indemnify and
hold harmless PTI and Sub and their respective officers, directors, agents and
employees, and each person, if any, who controls or may control PTI or Sub
within the meaning of the Securities Act (hereinafter referred to individually
as an "Indemnified Person") from and against any and all liabilities and
expenses arising from claims, demands, actions, causes of action, including,
without limitation, reasonable legal fees, net of any recoveries under existing
insurance policies or indemnities from third parties (collectively, "Damages")
arising out of any misrepresentation or breach of or default in connection with
any of the representations, warranties, covenants and agreements given or made
by MicroLegend in this Agreement, the MicroLegend Disclosure Schedules or any
exhibit or schedule to this Agreement. PTI and its Affiliates shall act in good
faith and in a commercially reasonable manner to mitigate any Damages they may
suffer. The Escrow Fund established pursuant to this Section 10.2 shall be
security for this indemnity obligation subject to the limitations in this
Agreement.
(d) Limitation. PTI and MicroLegend each acknowledge that such Damages, if any,
would relate to unresolved contingencies existing at the Closing Date, which if
resolved at the Closing Date would have led to a reduction in the total number
of shares PTI would have agreed to issue in connection with the Acquisition and
this Agreement. Except as set forth hereinafter, nothing in this Agreement shall
limit the liability of (i) MicroLegend or any MicroLegend shareholder for any
breach of any representation, warranty or covenant if the Acquisition is not
consummated, or (ii) of any MicroLegend shareholder in connection with any
breach by such shareholder of the Affiliate Agreement provided that any such
liability does not exceed the value of the consideration received by the Record
Holder for that Record Holder's shares of MicroLegend capital stock.
(e) Damage Threshold. Notwithstanding the foregoing, PTI may not receive any
shares from the Escrow Fund unless and until an Officer's Certificate or
Certificates (as defined in Section 10.2(f) below) identifying Damages the
aggregate amount of which exceeds $150,000 plus the amount if any, by which the
Tangible Net Worth exceeds $1,700,000 has been delivered to the Escrow Agent as
provided in Section 10.2(f) below and such amount is determined pursuant to this
Article 10 to be payable, in which case PTI shall receive shares equal in value
to the full amount of Damages. In determining the amount of any Damage
attributable to a breach, any materiality standard contained in a
representation, warranty or covenant shall be disregarded.
(f) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent on or before the last day of the Escrow
Period of a certificate signed by any officer of PTI (an "Officer's
Certificate"):
A. stating that Damages existing in an aggregate amount greater than $150,000
plus the amount, if any, by which the Tangible Net Worth Exceeds $1,700,000, and
B. specifying in reasonable detail the individual items of such Damages included
in the amount so stated, the date each such item was paid, or properly accrued
or arose, the nature of the misrepresentation, breach of warranty or claim to
which such item is related.
The Escrow Agent shall, subject to the provisions of this Section 10.2, deliver
to PTI out of the Escrow Fund, as promptly as practicable, shares of PTI Common
Stock or other assets held in the Escrow Fund having a value equal to such
Damages.
(ii) For the purpose of compensating PTI for its Damages pursuant to this
Agreement, each Escrow Share in the Escrow Fund shall be valued at the five day
average closing price of the PTI Common Stock immediately prior to the date on
which any Escrow Shares are to be released to PTI by the Escrow Agent.
(g) Objections to Claims. At the time of delivery of any Officer's Certificate
to the Escrow Agent, a duplicate copy of such Officer's Certificate shall be
delivered to the Representatives of the Shareholders (defined in Section 10.2(i)
below) and for a period of forty-five (45) days after such delivery, the Escrow
Agent shall make no delivery of Escrow Shares or other property pursuant to
Section 10.2(b) hereof unless the Escrow Agent shall have received written
authorization from either of the Representatives of the Shareholders to make
such delivery. After the expiration of such forty-five (45) day period, the
Escrow Agent shall make delivery of the Escrow Shares or other property in the
Escrow Fund in accordance with Section 10.2(b) hereof, provided that no such
payment or delivery may be made if the Representative of the Shareholders shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Escrow Agent and to PTI
prior to the expiration of such forty-five (45) day period.
(h) Resolution of Conflicts; Arbitration.
(i) In case either of the Representatives of the Shareholders shall so object in
writing to any claim or claims by PTI made in any Officer's Certificate, PTI
shall have forty-five (45) days to respond in a written statement to the
objection of such Representatives of the Shareholders. If after such forty-five
(45) day period there remains a dispute as to any claims, the Representatives of
the Shareholders and PTI shall attempt in good faith for sixty (60) days to
agree upon the rights of the respective parties with respect to each of such
claims. If the Representatives of the Shareholders and PTI should so agree, a
memorandum setting forth such agreement shall be prepared and signed by PTI and
either of the Representatives of the Shareholders and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute the Escrow Shares or other property from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation, either
PTI or either of the Representatives of the Shareholders may, by written notice
to the other, demand arbitration of the matter unless the amount of the damage
or loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration in accordance with the provisions hereof. Within fifteen
(15) days after such written notice is sent, PTI and the Representatives of the
Shareholders shall attempt to agree on the appointment of a single arbitrator.
If they are unable to do so, then within ten (10) days after the expiration of
such 15-day period, PTI and either of the Representatives of the Shareholders
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators as to the validity
and amount of any claim in such Officer's Certificate shall be binding and
conclusive upon the parties to this Agreement, and notwithstanding anything in
Section 10.2(g) hereof, the Escrow Agent shall be entitled to act in accordance
with such decision and make or withhold payments out of the Escrow Fund in
accordance therewith.
(iii) Judgment upon any award rendered by the arbitrators may be entered in any
court having jurisdiction. Any such arbitration shall be held in Ottawa,
Ontario, Canada under the commercial rules then in effect of the Arbitration Act
of Ontario. For purposes of this Section 10.2(h)(iii), in any arbitration
hereunder in which any claim or the amount thereof stated in the Officer's
Certificate is at issue, the fees of each arbitrator, and the expenses,
including without limitation, attorneys' fees and costs, reasonably incurred by
any party to the arbitration shall be allocated by the arbitrator(s) and be part
of the decision of the arbitrator(s).
(i) Representatives of the Shareholders.
(i) Thomas Blain and Reginald Cable shall be constituted and appointed as
representatives and agents ("Representatives of the Shareholders") for and on
behalf of the MicroLegend shareholders to give and receive notices and
communications, to authorize delivery to PTI of the Escrow Shares or other
property from the Escrow Fund in satisfaction of claims by PTI, to object to
such deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary or
appropriate in the judgment of the Representatives of the Shareholders for the
accomplishment of the foregoing. Such agency may be changed by the holders of a
majority in interest of the Escrow Fund from time to time upon not less than ten
days' prior written notice to PTI. No bond shall be required of the
Representatives of the Shareholders, and the Representatives of the Shareholders
shall receive no compensation for their services. PTI and/or Sub, whenever
required by the provisions of this Agreement, shall provide notice to both of
the Representatives of the Shareholders. Notices or communications from either
of the Representatives of the Shareholders shall constitute notice from each of
the Record Holders, and PTI and Sub shall be entitled to rely upon any such
notice or communication from either of the Representatives of the Shareholders.
(ii) The Representatives of the Shareholders shall not be liable for any act
done or omitted hereunder as the Representative of the Shareholders while acting
in good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Record Holders shall severally indemnify the Representatives of
the Shareholders and hold them harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the
Representatives of the Shareholders and arising out of or in connection with the
acceptance or administration of their duties hereunder.
(iii) The Representatives of the Shareholders shall have reasonable access to
information about MicroLegend and the reasonable assistance of MicroLegend's
officers and employees for purposes of performing their duties and exercising
their rights hereunder, provided that the Representatives of the Shareholders
shall treat confidentially and not disclose any nonpublic information from or
about MicroLegend to anyone (except on a need to know basis to individuals who
agree to treat such information confidentially).
(iv) A decision, act, consent or instruction of the Representatives of the
Shareholders shall constitute a decision of all Record Holders for whom Escrow
Shares otherwise issuable to them are deposited in the Escrow Fund and shall be
final, binding an conclusive upon each such MicroLegend shareholder, and the
Escrow Agent and PTI may rely upon any decision, act, consent or instruction of
either one of the Representatives of the Shareholders as being the decision,
act, consent or instruction of each and every such Record Holders. The Escrow
Agent and PTI are hereby relieved from any liability to any person for any acts
done by them in accordance with such decision, act, consent or instruction of
the Agent.
(j) Third-Party Claims. In the event PTI becomes aware of a third-party claim
which PTI believes may result in a demand against the Escrow Fund, PTI shall
notify the Representatives of the Shareholders of such claim, and the
Representatives of the Shareholders and the MicroLegend shareholders for whom
Escrow Shares otherwise issuable to them are deposited in the Escrow Fund shall
be entitled, at their expense, to participate in any defense of such claim. PTI
shall have the right in its sole discretion to settle any such claim; provided,
however, that PTI not effect the settlement of any such claim without the
consent of the Representatives of the Shareholders, which consent shall not be
unreasonably withheld. In the event that the Representatives of the Shareholders
has consented to any such settlement, the Representatives of the Shareholders
shall have no power or authority to object under Section 10.2(f) or any other
provision of this Section 10.2 to the amount of any claim by PTI against the
Escrow Fund for indemnity with respect to such settlement.
(k) Indemnification by PTI. Subject to the same limitations set forth in Section
10.2(d), PTI and Sub will jointly and severally indemnify and hold harmless the
Principal Shareholders of MicroLegend, their respective successors and assigns
and each Person, if any, who controls or may control any Principal Shareholder
within the meaning of the Securities Act from and against any and all Damages
arising out of any misrepresentation or breach of or default in connection with
any of the representations, warranties, covenants and agreements given or made
by PTI or Sub in this Agreement or any exhibit or schedule to this Agreement.
The Principal Shareholders and their Affiliates shall act in good faith and in a
commercially reasonable manner to mitigate any Damages they may suffer. The
Principal Shareholders shall not make a claim for indemnification under this
Section 10.2(k) until the aggregate amount of Damages exceeds $150,000.00, in
which case PTI and Sub shall indemnify the Principal Shareholders for the full
amount of any such Damages. The Principal Shareholders shall give notice to PTI
and Sub of any demand for indemnification under this Section 10.2(k), stating in
reasonable detail the nature thereof. If any such demand arises out of a claim
made against the Principal Shareholders by any Person not a party to this
Agreement or an Affiliate of any party to this Agreement, such notice shall also
state whether the Principal Shareholders dispute the claim and intend to defend
against it. If the Principal Shareholders shall defend against the claim, PTI
and Sub shall cooperate with them in such defense, shall make available to them
all records and other materials reasonably required by them in such defense, and
shall have the right to participate in such defense, but the Principal
Shareholders shall at all times control such defense. If the Principal
Shareholders do not intend to defend against the claim, then within fifteen (15)
days after their notice is given, PTI and Sub shall either (i) make payment in
full of the claim (ii) compromise and make payment of the compromised claim, or
(iii) notify the Principal Shareholders that they dispute the claim and intend
to defend against it. If PTI and Sub shall defend against the claim, the
Principal Shareholders shall cooperate with PTI and Sub in such defense, shall
make available to PTI and Sub all records and other materials reasonably
required by PTI and Sub in such defense, and shall have the right to participate
in such defense, but PTI and Sub shall at all times control such defense. In the
event there is a dispute over the extent to which indemnification is available
hereunder, the Representatives of the Shareholders and PTI shall attempt in good
faith for sixty (60) days to agree upon the rights of the respective parties
with respect to each of such claims. If no such agreement can be reached after
good faith negotiation, either PTI or either of the Representatives of the
Shareholders may, by written notice to the other, demand arbitration in the
manner set forth in Section 10.2(h).
Article 11. TERMINATION
11.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date.
(a) by PTI, upon notice to MicroLegend and the Principal Shareholders, if
(without any breach by PTI of any of its obligations hereunder) if MicroLegend
fails to comply with any condition set forth in Sections 9.1 or 9.3, and such
failure of compliance is not waived by PTI; or
(b) by MicroLegend, upon notice to PTI, if (without any breach by MicroLegend of
any of its obligations hereunder) compliance with any condition set forth in
Sections 9.1 or 9.3 becomes impossible, and such failure of compliance is not
waived by MicroLegend; or
(c) by PTI, upon notice to MicroLegend, if between the date hereof and the
Closing Date there has occurred (or been discovered) any event, condition or
change in the operations, financial condition, assets, liabilities (contingent
or otherwise), income or business of MicroLegend and its Subsidiaries (other
than events, conditions and changes affecting the technology industry as a
whole, or changes in income resulting from business operations in the ordinary
course), or any damage, destruction or loss, whether or not covered by
insurance, that adversely impairs the value of MicroLegend, any of its
Subsidiaries, any of the facilities occupied by MicroLegend or any of their
respective assets; and the reasonably anticipated aggregate ongoing effect of
such events, conditions and changes on the operations, financial condition,
assets, liabilities (contingent or otherwise), income or business of MicroLegend
subsequent to Closing exceeds $150,000;
(d) by PTI or Sub immediately upon notice to MicroLegend and the Principal
Shareholders in the event MicroLegend breaches the provisions of Section 6.7;
(e) by PTI or Sub immediately upon notice to MicroLegend and the Principal
Shareholders in the event the amount of Tangible Net Worth is less than
$1,700,000; and
(f) by PTI or by MicroLegend, upon notice to the other, at any time after
December 31, 1999.
11.2 Effect of Termination. In the event of termination of this Agreement by any
Party in the manner provided by Section 11.1, this Agreement will immediately
become void and of no effect, and subject to the provisions of Section 6.7,
there will be no liability or obligation on the part of PTI, Sub, MicroLegend or
any of their respective officers or directors to any other party hereto.
Article 12. IN GENERAL
12.1 Survival of Representations, Warranties and Agreements. Unless otherwise
specifically provided herein, the representations, warranties and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement will survive the Closing.
12.2 Amendment; Waiver. This Agreement may be amended by the parties at any
time. This Agreement may not be amended except by an instrument in writing
signed by each of the parties. No waiver of compliance with any provision or
condition hereof, and no consent provided for herein, will be effective unless
evidenced by an instrument in writing duly executed by the party sought to be
charged therewith. No failure on the part of any party to exercise, and no delay
in exercising, any of its rights hereunder will operate as a waiver thereof, nor
will any single or partial exercise by either party of any right preclude any
other or future exercise thereof or the exercise of any other right.
12.3 Notices. Each notice and other communication given hereunder will be in
writing and will be deemed given when delivered personally, sent by telecopier
(receipt of which is confirmed), mailed by commercial express courier (with
receipt confirmed) or mailed by registered or certified mail (return receipt
requested) to the party for which it is intended at the following address (or at
such other address for a party as is specified by like notice):
(a) if to MicroLegend prior to the Closing Date, to:
MicroLegend Telecom Systems, Inc.
......... 150 Metcalfe Street, Suite 2201
......... Ottawa, Ontario, Canada K2P 1P1
......... Attention: Thomas Blain,
Chief Technology Officer
..... tel.:(613) 237-4344
......... fax: (613) 237-4456
.........with a copy to:
......... LaBarge Weinstein
......... Xerox Tower
......... 333 Preston Street, 11th Floor
......... Ottawa, Ontario, Canada K1S 5N4
......... Attention: Deborah L. Weinstein, Esq.
......... Tel.: (613) 231-3000
......... fax: (613) 231-3900
(b) if to PTI or Sub, or to MicroLegend after the Closing Date, to:
......... PERFORMANCE TECHNOLOGIES, INCORPORATED
......... 315 Science Parkway
......... Rochester, New York 14620
......... Attention: Donald L. Turrell
......... President and Chief Executive Officer
......... Tel.: (716) 256-0200
......... fax: (716) 256-3520
.........with a copy to:
......... HARTER, SECREST & EMERY LLP
......... 700 Midtown Tower
......... Rochester, New York 14604
......... Attention: Jeffrey H. Bowen, Esq.
......... Tel.: (716) 231-1149
......... fax: (716) 232-2152
......... NELLIGAN POWER, LLP
......... 66 Slater, Suite 1900
......... Ottawa, Ontario, Canada K1P 5H1
......... Attention: David Stout, Esq.
......... Tel.: (613) 231-8344
......... fax: (613) 788-3678
(c) if to the Principal Shareholders or the Representatives of the Shareholders
Thomas Blain
Reginald T. Cable
c/o MicroLegend Telecom Systems, Inc.
150 Metcalfe Street, Suite 2201
Ottawa, Ontario, Canada K2P 1P1
tel.: (613) 237-4284
fax: (613) 237-4456
with a copy to:
LaBarge Weinstein
Xerox Tower
333 Preston Street, 11th Floor
Ottawa, Ontario, Canada K1S 5N4
Attention: Deborah L. Weinstein, Esq.
tel.: (613) 231-3000
fax: (613) 231-3900
12.4 Schedules and Other Instruments. Each Schedule, each certificate provided
hereunder and each written disclosure required hereby is incorporated by
reference into this Agreement and will be considered a part hereof as if set
forth herein in full; provided, however, that information set forth on any
Schedule, certification or written disclosure constitutes a representation and
warranty of the party providing the same, and not the mutual agreement of the
parties as to the facts therein stated. No Schedule may be amended after the
date of its delivery, except by mutual written agreement of PTI and MicroLegend.
In the event that (a) MicroLegend presents to PTI a written proposed amendment
to any Schedule, and (b) PTI fails to agree to such amendment in writing, and
(c) PTI nevertheless proceeds to close the Acquisition, then PTI waives any
claim which it may have against MicroLegend, or its directors, officers or
agents, based on an alleged breach of representation or warranty which would not
have been a breach had PTI agreed to the amendment as proposed; provided,
however, that the foregoing does not affect PTI's right to terminate this
Agreement as provided by Article 11.
12.5 Inferences. Inasmuch as this Agreement is the result of negotiations
between sophisticated parties of equal bargaining power represented by counsel,
no inference in favor of or against any party will be drawn from the fact that
any portion of this Agreement has been drafted by or on behalf of such party.
12.6 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the Province of Ontario and the Dominion of Canada
without regard to its principles of conflicts of laws.
12.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any of the parties (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Sub may assign, in its sole discretion, any or all of its
rights, interests and obligations hereunder to any direct or indirect
wholly-owned Subsidiary of PTI.
12.8 Benefit. Subject to express provisions herein to the contrary, this
Agreement will inure to the benefit of and be binding upon the parties hereto
and their respective legal representatives, successors and permitted assigns.
This Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
12.9 Entire Agreement; Rights of Ownership. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, including the MOU among the parties with respect to the
subject matter hereof. The parties acknowledge that no party will have the right
to acquire or will be deemed to have acquired shares of the capital stock of any
other party pursuant to the Acquisition until the Closing Date.
12.10 Counterparts. This Agreement, and any document or instrument required or
permitted hereunder, may be executed in counterparts, each of which will be
deemed an original and all of which together will constitute but one and the
same instrument.
<PAGE>
In Witness Whereof, PTI, Sub and MicroLegend, each pursuant to the
approval and authority duly given by resolutions adopted by its Board of
Directors, and the Principal Shareholders have caused this Share Acquisition
Agreement to be executed as of the date first above written.
PERFORMANCE TECHNOLOGIES, INCORPORATED
By:___________________________________
Its:
3688283 CANADA INC.
By:___________________________________
Its:
MICROLEGEND TELECOM SYSTEMS, INC.
By:___________________________________
Its:
Thomas Blain
Reginald T. Cable
<PAGE>
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Description of Exchangeable Shares
Exhibit B Form of Voting Agreement
Exhibit C Form of Affiliates' Agreement
Exhibit D Form of Shareholder's Representation Agreement
Exhibit E-1 Form of Employment Agreement
Exhibit E-2 Form of Remaining Employee Employment Agreement
Exhibit F Form of Principal Shareholder Employment Agreements
Exhibit G Form of Voting and Exchange Trust Agreement
Exhibit H Form of Support Agreement
Exhibit I Form of Escrow Agreement
Schedule 2.1 Allocation of Exchangeable Shares
Schedule 4.1 Subsidiaries, Etc.
Schedule 4.2 Stock Rights
Schedule 4.4 Conflicts; Consents
Schedule 4.6 Additional Material Liabilities
Schedule 4.8 MicroLegend Permits
Schedule 4.9 Real Property
Schedule 4.10(a) Permitted Encumbrances
Schedule 4.10(b) Leases
Schedule 4.10(c) Wetlands
Schedule 4.12 Condition of Real Property
Schedule 4.13 Equipment; Personal Property
Schedule 4.14 Environmental Matters
Schedule 4.15 Employee Plans
Schedule 4.16 Employment Matters
Schedule 4.17 Material Agreements
Schedule 4.18 Litigation
Schedule 4.24 Intellectual Property
Schedule 4.25 Accounts Receivable and Accounts Payable
Schedule 4.26 Inventory and Backlog
Schedule 4.27 Customers and Suppliers
Schedule 4.28 Product Warranties
Schedule 4.29 Year 2000
Schedule 4.30 Banking Relations
Schedule 6.1 Material Changes
Schedule 7.3 Employees
AMENDMENT
TO SHARE ACQUISITION AGREEMENT made December 2, 1999
THIS AMENDMENT dated December 10, 1999, to a Share Acquisition
agreement between Performance Technologies, Incorporated, 3688283 Canada Inc.,
MicroLegend Telecom Systems Inc., Thomas Blain and Reginald T. Cable dated
December 2, 1999 (the "Acquisition Agreement").
1. The parties hereto agree to amend the Acquisition Agreement as follows:
(a) Delete from Section 4.5 the following from the definition of
"Financial Statements": "and for the nine months ended
September 30, 1999".
(b) Delete Section 6.14 in its entirety.
2. The parties expressly agree that the delivery of the Pre-Closing Balance
Sheet shall not be a condition of Closing.
3. The parties expressly agree that no party may rely on any Pre-Closing
Balance Sheet that may have been delivered or reviewed by any party.
4. The parties agree that Section 10.2(e) and (f) shall be amended as
follows: any reference to a claim of indemnity for damages of "an
aggregate amount of which exceeds $150,000 plus the amount if any, by
which the Tangible Net Worth exceeds $1,700,000" shall be replaced by
"$327,000".
5. All dollar amounts referred herein are in "U.S. Dollars".
6. All initially capitalized terms which are not identified herein shall
have the meanings attached to them in the Acquisition Agreement.
7. Article 12 of the Acquisition Agreement is incorporated herein by
reference.
8. Except to the extent modified hereby, the Acquisition Agreement remains
in full force and effect.
PERFORMANCE TECHNOLOGIES, INCORPORATED
By: /s/ DONALD L. TURRELL
--------------------------
Donald L. Turrell,
President, Chief Executive
Officer and Director
3688283 Canada Inc.
Name: Dorrance W. Lamb
Title: Vice-President
MicroLegend Telecom Systems Inc.
By: /s/ REGINALD T. CABLE
-------------------------
Reginald T. Cable
President
MicroLegend Telecom Systems Inc.
By: /s/ THOMAS BLAIN
-------------------------
Thomas Blain
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amended Registration Statement on Form
S-3/A of our report dated February 12, 1999 relating to the consolidated
financial statements of Performance Technologies, Inc., which appears in such
Amended Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Amended Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
Rochester, NY
January 28, 2000
