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Exhibit 2.1
MERGER AGREEMENT
BY AND AMONG
NATURAL MICROSYSTEMS CORPORATION
3758982 CANADA INC.
MICHEL LAURENCE
MICHEL BRULE
STEPHANE TREMBLAY
AND
INVESTISSEMENTS NOVACAP INC.
DATED AS OF MAY 18, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..................................................................................................2
1.1 Closing Dates.......................................................................................2
1.2 The Offer...........................................................................................2
1.3 Directors'Approval..................................................................................6
1.4 Capital of Purchaser................................................................................6
1.5 Options.............................................................................................6
1.6 Indemnification Shares..............................................................................7
1.7 Delivery of Escrow, Employment and Non-Competition Agreements.......................................8
1.8 Endorsement and Delivery of Certificates............................................................8
1.9 Adjustment to Consideration Payable to Michel Laurence..............................................8
1.10 Waiver of Shareholders' Rights.....................................................................10
1.11 Audited Financial Statements.......................................................................10
1.12 Stated Capital Adjustment..........................................................................10
1.13 Tax Considerations.................................................................................11
ARTICLE II REPRESENTATIONS AND WARRANTIES............................................................................11
2.1 Representations and Warranties of the Employee Shareholders........................................11
2.2 Representations and Warranties of Novacap..........................................................11
2.3 Representations and Warranties of the Selling Shareholders.........................................12
2.4 Representations and Warranties of the Parent and the Purchaser.....................................28
ARTICLE III CONDUCT PRIOR TO THE CLOSING.............................................................................30
3.1 Conduct of Business of the Company.................................................................30
3.2 No Solicitation....................................................................................32
ARTICLE IV ADDITIONAL AGREEMENTS.....................................................................................34
4.1 Sale and Registration of Shares; Shareholder Matters...............................................34
4.2 Confidentiality....................................................................................34
4.3 Expenses...........................................................................................35
4.4 Public Disclosure..................................................................................35
4.5 Consents...........................................................................................35
4.6 Commercially Reasonable Efforts....................................................................35
4.7 Notification of Certain Matters....................................................................36
4.8 Transition.........................................................................................36
4.9 Additional Documents and Further Assurances........................................................36
4.10 Tax Filings........................................................................................36
4.11 Access to Information..............................................................................36
4.12 Post-Closing Covenants.............................................................................37
4.13 Severance..........................................................................................37
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ARTICLE V CLOSING DELIVERIES AND ADDITIONAL CONDITIONS...............................................................38
5.1 Deliveries at the Closing..........................................................................38
5.2 Conditions to Obligations of the Selling Shareholders..............................................38
ARTICLE VI INDEMNIFICATION; ESCROW...................................................................................39
6.1 Survival of Representations, Warranties and Agreements.............................................39
6.2 Indemnification....................................................................................39
6.3 Escrow Arrangements................................................................................40
6.4 Manner of Indemnification..........................................................................40
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER........................................................................41
7.1 Termination........................................................................................41
7.2 Effect of Termination..............................................................................41
7.3 Amendment..........................................................................................42
7.4 Extension; Waiver..................................................................................42
ARTICLE VIII GENERAL PROVISIONS......................................................................................42
8.1 Notices............................................................................................42
8.2 Interpretation.....................................................................................44
8.3 Counterparts.......................................................................................44
8.4 Entire Agreement; Assignment.......................................................................44
8.5 Holding Companies..................................................................................44
8.6 Severability.......................................................................................45
8.7 Tax Election.......................................................................................45
8.8 Other Remedies.....................................................................................45
8.9 Governing Law......................................................................................45
8.10 Rules of Construction..............................................................................45
8.11 Specific Performance...............................................................................46
8.12 English Language Only..............................................................................46
8.13 Certain Defined Terms..............................................................................46
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EXHIBITS
Exhibit A Exchangeable Shares Provisions
Exhibit B Support Agreement
Exhibit C Escrow Agreement
Exhibit D Form of Opinion
Exhibit E Merger by way of Amalgamation
Exhibit F Declaration Of Registration Rights
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SCHEDULES
Schedule 1.2(f)(i) Cash Portion
Schedule 1.6 Indemnification Shares
Schedule 2.3(c) Required Authorizations
Schedule 2.3(d) Authorized and Issued Capital
Schedule 2.3(e) Subsidiaries
Schedule 2.3(g) Options
Schedule 2.3(j) Liabilities
Schedule 2.3(m) Immovable Property
Schedule 2.3(o) Place Of Business
Schedule 2.3(p)(i) Owned Marks And Measures To Protect Owned Marks
Schedule (Ii)2.3(p)(ii) Owned Patents And Measures To Protect Owned
Patents
Schedule 2.3(p)(iii) Owned Copyrights
Schedule 2.3(p)(iv) Licensed Technology Agreements
Schedule 2.3(p)(v) Agreements Involving Distribution Or Other Rights
Granted To Third Parties
Schedule 2.3(p)(vi) Technology Exploitation Agreements
Schedule 2.3(p)(vii) Sufficiency Of Owned And Licensed Intellectual
Property
Schedule 2.3(p)(viii) Infringement
Schedule 2.3(p)(ix) Employee Agreements
Schedule 2.3(q) Product And Service Warranties
Schedule 2.3(r) Leases
Schedule 2.3(s) Contracts
Schedule 2.3(u) Insurance
Schedule 2.3(v) Bank Accounts, Powers Of Attorney
Schedule 2.3(w) Litigation
Schedule 2.3(y)(iv) Status Of Assessments
Schedule 2.3(z) Licenses, Permits
Schedule 2.3(aa) Environmental Matters
Schedule 2.3(bb)(1) Collective Agreements
Schedule 2.3(cc) Employee Plans
Schedule 2.3(ii) Customers And Suppliers
Schedule 2.3(h) Financial Statements
Schedule 8.13(ee)(ii) Patents
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MERGER AGREEMENT
This Merger Agreement (this "AGREEMENT") is made and entered into as of
May 18, 2000, by and among Natural MicroSystems Corporation, a Delaware company
(the "PARENT"), 3758982 Canada Inc. (the "PURCHASER", and together with Parent,
"NMS"), a company existing under the federal laws of Canada and a wholly-owned
subsidiary of the Parent, Michel Laurence, Michel Brule and Stephane Tremblay
(the "EMPLOYEE SHAREHOLDERS"), and Investissements Novacap Inc. ("NOVACAP") (the
Employee Shareholders and Novacap together hereinafter referred to as the
"SELLING SHAREHOLDERS").
RECITALS
WHEREAS the Parent intends to cause one or more of its subsidiaries to
acquire the issued and outstanding Class A Shares (the "SHARES") of Inno Media
Logic (I.M.L.) Inc. (the "COMPANY") or to amalgamate with the Company on the
Closing Date (the "MERGER"), subject to the terms and conditions of this
Agreement;
WHEREAS the Selling Shareholders wish to irrevocably agree to sell,
directly or indirectly, certain of their Shares to Purchaser for consideration
payable up to fifty percent (50%) in cash and ancillary rights and the balance
through the issuance of either common shares of the Parent (the "PARENT COMMON
STOCK") or Exchangeable Shares (as defined herein) or failing such sale, to
cause the Company to amalgamate with a direct or indirect subsidiary of the
Parent (the "AMALGAMATION") to form a single corporation ("AMALCO"), subject to
the terms and condition of this Agreement;
WHEREAS to implement the Merger, the Purchaser agrees to make an offer
to all the holders of Shares of the Company in the form required under the
takeover bid provisions of Sections 194 and following of the CANADA BUSINESS
CORPORATIONS ACT (the "CBCA") (the "OFFER") or to cause the Company to enter
into the Amalgamation;
WHEREAS (i) the articles of incorporation of the Purchaser or the
articles of amalgamation of Amalco authorize or will, on the Closing Date,
authorize the issuance of an unlimited number of Exchangeable Shares, the terms
and conditions of which will be in substantially the form attached as Exhibit A
(the "EXCHANGEABLE SHARE PROVISIONS"); and (ii) an exchangeable share support
agreement will be entered into between Parent, and of its subsidiaries and
Purchaser (the "SUPPORT AGREEMENT") (or Parent, one of its subsidiaries and
Amalco, as the case may be) in substantially the form attached as Exhibit B;
WHEREAS the Exchangeable Shares (as defined herein) will be
exchangeable into Parent Common Stock, subject to the terms and conditions of
the Exchangeable Share Provisions and the Support Agreement; and
WHEREAS a portion of the Parent Common Stock and Exchangeable Shares
otherwise receivable by the Shareholders in connection with the Merger will be
placed in escrow pursuant to an escrow agreement (the "ESCROW AGREEMENT") in
substantially the form attached as Exhibit C, the
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release of which will be contingent upon certain events and conditions as
contemplated by the Escrow Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 CLOSING DATES
Unless this Agreement is earlier terminated pursuant to Article VII,
the closing of the transactions contemplated by this Agreement (the "CLOSING")
shall take place as promptly as practicable and no later than five (5) business
days following the end of the period provided for the deposit of Shares under
the Offer or on the date on which the Amalgamation takes effect, as the case may
be, (the "OFFER TERMINATION DATE") at the offices of Stikeman Elliott, 1155
Rene-Levesque boulevard West, 40th Floor, Montreal, Quebec, Canada H3B 3V2;
provided that if the conditions attached to the Offer are not satisfied on the
Offer Termination Date but NMS determines, in its sole discretion, that such
conditions are likely to be satisfied at a later time, NMS may elect to delay
the Closing until a date no later than fourteen (14) days following the Offer
Termination Date. The date upon which the Closing actually occurs is herein
referred to as the "CLOSING DATE."
1.2 THE OFFER
As soon as practicable after the execution and delivery of the
Agreement and all of the schedules and attachments hereto in final form and the
delivery of all the written acknowledgments and waivers contemplated by Section
1.10 hereof to the Purchaser, and in any case within ten (10) days thereafter,
the Purchaser agrees to make, either itself or together with another corporation
wholly owned, directly or indirectly, by the Parent, the Offer to all the
holders of Shares in the form required by the takeover bid provisions of Section
194 and following of the CBCA. The Offer shall contain the following terms and
conditions (among others):
(a) the Offer shall be to purchase all outstanding Shares,
including those Shares as are issuable upon the exercise or conversion of
outstanding options and warranties which are vested and immediately exercisable
according to their terms or are vested and exercisable immediately upon a change
of control of the Company ("IMMEDIATELY EXERCISABLE OPTIONS");
(b) the Offer shall remain open for deposits of Shares for 21
days, being the minimum period permitted under the CBCA;
(c) the minimum number of shares to be acquired under the
Offer shall be 66 2/3 % of the outstanding Shares (calculated on a fully diluted
basis), including the Shares deposited by the Selling Shareholders as
contemplated by Section 1.8 hereof;
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(d) the Offer shall be subject to the conditions necessary to
effect the purchase of Shares contemplated by the Offer, including:
(i) that the Board of Directors of the Company shall have
authorized the transfer to the Purchaser of the
outstanding Shares and all Shares issued on the exercise
of outstanding options and warrants;
(ii) The Purchaser shall have determined, acting
reasonably, that no covenant, term or condition of any
instrument or agreement of the Company not previously
disclosed or made available to NMS prior to the date
hereof, exists, and no document otherwise required to be
delivered by the Selling Shareholders hereunder has not
been delivered, which might make it inadvisable for NMS to
proceed with the Offer and/or with the taking up and
paying for the Shares under the Offer (including without
limitation any default, acceleration or other adverse
event that may ensue as a result of the Purchaser taking
up and paying for the Shares under the Offer);
(iii) no act, action, suit or proceeding shall have been
taken before or by any Canadian or United States federal,
provincial, state or foreign court or other tribunal or
governmental agency or other regulatory or administrative
agency or commission or by any elected or appointed public
official or private person (including without limitation
any individual, Company, firm, group or other entity) in
Canada, the United States or elsewhere, whether or not
having the force of law, which could reasonably be
expected to have the effect of:
(A) making illegal, or otherwise directly or
indirectly restraining or prohibiting or
making materially more costly the making of
the Offer, the acceptance for payment of,
payment for, or ownership, directly or
indirectly, of some or all of the Shares by
the Purchaser or the consummation of any of
the transactions contemplated by the
Agreement or the Offer;
(B) prohibiting or materially limiting the
ownership or operation by the Company or by
the Purchaser indirectly, of all or any
material portion of the business or assets
or the Company, on a consolidated basis, or
compelling the Purchaser, directly or
indirectly, to dispose of or hold separate
all or any material portion of the business
or assets of the Company, on a consolidated
basis, as a result of the transactions
contemplated by the Offer;
(C) imposing or confirming limitations on
the ability of the Purchaser, directly or
indirectly, effectively to acquire or hold
or to exercise full rights of ownership of
the Shares, including without limitation the
right to vote any Shares acquired or owned
by the Purchaser, directly or indirectly, on
all matters properly presented to the
Shareholders; or
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(D) requiring divestiture by the Purchaser,
directly or indirectly, of any Shares;
(iv) (A) neither the board of directors of the Company nor
any committee thereof shall have approved or recommended
to the Company's Shareholders any proposal or any other
acquisition of Shares other than the Offer, (B) no
company, partnership, person or other entity or group
shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a
takeover bid (other than the Offer), tender offer or
exchange offer, merger, sale of assets, amalgamation, plan
of arrangement, reorganization, consolidation, business
combination, recapitalization, liquidation, dissolution or
similar transaction with or involving the Company and (C)
neither the board of directors of the Company nor any
committee thereof shall have resolved to do any of the
foregoing;
(v) there shall not have occurred any material breach by
the Selling Shareholders of any of the representations,
warranties or covenants contained in this Agreement or any
termination of this Agreement pursuant to the terms
contemplated in this Agreement;
(vi) the Quebec Securities Commission shall have issued
orders approving the trades and distributions in
securities contemplated herein, by the Offer and by the
Exhibits to this Agreement (including trades and
distributions in securities pursuant to the exercise of
rights contemplated in each class of securities of
Purchaser) in form and substance reasonably satisfactory
to Parent and the Purchaser;
(vii) the Purchaser shall have received a legal opinion
from Me Olivier Despres, legal counsel to the Selling
Shareholders, in substantially the form attached hereto as
Exhibit D; and
(viii) the audited financial statements of the Company
delivered to the Parent pursuant to Section 1.11 hereof
shall be in form and substance which is not materially
different from the unaudited financial statement of the
Company for the same period comprised in the Financial
Statements.
The foregoing conditions shall be for the exclusive benefit of the Purchaser and
may be waived by the Purchaser in whole or in part at any time and from time to
time, both before or after the Offer Termination Date.
(e) each depositing Shareholder shall be deemed, by depositing
its Shares under the Offer, to have agreed to (i) deposit in escrow with the
Escrow Agent a number of Parent Common Stock and/or First Preferred Shares (as
defined in Exhibit E) and/or Exchangeable Shares (as the case may be) equal to
10% of the Consideration payable to the Shareholder under Section 1.2(f) divided
by the Weighted Average Closing Price, (ii) became a party to and be bound by
the terms and conditions set forth in the Escrow Agreement as though each such
depositing Shareholder
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hereunder were a signatory of the Escrow Agreement, (iii) to provide the Parent
and Purchaser with substantially the same representations and warranties as the
Selling Shareholders are providing to the Parent and Purchaser hereunder, and
(iv) to be bound by substantially the same indemnification obligations as the
Selling Shareholders are bound to under Article VI of this Agreement.
(f) the consideration offered under the Offer shall be an
aggregate of US$ 155 million for all outstanding Shares and all Immediately
Exercisable Options (the "CONSIDERATION") and such Consideration shall be
payable as follows:
(i) each depositing Shareholder shall have the right to
elect to sell up to 50% of his shares for an amount
payable to such Shareholder in cash and certain ancillary
rights (the "CASH PORTION"); provided that each of the
Selling Shareholders hereby elects to receive in cash the
percentage of the Consideration payable to it set forth in
SCHEDULE 1.2(f)(i) hereto;
(ii) the balance of the shares held by a depositing
Shareholder shall be transferred for a consideration
payable to the depositing Shareholder (the "NON-CASH
PORTION") through the issuance to the depositing
Shareholder, at its election, of either:
(A) a number of shares of Parent Common
Stock that is equal to the Non-Cash Portion
divided by the Weighted Average Closing
Price, rounded to the next lowest common
share (the "NUMBER OF PARENT COMMON STOCK"),
with an amount equal to the value of any
fractional share payable in cash; or
(B) a number of Exchangeable Shares that is
equal to the number which, if exchanged for
Parent Common Stock, is equal to the Number
of Parent Common Stock.
For the purposes of this Agreement, the "WEIGHTED AVERAGE
CLOSING PRICE" shall be the weighted average closing price
per share of the Parent Common Stock on the NASDAQ
National Market over the ten (10) consecutive trading days
ending on the trading day immediately preceding the date
of this Agreement.
(g) If on or after the date of this Agreement, but on or prior
to Closing, Parent recapitalizes through a stock split, reverse stock split, or
reorganizes, reclassifies or otherwise changes its outstanding shares into the
same or a different number of shares of other classes, or declares a dividend on
its outstanding shares payable in shares or securities convertible into shares,
then the total number of shares of Parent Common Stock to be ultimately issued
under the Offer, either pursuant to Section 1.2(f)(ii)(A) or upon any exchange
of Exchangeable Shares, as the case may be, and the terms and conditions of
exchange of the Exchangeable Shares will be adjusted appropriately so that the
Shareholders receive the number and class of Parent securities and/or cash which
they would have received had they been holders of the Number of Parent Common
Stock
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prior to such recapitulation or, as the case may be, Exchangeable Shares
exchangeable into such securities and/or assets.
1.3 DIRECTORS' APPROVAL
The Selling Shareholders agree with NMS that as soon as reasonably
practicable after the execution and delivery of this Agreement, and in any event
within seven (7) days thereafter, the Selling Shareholders will (i) cause a
meeting of the board of directors of the Company to be duly held for the purpose
of obtaining a resolution of a majority of the directors of the Company
authorizing the transfers of all outstanding Shares to the Purchasers
contemplated by this Agreement and the Offer, (ii) propose such a resolution at
that meeting, and (iii) vote or cause each of their nominees on the board of
directors of the Company to vote, as the case may be, in favour of the such
resolution at such meeting.
1.4 CAPITAL OF PURCHASER
On or prior to the Closing, NMS shall ensure that at Closing the
capital of Purchaser shall provide that an unlimited number of common shares and
an unlimited number of fully paid and non-assessable Class A non-voting
preferred shares of Purchaser (the "EXCHANGEABLE SHARES") shall be authorized
for issuance. In the event the merger contemplated herein proceeds by
Amalgamation, the parties agree that the share capital of Amalco will be
comprised of an unlimited number of common shares, an unlimited number of
Exchangeable Shares and an unlimited number of First Preferred Shares (as
defined in Exhibit E). The terms and provisions of the Exchangeable Shares,
including the basis on which the shareholders shall have the right to exchange
Exchangeable Shares of Purchaser for shares of Parent Common Stock, shall be as
set forth in the terms and conditions attaching to the Exchangeable Shares set
forth at Exhibit A
1.5 OPTIONS
Except for Immediately Exercisable Options which are exercised on or
prior to the Closing Date, the Parent and the Purchaser agree that on or prior
to the Closing Date, the Purchaser shall cause the existing Directors' Stock
Option Plan and Employee Stock Option Plan of the Company (the "STOCK OPTION
PLANS") to be amended such that each option to purchase Shares (an "OPTION")
outstanding under the Stock Option Plans that remains outstanding at the Closing
shall be converted into an option to acquire, on substantially the same terms
and conditions as were applicable under such Option (including, without
limitation, any repurchase rights or vesting provisions), Parent Common Stock,
except that (i) such Option shall be exercisable for that number of shares of
Parent Common Stock as is equal to the product of the number of Shares that were
issuable upon exercise of such Option immediately prior to the Closing Date
multiplied by the amount of the Consideration per Share under the Offer and
divided by the Weighted Average Closing Price and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
converted Option will be equal to the aggregate exercise price for the Shares
purchasable pursuant to such Option immediately prior to the Closing Date
(converted into US currency based on the Bank of Canada daily noon exchange rate
on the Closing Date) divided by the number of full shares of Parent Common Stock
purchasable pursuant to (i) above, rounded down to the nearest whole cent. As
soon as reasonably practicable after the Closing Date, Parent shall deliver to
holders of Options
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appropriate notice setting forth such holders' rights pursuant hereto. The total
number of shares of Parent Common Stock issuable upon exercise of assumed
Options is referred to hereinafter as the "TOTAL ASSUMED OPTION SHARES".
In the event that the Stock Option Plans may not be amended or does not
otherwise permit the Parent to cause the Options to be converted unto options to
acquire Parent Company Stock as aforementioned, Parent agrees to offer to all
holders of the outstanding Options (for greater certainty, other than
Immediately Exercisable Options which are exercised on or prior to the Closing
Date), the right to exchange their Options into options issued by the Parent to
acquire Parent Common Stock (the "EXCHANGE OPTIONS") on same terms as set forth
above. The Selling Shareholders agree if reasonably requested by the Parent and
the Purchaser, to cause the Company and if necessary the Company's board of
directors, to do all things reasonably requested to facilitate the conversion of
the Options into options to acquire Parent Company Stock or as the case may be,
to encourage all such holders of outstanding Options to exchange their Options
into Exchange Options. Parent shall register the issuance of Parent Common Stock
issuable upon exercise of Options or Exchange Options under the SECURITIES ACT
of 1933 on a Form S-8 or other available form so as to permit the holders of
Options or Exchange Options to resell the Parent Common Stock issuable upon the
exercise of the Options or Exchange Options without such holders being obliged
to establish a registration statement or prospectus or other similar
requirements.
The parties agree that the conversion of Options into options to
acquire Parent Company Stock or the exchange of Options into Exchange Options by
the holders thereof shall constitute an exchange under Sub-Section 7(1.4) of the
ITA and will make such minor adjustments as may be required for such purposes.
The Selling Shareholders agree to cause the Board of Directors not to
accelerate the vesting or exercise period for any Option issued under the Stock
Option Plans.
1.6 INDEMNIFICATION SHARES
At Closing each of the Selling Shareholders (and the Purchaser, acting
on behalf of the Selling Shareholders, with respect to the certificate delivered
to the Purchaser under Section 1.8) shall deposit in escrow with a trust company
or other corporation authorized to act as trustee (the "TRUST COMPANY"), acting
as escrow agent under the Escrow Agreement, one or more share certificate(s)
representing that number of Parent Common Stock and/or Exchangeable Shares which
is described next to such Selling Shareholder's name in SCHEDULE 1.6 hereto
(collectively the "INDEMNIFICATION SHARES") and such shares shall be delivered
and held on the terms and conditions contained in the Escrow Agreement to
partially secure the indemnification obligations of the Shareholders set forth
in Article VI and the terms of the Offer shall also provide that each depositing
Shareholder shall agree to be bound by the terms of the Escrow Agreement and, at
Closing, shall deposit that number of Parent Common Stock and/or Exchangeable
Shares indicated in the Offer to be held by the Escrow Agent in accordance with
the terms of the Escrow Agreement.
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1.7 DELIVERY OF ESCROW, EMPLOYMENT AND NON-COMPETITION AGREEMENTS
Concurrently with the execution of this Agreement, Michel Laurence, on
the one hand, and the Purchaser and NMS, on the other hand, have executed and
delivered an employment and non-competition agreement. Within seven (7) days
after the date hereof, (i) the Selling Shareholders, the Parent, and the
Purchaser agree to enter into the Escrow Agreement with the Trust Company, and
(ii) Michel Brule, IML Research Inc., Carrier Class Systems Inc. and OvalSys
Inc. will each execute and deliver a non-competition agreement, the terms and
conditions of which provide that such Agreements are conditional upon and shall
take effect only upon the occurrence of the Closing. On or prior to Closing, NMS
will propose, to a number of employees of the Company who NMS elects, employment
and non-competition agreements to be entered into between the Company and such
employees, such agreements to take effect following Closing, and the Employee
Shareholders agree to exercise reasonable efforts to assist NMS in the
negotiation and settlement of such agreements.
1.8 ENDORSEMENT AND DELIVERY OF CERTIFICATES
(a) The Selling Shareholders have, concurrently with the
execution of this Agreement, delivered to the Purchaser certificates, duly
endorsed for transfer, representing all of the Shares owned by them (the
"CERTIFICATES"). The Parties acknowledge and agree that such delivery and the
Selling Shareholders' agreement to sell the Shares as contemplated by this
Agreement shall constitute sufficient delivery and deposit of the Shares and
Certificates to sell the Shares to the Purchaser, and the Purchaser is hereby
authorized to deposit such Shares under the Offer or otherwise acquire such
Shares, as it may determine in its discretion, and the Selling Shareholders
agree not to withdraw the Shares from such deposit under the Offer unless the
Purchaser has not taken up and paid for the Shares under the Offer within the
date that is fourteen (14) days after the last day for deposits under the Offer.
(b) If, at any time after the Closing, any further action by
the Selling Shareholders or the Company is necessary or desirable to carry out
the purposes of this Agreement, to transfer the Shares owned by the Selling
Shareholders to the Purchaser and to retain, after the acquisition of Shares by
the Purchaser, the full right, title and possession of the Company to all its
assets, property, rights, privileges, powers, contracts and franchises, the
Selling Shareholders undertake and agree to take such action promptly upon
request and, to the extent necessary or desirable, to cause the officers and
directors of the Company to take such action promptly upon request.
1.9 ADJUSTMENT TO CONSIDERATION PAYABLE TO MICHEL LAURENCE
The parties recognize that part of the Consideration payable to the
Shareholders under the Offer has been determined based on the value of the
goodwill of the Company resulting from Michel Laurence's contribution as a
member of the management team of the Company. The parties further acknowledge
that the value of the Company's goodwill would be substantially reduced if
Michel Laurence were, for any reason, not to remain a member of the management
team of the Company. In order to ensure that the value of the goodwill
associated with the Company is not effected as a result of the Acquisition,
Michel Laurence, the Parent and the Purchaser agree that the Company shall be
granted the right to purchase for cancellation at a price of $0.01 per share all
or part of the
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Non-Cash Consideration (the "CANCELLATION RIGHT") payable to Michel Laurence
pursuant to the Offer (being a number of Exchangeable Shares representing 50% of
the Consideration payable to him) (the "ML EXCHANGEABLE Shares") on the
following basis:
(a) if Michel Laurence ceases to be Employed by the Company,
(the "ML DEPARTURE DATE") within the first three (3) months following the
Closing Date, the Cancellation Right shall be in respect of the aggregate number
of the ML Exchangeable Shares;
(b) if the ML Departure Date is more than three (3) months but
less than six (6) months after the Closing Date, the Cancellation Right shall be
in respect of seven-eighths (7/8) of the aggregate number of the ML Exchangeable
Shares; and
(c) for each additional complete three (3) month period that
occurs prior to the ML Departure Date, the number of the Exchangeable Shares
that shall be subject to the Cancellation Right shall be reduced by one-eighth
(1/8) of the aggregate number of ML Exchangeable Shares for each such period,
such that if the ML Departure Date occurs after the second anniversary of the
Closing, the number of ML Exchangeable Shares which he shall be subject to the
Cancellation Right shall be nil.
Notwithstanding the foregoing, (i) in the event there is a "change of
control" of NMS on or before the first anniversary of the Closing Date and the
ML Departure Date occurs after such first anniversary, the number of ML
Exchangeable Shares that shall be subject to the Cancellation Right after such
first anniversary shall be nil; and (ii) in the event there is a "change of
control" during the second twelve (12) month period after the Closing Date and
the ML Departure Date occurs after the effective date of such change of control,
the number of ML Exchangeable Shares that shall be subject to the Cancellation
Right after such change of control shall be nil.
For purposes of this Agreement, a "change of control" with respect to
NMS shall be deemed to have occurred if: any Person becomes the Beneficial
Owner, directly or indirectly, of 50% or more of the voting shares of NMS
("voting shares" shall mean shares which are expressly provided in such partys'
constitutive documents as being voting, which shall include for these purposes,
such partys' existing voting common shares and any shares into which such voting
shares may be converted, exchanged or reclassified) (for purposes of this
clause, such Person shall be deemed to beneficially own any capital stock of a
corporation held by any other corporation (the "parent corporation") so long as
such Person Beneficially Owns, directly or indirectly, in the aggregate a
majority of the total voting shares of such parent corporation). The "Beneficial
Owner" of a security shall include any Person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise,
has (a) the power to vote, or to direct the voting of, such security; and/or (b)
the power to dispose, or to direct the disposition of such security.
For the purposes of this Section 1.9, Michel Laurence shall be deemed
to be Employed by the Company so long as he continues to carry out, to the
exclusion of any other employment or consulting arrangement (except such other
arrangements as may be agreed by the Parent), the reasonable employment
responsibilities set for him by the Parent (such obligations to be, in general
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terms, not materially more onerous than those he carried out for the Company
immediately prior to Closing). The parties agree that there shall be no
Cancellation Right and that Michel Laurence shall have the right to immediately
receive a release from escrow under the Escrow Agreement of all ML Exchangeable
Shares (except any such shares as are also Indemnification Shares) if Michel
Laurence's employment is terminated by the Company other than for Cause (as
defined in his employment agreement) or by reason of his Incapacity (as defined
in his employment agreement) or if he dies.
The parties recognize that all of the ML Exchangeable Shares will be
delivered in escrow under the Escrow Agreement at Closing.
1.10 WAIVER OF SHAREHOLDERS' RIGHTS
Within seven (7) days of the execution of this Agreement or such longer
period as the Purchaser may determine, the Selling Shareholders shall deliver to
the Purchaser written acknowledgements and waivers, executed by each party to
the Shareholders' Agreement, stipulating that such parties (a) are aware that
Michel Laurence, Michel Brule and Novacap are negotiating the sale of the
Company, (b) waiving any rights that they may have under the Shareholders'
Agreement or otherwise which would affect, restrict or limit in any manner
whatsoever the transfer of any of the Shares of the Company in a transaction
agreed by Michel Laurence, Michel Brule and Novacap, including, without
limitation, any pre-emptive rights, rights of first refusal, drag-along,
tag-along or similar rights, provided that the Purchaser under any such
transaction also offers to purchase such parties, Shares on the same terms and
conditions as the purchase of the Shares held by Michel Laurence, Michel Brule
and Novacap, and (c) that such parties agree that the Shareholders' Agreement
shall automatically terminate upon the sale of 66 2/3% or more of the
outstanding Shares to a purchaser other than a party to the Shareholders'
Agreement. In the event that Michel Laurence, Michel Brule and Novacap do not
deliver the acknowledgements and waivers within the period provided, then the
parties agree that the merger shall proceed by way of Amalgamation in the manner
outlined in Exhibit E, and each of the parties agree that in such event the
provisions of Exhibit E shall apply.
1.11 AUDITED FINANCIAL STATEMENTS
The Selling Shareholders hereby undertake to cause the Company's
auditors, Ernst & Young, to deliver to the Parent on or before ten (10) days
from the date hereof, audited financial statements of the Company for the year
ended March 31, 2000 together with an unqualified audit report therein. In the
event that such audited financial statements shall be materially different from
the unaudited financial statements for the same period previously delivered to
NMS and included in the Financial Statements, NMS shall have the right to
immediately terminate the Agreement by notice in writing to the Selling
Shareholders.
1.12 STATED CAPITAL ADJUSTMENT
NMS hereby acknowledges that the Company intends to increase the stated
capital of its issued and outstanding Shares prior to the Closing. NMS agrees to
permit such increase if such increase does not exceed an aggregate of up to CDN
$ 7 million.
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1.13 TAX CONSIDERATIONS
NMS, on the one hand, and the Selling Shareholders, on the other hand,
agree to consider amending the terms of this Agreement to allow each such party
to implement additional tax planning; provided, that the respective parties
hereto shall disclose such arrangements to the other parties prior to
implementation and shall only agree to any such amendments if additional tax
planning proposed by any one of them do not result in any adverse tax
consequences to the other party or to the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE EMPLOYEE SHAREHOLDERS
Each of the Employee Shareholders, jointly (and not solidarily),
represents and warrants to the Parent and the Purchaser as follows and
acknowledge that the Parent and the Purchaser are relying upon such
representations and warranties in connection with the purchase of the Company by
the Purchaser as contemplated by this Agreement and that the Parent and the
Purchaser would not have entered into this Agreement without such
representations and warranties:
(a) DUE AUTHORIZATION. Such Employee Shareholder has the
necessary capacity to execute this Agreement and to perform its obligations
hereunder. The execution and performance by such Employee Shareholder of this
Agreement does not require any action or consent of, any registration with, or
notification to, any Person, or any action or consent under any Laws to which
such Employee Shareholder or the Company is subject.
(b) ENFORCEABILITY. This Agreement has been duly executed and
delivered by, and constitutes a legal, valid and binding obligation of such
Employee Shareholder enforceable against it in accordance with its terms.
(c) NO CONFLICT. The execution of this Agreement, the
consummation of the transactions contemplated herein, the performance by such
Employee Shareholder of its obligations hereunder and the compliance by such
Employee Shareholder with this Agreement does not violate, contravene or breach,
or constitute a default under any contract, agreement, indenture, instrument, or
commitment to which such Employee Shareholder may be a party, or the properties
may be subject, or by which any one of them is bound or affected.
2.2 REPRESENTATIONS AND WARRANTIES OF NOVACAP
Novacap represents and warrants to the Parent and the Purchaser as
follows and acknowledge that the Parent and the Purchaser are relying upon such
representations and warranties in connection with the purchase of the Company by
the Purchaser as contemplated by this Agreement and that the Parent and the
Purchaser would not have entered into this Agreement without such
representations and warranties:
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(a) DUE INCORPORATION OF NOVACAP.
(i) is duly incorporated, validly existing and in good
standing under the Laws of its jurisdiction of incorporation; and
(ii) has all necessary corporate power and authority to
own, lease and operate its properties and to conduct its business as and in the
places where such properties are now owned, leased or operated or such business
is now conducted.
(b) DUE AUTHORIZATION. Novacap has the necessary corporate
power and authority to execute this Agreement and to perform its obligations
hereunder. The execution of this Agreement by Novacap and the performance by
Novacap of its obligations hereunder has been duly authorized by all necessary
action on its part. Such execution and performance by Novacap does not require
any action or consent of, any registration with, or notification to, any Person,
or any action or consent under any Laws to which Novacap is subject.
(c) ENFORCEABILITY. This Agreement has been duly executed and
delivered by, and constitutes a legal, valid and binding obligation of Novacap
enforceable against it in accordance with its terms.
(d) NO CONFLICT. The execution of this Agreement, the
consummation of the transactions contemplated herein, the performance by Novacap
of its obligations hereunder and the compliance by Novacap with this Agreement
does not violate, contravene or breach, or constitute a default under any
contract, agreement, indenture, instrument, or commitment to which Novacap or
may be a party, or their properties may be subject, or by which any one of them
is bound or affected.
2.3 REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS
Each of the Selling Shareholders, jointly (and not solidarily),
represents and warrants to the Parent and the Purchaser as follows and
acknowledge that the Parent and the Purchaser are relying upon such
representations and warranties in connection with the purchase of the Company by
the Purchaser as contemplated by this Agreement and that the Parent and the
Purchaser would not have entered into this Agreement without such
representations and warranties:
(a) DUE INCORPORATION. The Company:
(i) is duly incorporated, validly existing and in good
standing under the Laws of its jurisdiction of incorporation; and
(ii) has all necessary corporate power and authority to
own, lease and operate its properties and to conduct its business as and in the
places where such properties are now owned, leased or operated or such business
is now conducted.
(b) NO CONFLICT. The execution of this Agreement, the
consummation of the transactions contemplated herein, the performance by each of
the Selling Shareholders of its obligations hereunder and the compliance by each
of the Selling Shareholders with this Agreement does not:
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(i) violate, contravene or breach, or constitute a default
under, the constating instruments or by-laws of the Company;
(ii) result in, or give any Person the right to seek, or
to cause (a) the termination, cancellation, modification, amendment, variation
or renegotiation of any contract, agreement, indenture, instrument or commitment
to which the Company or any of their properties may be a party or subject or by
which it is bound or affected, or (b) the acceleration or forfeiture of any term
of payment, or (c) the loss in whole or in part of any benefit which would
otherwise accrue to the Company;
(iii) result in, or require the creation of any lien,
hypothec, pledge, charge, prior claim, security interest, adverse claim or other
encumbrance or right of others of any nature, whatsoever or howsoever arising
(individually, a "LIEN" and collectively, "LIENS"), upon any of the Shares or
any property of the Company or any Subsidiary; or
(iv) violate, contravene or breach any Laws.
(c) REQUIRED AUTHORIZATIONS. There is no requirement to make
any filing with, give any notice to, or, obtain any Authorization of, any
Governmental Entity or Person as a condition to the lawful completion of the
transactions contemplated by this Agreement, except for the filings,
notifications and Authorizations described in SCHEDULE 2.3(c) annexed hereto.
(d) AUTHORIZED AND ISSUED CAPITAL. The authorized capital of
the Company consists of an unlimited number of Class A shares, Class B shares,
Class C shares, Class D shares, Class E shares, Class F shares and Class G
shares, of which three million five hundred forty-five thousand one hundred
eighty (3,545,180) Class A shares (and no more) have been validly subscribed and
issued and are outstanding as fully paid and non-assessable; such shares are
registered in the names of the persons listed on SCHEDULE 2.3(d) annexed hereto.
No shares in the capital of the Company are issued and
outstanding other than the Shares.
(e) NO SUBSIDIARIES. The Company does not own, and has never
owned, directly or indirectly, any shares in the capital of any Person and has
never made any investment in, and does not have, and has never had, any property
interest in, any Person, except as disclosed in SCHEDULE 2.3(e).
(f) TITLE TO SHARES. The Selling Shareholders are the
beneficial owners and holders of record of the Shares being sold under this
Agreement, free and clear of all Liens.
Michel Laurence and Michel Brule are the beneficial owners
and holders of record of all of the issued and outstanding shares in the capital
of I.M.L. Research Inc. and OvalSys Inc. The existing shareholders of the
Company are also all of the shareholders of Carrier Class Systems Inc., in the
same proportion as their shareholdings in the Company.
(g) NO OPTIONS. Except as disclosed in SCHEDULE 2.3(g) annexed
hereto, there is no:
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(i) outstanding security of the Company convertible or
exchangeable into any share or shares in the capital of the Company;
(ii) outstanding subscription, option (including, without
limitation, rights granted to employees of the Company), warrant, call,
commitment or agreement obligating the Company to issue any share or shares of
its capital or any security or securities of any class or kind which in any way
relate to the authorized or issued capital of the Company;
(iii) agreement (other than this Agreement) which grants
to any Person the right to purchase or otherwise acquire any share or shares
issued and outstanding in the capital of the Company (including, without
limitation, the Shareholder Shares); or
(iv) voting trust or voting agreement or pooling agreement
or proxy with respect to any Shares.
(h) BOOKS AND RECORDS. The minute books of the Company are
complete and accurate, and contain copies of all by-laws and resolutions passed
by the shareholders and directors since the date of their incorporation; all of
which by-laws and resolutions have been duly passed.
The share certificate books, registers of shareholders,
registers of transfers and registers of directors of the Company are complete
and accurate.
The financial books and records of the Company have been
maintained in accordance with sound business practices and fairly, accurately
and completely present and disclose in accordance with Canadian GAAP (i) the
financial position of the Company, and (ii) all transactions of the Company.
(i) FINANCIAL STATEMENTS. The Financial Statements fairly,
accurately and completely present and disclose in all material respects (i) the
assets, liabilities and obligations (whether accrued, contingent, absolute or
otherwise), income, losses, retained earnings, reserves and financial position
of the Company, (ii) the results of operations of the Company, and (iii) the
changes in the financial position of the Company, all as at the dates and for
the periods therein specified.
(j) LIABILITIES. The Company has no liabilities or obligations
of any nature whatsoever, whether direct, indirect, absolute, contingent or
otherwise, except for those liabilities or obligations (i) reflected in or
reserved against in the Financial Statements for the year ended March 31, 2000,
(ii) incurred after March 31, 2000 in the usual and ordinary course of its
business, or (iii) disclosed in SCHEDULE 2.3(j) annexed hereto.
(k) ACCOUNTS RECEIVABLE. All accounts receivable of the
Company are BONA FIDE, result from the ordinary course of business, have been
properly recorded in the ordinary course of business, and, subject to reserves
in accordance with past practice, are good and collectible in full when due
without any discount, setoff or counterclaim, in amounts equal to not less than
the aggregate face amounts thereof.
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(l) TITLE TO PROPERTY. The Company is the sole and
unconditional owner of, and has a good and valid title to (or, in the case of
immovable (real) property, has a good and marketable title to), all of its
assets (whether movable (personal), immovable (real) or mixed and whether
tangible or intangible), including (without restriction) those reflected on the
Financial Statements for the year ended March 31, 2000, or which have been
acquired on or after March 31, 2000 (other than such assets consumed or disposed
of on or after March 31, 2000 in the ordinary course of business and in a manner
consistent with past practice), in each case free and clear of all Liens.
(m) IMMOVABLES. SCHEDULE 2.3(m) annexed hereto is a true and
complete description of all immoveable (real) property owned by or leased to the
Company, including, without limitation, all buildings, structures, erections and
appurtenances located thereon.
Every immoveable (real) property owned or used by or
leased to or from the Company does not violate, contravene or breach, and is
used in compliance with, any and all Laws. The Company has not received any
notice that any of the aforesaid immoveable (real) property (i) is not in
compliance with any Laws, (ii) is not used in compliance with any Laws, and/or
(iii) requires work to be done in connection therewith.
(n) CONDITION AND SUFFICIENCY OF ASSETS; INVENTORY. All of the
tangible assets of the Company are (i) in good operating condition and repair,
ordinary wear and tear excepted, (ii) not in need of maintenance or repairs
(except ordinary or routine maintenance or repairs that are not material in
nature or costs, individually or collectively), and (iii) adequate and
sufficient for the continuing conduct of the business of the Company as now
conducted.
All Inventory of the Company is of a quality and quantity
usable and saleable in the ordinary course of business or adequate reserves have
been provided for.
(o) LOCATION; PLACE OF BUSINESS. Other than inventory in
transit and vehicles used in the transportation of such inventory, the Company
does not hold, directly or indirectly, any of their immoveable (real) property
or moveable or personal property anywhere other than in the locations set forth
in SCHEDULE 2.3(o) annexed hereto.
(p) INTELLECTUAL PROPERTY.
(i) OWNED MARKS. SCHEDULE 2.3(p)(i) annexed hereto sets
forth an accurate and complete list of all registered Marks, pending
applications for registration of any Marks and material unregistered Marks, in
each case owned by the Company (collectively, "OWNED MARKS"). Except as may be
set forth in SCHEDULE 2.3(p)(i):
(a) the Company has not received any notice
or claim (whether written or oral) challenging their respective exclusive and
complete ownership of the Owned Marks or suggesting that any other Person has
any claim of legal or beneficial ownership or other claim or interest with
respect thereto;
(b) the Company has not received any notice
or claim (whether written or oral) challenging the validity or enforceability of
the Owned Marks;
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(c) the Company has taken the steps set out
in SCHEDULE 2.3(p)(i) to protect their respective rights in and to each of the
Owned Marks and to prevent the unauthorized use thereof by any other Person;
(d) the Company has granted to any Person
any right, license or permission to use any of the Owned Marks; and
(e) no Owned Marks has been or is now
involved in any opposition or cancellation proceeding and, to the Selling
Shareholders' Knowledge, no such action is threatened with respect to any of the
Owned Marks.
(ii) OWNED PATENTS. SCHEDULE 2.3(p)(ii) annexed hereto
contains a complete and correct list and summary description of all Patents
owned by the Company (collectively, "OWNED PATENTS"), indicating for each (to
the extent applicable) the applicable jurisdiction, registration or application
number and date issued (or date filed) and a summary of the claims to which such
Owned Patent relates. Except as may be set forth on SCHEDULE 2.3(p)(ii):
(a) to the Knowledge of the Selling
Shareholders, the Company are the owners of all right, title and interest in and
to all Owned Patents, in each case free and clear of any and all Liens,
covenants, conditions and restrictions or other adverse claims or interests of
any kind or nature, and the Company has not received any notice or claim
(whether written or oral) challenging their respective complete and exclusive
ownership of the Owned Patents or suggesting that any other Person has any claim
of legal or beneficial ownership with respect thereto;
(b) there is no claim challenging or
questioning the validity or enforceability of any of the Owned Patents or, to
Selling Shareholders' Knowledge, any threat or other indication of an intention
on the part of any Person to bring a claim that any Owned Patent is invalid, is
unenforceable or has been misused;
(c) to the Knowledge of Selling
Shareholders, the Owned Patents are legally valid and enforceable;
(d) the inventions disclosed in the Owned
Patents may be practiced by the Company without infringing any other patents
owned by any Person;
(e) the Company has taken the steps set out
in SCHEDULE 2.3(p)(ii) to protect its rights in and to the Owned Patents, in
each case in accordance with standard industry practice;
(f) the Company has not granted to any other
Person any right, license or permission to practice any of the Owned Patents;
(g) to the Knowledge of Selling
Shareholders, all of the Owned Patents are currently in compliance with legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use);
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(h) to the Knowledge of Selling
Shareholders, all maintenance fees, annuities, and the like due on the Owned
Patents have been timely paid; and
(i) no other Person's activities,
technology, products or operations have infringed or are infringing in any
material respect on any of the Owned Patents.
(iii) OWNED COPYRIGHTS. SCHEDULE 2.3(p)(iii) annexed
hereto sets forth a complete and correct list of all registered Copyrights
(whether registered with the Canadian Intellectual Property Office or in any
foreign jurisdiction) owned by the Company and all pending applications for
registration of Copyrights filed by the Company anywhere in the world. SCHEDULE
2.3(p)(iii)annexed hereto also sets forth a complete and correct list and
summary description of all material Copyrights, including but not limited to
software on which the Company owns copyright (collectively the "OWNED
COPYRIGHT"). Except as may be set forth on SCHEDULE 2.3(p)(iii)
(a) the Company is the sole owner of all
rights, title and interest in and to all Owned Copyright, in each case free and
clear of all Liens, covenants, conditions and restrictions or other adverse
claims or interest of any kind or nature, and the Company has not received any
notice of claim challenging their respective complete and exclusive ownership of
the Owned Copyright or suggesting that any other Person has any claim of legal
or beneficial ownership with respect thereto;
(b) the Company has obtained, in writing,
appropriate waivers of moral rights in the favour of themselves, their
successors and assigns as well as copyright assignments in writing, where
necessary, from all Persons whose copyrightable work has been incorporated, in
whole or in part, to any Owned Copyright;
(c) there is no claim challenging or
questioning the validity or enforceability of any of the Owned Copyright or, to
Selling Shareholders' Knowledge, any threat or other indication of an intention
on the part of any Person to bring a claim that any Owned Copyright is invalid,
is unenforceable or is infringing on any Person's rights;
(d) the Company has not granted to any other
Person any right, license or permission to use any of the Owned Copyright; and
(e) no other Person's activities, products
or operations have infringed or are infringing in any material respect on any of
the Owned Copyright.
(iv) AGREEMENTS IN RESPECT OF LICENSED TECHNOLOGY.
SCHEDULE 2.3(p)(iv) annexed hereto sets forth a complete and accurate list of
all license agreements granting to the Company any material right to use or
practice any rights under any Intellectual Property (collectively, the "LICENSED
TECHNOLOGY AGREEMENTS"), including for each the title and the parties thereto.
The Company owns or possess adequate licenses or other rights to use all of its
Intellectual Property that are licensed from third parties. SCHEDULE 2.3(p)(iv)
contains a complete and accurate list of any royalty obligations or other volume
or milestone-based payment obligations
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of the Company under any Licensed Technology Agreement. Except as may be set
forth on SCHEDULE 2.3(p)(iv):
(a) no royalties, fees, honoraria or other
payments are payable by the Company to any Person by reason of the ownership,
use, sale, licensing, distribution or other exploitation of any Software or
Owned Copyright;
(b) all Licensed Technology Agreements are
in full force and effect, and the Company is not in material breach thereof, nor
are they aware of any claim or information to the contrary;
(c) there are no outstanding and, to Selling
Shareholders' Knowledge, no threatened disputes or disagreements with respect to
any Licensed Technology Agreement;
(d) the expiration dates of all Licensed
Technology Agreements are sufficiently distant from the date hereof that no
potential impairment of the value of any of the Company's products could
reasonably be imputed by virtue of the non-renewal of the term of any Licensed
Technology Agreement;
(e) the rights licensed under each Licensed
Technology Agreement will be exercisable by the Company on and after the Closing
to the same extent as exercisable by the Company prior to the Closing (subject
to any applicable consent requirement);
(f) the Licensed Technology Agreements
together expressly confer on the Company, as applicable, valid and enforceable
rights under or in respect of all of the Intellectual Property Rights that are
not owned exclusively by the Company and that are used or practiced in the
Company's business (collectively, the "LICENSED INTELLECTUAL PROPERTY"); and
(g) neither the execution and delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will conflict with or result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the impairment of any
rights under, any Licensed Technology Agreement.
(v) AGREEMENTS INVOLVING DISTRIBUTION OR OTHER RIGHTS
GRANTED TO THIRD PARTIES. SCHEDULE 2.3(p)(v) annexed hereto lists those
agreements which contain provisions regarding the grant by the Company to any
Person of any right to distribute, develop, prepare derivative works based on,
support or maintain or otherwise commercially exploit any content, Software or
technology of the Company used in connection with its business, or any license
by the Company of any rights with respect to any Intellectual Property,
including any value-added reseller agreements, exclusive and non-exclusive
license agreements, joint development or marketing agreements, and strategic
alliance agreements (collectively, "TECHNOLOGY EXPLOITATION AGREEMENTS").
(vi) TECHNOLOGY EXPLOITATION AGREEMENTS. Except as may be
set forth in SCHEDULE 2.3(p)(vi):
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(a) all Technology Exploitation Agreements
are in full force and effect and the Company, and, to Selling Shareholders'
Knowledge, any other party thereto, is not in breach thereof, nor is it aware of
any claim or information to the contrary;
(b) there are no outstanding and, to Selling
Shareholders' Knowledge, no threatened disputes or disagreements with respect to
any Technology Exploitation Agreement; and
(c) neither the execution and delivery of
this Agreement, nor the consummation of the transaction contemplated hereby,
will conflict with or result in a breach of (or adversely impact the Company's
rights under) any of the terms, conditions or provisions of, or constitute a
default under any Technology Exploitation Agreement.
(vii) SUFFICIENCY OF OWNED AND LICENSED INTELLECTUAL
PROPERTY. Except as set forth in SCHEDULE 2.3(p)(vii) annexed hereto, the Owned
Marks, the Owned Patents, the Owned Copyright, the Licensed Intellectual
Property and the Trade Secrets owned by the Company constitute all of the
Intellectual Property Rights necessary for the conduct of the Company's a
business as presently conducted by it, and constitute all of the Intellectual
Property Rights necessary to operate the Company's business after the Closing in
substantially the same manner as the business heretofore has been operated by
the Company.
(viii) INFRINGEMENT. Except as may be set forth on
SCHEDULE 2.3(p)(viii) annexed hereto, the Company are not, nor has the Company
ever been a party to any proceeding, nor, to the Knowledge of Selling
Shareholders, has any proceeding been threatened, that involves or involved a
claim of infringement misappropriation or other wrongful use or exploitation,
either (i) by the Company against any other Person or (ii) by any Person against
the Company of any Intellectual Property or of the Intellectual Property Right
used or exploited by the Company in the conduct of its business, nor, to Selling
Shareholders' Knowledge, is there any reasonable basis therefor. Except as may
be set forth in SCHEDULE 2.3(P)(viii), the use, practice or other exploitation
of (A) any of the Owned Marks, (B) any of the Owned Patents, (C) any of the
Owned Copyright, (D) the subject matter of any other work of authorship fixed in
a tangible medium that is used, copied, modified, displayed or distributed in
connection with the conduct by the Company of its business, including any
Software, (E) any Trade Secrets, (F) any of the Licensed Intellectual Property,
and (G) any other Intellectual Property, do not conflict with, infringe upon,
violate or result in a misappropriation of, any patent, copyright, trade secret
or other Intellectual Property Right or other right of any Person, nor is any of
the foregoing subject to any outstanding order, judgement, decree, stipulation
or agreement restricting the use thereof by the Company or, in the case of any
Intellectual Property licensed to the Company, restricting the sale, transfer,
assignment or licensing thereof by the Company to any Person. Except as may be
set forth in SCHEDULE 2.3(p)(viii), the Company has the exclusive right to bring
actions against any Person that is infringing any Intellectual Property other
than Licensed Intellectual Property and to retain for itself any damages
recovered in any such action.
(ix) EMPLOYEE AGREEMENTS. Except as set forth on SCHEDULE
2.3(p)(ix) annexed hereto, all current and former employees and consultants of
the Company whose duties or responsibilities relate to the Company's business
have entered into confidentiality, invention assignment and proprietary
information agreements with the Company in the form provided to
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Purchaser. To the Selling Shareholders' Knowledge, no employee or consultant of
the Company whose duties or responsibilities relate to the Company's business is
obligated under any agreement (including licenses, covenants or commitments of
any nature) or subject to any judgment, decree or order of any court or
administrative agency, or any other restriction that would interfere with the
use of his or her best efforts to carry out his duties for the Company or to
promote the interests of the Company or that would conflict with the Company's
business. The carrying on of the Company's business by such employees and
contractors of the Company, to Selling Shareholders' Knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees or consultants or the Company is now obligated. Except as set forth on
SCHEDULE 2.3(p)(ix), to Selling Shareholders' Knowledge, it will not be
necessary to utilize any inventions or any other intellectual property of any
employees of or consultants to the Company (or Person the Company currently
intends to hire) acquired prior to their employment by the Company in order to
carry on the business as presently conducted by the Company. At no time during
the conception of or reduction to practice of any Intellectual Property Right
owned by the Company was any developer, inventor or other contributor to such
Intellectual Property Right operating under any grants from any Governmental
Entity or private source, performing research sponsored by any Governmental
Entity or agency or private source or subject to any employment agreement or
invention assignment or nondisclosure agreement or other obligation with any
third party that could adversely affect the Company's rights in such
Intellectual Property Rights. SCHEDULE 2.3(p)(ix) lists each present and past
employee, independent contractor and consultant who participated in a material
way in the creation or development of any material Intellectual Property,
indicating, in the case of any such employee, whether such employee is a present
or past employee.
(x) TRADE SECRETS. The Trade Secrets used in the business
of the Company are either owned by the Company or are included in the Licensed
Intellectual Property.
(q) PRODUCT AND SERVICE WARRANTIES. SCHEDULE 2.3(q) annexed
hereto, lists those agreements which contain written warranties and guaranties
by the Company currently in effect with respect to its products and services and
a summary of any oral warranties. There have not been any material deviations
from such warranties and guaranties, and none of the Company, nor any of its
salesmen, employees, distributors and agents is authorized to undertake
obligations to any customer or to other third parties in excess of such
warranties or guaranties.
(r) LEASES. SCHEDULE 2.3(r) annexed hereto is a true and
complete list of all leases to which any of the Company are party or its
properties are subject. All such leases are in good standing and in full force
and effect without amendment thereto, and the Company are entitled to all
benefits under such leases.
(s) CONTRACTS. SCHEDULE 2.3(s) annexed hereto contains a
description of all written contracts, agreements, indentures, instruments and
commitments to which the Company is a party or by which it is bound.
(t) GUARANTEES. The Company is not party to or bound either
absolutely or on a contingent basis by any comfort letter, understanding or
agreement of guarantee, indemnification, assumption or endorsement or any like
commitment with respect to the liabilities or obligations of
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any Person (whether accrued, absolute or otherwise contingent), except in the
ordinary course of business.
(u) INSURANCE. The Company maintains insurance with
responsible and reputable insurers in such amounts and covering such risks and
with such deductibles as are generally maintained by like businesses.
SCHEDULE 2.3(u) annexed hereto contains a true and
complete list of all insurance policies currently maintained by or for the
Company. The coverage under each such policy is in full force and effect and the
Company is in good standing under such policies.
The Company has not received notice of, and to the
Knowledge of the Selling Shareholder, there does not exist, any fact, condition
or circumstance which might reasonably form the basis of any claim against the
Company which (i) is not fully covered by insurance (subject to deductibles)
maintained by or for the Company, or (ii) would result in any increase in
insurance premiums payable by the Company.
(v) BANK ACCOUNTS: POWERS OF ATTORNEY. SCHEDULE 2.3(v) annexed
hereto sets forth: (i) the name of each Person with whom the Company maintains
an account or safety deposit box and the names of all Persons authorized to draw
thereon or to have access thereto; and (ii) the name of each Person holding a
general or special power of attorney from the Company and a summary of the terms
thereof.
(w) LITIGATION. Except as disclosed in SCHEDULE 2.3(w) annexed
hereto, there are (i) no actions, claims, investigations, arbitrations, and
other proceedings pending, or to the Knowledge of the Selling Shareholders,
threatened against, with respect to, or affecting in any manner, the Company,
its properties or the Shares; and (ii) no outstanding judgments, orders,
decrees, writs, injunctions, decisions, rulings or awards against, with respect
to, or in any manner affecting any of the Company, its properties or the Shares.
(x) DEFAULT UNDER AGREEMENTS. The Company (i) is in good
standing and entitled to all benefits under, (ii) has performed all obligations
required to be performed under, and (iii) are not in default under, or in breach
of, any written or oral contracts, agreements, indentures, instruments,
commitments, licenses or permits applicable to any of them.
(y) TAX MATTERS.
(i) DEFINITION OF TAXES. For the purposes of this
Agreement, the term "TAX" or, collectively, "TAXES" shall mean (A) any and all
federal, state, provincial, municipal, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities including Canada
Pension Plan and Provincial Pension Plan contributions and unemployment
insurance contributions and employment insurance contributions and workman's
compensation and deductions at source, including taxes based upon or measured by
gross receipts, income, profits, sales, capital use and occupation, goods and
services, and value added, ad valorem, transfer, franchise, withholding, customs
duties, payroll, recapture, employment, excise and property taxes, together with
all interest, penalties, fines and additions imposed with respect to such
amounts and
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(B) any liability for the payment of any amounts of the type described in clause
(A) of this Section 2.3(y) as a result of any express or implied obligation to
indemnify any other Person or as a result of any obligations under any
agreements or arrangements with any other Person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(ii) COMPUTATION, PREPARATION AND PAYMENT. The Company has
correctly computed all Taxes, prepared and duly and timely filed all federal,
state, provincial, municipal, local and foreign returns, estimates, information
statements, elections, designations, reports and any other related filings ("TAX
RETURNS"), required to be filed by it, has timely paid all Taxes which are or
may become due and payable and has made adequate provision for Taxes in the
Financial Statements for the period ended March 31, 2000. The Company has made
adequate and timely installments of Taxes required to be made except for the
last tax installment to be paid for the fiscal year ended March 31, 2000.
(iii) ACCRUED TAXES. Except as disclosed in Schedule
2.3(y),since March 31, 2000, the Company has only incurred liabilities for Taxes
in the Ordinary Course.
(iv) STATUS OF ASSESSMENTS. All Tax returns of the Company
has been assessed through and including each of the dates set forth in SCHEDULE
2.3(y)(iv) annexed hereto, and there are no outstanding waivers of any
limitation periods or agreements providing for an extension of time for the
filing of any Tax Return or the payment of any Tax by the Company or any
outstanding objections to any assessment or reassessment of Taxes. Any
deficiencies proposed as a result of such assessments or reassessments of the
Tax returns through and including the dates set forth in SCHEDULE 2.3(y)(iv)
annexed hereto have been paid and settled.
(v) WITHHOLDINGS. Except as disclosed in Schedule
2.3(y)(v), the Company has withheld from each payment made to any of its past
and present shareholders, directors, officers, employees and agents the amount
of all Taxes and other deductions required to be withheld and has paid such
amounts when due, in the form required under the appropriate legislation, or
made adequate provision for the payment of such amounts to the proper receiving
authorities. The amount of Tax withheld but not remitted by the Company will be
retained in their respective accounts and will be remitted by them to the
appropriate authorities when due.
(vi) COLLECTION AND REMITTANCE. The Company has collected
from each receipt from any of the past and present customers (or other Persons
paying amounts to the Company) the amount of all Taxes (including goods and
services tax and provincial sales taxes) required to be collected and has paid
and remitted such Taxes when due, in the form required under the appropriate
legislation or made adequate provision for the payment of such amounts to the
proper receiving authorities. The amount of Tax collected but not remitted by
the Company will be retained in their respective accounts and remitted by them
to the appropriate authorities when due.
(vii) ASSESSMENTS. The Company is not nor, to the
Knowledge of Selling Shareholders, will it be subject to any assessments,
reassessment, levies, penalties or interest with respect to Taxes which will
result in any liability on their part in respect of any period ending on or
prior to the Closing Date.
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(viii) JURISDICTIONS OF TAXATION. The Company has not been
and nor is it currently required to file any returns, reports, elections,
designations or other filings with any taxation authority located in any
jurisdiction outside Canada or outside the Province of Quebec. The Company may
file treaty based returns as a protective measure for sales made in the U.S.A.
(ix) RELATED PARTY TRANSACTIONS. The Company has not and
neither has it ever been deemed to have for purposes of the INCOME TAX ACT
(Canada) (the "ITA"), acquired or had the use of property for proceeds greater
than the fair market value thereof from, or disposed of property for proceeds
less than the fair market value thereof to, or received or performed services
for other than the fair market value from or to, or paid or received interest or
any other amount other than at a fair market value rate to or from, any Person,
firm or Company with whom it does not deal at arm's length within the meaning of
the ITA.
(x) FORGIVENESS OF DEBT. The Company has not at any time
benefited from a forgiveness of debt or entered into any transaction or
arrangement (including conversion of debt into shares of their share capital)
which could have resulted in the application of Section 80 and following of the
ITA.
(xi) RESEARCH AND DEVELOPMENT TAX CREDITS AND
EXPENDITURES. All refunds of taxes or credits claimed with respect to research
and development ("R&D CREDITS OR REFUNDS") have been claimed by the Company in
accordance with the provisions of the ITA and the relevant provincial
legislation and the Company has for the taxation year ended March 31, 1999
satisfied at all relevant times the relevant criteria and conditions entitling
it to such R&D Credits or Refunds.
(xii) TAX RETURNS. The Company has made available to
Purchaser or its legal counsel, copies of all foreign, federal, state,
provincial, municipal and local income and all state and local sales and use Tax
Returns for the Company filed for all periods terminating up to and including
March 31, 1999.
(xiii) CCPC. Since the date of the incorporation of the
Company and until the date hereof, the Company has been a "Canadian controlled
private Company" within the meaning of the ITA.
(xiv) ASSOCIATES OF THE COMPANY. The Company has not nor
has it ever been at any time associated (within the meaning of the ITA) with any
other Company except for the association with I.M.L. Research Inc., Carrier
Class Systems Inc. and Ovalsys Inc. arising from the common shareholdings of
those companies and the Company by Michael Laurence and Michel Brule.
(xv) DEDUCTIBILITY. As of the Closing, there will not be
any Contract, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by the Company as an expense under applicable Law other
than reimbursements of a reasonable amount of entertainment expenses and
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other nondeductible expenses that are commonly paid by similarly businesses
in reasonable amounts.
(xvi) TAX BASIS. The Company's tax base in its assets (and
the undepreciated capital cost of such assets) for purposes of determining their
future amortization, depreciation and other Federal or Provincial income Tax
deductions are accurately reflected on the Company's Tax Returns and records.
(xvii) PAID-UP CAPITAL. The paid-up capital for Tax
purposes of each of the Shares is no less than its stated capital for corporate
purposes.
(z) LICENSES, PERMITS. The Company has, and is in full
compliance with and entitled to all of the benefits under, all permits,
licenses, certificates of compliance, consents, approvals and authorizations of,
or registrations with, any governmental, judicial or public authority or
regulatory body (collectively, the "Licenses", and individually a "LICENSE")
necessary or required to conduct its business as presently conducted, and each
License has been validly issued and is in full force and effect. Other than as
set forth in SCHEDULE 2.3(z) annexed hereto, there are no Licenses required to
conduct the business of the Company as presently conducted.
No fact, condition or circumstance has occurred to create,
and the execution of this Agreement and its performance shall not create, any
right to terminate, cancel, modify, amend, revoke or expire any License.
(aa) ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
2.3(aa) annexed hereto:
(1) the Company has never transported, removed or disposed
of any waste to a location outside of Canada;
(2) to the Knowledge of Selling Shareholders, there are no
contaminants located in the ground or in groundwater under the Leased Property
caused by the operations of the Company; and
(3) the Company has ever been required by any Governmental
Entity to alter the Leased Property in a material way in order to be in
compliance with Environmental Laws, or (ii) perform any environmental closure,
decommissioning, rehabilitation, restoration or post-remedial investigations,
on, about, or in connection with any real property.
SCHEDULE 2.3(aa) lists all reports and documents relating
to the environmental matters affecting the Company, and the Leased Property
which are in the possession or under the control of the Company, and Selling
Shareholders. Copies of all such reports and documents have been provided to
Purchaser. To the Knowledge of Selling Shareholders, there are no other reports
or documents relating to environmental matters affecting the Company, or the
Leased Property which have not been made available to Purchaser whether by
reason of confidentiality restrictions or otherwise.
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(bb) EMPLOYEES. Except as set forth in SCHEDULE 2.3(BB)(1)
annexed hereto:
(1) there is no collective agreement in force with respect
to the employees of the Company, no collective agreement is currently being
negotiated by the Company, no union or employee bargaining agent holds
bargaining rights with respect to any employees of the Company, and there are no
current or, to the Selling Shareholders' Knowledge, threatened attempts to
organize or establish any trade union or employee association with respect to
the Company; and
(2) all amounts due and owing or accrued due but not yet
owing for all salary, wages, bonuses, commissions, vacation with pay, pension
benefits or other employee benefits have been paid or if accrued are reflected
in the Books and Records, except amounts accruing since April 30, 2000.
(3) SCHEDULE 2.3(cc)(1) contains a correct and complete
list of each current employee and consultant of the Company whether actively at
work or not, their salaries, wage rates, commissions and consulting fees, bonus
arrangements, benefits, positions, status as full-time or part-time employees
and length of service.
(cc) EMPLOYEE PLANS.
(1) SCHEDULE 2.3(cc)(1) annexed hereto lists and
accurately and completely describes all Employee Plans. The Company has
furnished to the Purchaser true, correct and complete copies of all the Employee
Plans as amended as of the date hereof, together with all related material
documentation including, summary plan descriptions, the most recent and all
material correspondence with all regulatory authorities or other relevant
persons.
(2) All of the Employee Plans are and have been
established, registered, qualified, invested and administered, in all respects,
in accordance with their terms and all Laws, including all Tax Laws where same
is required for preferential tax treatment. To the Knowledge of Selling
Shareholders, no fact or circumstance exists that could adversely affect the
preferential tax treatment ordinarily accorded to any such Employee Plan.
(3) No Employee Plan is subject to any pending
investigation, examination or other proceeding, action or claim initiated by any
regulatory authority, or by any other party (other than routine claims for
benefits).
(4) All contributions or premiums required to be paid by
the Company under the terms of each Employee Plan or by Laws have been made in a
timely fashion in accordance with Laws and the terms of the Employee Plans. The
Company has no liability (other than liabilities accruing after the Closing
Date) with respect to any of the Employee Plans.
(5) No commitments to improve or otherwise amend any
Employee Plan have been made except as required by applicable Laws.
(6) None of the Employee Plans (other than pension plans)
provide benefits to retired employees or to the beneficiaries or dependants of
retired employees.
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(7) No Employee Plan exists that could result in (i) the
payment to any person of any money, benefits or other property, (ii) accelerated
or increased funding requirements for any Employee Plan or (iii) the
acceleration or provision of any other increased rights or benefits to any
person, as a result of the transactions contemplated by this Agreement.
(dd) COMPLIANCE WITH LAWS. The Company has complied and
continues to comply with all Laws.
(ee) NO CHANGES. Since March 31, 2000, there has not been any
change which is a Material Adverse Effect in the business, operations,
properties, prospects or condition of the Company, or any event, condition or
contingency that is likely to result in such a change.
(ff) NO UNUSUAL TRANSACTIONS. Since March 31, 2000, except as
described in Schedule 2.3(ff)), each of the Company and the Subsidiaries have
conducted their business in the ordinary course, and, without limiting the
generality of the foregoing, has not:
(i) made or assumed any commitment, obligation or
liability which is outside the usual and ordinary course of its business;
(ii) ceased to operate its properties and to carry on its
business as heretofore carried on nor has the Company failed to maintain all of
its properties, rights and assets consistently with past practices, nor has the
Company failed to do any and all things reasonably necessary and within its
power to retain and preserve the goodwill of its business;
(iii) sold or otherwise in any way alienated or disposed
of or lost any of its assets other than in the ordinary course of business and
in a manner consistent with past practices;
(iv) split, combined or reclassified any of its shares, or
redeemed, retired, repurchased or otherwise acquired shares in its capital stock
or other corporate security, or reserved, declared, made or paid any dividend,
or made any other distributions or appropriations of profits or capital;
(v) discharged any secured or unsecured obligation or
liability (whether accrued, absolute, contingent or otherwise), other than
obligations and liabilities discharged in the ordinary course of business and in
a manner consistent with past practices;
(vi) waived or canceled any claim, account receivable,
trade account, or right outside the ordinary course of business or made any
gift;
(vii) made any change in the rate or form of compensation
or remuneration payable or to become payable to any of its shareholders,
directors, officers, employees or agents;
(viii) except as disclosed in Schedule 2.3(ff)(viii) made
any change in its accounting principles and practices as utilized in the
preparation of the Financial Statements, or granted to any customer any special
allowance or discount, or changed its pricing, credit or payment policies, other
than in the ordinary course of business;
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(ix) made any capital expenditure out of the ordinary
course of business;
(x) made any loan or advance, or assumed, guaranteed or
otherwise became liable with respect to the liabilities or obligations of any
Person, except in the ordinary course of business;
(xi) suffered any extraordinary losses whether or not
covered by insurance;
(xii) modified its constating instruments, by-laws or
capital structure;
(xiii) suffered any material shortage or any cessation or
interruption of inventory shipments, supplies or ordinary services;
(xiv) removed any director or auditor or terminated any
officer;
(xv) purchased or otherwise acquired any corporate
security or proprietary, participatory or profit interest in any Person;
(xvi) incurred any indebtedness other than to trade
creditors in the ordinary course of business and in a manner consistent with
past practices;
(xvii) issued, sold or otherwise disposed of any shares of
its capital stock or any warrants, rights, bonds, debentures, notes or other
corporate security, except for the issuance of 50,000 Shares to Dialogic
Corporation pursuant to its exercise of its warrant;
(xviii) modified or changed its business organization or
its relationship with its suppliers, customers and others having business
relations with it; or
(xix) authorized, agreed or otherwise committed to any of
the foregoing.
(gg) NO BROKER. None of the Vendor, the Company, or any of
their respective shareholders, directors, officers, employees or agents has
employed or incurred any liability to any broker, finder or agent for any
brokerage fees, finder's fees, commissions or other amounts with respect to this
Agreement or any of the transactions contemplated hereby.
(hh) STAND ALONE. No part of the business of the Company is
conducted through any Person other than the Company. The Vendor does not have,
and none of the Company's directors or officers has, any interest in any
property, immovable or real, movable or personal, tangible or intangible, used
in or pertaining to the business of the Company.
(ii) CUSTOMERS AND SUPPLIERS. SCHEDULE 2.3(ii) contains true
and correct lists setting forth the ten largest customers and the ten largest
suppliers of the Company for the fiscal year ended March 31, 2000 by dollar
amount.
(jj) FULL DISCLOSURE. None of the aforesaid covenants,
agreements, obligations, representations, warranties, Schedules, certificates or
documents contains any untrue statement of a
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material fact or omits to state a material fact necessary to make such
representation, warranty, Schedule, certificate or other document not
misleading.
(kk) RESIDENT. None of the Selling Shareholders are
non-residents of Canada within the meaning of the ITA.
2.4 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER
The Parent and the Purchaser represent and warrant to the Selling
Shareholders as follows and acknowledge that the Selling Shareholders are
relying upon such representations and warranties in connection with the
acquisition of the Shares by the Purchaser and that the Selling Shareholders
would not have entered into this Agreement without such representations and
warranties:
(a) DUE INCORPORATION. Each of the Parent and the Purchaser is
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the necessary corporate power to own or
lease its properties and to carry on its business as such business is presently
conducted.
(b) DUE AUTHORIZATION. Each of the Parent and the Purchaser
has the necessary corporate power and authority to execute this Agreement and to
perform its obligations hereunder. The execution of this Agreement by the Parent
and the Purchaser and the performance by the Parent and the Purchaser of their
respective obligations hereunder have been duly authorized by all necessary
corporate action on the part of each of the Parent and Purchaser respectively.
Such execution and performance by each of the Parent and the Purchaser does not
require any action or consent of, any registration with, or notification to, any
Person, or any action or consent under any Laws to which each of the Parent and
the Purchaser is subject.
(c) ENFORCEABILITY. This Agreement constitutes a legal, valid
and binding obligation of each of the Parent and the Purchaser, enforceable
against each in accordance with its terms.
(d) NO CONFLICT. The execution of this Agreement, the
consummation of the transactions contemplated herein, the performance each of
the by Parent and the Purchaser of their respective obligations hereunder and
the compliance by the Parent and the Purchaser with this Agreement do not
violate, contravene or breach, or constitute a default under (i), the constating
instruments or by-laws of Parent or the Purchaser, or (ii) the financing
agreement of the Parent or the Purchaser.
(e) NO BROKER. Neither Parent, nor the Purchaser nor any of
their shareholders, directors, officers, employees or agents of either have
employed or incurred any liability to any broker, finder or agent for any
brokerage fees, finder's fees, commissions or other amounts with respect to this
Agreement or any of the transactions contemplated hereby.
(f) CAPITAL STRUCTURE.
(i) The authorized stock of Parent consists of 125,000,000
shares of Common Stock, par value $.01 per share, of which 16,428,205 shares
were issued and outstanding as
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of May 16, 2000 as fully paid and non-assessable shares and 3,000,000 shares of
Preferred Stock, $0.05 par value. The Parent Common Stock is traded on the
NASDAQ National Market. No shares of Preferred Stock are issued and outstanding.
As of the Closing, the authorized capital stock of the Purchaser will consist of
1,000 shares of Common Stock, 1,000 shares of which will be issued and
outstanding and be held by Parent. All such shares either have been duly
authorized or will be duly authorized as of the Closing, and all such issued and
outstanding shares have been or as of the Closing will be validly issued, fully
paid and non-assessable and free of any Liens other than any Liens created by or
imposed upon the holders thereof. As of the Closing, all shares of capital stock
will be beneficially owned by Parent.
(ii) The shares of Parent Common Stock to be issued at the
Closing will, when issued in accordance with the terms of this Agreement and the
Offer, be duly authorized, validly issued, fully paid and non-assessable.
(iii) The shares of Parent Common Stock to be issued
pursuant to the Exchangeable Share Provisions will, when issued in accordance
therewith, be duly authorized, validly issued, fully paid and non-assessable.
(iv) The Exchangeable Shares to be issued pursuant hereto
and pursuant to the Offer will, when issued in accordance with the terms of this
Agreement, be duly authorized, validly issued, fully paid and non-assessable.
(g) SEC DOCUMENTS; PARENT FINANCIAL STATEMENTS. Parent has
furnished or made available to the Selling Shareholders true and complete copies
of all reports or registration statements filed by it with the United States
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT") for all periods since June 30, 1997,
all in the form so filed (all of the foregoing being collectively referred to as
the "SEC DOCUMENTS"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 or the Exchange Act, as the case may be, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a document subsequently filed with the SEC.
The financial statements of Parent, including the notes thereto, included in the
SEC Documents (the "PARENT FINANCIAL STATEMENTS") comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with United States generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and present
fairly the consolidated financial position of Parent at the dates thereof and
the consolidated results of its operations and cash flows for the period then
ended (subject, in the case of unaudited statements, to normal audit
adjustments). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements.
(h) NO MATERIAL ADVERSE CHANGE. Since the date of the balance
sheet included in Parent's most recently filed report on Form 10-Q or Form 10-K,
Parent has conducted its business in the ordinary course and there has not
occurred: (a) any material adverse change in the financial
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condition, liabilities, assets or business of Parent; (b) any amendment or
change in the Certificate of Incorporation or Bylaws of Parent (other than those
amendments to increase the autorized capital of the Parent to the levels
disclosed herein), or (c) any damage to, destruction or loss of any assets of
Parent (whether or not covered by insurance) that materially and adversely
affects the financial condition or business of Parent.
(i) ACQUISITION SUBSIDIARIES. As of the Closing, the Purchaser
will not have engaged in or transacted any business or activity of any nature
other than activities related to its corporate organization and as contemplated
by this Agreement and the Related Agreements Immediately prior to the Closing,
the Purchaser will have no assets or liabilities or obligations of any kind
whatsoever other than as contemplated in this Agreement and the Related
Agreements, and will not be a party to any other contract, agreement or
undertaking of any nature.
(j) COMPLIANCE. The Parent is in full compliance with the
terms and conditions contained in its listing agreement with the NASDAQ National
Market and has not received any notice requesting the delisting of the Parent
Common Stock on the NASDAQ National Market.
ARTICLE III
CONDUCT PRIOR TO THE CLOSING
3.1 CONDUCT OF BUSINESS OF THE COMPANY
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement and the Closing, the Selling
Shareholders shall cause the Company (except to the extent that Parent shall
otherwise consent in writing) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
its debts in substantially the same manner as heretofore conducted and Taxes
when due, to pay or perform other obligations when due, and, to the extent
consistent with such business, to use all reasonable efforts consistent with
past practice and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at and after the
Closing. The Selling Shareholders shall cause the Company, to promptly notify
Parent of any event or occurrence or emergency not in the ordinary course of its
business, and any material event involving or adversely affecting the Company or
its business. Except as expressly contemplated by this Agreement the Selling
Shareholders shall cause the Company, not to take any of the following actions
without the prior written consent of Parent, such consent not to be unreasonably
withheld or delayed:
(i) enter into any commitment, activity or transaction not
in the ordinary course of business;
(ii) transfer to any person or entity any rights to any
Intellectual Property;
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(iii) enter into or amend any agreements pursuant to which
any other party is granted manufacturing, marketing, distribution or similar
rights of any type or scope with respect to any products of the Company, except
in the ordinary course of business;
(iv) amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any of the
agreements set forth or described in the Company Schedules;
(v) commence any litigation;
(vi) declare, set aside or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of the shares in its share capital, or split, combine or reclassify any of the
shares in its share capital or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares in the share
capital of the Company, or repurchase, redeem or otherwise acquire, directly or
indirectly, any shares in the share capital of the Company (or options, warrants
or other rights exercisable therefor), except for the Recapitalization Dividend;
(vii) issue, grant, deliver or sell or authorize or
propose the issuance, grant, delivery or sale of, or purchase or propose the
purchase of, any shares of its share capital or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, except for assurance of Shares pursuant to Immediately
Exercisable Options;
(viii) cause or permit to be made any amendments to its
articles of incorporation or bylaws, as amended;
(ix) acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or any company, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of the Company;
(x) sell, lease, license or otherwise dispose of any of
its properties or assets, except in the ordinary course of business and
consistent with past practice;
(xi) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or guarantee any debt securities of others other than fluctuations under
existing loan facilities, excluding amounts loaned to the Company by Parent;
(xii) grant any severance, change of control award or
termination pay to any director, officer employee or consultant;
(xiii) adopt or amend any employee benefit plan, program,
policy or arrangement, or enter into any employment contract, extend any
employment offer, pay or agree to
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pay any special bonus or special remuneration to any director, employee or
consultant, or increase the salaries or wage rates of its employees, except in
the ordinary course of business;
(xiv) revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable, other than in the ordinary course of business and consistent with
past practice;
(xv) excluding payroll obligations performed in the
ordinary course, pay, discharge or satisfy, in an amount in excess of CDN
$50,000, any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the Financial Statements or incurred in the ordinary course
of business consistent with past practice after March 31, 2000;
(xvi) make or change any material election in respect of
Taxes, adopt or change any accounting method in respect of Taxes, enter into a
settlement or compromise, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xvii) enter into any strategic alliance, joint
development or joint marketing arrangement or agreement;
(xviii) fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;
(xix) waive or commit to waive any rights with a value in
excess of CDN $25,000, in any one case, or CDN $50,000, in the aggregate;
(xx) cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xxi) alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any interest on the
date hereof; or
(xxii) agree in writing or otherwise to take, any of the
actions described in Sections 3.1(i) through (xxi) above, or do any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
(b) NMS CONDUCT. NMS shall promptly notify the Company and the Selling
Shareholders of any event or occurrence which may be reasonably likely to
prevent or materially delay NMS from carrying out any of its obligations under
this Agreement.
3.2 NO SOLICITATION
Until the earlier of the Closing and the date of termination of this
Agreement pursuant to the provisions of Section 7.1 hereof, and the Selling
Shareholders will not and will cause the Company
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not to (nor will the Selling Shareholders permit any of its or the Company's
officers, directors, shareholders, agents, representatives or affiliates to),
directly or indirectly, take any of the following actions with any party other
than NMS and their respective designees: (a) solicit, initiate, entertain,
discuss or encourage any proposals or offers from, or conduct discussions with
or engage in negotiations with, any person relating to any possible acquisition
of the Company (whether by way of amalgamation, purchase of shares, purchase of
assets or otherwise), any portion of its share capital or assets or any equity
interest in the Company, (b) provide information with respect to it to any
person, other than NMS, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of amalgamation, purchase of shares,
purchase of assets or otherwise), any material portion of its share capital or
assets or any equity interest in the Company, (c) enter into an agreement with
any person, other than NMS, providing for the acquisition of the Company
(whether by way of amalgamation, purchase of shares, purchase of assets or
otherwise), any material portion of its share capital or assets or any equity
interest in the Company, or (d) make or authorize any statement, recommendation
or solicitation in support of any possible acquisition of the Company (whether
by way of amalgamation, purchase of shares, purchase of assets or otherwise),
any material portion of its share capital or assets or any equity interest in
the Company by any person, other than by NMS. The Company and each Selling
Shareholder shall immediately cease and cause to be terminated any such contacts
or negotiations with third parties relating to any such transaction or proposed
transaction. In addition to the foregoing, if the Company or any Selling
Shareholder receives prior to the Closing or the termination of this Agreement
any offer or proposal relating to any of the above, the Selling Shareholders
shall immediately notify NMS thereof, including information as to the identity
of the offer or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as the NMS may reasonably request.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 SALE AND REGISTRATION OF SHARES; SHAREHOLDER MATTERS
(a) SALE OF SHARES. The parties hereto acknowledge and agree
that the securities to be issued by the Parent pursuant to this Agreement and
the Exchange and Support Agreement shall constitute "restricted securities"
within the meaning of the U.S. SECURITIES ACT of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder (the "SECURITIES
ACT"). The certificates representing Parent Common Stock issued in connection
with this Agreement shall bear appropriate legends to identify such privately
placed shares as being restricted under the Securities Act, to comply with
applicable U.S. state securities laws. Each Selling Shareholder represents that
he or it is a resident of or organized in Canada and is not acquiring the Parent
Common Stock for the benefit of a U.S. resident or entity and agrees that it
shall not sell or otherwise dispose of or pledge such Parent Common Stock in
violation of applicable United States Securities laws.
(b) REGISTRATION RIGHTS. Parent shall grant each Shareholder
registration rights, as set forth in the Declaration of Registration Rights
attached hereto as Exhibit F. Participation by Shareholders in any such
registration shall be subject to the terms and conditions set forth in the
Declaration of Registration Rights, which Declaration of Registration Rights
will provide, among other things, that the Parent will file all necessary
documents and take all necessary measures to register with the United States
Securities and Exchange Commission the Parent Common Stock and Parent Common
Stock issued upon the exercise of the Exchangeable Shares as soon as practicable
after the Closing, but no later than 45 days from such date.
4.2 CONFIDENTIALITY
Each of the parties hereto hereby agrees to keep such information
or knowledge obtained pursuant to the negotiation and execution of this
Agreement, or the effectuation of the transactions contemplated hereby
confidential, and also agree not to use such knowledge or information; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession on a
non-confidential basis prior to the disclosure thereof by the other party, (b)
is generally known to the public and did not become so known through any
violation of law, (c) became known to the public through no fault of such party,
(d) is later lawfully acquired by such party from other sources, (e) is required
to be disclosed by order of court or government agency with subpoena powers, (f)
is disclosed in the course of any litigation between any of the parties hereto,
(g) is independently developed by a party through Persons who have not had
accessed to, or knowledge of, such knowledge or information, (h) is required to
be disclosed in order to obtain such consents, waivers and approvals required
pursuant to Section 4.5, or (i) is required to be disclosed by the Parent under
applicable securities laws.
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4.3 EXPENSES
Whether or not the Merger is consummated, all fees and expenses
incurred in connection with the Merger including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("THIRD PARTY EXPENSES") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby shall be the obligation of the
respective party incurring such fees and expenses; provided that the parties
recognize that the Company shall bear up to $250,000 of expenses for
professional services in connection with the transactions contemplated hereby
which might be considered expenses of the Selling Shareholders.
4.4 PUBLIC DISCLOSURE
Unless otherwise required by law (including, without limitation,
federal and state securities laws) no disclosure (whether or not in response to
an inquiry) of the subject matter of this Agreement shall be made by the Company
or the Selling Shareholders unless approved by Parent, prior to release.
4.5 CONSENTS
The Selling Shareholders shall use their commercially reasonable
efforts to cause the Company to obtain the consents, waivers and approvals under
any of the Contracts as may be required in connection with the Merger (all of
such consents, waivers and approvals are set forth in the Schedules) so as to
preserve all rights of and benefits to the Company thereunder, or to consummate
the transactions contemplated hereby, and shall use commercially reasonable
efforts to obtain all necessary consents, waivers and approvals under any of its
material contracts in connection with the transactions contemplated hereby for
the assignment thereof or otherwise. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with the foregoing.
4.6 COMMERCIALLY REASONABLE EFFORTS
Subject to the terms and conditions provided in this Agreement, each of
the parties hereto shall use its commercially reasonable efforts to ensure that
its representations and warranties remain true and correct in all material
respects, and to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.
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4.7 NOTIFICATION OF CERTAIN MATTERS
The Selling Shareholders shall give prompt notice to Parent, and Parent
shall give prompt notice to the Selling Shareholders, of (i) the occurrence or
non-occurrence of any event, the occurrence or non-occurrence of which is likely
to cause any representation or warranty of any such party contained in this
Agreement to be untrue or inaccurate at or prior to the Closing and (ii) any
failure of any such party, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 4.7 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
4.8 TRANSITION
None of the Selling Shareholders will take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing. For a period of twelve (12) months after
Closing, each of the Selling Shareholders will refer all customer inquiries
relating to the business of the Company to the Company or Parent.
4.9 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES
Each party hereto, at the request of the other party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
4.10 TAX FILINGS
The Selling Shareholders shall be responsible for the preparation of
all Tax Returns of the Company for taxation periods ending on or before the
Closing Date, in accordance with applicable law and in a manner consistent with
prior practices. Notwithstanding the foregoing, such Tax Returns shall be
prepared within 90 days of the Closing Date and, once prepared and prior to
filing with the relevant tax authority, such Tax Returns shall be submitted to
Parent for its review and approval, such approval not to be unreasonably
withheld. After the Closing Date, NMS, the Company, and the Selling Shareholders
will make available to each other, as reasonably requested, all information,
records or documents relating to the liability for Taxes of the Company for all
periods ending on or prior to the Closing Date and will preserve such
information, records or documents until the expiration of any applicable statute
of limitations or extensions thereof.
4.11 ACCESS TO INFORMATION
The Selling Shareholders will cause the Company to afford Parent and
its accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Closing, upon the Parent
providing the Employee Shareholders with reasonable prior written notice (it
being understood that such access shall be provided to the Parent in such manner
as shall not interfere with the normal day-to-day operations of the Company), to
(a) all of its properties,
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books, contracts, commitments and records, and (b) all other information
concerning the business, properties and personnel (subject to restrictions
imposed by applicable law) of it as Parent may reasonably request subject to
reasonable limits on access to Company's source codes. No information or
knowledge obtained in any investigation pursuant to this Section 4.11 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the transactions
contemplated hereby.
4.12 POST-CLOSING COVENANTS
(a) Michel Laurence and Michel Brule hereby undertake to (i)
remain the sole shareholders of IML Research, (ii) maintain the due existence of
IML Research, including, without limitation, ensuring that IML Research is
sufficiently funded to fulfill its obligations as they become due and remains,
at all times, a solvent entity, (ii) use their best efforts to maintain IML
Research's existing relations with [the counter parties under any of its
agreements or commercial arrangements] in good standing and not alter or modify
such relations or their written or verbal commercial arrangements with such
person, without obtaining the prior written consent of NMS, and (iv) not alter
or modify any of the agreements which have been entered into between IML
Research and the Company, without obtaining the prior written consent of NMS. At
the request of the Purchaser, Michel Laurence and Michel Brule agree to transfer
all of the issued and outstanding shares in the capital of IML Research to the
Purchaser for nominal consideration.
(b) Except as contemplated in the Exchangeable Share
Provisions, none of the shares in the capital of Purchaser or Amalco (as the
case may be) may be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of, directly or indirectly, by a Shareholder,
including but not restricted to any disposition by agreement, option, right or
privilege capable of becoming an agreement or option, without the prior consent
of the Parent. No Exchangeable Shares may be transferred unless the transferee
agrees to be bound by the provisions of this Section 4.12(b).
4.13 SEVERANCE
(a) NMS hereby undertakes to pay to each person that is an
employee of the Company prior to the Closing, in the event that any such
employee is terminated without Cause by NMS within twelve months following the
Closing, an amount equal to (i) 12 months base salary of such terminated
employee if such employee has been an employee of the Company for more than 3
years, (ii) 9 months base salary of such terminated employee if such employee
has been an employee of the Company for more than 2 years, (iii) 6 months base
salary of such terminated employee if such employee has been an employee of the
Company for more than one year, or (iv) 3 months of base salary of such
terminated employee if such employee has been an employee of the Company for
less than one year.
(b) NMS further undertakes to accelerate the unvested portion
of any Option outstanding under the Stock Option Plan granted to an employee of
the Company that is terminated without Cause within twelve months following the
Closing to the extent that, if such employee had been given notice of the length
provided for such employee under Section 4.13(a), such employee would have
received vesting of such unvested portion, and to permit such employee at least
three
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months from its date of termination without Cause to exercised its vested
Options (or such longer period as may otherwise apply to the exercise of such
Options following termination of such employee without Cause). The foregoing
undertaking shall include NMS using its best efforts to cause the Stock
Option Plan of the Company or its own stock option plan, to the extent there
are Exchange Options, to be amended, if necessary, to allow such acceleration.
ARTICLE V
CLOSING DELIVERIES AND ADDITIONAL CONDITIONS
5.1 DELIVERIES AT THE CLOSING
At the Closing, NMS and the Selling Shareholders shall deliver the
following items:
(i) The Selling Shareholders shall deliver to NMS evidence
reasonably satisfactory to it that the resolution contemplated by Section 1.3 or
the resolutions of the Company and its Shareholders required to implement the
Merger by Amalgamation as contemplated by Exhibit E, as the case may be, shall
have been adopted and approved by the Board of Directors of the Company (and, in
the case of a merger by amalgamation, the Shareholders) by the requisite vote
under applicable law and the Company's Articles of Incorporation and by-laws.
(ii) The Selling Shareholders shall deliver to NMS
evidence satisfactory to it that the Company and the Selling Shareholders have
obtained the consents, approvals and waivers required under Section 4.5
(including, without limitation, any consents, waivers or approvals required
under any contract or agreement to which the Company or the Selling Shareholders
or a party or by which they are bound and which are necessary in connection with
the Merger to maintain all rights of the Company thereunder subsequent to the
Closing).
(iii) NMS shall deliver to Michel Laurence and the Selling
Shareholders evidence reasonably satisfactory to Michel Laurence that the Parent
and the Purchaser shall have entered into the Support Agreement and the Voting
and Exchange Trust Agreement.
(iv) The Selling Shareholders shall deliver the legal
opinion of Me Olivier Despres in the form contemplated by Exhibit D as provided
under Section 1.2(d)(iv) or, in the event the Merger proceeds by way of
Amalgamation, such other opinion of Me. Olivier Despres as the Parent may
reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE SELLING SHAREHOLDERS
The obligations of the Selling Shareholders to consummate the
transactions contemplated by this Agreement and by the Offer shall be subject to
the satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, by Selling Shareholders holding a
majority of the Shares being purchased under the Offer:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Parent and the Purchaser contained in this Agreement shall be
true and correct in all material respects (except for those representations and
warranties which are by their terms are qualified by a standard of materiality,
which representations and warranties shall be true in all respects) on and as of
the Closing Date, except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with the
same force and effect as if made on and as of the Closing Date; and the
Shareholders shall have received a certificate to such effect signed on behalf
of Parent and the Purchaser by a duly authorized officer of Parent and by a duly
authorized officer of Purchaser.
(b) AGREEMENTS AND COVENANTS. Parent and Purchaser shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing; and the Selling Shareholders shall have received a certificate
to such effect signed on behalf of Parent and Purchaser by a duly authorized
officer of Parent and by a duly authorized officer of Purchaser.
ARTICLE VI
INDEMNIFICATION; ESCROW
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All representations, warranties, covenants and agreements of the
Selling Shareholders and NMS in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing Date and shall terminate
two (2) years after the Closing Date; PROVIDED, HOWEVER, that (i) the
representations and warranties contained in Section 2.3(y) shall terminate only
on the 90th day after the last date the relevant Tax authority is entitled to
assess or reassess the relevant person with respect to such Tax matter, (iv) the
representations, warranties, covenants and agreements in Sections 2.1(a), (b)
and (c), 2.2(a), (b) and (c), 2.3(a), (c), (d), (f), (h), (i), (j), (p) and
(aa), and 4.12(a) shall not terminate; and provided that the rights to obtain a
remedy, including the rights of indemnification provided for in Section 6.2,
shall continue notwithstanding the expiry of such survival period to the extent
that notice of an inaccuracy or breach of any such provision is given in writing
to the party bound by such representation, warranty, covenant and agreement
within such survival period.
6.2 INDEMNIFICATION
(a) Subject to the limitations set forth in Section 6.2(b),
each of the Selling Shareholders hereunder jointly (and not solidarily) agrees
to indemnify and hold the Parent, and the Purchaser, their officers, directors,
and affiliates (including the Company) harmless for, from and against any
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses, and expenses of investigation
and defense incurred or accrued by the Parent, their officers, directors, or
affiliates (including the Company) directly or indirectly as a result of any
inaccuracy or breach of a representation or warranty given individually
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or collectively by each of the Selling Shareholders contained in Article II
herein (as modified by the Schedules, without giving effect to any update
thereto), or any failure by the Selling Shareholders to perform or comply with
any covenant contained herein (hereinafter individually a "LOSS" and
collectively "Losses").
(b) Notwithstanding anything to the contrary contained in
Section 6.2(a) or elsewhere in this Agreement, the maximum liability of any of
the Selling Shareholders, in the aggregate, in respect of claims for
indemnification against Losses shall not exceed the amount of the Consideration
paid to such Selling Shareholders.
(c) Notwithstanding anything to the contrary contained in
Section 6.2(a) or elsewhere in this Agreement, no claim for indemnification may
be made by any party under this Article VI unless and until the aggregate amount
of all claims by that party hereunder for Losses exceeds Two Hundred Fifty
Thousand Dollars ($250,000) (the "INDEMNIFICATION THRESHOLD"), in which event
the liability of the indemnifying party shall be limited to the amount by which
such claims for Losses exceeds the Indemnification Threshold. Notwithstanding
the foregoing, the Indemnification Threshold shall not be applicable in respect
of a claim based on any failure by a Selling Shareholder to transfer all or part
of its Shares to the Purchaser.
6.3 ESCROW ARRANGEMENTS
Concurrent with the Closing, as partial security for the indemnity
provided in Section 6.2, each of the Selling Shareholders shall be deemed to
have received and deposited with the Escrow Agent (as defined below) the
Indemnification Shares and Michel Laurence shall be deemed to have received and
deposited with the Escrow Agent the ML Escrowed Shares, in each case to be
governed by the terms of the Escrow Agreement. The Escrow Agreement provides,
among other things, the schedule under which the Indemnification Shares may be
released from escrow.
6.4 MANNER OF INDEMNIFICATION
Any indemnification for Losses of the Parent or the Purchaser under
this Article VI, if not paid promptly by the indemnifying party in cash, shall
be effected in the following manner:
(a) Each of the Selling Shareholders agrees that the Parent or
Purchaser, as the case may be, may cause any Exchangeable Shares comprised in
the Indemnification Shares to be exchanged for Parent Common Stock and may, in
its sole discretion, either sell the Parent Common Stock comprised in the
Indemnification Shares or resulting from the exchange of such Exchangeable
Shares on any public market on which Parent Common Stock is traded or purchase
such shares for cancellation, the value of which Indemnification Shares for the
purposes of satisfying any claim for Losses shall, in the case of a sale of
Parent Common Stock on the public markets, be equal to the net proceeds of such
sale or, in the case of a purchase for cancellation of Parent Common Stock, be
equal to the Weighted Average Closing Price of the Parent Common Stock at the
date of such purchase for cancellation and in each case Indemnification Shares,
and shall apply such value, net of any out-of-pocket expenses incurred, to the
payment of the amount owing to Parent or Purchaser by the Selling Shareholders.
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(b) If the amount produced by paragraph 6.4(a) above is still
insufficient to satisfy the indemnification obligations of Selling Shareholders
under this Article VI, the Selling Shareholders agree to deliver the remainder
to the Parent or the Purchaser, as the case may be, in cash or by certified or
bank cheque.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may only be terminated as follows:
(a) by mutual written consent of the Selling Shareholders and
NMS;
(b) by either NMS or the Selling Shareholders if there shall
be any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any Governmental Authority that would make
consummation of the transactions contemplated herein illegal;
(c) by the Selling Shareholders if the Purchaser (i) has not
made the Offer on or before 5:00 p.m. (Montreal time) on May 31, 2000 except if
the Purchaser has not made the Offer on or prior to such date by reason of any
failure of the Selling Shareholders to satisfy a condition precedent to the
Purchaser's obligation to make the Offer; or (ii) all of the conditions to the
Purchaser's obligation to acquire Shares under the Offer have been satisfied but
the Purchaser has not acquired and paid for the Shares under the Offer on or
before 5:00 p.m. (Montreal time) on July 15, 2000; or, if the Merger proceeds by
Amalgamation, the Parent shall fail to undertake or to cause its subsidiaries to
undertake those matters required by them to implement the Amalgamation
contemplated in Exhibit E by July 31, 2000, and such failure is not attributable
to any failure by the Selling Shareholders to fulfill their obligations to
implement such arrangements.
(d) by NMS if the Closing has not occurred before 5:00 p.m.
(Montreal time) on July 31, 2000;
(e) by NMS if it is not in material breach of its obligations
under this Agreement and the conditions of the obligations of the Purchaser to
acquire shares under the Offer have not been satisfied on or before 5:00 p.m.
(Montreal time) on the Offer Termination Date (or such later date as the
Purchaser may have determined for the taking up of Shares under the Offer as
provided by Section 1.1.
7.2 EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in Section
7.1, this Agreement shall forthwith become void and there shall be no liability
or obligation on the part of the Parent, Purchaser or the Selling Shareholders,
or their respective officers, directors or shareholders, provided that each
party shall remain liable for any breaches of this Agreement prior to its
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termination; and provided further that, the provisions of Sections 4.2 and 4.3
and Article IV and Article VII (other than Section 7.1) of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
7.3 AMENDMENT
Except as is otherwise required by applicable law, this Agreement may
only be amended by the parties hereto by execution of an instrument in writing
signed by or on behalf of each of the parties hereto or their duly appointed
representatives.
7.4 EXTENSION; WAIVER
At any time prior to the Closing, the Parent and Purchaser, on the one
hand, and the Selling Shareholders, on the other, may, (i) extend the time for
the performance of any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, or (iii) waive
compliance with any of the agreements, covenants or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party and such waiver of any of the
provisions of this Agreement shall not constitute a waiver of any other
provisions (whether or not similar) or a continuing waiver unless otherwise
expressly provided in the instrument.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with acknowledgment of receipt of such facsimile returned) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Purchaser:
Natural MicroSystems Corporation
100 Crossing Blvd.
Framingham MA 01702
Attn: Chief Executive Officer
Telephone No.: (508) 271-1200
Facsimile No.: (508) 271-1225
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with a copy to:
Stikeman Elliott
1155 Rene-Levesque Blvd. West
Suite 4000
Montreal, Quebec
H3B 3V2
Attn: Edward B. Claxton
Telephone No.: (514) 397-3364
Facsimile No.: (514) 397-3222
(b) if to Novacap to:
375 Roland Therrien Blvd.
Longueuil, Quebec
J4H 4A6
Attn: Chief Executive Officer
Telephone No.: (450) 651-5000
Facsimile No.: (450) 651-7585
(c) if to the Employee Shareholders, to:
c/o Michel Laurence
InnoMedialogic Inc.
4501 Bishop Street
St-Hubert, Quebec
J3Y 9E1
Telephone No.: (450) 676-2977, ext. 109
Facsimile No.: (450) 926-5725
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with a copy to:
Olivier Despres, Attorney
6, rue du Perigord
La Prairie, Quebec
J5R 5Y6
Telephone No.: (450) 659-6737
Facsimile No.: (450) 659-9878
8.2 INTERPRETATION
The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein shall
be deemed in each case to be followed by the words "WITHOUT LIMITATION." The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.3 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
8.4 ENTIRE AGREEMENT; ASSIGNMENT
This Agreement, the Schedules and Exhibits hereto, and the documents
and instruments and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided, except that Parent may
assign its rights and delegate its obligations hereunder to its affiliates.
8.5 HOLDING COMPANIES
NMS hereby acknowledges and agrees that each of Michel Laurence and
Michel Brule may transfer all or part of the Shares that he is selling to the
Purchaser hereunder as which he will hold at the time of the implementation of
the Amalgamation described in Exhibit E to a holding company, all of the shares
of which shall be held by Michel Laurence or Michel Brule, as the case may be,
provided that such company assumes all of the rights and obligations of Michel
Laurence or Michel Brule, as the case may be, under this Agreement and provided
that Michel Laurence or Michel Brule, as the case may be, continues to be bound
by his obligations hereunder.
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8.6 SEVERABILITY
In the event that any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
8.7 TAX ELECTION
Any Selling Shareholder who receives Exchangeable Shares on the
purchase of its Shares by Purchaser shall be entitled to make an income tax
election pursuant to section 85(1) of the ITA (and under the corresponding
provisions, if any, of any applicable provincial statute) with respect to the
transfer of its Shares to Purchaser provided that the agreed amount for purpose
of such election is not less that the greater of (i) the Cash Portion received
by the Selling Shareholder including the value of Parent Common Stock and (ii)
the adjusted cost base as defined in the ITA to the Selling Shareholder of the
Shares and not greater than the fair market value of the Shares disposed to
Purchaser.
8.8 OTHER REMEDIES
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.9 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Quebec and of Canada applicable herein, regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Each of the parties hereto agrees that process may be served
upon them in any manner authorized by the laws of the Province of Quebec for
such persons and waives and covenants not to assert or plead any objection which
they might otherwise have to such jurisdiction and such process.
8.10 RULES OF CONSTRUCTION
The parties hereto agree that they have been represented by counsel
during the negotiation and execution of this Agreement and that the Agreement
has been negotiated and settled with their consent, therefore, recognize that
the application of the provisions of any law, regulation or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document is not applicable to this
Agreement and, to the extent they have the power to do so, the parties waive
such provisions.
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8.11 SPECIFIC PERFORMANCE
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States, Canada or any
state or province having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
8.12 ENGLISH LANGUAGE ONLY
The parties hereto confirm that is their wish that this Agreement, as
well as all other documents related hereto, including legal notices, have been
and shall be drawn up in the English language only. LES PARTIES CONFIRMENT LEUR
DESIR QUE CET ACCORD AINSI QUE TOUS LES DOCUMENTS, Y COMPRIS TOUS LES AVIS QUI
S'Y RATTACHENT, SOIENT REDIGES EN LANGUE ANGLAISE.
8.13 CERTAIN DEFINED TERMS
As used in this Agreement, in addition to the terms defined elsewhere
in the Agreement (including in the Recitals), the following terms will have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
(a) "AGREEMENT" shall mean this SHARE PURCHASE AGREEMENT and
all instruments supplemental hereto or in amendment of confirmation hereof;
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar expressions mean and refer
to this Agreement and not to any particular Article, Section, Subsection or
other subdivision; "ARTICLE", "SECTION", "SUBSECTION" or "OTHER SUBDIVISION" of
this Agreement means and refers to the specified Article, Section, Subsection or
other subdivision of this Agreement.
(b) "AMALGAMATION" shall have the meaning ascribed thereto in
the Recitals hereto.
(c) "AMALCO" shall have the meaning ascribed thereto with
Recitals hereto.
(d) "BOOKS AND RECORDS" means all books of account, tax
records, sales and purchase records, customer and supplier lists, computer
software, formulae, business reports, plans and projections and all other
documents, files, correspondence and other information of Company whether in
writing or electronic form.
(e) "CANADIAN GAAP" means generally accepted accounting
principles in Canada, including those set out in the Handbook of the Canadian
Institute of Chartered Accountant, applied on a consistent basis.
(f) "CANCELLATION RIGHT" shall have the meaning ascribed
thereto at Section 1.9.
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(g) "CASH PORTION" shall have the meaning ascribed thereto at
Section 1.2(f)(i)
(h) "CAUSE" shall mean any event or circumstance which,
pursuant to applicable law, constitutes a serious reason for dismissal without
either notice, payment in lieu of notice, severance or indemnity whatsoever,
and, without restriction, the foregoing shall include any conviction of an
employee for a criminal offense (whether by summary proceeding or by indictment)
and the taking of any act or failure to take any act in a manner contrary to an
employee's obligation of diligence, loyalty and honesty to the employer and an
employee's obligation to promote and act in furtherance of the employer's
legitimate interests;
(i) "CBCA" shall have the meaning ascribed thereto in the
Recitals hereto.
(j) "CERTIFICATES" shall have the meaning ascribed thereto at
Section 1.8.
(k) "CLOSING DATE" shall have the meaning ascribed thereto at
Section 1.1.
(l) "CLOSING" shall have the meaning ascribed thereto at
Section 1.1.
(m) "COMPANY SCHEDULES" shall mean the disclosure schedules by
the Company under the representations and warrants set forth in Section 2.1
(n) "COMPANY" has the meaning specified in the Recitals
hereto.
(o) "CONSIDERATION" shall have the meaning ascribed thereto at
Section 1.2(f).
(p) "CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any note, bond or security issued by such Person or of any
mortgage, indenture, deed of trust, lease, license, franchise, contract,
agreement, instrument or undertaking to which such Person is a party or to which
it or any of its property or assets is subject.
(q) "DOLLAR" and the symbol "US" shall mean US currency,
unless specified otherwise.
(r) "EMPLOYEE PLANS" AND "BENEFIT PLANS" shall mean all the
employee benefit, fringe benefit, supplemental unemployment benefit, bonus,
incentive, profit sharing, termination, change of control, pension, retirement,
stock option, stock purchase, stock appreciation, health, welfare, medical,
dental, disability, life insurance and similar plans, programs, arrangements or
practices relating to the current or former employees, officers or directors
employed in connection with the Company, whether written or oral, funded or
unfunded, insured or self-insured, registered or unregistered.
(s) "EMPLOYEE SHAREHOLDERS" shall have the meaning ascribed
thereto in the first paragraph hereof.
(t) "ESCROW AGREEMENT" shall have the meaning ascribed thereto
in the Recitals hereto.
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(u) "EXCHANGE ACT" shall have the meaning ascribed thereto at
Section 2.2.
(v) "EXCHANGE OPTIONS" shall have the meaning ascribed thereto
at Section 1.5.
(w) "EXCHANGEABLE SHARES" shall have the meaning ascribed
thereto in Section 1.4.
(x) "EXCHANGEABLE SHARE PROVISIONS" shall have the meaning
ascribed thereto in the Recitals hereto.
(y) "FINANCIAL STATEMENTS" shall mean the audited financial
statements for the Company as at March 31, 1999 and 1998, and the unaudited
financial statements for the Company as at March 31, 2000, respectively,
consisting in each case of a balance sheet and the accompanying statements of
income, retained earnings and changes in financial position for the period then
ended and notes to the financial statements together with the report of the
auditors thereon, a copy of which financial statements is annexed hereto as
SCHEDULE 8.13(x)
(z) "GAAP" means generally accepted accounting principles in
the United States of America.
(aa) "GOVERNMENTAL AUTHORITY" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
(bb) "IMMEDIATELY EXERCISABLE OPTIONS" shall have the meaning
ascribed thereto at Section 1.2(a).
(cc) "INCLUDE", "INCLUDES" and "INCLUDING" shall have the
meaning ascribed thereto at Section 8.2.
(dd) "INDEMNIFICATION SHARES" shall have the meaning ascribed
thereto at Section 1.6.
(ee) "INTELLECTUAL PROPERTY RIGHTS" means all the rights of
the Company and the Subsidiaries in the following, whether protected, created or
arising under the laws of Canada or any foreign, state or other jurisdiction:
(i) business names, trade names, trademarks and service
marks (whether registered or unregistered, including any
applications for registration of any of the foregoing),
logos, Internet domain names, trade dress rights and
general intangibles of a like nature, together with the
goodwill associated with any of the foregoing
(collectively, "MARKS");
(ii) (a) patents, patent rights and all applications
therefor, including any and all continuation, divisional,
continuation-in-part, or reissue patent applications or
patents issuing thereon and (b) disclosures with respect
to
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potential patent applications listed on SCHEDULE
8.13(dd)(ii) (collectively, "PATENTS");
(iii) topographies, codes, software, copyrightable works,
including but not limited to all registrations and
applications therefor (collectively, "COPYRIGHTS"); and
(iv) know-how, inventions, discoveries, concepts, ideas,
methods, processes, formulae, technical data, circuit
board designs, schematics, bills of materials,
confidential information and other proprietary
information, including customer lists, excluding any
rights in respect of any of the foregoing that comprise or
are protected by Copyrights or Patents (collectively,
"TRADE SECRETS").
(ff) "INTELLECTUAL PROPERTY" means all Intellectual Property
Rights owned or licensed by the Company.
(gg) "ITA" shall have the meaning ascribed thereto at Section
2.3(y)(ix).
(hh) "KNOWLEDGE OF THE SELLING SHAREHOLDERS", or "TO THE
SELLING SHAREHOLDERS' KNOWLEDGE" shall mean the knowledge which each of the
Selling Shareholders (i) actually has, or (ii) should have after having
conducted due enquiry or investigation, and for the purposes hereof, the actual
or implied knowledge of either of Michel Laurence and Michel Brule, as
determined in accordance with this provision, shall be deemed to be the
knowledge of the Selling Shareholders.
(ii) "LAWS" shall mean:
(i) all constitutions, treaties, laws, statutes, codes,
ordinances, orders, decrees, rules, regulations, and
municipal by-laws, whether domestic, foreign or
international having jurisdiction;
(ii) all judgments, orders, writs, injunctions, decisions,
rulings, decrees, and awards of any governmental authority
or body; and
(iii) all policies, practices and guidelines of any
governmental authority or body which, although not
actually having the force of law, are considered by such
governmental authority or body as requiring compliance as
if having the force of law, in each case binding on or
affecting the Party or Person referred to in the context
in which such word is used; and "LAW" shall mean any one
of them.
(jj) "LICENSE" and "LICENSES" shall have the meanings ascribed
thereto at Section 2.3(z).
(kk) "LICENSED INTELLECTUAL PROPERTY" shall have the meaning
ascribed thereto at Section 2.3(p)(iv)(f).
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(ll) "LICENSED TECHNOLOGY AGREEMENTS" shall have the meaning
ascribed thereto at Section 2.3(p)(iv).
(mm) "LIEN" and "LIENS" shall have the meanings ascribed
thereto at Section 2.3(b)(iii).
(nn) "LOSS" and "LOSSES" shall have the meanings ascribed
thereto at Section 6.2.
(oo) "MATERIAL ADVERSE EFFECT" shall mean any change or effect
(excluding any change or effect related to general economic conditions) that is,
or is reasonably likely to be, (A) material and adverse to the current or future
business, operations, properties, condition (financial or other), assets or
liabilities of the Company or its business; provided that any change or effect
having an impact of US$25,000 or more (or its equivalent in Canadian dollars)
shall be material for such purposes, or (B) material and adverse to the ability
of the Parent and/or the Purchaser to consummate the transactions contemplated
by this Agreement, the Offer or the Related Agreements or to perform their
respective obligations hereunder or thereunder or (C) the ability of the Parent
or the Purchaser to exercise its rights under this Agreement, the Offer or the
Related Agreements or as a shareholder of the Company.
(pp) "ML DEPARTURE DATE" shall have the meaning ascribed
thereto at Section 1.9(a).
(qq) "MERGER" shall have the meaning ascribed thereto in the
Recitals hereto.
(rr) "ML ESCROWED SHARES" shall have the meaning ascribed
thereto at Section 1.9.
(ss) "ML EXCHANGEABLE SHARES" shall have the meaning ascribed
thereto in Section 1.9.
(tt) "NMS" shall have the meaning ascribed thereto in the
first paragraph hereof.
(uu) "NON-CASH PORTION" shall have the meaning ascribed
thereto at Section 1.2(f)(ii).
(vv) "NUMBER OF PARENT COMMON STOCK" shall have the meaning
ascribed thereto at Section 1.2(f)(ii)(A).
(ww) "OFFER TERMINATION DATE" shall have the meaning ascribed
thereto at Section 1.1.
(xx) "OFFER" shall have the meaning ascribed thereto in the
Recitals hereto.
(yy) "OPTION" shall have the meaning ascribed thereto at
Section 1.5.
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(zz) "ORDINARY COURSE" means, with respect to an action taken
by a Person, that such action is consistent with the past practices of the
Person and is taken in the ordinary course of the normal day-to-day operations
of the Person.
(aaa) "OTHER SELLING SHAREHOLDERS" shall have the meaning
ascribed thereto in the first paragraph hereof.
(bbb) "OWNED COPYRIGHT" shall have the meaning ascribed
thereto at Section 2.3(p)(iii).
(ccc) "OWNED MARKS" shall have the meaning ascribed thereto at
Section 2.1(r)(i).
(ddd) "OWNED PATENTS" shall have the meaning ascribed thereto
at Section 2.3(p)(ii).
(eee) "PARENT COMMON STOCK" shall have the meaning ascribed
thereto in the Recitals hereto.
(fff) "PARENT FINANCIAL STATEMENTS" shall have the meaning
ascribed thereto at Section 2.4(g)
(ggg) "PARENT" shall have the meaning ascribed thereto in the
first paragraph hereof.
(hhh) "PARTIES" shall mean the Selling Shareholders, the
Parent and the Purchaser; and "PARTY" shall mean either one of them.
(iii) "PERSON" shall mean an individual, company, cooperative,
partnership, trust, unincorporated association, entity with juridical
personality or governmental authority or body, and pronouns which refer to a
Person shall have a similarly extended meaning.
(jjj) "PURCHASER" shall have the meaning ascribed thereto in
the first paragraph hereof.
(kkk) "R&D CREDIT OR REFUNDS" shall have the meaning ascribed
thereto at Section 2.3(y)(xi).
(lll) "RELATED AGREEMENTS" means collectively each agreement
or instrument entered into or implemented by Parent, the Purchaser and/or the
Selling Shareholders or certain employees of the Company as contemplated and
required by this Agreement, including without limitation the employment and
non-competition agreements referred to in Section 1.7, the Escrow Agreement the
Voting and Exchange Trust Agreement and the Support Agreement, the Offer and the
Exchangeable Share Provisions.
(mmm) "SCHEDULE" shall mean a schedule annexed to this
Agreement.
(nnn) "SEC" shall have the meaning ascribed thereto at
Section 2.4(g).
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(ooo) "SEC DOCUMENTS" shall have the meaning ascribed thereto
at Section 2.4(g).
(ppp) "SECURITIES ACT" shall have the meaning ascribed thereto
at Section 4.1.
(qqq) "SELLING SHAREHOLDERS" shall have the meaning ascribed
thereto in the first paragraph hereof.
(rrr) "SHARES" shall have the meaning ascribed thereto in the
Recitals hereto.
(sss) "SHAREHOLDERS AGREEMENT" shall mean the Shareholders
Agreement among the Selling Shareholders and the Company dated June 19, 1997.
(ttt) "SHAREHOLDERS" shall mean the holders of any issued and
outstanding shares of the Company or of any securities or right susceptible of
being exchanged or converted into shares of the Company.
(uuu) "SHAREHOLDERS' EXPENSES" means: (i) all broker, advisory
and legal fees and expenses incurred by the Shareholders as a result of the
Share Exchange regardless of whether Company or the Shareholders are directly
obligated by contract to pay such fees and (ii) any stock transfer tax and
notarial fees required or assessed upon transfer of Canadian securities.
(vvv) "SHARES" shall have the meaning ascribed thereto in the
Recitals hereto.
(www) "STOCK OPTION PLANS" has the meaning given in
Section 1.5.
(xxx) "SUPPORT AGREEMENT" shall have the meaning ascribed
thereto in the Recitals hereto.
(yyy) "TAX" and "TAXES" shall have the meaning ascribed
thereto at Section 2.3(y)(i).
(zzz) "TAX RETURNS" shall have the meaning ascribed thereto at
Section 2.1(aa)(ii).
(aaaa) "TECHNOLOGY EXPLOITATION AGREEMENTS" shall have the
meaning ascribed thereto at Section 2.3(p)(vi).
(bbbb) "THIRD PARTY EXPENSES" shall have the meaning ascribed
thereto at Section 4.3.
(cccc) "TOTAL ASSUMED OPTION SHARES" shall have the meaning
ascribed thereto at Section 1.5.
(dddd) "TRIBUNAL" shall have the meaning ascribed thereto at
Section 8.9.
(eeee) "VOTING EXCHANGE TRUST AGREEMENT" shall have the
meaning ascribed thereto in the Recitals hereto.
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(ffff) "WEIGHTED AVERAGE CLOSING PRICE" shall have the meaning
ascribed thereto at Section 1.2(f)(ii)(B).
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers, all as of the date first
written above.
NATURAL MICROSYSTEMS CORPORATION 3758982 CANADA INC.
By: By:
----------------------------------------- ----------------------------------
Name: Name:
----------------------------------------- ----------------------------------
Title: Title:
----------------------------------------- ----------------------------------
INVESTISSEMENTS NOVACAP INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
----------------------------------------- ----------------------------------
Michel Laurence Michel Brule
-----------------------------------------
Stephane Tremblay
[SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT]
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EXHIBIT A
EXCHANGEABLE SHARES PROVISIONS
<PAGE>
EXHIBIT B
SUPPORT AGREEMENT
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
<PAGE>
EXHIBIT D
FORM OF OPINION
<PAGE>
EXHIBIT E
MERGER BY WAY OF AMALGAMATION
The following steps will be taken to effect the Merger by way of
Amalgamation:
1. Within five Business Days following the expiry of the period for the
delivery of the acknowledgements and waivers provided for in Section
1.10 of the Agreement (the "WAIVER EXPIRY DATE"), the Purchaser will
incorporate a new wholly-owned subsidiary under the CBCA ("MERGECO")
having the following authorized and issued capital:
(a) AUTHORIZED:
(i) an unlimited number of common shares;
(ii) an unlimited number of Exchangeable Preferred Shares;
and
(iii) an unlimited number of First Preferred Shares, which
by their terms will be: redeemable by the Company for
a value equal to the value of the consideration
received upon their issuance; not retractable by the
holder; non-voting; bearing dividends in the
discretion of the directors; ranking on liquidation
prior to the Common Shares and PARI PASSU with the
Exchangeable Shares.
(b) ISSUED: Such number of common shares as the Parent may
determine.
2. Within seven Business Days following the Waiver Expiry Date, the
Purchaser shall cause Mergeco, and the Selling Shareholders shall cause
the Company to settle the terms of an amalgamation agreement (the
"AMALGAMATION AGREEMENT") pursuant to which Mergeco and the Company
shall amalgamate under Section 181 and following of the CBCA. The
Amalgamation Agreement shall provide that on Amalgamation:
(a) the authorized share capital of Amalco shall be identical to
that of Mergeco;
(b) the outstanding common shares of Mergeco shall be converted
into common shares of Amalco;
<PAGE>
(c) each of the outstanding Shares shall be converted into one
First Preferred Share of Amalco;
(d) the other provisions of the articles of amalgamation (the
"ARTICLES OF AMALGAMATION") shall be those ordinarily used for
a private corporation under the CBCA (determined in the
discretion of the Purchaser);
(e) the directors shall be appointees of the Purchaser; and
(f) the by-laws shall be those of Mergeco.
3. Within ten Business Days following the Waiver Expiry Date, the Selling
Shareholders shall cause the Board of Directors of the Company to meet
(the "COMPANY DIRECTORS' MEETING") and:
(a) authorize the execution and delivery of the Amalgamation
Agreement and the filing of Articles of Amalgamation, subject
to the approval of the Shareholders;
(b) set a date for a meeting of the Shareholders (the "COMPANY
SHAREHOLDERS' MEETING") to approve the Amalgamation Agreement
(such date to be at least 21 days and not later than 25 days
after the date of the Company Directors' Meeting);
(c) approve the sending of a management proxy circular to the
shareholders in prescribed form; and
(d) cause the Company to send the notice of meeting and management
proxy circular for the Company Shareholders' Meeting.
4. On or before the date of the Company Directors' Meeting the Purchaser
shall cause the directors and shareholders of Mergeco to authorize the
execution and delivery of the Amalgamation Agreement.
5. At least two weeks prior to the Company Shareholders' Meeting, the
Purchaser or one of its affiliates shall send an offer (the
"AMALGAMATION OFFER") to each one of the Shareholders, such offer to be
conditional upon the occurrence of the Amalgamation, offering to:
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(a) acquire up to 50% of the First Preferred Shares to be held by
such Shareholder following the Amalgamation for an amount in
cash per First Preferred Share equal to US$155 million divided
by the number of outstanding Shares and all Shares issuable
upon the exercise of Immediately Exercisable Options; and
(b) acquire the remaining 50% of the First Preferred Shares to be
held by such Shareholder following the Amalgamation in
consideration for the Number of Parent Company Stock (as
defined in Section 1.2(e)(ii) of the Agreement).
The Acquisition Offer shall terminate one day following the
date of the Company Shareholders' Meeting, and shall be accepted
through the return by an accepting Shareholder of an acceptance form
attached to the Amalgamation Offer under which the accepting
Shareholder:
(i) accepts the Amalgamation Offer as to the number of
First Preferred Shares it wishes to sell for cash (to
a maximum of 50% of all the First Preferred Shares as
shall be registered in its name at the closing date
of the Offer);
(ii) if it so elects, accepts the Amalgamation Offer as to
its remaining First Preferred Shares in consideration
for Parent Company Stock;
(iii) directs the Company to transfer such First Preferred
Shares to the offeror under the Amalgamation Offer on
the share registers of the Company;
(iv) agrees to the immediate termination of the
Shareholders' Agreement and to the waiver of any
rights it may have under the Shareholders' Agreement
arising prior to such acceptance;
(v) makes representations and warranties substantially
identical to those made by the Selling Shareholders
under the Agreement; and
(vi) agrees to deposit in escrow the Parent Company Stock
or Exchangeable Shares required to be deposited by it
in escrow and to be bound by the Escrow Agreement.
6. The Amalgamation Offer shall contain such other provisions as are
necessary to implement the transactions contemplated by this Exhibit E
and the Agreement. The Selling Shareholders agree to cause Company
Shareholders' Meeting to be held, to propose a
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resolution authorizing the Amalgamation at the Company Shareholders'
Meeting and to vote the Shares held or controlled by them at that
meeting in favour of the Amalgamation.
7. Within one Business Day following the approval of the Amalgamation by
the Shareholders at the Company Shareholders' Meeting, and in any case
prior to the expiry of the Amalgamation Offer, the Selling Shareholders
shall cause the Company and the Purchaser shall cause Mergeco to
execute and file the Articles of Amalgamation under the CBCA to effect
the Amalgamation and create Amalco.
8. The Parent agrees to cause the offeror under the Amalgamation Offer to
make payment for the First Preferred Shares deposited under the
Amalgamation Offer on the next business day following the expiry of the
Amalgamation Offer; however, certificates representing the shares of
the Parent Company Stock to be delivered in escrow as provided under
the Amalgamation Offer shall be delivered in escrow to the Escrow Agent
rather than to the depositing Shareholder.
9. Within five Business Days following the effective date of the
Amalgamation:
(a) the registered holders of all First Preferred Shares shall
authorize the conversion of all outstanding First Preferred
Shares into Exchangeable Shares;
(b) the Purchaser shall cause Amalco to file Articles of Amendment
under the CBCA effecting such conversion;
(c) Amalco will execute and deliver the Exchange and Support
Agreement;
(d) the Purchaser and Amalco shall deposit in escrow with the
Escrow Agent certificates representing those Exchangeable
Shares which are to be deposited in escrow; and
(e) Amalco shall send to each of the former registered holders of
First Preferred Shares the certificates representing the
remaining Exchangeable Shares which they have the right to
receive.
The Selling Shareholders, the Purchaser and the Parent shall cooperate
with each other for the purposes of preparing all documentation required to
implement those matters described in this Exhibit E.
-4-
<PAGE>
EXHIBIT F
DECLARATION OF REGISTRATION RIGHTS
NMS shall prepare and file with the U.S. Securities and Exchange
Commission a registration statement on Form S-3 in connection with the
registration under the Securities Act of 1933 of the Parent Common Stock
(including Parent Common Stock to be issued upon exercise of Exchangeable
Shares) and shall use its best efforts to cause such registration to become
effective not later than 45 days following the Closing and remain effective
until all shares registered and not sold thereunder may be sold without
limitation in the absence of an effective registration statement.
