AGREEMENT AND PLAN OF REORGANIZATION
Dated as of May 9, 2000
AMONG
MDSI MOBILE DATA SOLUTIONS INC.
MDSI ACQUISITION CORPORATION
CONNECTRIA CORPORATION
AND
CERTAIN PRINCIPAL SHAREHOLDERS
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Table of Contents
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1. Definitions...............................................................................................1
1.1 Certain Definitions..............................................................................1
1.2 Terms Generally..................................................................................7
2. The Merger................................................................................................8
2.1 The Merger.......................................................................................8
2.2 Closing; Effective Time..........................................................................8
2.3 Effect of The Merger.............................................................................8
2.4 Certificate of Incorporation; Bylaws.............................................................8
2.5 Directors and Officers...........................................................................9
2.6 Effect on Capital Stock..........................................................................9
2.7 Surrender of Certificates.......................................................................10
2.8 No Further Ownership Rights in Capital Stock....................................................12
2.9 Lost, Stolen or Destroyed Certificates..........................................................12
2.10 Tax and Accounting Consequences.................................................................12
2.11 Taking of Necessary Action; Further Action.....................................................13
3. Representations and Warranties of the Company and the Principal Shareholders.............................13
3.1 Organization and Standing of the Company........................................................13
3.2 Authority.......................................................................................13
3.3 No Bankruptcy, etc..............................................................................14
3.4 Litigation......................................................................................14
3.5 Capital Stock of the Company....................................................................14
3.6 Equity Interests................................................................................16
3.7 Financial Statements............................................................................16
3.8 Liabilities.....................................................................................16
3.9 Taxes...........................................................................................16
3.10 Assets Other than Real Property.................................................................18
3.11 Real Property...................................................................................18
3.12 Intellectual Property...........................................................................18
3.13 Contracts.......................................................................................19
3.14 Partner Agreements..............................................................................21
3.15 Certain Payments................................................................................21
3.16 Accounts Receivable.............................................................................21
3.17 Absence of Changes or Events....................................................................21
3.18 Compliance with Applicable Laws.................................................................22
3.19 Certain Employee Matters........................................................................22
3.20 Insurance.......................................................................................24
3.21 Benefit Plans...................................................................................24
3.22 Beneficial Ownership............................................................................26
3.23 Disclosure......................................................................................26
3.24 Confidentiality Obligations.....................................................................26
3.25 Depositories; Powers of Attorney................................................................26
3.26 Brokers' or Finders' Fees.......................................................................26
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3.27 Environmental Matters...........................................................................27
3.28 Related Party Transactions......................................................................27
3.29 Canadian Residency Status, etc..................................................................28
3.30 Principal Shareholder Employment Agreements.....................................................28
3.31 Intellectual Property Assignment Agreements.....................................................29
4. Representations and Warrantees of Parent and Merger Sub..................................................29
4.1 Organization and Standing of Parent.............................................................29
4.2 Capitalization..................................................................................29
4.3 Authority of Parent.............................................................................30
4.4 Absence of Certain Changes or Events............................................................30
4.5 Absence of Undisclosed Liabilities..............................................................31
4.6 No Default......................................................................................31
4.7 Reports.........................................................................................31
4.8 Due Authorization of Shares.....................................................................32
4.9 Brokers' or Finders' Fees.......................................................................32
4.10 Organization and Authority of Merger Sub........................................................32
4.11 Capitalization of Merger Sub....................................................................32
4.12 Authority of Merger Sub.........................................................................32
4.13 Interim Operations of Merger Sub................................................................33
4.14 Certain Payments................................................................................33
4.15 No Bankruptcy, etc..............................................................................34
4.16 Litigation......................................................................................34
4.17 Compliance with Applicable Laws.................................................................34
4.18 Pooling of Interests............................................................................34
4.19 Warranties Relating to Tax Matters..............................................................34
4.20 Disclosure......................................................................................35
5. Agreements and Covenants of the Parties..................................................................36
5.1 Conduct of Business of the Company and Parent...................................................36
5.2 Conduct of Business of the Company..............................................................37
5.3 No Solicitation.................................................................................39
5.4 Parent Investigation............................................................................39
5.5 Company Investigation...........................................................................40
5.6 Confidentiality.................................................................................40
5.7 Tax Matters.....................................................................................40
5.8 Employee Agreements.............................................................................42
5.9 Confidentiality Agreement.......................................................................42
5.10 Cooperation.....................................................................................42
5.11 Shareholders Meeting............................................................................43
5.12 Affiliate Agreements............................................................................43
5.13 Company Stock Options...........................................................................43
5.14 Form S-8 Registration Statement.................................................................44
5.15 Escrow Agreement................................................................................44
5.16 [This section intentionally left blank.]........................................................44
5.17 Indemnification and Insurance...................................................................44
5.18 Intellectual Property Matters...................................................................45
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5.19 Participation in Parent Benefit Plans...........................................................46
5.20 Nasdaq Listing Application......................................................................46
5.21 Blue Sky Approvals..............................................................................46
5.22 Section 16 Matters..............................................................................46
5.23 Board Nominee...................................................................................46
5.24 Pooling Accounting..............................................................................47
5.25 Investor Certificate............................................................................47
5.26 Shareholders Agreement..........................................................................47
5.27 Benefit Plan Matters............................................................................47
6. Conditions of Parent's Obligations.......................................................................47
6.1 Representations, Warranties and Covenants.......................................................47
6.2 Consents and Approvals..........................................................................48
6.3 Employment Agreements...........................................................................48
6.4 Injunctions, etc................................................................................48
6.5 Closing Documents...............................................................................48
6.6 Opinion of Counsel..............................................................................49
6.7 Merger..........................................................................................49
6.8 Certificate Related to Financial Statements.....................................................49
6.9 Proceedings.....................................................................................49
6.10 Voting, Lockup and Registration Rights Agreement................................................49
6.11 Parent Benefit Plans Participation..............................................................50
6.12 Escrow Agreement................................................................................50
6.13 No Company Material Adverse Effect..............................................................50
6.14 Pooling.........................................................................................50
6.15 Investment Representation.......................................................................50
6.16 Shareholders Agreement..........................................................................50
6.17 Affiliate Agreements............................................................................50
7. Conditions of Company and Principal Shareholder Obligations..............................................50
7.1 Representations, Warranties and Covenants.......................................................51
7.2 Consents and Approvals..........................................................................51
7.3 Employment Agreements...........................................................................51
7.4 Tax Opinion of Counsel..........................................................................51
7.5 Exemption From Registration.....................................................................51
7.6 Opinions of Counsel.............................................................................52
7.7 Composition of Parent Board of Directors........................................................52
7.8 Merger..........................................................................................52
7.9 Proceedings.....................................................................................52
7.10 Escrow Agreement................................................................................52
7.11 Closing Documents...............................................................................52
7.12 No Parent Material Adverse Effect...............................................................53
7.13 Injunctions, etc................................................................................53
7.14 [This section intentionally left blank].........................................................53
7.15 Affiliate Agreements............................................................................53
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8. Termination: Amendment and Waiver.......................................................................53
8.1 Termination.....................................................................................53
8.2 Effect of Termination...........................................................................54
8.3 Expenses........................................................................................54
8.4 Amendment.......................................................................................54
8.5 Extension, Waiver...............................................................................55
9. Escrow and Indemnification...............................................................................55
9.1 Escrow Fund.....................................................................................55
9.2 Indemnification by the Company Shareholders.....................................................55
9.3 Officer's Certificate...........................................................................56
9.4 Escrow Period...................................................................................56
9.5 Claims Upon Escrow Fund.........................................................................57
9.6 Objections to Claims............................................................................57
9.7 Resolution of Conflicts and Arbitration.........................................................57
9.8 Shareholders' Agent.............................................................................58
9.9 Actions of the Shareholders' Agent..............................................................59
9.10 Third-Party Claims..............................................................................60
9.11 Exclusive Remedy................................................................................60
10. General Provisions.......................................................................................60
10.1 Survivability...................................................................................60
10.2 Notices.........................................................................................61
10.3 Entire Agreement................................................................................62
10.4 News Releases; Public Announcements.............................................................62
10.5 Counterparts; Effectiveness.....................................................................63
10.6 Descriptive Headings............................................................................63
10.7 Choice of Law...................................................................................63
10.8 Assignment......................................................................................63
10.9 No Third-Party Beneficiaries....................................................................63
10.10 Waiver and Amendment............................................................................63
10.11 Waiver of Jury Trial............................................................................64
10.12 Severability....................................................................................64
10.13 Construction....................................................................................64
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EXHIBITS
No. Exhibit
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1.1 Escrow Agreement
3.5(e) Form of Voting, Lockup and Registration Rights Agreement
3.5(g) Form of Investor Certificate
3.30 Form of Employment Agreement
3.31 Intellectual Property Assignment Agreement
5.12A Schedule of Affiliates of the Company
5.12B Form of Affiliate Agreement for Affiliates of the Company
5.12C Schedule of Affiliates of Parent
5.12D Form of Affiliate Agreement for Affiliates of Parent
6.3 Persons Delivering Employment Agreements to Parent
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of May 9, 2000, by and among MDSI Mobile Data Solutions Inc., a
Canadian corporation ("Parent"), MDSI Acquisition Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Parent, Connectria
Corporation, a Missouri corporation (the "Company"), and Richard S. Waidmann and
Eric Y. Miller (the "Principal Shareholders").
RECITALS
A. The Boards of Directors of the Company, Parent and Merger Sub believe it
is in the best interests of their respective companies and the shareholders of
their respective companies that the Company and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into the Company
(the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
the Company's capital stock shall be converted into common shares of Parent at
the rate set forth herein.
C. The Principal Shareholders own all the issued and outstanding Class A
Common Shares of the Company, and believe that the Merger is in the best
interests of the Company and its shareholders.
D. The Company, Parent, Merger Sub and the Principal Shareholders desire to
make certain representations and warranties and other agreements in connection
with the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code, and to cause the
Merger to qualify as a reorganization under the provisions of Sections 368(a) of
the Code.
F. The parties intend to cause the Merger to be accounted for as a pooling
of interests.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
1. Definitions.
1.1 Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
specified below:
"Affiliate" shall mean, as to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person specified.
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"Articles of Merger" shall mean the articles of merger with respect to
the Merger containing the provisions required by, and executed in accordance
with Section 351.430 of the MRS.
"Best Efforts" shall mean the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such a
result is achieved on a timely basis; provided, however, that an obligation to
use Best Efforts under this Agreement does not require that Person subject to
that obligation to take actions that either: (a) would result in a materially
adverse change in the benefits to such Person of this Agreement or the
transactions contemplated herein, or (b) would entail a material expenditure or
a risk of material loss.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the Province of British Columbia or the
State of Missouri), on which commercial banks are open for business in
Vancouver, British Columbia and St. Louis, Missouri.
"Capital Lease Obligations" of any Person shall mean the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP.
"Certificate of Merger" The certificate of merger with respect to the
Merger containing the provisions required by, and executed in accordance with,
Section 251 of the DGCL.
"Closing" shall have the meaning given to such term in Section 2.2.
"Closing Date" shall have the meaning given to such term in Section
2.2.
"Closing Price" shall mean, as to any date, the average closing "bid"
price of a share of Parent Common Shares for the ten most recent days that
Parent Common Shares have traded ending on the trading day immediately prior to
such date, as reported on the Nasdaq National Market.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time (and any successor statute), and the rules and regulations
thereunder.
"Company Common Stock" shall have the meaning given to such term in
Section 3.5.
"Company Disclosure Statement" shall mean the disclosure statement of
the Company dated the date hereof and delivered pursuant to Section 3 hereof.
As used in this Agreement, any reference to any event, change or
effect having a "Company Material Adverse Effect" shall mean that such event,
change or effect is, individually or in the aggregate, materially adverse to the
business, operations, prospects, properties, assets (including intangible
assets), liabilities (including contingent liabilities), condition (financial or
other) or results of operations of the Company or the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement;
provided, however that
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Company Material Adverse Effect shall not be deemed to include the impact of (a)
any change in GAAP, (b) acts or omissions of the Company made with the prior
written consent of Parent, (c) any change in general economic conditions or the
industry in which the Company is engaged in business, (d) the effect of the
transactions contemplated hereby or compliance by the Company with the
provisions of this Agreement on the business, financial condition or results of
operations of the Company, or (e) any changes or effects resulting from the
announcement of the transactions contemplated hereby.
"Company Shareholder" shall have the meaning given to such term in
Section 3.5(a).
"Company Stock Option Plan" shall have the meaning given to such term
in Section 2.6(b).
"Control" (including, with its correlative meanings, "controlled by"
and "under common control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"$" shall mean United States Dollars, unless indicated otherwise.
"DGCL" shall mean the Delaware General Corporation Law.
"Dissenting Shares" shall have the meaning given to such term in
Section 2.6(a).
"Effective Time" shall have the meaning given to such term in Section
2.2.
"Employment Agreements" shall mean the Employment Agreements dated as
of the date hereof, but effective as of the Closing Date, between Parent and
each employee of the Company identified in Exhibit 6.3A attached hereto. The
Employment Agreements shall be in substantially the form of Exhibit 6.3B
attached hereto.
"Escrow Agent" shall mean U.S. Bancorp, or such other agent as may be
selected by mutual agreement of Parent and the Shareholders' Agent, as escrow
agent under the Escrow Agreement.
"Escrow Agreement" shall mean the Escrow Agreement to be dated as of
the Closing Date among Parent, Merger Sub, the Shareholders' Agent and the
Escrow Agent, in substantially the form of Exhibit 1.1 attached hereto.
"Escrow Amount" shall mean that number of Parent Common Shares
obtained by multiplying (x) the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time by (y) the Exchange Ratio,
as defined by Section 2.6 hereof, by (z) 0.10.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
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"GAAP" shall mean, with respect to any Person, United States generally
accepted accounting principles, consistently applied.
"Governmental Authority" shall mean any court, administrative agency
or commission or other governmental agency or instrumentality, domestic or
foreign, of competent jurisdiction.
"Guarantee" of or by any Person shall mean any obligation, contingent
or otherwise, of such Person guaranteeing any Indebtedness of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such Person, direct or indirect, (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (b) to purchase property,
securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness or (c) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the term Guarantee shall not include
endorsements for collection or deposit, in either case in the Ordinary Course of
Business.
"Indebtedness" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding current liabilities incurred in the Ordinary Course of Business, (f)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such Person
of the Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (j) all obligations of such Person as an account
party in respect of letters of credit and bankers' acceptances. The Indebtedness
of any Person shall include the Indebtedness of any entity that is a Subsidiary
of such Person.
"Investment Canada Act" means the Investment Canada Act, a Canadian
federal statute, as amended from time to time.
"IP Assets" shall mean any and all intellectual property assets
including, but not limited to, copyrights, patents, trademarks, trade names,
service marks, trade secrets, and any rights and licenses pertaining thereto
that have been created by or used by any predecessor entity of such Person or
have been or were being used by or for such Person or in connection with its
business, as presently conducted or as proposed to be conducted, or its
products, services, marketing or sales.
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"Knowledge" An individual will be deemed to have Knowledge of a
particular fact or other matter if such individual is actually aware of such
fact or other matter at the time in question.
A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving as an
officer of such Person (or in similar capacity) has, or at any time had,
"Knowledge" of such fact or other matter.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.
"Materials" shall mean any work of authorship of any Person, including
literary works (including computer programs), pictorial works, graphic works
(including logos and designs), motion pictures, sound recordings and audiovisual
works, regardless of the nature of the material objects such as courseware,
documents, manuscripts, periodicals, disks, memory storage devices, tapes, film,
and compact disks in which the works are embodied, that has been created by or
used by a predecessor entity of such Person or has been or is being used by or
for such Person or in connection with its business, as presently conducted or as
proposed to be conducted, or its products, services, marketing or sales.
"Merger" shall have the meaning given to such term in the recitals
hereto.
"MRS" shall mean the Missouri General and Business Corporation Law.
"Ordinary Course of Business" An action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically
authorized by the parent company (if any) of such Person.
"Permitted Liens" shall mean:
(a) mechanics', carriers', workmen's, repairmen's or other like
Liens arising from or incurred in the Ordinary Course of Business and
securing obligations which are not due or which are being contested in
good faith by any Person (provided that such Person has set up
adequate reserves therefor), Liens for Taxes which are not due and
payable or which may thereafter be paid without penalty or which are
being contested in good faith by any Person (provided that such Person
has set up adequate reserves for the payment of such Taxes) and other
imperfections of title or encumbrances,
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if any, which imperfections of title or other encumbrances do not
materially impair the use of the assets to which they relate in the
business of such Person as presently conducted and as proposed to be
conducted;
(b) easements, covenants, rights-of-way and other encumbrances or
restrictions of record;
(c) zoning, building and other similar restrictions; provided
that the same are not violated in any material respect by any
improvements of such Person or by the use thereof for the conduct of
such Person's business;
(d) equipment leases with third parties entered into by such
Person; and
(e) unrecorded easements, covenants, rights-of-way or other
encumbrances or restrictions, and other Liens that are not material in
character or amount, none of which materially impairs the use of the
property to which they relate in the business of such Person as
presently conducted and as proposed to be conducted.
"Person" shall mean any individual, firm, corporation, partnership,
trust, joint venture, Governmental Authority or other entity, including any
Subsidiary of any of the foregoing (unless the context otherwise requires), and
shall include any successor (by merger or otherwise) of such entity.
"Parent Common Shares" shall mean common shares of Parent bearing a
right to vote for directors of Parent and all other matters coming before
shareholders of Parent.
"Parent Disclosure Statement" shall mean the disclosure statement of
Parent dated the date hereof and delivered pursuant to Section 4 hereof.
As used in this Agreement, any reference to any event, change or
effect having an "Parent Material Adverse Effect" shall mean that such event,
change or effect is, individually or in the aggregate, materially adverse to the
business, operations, prospects, properties, assets (including intangible
assets), liabilities (including contingent liabilities), condition (financial or
other) or results of operations of Parent and its Subsidiaries taken as a whole
or the ability of Parent or Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement; provided, however that Parent
Material Adverse Effect shall not be deemed to include the impact of (a) any
change in GAAP, (b) acts or omissions of Parent made with the prior written
consent of the Company, (c) any change in general economic conditions or the
industry in which Parent is engaged in business, (d) the effect of the
transactions contemplated hereby or compliance by Parent with the provisions of
this Agreement on the business, financial condition or results of operations of
Parent, or (e) any changes or effects resulting from the announcement of the
transactions contemplated hereby.
"Pre-Closing Tax Period" shall mean all Taxable periods ending on or
before the Closing Date and the portion ending on the Closing Date of any
Taxable period that includes (but does not end on) such day.
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"SEC" shall mean the Securities and Exchange Commission or any
successor commission or agency having similar powers.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Subsidiary" of any Person shall mean a corporation, company or other
entity (a) more than 50% of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority) are
now or hereafter owned or controlled, directly or indirectly, by such Person,
but such corporation, company or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists, or (b) which does not have
outstanding shares or securities (as may be the case in a partnership, joint
venture or unincorporated association), but more than 50% of whose ownership
interest representing the right to make decisions for such other entity is, now
or hereafter owned or controlled, directly or indirectly, by such Person, but
such corporation, company or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists.
"Surviving Corporation" shall have the meaning given to such term in
Section 2.1.
"Tax" or "Taxes" (including, with correlative meaning, "Taxable")
shall mean all federal, state, local and foreign taxes, assessments, levies,
duties, impositions, withholdings and other governmental charges (including
taxes based upon or measured by gross receipts, income, profits, sales, use or
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, social security, employment, excise and property taxes), together with
all interest, penalties and additions imposed with respect to such amounts and
any obligations under any agreements or arrangements with any other Person with
respect to such amounts.
"Tax Returns" shall mean all Tax returns, reports and forms (including
withholding Tax returns) for a Taxable period required to be filed by applicable
federal, state, local or foreign Tax laws.
1.2 Terms Generally.
The definitions in Section 1.1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation." All references herein to
Sections, paragraphs and Exhibits shall be deemed references to paragraphs and
Sections of, and Exhibits to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time.
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2. The Merger.
2.1 The Merger.
Subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger and the Articles of Merger in accordance with the
applicable provisions of the DGCL and the MRS, at the Effective Time Merger Sub
shall be merged with and into the Company, the separate corporate existence of
Merger Sub shall cease and the Company shall continue as the surviving
corporation. The Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
2.2 Closing; Effective Time.
The closing of the transactions contemplated hereby (the "Closing")
shall take place as soon as practicable after (but not more than five (5)
Business Days following) the satisfaction or waiver of each of the conditions
set forth in Sections 6 and 7 hereof, or at such other time as the parties
hereto agree (the "Closing Date"). The Closing shall take place at the offices
of Dorsey & Whitney LLP in Seattle, Washington, or at such other location as the
parties hereto agree. In connection with the Closing, the parties hereto shall
cause the Merger to be consummated by filing the Certificate of Merger with the
Secretary of State of the State of Delaware and the Articles of Merger with the
Secretary of State of the State of Missouri, respectively, in accordance with
the relevant provisions of the DGCL and the MRS (the time of such filing being
the "Effective Time").
2.3 Effect of The Merger.
At the Effective Time, the effect of the Merger shall be as provided
in this Agreement, the Certificate of Merger, the Articles of Merger and the
applicable provisions of the DGCL and the MRS. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of the
Company shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided therein or by the
MRS.
(b) At the Effective Time, the Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall be the Bylaws of
the Surviving Corporation until thereafter changed or amended as
provided therein or by the Articles of Incorporation.
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2.5 Directors and Officers.
At the Effective Time, the officers and directors of the Company shall
constitute the officers and directors of the Surviving Corporation until such
time as their successors have been duly elected or appointed.
2.6 Effect on Capital Stock.
By virtue of the Merger and without any action on the part of Merger
Sub, the Company or the holders of any of the following securities:
(a) Conversion of the Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares, if any,
held by Persons exercising dissenters rights in accordance with
Section 351.455 and related provisions of the MRS ("Dissenting
Shares")) shall be converted and exchanged, without any action on the
part of the holders thereof, into 0.13745 Parent Common Shares (the
"Exchange Ratio").
(b) Company Stock Option Plans. At the Effective Time, all
options to purchase Company Common Stock then outstanding under the
Company's 1998 Stock Option Plan ("the Company Stock Option Plan")
shall be assumed by Parent in accordance with Section 5.13 hereof.
(c) Capital Stock of Merger Sub. At the Effective Time, each
share of common stock of Merger Sub, par value $0.0001 per share
("Merger Sub Common Stock"), issued and outstanding immediately prior
to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of Class A Common
Stock, par value $0.01 per share, of the Surviving Corporation
("Surviving Corporation Common Stock"). Each stock certificate of
Merger Sub evidencing ownership of Merger Sub Common Stock shall
evidence ownership of such shares of Surviving Corporation Common
Stock.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Shares or Company Common
Stock), reorganization, recapitalization or other like change with
respect to Parent Common Shares or Company Common Stock occurring
after the date hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a Parent Common Share will
be issued, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to a fraction of an Parent
Common Share (after aggregating all fractional Parent Common Shares to
be received by such holder) shall receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the Closing Price at the Effective
Time. The fractional share interests of each Company Shareholder shall
be aggregated, so that no Company
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Shareholder shall receive cash in respect of fractional share
interests in an amount greater than the value of one full Parent
Common Share.
(f) Dissenters' Rights. Dissenting Shares, if any, shall not be
converted into Parent Common Shares but shall instead be converted
into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to the MRS. The
Company shall give Parent prompt notice of any demand received by the
Company to require the Company to purchase Dissenting Shares, and
Parent shall have the right to participate in all negotiations and
proceedings with respect to such demand. The Company agrees that,
except with the prior written consent of Parent, or as required under
the MRS, it will not voluntarily make any payment with respect to, or
settle or offer to settle, any such purchase demand. Each holder of
Dissenting Shares who, pursuant to the provisions of the MRS, becomes
entitled to payment of the fair value for such Dissenting Shares shall
receive payment therefor (but only after the value therefor shall have
been agreed upon or finally determined pursuant to such provisions).
If, after the Effective Time, any Dissenting Shares shall lose their
status as Dissenting Shares, Parent shall issue and deliver, upon
surrender by such shareholder of certificate or certificates
representing shares of the Company Common Stock, the number of Parent
Common Shares to which such shareholder would otherwise be entitled
under this Section 2.6, the Certificate of Merger and the Articles of
Merger less the number of shares allocable to such shareholder that
would be required to be on deposit in the Escrow Fund (as defined
below) in respect of such Parent Common Shares pursuant to Section
2.7(i) and Section 9 hereof, after giving effect to any required
deposits in and distributions from the Escrow Fund.
(g) Certificate Legends. The shares of Parent Common Stock to be
issued pursuant to this Section 2 shall not have been registered and
shall be characterized as "restricted securities" under the federal
securities laws, and under such laws such shares may be resold without
registration under the Securities Act of 1933, as amended (the
"Securities Act"), only in certain limited circumstances. Each
certificate evidencing shares of Parent Common Stock to be issued
pursuant to this Section 2 shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN
OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
2.7 Surrender of Certificates.
(a) Exchange Procedures. Prior to Closing, Parent shall deliver
to each holder of record of a certificate or certificates (the
"Certificate") which immediately
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prior to the Effective Time represented outstanding shares of Company
Common Stock, whose shares were converted into the right to receive
Parent Common Shares (and cash in lieu of fractional shares) pursuant
to Section 2.6, (i) a letter of transmittal consistent with the terms
hereof (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon receipt of
the Certificates by Parent, and shall be in such form and have such
other provisions as shall be acceptable to Parent and the Company) and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Parent Common
Shares (and cash in lieu of fractional shares). Upon surrender of a
Certificate for cancellation to Parent or to such other agent as may
be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing the number of whole
Parent Common Shares less the number of Parent Common Shares to be
deposited in the Escrow Fund on such holder's behalf pursuant to
Sections 2.7(e) and 9 hereof and payment in lieu of fractional shares
which such holder has the right to receive pursuant to Section 2.6(e),
and the Certificate so surrendered shall forthwith be canceled. Until
so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Common Stock will be
deemed from and after the Effective Time, for all corporate purposes,
to evidence the ownership of the number of full Parent Common Shares
into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 2.6(e).
(b) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Shares
with a record date after the Effective Time will be paid to the holder
of any unsurrendered Certificate with respect to the Parent Common
Shares represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable
law, following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole Parent
Common Shares issued in exchange therefor, without interest at the
time of such surrender, the amount of any such dividends or other
distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 2.7(b)) with respect
to such Parent Common Shares.
(c) Transfers of Ownership. If any certificate for Parent Common
Shares is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so
surrendered will be properly endorsed and otherwise in proper form for
transfer and that the Person requesting such exchange will have paid
to Parent or any agent designated by it any transfer or other Taxes
required by reason of the issuance of a certificate for Parent Common
Shares in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent
or any agent designated by it that such Tax has been paid or is not
payable.
(d) Dissenting Shares. The provisions of this Section 2.7 shall
also apply to Dissenting Shares that lose their status as such, except
that the obligations of Parent under this Section 2.7 shall commence
on the date of loss of such status and the
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holder of such shares shall be entitled to receive in exchange for
such shares the number of Parent Common Shares to which such holder is
entitled pursuant to Section 2.6 hereof.
(e) Escrow. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Section 9 hereof,
Parent shall cause to be delivered to the Escrow Agent a certificate
or certificates representing that number of Parent Common Shares equal
to the Escrow Amount, which shall be registered in the name of the
Escrow Agent as nominee for the holders of Certificates canceled
pursuant to this Section 2.7. Such shares shall be beneficially owned
by such holders and shall be held in escrow and shall be available to
compensate Parent for certain damages as provided in Section 9. To the
extent not used for such purposes, such shares shall be released, all
as provided in Section 9 hereof and in the Escrow Agreement.
2.8 No Further Ownership Rights in Capital Stock.
All Parent Common Shares issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof (including
any cash paid in lieu of fractional shares) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 2.
2.9 Lost, Stolen or Destroyed Certificates.
In the event any Certificates shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof, such Parent Common Shares (and cash in lieu of fractional
shares) as may be required pursuant to Section 2.6; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to the Certificates alleged to have been lost stolen or
destroyed.
2.10 Tax and Accounting Consequences.
It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368 of the Code and qualify for
accounting treatment as a pooling. The parties to this Agreement hereby adopt
this Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations. Each of the
parties hereto agrees to file any and all Tax Returns, in a manner consistent
with the qualification of the Merger as a reorganization under Section 368 of
the Code unless advised by its principal Tax advisors that substantial authority
does not exist for such qualification. Notwithstanding the foregoing or anything
else to the contrary contained in this Agreement, except for the representations
and warranties contained in Section 4.19 and the
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Tax certificates provided under Section 7.4, the parties acknowledge and agree
that no party is making any assurances as to the status of the Merger as a
reorganization under Section 368 of the Code or as to the effect, if any, that
any transaction consummated prior to the Effective Time has or may have on any
such reorganization status.
2.11 Taking of Necessary Action; Further Action.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action, so long as such action is
not inconsistent with this Agreement.
3. Representations and Warranties of the Company and the Principal
Shareholders.
Except as disclosed in the Company Disclosure Statement, the Company and
the Principal Shareholders jointly and severally represent and warrant to Parent
and Merger Sub as follows:
3.1 Organization and Standing of the Company.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Missouri. The Company is duly
qualified to do business as a foreign corporation in each jurisdiction in which
the failure so to qualify would have a Company Material Adverse Effect. Attached
to the Company Disclosure Statement are true and complete copies of the Articles
of Incorporation and the Bylaws, as in effect on the date hereof, of the
Company. The share certificates and transfer books and the minute books of the
Company which have been made available for inspection by Parent and its
representatives are complete and correct. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the board of directors and committees of the
board of directors of the Company, and no meeting of any such shareholders,
board of directors or committee has been held for which minutes have not been
prepared and are not contained in such minute books.
3.2 Authority.
The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger by the Company Shareholders as contemplated by Section 5.11. The Board of
Directors of the Company has (i) unanimously approved this Agreement and the
Merger, (ii) determined that in its opinion the Merger is in the best interests
of the Company Shareholders and is on terms that are fair to such shareholders
and (iii) recommended that the Company Shareholders approve this Agreement and
the Merger. This Agreement has been duly
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executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and except to the extent such enforceability may be limited by
general principles of equity. The execution and delivery of this Agreement by
the Company does not, and the consummation of the transactions contemplated
hereby will not conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
any material benefit under (i) any provision of the Articles of Incorporation or
Bylaws of the Company, as amended, (ii) any mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise or license which
is required by this Agreement to be disclosed in the Company Disclosure
Statement, or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its properties or assets. No
consent, approval, order or authorization of, or registration, declaration or
filing with or notice to any Governmental Authority or any other Person is
required by or with respect to the Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filings of the Certificate of Merger and the Articles
of Merger, as provided in Section 2.2, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
(iii) the consents, approvals, orders, authorizations, registrations,
declarations, filings and notices described in Section 3.2 of the Company
Disclosure Statement, and (iv) such other consents, authorizations, filings,
approvals, registrations and notices which, if not obtained or made, would not
prevent, or materially alter or delay, any of the transactions contemplated by
this Agreement.
3.3 No Bankruptcy, etc.
There has not been filed any petition or application, or any
proceedings commenced which have not been discharged, by or against the Company
or any of its assets under any law, domestic or foreign, relating to bankruptcy,
reorganization, compromise arrangements, insolvency, readjustment of debt or
creditors rights, and no assignment or proposal for the benefit of creditors has
been made by the Company.
3.4 Litigation.
Except as set forth in Section 3.4 of the Company Disclosure
Statement, there is no claim, action, suit, proceeding, arbitration, or other
proceeding or investigation pending or, to the Knowledge of the Company,
threatened against or relating to the Company.
3.5 Capital Stock of the Company.
(a) The authorized capital stock of the Company consists of Sixty
Million (60,000,000) shares of common stock, par value $0.01 per share
(the "Company Common Stock") consisting of Forty Million (40,000,000)
shares of Class A Voting Common Stock, par value $0.01 per share (the
"Class A Common Stock"); and Twenty Million (20,000,000) shares of
Class B Non-Voting Common Stock, par value $0.01 per share (the "Class
B Common Stock," and collectively with the Class A Common Stock,
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the "Company Common Stock"), of which Six Million (6,000,000) shares
of Class A Common Stock and One Hundred Fifty Thousand (150,000)
shares of Class B Common Stock are issued and outstanding. The
shareholders of the Company Common Stock as set forth in Section
3.5(a) of the Company Disclosure Statement (the "Company
Shareholders") are the record owners of the issued and outstanding
Company Common Stock as of the Record Date (as defined in Section
5.11). There are no other shares of Company Common Stock issued, or,
except as set forth in Section 3.5(b) of the Company Disclosure
Statement, reserved for issuance, or authorized or outstanding. All
Company Common Stock is duly authorized, validly issued, fully paid
and non-assessable and was not issued in violation of any preemptive
or subscription rights of any Person.
(b) Except for stock options subject to the Company Stock Option
Plan, which are described in Section 3.5(b) of the Company Disclosure
Statement, there are no outstanding warrants, options, rights,
securities, agreements, subscriptions or other commitments pursuant to
which the Company is or may become obligated to issue, deliver or sell
any additional shares of the Company Common Stock or to issue, grant,
extend or enter into any such warrant, option, right, security,
agreement, subscription or other commitment. Except as set forth in
Section 3.5(b) of the Company Disclosure Statement and except as
provided in the Company's Articles of Incorporation, there are no
outstanding options, rights, securities, agreements or other
commitments pursuant to which the Company is or may become obligated
to redeem, repurchase or otherwise acquire or retire any Company
Common Stock which is presently outstanding or may be issued in the
future.
(c) All securities of the Company heretofore issued and sold by
the Company were issued and sold in compliance with all applicable
federal and state securities laws.
(d) The Principal Shareholders have entered into written
agreements with Parent to vote all shares held by such shareholders in
favor of the Merger in substantially the form attached as Exhibit
3.5(e) (the "Voting, Lockup and Registration Rights Agreements") and
have executed and delivered to Parent the irrevocable proxy attached
thereto concurrently with the execution of this Agreement.
(e) At the Effective Date, except as granted in connection with
the transactions contemplated by this Agreement, no Person will
possess the right to require or compel the Company or any successor
thereto to file any registration statement to register under the
Securities Act or any state securities laws any shares of Company
Common Stock or any security issued in exchange or substitution
therefor.
(f) Each Principal Shareholder (i) is an accredited investor, as
such term is defined in Rule 501(a) of Regulation D under the
Securities Act, and (ii) has completed and delivered to Parent an
Investor Certificate in the form attached as Exhibit 3.5(g) hereto.
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3.6 Equity Interests.
Except as described in Section 3.6 of the Company Disclosure
Statement, the Company does not have any Subsidiaries and does not directly or
indirectly own any capital stock of or other equity interests in any
corporation, partnership or other entity, and the Company is not a member of or
participant in any partnership, joint venture or similar entity and is not
obligated to become such a member or participant.
3.7 Financial Statements.
The Company has delivered to Parent the balance sheets of the Company
as of the years ended December 31, 1997, 1998 and 1999, and the related
statements of income, shareholders' equity and cash flows for the years then
ended, and unaudited financial statements for the most recent quarter end (the
"Financial Statements"). The Financial Statements have been prepared from and
are in accordance with the books and records of the Company, have been prepared
in conformity with generally accepted accounting principles in the United States
consistently applied (subject, in the case of interim financial statements, to
normal, recurring, year-end adjustments and in each case to the lack of required
footnotes) and fairly present in all material respects the financial condition
of the Company as of the dates thereof and the results of its operations for the
periods then ended.
3.8 Liabilities.
The Company does not have any liabilities or obligations of any nature
(whether accrued, absolute, contingent, unasserted or otherwise) except (i) as
set forth or reflected on the Financial Statements (or described in the notes
thereto), (ii) for open purchase contracts and orders for supplies and equipment
in the Ordinary Course of Business (none of which is reflected on the Financial
Statements), (iii) for liabilities and obligations incurred in the Ordinary
Course of Business consistent with past practice since the date of the Financial
Statements and not in violation of this Agreement, (iv) for liabilities
disclosed in the Company Disclosure Statement, (v) for liabilities and
obligations arising under the Contracts described in Sections 3.13 and 3.14 of
the Company Disclosure Statement (or not required to be described therein due to
the dollar amount or other terms of such Contracts), and (vi) for liabilities
and obligations under applicable laws and regulations of Governmental
Authorities of the type generally applicable to businesses engaged in the
transaction of business for profit.
3.9 Taxes.
(a) The Company has never been a member of an affiliated group
within the meaning of Section 1504 of the Code. Except as set forth in
Section 3.9 of the Company Disclosure Statement, (1) the Company filed
or caused to be filed in a timely manner (within any applicable
extension periods) all Tax Returns for the Pre-Closing Tax Period
required to be filed as of the date hereof with respect to the Company
and have paid all Taxes shown as due thereon, (2) each such Tax Return
is true, complete and correct in all respects, (3) all Taxes of the
Company arising under applicable law in respect of the Pre-Closing Tax
Period required to be paid as of the date hereof have been paid in
full to the proper authorities (or adequate reserves for the payment
thereof have
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been established on the Financial Statements in accordance with GAAP),
(4) no Tax Liens have been filed and no claims are being asserted or
might be asserted with respect to any Taxes of the Company, (5) the
Company is not delinquent in the payment of any Taxes for which the
Company may be liable other than amounts that are being disputed in
good faith and for which reserves have been established in the
Financials Statements in accordance with GAAP, (6) no restrictions on
assessment or collection of Taxes have been waived with respect to the
Company and the Company has not consented to the extension of any
statute of limitations with respect to the Company relating to Taxes
for which the Company may be liable, (7) there never has been, and
currently there is no, action, suit, proceeding, investigation or
claim now pending or, to the Knowledge of the Company, impending or
threatened against the Company with respect to any Tax for the
Pre-Closing Tax Period, (8) the Company has neither agreed nor is
required by law to make any adjustment by reason of a change in
accounting method or otherwise that will affect the Taxable income or
deductions of the Company for any period ending after the Closing
Date, except for such adjustments as are contemplated by this
Agreement and the transactions contemplated hereby, (9) no returns,
reports or forms filed by or on behalf of the Company with respect to
Taxes are currently being audited or examined, nor has notice been
received by the Company of any audit or examination, and (10) the
Company does not have and has not had a permanent establishment in any
foreign country, as defined in any applicable Tax treaty or convention
between the United States of America and such foreign country. Section
3.9 of the Company Disclosure Statement also sets forth the Company's
best estimate of all unpaid Taxes to be accrued in respect of the
Pre-Closing Tax Period (other than accrued and unpaid Taxes reflected
on the Financial Statements). The Company has delivered or made
available to Parent or its representatives accurate and complete
copies of all federal and state income Tax Returns previously filed by
the Company for its last three full taxable years.
(b) Except as disclosed in Section 3.9 of the Company Disclosure
Statement, (1) the Company has not made with respect to itself, or any
property held by it, any consent under Section 341 of the Code, (2) no
property of the Company is "tax exempt use property" within the
meaning of Section 168(h) of the Code, (3) the Company is not a party
to any lease made pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954, (4) there are not now and never have been any
Tax sharing agreements, Tax indemnity agreements, Tax allocation
agreements or other arrangements with any Person under which the
Company could have any obligation or liability on or after the Closing
Date, (5) the Company is not and has not been a United States real
property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code and Parent is not required to withhold
tax with respect to the Merger by reason of Section 1445 of the Code,
(6) the Company has not entered into any compensatory agreements with
respect to the performance of services which payment thereunder would
result in a nondeductible expense to the Company pursuant to Section
280G or 162 (other than by reason of Section 263 or 263A) of the Code
or an excise tax to the recipient of such payment pursuant to Section
4999 of the Code, (7) the Company has not participated in an
international boycott as defined in Section 999 of the Code, (8) the
Company has no net operating or other tax attributes presently subject
to limitation under
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Code Sections 382, 383 or 384 except as such limitations may be
imposed by reason of the transaction contemplated herein; (9) except
with respect to any cash paid by Parent pursuant to this Agreement,
the transactions contemplated by this Agreement are not subject to the
tax withholding provisions of Section 3406, or of subchapter A of
Chapter 3 of the Code or of any other provision of law, (10) no item
of income or gain reported by the Company for financial accounting
purposes in any pre-Closing period is required to be included in
taxable income for a post-Closing period, and (11) there are no
outstanding rulings of, or requests for rulings with, any tax
authority addressed to the Company that are, or if issued would be,
binding on the Company.
3.10 Assets Other than Real Property.
The Company has good and marketable title to all tangible assets
reflected on the Financial Statements or acquired after the date thereof, except
those since sold or otherwise disposed of for fair value in the Ordinary Course
of Business, in each case free and clear of all Liens except Permitted Liens.
All the tangible personal property owned by the Company is in all material
respects in good operating condition and repair, ordinary wear and tear
excepted, and to the Company's Knowledge all personal property leased by the
Company is in all material respects in the condition required of such property
by the terms of the lease applicable thereto during the term of such lease and
upon the expiration thereof.
3.11 Real Property.
Section 3.11 of the Company Disclosure Statement sets forth a complete
list of all real property and interests in real property leased by the Company.
The Company does not own any interests in real property in fee. The Company has
a good and valid leasehold interest in all real property and interests in real
property shown in Section 3.11 of the Company Disclosure Statement to be leased
by it, in each case free and clear of all Liens except Permitted Liens. Except
as disclosed in Section 3.11 of the Company Disclosure Statement, the Company
has never owned, leased or used, or controlled any other Person which has owned,
leased or used, any real property or interests in real property, other than as
now owned, leased or used by the Company.
3.12 Intellectual Property.
(a) Section 3.12A of the Company Disclosure Statement sets forth
a true and complete description of the Company's IP Assets and
Materials. Any intellectual property interests and rights of any other
Person in the Company's IP Assets or Materials, or any portions
thereof, have been identified in Section 3.12B of the Company
Disclosure Statement. Section 3.12B of the Company Disclosure
Statement sets forth a true and complete list of all such interests
and rights. Except as disclosed in Section 3.12B of the Company
Disclosure Statement, all Company IP Assets and Materials, including
those disclosed in Section 3.12A of the Company Disclosure Statement,
are owned by the Company. Except as identified in Section 3.12B of the
Company Disclosure Statement, the Company owns or has the right to
use, without payment to any other Person, all of the Company's IP
Assets and Materials, or portions thereof, free and clear of all
Liens. The Company has no notice or Knowledge of any objection or
claim being asserted by any
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Person with respect to the ownership, validity, enforceability or use
of any such Company IP Assets or Materials or challenging or
questioning the validity or effectiveness of any license relating
thereto. The conduct of the Company's business, as presently conducted
and to the Company's Knowledge, as proposed to be conducted (including
the use, preparation, and design of the Materials), and the Materials
themselves, do not violate, conflict or infringe any contract,
license, patent, copyright, trademark, trade secret, or other
intellectual property rights, or privacy, publicity or similar rights
of any other Person. Except as disclosed in Section 3.12C of the
Company Disclosure Statement, there are no unresolved conflicts with,
or pending claims of, any other Person, whether in litigation or
otherwise, involving the Company's IP Assets or Materials, and there
are no Liens or rights of any other Person, including moral rights,
which would prevent the Company from fulfilling its obligations under
this Agreement. No activity of any employee of the Company as or while
an employee of the Company has caused a violation of any trade secret
of the Company.
(b) Any options, rights, licenses or interests of any kind
relating to the IP Assets or Materials, or any portions thereof,
granted to any other Person have been identified in Section 3.12D of
the Company Disclosure Statement. Section 3.12D of the Company
Disclosure Statement sets forth a true and complete list of all such
options, rights, licenses or interests. Except as disclosed in Section
3.12D of the Company Disclosure Statement, the Company has not granted
any options, rights, licenses, or interests of any kind relating to
the Company's IP Assets or Materials, or any portions thereof.
3.13 Contracts.
Except as set forth in Section 3.13 of the Company Disclosure
Statement, the Company is not a party to and neither the Company nor any of its
property or assets are bound by any contracts, agreements or understandings,
whether written or oral, involving:
(a) agreements or contracts involving expenditures or receipts of
the Company in excess of $10,000 in any twelve month period;
(b) employment agreements or employment contracts that are not
terminable at will by the Company;
(c) (i) employee collective bargaining agreements or other
contracts with any labor union, (ii) plans, programs, arrangements or
agreements that provide for the payment of severance, termination or
similar type of compensation or benefits upon the termination or
resignation of any employee of the Company or (iii) plans, programs,
arrangements or agreements that provide for medical or life insurance
benefits for former employees of the Company or for current employees
of the Company upon their retirement from, or termination of
employment with, the Company;
(d) covenants not to compete, other than confidentiality,
non-disclosure and non-competition agreements executed by employees of
the Company in favor of the Company;
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(e) agreements, contracts or other arrangements with (i) any
Company Shareholder, (ii) any Affiliate of the Company or any
Shareholder of any Affiliate of the Company or (iii) any officer,
director or employee of the Company or any Affiliate of the Company
(other than employment agreements covered by clause (b) above and
confidentiality, non-disclosure and non-competition agreements with
employees);
(f) licenses or other agreements relating in whole or in part to
patents, trademarks, trade names, service marks, copyrights or other
intellectual property rights (including, but not limited to, any
license or other agreement under which the Company has the right to
use any of the same owned or held by any other Person);
(g) licenses or franchise agreements granted by the Company
pursuant to which the Company has agreed to refrain from granting
license or franchise rights to any other Person;
(h) agreements or contracts under which the Company has (i)
incurred any Indebtedness or (ii) given any Guarantee;
(i) mortgages, pledges, security agreements, deeds of trust or
other documents under which the Company has granted a Lien or security
interest (including Liens upon properties acquired under conditional
sales, capital leases or other title retention or security devices);
or
(j) other agreements, contracts, leases, licenses, commitments or
instruments to which the Company is a party or by or to which it or
any of its properties or assets or businesses is bound or subject
which is otherwise material to the business of the Company as
presently conducted or as proposed to be conducted.
The Company has delivered to Parent a true and correct copy or written summary
of each agreement, contract, lease, license, commitment or instrument of the
Company set forth in this Section 3.13 of the Company Disclosure Statement
(collectively, the "Contracts") and each such agreement is in full force and
effect and is a legal, valid and binding agreement of the Company and, to the
Company's Knowledge, of each other party thereto, enforceable against the
Company and each other party thereto, in accordance with its terms; the Company
has performed or is performing all material obligations required to be performed
by it under the Contracts and is not (with or without notice or lapse of time or
both) in breach or default in any material respect thereunder; and to the
Company's Knowledge, no other party to any of the Contracts is (with or without
notice or lapse of time or both) in breach or default in any material respect
thereunder. The Company knows of no facts or circumstances that would reasonably
be expected to materially adversely affect the Company's ability to perform its
obligations under any Contract. With respect to Contracts required to be
disclosed in Section 3.13 of the Company Disclosure Statement which have not
been furnished to Parent prior to execution of this Agreement, none of such
Contracts contains any penalty, forfeiture, guaranty, warranty, liquidated
damages or default provisions that would require the Company to pay, forfeit or
refund a sum, or to provide services with a value, in excess of the original
value of such Contract, in the event of the Company's default or breach under
the terms of such Contract.
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3.14 Partner Agreements.
Set forth in Section 3.14 of the Company Disclosure Statement is a
true and complete list of each agreement between the Company and those
businesses which the Company publicly identifies as its business partners
(collectively, the "Partner Agreements"). Each Partner Agreement is in full
force and effect and is a legal, valid and binding agreement of the Company,
enforceable in accordance with its terms; the Company has performed or is
performing all material obligations required to be performed by it under the
Partner Agreements and is not (with or without notice or lapse of time or both)
in breach or default in any material respect thereunder; and no other party to
any of the Partner Agreements is (with or without notice or lapse of time or
both) in breach or default in any material respect thereunder. The Company is
not engaged in any disputes with any party to any Partner Agreement, and to the
Company's Knowledge, no party to any Partner Agreement is considering
termination, nonrenewal or any material adverse modification of its arrangements
with such Partner Agreements with the Company.
3.15 Certain Payments.
Since its inception, neither the Company nor, to the Company's
Knowledge, any director, officer, employee or other Person associated with or
acting for or on behalf of the Company, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any Affiliate of the Company, or (iv) in violation of
applicable law, or (b) established or maintained any fund or asset that has not
been recorded in the books and records of the Company.
3.16 Accounts Receivable.
All the accounts receivable of the Company as shown on or reflected in
the Financial Statements constituted at the date of the Financial Statements
actual and bona fide receivables representing obligations for the amount thereof
shown on the books of the Company. All such accounts receivable resulted from
the conduct of the Company's business in the Ordinary Course of Business.
3.17 Absence of Changes or Events.
(a) Except as set forth in Section 3.17 of the Company Disclosure
Statement, since December 31, 1999, the business of the Company has
been conducted in the Ordinary Course of Business and there has not
been any fact, event, circumstance or change affecting the Company
which has had or is reasonably likely to have a Company Material
Adverse Effect.
(b) Except as set forth in Section 3.17 of the Company Disclosure
Statement, since December 31, 1999, the Company has not (i) declared
or paid or made, or agreed to declare or pay or make, any dividends or
other distributions in cash or property to the Company Shareholders,
purchased or redeemed any securities issued by
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the Company, (ii) made any material expenditures or investments, or
acquired any entity or entered into any joint venture, or entered into
any contract to do any of the foregoing, (iii) other than salaries and
benefits, paid, loaned or advanced money to or transferred property to
the Company Shareholders or to Affiliates of the Company or entered
into any contract to do any of the foregoing, (iv) sold, licensed,
assigned or otherwise transferred any material assets (other than in
the Ordinary Course of Business), or entered into any contract to do
any of the foregoing or to be acquired by another entity, (v) canceled
any material Indebtedness owed to the Company or waived any material
claims of any kind or (vi) failed to pay any payroll or other Taxes
when due or failed to pay all other obligations of the Company
consistent with past practice.
3.18 Compliance with Applicable Laws.
(a) The Company and its properties, assets, operations and
business have been operated and are in compliance in all material
respects with all applicable statutes, laws, ordinances,
administrative orders, rules and regulations of any Governmental
Authority and any filing requirements relating thereto.
(b) The Company has obtained all permits, licenses and other
authorizations which are required with respect to the operation of its
business and the ownership of its assets under federal, state, local
and foreign laws, except where the failure to obtain a permit, license
or authorization would not have a Company Material Adverse Effect. The
Company is in compliance in all material respects with all terms and
conditions of such permits, licenses and authorizations.
3.19 Certain Employee Matters.
(a) No activity of any officer, director or employee of the
Company as or while an officer, director or employee of the Company
has caused (or in light of the Company's business as now conducted or
as proposed to be conducted, will cause) a violation of any employment
contract, confidentiality agreement, patent disclosure agreement or
other contract or agreement, or any judgment, decree or order, by
which any such officer, director or employee is bound. Neither the
execution and delivery of the Employment Agreements by the employees
who will be parties thereto, nor the conduct of the business of the
Company as presently conducted, or as proposed to be conducted, will
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 such employees are now obligated.
(b) Except as disclosed in Section 3.19(b) of the Company
Disclosure Statement, all current and former members of management and
key personnel (including all employees involved in the development of
the Company's IP Assets or Materials) of and consultants to the
Company have executed and delivered to the Company a proprietary right
and confidential information agreement restricting such Person's right
to disclose confidential information of the Company. Except as
disclosed in Section 3.19(b) of the Company Disclosure Statement, all
such members of management and key personnel of and consultants to the
Company have been party to a "work-for-hire"
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arrangement, in the case of consultants, or proprietary rights
agreement, in the case of members of management and key personnel,
with the Company pursuant to which either (i) the Company, in
accordance with applicable federal and state law, has full, effective,
exclusive and original ownership of all tangible and intangible
property thereby arising or (ii) there has been conveyed to the
Company by appropriately executed instruments of assignment full,
effective and exclusive ownership of all tangible and intangible
property thereby arising. No employee, agent, consultant or contractor
associated with any of the members of management or key personnel of
the Company who has contributed to or participated in the conception
and development of the Company's IP Assets or Materials or other
proprietary rights of the Company has asserted or threatened any claim
against the Company, including any claim of moral rights, in
connection with such Person's involvement in the conception and
development of the Company's IP Assets or Materials or other
proprietary rights and no such Person has a reasonable basis for any
such claim.
(c) Neither the Company nor any of its officers or employees have
any patents or copyrights issued or applications pending for any
device, process, design or invention of any kind now used or needed by
the Company in the furtherance of its business operations as presently
conducted or as proposed to be conducted, which patents, copyrights or
applications have not been assigned to the Company with such
assignment duly recorded in the United States Patent and Trademark
Office or with the United States Department of Commerce, Library of
Congress, as the case may be.
(d) Since the date of its incorporation, the Company has not
experienced any labor disputes, union organization attempts or work
stoppage due to labor disagreements. The Company is in compliance in
all material respects with all applicable laws respecting employment
and employment practices, occupational safety and health standards,
terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice or any other unlawful practice
that may give rise to a claim. There is no unfair labor practice
charge or complaint against the Company pending or threatened before
the National Labor Relations Board or any comparable state agency or
authority. There is no labor strike, dispute, request for
representation, slowdown or stoppage pending or threatened against or
affecting the Company. No question concerning representation has been
raised or is threatened respecting the employees of the Company. No
grievance which might have a material adverse effect on the Company,
nor any arbitration proceeding arising out of collective bargaining
agreements, is pending or threatened against the Company.
(e) The Company has properly classified all non-employee Persons
providing services to the Company, including all consultants,
independent contractors, or other persons that have or are performing
services on behalf of the Company. The Company is in compliance in all
material respects with all applicable equal employment opportunity
laws, ordinances, regulations, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, social security and similar
taxes and occupation safety and health and other applicable rules (the
"Employment Regulations") and is not engaged in any practice that may
give rise to a claim under the Employment Regulations. Other than as
set forth in Section 3.19(e) of the Company Disclosure Statement, (i)
the Company is not aware of any facts or circumstances, which could
form the basis for
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assertion of a claim or liability, in each case, regarding
non-compliance with Employment Regulations and (ii) the Company is not
subject to any discrimination claims or affirmative action obligations.
3.20 Insurance.
Section 3.20 of the Company Disclosure Statement sets forth a complete
and accurate list and description, including, but not limited to, annual
premiums and deductibles, of all policies of fire, liability, product liability,
workmen's compensation, health, directors and officers, keyman, employees and
officers and other forms of insurance presently in effect with respect to the
Company's business, true copies of which have been delivered to, or made
available for review by, Parent. All such policies are valid and outstanding
policies and provide insurance coverage for the properties, assets and
operations of the Company, of the kinds, in the amounts and against the risks
required to comply with applicable law. The Company has not been refused any
insurance with respect to any aspect of the operations of its business nor has
its coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance. No notice of cancellation or
termination has been received by the Company to any such policy. The activities
and operations of the Company have been conducted in a manner so as to conform
in all material respects to all applicable provisions of such insurance
policies. There are no performance and surety bonds currently posted by the
Company.
3.21 Benefit Plans.
(a) Section 3.21(a) of the Company Disclosure Statement sets
forth a list and brief description of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA); and other plans for the
benefit of employees, including but not limited to any employment
agreements, executive compensation, fringe benefit, incentive, stock
option, performance pay, loan or loan guarantee, plant closing, change
of control, equity-based or deferred compensation plans, and any other
similar fringe or employee benefit plans, funds, programs or
arrangements, (all the foregoing being herein called "Benefit Plans")
maintained or contributed to by the Company for the benefit of any
officers or employees of the Company, whether of a legally binding
nature or in the nature of informal understandings. The Company has
delivered or made available to Parent true, complete and correct
copies of (i) each Benefit Plan (or, in the case of any unwritten
Benefit Plan, a brief description thereof), (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service
with respect to any Benefit Plan (if any such report was required) and
(iii) each trust agreement and group annuity contract relating to any
Benefit Plan. No such Benefit Plan is a plan subject to Title IV of
ERISA. There is no other entity or business that is treated as a
single employer with the Company within the meaning of Sections
414(b), (c), (m) or (o) of the Code.
(b) The Company and the Benefit Plans are in compliance in all
material respects with the provisions of ERISA and the Code and the
regulations and published interpretations thereunder. Any Benefit Plan
that is intended to qualify under
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Section 401(a) of the Code has received a favorable determination
letter from the IRS ruling that the plan does so qualify, and to the
Company's Knowledge, nothing has occurred since the issuance of each
such letter that could reasonably be expected to cause the loss of the
tax-qualified status of any such plan. All Benefit Plans have been
administered in accordance with their terms in all material respects.
(c) No transaction has occurred with respect to any Benefit Plan
that could subject the Company to a tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA. No Benefit Plans
(other than such plans intended to be qualified under Section 401(a)
of the Code) provide benefits to retired employees, except as required
by Section 601 et. seq. of ERISA and Section 4980B of the Code.
(d) All contributions required under applicable law or the terms
of any Benefit Plan or other agreement relating to a Benefit Plan to
be paid by the Company have been completely and timely made to each
such plan when due, and the Company has established adequate reserves
on its books to meet liabilities for contributions accrued but that
have not been made because they are not yet due and payable.
(e) No facts or circumstances exist, no actions have been taken
or omitted to be taken, nothing has occurred, and nothing will occur
as a result of the execution of this Agreement or the consummation of
the transactions contemplated herein, such that the Company could be,
or is, subject (directly or indirectly, such as through an
indemnification, guarantee or similar agreement or obligation) to any
liability for any claims, judgments, damages, penalties, taxes
(including excise taxes), assessments or similar items (including,
without limitation, any claim by a plan, or by the Pension Benefit
Guaranty Corporation under Section 412 of the Code or under Title IV
of ERISA, or by any other governmental authority) with respect to (i)
any plan currently or formerly maintained by the Company or (ii) any
plan to which the Company has contributed or has been obligated to
contribute (other than liability for benefit payments incurred in the
normal operations of any such plan for periods preceding and through
the Closing Date).
(f) Except as disclosed in Section 3.21(f) of the Company
Disclosure Statement, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or any employee of the Company under any Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any
Benefit Plan or (iii) result in any acceleration of the time of
payment or vesting of any such benefit. Except as described in Section
3.21(f) of the Company Disclosure Statement no payment (or
acceleration of benefits) required to be made to any employee as a
result of the transactions contemplated by this Agreement, under any
Benefit Plan or otherwise, will, if made, constitute a payment that
would not be deductible under Section 280G of the Code.
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3.22 Beneficial Ownership
To the Company's and the Principal Shareholder's Knowledge, no Company
Shareholder together with such Company's Shareholder's associates, Affiliates or
Persons with whom such Shareholder acts jointly or in concert, as a result of
the Merger, will immediately after the Effective Time beneficially own ten
percent (10%) or more of the outstanding Parent Common Shares.
3.23 Disclosure.
The Company has not failed to disclose to Parent any facts,
circumstances, events or acts of which the Company has Knowledge which may
constitute a Company Material Adverse Effect. No representation or warranty of
the Company contained in this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading or necessary in order to fully and fairly provide the
information required to be provided by this Agreement.
3.24 Confidentiality Obligations.
Except in the Ordinary Course of Business as disclosed in Section 3.24
of the Company Disclosure Statement, the Company is not in possession of any
information, documents or material under an obligation of confidentiality to any
other Person. The conduct of the Company's business as presently conducted and
as proposed to be conducted (including the use, preparation, and design of the
IP Assets or Materials), will not violate or conflict with the obligations of
confidentiality of the Company to any such other Person.
3.25 Depositories; Powers of Attorney.
Section 3.25 of the Company Disclosure Statement sets forth: (i) the
name of each bank or similar entity in which the Company has an account, lockbox
or safe deposit box and the names of all Persons authorized to draw thereon or
to have access thereto and (ii) the name of each Person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms thereof.
3.26 Brokers' or Finders' Fees.
Except as described in Section 3.26 of the Company Disclosure
Statement, no agent, broker, investment banker or other person or firm acting on
behalf of the Company or any of its directors or executive officers, or under
the authority of any of them will be entitled to any broker's or finder's fee or
any other commission or similar fee, directly or indirectly, from the Company in
connection with any of the transactions contemplated hereby.
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3.27 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental Laws" shall mean any federal, state or
local laws, ordinances, codes, regulations, rules, policies and
orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation
of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances,
materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other
persons, including the public; and
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including
without limitation, those substances, materials and wastes
defined in or regulated under any Environmental Laws.
(b) To the Company's Knowledge, the Company is not in violation
of any Environmental Law relating to the properties or facilities of
the Company at which any part of the Company's business is conducted.
To the Company's Knowledge, the Company has not used, generated,
manufactured or stored on or under any part of its properties or
facilities at which any part of the Company's business is conducted,
or transported to or from any part thereof, any Hazardous Materials in
violation of any applicable Environmental Laws. To the Knowledge of
the Company, during the Company's period of occupancy there has not
been any presence, disposal, or release by the Company of any
Hazardous Materials on, from or under any part of the Company's
properties or facilities at which any part of the Company's business
is conducted. No civil, criminal or administrative action, proceeding
or investigation is pending against the Company, or to the Company's
Knowledge, threatened against the Company, and the Company has no
Knowledge of any facts or circumstances which could form the basis for
assertion of a claim or liability, in each case, regarding
non-compliance with Environmental Laws relating to the Company's
business.
3.28 Related Party Transactions.
Except as set forth in Section 3.28 of the Company Disclosure
Statement (a) no Related Party has, and no Related Party has at any time since
December 31, 1997 had, any direct or indirect interest in any material asset
used in or otherwise relating to the business of the Company; (b) no Related
Party is, or has at any time since December 31, 1997 been, indebted to the
Company; (c) since December 31, 1997, no Related Party has entered into, or has
had any direct or indirect financial interest in (other than through de minimis
stock ownership in public companies), any material contract, transaction or
business dealing involving the Company; (d) no Related Party is competing, or
has at any time since December 31, 1997 competed, directly or indirectly, with
the Company; and (e) no Related Party has any claim or right against the company
(other than rights to receive compensation and benefits for services performed
as an employee of the Company), rights to reimbursement for expenses, and rights
to indemnification for their acts as officers and directors of the Company under
applicable law). For purposes of
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this Section 3.28 each of the following will be deemed to be a "Related Party:"
(i) each individual who is, or who has at any time since December 31, 1997 been,
an officer or director of the Company; (ii) each member of the immediate family
of each of the individuals referred to in clause "(i)" above; and (iii) any
trust or other Person (other than the Company) in which any one of the
individuals referred to in clauses "(i)" and "(ii)" above holds (or in which
more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.
3.29 Canadian Residency Status, etc.
(a) To the Knowledge of the Company and the Principal
Shareholders, (i) none of the Company Shareholders other than the
Principal Shareholders are residents of Canada and (ii) the Company
Shareholders will acquire Parent Common Shares for investment and not
for resale into Canada. None of the Principal Shareholders is a
resident of Canada. The Principal Shareholders will be acquiring the
Parent Common Shares allocated to them for investment and not for
resale into Canada.
(b) The Company and the Principal Shareholders acknowledge that:
(i) no securities commission or similar regulatory authority
has reviewed or passed on the merits of the Parent Common Shares;
(ii) there is no government or other insurance covering the
Parent Common Shares;
(iii) there are risks associated with the acquisition of the
Parent Common Shares;
(iv) there are restrictions on the ability of the Company
Shareholders to resell the Parent Common Shares and it is the
responsibility of the Company Shareholders to find out what those
restrictions are and to comply with them before selling the
Parent Common Shares; and
(v) Parent has advised the Company and the Principal
Shareholders that Parent is relying on an exemption from the
requirements to provide the Company Shareholders with a
prospectus and to sell securities through a person registered to
sell securities under the British Columbia Securities Act (the
"B.C. Act") and, as a consequence of acquiring securities
pursuant to this exemption, certain protections, rights and
remedies provided by the B.C. Act, including statutory rights of
rescission or damages, will not be available to the Company
Shareholders.
3.30 Principal Shareholder Employment Agreements.
Each of the Principal Shareholders has executed and delivered to
Parent an employment agreement in substantially the form attached hereto as
Exhibit 3.30.
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3.31 Intellectual Property Assignment Agreements.
Each of the Principal Shareholders has executed and delivered to the
Company an Intellectual Property Assignment Agreements in substantially the
forms attached hereto as Exhibit 3.31.
4. Representations and Warrantees of Parent and Merger Sub.
Except as disclosed in a document of even date herewith and delivered by
Parent to the Company prior to the execution and delivery of this Agreement and
referring to the representations and warranties in this Agreement (the "Parent
Disclosure Statement"), Parent and Merger Sub represent and warrant to the
Company as follows:
4.1 Organization and Standing of Parent.
Parent is a corporation duly organized, validly existing and in good
standing under the federal laws of Canada. Parent is duly qualified to do
business as a foreign corporation in each jurisdiction in which the failure so
to qualify would have a Parent Material Adverse Effect. Attached to the Parent
Disclosure Statement are true and correct copies of the Certificate or Articles
of Amalgamation and Bylaws, as in effect on the date hereof, of Parent and the
Merger Sub, respectively.
4.2 Capitalization.
(a) The authorized capital stock of Parent consists of an
unlimited number of Parent Common Shares with no par value, of which
7,694,768 shares are issued and outstanding as of May 3, 2000. All
shares of the issued and outstanding Parent Common Shares are duly
authorized, validly issued, fully paid and non-assessable and are not
subject to any preemptive or subscription rights. All of the issued
and outstanding Parent Common Shares were issued in compliance with
federal, provincial and foreign securities laws.
(b) Up to 2,100,000 Parent Common Shares are authorized to be
issued pursuant to Parent stock option plans, of which options to
acquire 1,898,534 Parent Common Shares (the "Parent Options") have
been granted as of December 31, 1999, and up to 100,000 Parent Common
Shares may be purchased pursuant to Parent's stock purchase plan.
Except as disclosed in the Parent SEC Reports (as hereinafter defined)
and the other options and warrants described in Section 4.2(b) of the
Parent Disclosure Statement, as of December 31, 1999, (i) there is no
outstanding right, subscription, warrant, call, unsatisfied preemptive
right, option or other agreement or arrangement of any kind to
purchase or otherwise to receive from, Parent any of the outstanding
authorized but unissued or treasury shares of the capital stock or any
other security of Parent, and (ii) there is no outstanding security of
any kind convertible into or exchangeable for such capital stock.
Parent has sufficient authorized and unissued Parent Common Shares to
enable it to comply with its obligations under this Agreement,
including the delivery of Parent Common Shares to the holders of
Company Common
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Stock pursuant to the Merger and the issuance of Parent Common Shares
pursuant to the exercise of options to be assumed by Parent as set
forth in Section 5.13 hereof.
(c) Except for qualifying shares required by certain foreign
jurisdictions, all of the issued and outstanding capital stock of all
of the Subsidiaries of Parent have been validly issued, are fully paid
and non-assessable and are owned of record and beneficially, directly
or indirectly, by Parent, free of any Liens, preemptive rights or
other restrictions with respect thereto.
4.3 Authority of Parent.
Parent has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been, duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and constitutes the valid and binding obligation of
Parent enforceable against Parent in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and except to
the extent such enforceability may be limited by general principles of equity.
The execution and delivery of this Agreement by Parent does not, and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any material obligation or loss of any material benefit under
(i) any provision of the Articles of Incorporation, as amended, or bylaws of
Parent, as amended, or (ii) any material mortgage, indenture, lease, contract or
other agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its properties or assets. No consent, approval, order or authorization
of, or registration, declaration or filing with or notice to any Governmental
Authority or any other Person is required by or with respect to Parent in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger and the Articles of Merger, as provided in Section 2.2,
(ii) filings required under Regulation D of the Securities Act; (iii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country; (iv) such filings or approvals required
under the By-Laws of the National Association of Securities Dealers (the "NASD")
or the Toronto Stock Exchange (the "TSE") as described in Section 4.3 of the
Parent Disclosure Statement; (v) the consents, approvals, orders,
authorizations, registrations, declarations, filings and notices described in
Section 4.12 of the Parent Disclosure Statement; and (vii) such other consents,
authorizations, filings, approvals, registrations and notices which, if not
obtained or made, would not have a Parent Material Adverse Effect and would not
prevent, or materially alter or delay any of the transactions contemplated by
this Agreement.
4.4 Absence of Certain Changes or Events.
Except as set forth in Section 4.4 of the Parent Disclosure Statement
or the Parent SEC Reports filed by Parent with the SEC pursuant to the Exchange
Act and the Securities Act,
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since December 31, 1999 there has not been any fact, event, circumstance or
change affecting or relating to Parent or its Subsidiaries which has had or is
reasonably likely to have an Parent Material Adverse Effect.
4.5 Absence of Undisclosed Liabilities.
Except as set forth in Section 4.5 of the Parent Disclosure Statement
or for liabilities or obligations which are accrued or reserved against in
Parent's financial statements (or reflected in the notes thereto) included in
the Parent SEC Reports or which were incurred after December 31, 1999, in the
Ordinary Course of Business, Parent and its Subsidiaries have no liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a balance sheet (or reflected in the notes
thereto) or which could reasonably be expected to have an Parent Material
Adverse Effect.
4.6 No Default.
Neither Parent nor any of its Subsidiaries is not in breach or
violation of, or in default under (and no event has occurred which with notice
or lapse of time or both would constitute such a breach, violation or default),
any term, condition or provision of (a) Parent's Articles of Incorporation or
ByLaws, or (b) (x) any order, writ, decree, statute, rule or regulation of any
Governmental Authority applicable to Parent or any of its properties or assets
or (y) any Parent Contract to which Parent is a party or by which Parent or any
of its properties or assets may be bound, except in the case of this clause (b),
which breaches, violations or defaults, individually or in the aggregate, would
not have an Parent Material Adverse Effect.
4.7 Reports.
As at the date hereof and the Effective Date, Parent has timely filed,
or will have timely filed, all forms, reports, statements and documents required
to be filed by Parent with the SEC, the NASD and the TSE since December 31, 1997
(collectively together with any such forms, reports, statements, and documents
that Parent may file subsequent to the date hereof until the closing, the
"Parent SEC Reports") each of which complied, or will comply, at the time such
form, report or document was or will be filed, in all material respects with the
then applicable requirements of the Securities Act and the Exchange Act, the
rules and regulations of the NASD or the rules and regulations of the TSE as
applicable, and the rules and regulations thereunder, except as described in
Section 4.7 of the Parent Disclosure Statement. As at the date hereof and the
Effective Date, none of the Parent SEC Reports, including without limitation any
financial statements or schedules included therein, at the time filed, contained
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of Parent included in the Parent SEC
Reports (the "Parent Financial Statements") were prepared from Parent's books
and records in accordance with GAAP (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of Parent and its
consolidated Subsidiaries as at the dates thereof and the results of their
operations and their cash flows for the periods then ended, subject, in the case
of the unaudited
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interim financial statements, to normal, recurring year-end adjustments and any
other adjustments described therein.
4.8 Due Authorization of Shares.
The Parent Common Shares to be issued in connection with this Merger
pursuant to this Agreement will, when issued, be duly authorized and, when
delivered, will be duly and validly issued, fully paid and nonassessable and
free and clear of any preemptive right or other restrictions and approved for
quotation on The Nasdaq National Market.
4.9 Brokers' or Finders' Fees.
Except as set forth in Section 4.9 of the Parent Disclosure Statement,
no agent, broker, investment banker or other person or firm acting on behalf of
Parent or any of its directors or executive officers, or under the authority of
any of them is or will be entitled to any broker's or finder's fee or any other
commission or similar fee, directly or indirectly, from Parent in connection
with any of the transactions contemplated hereby.
4.10 Organization and Authority of Merger Sub.
Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger Sub has all
requisite power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Merger Sub of
this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Sub. This Agreement constitutes a valid and binding
obligation of Merger Sub enforceable against Merger Sub in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally and is subject to general principles of equity.
4.11 Capitalization of Merger Sub.
As of the date of this Agreement, the authorized capital stock of
Merger Sub consists of 100 shares of Merger Sub Common Stock, of which one share
is issued and outstanding. The issued and outstanding share of Merger Sub Common
Stock has been validly issued, is fully paid and non-assessable and is owned of
record and beneficially by Parent, free of any Liens, preemptive rights or other
restrictions with respect thereto.
4.12 Authority of Merger Sub.
Merger Sub has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub, subject only to the approval of the
Merger by Parent. The affirmative vote of Parent, previously obtained, is the
only vote of the holders of the Merger Sub Common Stock necessary under the DGCL
and Merger Sub's Certificate of Incorporation to approve this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Merger Sub and
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constitutes the valid and binding obligation of Merger Sub enforceable against
Merger Sub in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to creditors' rights generally, and except to the extent such
enforceability may be limited by general principles of equity. The execution and
delivery of this Agreement by Merger Sub does not, and the consummation of the
transactions contemplated hereby will not conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any material obligation or loss of any material benefit under (i) any provision
of the Certificate of Incorporation or Bylaws of Merger Sub, as amended, or (ii)
any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Merger Sub or any of
its properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with or notice to any Governmental Authority
or any other Person is required by or with respect to Merger Sub in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger, as provided in Section 2.2, (ii) filings required under the
Securities Act; (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; (iv) the
consents, approvals, orders, authorizations, registrations, declarations,
filings and notices described in Section 4.12 of Parent Disclosure Statement;
and (vi) such other consents, authorizations, filings, approvals, registrations
and notices which, if not obtained or made, would not have a Parent Material
Adverse Effect and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
4.13 Interim Operations of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
4.14 Certain Payments.
Since its inception, neither Parent, any of its Subsidiaries nor
Merger Sub nor, to Parent's Knowledge, any employee or other Person associated
with or acting for or on behalf of Parent or Merger Sub, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Parent or Merger Sub or any Affiliate of Parent
or Merger Sub, or (iv) in violation of applicable law, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of Parent or Merger Sub.
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4.15 No Bankruptcy, etc.
There has not been filed any petition or application, or any
proceedings commenced which have not been discharged, by or against Parent or
any of its Subsidiaries or any of its assets under any law, domestic or foreign,
relating to bankruptcy, reorganization, compromise arrangements, insolvency,
readjustment of debt or creditors rights, and no assignment or proposal for the
benefit of creditors has been made by Parent or any of its Subsidiaries.
4.16 Litigation.
Except as set forth in Section 4.16 of the Parent Disclosure
Statement, there is no claim, action, suit, proceeding, arbitration, or other
proceeding or investigation pending or, to the Knowledge of Parent, threatened
against or relating to Parent or any of its Subsidiaries which would reasonably
be expected to have a Parent Material Adverse Effect.
4.17 Compliance with Applicable Laws.
(a) Parent and its Subsidiaries and their properties, assets,
operations and business have been operated and are in compliance with
all applicable statutes, laws, ordinances, administrative orders,
rules and regulations of any Governmental Authority and any filing
requirements relating thereto, except where failure to comply would
not have a Parent Material Adverse Effect.
(b) Parent and the Subsidiaries have obtained all permits,
licenses and other authorizations which are required with respect to
the operation of its business and the ownership of its assets under
federal, state, local and foreign laws, other than any permits,
licenses or authorizations the failure to obtain would not have an
Parent Material Adverse Effect. Parent and its Subsidiaries are in
compliance with all terms and conditions of such permits, licenses and
authorizations, except where failure to comply would not have a Parent
Material Adverse Effect.
4.18 Pooling of Interests.
Neither Parent nor any of its Subsidiaries nor, to the Knowledge of
Parent, any of their respective directors, officers or shareholders has taken
any action, which would interfere with Parent's ability to account for the
Merger as a pooling of interests.
4.19 Warranties Relating to Tax Matters.
(a) Prior to the Merger, Parent will be in control of Merger Sub,
i.e., will own at least eighty percent (80%) of the total combined
voting power of all classes of Merger Sub stock entitled to vote and
at least eighty percent (80%)of the total number of shares of all
other classes of Merger Sub stock ("Control").
(b) Parent has no current plan or intention to cause the
Surviving Corporation to issue additional shares of its stock that
would result in Parent losing Control of Surviving Corporation.
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(c) Except for transfers described in both Section 368(a)(2)(C)
of the Code and Treasury Regulations section 1.368-2(k)(2), Parent has
no current plan or intention to liquidate the Surviving Corporation,
to merge the Surviving Corporation with and into another corporation;
to sell or otherwise dispose of the stock of the Surviving
Corporation; or to cause the Surviving Corporation to sell or
otherwise dispose of any of the assets of the Surviving Corporation
acquired in the transaction, except for dispositions made in the
Ordinary Course of Business.
(d) Following the transaction, the Surviving Corporation will
continue the historic business of the Company or use a significant
portion of the Company's business assets in a business within the
meaning of Treasury Regulations section 1.368-1(d).
(e) Provided that any Company Shareholder required to do so under
Section 367 of the Code and the Treasury Regulations thereunder enters
into a "gain recognition agreement" contemplated by Section 367 of the
Code and the Treasury Regulations thereunder, Parent satisfies the
"active trade or business test" of Treasury Regulations section
1.367(a)-3(c)(3) and Parent has no current plan or intention to
dispose of the stock of the Surviving Corporation or substantially all
of the assets of the Surviving Corporation in a manner that would
trigger gain to any such Company Shareholder under such gain
recognition agreement pursuant to Treasury Regulations section
1.367(a)-8(e).
(f) Pursuant to the Merger, the Surviving Corporation will
acquire at least ninety percent (90%) of the fair market value of the
net assets and at least seventy percent (70%) of the fair market value
of the gross assets held by the Merger Sub immediately prior to the
Merger. Parent has no obligation, understanding, plan or intention to
cause the Surviving Corporation to dispose of assets that would result
in the Surviving Corporation failing to retain assets, immediately
following the Merger, representing at least ninety percent (90%) of
the fair market value of the net assets and at least seventy percent
(70%) of the fair market value of the gross assets held by the
Surviving Corporation immediately prior to the Merger. For the purpose
of determining the percentage of Merger Sub's net and gross assets
held by the Surviving Corporation immediately following the Merger,
the following assets will be treated as property held by Merger Sub
immediately prior but not subsequent to the Merger: (i) assets
disposed of by the Merger Sub (other than assets transferred from
Merger Sub to the Surviving Corporation in the Merger) prior to or
subsequent to the Merger and in contemplation thereof; (ii) assets
used by Merger Sub to pay shareholders perfecting dissenters' rights
or other expenses or liabilities incurred in connection with the
Merger; and (iii) assets used to make payments in respect of stock of
the Surviving Corporation or rights to acquire such stock (including
payments treated as such for tax purposes) that are made in
contemplation of the Merger or that are related thereto.
4.20 Disclosure.
Parent has not failed to disclose to the Company any facts,
circumstances, events or acts of which Parent has Knowledge and which may
constitute a Parent Material Adverse
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Effect. No representation or warranty of Parent contained in this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading or necessary in order to
fully and fairly provide the information required to be provided by this
Agreement.
5. Agreements and Covenants of the Parties.
5.1 Conduct of Business of the Company and Parent.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or
the Effective Time, each of the Company and Parent agrees (except to
the extent expressly contemplated by this Agreement or as consented to
in writing by the other), to carry on its and its Subsidiaries'
business in the Ordinary Course of Business, to pay and to cause its
Subsidiaries to pay debts and Taxes when due (subject to good faith
disputes over such debts or Taxes), to pay or perform other
obligations in the Ordinary Course of Business, and to use all
commercially reasonable efforts to preserve intact its present
business organizations, keep available the services of its and its
Subsidiaries' present officers and key employees and preserve its and
its Subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business
dealings with it or its Subsidiaries, to the end that its and its
Subsidiaries' goodwill and ongoing businesses shall be unimpaired at
the Effective Time. Each of the Company and Parent agrees to promptly
notify the other of (i) any event or occurrence of which it has
Knowledge that is not in the ordinary course of its or its
Subsidiaries' business, and of any event of which it has Knowledge
which could have a Parent Material Adverse Effect or Company Material
Adverse Effect and (ii) any material change in its capitalization as
set forth in Sections 3.5 and 4.2, respectively. Without limiting the
foregoing, except as expressly contemplated by this Agreement or the
Company Disclosure Statement or the Parent Disclosure Statement,
neither the Company nor Parent, respectively, shall do, cause or
permit any of the following, or allow, cause or permit any of its
Subsidiaries to do, cause or permit any of the following, without the
prior written consent of the other:
(i) Charter Documents. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(ii) Dividends: Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash,
stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of in
lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing
for the repurchase of shares in connection with any termination
of service to it or its Subsidiaries;
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(iii) Stock Option Plans, Etc. Accelerate, amend or change
the period of exercisability or vesting of options or other
rights granted under its stock plans or authorize cash payments
in exchange for any options or other rights granted under any of
such plans (other than any acceleration resulting from the Merger
under the terms of agreements in place as of the date hereof);
(iv) Pooling. Take any action, which Parent reasonably
advises would interfere with Parent's ability to account for the
Merger as a pooling of interests;
(v) Other. Take, or agree in writing or otherwise to take,
any of the actions described in Sections 5.1(a)(i) through
(a)(iv) above, or any action, which would cause a material breach
of its representations or warranties contained in this Agreement
or prevent it from materially performing or cause it not to
materially perform its covenants hereunder; or
(b) Notices. The Company shall give all notices and other
information required to be given to any applicable Governmental
Authority under the Code, the Consolidated Omnibus Budget
Reconciliation Act, and other applicable law in connection with the
transactions provided for in this Agreement.
5.2 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 or the Effective Time, except
as expressly contemplated by this Agreement, the Company shall not do, cause or
permit any of the following, without the prior written consent of Parent, which
shall not be unreasonably withheld:
(a) Material Contracts. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the
terms of any of its material contracts in any case, other than in the
Ordinary Course of Business;
(b) Issuance of Securities. Issue, deliver or sell or authorize
or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock 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, other than the issuance of shares of its common stock
pursuant to the exercise of stock options or other rights therefor
outstanding as of the date of this Agreement;
(c) Intellectual Property. Transfer to any person or entity any
rights to its IP Assets or Materials other than in the Ordinary Course
of Business;
(d) Exclusive Rights. Enter into or amend any agreements pursuant
to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its
products or technology;
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(e) Dispositions. Sell lease, license or otherwise dispose of or
encumber any of its properties or assets which are material
individually or in the aggregate, to its and its business, taken as a
whole, except for Permitted Liens or in the Ordinary Course of
Business;
(f) Indebtedness. Except for outstanding borrowings under
existing lines of credit or in the Ordinary Course of Business, incur
any Indebtedness for borrowed money or Guarantee any such Indebtedness
or issue or sell any debt securities or Guarantee any debt securities
of others;
(g) Leases. Enter into any operating lease in excess of $50,000;
(h) Payment of Obligations. Pay, discharge or satisfy in an
amount in excess of $25,000 in any one case or $125,000 in the
aggregate, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) arising other than in
the Ordinary Course of Business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in the
Company Financial Statements or incurred in the Ordinary Course of
Business;
(i) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements except in the Ordinary Course of
Business;
(j) Insurance. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(k) Termination or Waiver. Terminate or knowingly waive any right
of substantial value, other than in the Ordinary Course of Business;
(l) Employee Benefit Plans; Pay Increases. Adopt or amend any
employee benefit or stock purchase or option plan or agreement,
(except as contemplated in Section 5.13(b)) or pay any special bonus
or special remuneration exceeding $5,000 individually or $50,000 in
the aggregate to any employee or director (except payments made
pursuant to written agreements outstanding on the date hereof), or
increase the salaries or wage rates of its employees except in the
Ordinary Course of Business;
(m) Severance Arrangements. Grant any severance or termination
pay to any director or officer or to any other employee except
payments made pursuant to written agreements outstanding on the date
hereof;
(n) Lawsuits. Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it, in good faith,
determines that failure to commence suit would result in the material
impairment of a valuable aspect of its business, provided that it
consults with Parent prior to the filing of such a suit, or (iii) in
connection with the enforcement of this Agreement;
(o) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business
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organization or division thereof or otherwise acquire or agree to
acquire any assets which are material individually or in the
aggregate, to its business, taken as a whole;
(p) Taxes. Other than in the Ordinary Course of Business, make or
change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, or settle any material claim or
assessment in respect of Taxes, if any such action could reasonably be
expected to result in a Tax liability of the Surviving Corporation,
the Company, or Parent after the Closing Date;
(q) Revaluation. 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 or
as required by GAAP; or
(r) Other. Take or agree in writing or otherwise to take, any of
the actions described in Sections 5.2(a) through (q) above, or any
action which would cause a material breach of its representations or
warranties contained in this Agreement or prevent it from materially
performing or cause it not to materially perform its covenants
hereunder.
5.3 No Solicitation.
Prior to the Closing, the Company and the officers, directors,
employees or other agents of the Company will not, directly or indirectly, take
any action to solicit, initiate or encourage any Takeover Proposal (defined
below) or, engage in negotiations with, or (unless otherwise required by court
order, subpoena or other compulsory process) disclose any nonpublic information
relating to the Company to, or afford access to the properties, books or records
of the Company to, any person that has advised the Company that it may be
considering making, or that has made, a Takeover Proposal. For purposes of this
Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving the
Company or the acquisition of any significant equity interest in, or a
significant portion of the assets of, the Company, other than the transactions
contemplated by this Agreement.
5.4 Parent Investigation.
The Company shall make available to Parent or its representatives or
designees for inspection at the Company's premises all properties, assets, books
of accounts, corporate records and contracts of the Company, and any other
material related to the Company or its business reasonably requested by Parent,
and shall make available to Parent the directors, officers, employees, and
independent accountants (and upon reasonable prior notice and if available, the
customers) of the Company for interviews to verify all information furnished and
otherwise to become familiar with the Company and its business, operations,
properties and assets.
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5.5 Company Investigation.
Parent shall make available to the Company or its representatives or
designees for inspection at Parent's premises all properties, assets, books of
accounts, corporate records and contracts of Parent, and any other material
related to Parent or its business reasonably requested by the Company, and shall
make available to the Company the directors, officers, employees, and
independent accountants (and upon reasonable prior notice and if available, the
customers) of Parent for interviews to verify all information furnished and
otherwise to become familiar with Parent and its business, operations,
properties and assets.
5.6 Confidentiality.
The Company covenants and agrees to cause the Company's Affiliates and
take all necessary precautions to maintain the confidentiality of all trade
secrets, specifications, technology, know-how, customer information and other
confidential and proprietary information relating to the Company, except to the
extent information relating to any such confidential and proprietary information
is currently public knowledge or becomes public knowledge (otherwise than
through the fault of the Company or any of its Affiliates) or to the extent such
duty as to confidentiality is waived by Parent, or except as may be required by
any Governmental Authority or any applicable law or regulation, any court order,
subpoena or other compulsory process.
5.7 Tax Matters.
(a) The Company shall, at the Company's expense, timely prepare
and file (or cause to be prepared and filed) with the appropriate Tax
authorities all Tax Returns for the Company for the Pre-Closing Tax
Period that are required to be filed on or before the Closing Date;
and the Company shall pay all Taxes due prior to the Closing Date with
respect to all such Tax Returns. All Tax Returns filed by the Company
pursuant to the preceding sentence shall be prepared using accounting
methods that were used in preparing the relevant Tax Returns for prior
Taxable periods and in a manner which does not have the effect of
distorting Taxes due for any such period. All such Tax Returns shall
be made available to Parent for review a reasonable period of time
prior to filing.
(b) To the extent not prepared and filed by the Company, Parent,
consistent with past practice of the Company, shall timely prepare and
file (or cause to be prepared and filed) with the appropriate Tax
authorities, at its expense, all Tax Returns for the Company that the
Company is required to file prior to the Closing Date (other than S
corporation income Tax returns for any Pre-Closing Tax Period, which
returns shall be prepared by the Principal Shareholders of filing by
the Company) and, to the extent not required to be paid prior to the
Closing Date as described in Section 5.7(a), shall cause the Company
to pay all Taxes due with respect thereto, (to the extent the Company
is liable therefor); provided, however, that Parent shall treat the
Company as an S corporation within the meaning of the Code for all
federal and applicable state income tax purposes for all taxable
periods through the day prior to the Closing Date, and provided
further, if any such return will cause the Shareholders to incur any
obligation to
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indemnify the Company or Parent in accordance with Section 9 hereof,
Parent shall provide the Shareholders' Agent or the Principal
Shareholders shall provide Parent, as the case may be, with copies of
such returns within a reasonable time prior to filing and shall
provide the Shareholders' Agent or Parent, as the case may be, a
reasonable opportunity to comment thereon.
(c) As soon as practicable, but in any event within 15 days after
a request of a party to this Agreement (the "Requesting Party"), from
and after the Closing Date, the other parties shall use all reasonable
efforts to cooperate with the Requesting Party and to deliver to the
Requesting Party such information and data concerning the Pre-Closing
operations of the Company as it shall have and shall use all
reasonable efforts to make available such knowledgeable persons as may
be requested in order to enable the Requesting Party to complete and
file all Returns which it may be required to file or to respond to
audits by any taxing authorities with respect to such period. Such
cooperation and information shall include provision of powers of
attorney for the purpose of signing Tax Returns (other than S
corporation income Tax returns for any Pre-Closing Tax Period, which
returns shall be prepared by the Principal Shareholders for filing by
the Company) and defending audits of the Company and promptly
forwarding copies of appropriate notices and forms or other
communications received from or sent to any taxing authority which
relate to the Company and providing copies of all relevant Returns,
together with accompanying schedules and related workpapers, documents
relating to rulings or other determinations by any taxing authority
and records concerning the ownership and tax basis of property of the
Company.
(d) All Tax sharing or Tax indemnity agreements to which the
Company is a party shall be terminated prior to the Closing Date.
(e) The Company shall have taken, or shall have caused to be
taken, prior to the Closing Date, all actions necessary to satisfy
Section 280G(b)(5) of the Code such that no payment made under,
contemplated by, or otherwise with respect to, this Agreement shall be
a "parachute payment" within the meaning of Section 280G of the Code.
(f) Any Parent Common Shares or cash returned to Parent pursuant
to the Escrow Agreement shall be treated as an adjustment to the
purchase price for Tax purposes.
(g) In the event the Company or Parent receive notice of any
audit, examination, proceeding or litigation with respect to any Tax
for any Pre-Closing Tax period which will or may result in the Company
Shareholders incurring any indemnity obligation pursuant to Section
9.2 of this Agreement (a "Tax Contest"), Parent shall immediately
notify the Shareholders' Agent of such Tax Contest at such time and in
such manner as will enable the Shareholders' Agent to exercise the
rights created hereunder, provided that any failure or delay in
providing such notice shall not limit the obligations of the
shareholders to indemnify Parent or the Company under this Agreement
if such failure or delay does not have a material adverse affect on
the ability of the Shareholders' Agent to exercise the rights granted
herein. The Shareholders' Agent, on behalf of the
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shareholders, may assume the responsibility of conducting any audit,
examination, proceeding or litigation with respect to any Tax (a "Tax
Contest") involving a Tax Return for a period which ends prior to the
Closing Date if the Company Shareholders would be liable, or obligated
to reimburse Parent for any Taxes determined to be due as a result of
the Tax Contest, and Parent shall have the responsibility, at its
expense, for conducting any other Tax Contest. Each Shareholders'
Agent, the Company and Parent shall keep the other informed with
respect to all matters relating to any Tax Contest. Notwithstanding
the foregoing, if any issue raised in a Tax Contest would have a
material adverse impact on the party other than the one responsible
for conducting such Tax Contest, such other party shall be entitled,
at its expense, to participate in such Tax Contest and such Tax
Contest shall not be settled, compromised or otherwise conceded
without the written consent of both parties, which consent shall not
be unreasonable withheld. Each of the Shareholders' Agent, the Company
and Parent agree to cooperate fully and in good faith in the conduct
of any Tax Contest. Parent shall pay all expenses reasonably incurred
by the Shareholders' Agent and all of its own expenses, provided that
any expenses of the Shareholders' Agent which are attributable to that
portion of any Tax Contest for which the Shareholders are ultimately
required to indemnify Parent pursuant to Section 9.2 shall be treated
as part of the loss incurred by Parent for which it is entitled to
indemnification.
5.8 Employee Agreements.
At the written request of Parent, the Company shall use its Best
Efforts to obtain agreements, prior to the Closing, with respect to any
employee, agent or consultant of the Company identified by Parent providing for
(1) protection of confidential and proprietary information, (2) patent and
copyright assignment, (3) invention disclosure, (4) business conduct guidelines,
and (5) a waiver of all moral rights to intellectual property of the Company.
5.9 Confidentiality Agreement.
Parent and the Company shall comply and shall cause their agents and
representatives to comply, with the Confidentiality Agreement entered into
between Parent and the Company.
5.10 Cooperation.
Subject to and on the terms and conditions set forth herein, each of
the parties hereto shall use its Best Efforts to (i) effect such transactions
and take such steps as may be deemed reasonably necessary to facilitate the
Merger, including, but not limited to, executing and delivering the Certificate
of Merger, the Articles of Merger, and a plan of merger as required by the DGCL
and the MRS, (ii) obtain all necessary consents and approvals from lenders,
landlords, Government Authorities or other third parties for the Merger and any
other transaction contemplated by this Agreement, and (iii) comply with all
other legal, regulatory or contractual requirements for or preconditions to the
Closing.
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5.11 Shareholders Meeting.
Promptly following the execution of this Agreement, the Company will
duly call, give notice of, and convene and hold a meeting of shareholders (the
"Company Shareholders Meeting") on or before May 31, 2000 for the purpose of,
among other things, considering the approval of this Agreement. The record date
for shareholders entitled to vote at the Company Shareholder Meeting shall be
May 7, 2000 (the "Record Date"). The Company will, through its Board of
Directors, recommend to its shareholders adoption or approval of such matters,
as the case may be, shall use all reasonable efforts to solicit such approvals
by its shareholders and shall not withdraw such recommendation unless the
Company shall then be entitled to terminate this Agreement in accordance with
Section 8(a), Section 8(d) or Section 8(e) hereof.
5.12 Affiliate Agreements.
(a) Exhibit 5.12A sets forth those person who are, in the
Company's reasonable judgment, "Affiliates" of the Company within the
meaning of Rule 145 promulgated under the Securities Act ("Rule 145").
The Company shall provide Parent such information and documents as
Parent shall reasonably request for purposes of reviewing such list.
The Company shall use its best efforts to deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement
(and in each case prior to the Effective Time) from each of the
Affiliates of the Company, an executed Affiliate Agreement in the form
attached hereto as Exhibit 5.12B. Parent and Merger Sub shall be
entitled to place appropriate legends on the certificates evidencing
and Parent Common Shares to be received by such Affiliates of the
Company pursuant to the terms of this Agreement and to issue
appropriate stop transfer instructions to the transfer agent for
Parent Common Shares, consistent with the terms of such Affiliate
Agreement.
(b) Exhibit 5.12C sets forth those persons who may be deemed
"Affiliates" of Parent within the meaning of Rule 145. Parent shall
provide the Company such information and documents as the Company
shall reasonably request for purposes of reviewing such list. Parent
shall use its best efforts to deliver or cause to be delivered to the
Company, concurrently with the execution of this Agreement (and in
each case prior to the Effective Time) from each of the Affiliates of
Parent, an executed Affiliate Agreement in the form attached hereto as
Exhibit 5.12D.
5.13 Company Stock Options.
(a) At the Effective Time, each outstanding option to purchase
shares of the Company Common Stock under the Company Stock Option
Plan, whether vested or unvested, will be assumed by Parent. Each such
option so assumed by Parent under this Agreement shall be governed by,
and shall be subject to, the terms and conditions set forth in the
documents governing such stock options, as such documents may be
amended prior to the Effective Time, except that (i) such option will
be exercisable for that number of whole Parent Common Shares equal to
the product of the number of shares of the Company Common Stock that
were issuable upon exercise of such option immediately prior to the
Effective Time multiplied by the Exchange Ratio and rounded down to
the nearest whole number of Parent Common Shares, and (ii) the per
share exercise price for
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the Parent Common Shares issuable upon exercise of such assumed option
will be equal to the quotient determined by dividing the exercise price
per share of the Company Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Exchange
Ratio, rounded up to the nearest whole cent.
(b) Consistent with the terms of the Company Stock Option Plan
and the documents governing the outstanding options under such plan,
the Merger will not terminate any of the outstanding options under the
Company Stock Option Plan or accelerate the exercisability or vesting
of such options or the Parent Common Shares which will be subject to
those options upon Parent's assumption of the options in the Merger.
Within 10 Business Days after the Effective Time, Parent will issue to
each person who, immediately prior to the Effective Time was a holder
of an outstanding option under the Company Stock Option Plan, a
document consistent with this Agreement and such option evidencing the
foregoing assumption of such option by Parent. Parent shall use its
Best Efforts to obtain approval of the TSE for the assumption by
Parent of the Company stock options.
5.14 Form S-8 Registration Statement.
Within sixty (60) days after the Effective Time, Parent shall file a
Form S-8 registration statement under the Securities Act to register the options
assumed by Parent pursuant to Section 5.12 after the Effective Time and shall
maintain the effectiveness of such registration as long as such options remain
outstanding. Parent shall reserve a sufficient number of Parent Common Shares to
assume the options assumed by Parent pursuant to Section 5.13.
5.15 Escrow Agreement.
On or before the Effective Time, Parent, Merger Sub, the Company, and
the Shareholders' Agent (as defined in Section 9 hereto) will execute and
deliver to the Escrow Agent the Escrow Agreement contemplated by Section 9.
5.16 [This section intentionally left blank.]
5.17 Indemnification and Insurance.
(a) The Company shall and, from and after the Effective Time,
Parent and the Surviving Corporation shall, indemnify, defend and hold
harmless each Person who is now, or has been at any time prior to the
date of this Agreement or who becomes prior to the Effective Time, an
officer, director or employee of the Company (the "Indemnified
Parties") against all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement with
the approval of the Indemnifying Party (which approval shall not be
unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was
a director, officer, or employee of the Company, whether pertaining to
any matter existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities") including, without limitation, all
losses, claims, damages,
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costs, expenses, liabilities or judgments based in whole or in part
on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the
full extent a corporation is permitted under the MSA to indemnify its
own directors, officers and employees, as the case may be (the
Company, Parent and the Surviving Corporation, as the case may be,
will pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent
permitted by law upon receipt of any undertaking contemplated by the
MSA). Without limiting the foregoing, in the event any such claim,
action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective
Time), (i) the Indemnified Parties may retain counsel satisfactory to
them and the Company (or them and Parent and the Surviving Corporation
after the Effective Time), (ii) the Company (or after the Effective
Time, Parent and the Surviving Corporation) shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly
as statements therefore are received, and (iii) the Company (or after
the Effective Time, Parent and the Surviving Corporation) will use all
reasonable efforts to assist in the vigorous defense of any such
matter, provided that none of the Company, Parent or the Surviving
Corporation shall be liable for any settlement of any claim effected
without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.18, upon learning of such claim,
action, suit, proceeding or investigation, shall promptly notify the
Company, Parent or the Surviving Corporation (but the failure to so
notify an Indemnifying Party shall not relieve it from any liability
which it may have under this Section 5.18, except to the extent such
failure prejudices such party), and shall deliver to the Company (or
after the Effective Time, Parent and the Surviving Corporation) the
undertaking contemplated by the MSA. The Indemnified Parties as a
group shall be indemnified for the reasonable fees and expenses of
only one law firm to represent them with respect to each such matter
(provided for this purpose that local counsel retained principally to
permit an appearance by the selected law firm shall not be treated as
an additional law firm) unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties. The obligations of
the parties set forth in this Section 5.17(a) shall be in the
furtherance of and not in limitation of the succeeding paragraph of
this Section 5.17.
(b) From and after the Effective Time, the Surviving Corporation
and Parent will fulfill, assume and honor, in all respects, the
obligations of the Company pursuant to the Company's Articles of
Incorporation as in effect immediately prior to the Effective Time and
any indemnification agreement between the Company and any of the
Company's directors and officers existing and in force as of the
Effective Time.
5.18 Intellectual Property Matters.
To the extent that any employee, consultant or independent contractor
of the Company has any rights, licenses, or other interests in any Materials or
any IP Assets of the Company, other than those IP Assets or Materials licensed
by the Company from a third party, the Company shall use its Best Efforts to
obtain an assignment to the Company of such rights, licenses, and interests from
such employees. The Company will cooperate, provide all
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reasonable assistance, and will use its Best Efforts to cause to be executed all
assignments and other instruments and documents necessary or appropriate to
carry out the intent of this Section 5.18, including any patent, copyright or
trademark registrations or assignments.
5.19 Participation in Parent Benefit Plans.
On or as soon as practicable following the Effective Time, continuing
employees of the Company ("Continuing Employees") shall be eligible to
participate in those benefit plans and programs maintained for similarly
situated employees of Parent (or in substantially similar programs), on the same
terms applicable to similarly situated employees of Parent; provided, however,
that for a period ending on December 31, 2000 Parent shall cause the Surviving
Corporation to continue in existence the Company's Section 125 cafeteria plan
(providing for certain benefits on a pretax basis) and the Company's Section
401(k) plan (providing for employer matching payments of not less than fifty
percent (50%) of employee contributions up to existing limits). For purposes of
all benefit plans and programs of Parent, the Continuing Employees shall receive
full credit for their prior service to the Company for the purposes of
eligibility, vesting and benefit accrual under such plans and programs.
5.20 Nasdaq Listing Application.
Parent shall, at or prior to the Closing, file a notice of issuance
with the Nasdaq National Market to qualify the Parent Common Shares for
quotation on the Nasdaq National Market.
5.21 Blue Sky Approvals.
Parent shall use its Best Efforts to take such steps as may be
required and complete all filings to obtain approvals required under state
securities or "blue sky" laws for the issuance of the Parent Common Shares in
connection with the Merger.
5.22 Section 16 Matters.
Prior to the Effective Date, the board of directors of Parent shall
adopt a resolution approving the acquisition, by officers and directors of the
Company who become officers and directors of Parent at the Effective Time, of
Parent Common Shares in exchange for Company Common Stock and options to acquire
Parent Common Shares upon conversion of options granted under the Company Stock
Option Plan, in each case pursuant to the transactions contemplated by this
Agreement, in order that such acquisitions will be exempt from the application
of Section 16(b) of the Exchange Act.
5.23 Board Nominee.
Parent agrees to use its Best Efforts to cause Richard S. Waidmann to
be appointed and nominated for election to the Board of Directors of Parent for
a term ending on the date of the Company's annual general meeting of its
shareholders in 2001.
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5.24 Pooling Accounting.
Parent and the Company shall each use their Best Efforts to cause the
business combination to be effected by the Merger to be accounted for as a
pooling of interests. Each of Parent and the Company shall use its Best Efforts
to cause its Affiliates not to take any action that would adversely affect the
ability of Parent to account for the business combination to be effected by the
Merger as a pooling of interests.
5.25 Investor Certificate.
The Company and each Principal Shareholder shall use its or his Best
Efforts to cause each Company Shareholder to execute and deliver to Parent,
prior to the Closing, an Investor Certificate in substantially the form attached
hereto as Exhibit 3.5(g).
5.26 Shareholders Agreement.
The Company and each Principal Shareholder shall use its or his Best
Efforts to cause the shareholders agreement dated July 1, 1999 among the Company
and the shareholders named therein (the "Shareholders Agreement") to be
terminated effective immediately prior to Closing.
5.27 Benefit Plan Matters.
The Company will use its Best Efforts to take such actions as Parent
reasonably requests with respect to the Company's Benefit Plans, it being
understood that the purpose of the covenant contained in this Section 5.27 is to
conform the Company's Benefit Plans to applicable requirements and to minimize
any future liabilities of Parent or the Surviving Corporation in respect of
Parent's Benefit Plans.
6. Conditions of Parent's Obligations.
The obligations of Parent hereunder are subject to the satisfaction (or
waiver by Parent) as of the Closing Date of the following conditions:
6.1 Representations, Warranties and Covenants.
The representations and warranties of the Company made in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date with the same effect as if made at and
as of the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier time, and the Company shall have delivered to
Parent certifications dated as of the Closing Date to that effect. The Company
shall have performed in all material respects its covenants and agreements
contained in this Agreement required to be performed at or prior to the Closing
and the Company shall have delivered to Parent certifications dated as of the
Closing Date to that effect.
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6.2 Consents and Approvals.
The Company shall have obtained or made all consents, approvals,
orders, licenses, permits and authorizations of, and registrations, declarations
and filings with any Governmental Authority or any other Person required to be
obtained or made by or with respect to the Company in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, except where failure to obtain or make the
same would not reasonably be expected to cause a Company Material Adverse
Effect.
6.3 Employment Agreements.
The Persons identified on Exhibit 6.3, attached hereto, shall have
executed and delivered to Parent employment agreements in the form reasonably
satisfactory to Parent, and such employment agreements shall be in full force
and effect.
6.4 Injunctions, etc.
No injunction, order or decree of any Governmental Authority shall be
in effect as of the Closing, and no lawsuit, claim, proceeding or investigation
shall be pending or threatened by or before any Governmental Authority as of the
Closing, in either case that would restrain, prohibit or make unlawful the
Merger or the consummation of any of the other transactions contemplated by this
Agreement or invalidate or suspend any material provision of this Agreement.
6.5 Closing Documents.
The Company shall have delivered to Parent the following:
(a) a certificate of the Secretary or Assistant Secretary of the
Company, dated the Closing Date, as to the continued existence of the
Company, certifying the attached copy of the Bylaws of the Company,
the authorization of the execution, delivery and performance of this
Agreement, the resolutions adopted by the Board of Directors of the
Company authorizing the actions to be taken by the Company under this
Agreement and the approval of the Merger by the Company Shareholders,
including the information required by Section 6.13;
(b) a certificate of the Secretary of State of the State of
Missouri, dated not more than ten (10) days prior to the Closing Date,
to the effect that the Company is in good standing in the State of
Missouri and that all annual reports, if any, have been filed as
required and that all fees have been paid in connection therewith;
(c) a certificate of the Secretary of State of the Commonwealth
of Pennsylvania, dated a recent date, certifying that the Company is
duly qualified to transact business in Pennsylvania as a foreign
corporation; and
(d) a certification that, to the knowledge of the Company, none
of the Company Shareholders are Canadian residents.
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6.6 Opinion of Counsel.
Parent shall have received an opinion dated the Closing Date from
Thompson Coburn LLP addressed to Parent in substance and form acceptable to
Parent.
6.7 Merger.
All corporate and other proceedings of Company and the Company
Shareholders with respect to the Merger shall have been duly and validly taken,
including the filing of any certificates or documents in the office of the
Secretaries of State of the States of Delaware and Missouri, respectively, and
the actions, consents, and approvals and filings required to be obtained or made
by the Company and Merger Sub pursuant to the DGCL and the MRS shall have been
made or obtained and the Company shall have executed and delivered to Parent the
Certificate of Merger, Articles of Merger and a plan of merger as required by
the DGCL and the MRS, each in form and substance consistent with this Agreement.
6.8 Certificate Related to Financial Statements.
The Company shall have provided to Parent the certification of
the Chief Executive Officer of the Company and the Chief Financial Officer of
the Company to the effect that to the best of their knowledge and belief, the
Financial Statements have been prepared from and in accordance with the books
and records of the Company, have been prepared in conformity with GAAP (subject
to normal, recurring year-end adjustments and the lack of required footnotes)
and fairly present in all material respects the financial condition of the
Company as of the date thereof and the results of its operations for the period
then ended. The certificate to be delivered by the Company pursuant to this
Section 6.8 shall include a representation and warranty of the Company to the
effect that there has been no material adverse change in the financial condition
of the Company since the date of the Financial Statements through the Closing
Date.
6.9 Proceedings.
All corporate and legal proceedings taken by the Company and the
Company Shareholders in connection with the transactions contemplated by this
Agreement and all documents and papers relating to such transactions shall be
reasonably satisfactory in form and substance to Parent and its counsel, and
Parent shall have received all such certified or other copies of all such
documents, including any third party or stockholder consents, as it shall have
reasonably requested.
6.10 Voting, Lockup and Registration Rights Agreement.
Holders of all the Class A Common Stock issued and outstanding
(except holders of Dissenting Shares, if any) have executed and delivered the
Voting, Lockup and Registration Rights Agreement as required by Section 3.5(e)
hereof.
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6.11 Parent Benefit Plans Participation.
All consents, approvals, orders, licenses, permits and authorizations
as may be required by Parent shareholders, the TSE, any Governmental Authority
or any other Person shall have been received with respect to the assumption by
Parent of the Company stock options under the Company Stock Option Plan and
Continuing Employees' eligibility to participate in Parent benefit plans and
programs on the same terms applicable to similarly situated employees of Parent.
6.12 Escrow Agreement.
The Company, and the Shareholders Agent (as defined in Section 9.8
hereto) shall have executed and delivered the Escrow Agreement.
6.13 No Company Material Adverse Effect.
No event shall have occurred that has resulted or could reasonably be
expected to result in a Company Material Adverse Effect.
6.14 Pooling.
Parent shall have received a letter from its independent accountants,
dated the Closing Date, in form and substance reasonably satisfactory to Parent,
stating that the Merger will qualify as a pooling of interests transaction under
Accounting Principles Board Opinion No. 16 and applicable SEC regulations, if
the Merger is consummated in accordance with this Agreement. Parent shall use
its Best Efforts to obtain such letter.
6.15 Investment Representation.
Parent shall have received a signed Investor Certificate in
substantially the form attached hereto as Exhibit 3.5(g) from each of the
Company Shareholders.
6.16 Shareholders Agreement.
The Shareholders Agreement shall have terminated.
6.17 Affiliate Agreements.
Parent shall have received from each of the Affiliates of the Company
an executed Affiliate Agreement in substantially the form attached hereto as
Exhibit 5.12(a).
7. Conditions of Company and Principal Shareholder Obligations.
The obligations of the Company and the Principal Shareholders hereunder are
subject to the satisfaction (or waiver) by the Company as of the Closing Date of
the following conditions:
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7.1 Representations, Warranties and Covenants.
The representations and warranties of Parent and Merger Sub made in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date with the same effect as if made at
and as of the Closing Date and Parent and Merger Sub shall have delivered to the
Company a certification dated as of the Closing Date to that effect. Parent and
Merger Sub shall have performed in all material respects their respective
covenants and agreements contained in this Agreement required to be performed at
or prior to the Closing Date and Parent and Merger Sub shall have delivered to
the Company a certification dated as of the Closing Date to that effect.
7.2 Consents and Approvals.
Parent and Merger Sub shall have obtained or made all consents,
approvals, orders, licenses, permits and authorizations of, and registrations,
declarations and filings with any Governmental Authority or any other Person
required to be obtained or made by or with respect to Parent or Merger Sub in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby, except where
failure to so obtain or make the same would not reasonably be expected to cause
a Parent Material Adverse Effect.
7.3 Employment Agreements.
Parent shall have executed and delivered Employment Agreements to the
Persons listed on Exhibit 6.3A.
7.4 Tax Opinion of Counsel.
The Company and the Company Shareholders shall have received an
opinion of Thompson Coburn LLP dated the Closing Date, to the effect that the
Merger will constitute a reorganization for federal income tax purposes within
the meaning of Section 368(a) of the Code and which opines on the tax
consequences to the Shareholders.
In rendering such opinion, Thompson Coburn LLP may reasonably require
and rely upon factual representations contained in certificates of officers of
Parent, of the Company, and of certain Company Shareholders and others dated on
or before the date of such opinion. Notwithstanding the foregoing, the failure
of the Company, any Company Shareholders or others to deliver any certificate
requested by such counsel, or the failure of any Company Shareholder required to
do so to enter into any gain recognition agreement contemplated by Section 367
of the Code and the regulations issued thereunder, shall constitute a waiver by
the Company of the conditions set forth in this Section 7.4.
7.5 Exemption From Registration.
The Parent Common Shares shall be exempt from Securities Act and from
qualification or registration under comparable state securities laws, and at or
prior to the Effective Time no stop order suspending the issuance or the
qualification of the Parent Common Shares for an exemption under the Securities
Act or Blue Sky laws of any jurisdiction shall have
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been initiated or shall be threatened or contemplated by the SEC or the
authorities of any such jurisdictions, and the Parent Common Shares shall be
authorized for quotation on the Nasdaq National Market.
7.6 Opinions of Counsel.
The Company and the Company Shareholders shall have received opinions
dated the Closing Date from Dorsey & Whitney LLP, U.S. counsel to Parent, and
Reid & Company, Canadian counsel to Parent, addressed to the Company and the
Company Shareholders in substance and form acceptable to the Company and the
Company Shareholders.
7.7 Composition of Parent Board of Directors.
Parent shall have taken all action necessary to cause Richard S.
Waidmann to become a member of its Board of Directors upon consummation of the
Merger.
7.8 Merger.
All corporate and other proceedings of Parent and Merger Sub with
respect to the Merger shall have been duly and validly taken, including the
filing of any certificates or documents in the office of the Secretaries of
State of the States of Delaware and Missouri and the actions, consents, and
approvals and filings required to be obtained or made by the Company and Merger
Sub pursuant to the DGCL and the MRS shall have been made or obtained and Merger
Sub shall have executed the Certificate of Merger, the Articles of Merger and a
plan of merger as required by the DGCL and the MRS, each in form and substance
consistent with this Agreement.
7.9 Proceedings.
All corporate and legal proceedings taken by Parent and Merger Sub in
connection with the transactions contemplated by this Agreement and all
documents and papers relating to such transactions shall be reasonably
satisfactory in form and substance to the Company, and the Company shall have
received all such certified or other copies of all such documents, including any
third party or stockholder consents, as it shall have reasonably requested.
7.10 Escrow Agreement.
Parent, the Company, the Escrow Agent and the Shareholders' Agent (as
defined in Section 9 hereto) shall have entered into the Escrow Agreement.
7.11 Closing Documents.
Parent shall have delivered to the Company the following:
(a) a certificate of the Secretary or Assistant Secretary of
Parent, dated the Closing Date, as to the continued existence of
Parent, certifying the attached copy of the Articles of Amalgamation
of Parent, the authorization of the execution, delivery and
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performance of this Agreement, the resolutions adopted by the Board of
Directors of Parent authorizing the actions to be taken by Parent
under this Agreement; and
(b) a certificate of the Secretary or Assistant Secretary of
Merger Sub, dated the Closing Date, as to the continued existence of
Merger Sub, certifying the attached copy of the Articles of Memorandum
of Merger Sub, the authorization of the execution, delivery and
performance of this Agreement, the resolutions adopted by the Board of
Directors of Merger Sub authorizing the actions to be taken by Merger
Sub under this Agreement and the approval of the Merger by the Merger
Sub Shareholders.
7.12 No Parent Material Adverse Effect.
No event shall have occurred that would result in a Parent Material
Adverse Effect.
7.13 Injunctions, etc.
No injunction, order or decree of any Governmental Authority shall be
in effect as of the Closing, and no lawsuit, claim, proceeding or investigation
shall be pending or threatened by or before any Governmental Authority as of the
Closing, in either case that would restrain, prohibit or make unlawful the
Merger or the consummation of any of the other transactions contemplated by this
Agreement or invalidate or suspend any material provision of this Agreement.
7.14 [This section intentionally left blank].
7.15 Affiliate Agreements.
The Company shall have received from each of the Affiliates of Parent
an executed Affiliate Agreement in substantially the form attached hereto as
Exhibit 5.12(b).
8. Termination: Amendment and Waiver.
8.1 Termination.
At any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
shareholders of the Company, this Agreement may be terminated:
(a) by mutual consent of the Board of Directors of Parent and the
Company;
(b) by either Parent or the Company, without fault of the
terminating party, if the Closing shall not have occurred on or before
May 31, 2000 (or such later date as may be agreed upon in writing by
the parties hereto);
(c) by Parent (provided Parent is not otherwise in breach), if
(i) the Company shall materially breach any of its representations,
warranties or obligations
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hereunder and such breach shall not have been cured within ten
Business Days of receipt by the Company of written notice of such
breach, (ii) the Board of Directors of the Company shall have
withdrawn or modified its recommendation of this Agreement or the
Merger in a manner adverse to Parent (other than by reason of the
exercise of the Company's right to terminate this Agreement pursuant
to Section 8.1(a), Section 8.1(d) or Section 8.1(e)), (iii) for any
reason the Company fails to call and hold the Company Shareholders
Meeting or obtain appropriate written consent of the Company's
shareholders by May 31, 2000, or (iv) holders of at least two-thirds
of the outstanding shares of the Company Common Stock have not voted
in favor of the Merger.
(d) by the Company (provided the Company is not otherwise in
breach), if Parent shall materially breach any of its representations,
warranties or obligations hereunder and such breach shall not have
been cured within ten (10) Business Days following receipt by Parent
of written notice of such breach; or
(e) by either Parent or the Company if any permanent injunction
or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable.
(f) by Parent at any time prior to May 19th, 2000 , if, as a
result of Parent's due diligence investigation of the Company, the
Board of Directors of Parent shall determine, in its sole discretion,
that the Merger is not in the best interests of Parent and its
shareholders.
8.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section
8.1, there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company or their respective officers, directors, shareholders or
Affiliates to proceed with the Merger. Such termination shall not affect the
right of a party to assert a claim with respect to the breach by a party hereto
of any of its representations, warranties or covenants set forth in this
Agreement. In all events, the provisions of Sections 5.6 and 5.9
(Confidentiality) this Section 8 and Section 10 shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Expenses.
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby (including, without limitation, the fees
and expenses of its advisers, accountants and legal counsel) shall be paid by
the party incurring such expense whether or not the Merger is consummated.
8.4 Amendment.
The respective boards of directors of the parties hereto may cause
this Agreement to be amended at any time prior to Closing by execution of an
instrument in writing signed on behalf of each of the parties hereto; provided
that an amendment made subsequent to adoption of the Agreement by the
shareholders of the Company or Merger Sub shall not (i) alter or change
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the amount or kind of consideration to be received on conversion of Company
Common Stock, (ii) alter or change any term of the Articles of Incorporation of
the Surviving Corporation to be effected by the Merger, or (iii) alter or change
any of the terms and conditions of the Agreement if such alteration or change
would adversely affect the holders of Company Common Stock or Merger Sub Common
Stock.
8.5 Extension, Waiver.
At any time prior to the Effective Time any party hereto may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
9. Escrow and Indemnification.
9.1 Escrow Fund.
As soon as practicable after the Effective Time, that portion of the
Parent Common Shares issuable to the Company Shareholders pursuant to Section
2.6(a) of this Agreement equal to the Escrow Amount (the "Escrow Shares") shall
be registered in the name of, and be deposited with, the Escrow Agent as nominee
for the Company Shareholders, such deposit to constitute the Escrow Fund and to
be governed by the terms set forth herein and in the Escrow Agreement. The
Escrow Fund shall be available to compensate Parent pursuant to the
indemnification obligations of the Company Shareholders in this Section 9.
9.2 Indemnification by the Company Shareholders.
(a) Survival of Warranties. All representations and warranties
made by the Company herein, or in any certificate, schedule or exhibit
delivered pursuant hereto, shall survive the Closing and continue in
full force and effect for a period of twenty-four (24) months from the
Effective Date; provided, however, that all representations and
warranties made by the Company with respect to any Tax, Tax Return or
Tax matter shall survive the Closing and continue until ninety (90)
days after all applicable statutes of limitations, including waivers
and extensions, have expired and if no statute of limitation applies,
forever thereafter.
(b) Subject to the limitations set forth in this Section 9, from
and after the Closing the Company Shareholders will indemnify and hold
harmless Parent and the Surviving Corporation and its respective
officers, directors, agents and employees, and each Person, if any,
who controls or may control Parent or the Surviving Corporation within
the meaning of the Securities Act (hereinafter referred to
individually as an "Indemnified Person" and collectively as
"Indemnified Person") from and against any and all losses, costs,
damages, third-party claims, liabilities and expenses (net of any
recoveries under existing insurance policies, Tax benefit received by
Indemnified Person
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or its Affiliates as a result of such damages, indemnities from third
parties or in the case of third party claims, by any amount actually
recovered by Indemnified Person pursuant to counterclaims made by any
of them directly relating to the facts giving rise to such third party
claims), including, without limitation, reasonable legal fees
(collectively, "Damages") arising out of (i) any breach of the
representations, warranties, covenants and agreements given or made by
the Company or the Principal Shareholders in this Agreement, the
Company Disclosure Statement or any exhibit or schedule to this
Agreement, or (ii) any action, claim, suit, proceeding, arbitration or
other litigation commenced or pending against the Company on the date
hereof. Without limiting the foregoing, the Company Shareholders shall
be required to indemnify Parent for Taxes for any Pre-Closing Tax
Period only to the extent, if any, such Taxes for such period exceed
(x) with respect to Tax Returns filed prior to the Closing, any Taxes
or estimated Taxes paid by the Company or the Company Shareholders
attributable to such period and (y) with respect to Tax Returns filed
after the Closing, the amount of Taxes accrued as a reserve or
provision on the books of the Company and properly shown on the
Financial Statements of the Company for such period. Each Indemnified
Person shall act in good faith and in a commercially reasonable manner
to mitigate any Damages it may suffer, regardless of whether the
damages threshold contained in the following sentence has been
attained. Notwithstanding the foregoing, Parent shall be entitled to
indemnification from the Company Shareholders hereunder only if and to
the extent the aggregate amount of Damages suffered by Parent exceeds
$500,000, and then only to the extent such amount of Damages exceeds
$500,000.
9.3 Officer's Certificate.
Notwithstanding Section 9.2(a), Parent may not receive any shares from
the Escrow Fund with respect to the indemnification obligations of the Company
Shareholders set forth in Section 9.2(a) unless and until an Officer's
Certificate or Certificates (as defined in Section 9.5 below) identifying the
requirements of Section 9.5(a) and identifying Damages has been delivered to the
Escrow Agent as provided in Section 9.5 below and such amount is determined
pursuant to this Section 9 to be payable.
9.4 Escrow Period.
(a) The Escrow Period shall terminate upon the expiration of
twenty-four (24) months after the Effective Time; provided, however,
that a portion of the Escrow Shares, which, in the reasonable judgment
of Parent, subject to the objection of the Shareholders' Agent and the
subsequent arbitration of the matter in the manner provided in Section
9.7 hereof are necessary to satisfy the expected Damages attributable
to any unsatisfied claims specified in any Officer's Certificate
theretofore delivered to the Escrow Agent prior to termination of the
Escrow Period with respect to facts and circumstances existing prior
to expiration of the Escrow Period, shall remain in the Escrow Fund
until such claims have been resolved.
(b) Upon termination of the Escrow Period, the Escrow Agent shall
deliver to the former Company Shareholders that portion of the Escrow
Fund that is not required to satisfy any claims made by Parent
pursuant to Section 9.5 hereof. Deliveries
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of Escrow Amounts to the Company Shareholders pursuant to this Section
9.4(b) shall be made in proportion to their respective original
contributions to the Escrow Fund. Any Escrow Shares remaining in the
Escrow Fund following the termination of the Escrow Period pursuant to
Section 9.4(a) shall be released after such claims are resolved.
9.5 Claims Upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the last
day of the Escrow Period of a certificate signed by any officer
of Parent (an "Officer's Certificate") specifying in reasonable
detail the individual items of such Damages included in the
amount so stated, the date each such item was paid, or properly
accrued or arose, the nature of the misrepresentation, breach of
warranty or claim to which such item is related, the Escrow Agent
shall, subject to the provisions of this Section 9.2, deliver to
Parent out of the Escrow Fund, as promptly as practicable, Parent
Common Shares or other assets held in the Escrow Fund having a
value equal to such Damages with respect to the indemnification
obligations of the shareholders of the Company set forth in
Section 9.2(b). In connection with all withdrawals from and
distributions out of the Escrow Fund, Parent shall take all
appropriate action to issue original certificates for Parent
Common Shares in the name of the Escrow Agent or the former
Company Shareholders (or their successors in interest) in order
to assist the Escrow Agent in performing its duties and otherwise
to carry out the provisions of this Section 9.
(b) For the purpose of compensating Parent for its Damages
pursuant to this Agreement, the Parent Common Shares in the
Escrow Fund shall be valued at the average published closing
price of the Parent Common Shares on the NASDAQ National Market
(or successor U.S. market or exchange) during the twenty (20)
consecutive trading days ending on the last day of the calendar
month in which the claim for which Parent is entitled to
indemnification first properly accrued or arose.
9.6 Objections to Claims.
At the time of delivery of any Officer's Certificate to the Escrow
Agent, a duplicate copy of such Officer's Certificate shall be delivered to the
Shareholders' Agent (defined in Section 9.8 below) and for a period of
forty-five (45) days after receipt by the Escrow Agent, the Escrow Agent shall
make no delivery of Parent Common Shares or other property pursuant to Section
9.5 hereof unless the Escrow Agent shall have received written authorization
from the Shareholders' Agent to make such delivery. After the expiration of such
forty-five (45) day period, the Escrow Agent shall make delivery of the Parent
Common Shares or other property in the Escrow Fund in accordance with Section
9.5 hereof, provided that no such payment or delivery may be made if the
Shareholders' Agent shall object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have been delivered to the
Escrow Agent and to Parent prior to the expiration of such forty-five (45) day
period.
9.7 Resolution of Conflicts and Arbitration.
(a) In case the Shareholders' Agent shall so object in writing to
any claim or claims by Parent made in any Officer's Certificate,
Parent shall have forty-five
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(45) days to respond in a written statement to the objection of the
Shareholders' Agent. If after such forty-five (45) day period there
remains a dispute as to any claims, the Shareholders' Agent and Parent
shall attempt in good faith for sixty (60) days to agree upon the
rights of the respective parties with respect to each of such claims.
If the Shareholders' Agent and Parent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent. The Escrow Agent
shall be entitled to rely on any such memorandum and shall distribute
the Parent Common Shares or other property from the Escrow Fund in
accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders' Agent may, by written
notice to the other, demand arbitration of the matter unless the
amount of the damage or loss is at issue in pending litigation with a
third party, in which event arbitration shall not be commenced until
such amount is ascertained or both parties agree to arbitration; and
in either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within fifteen (15) days after such
written notice is sent, Parent and the Shareholders' Agent shall each
select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators as to the
validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 9.6 hereof, the Escrow Agent shall
be entitled to act in accordance with such decision, as certified to
it by Parent or the Shareholders' Agent, and make or withhold payments
out of the Escrow Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall
be held in Minneapolis, Minnesota under the commercial rules then in
effect of the American Arbitration Association. For purposes of this
Section 9.7(c), in any arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, Parent
shall be deemed to be the non-prevailing party unless the arbitrators
award Parent more than one-half (1/2) of the amount in dispute, plus
any amounts not in dispute; otherwise, the Company Shareholders for
whom shares of Parent Common Shares otherwise issuable to them have
been deposited in the Escrow Fund shall be deemed to be the
non-prevailing party. The non-prevailing party to an arbitration shall
pay its own expenses, the fees of each arbitrator, the administrative
fee of the American Arbitration Association, and the expenses,
including without limitation, attorneys' fees and costs, reasonably
incurred by the other party to the arbitration.
9.8 Shareholders' Agent.
(a) Richard S. Waidmann shall be constituted and appointed as
agent ("Shareholders' Agent") for and on behalf of the Company
Shareholders to give and receive notices and communications, to
authorize delivery to Parent of the Parent Common Shares or other
property from the Escrow Fund in satisfaction of claims by Parent, to
object to such deliveries, to agree to, negotiate, defend, enter into
settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or
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appropriate in the judgment of the Shareholders' Agent for the
accomplishment of the foregoing. Such agency may be changed by the
holders of a majority in interest of the Escrow Fund from time to time
upon not less than 10 days' prior written notice to Parent. No bond
shall be required of the Shareholders' Agent, and the Shareholders'
Agent shall receive no compensation for his services. Notices or
communications to or from the Shareholders' Agent shall constitute
notice to or from each of the Company Shareholders.
(b) The Shareholders' Agent shall not be liable for any act done
or omitted hereunder as Shareholders' Agent while acting in good faith
and in the exercise of reasonable judgment and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Company Shareholders shall severally indemnify the
Shareholders' Agent and hold him harmless against any loss, liability
or expense incurred without gross negligence or bad faith on the part
of the Shareholders' Agent and arising out of or in connection with
the acceptance or administration of his duties hereunder.
(c) The Shareholders' Agent shall have reasonable access to
information about the Company and the reasonable assistance of the
Company's officers and employees for purposes of performing its duties
and exercising its rights hereunder, provided that the Shareholders'
Agent shall treat confidentially and not disclose any nonpublic
information from or about the Company to anyone (except on a need to
know basis to individuals who agree to treat such information
confidentially).
(d) Parent acknowledges that Richard S. Waidmann may have a
conflict of interest with respect to its duties as Shareholders'
Agent, and in such regard will act in the best interests of the
Company Shareholders. No action taken by him as Shareholders' Agent
shall be construed to constitute a violation of any express, implied
or common law duties to Parent or the Surviving Corporation
notwithstanding any conflicting provision of his Employment Agreement.
(e) Parent and the Surviving Corporation shall have no liability
to any Company Shareholder or otherwise arising out of the acts or
omissions of the Shareholders' Agent or any disputes among the Company
Shareholders with respect to the duties of the Shareholders' Agent.
Parent and the Surviving Corporation may rely entirely on their
dealings with, and notices to and from, the Shareholders' Agent with
respect to matters for which the Shareholders' Agent acts on behalf of
the Company Shareholders.
9.9 Actions of the Shareholders' Agent.
A decision, act, consent or instruction of the Shareholders' Agent
shall constitute a decision of all the Company Shareholders for whom Parent
Common Shares otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each such Company Shareholder, and
the Escrow Agent and Parent may rely upon any decision, act, consent or
instruction of the Shareholders' Agent as being the decision, act consent or
instruction of each and every such Company Shareholder. The Escrow Agent and
Parent are hereby
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relieved from any liability to any person for any acts done by them in
accordance with such decision, act consent or instruction of the Shareholders'
Agent.
9.10 Third-Party Claims.
In the event Parent becomes aware of a third-party claim which Parent
believes may result in a demand against the Escrow Fund, Parent shall notify the
Shareholders' Agent of such claim, and the Shareholders' Agents and the Company
Shareholders for whom Parent Common Shares otherwise issuable to them are
deposited in the Escrow Fund shall be entitled, at their expense, to participate
in any defense of such claim. Parent may not affect the settlement of any such
claim without the consent of the Shareholders' Agent, which consent shall not be
unreasonably withheld. In the event that the Shareholders' Agent has consented
to any such settlement, the Shareholders' Agents shall have no power or
authority to object under Section 9.6 or any other provision of this Section 9
to a claim by Parent against the Escrow Fund for indemnity consistent with the
terms of such settlement.
9.11 Exclusive Remedy.
With the exception of claims based on fraud, the provisions of Section
9.2 shall be the sole remedy of Parent, the Surviving Corporation and each other
Indemnified Person with respect to any breach of a representation or warranty of
the Company or the Principal Shareholders contained in or made pursuant to this
Agreement. Notwithstanding the foregoing, with the exception of indemnification
obligations for claims arising from breach of representations and warranties
made in Section 3.5 hereof, the indemnification obligations of the Company
Shareholders shall not exceed $5,000,000. Prior to enforcing any claim for
indemnification against the Company Shareholders directly, an Indemnified Person
shall first proceed against the Escrow Fund in accordance with this Agreement
and the Escrow Agreement until the Escrow Fund has been exhausted. The Company
Shareholders, at their option, may satisfy their indemnification obligations for
Damages under this Section 9 by surrendering Parent Common Shares having a
value, calculated as set forth in Section 9.5(b), equal to Damages for which
such Company Shareholder has not satisfied in cash. Any Company Shareholder who
surrenders that number of Parent Common Shares equal to the number of Parent
Common Shares received by such Company Shareholder pursuant to this Agreement
shall have no further liability for indemnification under this Agreement,
regardless of whether the $5,000,000 cap in this Section 9.11 has been attained.
10. General Provisions.
10.1 Survivability.
The representations and warranties set forth in this Agreement shall
survive in accordance with Section 9.2. The agreements and covenants contained
herein that contemplate performance after the Effective Time the Company shall
survive the Effective Time.
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10.2 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 confirmation of receipt) to the parties at the following address
(or at such other address for a party as shall be specified by like notice):
(a) if to MDSI or Merger Sub,
MDSI Mobile Data Solutions Inc.
10271 Shellbridge Way
Richmond, British Columbia
Canada V6X 2W8
Telephone: (604) 207-6000
Telecopier: (604) 207-6060
Attention: Kenneth R. Miller, Chairman
and Chief Executive Officer
with a copy to:
Dorsey & Whitney LLP
U.S. Bank Centre
1420 Fifth Avenue Suite 3400
Seattle WA 98101-4010
Telephone: (206) 903-8800
Telecopier: (206) 903-8820
Attention: Randal R. Jones
with a copy to:
Reid & Company
1040 - 1055 West Hastings Street
Vancouver BC
Canada V6E 2E9
Telephone: (604) 687-5267
Telecopier: (604) 687-5872
Attention: David R. Reid
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(b) if to the Company:
Connectria Corporation
34 Worthington Drive
St. Louis, Missouri 63043
Telephone: (314) 991-5005
Telecopier: (314) 991-8104
Attention: Richard S. Waidmann,
Chairman and President
with a copy to:
Thompson Coburn LLP
One Mercantile Center
St. Louis, Missouri 63101-1693
Telephone: (314) 552-6000
Telecopier: (314) 552-7000
Attention: Ronald Haglof
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt (or the date delivery is refused) if delivered by hand or
overnight courier service, or on the date three Business Days after dispatch by
certified or registered mail if mailed, in each case delivered or mailed
(properly addressed) to such party as provided in this Section or in accordance
with the latest unrevised direction from such party given in accordance with
this Section. Any address or addressee specified above may be changed by notice
to the other parties in accordance with this Section.
10.3 Entire Agreement.
This Agreement (including the exhibits hereto) and the Confidentiality
Agreement previously executed between Parent and the Company contain the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersede any prior written or oral agreements between them concerning the
subject matter hereof or thereof.
10.4 News Releases; Public Announcements.
Prior to Closing or the earlier termination of this Agreement in
accordance with Section 8.1, no news releases or public announcements of the
Merger or the transactions contemplated by this Agreement shall be made without
the prior, written approval of Parent and the Company, except as otherwise
provided herein or as required by applicable law. Each of Parent and the Company
agrees that the financial terms of this Agreement and the related documents
shall be maintained as confidential, proprietary information of Parent and the
Company and shall not be disclosed publicly unless disclosure is required under
applicable securities laws and regulations. In the event that, prior to the
Closing, Parent is required to disclose under applicable securities laws or
regulations any terms of this Agreement, Parent agrees to provide to the Company
a copy of such disclosure prior to its public dissemination.
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10.5 Counterparts; Effectiveness.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which shall taken together
constitute but one and the same instrument, and shall become effective when one
or more such counterparts have been signed by each of the parties and delivered
to the other parties. Delivery by facsimile transmission of a signed signature
page of this Agreement will be effective as delivery of a manually executed
counterpart of this Agreement.
10.6 Descriptive Headings.
The Section headings and the Table of Contents used herein are for
convenience of reference only and shall not affect the meanings, interpretation
or construction of any provision of this Agreement.
10.7 Choice of Law.
This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware applicable to agreements to be made and
performed entirely within such State, without regard to the conflicts of law
principles of such State.
10.8 Assignment.
This Agreement and the rights hereunder shall not be assignable or
transferable by any party (except by operation of law in connection with a
merger, consolidation or sale of substantially all the assets of such party)
without the prior written consent of the other parties hereto; provided that
Parent may assign, in its sole discretion, any or all of its rights and
interests under this Agreement to any of its Affiliates. No assignment shall
relieve Parent of its obligations hereunder. Provided further that subject to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
10.9 No Third-Party Beneficiaries.
Except for the agreements contained in Sections 5.13, 5.14, 5.17,
5.19, 5.22 and 5.23 which shall be deemed made for the beneficiaries of those
agreements, nothing herein expressed or implied shall give or be construed to
give to any Person, other than the parties hereto and their permitted assigns,
any legal or equitable rights hereunder.
10.10 Waiver and Amendment.
(a) No failure or delay of any party in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise
of any other right or power. No waiver of any provision of this
Agreement or consent to any departure by any party therefrom shall in
any event be effective unless the same shall be expressly permitted
hereby, and then such waiver or consent shall be effective only in the
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specific instance and for the purpose for which given. No notice or
demand on any party in any case shall entitle any party to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or
agreements in writing, expressly identified as a waiver, amendment or
modification hereof, entered into by the parties hereto. To be
effective, any consent, approval, notice, waiver or demand required or
permitted under this Agreement must refer specifically to this
Agreement and be signed by an authorized signatory of the party making
or giving such consent, approval, notice, waiver or demand.
10.11 Waiver of Jury Trial.
Each party hereto hereby waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any
litigation directly or indirectly arising out of, under or in connection with
any of this Agreement. Each party hereto (a) certifies that no representative,
agent or attorney of the other party has represented, expressly or otherwise,
that the other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto have
been induced to enter into this Agreement by, among other things, the mutual
waivers and certifications in this Section.
10.12 Severability.
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
10.13 Construction.
This Agreement has been negotiated by the parties and their respective
counsel and will be fairly interpreted in accordance with its terms and without
any strict construction in favor of or against either party.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
MDSI MOBILE DATA SOLUTIONS INC.
By: /s/ Kenneth R. Miller
-------------------------------------
Name: Kenneth R. Miller
Title: Chief Executive Officer
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MDSI ACQUISITION CORPORATION
By: /s/ Kenneth R. Miller
-------------------------------------
Name: Kenneth R. Miller
Title: President
CONNECTRIA CORPORATION
By: /s/ Richard S. Waidmann
-------------------------------------
Name: Richard S. Waidmann
Title: President and Chief Executive Officer
THE SHAREHOLDERS
/s/ Richard S. Waidmann
---------------------------------
Richard S. Waidmann
/s/ Eric Y. Miller
---------------------------------
Eric Y. Miller
65
