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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: September 3, 1999
(Date of earliest event reported)
MERGE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in the charter)
Wisconsin 0-29486 39-1600938
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1126 South 70th St.
Milwaukee, Wisconsin 53214-3151
(Address of Principal Executive Offices)
(414) 977-4000
(Registrant's telephone number including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial statements of the business acquired will be filed by
amendment not later than 60 days from the date of the Form 8-K
reporting the acquisition of Interpra Medical Imaging Ltd.
(b) Exhibits
2.1 Purchase Agreement, dated as of September 1, 1999 by and among
Merge Technologies Incorporated, 3032854 Nova Scotia Company and Interpra
Medical Imaging Network Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MERGE TECHNOLOGIES INCORPORATED
Dated: September 21, 1999 By: /s/ William C. Mortimore
-------------------------------------
William C. Mortimore,
President and Chief Executive Officer
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PURCHASE AGREEMENT
by and among
MERGE TECHNOLOGIES INCORPORATED,
3032854 NOVA SCOTIA COMPANY
and
INTERPRA MEDICAL IMAGING NETWORK LTD.
Dated as of September 1, 1999
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TABLE OF CONTENTS
PAGE
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RECITALS .........................................................................................................1
ARTICLE 1
PURCHASE.................................................................................................1
1.1 Reorganization of Company Share Capital................................................1
1.2 Filing and Effective Time; Purchase of Shares by Holdings..............................1
1.3 Effects of the Reorganization..........................................................1
1.4 Exchange of Certificates...............................................................2
1.5 The Closing............................................................................2
1.6 Transfer Taxes.........................................................................2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................2
2.1 Organization...........................................................................2
2.2 Capitalization.........................................................................3
2.3 Authority Relative to This Agreement...................................................3
2.4 Consents And Approvals; No Violation...................................................4
2.5 Financial Statements...................................................................4
2.6 Absence of Certain Changes.............................................................4
2.7 Tax Matters............................................................................6
2.8 Employee Benefit Plans.................................................................8
2.9 Employment-Related Matters............................................................10
2.10 Litigation............................................................................12
2.11 No Undisclosed Liabilities............................................................12
2.12 Contracts and Commitments.............................................................12
2.13 Assets Other than Real Property.......................................................13
2.14 Real Property.........................................................................14
2.15 Insurance.............................................................................14
2.16 Intellectual Property.................................................................15
2.17 Books and Records.....................................................................16
2.18 Disclosure............................................................................16
2.19 Compliance with Law...................................................................16
2.20 Brokers and Finders...................................................................17
2.21 Environmental.........................................................................17
2.22 Banking Relationships.................................................................18
2.23 Investment Representations............................................................18
2.24 Security Interests....................................................................19
2.25 Ontario Securities Act................................................................19
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MERGE.................................................................19
3.1 Organization..........................................................................19
3.2 Authority Relative to this Agreement..................................................20
3.3 Consents and Approvals; No Violation..................................................20
3.4 Brokers and Finders...................................................................20
ARTICLE 4
COVENANTS...............................................................................................21
4.1 Conduct of Business...................................................................21
4.2 No Solicitation, Etc..................................................................21
4.3 Transfer Requirements.................................................................21
4.4 Due Diligence; Access to Information..................................................22
4.5 Regulatory and Other Approvals........................................................22
4.6 Public Announcements..................................................................23
4.7 Notification of Certain Matters.......................................................23
4.8 Resignation of Directors..............................................................23
4.9 Employment Agreements.................................................................23
4.10 Subsequent Financial Statements.......................................................23
4.11 Issuance by Merge of Merge Common Shares..............................................23
4.12 Transaction Agreements................................................................23
4.13 Co-Operation..........................................................................23
4.14 Consents..............................................................................24
4.15 Books and Records.....................................................................24
4.16 Execution of Certain Documents........................................................24
4.17 Employer Health Tax...................................................................24
4.18 Company Disclosure Schedule...........................................................24
4.19 SEC Reports...........................................................................24
ARTICLE 5
CONDITIONS TO CONSUMMATION OF TRANSACTIONS..............................................................24
5.1 Conditions to Each Party's Obligation to Consummate Transactions......................24
5.2 Additional Conditions to Obligations of Merge to Consummate
Transactions..........................................................................25
5.3 Additional Conditions to the Obligation of Company to
Consummate Transactions...............................................................27
ARTICLE 6
TERMINATION; AMENDMENTS; WAIVER........................................................................28
6.1 Termination...........................................................................28
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6.2 Effect of Termination.................................................................28
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS;
INDEMNITY...............................................................................................29
7.1 Survival of Representations, Warranties and Agreements................................29
7.2 Agreement to Indemnify................................................................30
7.3 Limitation of Liability...............................................................31
7.4 Process of Indemnification for Merge Claims...........................................31
7.5 Process of Indemnification for Company Claims.........................................32
ARTICLE 8
REGISTRATION RIGHTS.....................................................................................33
8.1 Registration of Merge Common Shares...................................................33
ARTICLE 9
MISCELLANEOUS...........................................................................................35
9.1 Definitions...........................................................................35
9.2 Entire Agreement; Assignment..........................................................43
9.3 Expenses..............................................................................43
9.4 Amendment.............................................................................43
9.5 Extension; Waiver.....................................................................43
9.6 Validity..............................................................................43
9.7 Notices...............................................................................43
9.8 Governing Law.........................................................................44
9.9 Descriptive Headings..................................................................44
9.10 Counterparts..........................................................................44
9.11 Parties in Interest...................................................................45
9.12 Specific Performance..................................................................45
9.13 Time of the Essence...................................................................45
Index of Exhibits
Exhibit A - Articles of Amendment
Exhibit B - Employment Agreements
Exhibit C - Opinion of Company Counsel
Exhibit D - Opinion of Merge Counsel
Exhibit E - IWeb Letter of Intent
Exhibit F - Share Exchange Agreement
Exhibit G - Support Agreement
Exhibit H - Trust Agreement
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of September 1, 1999 (this "Agreement"), by
and among Merge Technologies Incorporated, a Wisconsin corporation ("Merge"),
3032854 Nova Scotia Company, a Nova Scotia corporation ("Holdings") and Interpra
Medical Imaging Network Ltd., an Ontario corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Merge, Holdings and Company deem it
desirable and in their best interests to consummate the transactions
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE
1.1 Reorganization of Company Share Capital. Company agrees to hold
special meetings of its shareholders and directors to obtain all consents
required under the Business Corporations Act (Revised Statutes of Ontario) (the
"Canadian Act") to reorganize its share capital (the "Reorganization") so that
the resulting share capital shall consist of: (i) 420,000 Non-Voting
Exchangeable Shares (the "Exchangeable Shares") having the terms and conditions
set forth in the Articles of Amendment in the form attached hereto as Exhibit A;
and (ii) an unlimited number of Common Shares (the "New Common Shares").
1.2 Filing and Effective Time; Purchase of Shares by Holdings. At the
Closing, Company shall file the Articles of Amendment (the effective time of
such filing, the "Effective Time"). At the Effective Time: (a) each Company
Common Share issued and outstanding at and as of the Effective Time, by virtue
of the Reorganization and without any further action on the part of the holder
thereof, shall be converted into 317.333 Exchangeable Shares, such that all of
the issued and outstanding Company Common Shares shall be converted into an
aggregate of 420,000 Exchangeable Shares; and (b) Company shall issue to
Holdings 100 New Common Shares. Schedule 1.2 sets forth the number of
Exchangeable Shares each of the Holders will receive upon conversion.
1.3 Effects of the Reorganization. The Reorganization shall have the
effects set forth in the Canadian Act. In addition: (a) the Articles of
Incorporation of Company, as amended by the Articles of Amendment, shall be the
Company's Articles of Incorporation after the Reorganization, until amended or
changed in accordance with applicable law; and (b) the bylaws of Company as in
effect at the Effective Time shall remain in effect until amended or changed in
accordance with applicable law.
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1.4 Exchange of Certificates. At the Closing, all of the Holders shall
surrender to Company their stock certificates representing their Company Common
Shares. Upon receipt of the stock certificates, Company shall cancel such stock
certificates and Company shall promptly issue a certificate to each Holder
representing the Exchangeable Shares into which his, her or its Company Common
Shares previously represented by the surrendered certificates shall have been
converted at the Effective Time. Any stock certificates representing Company
Common Shares which are not surrendered to Company at the Closing shall be
deemed to represent the right to receive 317.333 Exchangeable Shares per Company
Common Share.
1.5 The Closing. The Closing of the Reorganization (the "Closing") shall
take place as promptly as practicable (and in any event within five business
days) after satisfaction or waiver of the conditions set forth in Article 5 (the
"Closing Date"), at the offices of the Company in Toronto, Ontario or such other
place as the parties may otherwise agree.
1.6 Transfer Taxes. Company shall pay any and all sales, documentary, use,
filing, transfer, goods and services and other taxes payable as a result of the
transfer of New Common Shares to Holdings.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Company represents and warrants to each of Merge and Holdings as of the
date of this Agreement and, except as otherwise provided, as of the Closing Date
as follows:
2.1 Organization.
(a) Company is duly organized, validly existing and in good standing under
the laws of the province of Ontario and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its Business
as it is now being conducted. Company does not own directly or indirectly, any
shares or other equity interests, or securities in any corporation, partnership,
other business organization, entity, enterprise or joint venture. Except as
disclosed in Section 2.1(a) of the Company Disclosure Schedule, Company is duly
registered, qualified or licensed as an extra-provincial or foreign corporation
or other business organization, and is up-to-date in the filing of all corporate
and similar returns, under the laws of each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or license necessary. On or before the Delivery Date,
Merge will receive from Company true and complete copies of the articles of
incorporation and by-laws (or similar document) of Company as currently in
effect.
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(b) There are no partnership agreements, voting trusts or other agreements
or understandings to which Company is a party or is bound with respect to the
voting of the shares or equity of Company.
(c) True copies of the minute books of Company will be provided to Merge
on or before the Delivery Date. All resolutions, minutes, contracts, acts,
by-laws, proceedings, appointments, elections and payments made, enacted, done
or taken by the directors and/or officers of Company since the date of
incorporation through the date of this Agreement have been ratified, confirmed
and approved by the board of directors and/or the shareholders, as applicable.
2.2 Capitalization. As of the date hereof, the authorized capital of
Company consists of (i) an unlimited number of Class A Special Shares, no shares
of which are issued and outstanding; (ii) an unlimited number of Class B Special
Shares, no shares of which are issued and outstanding; and (iii) an unlimited
number of Class C Shares (the "Company Common Shares") of which, as of the date
hereof, 1,323.53 shares are issued and outstanding. All issued and outstanding
Company Common Shares are duly authorized, validly issued, fully paid and
nonassessable and free of any preemptive rights with respect thereto. After
giving effect to the Reorganization, the authorized capital of Company will
consist of (i) an unlimited number of New Common Shares, 100 of which will be
issued and outstanding and held by Holdings; and (iii) 420,000 Exchangeable
Shares all of which will be issued and outstanding and held by the Holders.
There is no Voting Debt of Company issued or outstanding. Except as set forth in
Section 2.2 of the Company Disclosure Schedule, there are not outstanding any
(i) Company Common Shares, (ii) options, warrants, calls, subscriptions, or
other rights or agreements or commitments of any character relating to the
issued or unissued share capital or Voting Debt of Company or obligating Company
to issue, transfer or sell or cause to be issued, transferred or sold any shares
in the capital, partnership interests or other equity interests in, or Voting
Debt of, Company or securities convertible into or exchangeable for such shares,
partnership interests or other equity interests in, Voting Debt, or (iii)
obligations of Company to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement or commitment.
2.3. Authority Relative to This Agreement. Company has all requisite
corporate power and authority to execute and deliver this Agreement and each of
the Transaction Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and each of the Transaction Agreements to which it is a party and the
consummation of the transactions contemplated hereby and thereby by Company (i)
have been duly and validly authorized by Company's board of directors and (ii)
prior to the Closing will have been duly and validly authorized by Company's
shareholders, and no other corporate proceedings on the part of Company are or
will be, prior to Closing, necessary to authorize the execution and delivery of
this Agreement and each of the Transaction Agreements to which it is a party, or
to consummate the transactions contemplated hereby and thereby. This Agreement
and each of the Transaction Agreements to which the Company is a party has been
duly executed and delivered by Company and, assuming that this Agreement and
each of such Transaction Agreements has been duly executed and delivered by the
other parties thereto, constitutes a legal, valid and
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binding agreement of Company, enforceable against Company in accordance with its
respective terms subject to (a) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and (b) general principles of equity (regardless of
whether the enforcement is considered a proceeding in equity or at law).
2.4 Consents And Approvals; No Violation. None of the execution and
delivery by Company of this Agreement or any of the Transaction Agreements to
which Company is a party, the consummation by Company of the transactions
contemplated hereby or thereby or compliance by Company with any of the
provisions hereof or thereof will (i) conflict with or result in any breach of
any provision of the articles of incorporation, partnership agreement or by-laws
(or similar documents) of Company or any of the documents listed in Section
2.1(b) of the Company Disclosure Schedule; (ii) require any consent, waiver,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity; (iii) except as disclosed in Section 2.4(iii) of the
Company Disclosure Schedule, result in a violation of or a default under (with
or without notice or lapse of time, or both), or give rise to any right of
termination, cancellation or acceleration under, or give rise to any payments or
compensation under, any Obligation of Company; or (iv) violate any Order
applicable to Company or any of its assets.
2.5 Financial Statements. Company will furnish to Merge on or before the
Delivery Date complete copies of the Company Financial Statements. The
consolidated balance sheets and the consolidated statements of income and
retained earnings and of changes in financial position (including the related
notes thereto) of Company contained in the Company Financial Statements (a) have
been prepared in accordance with the books and records of Company, (b) present
fairly the financial position and the results of operations and changes in
financial position of Company as of the dates or for the periods presented
therein and (c) have been prepared in conformity with Canadian generally
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein and subject, in the case of quarterly and interim
financial statements, to normal and recurring year-end audit adjustments.
2.6 Absence of Certain Changes.
(a) Since July 31, 1999, except as set forth in Section 2.6(a) of the
Company Disclosure Schedule, Company has not (i) suffered any Company Material
Adverse Effect, nor has there occurred or arisen any event, condition or state
of facts of any character that, individually or in the aggregate, could have a
Company Material Adverse Effect, (ii) suffered any damage or destruction in the
nature of a casualty loss or other loss, whether covered by insurance or not,
that, individually or in the aggregate, has had or could have a Company Material
Adverse Effect, or (iii) had any adverse change in its relations with its
employees, agents, landlords, customers or suppliers or any governmental or
regulatory authorities, that, individually or in the aggregate, has had or could
have a Company Material Adverse Effect.
(b) Since July 31, 1999, except as set forth in Section 2.6(b) of the
Company Disclosure Schedule, Company has conducted its business only in the
ordinary course of business, consistent
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with past practice and, without limiting anything in this Section 2.6, has not
taken any of the following actions:
(i) amended its articles of incorporation, partnership agreement or
by-laws (or similar documents);
(ii) declared or paid any dividends or distributions on its
outstanding shares of capital stock, partnership interests or other equity
interests or purchased, redeemed or otherwise acquired for consideration
any shares of its capital stock, partnership interests or other equity
interests or other securities;
(iii) issued or sold any shares of its capital stock, partnership
interests or other equity interests, effected any share split or otherwise
changed its capitalization as it existed on July 31, 1999, or issued,
granted, or sold any options, share appreciation or purchase rights,
warrants, conversion rights or other rights, securities or commitments
obligating it to issue or sell any shares of its capital stock, partnership
interests or other equity interests, or any securities or obligations
convertible into, or exercisable or exchangeable for, any shares of its
capital stock, partnership interests or other equity interests;
(iv) borrowed or agreed to borrow any funds or voluntarily incurred,
or assumed or become subject to, whether directly or by way of guaranty or
otherwise, any Obligation or liability, except in the ordinary course of
business consistent with past practice;
(v) paid, discharged or satisfied any claim, Obligation or
liability, other than (A) the payment, discharge or satisfaction in the
ordinary course of business of claims, Obligations or liabilities reflected
on or reserved against in the audited balance sheet as of July 31, 1999
contained in the Company Financial Statements, or (B) any individual
claims, Obligations or liabilities incurred in the ordinary course of
business consistent with past practice;
(vi) made any capital expenditures or commitments for any capital
expenditures, except in the ordinary course of business consistent with
past practice;
(vii) sold, mortgaged, pledged or otherwise encumbered or disposed of
any of its assets, except in the ordinary course of business consistent
with past practice;
(viii) except in the ordinary course of business consistent with past
practice, entered into any agreement, contract, or commitment, including,
but not limited to, any agreements with suppliers, customers or
distributors, leases or subleases;
(ix) except in the ordinary course of business consistent with past
practice, amended, terminated or changed any agreement, contract or
commitment, including, but not limited to, any agreements with suppliers,
customers or distributors, leases or subleases;
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(x) knowingly done any act or omitted to do any act, or permitted
an act or omission to act, that will cause a breach of or default under any
Material Contract or Company Lease, or give rise to a right of termination
with respect thereto;
(xi) merged or consolidated with any entity or purchased the equity
capital of any entity or, except in the ordinary course of business
consistent with past practice, purchased any assets;
(xii) adopted, modified or amended in any respect, any Company
Plans;
(xiii) granted any increase in: (A) the salary of any present or
former directors or officers of Company, (B) any other compensation of its
present or former directors or officers, including any increase in benefits
under any bonus, insurance, pension or other benefit plan made for or with
any of those persons and (C) the compensation of any of its consultants,
agents or, except in the ordinary course of business consistent with past
practice, employees;
(xiv) paid, loaned, or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of
its present or former officers, directors or affiliates;
(xv) disposed of, permitted to lapse, or otherwise failed to
preserve the rights of Company to use the Company Proprietary Rights or
entered into any settlement regarding the breach or infringement of the
Company Proprietary Rights, or modified any existing rights with respect
thereto;
(xvi) waived, released, transferred or permitted to lapse any
individual claim or right against Company or any present or former
director, officer, shareholder or consultant of Company or, except in the
ordinary course of business consistent with past practice, taken or omitted
to take any such action against any other party;
(xvii) made any change in any method of accounting or accounting
practice;
(xviii) entered into any other transaction or made any other
commitment that is not in the ordinary course of business consistent with
past practices or not permitted or contemplated by any other provision of
this Agreement; or
(xix) agreed, whether in writing or otherwise, to take any action
described in this Section 2.6.
2.7 Tax Matters.
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(a) Except as set forth in Section 2.7(a) of the Company Disclosure
Schedule, Company has (i) filed in accordance with all applicable laws (without
having to pay penalties) all Returns required to be filed by it, (ii) paid all
Taxes shown to have become due pursuant to such returns, (iii) paid all Taxes
(other than those being contested in good faith as set forth in Section 2.7(a)
of the Company Disclosure Schedule) for which a notice of, or assessment or
demand for, payment has been received or which are otherwise due and payable and
(iv) in the case of Taxes accruing on or before the Closing Date which are not
due and payable on or before the Closing Date and have not been paid, provided
in full for such Taxes in the books and records and financial statements of the
Company. Except as set forth in Section 2.7(a) of the Company Disclosure
Schedule, all Returns filed by Company with respect to Taxes are true, complete
and correct and properly reflect and do not in any respect understate the
taxable income or the liability of Company for Taxes and, for greater certainty,
all deductions claimed by Company in such Returns are properly deductible in
computing the income of such corporations for tax purposes, or, in the case of
the current taxation year or any other taxation year for which a Return has not
been filed, all deductions claimed will be properly deductible in computing the
income of such corporations for tax purposes. The accruals for Taxes set forth
on the Company Financial Statements fully cover all known or contingent
liabilities for Taxes through the date thereof.
(b) All amounts required to be collected or withheld by Company with
respect to Taxes have been duly collected or withheld and any such amounts that
are required to be remitted to any Governmental Entity have been duly remitted
within the time required, including, without limitation, all amounts required to
be withheld from each payment made to any of its present or former employees,
officers, directors and to all persons who are non-residents of Canada for
purposes of the Income Tax Act (Canada). The Company has remitted all Canada
Pension Plan contributions, employment insurance premiums, employer health taxes
and other Taxes payable by it in respect of its employees to the appropriate
governmental authority as and within the time required under the applicable
legislation. The Company has charged, collected and remitted on a timely basis
all Taxes as required under applicable legislation on any sale, supply or
delivery whatsoever, made by Company.
(c) Except as set forth in Section 2.7(c) of the Company Disclosure
Schedule (i) there is no action, suit, proceeding, investigation, audit, claim,
assessment or reassessment in progress, pending or proposed with respect to any
liability for Tax that relates to Company and (ii) there are no currently
outstanding written inquiries that have been issued or raised in respect of
Taxes. Except as disclosed in Section 2.7(c) of the Company Disclosure Schedule,
Company has not executed or filed any agreement or waiver extending the period
of assessment, reassessment or collection of any Taxes which remain in effect
and no extension of time within which to file any Return that relates to Company
has been requested, which Return has not since been filed.
(d) Except as set forth in Section 2.7(d) of the Company Disclosure
Schedule, (A) there are no tax rulings, requests for rulings, or closing
agreements to which Company is a party or is subject which could affect its
liability for Taxes for any period after the Closing, and (B) no power
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of attorney has been granted by Company with respect to any matter relating to
Taxes of Company which is currently in force.
(e) On or before the Delivery Date, Merge will be provided with a copy of
all federal, provincial, state, local and foreign (including, but not limited
to, U.S. federal, state or local) tax returns filed by Company since its
inception. On or before the Delivery Date, Merge will be provided with a copy of
all assessments, extensions and waivers resulting from any audits.
(f) The Company has not deducted any material amounts in computing its
income in a taxation year which will be included in income for a taxation year
ending after the Closing under Section 78 of the Income Tax Act (Canada).
(g) No shareholder of Company is a non-resident of Canada for purposes of
the Income Tax Act (Canada).
(h) Except as disclosed in Section 2.7(h) of the Company Disclosure
Schedule, Company is in compliance with all registration, reporting and
remittance obligations in respect of all provincial or federal sales tax and
goods and services tax ("GST") legislation. Without restricting the generality
of the foregoing, Company is duly registered under the Excise Tax Act (Canada)
for GST purposes, and its GST registration numbers are set out in Section 2.7(h)
of the Company Disclosure Schedule. In addition, all input tax credits claimed
by Company at any time are justified and have been duly calculated. Copies of
all elections, agreements or arrangements made with Revenue Canada Customs,
Excise and Taxation, and all written communications (other than Returns) between
Company and Revenue Canada Customs, Excise and Taxation since Company's
inception will be provided to Merge on or before the Delivery Date.
(i) Company acknowledges that Company and those persons retained by
Company to advise Company with respect to the Tax effects of the transactions
contemplated hereby have fully and independently examined the Tax effects of
such transactions as they may relate to Company. Merge makes no representation
or warranty whatsoever with respect to such Tax effects, and Company further
acknowledges that Company is not relying on any representation or warranty of
Merge with respect to such Tax effects.
2.8 Employee Benefit Plans.
(a) Section 2.8(a) of the Company Disclosure Schedule contains a true,
correct and complete list of all pension, profit sharing, retirement, deferred
compensation, welfare, legal services, medical, dental or other employee benefit
or health insurance plans or arrangements, life insurance or other death benefit
plans, disability, share option, share purchase, share compensation, bonus,
vacation pay, severance pay, change in control and other similar plans,
programs, arrangements or agreements, and every personnel policy, relating to
officers, directors, consultants or any persons employed by Company or in which
any such person is eligible to participate and currently maintained, or that
were maintained at any time by Company and pursuant to which
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Company has any liability, whether contingent or otherwise (collectively, the
"Company Plans"). On or before the Delivery Date, Company will provide Merge
with true, correct and complete copies, as of the date hereof, of all of Company
Plans that have been reduced to writing, together with all documents
establishing or constituting any related trust, annuity contract, insurance
contract or other funding instrument, and summaries of those that have not been
reduced to writing. On or before the Delivery Date, Company will provide Merge
with true, correct and complete copies of the most recent financial statements,
actuarial reports and annual reports prepared in respect of each Company Plan,
current plan summaries, employee booklets, personnel manuals and any other
documents or written materials concerning the Company Plans that are in the
possession of Company as of the date hereof or which are available, as of the
date hereof, to Company.
(b) The Company Plans have been registered, where required, and
administered and established in accordance with all laws, regulations, orders or
other legislative, administrative or judicial promulgations (including
applicable case law) applicable to the Company Plans ("Applicable Laws") and in
accordance with the terms of each such plan. No fact or circumstance exists that
could adversely affect the tax exempt status, if any, of a Company Plan or
result in any liability for Taxes to Company in respect of its administration of
Company Plans or its contributions thereto. Except as disclosed in Section
2.8(b) of the Company Disclosure Schedule, none of the Company Plans enjoys any
special tax status under the Income Tax Act (Canada) or under other Applicable
Laws, nor have any advance tax rulings been sought or received in respect of the
Company Plans.
(c) Except as disclosed in Section 2.8(c) of the Company Disclosure
Schedule, since the date of the financial statements heretofore provided to
Merge no changes have occurred to any of the Company Plans or the assets of the
Company Plans, if any, or are expected by Company or, to the actual knowledge of
Company, any third party carrier or insurer of a Company Plan to occur other
than as a result of benefit or similar payments and contributions which would
affect such financial statements. Except as disclosed in Section 2.8(c) of the
Company Disclosure Schedule, no amendments have been made to any Company Plan
and no improvements to any Company Plan have been promised that are not
reflected in the copies or summaries of the Company Plans which will be provided
to Merge on or before the Delivery Date and no amendments or improvements to a
Company Plan will be made or promised prior to Closing.
(d) All obligations of Company, including the obligation to pay premiums
or contributions, occurring or arising before the date hereof, regarding the
Company Plans have been satisfied on a timely basis in accordance with
Applicable Laws and the terms of the Company Plans and there are no outstanding
defaults or violations by Company thereunder and no taxes, penalties or fees are
owing or assessable under any of the Company Plans. The Company has no liability
(other than liabilities accruing after the Closing and other than in the
ordinary course of business) with respect to any of the Company Plans. No
insurance policy or any other contract or agreement affecting any Company Plan
requires or permits a retroactive increase in premiums or payments due
thereunder. All contributions and premiums will be accounted for by Company on
an accrual basis for the period up to Closing, even though not otherwise
required to be made until a later date in respect of the period that includes
the Closing.
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(e) There are no pending or threatened investigations, litigation,
proceedings or enforcement actions concerning the Company Plans or against
Company (or any fiduciary) with respect to any of the Company Plans nor any
insurance policy or other contract relating thereto, and there exists no state
of facts which with or without notice or lapse of time or both could give rise
to any such investigation, litigation, proceeding or enforcement action.
(f) There are no actions, suits or claims pending or threatened by former
or present employees of Company (or their beneficiaries) with respect to the
Company Plans or any insurance policy or other contract relating thereto (other
than routine claims for benefits).
(g) Subject to insurer consent, if applicable, and applicable law, Company
may unilaterally amend, modify, vary or terminate, in whole or in part, each
Company Plan, except as disclosed in Section 2.8(g) of the Company Disclosure
Schedule.
(h) All employee data necessary to administer, or used in the
administration of, each Company Plan is true and correct as of the date hereof.
(i) Except as disclosed in Section 2.8(i) of the Company Disclosure
Schedule, none of the Company Plans provides benefits to retired employees or to
the beneficiaries or dependents of retired employees.
(j) The Company does not have any contribution or other obligation or
liability, as of the date hereof, with respect to any multi-employer pension or
employee benefit plan.
(k) There have been no withdrawals, applications or transfers of assets,
in each case which were not permissible under Applicable Laws, from any Company
Plan or any applicable trust or other funding media relating thereto. Neither
Company nor any of its agents nor, to the knowledge of Company, any other
fiduciary is or has been in breach of any fiduciary duty with respect to the
Company Plans or any applicable trusts or other funding media relating thereto.
(l) Except as disclosed in Section 2.8(l) of the Company Disclosure
Schedule, no Company Plan provides or will provide benefits to employees (or
their beneficiaries or dependents) of Company employed in the United States.
Except as disclosed in Section 2.8(l) of the Company Disclosure Schedule, no
employee (or the employee's beneficiaries or dependents) of Company is eligible,
or will become eligible, to participate in any Company Plan while employed in
the United States.
2.9 Employment-Related Matters.
(a) Except as disclosed in Section 2.9(a) of the Company Disclosure
Schedule: (i) Company is not a party to any collective bargaining agreement or
other contract or agreement with any labor organization or other representative
of any of the employees of Company and no
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<PAGE> 15
organizational effort is being made or threatened by or on behalf of any labor
organization or other representative of any of the employees with respect to
employees of Company and all such collective bargaining agreements or other
contracts or agreements to which Company is a party or by which it is bound have
been duly executed and are valid and binding and in full force and effect and
Company has not breached any provision of, and are not in default under, the
terms of any such collective bargaining agreement or other contract or
agreement, as the case may be, and no event has occurred which with the lapse of
time or the giving of notice or both would constitute a breach or default by
Company; (ii) to the best of Company's knowledge, no labor organization or
representative holds bargaining rights with respect to any employees of Company
and no labor representatives have applied to have Company declared a related
employer pursuant to the Labor Relations Act (Ontario) or other similar
legislation; (iii) there is no labor strike, dispute, grievance, slowdown, work
stoppage, lockout or proceeding before any employment or labor related board or
tribunal that is pending or threatened against or otherwise affecting Company,
Company has not experienced the same within the past three years; (iv) Company
has not closed any plant or facility, effectuated any layoffs of employees or
implemented any early retirement or separation program at any time since
Company's inception, nor has Company planned or announced any such action or
program for the future with respect to which Company has any liability; (v) all
salaries, wages, vacation pay, bonuses, commissions and other emoluments
relating to the employees of Company and payable by Company before the date
hereof have been paid in full as of the date hereof or have been reflected as an
accrual on the most recent Company Financial Statements; (vi) Company is in
compliance with all applicable laws, regulations, orders or other legislative,
administrative or judicial promulgations (including applicable case law) with
respect to employment, employment practices (including pay equity and human
rights code compliance), labor, terms and conditions of employment, wages and
hours, in each case, with respect to its employees; (vii) all current
assessments in respect of workers' compensation premiums assessable against
Company have been accrued to date, and there are no current or threatened
penalty assessments on account of workers' compensation affecting Company and
Company has not been reassessed under any such legislation during the past 3
years nor is any experience-related reassessment reasonably anticipated to be
made; and (viii) Company is not a party to or bound by any employment or
consulting contracts or other written contract with any employee, officer or
consultant other than oral contracts of indefinite hire terminable without cause
on reasonable notice, none of which involve any commitment, understanding or
arrangement for payment of bonus or incentive pay.
(b) The Company will deliver to Merge by the Delivery Date a list (the
"Employee List") dated as of the Delivery Date containing the name of each
employee of Company, and each such employee's position, starting employment date
and annual salary. The Employee List is true, correct and complete as of the
date of the Employee List. No third party has asserted, or threatened to assert,
any claim against Company that either (a) the continued employment by, or
association with, Company of any of the present officers, employees of or
consultants to Company (collectively, the "Designated Persons"), or (b) the use
by Company, or any of the Designated Persons in connection with their activities
for or on behalf of Company of any information which Company or any of the
Designated Persons uses contravenes any agreements or laws applicable to unfair
competition, trade secrets or proprietary information.
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2.10 Litigation. Except as set forth in Section 2.10 of the Company
Disclosure Schedule, there are (i) no actions, suits, proceedings, arbitrations,
investigations or inquiries pending, ongoing, or, to the knowledge of Company
threatened against, with respect to or affecting Company before any arbitration
tribunal or Governmental Entity which, if decided adversely to Company,
individually or in the aggregate, could have a Company Material Adverse Effect
or delay the consummation of the transactions contemplated hereby, (ii) no
Orders of any Governmental Entity outstanding or, to the knowledge of Company,
threatened against Company which, individually or in the aggregate, could have a
Company Material Adverse Effect, and (iii) no pending or threatened adjustments
arising with respect to any audit, investigation, or review, pursuant to any
contractual or statutory audit, investigation, or review right relating to
Company and no such audits, investigations or reviews are presently being
conducted.
2.11 No Undisclosed Liabilities. Except as fully reflected and provided for
on the balance sheets as of July 31, 1999 (or disclosed in the notes thereto)
contained in the Company Financial Statements, Company does not have any
liabilities or obligations (absolute, accrued, fixed, contingent, liquidated,
unliquidated or otherwise), except (i) liabilities incurred after such date in
the ordinary course of business consistent with past practice, none of which,
individually or in the aggregate, has or could have a Company Material Adverse
Effect and (ii) liabilities permitted or contemplated by this Agreement.
2.12 Contracts and Commitments.
(a) Section 2.12(a) of the Company Disclosure Schedule contains a list
(indicating the clause of this Section 2.12 pursuant to which disclosure is
made) of all of the following written or oral contracts or agreements (including
any and all amendments thereto), other than agreements listed in Sections
2.8(a), 2.9(a), 2.14(b), 2.15 or 2.16(c) of the Company Disclosure Schedule and
other than purchase orders made in the ordinary course of business, to which, as
of the date hereof, Company is a party or by which Company is bound
(collectively, the "Material Contracts"): (i) any agreements with any present
shareholder, employee, officer, director or consultant (or former shareholder,
employee, officer, director or consultant to the extent there remain at the date
hereof obligations to be performed by Company); (ii) agreements or indentures
relating to the borrowing of money; (iii) indemnification agreements or
guaranties of any obligation for borrowed money or otherwise; (iv) contracts
which prohibit Company from freely engaging in business anywhere in the world;
(v) any joint venture or profit-sharing agreement (other than with employees);
(vi) contracts, not entered into in the ordinary course of business on an
arm's-length basis, that are continuing over a period of more than six months
from the date hereof and are not terminable by Company on 60 days or less notice
without penalties or premiums (including contracts to provide advertising
allowances or promotional services); (vii) any agreements for the purchase by
Company of any materials, equipment, services, or supplies not entered into in
the ordinary course of business on an arm's-length basis, that may not be
terminated by Company without penalty upon less than three months' notice;
(viii) any agreements or commitments for the acquisition, construction or sale
of fixed assets owned or to be owned by Company that continue for a period of
more than six months
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<PAGE> 17
from the date hereof and may not be terminated without penalty by Company prior
to the expiration of such six-month period; (ix) any agreements that provide for
the distribution of goods or services that continue for a period of more than
six months from the date hereof and may not be terminated without penalty by
Company prior to the expiration of such six-month period; (x) any agreements or
arrangements for the sale of any of the assets, properties, services or rights
of Company other than in the ordinary course of business on an arms length basis
or for the grant of any preferential rights to purchase any of its assets,
properties or rights or that require the consent of any third party to the
transfer and assignment of any of its assets, properties or rights; (xi) any
agreements with any third party to develop any intellectual property concepts
involving payments by Company in excess of Cdn. $10,000; (xii) any commitments
for charitable contributions or any other agreements; and (xiii) any other
agreements which (A) are material to the Business of Company taken as a whole or
(B), except as disclosed in Section 2.12(b) of the Company Disclosure Schedule,
pursuant to the terms of which the consent of a third party would be required
for the consummation of the transactions contemplated hereby or by the
Transaction Agreements.
(b) Except as disclosed in Section 2.8(a) or Section 2.12(b) of the
Company Disclosure Schedule, Company is not a party to any contract, agreement
or understanding which contains a "change in control" or similar provision or
any other provision which could be triggered by the execution and delivery of,
or the consummation of the transactions contemplated by, this Agreement or the
Transaction Agreements; and the execution and delivery of, or the consummation
of the transactions contemplated by, this Agreement or the Transaction
Agreements will not (either alone or upon the occurrence of any additional acts
or events) by reason of any such provision result in any payment (whether of
severance pay or otherwise) becoming due from Company to any person.
(c) On or before the Delivery Date, complete copies of all Material
Contracts will be provided to Merge or its solicitors. All Material Contracts
have been duly executed and are valid and binding and in full force and effect
and, except as set forth in Section 2.12(c) of the Company Disclosure Schedule,
none of Company, or to the actual knowledge of Company, any other party to any
Material Contract has breached any provision of, or is in default under, the
terms of any Material Contract and no event has occurred which with the lapse of
time or the giving of notice or both would constitute a breach or default by any
party thereto.
2.13 Assets Other than Real Property.
(a) With respect to all assets (other than real property) and personal
property used in, or necessary for the conduct of its Business, Company has (i)
good and marketable title to all of such assets and personal property owned by
it and (ii) a valid and enforceable leasehold interest in all of such assets and
personal property leased by it. All of such assets (other than real property)
and personal property are shown on the balance sheets as of July 31, 1999
included in the Company Financial Statements, except as to assets (other than
real property) acquired since the date of such balance sheets in the ordinary
course of business and in a manner consistent with past practice or as
contemplated by this Agreement. Except as set forth in Section 2.13(a) of the
Company Disclosure Schedule, none of the assets (other than real property) owned
by Company subject to any Lien.
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<PAGE> 18
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, all receivables shown on the balance sheets as of July 31, 1999
included in the Company Financial Statements have been collected or are
collectable in the amounts shown therein, less any allowance for doubtful
accounts shown thereon. All receivables accrued by Company since July 31, 1999
have been collected or are collectable, less any additional allowances in
respect thereof calculated in a manner consistent with the allowance reflected
on the balance sheets as of July 31, 1999 included in the Company Financial
Statements. All material plant, equipment and personal property owned by Company
are in good operating condition and repair, ordinary wear and tear excepted.
2.14 Real Property.
(a) The Company (i) does not own any real property, and (ii) has no right
or option to purchase any real property.
(b) Section 2.14(b) of the Company Disclosure Schedule sets forth a true
and complete list of all leases or subleases for real property to which Company
is a party (collectively, the "Company Leases"). All of the Company Leases grant
leasehold estates free of mortgages of lease and, where Company is the tenant,
Company has the right of quiet possession and, except as disclosed in Section
2.14(b) of the Company Disclosure Schedule, non-disturbance as against any Lien
on the property and any holder of any such Lien (except where a tenant's
registered notice of lease has priority over such Lien). All Company Leases or
subleases have been duly executed by all parties thereto, are valid and binding,
in good standing, in full force and effect in the form executed and none of
Company or, to Company's knowledge, any of the other parties to any such leases
or subleases has breached any provisions of, or is in default under the terms
thereof and no event has occurred which is continuing, with respect to any such
leases or subleases, which with the giving of notice or the lapse of time or
both would result in a default thereunder. Except as disclosed in Section
2.14(b) of the Company Disclosure Schedule, no prepayment of rent or other
amounts has been made in respect of any leased property. The Company is not
obligated to pay any leasing or brokerage commission relating to any Company
Lease or will have any enforceable obligation to pay any leasing or brokerage
commission upon the renewal of any such lease. Except in the ordinary course of
business consistent with past practice, no material construction, alteration or
other leasehold improvement work with respect to any Company Leases remains to
be paid or to be performed by Company.
2.15 Insurance. Section 2.15 of the Company Disclosure Schedule sets forth
(i) a complete and correct list of all contracts of insurance and indemnity in
force at the date hereof with respect to Company, true and complete copies of
which will be delivered to Merge on or before the Delivery Date, and (ii) with
respect to each such contract of insurance and indemnity, the type and amount of
coverage, deductibles, expiration date and premium amount, which contracts of
insurance and indemnity insure against such risks and in such amounts as are
appropriate and reasonable considering Company's property, business and
operations. All of such contracts of insurance and indemnity are in full force
and effect, with no default thereunder by Company which could permit
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<PAGE> 19
the insurer to deny payment of claims thereunder and Company is in compliance
with all terms and conditions contained therein. The Company has not received
notice from any of its insurance carriers that any insurance premiums will be
materially increased in the future or that any insurance coverage listed in
Section 2.15 of the Company Disclosure Schedule will not be available in the
future on substantially the same terms as now in effect. The Company has not
received or given a notice of cancellation with respect to any of the policies
or binders listed in Section 2.15 of the Company Disclosure Schedule. With
respect to all of its insurance policies, Company has not made any false or
misleading statements or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein in light of
the circumstances under which they were made not misleading.
2.16 Intellectual Property.
(a) Except as set out in Section 2.16(a) of the Company Disclosure
Schedule, Company is the sole and exclusive owner of, or is licensed to use or
possesses other valid rights to, all intellectual property or industrial
property, including, without limitation, all assumed names, trademarks, trade
names, whether registered or not (together with all goodwill associated
therewith), patents, software, moral rights and moral right waivers, copyrights
whether registered or not (including, without limitation, those relating to
computer software and data bases), trade secrets, technology, formulae, know-how
and processes which are used in its Business (collectively, the "Company
Proprietary Rights") free and clear of all Liens. Section 2.16(a) of the Company
Disclosure Schedule lists in reasonable detail all Company Proprietary Rights
(i) which are not owned by Company and (ii) which are not perpetual or in
respect of which license or other fees may be payable in the future.
All computer software that is not used under license by Company was either
purchased or authored (A) by employees in the course of their employment, or (B)
by independent contractors who have in writing assigned the copyright in such
software to Company. With respect to the Company Proprietary Rights which are
registered or as to which application for registration has been made, Company is
the owner of record thereof. Particulars of all documentation to make Company
the record owner thereof are set forth in Section 2.16(a) of the Company
Disclosure Schedule in reasonable detail. All registrations and applications for
Company Proprietary Rights are set forth in Section 2.16(a) of the Company
Disclosure Schedule.
No Company Proprietary Rights used by Company to deliver services to its
customers, and no services or products sold by Company, conflict with or
infringe upon any proprietary rights available to any third party. Other than as
disclosed in Section 2.16(a) of the Company Disclosure Schedule, Company has not
entered into any (i) consent, (ii) indemnification which is not customary in the
Business or (iii) forbearance to sue or settlement agreement with respect to the
Company Proprietary Rights. The Company has always taken and are taking all
appropriate measures to maintain the validity of the Company Proprietary Rights.
Without limiting the foregoing, the Company Proprietary Rights which are
formulae are confidential and Company has always taken and are taking all
appropriate measures to keep them confidential.
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(b) No claims have been asserted in writing or otherwise by any person
with respect to the validity of or Company's ownership or right to use the
Company Proprietary Rights, or of any similar right in any jurisdiction, and, to
the best knowledge of Company, there is no reasonable basis for any such claim.
The Company Proprietary Rights are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of a cancellation proceeding.
(c) Section 2.16(c) of the Company Disclosure Schedule sets forth
separately all licenses granted by Company relating to the use of the Company
Proprietary Rights. Each of such licenses is in full force and effect and a
valid and binding obligation of each of the parties thereto. The Company is a
party thereto is in compliance with its contractual obligations relating to the
protection of the Company Proprietary Rights used pursuant to such licenses. The
Company has taken reasonable steps to protect its Company Proprietary Rights
and, except as set forth in Section 2.16(c) of the Company Disclosure Schedule,
has not licensed, assigned, transferred, encumbered or otherwise disposed of the
Company Proprietary Rights or any similar right in any jurisdiction.
(d) The consummation of the transactions contemplated hereby will not
alter or impair any of the Company Proprietary Rights. To the actual knowledge
of Company, no person is infringing on or violating the Company Proprietary
Rights owned or used by Company.
2.17 Books and Records. All accounts, books, ledgers and official and other
records maintained by Company of whatever kind in respect of its businesses have
been fully, properly and accurately kept and completed in all material respects,
and there are no material inaccuracies or discrepancies of any kind contained or
reflected therein, and they fairly represent the financial position of Company.
All financial transactions of Company have been properly recorded in the books
and records of Company. The records and books of accounts of Company have been
kept on a consistent basis for the previous three fiscal years except as
otherwise disclosed in the Company Financial Statements and the notes thereto.
2.18 Disclosure. No information provided by or on behalf of Company to
Merge in connection with this Agreement and the transactions contemplated hereby
and no representation or warranty by or on behalf of Company in this Agreement,
the Transaction Agreements, or any certificate or statement furnished or to be
furnished in connection with this Agreement or the Transaction Agreements
contains or will contain any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. All projections and financial forecasts provided by
or on behalf of Company to Merge have been prepared by Company's management in
good faith, based on reasonable assumptions.
2.19 Compliance with Law. The Company has all requisite Permits from all
Governmental Entities necessary to conduct its Business as currently conducted,
and to own, lease and operate its properties in the manner currently held and
operated and all such Permits are in full
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force and effect. The Company is in compliance in all material respects with all
applicable Orders and all of the terms and conditions related to such Permits.
There are no proceedings in progress, pending, threatened, or, to the actual
knowledge of Company, likely which may result in revocation, cancellation,
suspension, or any material adverse modification of any of such Permits. The
business of Company is not being conducted in violation of any applicable Order,
Permit, concession, grant or other authorization of any Governmental Entity,
except for any violations that, in the aggregate, do not and could not have a
Company Material Adverse Effect or prevent or delay the consummation of the
transactions contemplated hereby or by the Transaction Agreements.
2.20 Brokers and Finders. None of Company, or any of the officers,
directors or employees of Company has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in connection
with the transactions contemplated by this Agreement.
2.21 Environmental.
(a) Except as disclosed in Section 2.21(a) of the Company Disclosure
Schedule, to the actual knowledge of Company, (i) Company is in full compliance
with and not in violation of all applicable Environmental Laws; (ii) Company has
not received any order, direction or other communication (written or oral) that
alleges that Company is not in full compliance with all, or has any liability
under any, applicable Environmental Laws in effect on the date hereof or
claiming any fine, damages, costs of clean-up or remediation of real property or
which may require any person to do or cease doing any act or undertaking; (iii)
all Permits and other governmental authorizations currently held by Company
pursuant to Environmental Laws (true and complete copies of which Permits and
other governmental authorizations will be delivered to Merge on or before the
Delivery Date) are in full force and effect, Company, is in compliance with all
of the terms of such Permits and authorizations, no other Permits or
authorizations are required by Company, there are no conditions, including, but
not limited to, renewal dates, revocations, modifications, limitations or
transfer restrictions that will affect the continued validity on the same terms
and conditions after giving effect to the transactions contemplated by this
Agreement and the Transaction Agreements of all such Permits or authorizations
and no consent to the transactions contemplated by this Agreement or the
Transaction Agreements is required to maintain the validity of or compliance
with any of such Permits or authorizations; (iv) Company has not failed to
report any Environmental Matter where required under applicable Environmental
Laws; (v) Company has not failed to maintain any environmental and operating
documents, books and records in the manner and for the periods required under
all applicable Environmental Laws; (vi) no environmental audit, evaluation,
assessment, study or test of any of the operations or property of Company is
being or has been conducted or performed at the request, direction or order or
on behalf of any Governmental Entity; (vii) no environmental audit, evaluation,
assessment, study or test of any of the operations or property of Company is in
the possession or control of Company, is being or has been conducted or
performed at the request or direction or on behalf of Company except as set
forth in Section 2.21(a) of the Company Disclosure Schedule (true and complete
copies of any audit, evaluation, assessment, study or test listed in Section
2.21(a) of the Company Disclosure Schedule will be delivered to Merge on or
before the Delivery Date); and (viii) no real property owned or leased by
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<PAGE> 22
Company, based on the actual knowledge of Company, has problems involving
Hazardous Materials or previously had a problem where there is no verification
of remediation.
(b) Except for matters set forth in Section 2.21(b) of the Company
Disclosure Schedule, to the actual knowledge of Company, there is no
Environmental Claim that is or has been the subject of any complaint or
investigation or that is pending or threatened against or involving Company or
against any person or entity whose liability for any Environmental Claim Company
has or may have retained, assumed or in respect of whose liability for any
Environmental Claim Company may be obligated to contribute, indemnify, remedy or
otherwise compensate, in whole or in part, either contractually, by lease, or by
operation of common law, statute or equity. True and complete copies of all
writings in the possession or control of Company evidencing the Environmental
Claims listed in Section 2.21(b) of the Company Disclosure Schedule will be
provided to Merge on or before the Delivery Date. Company agrees to continue to
provide Merge and its solicitors with all commercially reasonable assistance in
obtaining any such writings which are not in the possession of Company.
2.22 Banking Relationships. Section 2.22 of the Company Disclosure Schedule
shows the names and locations of all banks and trust companies in which Company
has accounts, lines of credit or safety deposit boxes and, with respect to each
account, line of credit or safety deposit box, the names of all persons
authorized to draw thereon or to have access thereto.
2.23 Investment Representations.
(a) Company represents that to the best of its knowledge none of the
Holders is: (i) a U.S. Person; (ii) within the United States as of the date of
this Agreement; or (iii) acquiring the Exchangeable Shares or the Merge Common
Shares issuable in exchange therefor for the account or benefit of any U.S.
Person. Company acknowledges and represents that the Holders may be restricted
from distributing to a U.S. Person or for the account of a U.S. Person any
Exchangeable Shares or the Merge Common Shares issuable in exchange therefor for
a period of one year after the date the Holder acquires such shares. Company
acknowledges that the certificates representing the Exchangeable Shares and the
Merge Common Shares issuable in exchange for the Exchangeable Shares will bear a
legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS OR QUALIFIED BY PROSPECTUS FILED UNDER ANY PROVINCIAL
SECURITIES ACTS IN CANADA. THE SHARES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT WITH RESPECT THERETO OR IN
ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER THAT AN EXEMPTION FROM REGISTRATION UNDER
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THE ACT AND THE SECURITIES ACT (ONTARIO) AND FROM ANY APPLICABLE STATE AND
PROVINCIAL SECURITIES LAWS IS AVAILABLE. BY ACCEPTING AND HOLDING THE
SHARES, THE HOLDER AGREES TO BE BOUND BY ALL OF THE PROVISIONS, INCLUDING
RESTRICTIONS ON TRANSFERRING THE SHARES, APPLICABLE TO A HOLDER OF SHARES
AS SET FORTH IN THE SHARE EXCHANGE AGREEMENT, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICES OF EITHER 3032854 NOVA SCOTIA COMPANY OR MERGE
TECHNOLOGIES INCORPORATED, AS IF SUCH HOLDER WERE A PARTY TO SUCH
AGREEMENT."
(b) Except as contemplated by this Agreement, Company is not aware that
any Holder has any present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition of the
Merge Common Shares issuable in exchange for the Exchangeable Shares.
(c) Company represents that it has had an opportunity to discuss Merge
business, management and financial affairs with such advisors as Company has
deemed necessary.
(d) Company represents that, except for the transactions contemplated by
this Agreement and the Transaction Agreements, Company has no, and is not aware
of any, plans or proposals of a type which would be required to be disclosed
pursuant to Item 4 of a Schedule 13D to be filed under the Exchange Act and the
rules and regulations promulgated thereunder in respect of Merge Common Shares.
2.24 Security Interests. Company is not aware of any Lien that may attach
or otherwise apply to the Exchangeable Shares.
2.25 Ontario Securities Act. The Company is not a "reporting issuer" within
the meaning of the Ontario Securities Act.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MERGE
Each of Merge and Holdings, jointly and severally, represents and warrants
to Company as of the date of this Agreement and, except as otherwise provided,
as of the Closing Date as follows:
3.1 Organization. Merge is a corporation duly organized, validly existing
and in good standing under the laws of the state of Wisconsin. Holdings is a
corporation duly organized, validly existing and in good standing under the laws
of the province of Nova Scotia. Each of Merge and Holdings has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized,
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existing and in good standing or up to date in such filing, as the case may be,
or to have such power and authority would not have a Merge Material Adverse
Effect.
3.2 Authority Relative to this Agreement. Each of Merge and Holdings has
all requisite corporate power and authority to execute and deliver this
Agreement and the Transaction Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Transaction Agreements to which Merge or
Holdings is a party and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the Board of Directors of
each of Merge and Holdings, and no other corporate proceedings on the part of
Merge or Holdings are necessary to authorize this Agreement or the Transaction
Agreements to which Merge or Holdings is a party or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by each of Merge and Holdings, and assuming that this
Agreement has been duly executed and delivered by Company, constitutes a legal,
valid and binding obligation of each of Merge and Holdings, enforceable against
each of Merge and Holdings in accordance with its terms. Assuming due execution
and delivery by all parties thereto, the Transaction Agreements to which Merge
or Holdings is a party will constitute a legal, valid and binding obligation of
each of Merge and Holdings, as the case may be, enforceable against each of
Merge and Holdings in accordance with their respective terms.
3.3 Consents and Approvals; No Violation. None of the execution and
delivery by Merge or Holdings of this Agreement or the Transaction Agreements to
which Merge or Holdings is a party, as the case may be, the consummation by
Merge or Holdings, as the case may be, of the transactions contemplated hereby
or thereby or compliance by Merge or Holdings with any of the provisions hereof
or thereof will (i) conflict with or result in any breach of any provision of
the articles of incorporation (or similar document) or by-laws of Merge or
Holdings or any voting trust or other agreement or understanding with respect to
the voting of Merge Common Shares to which Merge or Holdings is a party or by
which either of them is bound, (ii) require any consent, waiver, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity filings required under the Securities Act, the Exchange Act, state
securities or blue sky laws, (iii) result in a violation of, default under (with
or without notice or lapse of time or both) or give rise to any right of
termination, cancellation or acceleration under, any of the terms, conditions or
provisions of any Obligation to which Merge or any of its subsidiaries is a
party or by which Merge or any of its subsidiaries or any of their respective
assets may be bound, or (iv) violate any Order applicable to Merge or any of its
subsidiaries or any of their respective assets.
3.4 Brokers and Finders. None of Merge, its subsidiaries or any of the
officers, directors or employees of Merge or any of its subsidiaries has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement.
ARTICLE 4
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COVENANTS
4.1 Conduct of Business. Except as contemplated by this Agreement or with
the prior written consent of Merge during the period from the date of this
Agreement to the Closing Date, Company will conduct its operations only in the
ordinary course of business consistent with past practice and Company will
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with its
licensors, licensees, customers, suppliers, employees and any others having
business dealings with them to the end that the goodwill and ongoing Business of
Company shall not be impaired at the Closing. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in this Agreement,
including the Exhibits hereto, prior to the Closing without the prior written
consent of Merge, Company will not take any of the actions set forth in Section
2.6(b) hereof or to make any major planning decision or any strategic decision
or any major investment (including any decision involving an investment of more
than Cdn. $10,000).
4.2 No Solicitation, Etc. Company covenants and agrees that, during the
period from the date of this Agreement until the earlier of the termination of
this Agreement or the Closing Date:
(a) Company shall not, and shall direct and cause its officers, directors,
employees, agents and representatives (including, without limitation, any
attorney or accountant retained by Company) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders) with respect to a merger, amalgamation, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities (including, but not
limited to, a public offering) of, Company (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data
relating to the Company to, or have any discussions with, any person other than
Merge relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal;
(b) Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and Company will take the necessary steps
to inform such parties of the obligations undertaken in this Section 4.2; and
(c) Company will notify Merge immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with,
Company.
4.3 Transfer Requirements. Company acknowledges that neither the
Exchangeable Shares nor the Merge Common Shares issuable in exchange for the
Exchangeable Shares have been registered under the Securities Act or the Ontario
Securities Act, and may not be sold, transferred
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or otherwise disposed unless: (i) in the United States or to a U.S. Person
unless such shares are registered under the Securities Act, or an exemption from
the registration requirements of the Securities Act is available; (ii) made in
conformity with Rule 144 promulgated by the SEC under the Securities Act; or
(iii) in Canada unless such shares are qualified by prospectus filed in
accordance with the applicable provincial Securities Acts or an exemption from
the prospectus requirements of such provincial Securities Acts is available. In
no event shall any sale, transfer or other disposition of the Merge Common
Shares be permitted in violation of (i) the rules and regulations of the SEC
promulgated under the Securities Act, (ii) the Ontario Securities Act and any
provincial securities laws and regulations; or (iii) this Section 4.3.
4.4 Due Diligence; Access to Information. From the date of this Agreement
until the Closing, upon reasonable notice, Company will, and will cause each of
its officers, directors, employees, counsel, advisors and representatives
(collectively, the "Company Representatives") to, give Merge and its officers,
employees, counsel, advisors and representatives (collectively, the "Merge
Representatives") full access, during normal working hours, to the offices and
other facilities and to the books and records of Company and permit Merge and
the Merge Representatives to make inspections thereof as either of them may
require and will cause the Company Representatives to furnish Merge and the
Merge Representatives with such financial and operating data and such other
information with respect to the Business of Company and make such management and
other personnel available to discuss the business and prospects of Company as
Merge may from time to time reasonably request. Company agrees that no
investigation by Merge or the Merge Representatives shall affect or limit the
scope of the representations and warranties of Company contained herein or in
any of the Transaction Agreements or limit the liability for the breach of any
such representation or warranty.
4.5 Regulatory and Other Approvals.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
action, and to do, or cause to be done as promptly as practicable, all things
necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing any further action is necessary or desirable to
carry out the purposes of this Agreement, including the execution of additional
instruments, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
(b) Each of the parties hereto will use its (i) best efforts to obtain as
promptly as practicable all consents, authorizations, orders, approvals and
waivers from Governmental Entities and regulatory bodies and transfers of
Permits or registrations with Governmental Entities and regulatory bodies
required in connection with the transactions contemplated by this Agreement (the
"Required Consents") and (ii) commercially reasonable efforts to obtain as
promptly as practicable all other consents, approvals and waivers of any
violations, breaches and defaults that may be caused by the consummation of the
transactions contemplated by this Agreement.
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4.6 Public Announcements. Company acknowledges that Merge may have
obligations at law to make a public announcement, and that Merge may desire to
issue a press release, with respect to the transactions contemplated by this
Agreement. Merge agrees to consult Company with respect to the content and
timing of any such announcement or release. Company agrees not to make any
public announcement of the transactions contemplated by this Agreement without
Merge's prior written consent.
4.7 Notification of Certain Matters. Each of the parties hereto shall give
prompt notice to the other parties of (i) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement and made by such party to
be untrue or inaccurate in any material respect at any time from the date hereof
to the Closing and (ii) any material failure of such other party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement; provided, however, that no such notification shall
affect the representations or warranties of such party or the conditions to the
obligations of such party hereunder.
4.8 Resignation of Directors. Company agrees that it shall cause all of
the members of the Board of Directors of Company to resign as directors of
Company as of the Closing Date. Company will use all reasonable commercial
efforts to obtain releases from each of the foregoing individuals in favor of
Company.
4.9 Employment Agreements. At Closing, Merge shall enter into the
Employment Agreements.
4.10 Subsequent Financial Statements. As soon as practicable after the end
of each month during the period from the date of this Agreement until the
Closing Date, Company shall prepare and promptly deliver to Merge (i) copies of
an unaudited consolidated balance sheet as of the end of such month and an
unaudited consolidated income statement for the month then ended for the Company
and (ii) copies of detailed schedules of inventories, receivables and payables
as of the end of such month, relating to Company (such detailed Schedules shall
include an aging analysis, the principles on which this analysis is based,
whether such receivables or payables are disputed, and if so the particulars
regarding such dispute). All financial statements and schedules delivered
hereunder shall be prepared on a basis consistent with past practice.
4.11 Reservation by Merge of Merge Common Shares. Prior to the Closing, the
Board of Directors of Merge shall have reserved sufficient Merge Common Shares
for issuance in connection with the Exchangeable Shares and the Subscription
Agreement.
4.12 Transaction Agreements. Each of the parties hereto agrees that at the
Closing it shall enter into each Transaction Agreement to which it is a party.
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4.13 Co-Operation. The parties hereto shall co-operate fully and in good
faith with each other and their respective legal advisors, accountants and other
representatives in connection with any steps required to be taken as part of
their respective obligations under this Agreement.
4.14 Consents. Company shall use all reasonable efforts to obtain the
consent to the Reorganization, where necessary or advisable, from the parties to
the Material Contracts.
4.15 Books and Records. On the Closing Date, Company shall be in possession
of all documents which relate to its operations, including all books, records,
books of account, lists of suppliers and other data, financial or otherwise
relating to the operation of its business.
4.16 Execution of Certain Documents. Prior to Closing, Company covenants
and agrees to arrange for the preparation and execution of all releases, waivers
and agreements identified on Schedule 4.16, with all such documentation to be
signed by all parties thereto and all waivers to be in a form acceptable to
Merge and, in circumstances where the waiver arose as a result of a third party
assertion that Company had failed to fulfill all its obligations, shall include
a full and final release from such third party.
4.17 Employer Health Tax. Company shall fully accrue all possible Employer
Health Tax liability prior to Closing.
4.18 Company Disclosure Schedule. The Company shall deliver to Merge the
Company Disclosure Schedule, in complete and final form, at least two business
days before the Closing.
4.19 SEC Reports. Merge shall provide Company with all reports filed with
the SEC after the date hereof and prior to Closing.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF TRANSACTIONS
5.1 Conditions to Each Party's Obligation to Consummate Transactions. The
obligations of each party to consummate the transactions contemplated hereby are
subject to the satisfaction or, where permissible, waiver at or prior to the
Closing, of each of the following conditions:
(a) no Order shall have been issued, enacted, entered, or promulgated
(which remains in effect) by any Governmental Entity, the enforcement of which
would, individually or in the aggregate, prohibit or materially restrict the
consummation of the transactions contemplated hereby or make such consummation
illegal;
(b) each of the Transaction Agreements shall have been executed and
delivered by all parties thereto;
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(c) each of the Employment Agreements, substantially in the form of
Exhibit B hereto, shall have been executed and delivered by all parties thereto;
and
(d) all necessary corporate action for the purpose of approving the
transactions contemplated by this Agreement and the Transaction Agreements,
including approval of the Reorganization by the Holders, shall have been taken
or obtained by Company and Merge.
5.2 Additional Conditions to Obligations of Merge to Consummate
Transactions. The obligations of Merge to consummate the transactions
contemplated hereby are further subject to the satisfaction of each of the
following conditions:
(a) (i) the representations and warranties of Company set forth in this
Agreement shall be true, complete and accurate in all material respects at and
as of the Closing Date as if made at and as of such time, except that any
representation or warranty made as of a specified date shall continue to be
true, complete and accurate in all material respects on and as of such date and
except for any changes resulting from the ordinary course of business which have
been disclosed to, and approved by, Merge; and (ii) Merge shall not have become
aware of any events, circumstances or conditions relating to Company as a
consequence of its review of any of the documents, other than the Company
Disclosure Schedule, required to be delivered to Merge by or on behalf of
Company on or before the Delivery Date (the "Required Documents"), which events,
circumstances or conditions, individually or in the aggregate, have or could
reasonably be expected to have a Company Material Adverse Effect; and (iii)
Merge shall not have become aware of any events, circumstances or conditions
relating to Company (other than events, circumstances or conditions of which
Merge shall have become aware as a consequence of its review of documents, other
than the Required Documents, delivered to it by, or on behalf of, Company) which
events, circumstances or conditions individually or in the aggregate have or
could reasonably be expected to have a Company Material Adverse Effect;
(b) Company shall have performed in all material respects all of its
covenants and obligations contained in this Agreement that are required to be
performed at or prior to the Closing;
(c) Merge and Holdings shall have received a certificate of Company, dated
the Closing Date, signed by the President and Chief Executive Officer of Company
to the effect that: (i) the representations and warranties of Company set forth
in this Agreement are true, complete and accurate in all material respects at
and as of the Closing Date as if made at and as of such time, except that any
representation or warranty made as of a specified date continues to be true,
complete and accurate in all material respects on and as of such date and except
for any changes resulting from the ordinary course of business which have been
disclosed to, and approved by, Merge; and (ii) Company has performed in all
material respects all of its covenants and obligations contained in this
Agreement that are required to be performed at or prior to the Closing;
(d) this Agreement has not been terminated pursuant to Article 6 hereof;
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(e) [Intentionally omitted];
(f) Merge shall have received the opinion of Tory Tory DesLauriers &
Binnington, counsel to Company, dated the Closing Date, in form and substance
satisfactory to Merge, as to the matters set forth in Exhibit C;
(g) Merge shall have had the opportunity to review the Company Disclosure
Schedule in complete and final form for at least two business days;
(h) The applicable Holders shall have delivered to Merge the releases set
forth in Section 4.8;
(i) [Intentionally omitted];
(j) no suit, action or proceeding before any Governmental Entity shall
have been commenced and be pending against any of the parties hereto or any of
their affiliates, associates, officers or directors (i) seeking to restrain,
prevent, or in any material respect change the transactions contemplated hereby;
(ii) seeking civil penalties or material damages in connection with any such
transactions; or (iii) which, if adversely decided, could reasonably be expected
to, individually or in the aggregate, materially impair Merge's or Holdings'
ability to consummate the transactions contemplated hereby, or could reasonably
be expected to result in a Company Material Adverse Effect;
(k) no Order shall be in effect, the enforcement of which could reasonably
be expected to, individually or in the aggregate, (i) impose civil penalties or
material damages in connection with the transactions contemplated hereby; (ii)
could have a Company Material Adverse Effect; (iii) materially impair Merge's or
Holdings' ability to consummate the transactions contemplated hereby; or (iv)
compel Merge or its affiliates to dispose of, discontinue, hold separate, or
materially restrict the operations of, a significant portion of the business of
Company, considered as a whole, or the business of Merge and its subsidiaries
considered as a whole in connection with or as a result of the consummation of
the transactions contemplated hereby;
(l) Company shall have obtained all Required Consents and shall have used
all commercially reasonable efforts to obtain all consents, approvals,
authorizations, exemptions and waivers from third parties, reasonably
satisfactory in form and substance to Merge and its counsel, with respect to the
contracts, leases and permits set forth in Sections 2.8(a) or 2.12(b) of the
Company Disclosure Schedule, to the extent necessary to consummate the
transactions contemplated hereby without any violation or breach thereof or
default, termination or acceleration occurring thereunder; and
(m) Holders, if any, who have exercised their statutory right to dissent
from the Reorganization collectively own no more than 5% of the Company Common
Stock.
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Company will furnish Merge with such certificates and other documents to
evidence the fulfillment of the conditions set forth in this Section 5.2 as
Merge may reasonably request.
5.3 Additional Conditions to the Obligation of Company to Consummate
Transactions. The obligation of Company to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing of the
following additional conditions:
(a) the representations and warranties of Merge and Holdings set forth in
this Agreement shall be true, complete and accurate in all material respects at
and as of the Closing Date as if made at and as of such time, except that any
representation or warranty made as of a specified date, shall continue to be
true, complete and accurate in all material respects on and as of such date and
except for any changes resulting from the ordinary course of business which have
been disclosed to, and approved by, Company;
(b) each of Merge and Holdings shall have performed in all material
respects all of its respective covenants and obligations contained in this
Agreement that are required to be performed at or prior to the Closing;
(c) Company shall have received certificates, dated the Closing Date,
signed by the Chief Executive Officer and the Chief Financial Officer of Merge
and the President of Holdings to the effect that: (i) the representations and
warranties of Merge or Holdings, as applicable, set forth in the Agreement are
true, complete and accurate in all material respects at and as of the Closing
Date as if made at and as of such time, except that any representation or
warranty made as of a specified date continues to be true, complete and accurate
in all material respects on and as of such date and except for any changes
resulting from the ordinary course of business which have been disclosed to, and
approved by, Company; and (ii) Merge or Holdings, as applicable has performed in
all material respects all of its covenants and obligations contained in this
Agreement that are required to be performed at or prior to the Closing;
(d) no suit, action or proceeding before any Governmental Entity shall
have been commenced and be pending against any of the parties hereto or any of
their affiliates, associates, officers or directors (i) seeking to restrain,
prevent, or in any material respect change the transactions contemplated hereby;
(ii) seeking civil penalties or material damages in connection with any such
transactions; or (iii) which, if adversely decided, could reasonably be expected
to, individually or in the aggregate, materially impair Company's ability to
consummate the transactions contemplated hereby, or could reasonably be expected
to result in a Merge Material Adverse Effect;
(e) no Order shall be in effect, the enforcement of which could reasonably
be expected to, individually or in the aggregate, (i) impose civil penalties or
material damages in connection with the transactions contemplated hereby; (ii)
could have a Merge Material Adverse Effect; (iii) materially impair Company's
ability to consummate the transactions contemplated hereby. Each of Merge and
Holdings will furnish Company with such certificates and other documents to
evidence
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the fulfillment of the conditions set forth in this Section 5.3 as Company may
reasonably request; and
(f) Company shall have received the opinion of counsel to Merge, dated the
Closing Date, in form and substance satisfactory to Company, as to the matters
set forth in Exhibit D;
ARTICLE 6
TERMINATION; AMENDMENTS; WAIVER
6.1 Termination. This Agreement may be terminated at any time prior to
Closing, by a written notice from the terminating party to the other parties
hereto:
(a) by the written consent of each of Merge, Holdings and Company;
(b) by Merge or Holdings if any of the representations or warranties of
Company contained herein shall be inaccurate or untrue in any material respect;
(c) by Company if any of the representations or warranties of Merge or
Holdings contained herein shall be inaccurate or untrue in any material respect;
(d) by Merge or Holdings if any covenant or agreement to be performed or
observed by Company hereunder has not been performed in any material respect at
or prior to the time specified in this Agreement;
(e) by Company if any covenant or agreement to be performed or observed by
Merge hereunder has not been performed in any material respect at or prior to
the time specified in this Agreement;
(f) by any party hereto if any Order of a Governmental Entity preventing
or materially restricting the consummation of the transactions contemplated by
this Agreement or the Transaction Agreements shall have become final and
non-appealable; or
(g) by Merge or Holdings if (i) Merge shall have become aware of any
events, circumstances or conditions relating to Company as a consequence of its
due diligence review which events, circumstances or conditions individually or
in the aggregate, have or could reasonably be expected to have a Company
Material Adverse Effect.
6.2 Effect of Termination.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Article 6 hereof, this Agreement shall forthwith become void and
have no further effect, other than the provisions of this Article 6 and Article
7 hereof which shall survive any such termination and
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there shall be no further liability (other than liabilities arising up to the
time of such termination or abandonment) on the part of any party or its
directors, officers or stockholders. Nothing contained in this Section 6.2 shall
relieve any party from liability for any breach of this Agreement.
(b) In the event of a termination of this Agreement pursuant to Section
6.1(b), (c), (d) or (e) hereof, nothing contained herein shall restrict the
ability of the terminating parties to seek damages (including, without
limitation, their expenses incurred in connection with this Agreement) from the
other parties for any breach of this Agreement or the right to pursue any other
remedy at law or in equity.
(c) In the event of a termination of this Agreement, the terms of the
confidentiality provisions of the Memorandum of Understanding between Merge and
Company dated July 28, 1999 shall continue to be binding on the parties hereto.
(d) In the event of a termination of this Agreement, Company and Merge
agree that: (i) the letter of intent attached hereto as Exhibit E and relating
to the joint development and marketing of IWeb middleware and related IWeb
Development Toolkit shall remain in full force and effect; and (ii) Company and
Merge will negotiate in good faith to finalize, execute and deliver any
additional documents or agreements that may be desirable in connection with the
Letter of Intent. In addition, upon the occurrence of (i) Company becoming an
insolvent person within the meaning of the Bankruptcy and Insolvency Act
(Canada) or commiting or threatening to commit any act of bankruptcy, or (ii)
the commencement of any proceeding or the taking of any step by Company (or
against Company if such proceeding or step is not discharged or withdrawn within
thirty (30) days after commencement) for the dissolution, liquidation or
winding-up of Company or for any relief under the laws of any jurisdiction
relating to bankruptcy, insolvency, Reorganization, arrangement, compromise or
winding-up, or for the appointment of one or more of a trustee, receiver,
receiver and manager, custodian, liquidator or any other person with similar
powers with respect to Company or its assets or any part thereof, then Company
shall be deemed to have granted Merge a perpetual, nonexclusive, royalty-free
license to use the IWeb Development Toolkit to develop enduser application
software for resale to Merge's customers, including run-time licenses required
by endusers.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; INDEMNITY
7.1 Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation by any party hereto and notwithstanding the
Closing hereunder, all representations and warranties made by any party in this
Agreement or any certificate or other writing delivered pursuant hereto or in
connection herewith shall survive the Closing for the period commencing on the
Closing Date and ending on the second anniversary of the Closing Date (the
"Survival Period") except as follows: (i) the representations and warranties of
Company to the extent relating to tax attributes or liabilities with respect to
Taxes of Company shall expire at the time the period of limitations
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(including any extensions thereof pursuant to the delivery of waivers of the
applicable period of limitations) expires for the assessment by the taxing
authority of additional Taxes with respect to which the representations and
warranties relate; (ii) the representations and warranties of Company contained
in Sections 2.19 and 2.21 shall expire at the time the latest period of
limitations expires for the enforcement by an applicable Governmental Entity of
any remedy with respect to which the particular representations and warranties
of Company related and if there is no such period of limitations, then the
representations and warranties shall continue indefinitely; and (iii) the
representations and warranties of Company contained in Sections 2.1, 2.2, 2.3,
2.4, and 2.5 shall not expire, but shall continue indefinitely. Notwithstanding
the foregoing, each of the obligations of Merge set forth in Article 8 shall
remain in effect until the earlier of (i) the date that such obligations would
expire pursuant to the provisions of Article 8, and (ii) the date which is
thirty days after the seventh anniversary of the date of this Agreement.
No claim for the recovery of Damages may be asserted after such
representations and warranties shall thus expire; provided, however, that any
claim (indicating with reasonable specificity the basis for such claim) written
notice of which shall have been delivered to the indemnifying party within the
Survival Period shall survive the termination of the Survival Period and
continue until the resolution of such claim. Notwithstanding any knowledge of
facts determined or determinable by any party by investigation, each party shall
have the right to fully rely on the representations, warranties, covenants and
agreements of the other parties contained in this Agreement or in any other
documents or papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement. The
covenants and agreements set forth in this Agreement shall survive the Closing
and shall continue in accordance with their terms.
7.2 Agreement to Indemnify.
(a) Subject to the terms and conditions of this Article 7, Company hereby
agrees to indemnify, defend and hold harmless Merge, Holdings and each of their
respective directors and officers, (collectively, the "Merge Group") from and
against any and all Damages asserted against, resulting from, imposed on or
incurred or suffered by the Merge Group, directly or indirectly, with Damages of
Company being deemed to be suffered by the Merge Group as a result of or arising
from the following (collectively, "Merge Claims"): (i) any breach or alleged
breach of any of the representations or warranties made by Company in this
Agreement, in any Transaction Agreement or in any certificate or other document
furnished by or on behalf of Company pursuant to this Agreement or any of the
Transaction Agreements (provided, however, that the Merge Group shall not be
entitled to indemnification for Merge Claims pursuant to this clause (i) unless
and until the sum of the Damages arising out of such breaches exceeds Cdn.
$10,000 in the aggregate (the "Deductible"); and provided further that
thereafter, subject to Section 7.3, the Merge Group shall be entitled to
indemnification in respect of all Damages arising out of such breaches in excess
of the Deductible); and (ii) any failure or alleged failure by Company to
perform any of its covenants, obligations or agreements contained in this
Agreement, any Transaction Agreement or any certificate
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or document furnished by or on behalf of Company pursuant to this Agreement or
any of the Transaction Agreements.
(b) Subject to the terms and conditions of this Article 7, Merge hereby
agrees to indemnify, defend and hold harmless Company from and against any and
all Damages asserted against, resulting from, imposed on or incurred or suffered
by Company, directly or indirectly, as a result of or arising from the following
(collectively, "Company Claims"): (i) any breach by Merge of any of the
representations or warranties made by Merge in this Agreement, in any
Transaction Agreement or in any certificate or other document furnished by or on
behalf of Merge pursuant to this Agreement or any of the Transaction Agreements
(provided, however, that Company shall not be entitled to indemnification for
Company Claims pursuant to this clause (i) unless and until the Damages arising
out of such breaches exceed U.S. $6,700 and provided further that thereafter,
subject to Section 7.3, Company shall be entitled to indemnification in respect
of all Damages arising out of such breaches in excess of U.S. $6,700); or (ii)
any failure or alleged failure by Merge to perform any of its covenants or
agreements contained in this Agreement, any Transaction Agreement or any
certificate or document furnished by or on behalf of Merge or pursuant to this
Agreement or any of the Transaction Agreements.
7.3 Limitation of Liability. The obligations and liabilities of Merge
hereunder with respect to indemnification for Company Claims shall be subject to
the following limitation: notwithstanding anything in this Agreement to the
contrary, Merge shall not be obligated to pay any amount in excess of
U.S. $1,300,000 in the aggregate in satisfaction of all of its obligations
pursuant to Section 7.2(b) hereof. The obligations and liabilities of Company
hereunder with respect to indemnification for Merge Claims shall be subject to
the following limitation: notwithstanding anything in this Agreement to the
contrary, Company shall not be obligated to pay any amount in excess of U.S.
$1,300,000 plus the outstanding balance of the Loan in the aggregate in
satisfaction of all of its obligations pursuant to Section 7.2(a) hereof.
7.4 Process of Indemnification for Merge Claims.
(a) A member of the Merge Group shall promptly notify Company in writing
of the assertion of any Merge Claim by a third party or the discovery of any
fact upon which the member of the Merge Group intends to base a Merge Claim
hereunder. Such notice shall set forth (i) the amount of the Merge Claim or, if
an amount is not then determinable, an approximate and reasonable estimate of
the potential amount of the Merge Claim and (ii) the alleged basis of the Merge
Claim. Subject to Section 7.1(a) hereof, the delay or failure of such member of
the Merge Group to provide notice hereunder shall not in any way limit such
member's indemnification rights hereunder.
(b) Following receipt of such notice, Company shall have 30 days to
consider such Merge Claim and to make (at its own cost and expense) such
investigations with respect to such Merge Claim as Company deems necessary. For
the purpose of such investigation, the claiming member of the Merge Group shall
make available to Company, at Company's request, the information which forms the
basis for such Merge Claims. If Company does not dispute the basis and/or amount
of any
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Merge Claim within 30 days of receiving written notice thereof, Merge shall have
the right on behalf of the claiming member or members of the Merge Group making
such Merge Claim promptly to recover indemnity as and to the extent provided
herein, which shall constitute recovery on behalf of the relevant member or
members of the Merge Group. If Company disagrees with the basis of the Merge
Claim and/or the amount of damages caused thereby, then within 30 days of
receiving written notice thereof, Company shall give notice to Merge of such
disagreement. After receipt of such notice, Merge shall be entitled to take the
dispute to a court of competent jurisdiction.
(c) Merge agrees to notify Company of any claims asserted by third parties
that are reasonably likely to give rise to indemnification hereunder
("Third-Party Merge Claims"). With respect to any Third-Party Merge Claim,
Company shall have the right, at its own cost and expense, to participate in or
assume control of the negotiation, settlement or defense of such Third-Party
Merge Claim, provided that Company shall reimburse Merge for all of Merge
out-of-pocket expenses as a result of such participation or assumption. If
Company elects to assume such control, Merge shall cooperate with Company, and
shall have the right to participate in the negotiation, settlement or defense of
such Third-Party Merge Claim, at its own cost and expense, and to disagree on
reasonable grounds with the selection and retention of counsel. If Company,
having elected to assume such control, thereafter fails to defend any such
Third-Party Merge Claim within a reasonable time, Merge shall be entitled to
assume such control. Merge agrees that it will not settle any Third-Party Merge
Claims without the consent of Company, which consent shall not be unreasonably
withheld. Merge further agrees that if Company wishes to enter into a settlement
with respect to a Third-Party Merge Claim on terms reasonably acceptable to
Merge, Merge will cooperate in such settlement, provided that such settlement
includes as an unconditional term thereof the giving by the third party to Merge
of a release from all liability in respect of such Third-Party Merge Claim;
provided further that Company shall reimburse Merge for its reasonable costs and
expenses, including, without limitation, reasonable attorney's fees, in
connection with such cooperation.
7.5 Process of Indemnification for Company Claims.
(a) Company shall promptly notify Merge in writing of the assertion of any
Company Claim by a third party or the discovery of any fact upon which Company
intends to base a Company Claim hereunder. Such notice shall set forth (i) the
amount of the Company Claim or, if an amount is not then determinable, an
approximate and reasonable estimate of the potential amount of the Company Claim
and (ii) the alleged basis of the Company Claim. Subject to Section 7.1(a)
hereof, the delay or failure of Company to provide notice hereunder shall not in
any way limit Company's indemnification rights hereunder.
(b) Following receipt of such notice, Merge shall have 30 days to consider
such Company Claim and to make (at its own cost and expense) such investigations
with respect to such Company Claim as Merge deems necessary. For the purpose of
such investigation, Company shall make available to Merge, at Merge's request,
the information which forms the basis for such Company Claim. If Merge does not
dispute the basis and/or amount of any Company Claim within 30 days
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of receiving written notice thereof, Company shall have the right promptly to
recover indemnity as and to the extent provided herein from Merge, which shall
constitute recovery (subject to the limitations set forth herein) on behalf of
Company. If Merge disagrees with the basis of the Company Claim and/or the
amount of damages caused thereby, then within 30 days of receiving written
notice thereof, Merge shall give notice to Company of such disagreement. After
receipt of such notice, Company shall be entitled to take the dispute to a court
of competent jurisdiction.
(c) Company agrees to notify Merge of any claims asserted by third parties
that are reasonably likely to give rise to indemnification hereunder
("Third-Party Company Claims") of which Company becomes aware. With respect to
any Third-Party Company Claim, Merge shall have the right, at its own cost and
expense, to participate in or assume control of the negotiation, settlement or
defense of such Third-Party Company Claim, provided that Merge shall reimburse
Company for his out-of-pocket expenses as a result of such participation or
assumption. If Merge elect to assume such control, Company shall cooperate with
Merge and shall have the right to participate in the negotiation, settlement or
defense of such Third-Party Company Claim, at his own cost and expense, and to
disagree on reasonable grounds with the selection and retention of counsel. If
Merge, having elected to assume such control, thereafter fail to defend any such
Third-Party Company Claim within a reasonable time, Company shall be entitled to
assume such control. Company agrees that it will not settle any Third-Party
Company Claims without the consent of Merge, which consent shall not be
unreasonably withheld. Company further agrees that if Merge wishes to enter into
a settlement with respect to a Third-Party Company Claim on terms reasonably
acceptable to Company, Company will cooperate in such settlement, provided that
such settlement includes as an unconditional term thereof the giving by the
third party to Company a release of Company from all liability in respect of
such Third-Party Company Claim; provided further that Merge shall reimburse
Company for his reasonable costs and expenses, including, without limitation,
reasonable attorney's fees, in connection with such cooperation.
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ARTICLE 8
REGISTRATION RIGHTS
8.1 Registration of Merge Common Shares.
(a) Merge shall, as promptly as practicable, and in any event not later
than December 31, 1999, prepare and file with the SEC a registration statement
on Form S-3 sufficient to permit the public offering and sale within the United
States of the Registrable Securities and will use its best efforts through its
officers, directors, auditors, and counsel to cause such registration statement
to become effective as promptly as practicable. Merge will bear all Registration
Expenses. All Selling Expenses shall be borne by the Holders of the Registrable
Securities being registered, pro rata on the basis of the number of shares so
registered (provided that each Holder shall bear the full amount of the fees and
disbursements of any counsel which the Holder retains).
(b) Merge shall use its best efforts to cause the Registrable Securities
so registered to be registered or qualified for sale under the securities or
blue sky laws of such jurisdictions within the United States as the Majority
Holders may reasonably request; provided, however, that Merge shall not be
required to qualify to do business in any state by reason of this Section in
which it is not otherwise required to qualify to do business.
(c) Merge shall prepare and file with the SEC a registration statement
with respect to the Registrable Securities and use its best efforts to cause
such registration statement to become effective, and shall keep effective the
registration, and shall from time to time amend or supplement the registration
statement, preliminary prospectus or final prospectus for such period of time as
shall be required to permit the Holders to complete the offer and sale of the
Registrable Securities covered thereby. Merge shall in no event be required to
keep the registration in effect or to take any other actions under this Section
8.1 for a period extending beyond the date which is thirty days following the
seventh anniversary of the date of this Agreement.
(d) Merge shall promptly furnish to the Holders such number of copies of
the registration statement and of each amendment and supplement thereto (in each
case, including all exhibits), such reasonable number of copies of each
prospectus contained in such registration statement and each supplement or
amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Securities Act and the rules and regulations
thereunder, and such other documents, as the Holders may reasonably request to
facilitate the disposition of the Registrable Securities included in such
registration.
(e) Merge shall provide prompt notice to the Holders that the registration
statement has become effective under the Securities Act and no order suspending
the effectiveness of the registration statement, preventing or suspending the
use of the registration statement, any preliminary prospectus, any final
prospectus, or any amendment or supplement thereto has been
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issued, nor has the SEC or any securities or blue sky authority of any
jurisdiction instituted or threatened to institute any proceedings with respect
to such an order.
(f) Merge agrees that until all the Registrable Securities have been sold
under the registration statement Merge agrees to: (i) use its best efforts to
make and keep public information available, as those terms are understood and
defined in Rule 144 promulgated under the Securities Act, at all times after 90
days after the effective date of the registration statement; and (ii) file with
the SEC in a timely manner all reports and other documents required of Merge
under the Securities Act and the Exchange Act.
(g) Merge shall promptly notify the Holders, at any time when a prospectus
relating to the registration statement is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, would
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
reasonable request of the Holders prepare and furnish to them such number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances under which they were made.
ARTICLE 9
MISCELLANEOUS
9.1 Definitions. Where used in this Agreement, the following terms shall
have the following meanings:
"Acquisition Proposal" is defined in Section 4.2;
"Affiliate," as applied to any person, shall mean any other person directly
or indirectly controlling, controlled by, or under common control with, that
person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that person, whether through the ownership of voting securities, by
contract or otherwise;
"Applicable Laws" is defined in Section 2.8(b);
"Articles of Amendment" means the Articles of Amendment attached as Exhibit
A hereto which include the Provisions Attaching to Exchangeable Shares;
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"Business" means, when used in reference to a person, the assets,
properties, business, operations and financial condition of such person;
"Cdn. $" means the currency of Canada;
"Closing" is defined in Section 1.5;
"Closing Date" means the date on which the Closing occurs pursuant to the
terms hereof;
"Code" means the Internal Revenue Code of the United States;
"Company Claim" is defined in Section 7.2(b);
"Company Common Shares" means the common shares, without par value per
share, of Company;
"Company Disclosure Schedule" means the disclosure schedule delivered by
Company to Merge pursuant to Article 2 of this Agreement;
"Company Financial Statements" means (i) the unaudited consolidated
financial statements of Company for the fiscal years ended August 31, 1997 and
1998; and (ii) the unaudited consolidated financial statements for Company for
the eleven-month period ended July 31, 1999;
"Company Leases" is defined in Section 2.14(b);
"Company Material Adverse Effect" means any event, circumstance or
condition which, individually or in the aggregate with all other such events,
circumstances or conditions, has or would reasonably be expected to have a
material adverse effect on the business, assets, liabilities, properties,
condition (financial or otherwise), prospects, operations or results of
operations of Company, taken as a whole, on the ability to continue to conduct
the Business of Company, taken as a whole, as it is presently being conducted or
on Company's ability to consummate the transactions contemplated hereby or by
the Transaction Agreements; provided that a Company Material Adverse Effect
shall include, without limitation, any events, circumstances or conditions as a
consequence of which Company has incurred or may incur expenses and/or which
would require Company to establish reserves pursuant to Canadian generally
accepted accounting principles in an amount exceeding Cdn. $10,000 in the
aggregate for all such expenses and/or reserves (the parties acknowledge that
such amount shall not be construed as the definition of materiality for purposes
of financial statements);
"Company Plans" is defined in Section 2.8(a);
"Company Proprietary Rights" is defined in Section 2.16(a);
"Company Representatives" is defined in Section 4.4;
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"Damages" means losses, liabilities, damages (actual, punitive or
consequential), demands, claims, suits, actions, judgments or causes of action,
assessments, reasonable costs and expenses, including, without limitation,
interest, penalties, attorneys' fees, any and all reasonable expenses incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever;
"Delivery Date" means the date two Business Days prior to the date on which
the Closing is scheduled to occur.
"Deductible" is defined in Section 7.2(a);
"Designated Persons" is defined in Section 2.9(b);
"Effective Time" defined in Section 1.2.
"Employee List" is defined in Section 2.9(b);
"Employment Agreement" means an agreement, substantially in the form of
Exhibit B hereto, with each of Stephen Herman, John Soloninka and James
Arbuthnot, each of which shall be deemed to be effective simultaneously with the
Closing and which shall be deemed to be of no force and effect if the Closing
does not occur for any reason.
"Environmental Claim" means any written claim or notice alleging potential
liability or remedy, whether civil, administrative, criminal or quasi- criminal,
(including, without limitation, potential liability for investigatory costs,
cleanup costs, response costs, costs of repair, construction, alteration and
installation, preventive and remediation costs, natural resources damages,
property damages, personal injuries, lost profits, business interruption costs,
consequential damages, fines, penalties and monetary and non-monetary sanctions)
arising out of, based on or resulting from (a) the presence, release, spill,
discharge or deposit into the environment, of any Hazardous Materials at any
location, whether or not owned or leased by Company, whether or not caused or
occasioned by any act or omission on the part of Company, whether or not
occasioned or arising during the period of ownership or lease by Company, and
whether or not originating or emanating from, on or through any real property
now or hereinbefore owned or leased by Company; (b) circumstances forming the
basis of any violation or contravention, or alleged violation or contravention
of any Environmental Law; or (c) any breach of, or default under, any
representation or warranty of Company contained in Section 2.21 of this
Agreement;
"Environmental Costs" means, without limitation, any actual or potential
cleanup costs, remediation, removal, or other response costs, business
interruption costs, costs of repair, construction, alteration and installation
and preventive and remediation costs (which without limitation shall include
costs to cause Company to come into compliance with Environmental Laws in a
manner approved for such real property by all applicable environmental
authorities), investigation costs (including without limitation fees of
consultants, counsel on a solicitor and his
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own client basis, and other experts in connection with any environmental
investigation, testing, audits or studies), losses, liabilities, or obligations
(including without limitation, liabilities or obligations under any lease or
other contract), payments, damages (including without limitation any actual,
incidental, special, exemplary, punitive or consequential damages under any
statutory laws, common law or equitable cause of action or contractual
obligations or otherwise, including without limitation damages (a) of third
parties for personal injury, property damage or loss of profits or revenue or
interference with business operations, (b) to natural resources or to the
environment, or (c) to Merge, including, without limitation, loss of profits or
revenues, interference with business operations, loss of tenants, lenders,
investors or buyers, diminution in value of any property or properties or
inability to use any property or properties, civil, administrative,
quasi-criminal or criminal fines, penalties and monetary and non-monetary
sanctions, judgments, and amounts paid in settlement arising out of or relating
to or resulting from any Environmental Matter; in each case, which Merge would
be required to accrue or to establish a reserve under U.S. GAAP in its
consolidated financial statements, had the transactions contemplated by this
Agreement been closed;
"Environmental Laws" means, without limitation, (a) to the extent Company
is resident in Canada, all Canadian federal, provincial or local statutes,
regulations, ordinances, guidelines, by-laws and rules relating to the
protection, conservation, enhancement or rehabilitation of the environment,
relating to the disposal of Hazardous Materials, occupational health and safety,
product liability and transportation of Hazardous Materials; (b) to the extent
Company is resident in the United States, the following U.S. laws: the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. Sections 9601 et seq., the Emergency Planning and Community
Right-to-know Act of 1986, 42 U.S.C. Sections 11001 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections 136 et seq., the
Clean Air Act, 42 U.S.C. Sections 7401 et seq., the Clean Water Act (Federal
Water Pollution Control Act), 33 U.S.C. Sections 1251 et seq., the Safe Drinking
Water Act, 42 U.S.C. Sections 300f et seq., the Occupational Safety and Health
Act, 49 U.S.C. Sections 641 et seq., and the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq., as any of the statutes listed under (a)
and (b) above have been or may be amended from time to time; (c) all rules,
regulations and guidelines promulgated pursuant to any of the above statutes;
and (d) to the extent Company is resident in the jurisdiction in which such
statute, ordinance, rule or regulation applies, any other foreign or Canadian
statute, ordinance, rule or regulation governing Environmental Matters
(including Canadian and U.S. federal, state or local laws), as the same have
been or may be amended from time to time, including any common law, equitable or
statutory cause of action providing any right or remedy with respect to
Environmental Matters, and all applicable judicial and administrative decisions,
directions, orders, guidelines and decrees relating to Environmental Matters;
"Environmental Matter" means any matter arising out of, relating to, or
resulting from pollution, contamination, protection of the environment, human
health or safety of employees, and any matter relating to emissions, discharges,
disseminations, spills, deposits, releases or threatened
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releases, of Hazardous Materials into the environment, including without
limitation, the air (indoor and outdoor), surface water, ground water, soil,
land surface or subsurface, buildings, facilities, real or personal property or
fixtures, or otherwise arising out of, relating to, or resulting from the
manufacture, processing, distribution, use treatment, storage, disposal,
transport, handling, release or threatened release of Hazardous Materials;
"Exchange Act" means the U.S. Securities Exchange Act of 1934 as amended;
"Exchangeable Shares" means the Non-Voting Exchangeable Shares of Company
having attributes substantially as set out in Exhibit A hereto;
"Governmental Entity" means any court, agency or other governmental
authority or instrumentality, domestic or foreign, including federal,
provincial, municipal tax authorities and U.S. federal, state, local and other
foreign tax authorities;
"GST" is defined in Section 2.7(h);
"Hazardous Materials" means any wastes, pollutants or contaminants (whether
or not toxic, hazardous or extremely hazardous), and toxic or hazardous or
extremely hazardous substances, materials, constituents, compounds, chemicals,
natural or man-made elements or forces (including, without limitation,
petroleum, gasoline or associated products (such as fuel and diesel oil) or any
by-products or fractions thereof whether or not now or previously in underground
storage tanks, any form of natural gas, lead, asbestos and asbestos-containing
materials ("ACM"), building construction materials and debris, polychlorinated
biphenyls ("PCBs") and PCB-containing equipment, radon and other radioactive
elements, ionizing radiation, electromagnetic field radiation and other
non-ionizing radiation, sonic forces and other natural forces, infectious,
carcinogenic, mutagenic, or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives and urea formaldehyde foam insulation) that
are regulated by, or may now or in the future form the basis of liability or
remedy, whether civil, administrative, criminal or quasi-criminal, under any
Environmental Laws;
"Holder" means, prior to Closing, each holder of Company Common Shares and,
following the Closing, each holder of Exchangeable Shares or Merge Common Shares
issued upon exchange of the Exchangeable Shares.
"Knowledge of Company" means the actual knowledge of management of Company
after due inquiry.
"Liens" means any pledge, lien, security interest, charge, claim,
hypothecation, mortgage, assignment, seizure, attachment, garnishment or other
similar encumbrance or, to the extent it interferes unreasonably with the use or
alienability of property, any covenant, grant, right of way, easement, leasehold
interest, license, restriction, title defect or objection or commitment or
obligation of any kind (whether absolute, accrued, contingent or otherwise)
provided that Liens shall
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not include statutory Liens or deemed trusts which arise out of an obligation to
remit taxes or other amounts which are not yet due or payable;
"Loan" means that loan evidenced by the Promissory Note issued by the
Company to Merge and secured by the General Security Agreement, each dated as of
August 18, 1999 and amended August 26, 1999, and as they may subsequently
amended, restated, supplemented or modified.
"Majority Holders" means at any time the Holders of more than 50% of the
Registrable Securities issued and outstanding at such time.
"Material Contracts" is defined in Section 2.12;
"Merge Claims" is defined in Section 7.2(a);
"Merge Common Shares" means shares of Merge common stock, $0.01 par value
per share;
"Merge Disclosure Schedule" means the disclosure schedule previously
delivered by Merge to Company;
"Merge Group" is defined in Section 7.2(a);
"Merge Material Adverse Effect" means a material adverse effect on the
ability of Merge or Holdings to consummate the transactions contemplated hereby
or by the Transaction Agreements;
"Merge Representatives" is defined in Section 4.4;
"New Common Shares" is defined in Section 1.1;
"Obligation" means any of the terms, conditions or provisions of any
indenture, mortgage, note, Lien, license, government registration, contract,
lease, agreement or other instrument or obligation, including, but not limited
to, Material Contracts, to which a person or any of its subsidiaries is a party
or whereby any of their respective assets may be bound;
"Ontario Securities Act" means the Securities Act (Ontario);
"Order" means any order, writ, judgment, injunction, decree, law, statute,
ordinance, rule or regulation applicable to a person or any of its subsidiaries
or any of their respective assets, as the case may be;
"Permit" means all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities;
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"Person" means, an individual, corporation, partnership, trust, any other
entity and a group (which term includes a "group" as defined in Section 13(d)(3)
of the Exchange Act);
"Provisions Attaching to Exchangeable Shares" means the Provisions
Attaching to Exchangeable Shares included as part of the Article of Amendment.
"Reorganization" is defined in Section 1.1;
"Required Consents" is defined in Section 4.5(b);
"Required Documents" is defined in Section 5.2(a);
"Registrable Securities" shall mean any Merge Common Shares: (i) acquired
or to be acquired by a Holder in exchange for the Exchangeable Shares pursuant
to the exchange of Exchangeable Shares which have not been previously sold
pursuant to a registration statement or Rule 144 promulgated under the
Securities Act; or (ii) issued by way of a stock split, stock dividend,
recapitalization, merger or other distribution with respect to, or in exchange
for, or in replacement of the Exchangeable Shares;
"Registration Expenses" shall mean all expenses incurred by Merge in
connection with the registration or compliance pursuant to Article 8 hereof,
including, without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for Merge, blue sky fees
and expenses (but excluding the compensation of regular employees of Merge which
shall be paid in any event by Merge);
"Return" or "Returns" means any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied in
connection with Taxes;
"SEC" means the U.S. Securities and Exchange Commission;
"Securities Act" means the U.S. Securities Act of 1933, as amended;
"Selling Expenses" shall mean all fees and disbursements of any special
counsel (other than Merge's regular counsel) incurred by any Holder in
connection with any registration pursuant to Article 8;
"Share Exchange Agreement" means the Share Exchange Agreement substantially
in the form of Exhibit F hereto;
"Subsidiary" means, with respect to any person, any corporation or other
organization, whether incorporated or unincorporated, of which such person or
any other subsidiary of such person is a general partner (excluding
partnerships, the general partnership interests of which held by such person or
any subsidiary of such person do not have a majority of the voting interest in
such
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partnership) or at least a majority of the securities or other interests having
by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such person or by any one or more of its subsidiaries, or by such person and
one or more of its subsidiaries;
"Support Agreement" means the Support Agreement substantially in the form
of Exhibit G hereto;
"Survival Period" is defined in Section 7.1;
"Tax" or "Taxes" means all taxes, duties, charges, fees, levies, imposts,
governmental charges and other assessments, including, without limitation, all
income, profits, gross receipts, net worth, franchise, sales, use, goods and
services, ad valorem, value added, capital, business, capital gains, alternative
or minimum, net worth, transfer, gains, withholding, payroll, employment, social
security, workers compensation, occupancy, premium, windfall profits, employer
health, excise, asset, license, real property and personal property taxes, and
any other taxes, customs duties, fees, assessments or similar charges including
Canadian pension plan and provincial pension plan contributions, unemployment
insurance or workers compensation premiums, together with any installments with
respect thereto imposed by or payable to any Governmental Entity, and whether
disputed or not, and in each instance such term shall include any interest,
penalties or additions to tax attributable to any such Tax including penalties
for the failure to file any Return.
"Third-Party Company Claims" is defined in Section 7.6(c);
"Third-Party Merge Claims" is defined in Section 7.5(c);
"Transaction Agreements" means the Employment Agreements, Share Exchange
Agreement, Support Agreement and Trust Agreement substantially in the form
attached as Exhibits hereto;
"Trust Agreement" means the Trust Agreement substantially in the form of
Exhibit H hereto;
"U.S. Dollars," or the symbol "U.S. $," means the currency of the United
States of America;
"U.S. GAAP" means generally accepted accounting principles in the United
States as defined by the American Institute of Certified Public Accountants;
"Voting Debt" means any bonds, debentures, notes or other indebtedness
having general voting rights;
9.2 Entire Agreement; Assignment. This Agreement, together with the
Transaction Agreement, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, both written and oral, between
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the parties with respect to the subject matter hereof. This Agreement shall not
be assigned by operation of law or otherwise.
9.3 Expenses. Except as expressly set forth herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such cost or expense.
9.4 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of all parties hereto.
9.5 Extension; Waiver. At any time prior to the Closing, a party hereto
may (i) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein by any other party or in any
document, certificate or writing delivered pursuant hereto by any other party or
(iii) waive compliance with any of the agreements of any other party or with any
conditions to its own obligations. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
9.6 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, each of which shall remain in full force and effect.
9.7 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given, delivered and received
(a) when delivered, if delivered personally by a commercial messenger delivery
service with verification of delivery, (b) four days after mailing, when sent by
registered or certified mail, return receipt requested and postage prepaid, (c)
one business day after delivery to a private courier service, when delivered to
a private courier service providing documented international overnight service,
(d) on the date of delivery if delivered by facsimile and electronically
confirmed before 5:00 p.m. (local time) on any business day, or (e) on the next
business day if delivered by facsimile and electronically confirmed either after
5:00 p.m. (local time) or on a non-business day, in each case addressed as
follows:
If to Company:
Interpra Medical Imaging Network Ltd.
Suite 400, 100 Sheppard Avenue East
North York, Ontario M2N 6N5
Attn: President
Telecopy No.: (416) 250-5374
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<PAGE> 48
with a copy to:
Tory Tory DesLauriers & Binnington
Suite 3000, Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Canada M5K 1N2
Attn: Candy L. Saga
Telecopy No.: (416) 865-7380
If to Merge or to Holdings:
Merge Technologies Incorporated
1126 South 70th Street
Suite S107B
Milwaukee, Wisconsin 53214-3151
Attn: President
Fax: (414) 977-3940
with a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue, Suite 2500
Chicago, Illinois 60611
Attention: Mitchell D. Goldsmith
Fax: (312) 527-5921
or to such other address or addresses as may hereafter be specified by notice
given by any of the above to the others.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Wisconsin and the federal laws of the
United States applicable therein, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
9.9 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
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9.11 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and, except as expressly set forth
herein, nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
9.12 Specific Performance. The parties hereto agree that, if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damages would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
9.13 Time of the Essence. Time is of the essence of this Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by their respective officers thereunto duly authorized,
all as of the date first above written.
MERGE TECHNOLOGIES INCORPORATED,
a Wisconsin corporation
By:
-------------------------------------------
Name: William C. Mortimore
Title: President and Chief Executive Officer
A NOVA SCOTIA COMPANY
By:
-------------------------------------------
Name: William C. Mortimore
Title: President
INTERPRA MEDICAL IMAGING NETWORK LTD.,
an Ontario corporation
By: /s/ Stephen Herman
-------------------------------------------
Name: Stephen Herman
Title: President
<PAGE> 51
SCHEDULE 4.16 TO PURCHASE AGREEMENT
RELEASES AND AGREEMENTS
1. Roland Kennedy: release acknowledging that Interpra has satisfied all
outstanding obligations to him.
2. Brian Leland Jones: release confirming that Interpra has returned any
amounts owed him and Interpra has no further obligation to him, including any
obligation to issue stock.
3. Learnout & Hauspie: agreement confirming that Interpra has no ongoing
obligation to purchase goods or services from L&H, but that Interpra may
purchase goods or services at Interpra's option.
4. IRAP: order or letter that Interpra has no obligation to repay any
grants from IRAP as a result of the proposed transaction.
5. University Health Network: agreement confirming outstanding
obligations and responsibilities of both UHN and Interpra, in substance
reasonably satisfactory to Merge.
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