Exhibit 99.1
SHAREHOLDERS AGREEMENT
THIS AGREEMENT dated as of this 23rd day of April, 2004.
BETWEEN:
MITEL NETWORKS CORPORATION, a corporation incorporated
under the laws of Canada (the "Corporation")
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EDGESTONE CAPITAL EQUITY FUND II-B GP, INC., as agent
for EdgeStone Capital Equity Fund II-A, L.P. and its
parallel investors, and EDGESTONE CAPITAL EQUITY FUND II
NOMINEE, INC., as nominee for EdgeStone Capital Equity
Fund II-A, L.P. and its parallel investors (collectively
"EdgeStone")
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MITEL SYSTEMS CORPORATION, a corporation incorporated
under the laws of Canada ("Systems")
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MITEL KNOWLEDGE CORPORATION, a corporation incorporated
under the laws of Canada ("Knowledge")
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ZARLINK SEMICONDUCTOR INC., a corporation incorporated
under the laws of Canada ("Zarlink")
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POWER TECHNOLOGY INVESTMENT CORPORATION, a corporation
incorporated under the laws of Canada ("PTIC")
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XXXXXX XXXXXX CORPORATION, a corporation incorporated
under the laws of Xxxxxxxxxxxx ("XXX")
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XXXXXXX X. XXXXXXXX, an individual residing in the City
of Ottawa, Province of Ontario ("Xxxxxxxx")
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and any other Persons who become party to this Agreement
by entering into an Assumption Agreement
RECITALS:
A. Prior to or contemporaneously with the execution and delivery of this
Agreement: (i) the Corporation and EdgeStone have entered into a
subscription agreement (the "Subscription Agreement") in connection with
the issuance and sale to EdgeStone of Series A Shares (as defined herein);
and (ii) WCC and PTIC received Series B Shares (as defined herein) on the
exchange of certain Common Shares of the Corporation.
B. The Series A Shares and Series B Shares referred to above are being issued
by the Corporation prior to or contemporaneously with the execution and
delivery of this Agreement such that the capitalization of the Corporation
immediately upon execution of this Agreement is as described in Schedule
A.
C. The parties to this Agreement wish to provide for certain rights of the
Shareholders of the Corporation upon, among other things, the issuance of
new securities by the Corporation and any proposed transfer of securities
by such shareholders to another person or entity.
NOW THEREFORE the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS, PRINCIPLES OF INTERPRETATION AND REPRESENTATIONS AND WARRANTIES
1.1 Definitions
Whenever used in this Agreement, the words and terms defined in Appendix 1 shall
have the meanings set out therein.
1.2 Certain Rules of Interpretation
In this Agreement:
(a) Currency - Unless otherwise specified, all references to money
amounts are to lawful currency of Canada.
(b) Governing Law - This Agreement is a contract made under and shall be
construed, interpreted and enforced in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable in
the Province of Ontario (excluding any conflict of law rule or
principle of such laws that might refer such interpretation or
enforcement to the laws of another jurisdiction). Subject to the
provisions of Section 11.7, any action, suit or proceeding arising
out of or relating to this Agreement shall be brought in the courts
of the Province of Ontario and each of the Parties hereby
irrevocably submits to the non-exclusive jurisdiction of such
courts.
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(c) Headings - Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the construction
or interpretation of this Agreement.
(d) Number and Gender - Unless the context otherwise requires, words
importing the singular include the plural and vice versa and words
importing gender include all genders.
(e) Statutory references - A reference to a statute includes all
regulations made pursuant to such statute and, unless otherwise
specified, the provisions of any statute or regulation which amends,
supplements or supersedes any such statute or any such regulation.
(f) Time Periods - Unless otherwise specified, time periods within or
following which any payment is to be made or act is to be done shall
be calculated by excluding the day on which the period commences and
including the day on which the period ends and by extending the
period to the next Business Day following if the last day of the
period is not a Business Day.
(g) Business Days - If any payment is required to be made or other
action is required to be taken pursuant to this Agreement on a day
which is not a Business Day, then such payment or action shall be
made or taken on the next Business Day.
(h) Including - Where the word "including" or "includes" is used in this
Agreement, it means "including (or includes) without limitation".
(i) No Strict Construction - The language used in this Agreement is the
language chosen by the Parties to express their mutual intent, and
no rule of strict construction shall be applied against any Party.
(j) Severability - If, in any jurisdiction, any provision of this
Agreement or its application to any Party or circumstance is
restricted, prohibited or unenforceable, such provision shall, as to
such jurisdiction, be ineffective only to the extent of such
restriction, prohibition or unenforceability without invalidating
the remaining provisions of this Agreement and without affecting the
validity or enforceability of such provision in any other
jurisdiction or without affecting its application to other Parties
or circumstances.
1.3 Entire Agreement
This Agreement, including the schedules annexed hereto, and the Other
Agreements constitute the entire agreement between the Parties and set out all
the covenants, promises, warranties, representations, conditions, understandings
and agreements between the Parties with respect to the subject matter of this
Agreement and supersede all prior understandings, agreements, negotiations and
discussions, whether oral or written, including, without limitation, those
contained in any term sheet between the Corporation and EdgeStone. There are no
covenants, promises, representations, warranties, terms, conditions,
undertakings, understandings or other agreements, oral or written, express,
implied or collateral, between the Parties in
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connection with the subject matter of this Agreement other than as expressly set
forth or referred to in this Agreement or the Other Agreements.
1.4 Scope of the Agreement
The Shareholders agree that in the event of any inconsistency or conflict
between the terms of this Agreement and the articles, by-laws or resolutions of
the Corporation or any Subsidiary, the provisions of this Agreement shall
prevail. In this regard, the Shareholders agree more particularly to vote their
shares to ensure that the constating documents of the Corporation and any
Subsidiaries are not amended to include provisions that are or could be
inconsistent with the provisions hereof.
1.5 Covenant by Controlling Shareholders
Each Controlling Shareholder hereby agrees to take such actions as may be
necessary to cause each of his or its Controlled Shareholders to fully and
faithfully perform and discharge its obligations under this Agreement and to
comply with the terms and conditions of this Agreement; provided that the
foregoing shall not constitute a guarantee of payment of any amount payable
hereunder.
1.6 Dissent and Other Rights
With respect to any matter provided for in Sections 6.4, 6.8 and Article 7
of this Agreement, each of the Shareholders hereby expressly waive and agree
that they shall not exercise any applicable rights to dissent, appraisal, any
oppression remedy, or other similar rights.
1.7 Representations and Warranties of Shareholders
Each of the Shareholders hereby severally, but not jointly, represents and
warrants with respect to itself that, as at the date hereof:
(a) it is: (i) the beneficial owner of the securities in the capital of
the Corporation referred to in Schedule A as being held by it; or,
(ii) in the case of EdgeStone, EdgeStone holds the securities in the
capital of the Corporation referred in Schedule A as nominee for and
on behalf of EdgeStone Capital Equity Fund II-A, L.P. and the
parallel investors listed on Schedule D;
(b) except as may be contemplated in this Agreement or in any of the
Other Agreements, such securities are free and clear of all Liens;
(c) it has the full power, authority and legal right to execute and
deliver this Agreement and to perform the terms and provisions
hereof;
(d) if other than an individual, it has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement;
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(e) this Agreement has been duly executed and delivered by it, and
constitutes a legal, valid and binding obligation of it, enforceable
against it in accordance with the terms hereof, subject to the
effect of:
(i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally; and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(f) the execution and delivery by it of this Agreement and the
performance by it of its obligations hereunder and compliance with
the terms, conditions and provisions hereof, will not, as
applicable, conflict with or result in a breach of any of the terms,
conditions or provisions of (i) its charter documents or by-laws;
(ii) any law, rule or regulation having the force of law; (iii) any
indenture, mortgage, lease, agreement or instrument binding or
affecting it or its properties; or (iv) any judgment, injunction,
determination or award which is binding on it or its properties;
(g) no authorization, consent, approval, licence or exemption from any
Governmental Body is required by it which has not been obtained in
connection with the execution and delivery by it of, and the
performance by it of its obligations under, this Agreement; and
(h) it is not a party to any agreement which is inconsistent with its
rights and obligations hereunder or otherwise conflicts with the
provisions of this Agreement.
1.8 Representations and Warranties of Xxxxxxxx
Xxxxxxxx hereby represents and warrants, on the date hereof, that:
(a) Xxxxxxxx Controls each of Systems, Knowledge and WCC;
(b) Xxxxxxxx has the full power, authority and legal right to execute
and deliver this Agreement and to perform the terms and provisions
hereof;
(c) this Agreement has been duly executed and delivered by Xxxxxxxx, and
constitutes a legal, valid and binding obligation of Xxxxxxxx,
enforceable against him in accordance with the terms hereof, subject
to the effect of:
(i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally; and
(ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
(d) the execution and delivery by him of this Agreement and the
performance by Xxxxxxxx of his obligations hereunder and compliance
with the terms, conditions
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and provisions hereof, will not, as applicable, conflict with or
result in a breach of any of the terms, conditions or provisions of:
(i) any law, rule or regulation having the force of law; (ii) any
indenture, mortgage, lease, agreement or instrument binding or
affecting Xxxxxxxx or his properties; or (iv) any judgment,
injunction, determination or award which is binding on Xxxxxxxx or
his properties;
(e) no authorization, consent, approval, licence or exemption from any
Governmental Body is required by Xxxxxxxx which has not been
obtained in connection with the execution and delivery by him of,
and the performance by him of his obligations under, this Agreement;
and
(f) Xxxxxxxx is not a party to any agreement which is inconsistent with
his rights and obligations hereunder or otherwise conflicts with the
provisions of this Agreement.
1.9 Schedules
The Appendices and Schedules to this Agreement, as listed below, are an integral
part of this Agreement:
Appendix 1 - Definitions
Appendix 2 - Certain Matters Requiring EdgeStone Approval
Appendix 3 - Determination of Fair Market Value
Schedule A - Capitalization Table
Schedule B - Articles of Amendment
Schedule C - Assumption Agreement
Schedule D - Parallel Investors of EdgeStone
ARTICLE 2
MANAGEMENT OF CORPORATION
2.1 Agreement Respecting Voting
For so long as this Agreement remains in effect, each Shareholder agrees
to vote any and all Shares held by it from time to time so as to elect and
maintain in office the EdgeStone Nominees as members of the Corporation's board
of directors (the "Board of Directors"), and to cause the Corporation to act in
compliance with all of the provisions of this Agreement and in particular to
vote to approve any Transfer which is permitted and otherwise made in compliance
with this Agreement. It is acknowledged and agreed that no Shareholder shall be
bound to vote in respect of any matter in the same manner as its nominee
director voted in respect of such matter in his or her capacity as a director on
the Board of Directors.
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2.2 EdgeStone Nominees on the Board of Directors
The Board of Directors will be composed of eight members, and shall
include two directors nominated by EdgeStone (each, an "EdgeStone Nominee"), one
of whom may, at EdgeStone's option, be an independent director acceptable to the
Corporation. Accordingly, each of the Shareholders agrees to act and vote from
time to time so that on any election of directors by the Shareholders of the
Corporation the EdgeStone Nominees to the Board of Directors are elected in
accordance with this Section 2.2. In the event that EdgeStone requests that an
EdgeStone Nominee be removed as a director of the Corporation, then each of the
Shareholders agrees to act and vote for such removal in accordance with this
Section 2.2.
Each EdgeStone Nominee shall be an individual who is not disqualified
under applicable law from acting as a director.
2.3 Notice of Directors Meetings
Notice of directors meetings shall be given, in writing, in accordance
with the by-laws of the Corporation, and such notice shall also contain a
statement as to the nature of the business proposed to be transacted at such
meeting. Such notice shall be accompanied by all relevant documentation or
information required for directors to make an informed decision regarding the
business to be transacted.
2.4 Expenses of Directors
The Corporation shall reimburse all directors for all reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
or of any committee of the Board of Directors.
2.5 Board Committees
The Board of Directors shall maintain a standing committee to be known as
the "Audit Committee" and a standing committee to be known as the "Compensation
Committee". At the option of EdgeStone, at least one of the members of the Audit
Committee, at least one of the members of the Compensation Committee, and at
least one member of any other committee of the Board of Directors, shall be an
EdgeStone Nominee.
2.6 Directors' Liability Insurance
The Corporation will maintain directors' liability insurance for each of
the directors of the Corporation with coverage acceptable to the Board of
Directors. The Corporation will not assign, transfer, dispose of, surrender,
borrow upon or in any way encumber such insurance.
2.7 Board Observer
EdgeStone shall be entitled, at any time and from time to time, to
designate an observer representative to attend meetings of the Board of
Directors and meetings of any committee of the Board of Directors (the
"Observer"), provided the Observer agrees to be bound by the confidentiality
obligations set forth in Section 10.1. The Observer shall have no right to vote
as a director of the Corporation with respect to any matter and shall not be
included in any
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determination as to whether a quorum for any particular meeting exists. The
minutes of each meeting of the Board of Directors or any such committee at which
the Observer is present shall record that the Observer was present and acting in
the capacity as an observer and not as a director. The Corporation shall pay the
Observer's reasonable out-of-pocket expenses incurred to attend any meeting of
the Board of Directors or any committee of the Board of Directors.
2.8 Certain Matters Requiring EdgeStone Approval
Provided that members of the EdgeStone Group hold, in the aggregate, at
least 5,000,000 Common Shares (calculated on an as-if converted to Common Shares
basis) (subject to appropriate adjustment for share dividends, share splits,
recapitalizations, combinations and the like), notwithstanding any other
provision of this Agreement, in addition to any other approvals that may be
required by law or pursuant to the articles, by-laws or other constating
documents of the Corporation or any of the Subsidiaries, without the prior
written consent of EdgeStone, neither the Corporation nor any of the
Subsidiaries shall at any time take or agree or commit to take any action
referred to in Appendix 2. It is acknowledged by the Parties that the provisions
referenced in Appendix 2 are for EdgeStone's benefit and may be amended or
waived by the mutual agreement of the Corporation and EdgeStone at any time.
2.9 Annual Budget
At least 30 days prior to the Corporation's fiscal year-end, the
Corporation shall submit the Annual Budget to the Board of Directors for
approval and thereafter from time to time as appropriate, any restatements or
updates or deviations thereto to the extent they contain items or amounts not
consistent with the normal course operations of the Business and previously
approved budgets. To the extent that the approval of EdgeStone is required for
any Annual Budget or restatements, updates or deviations thereto pursuant to
Section 2.8, such materials shall also be submitted to EdgeStone
contemporaneously with the submission of same to the Board of Directors.
2.10 Reporting
(a) Monthly. An internally-prepared summary of monthly consolidated
financial results of the Corporation shall be prepared and delivered
to EdgeStone within 15 Business Days after the end of each fiscal
month.
(b) Additional Information Provided to Senior Lenders. The Corporation
shall provide to EdgeStone simultaneously with furnishing such
information to any Person as required under the Debt Obligations of
the Corporation and the Subsidiaries: (i) copies of all other
financial statements, reports or projections with respect to the
Corporation or any of the Subsidiaries required to be delivered to
the lenders on a periodic basis; and (ii) copies of all material
information, documents, studies, reviews, reports or assessments
relating to the Business or the assets of the Corporation or any
Subsidiary provided by the Corporation or any Subsidiary from time
to time to any Person pursuant to or as required under the Debt
Obligations, if, in the case of (i) or (ii) above, such
documentation is broader in scope or delivered on a more frequent
basis than the Corporation provides to the Board of Directors or is
required to provide under this Section 2.10(a).
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2.11 Access
The Corporation shall, and the Corporation shall cause each of the
Subsidiaries to, at any and all reasonable times on reasonable notice and during
business hours on any Business Day and in such manner as is not reasonably
likely to adversely affect the operation of the Business, permit EdgeStone and
its authorized representatives to examine all of the books of account, records,
reports, documents, papers and data of the Corporation and any of the
Subsidiaries, whether in ordinary or machine language, and to make copies and
take extracts, and to discuss the Business, affairs, finances and accounts of
the Corporation and the Subsidiaries with the Corporation's executive officers,
senior financial officers, accountants and other advisors. The Corporation shall
authorize its accountants and other financial advisors to so discuss the
finances and affairs of the Corporation and the Subsidiaries, and agrees to
furnish EdgeStone and each of its authorized representatives with any
information reasonably requested regarding the Business, or the affairs,
finances and accounts of the Corporation or the Subsidiaries. The Corporation
shall bear the costs to the Corporation and any Subsidiary of compliance with
this Section 2.11. In no event shall the Corporation be required to disclose
information that it is prohibited from disclosing by contract or otherwise by
law.
ARTICLE 3
COVENANTS IN FAVOUR OF EDGESTONE
Without limiting any other covenants and provisions hereof, and except to
the extent the following covenants and provisions of this Article 3 are waived
in any instance by EdgeStone, the Corporation covenants and agrees that it shall
perform and observe the following covenants and provisions, and shall cause each
of the Subsidiaries to perform and observe such covenants and provisions. For
greater certainty, the covenants in this Article 3 are for the exclusive benefit
of EdgeStone.
3.1 Taxes
The Corporation shall pay and discharge, and cause each Subsidiary to pay
and discharge, all taxes, assessments and governmental charges or levies imposed
upon it or upon its income, profits or business, or upon any properties
belonging to it, prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Corporation or any Subsidiary; provided, however, that neither
the Corporation nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
appropriate proceedings if the Corporation or the Subsidiary shall have set
aside on its books sufficient reserves, if any, with respect thereto.
3.2 Compliance with Laws
The Corporation shall comply with, and cause each Subsidiary to comply
with, the requirements of all applicable laws, rules, regulations and orders of
any governmental authority, where noncompliance would have a Material Adverse
Effect.
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3.3 Financings
The Corporation shall inform EdgeStone of any negotiations, offers or
contracts relating to possible financings of any nature for the Corporation,
whether initiated by the Corporation or any other Person, except for: (i)
arrangements with trade creditors, and (ii) utilization by the Corporation or
any Subsidiary of commercial lending arrangements with financial institutions.
3.4 Debt Obligations
The Corporation shall pay, and cause each Subsidiary to pay, when due, or
in conformity with customary trade terms, all lease obligations, all trade debt,
and all other indebtedness incident to the operations of the Corporation or each
Subsidiary, except such as are being contested in good faith and by proper
proceedings if the Corporation or the Subsidiary shall have set aside on its
books sufficient reserves, if any, with respect thereto. The Corporation shall
at all times comply with, and cause each Subsidiary to comply with the, the
conditions, provisions and, without limitation, all financial covenants and/or
margin requirements provided for in any and all operating and term credit
facilities, loans and advances made by any of their respective creditors.
3.5 Notification of Breach
The Corporation shall advise EdgeStone forthwith of any breach or
non-compliance by the Corporation of or with any of its covenants in Section 2.8
or Article 3 of this Agreement.
ARTICLE 4
PRE-EMPTIVE RIGHTS
4.1 Exercise of Pre-Emptive Rights
(a) In the event that the Corporation proposes to undertake an issuance
of New Securities (in a single transaction or a series of related
transactions), it shall give to each Principal Shareholder (as such
term is defined below) written notice of its intention to issue New
Securities (the "Pre-Emptive Right Notice"), describing the amount
and the type of New Securities and the price and the proposed
closing date, upon which the Corporation proposes to issue the New
Securities. For the purposes of this Section 4.1, the term
"Principal Shareholders" means each Shareholder who is a Shareholder
on the date hereof together with each other Shareholder who,
together with its Affiliates (or in the case of EdgeStone, the other
members of the EdgeStone Group), holds not less than five percent
(5%) of the Common Shares then outstanding (calculated on an as-if
converted to Common Shares basis).
(b) Each Principal Shareholder shall have 15 Business Days from the date
of receipt of any such Pre-Emptive Right Notice (the "Pre-Emptive
Right Acceptance Period") to agree in writing (i) to purchase up to
its Pro Rata Share (as nearly as may be determined without division
into fractions) of the New Securities (which for the purpose of this
Article 4 shall be calculated based on holdings on the day
immediately prior to the date of delivery by the Corporation of the
Pre-Emptive Right Notice) for the price and on the other terms
specified in the Pre-Emptive
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Right Notice and (ii) purchase more than its Pro Rata Share (if
available) up to a specified maximum of the New Securities. Such
right to purchase its Pro Rata Share of New Securities and, if
desired, more than its Pro Rata Share shall be exercised by a
Principal Shareholder by giving written notice (an "Acceptance
Notice") to the Corporation of such intention and stating therein
the maximum number of New Securities it is willing to purchase
(which number may be greater or less than its Pro Rata Share). If a
Principal Shareholder fails to deliver such notice to the
Corporation within the Pre-Emptive Right Acceptance Period, it shall
be deemed to have declined to exercise its right to purchase any New
Securities. If any Principal Shareholder does not give an Acceptance
Notice within the Pre-Emptive Right Acceptance Period or specifies
in its Acceptance Notice a number of Shares less than its Pro Rata
Share, the resulting unaccepted New Securities shall be deemed to
have been offered by the Corporation to such of the Principal
Shareholders who specified in their respective Acceptance Notices a
desire to acquire a number of the New Securities greater than their
Pro Rata Share, and each such Principal Shareholder is, subject to
the maximum number of the New Securities specified in its Acceptance
Notice, entitled to acquire its Pro Rata Share (calculated relative
to each of the Principal Shareholders wishing to purchase more than
its Pro Rata Share) of the unaccepted New Securities based upon the
number of Shares (calculated on an as-if converted to Common Shares
basis) beneficially owned by such Principal Shareholders (calculated
based on holdings on the day immediately prior to the delivery of
the Pre-Emptive Right Notice), as between themselves, or in such
other proportion as such Principal Shareholders may agree in
writing.
(c) The Corporation shall, from time to time, when requested to do so,
advise each of the Principal Shareholders promptly of the names of
the other Principal Shareholders who have accepted the Corporation's
offer as contained in a Pre-Emptive Right Notice and the number of
New Securities in respect of which each such Principal Shareholder
has accepted such offer.
(d) Any New Securities not accepted by the Principal Shareholders
pursuant to Section 4.1(b) may be offered and sold by the
Corporation to third parties for a period not to exceed 60 Business
Days following the end of the Pre-Emptive Right Acceptance Period at
the same or higher price and upon non-price terms not materially
more favorable to the purchasers thereof than as specified in the
Pre-Emptive Right Notice. In the event that the Corporation has not
issued and sold such New Securities within such 60 Business Day
period, then the Corporation shall not thereafter issue or sell any
New Securities without again first offering such New Securities to
the Principal Shareholders pursuant to this Article 4. If the
Corporation offers any New Securities not taken up by Principal
Shareholders pursuant to Section 4.1(b), the Corporation shall
promptly notify the Principal Shareholders upon entering into one or
more binding purchase agreement(s) during the 60 Business Day period
referred to herein, including as to (i) the number of New
Securities, if any, that the Corporation will issue (specifying
respective numbers to be purchased by the Principal Shareholders on
the one hand (if any) and by other Person(s) on the other hand),
(ii) the material terms of such
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issuance(s) and (iii) the name(s) of the purchaser(s) of any New
Securities to be issued (other than the Principal Shareholders).
(e) All sales of New Securities pursuant to this Section 4.1 shall be
consummated contemporaneously at the offices of the Corporation as
soon as is reasonably practicable on such date as the Board of
Directors and the persons purchasing New Securities pursuant to this
Section 4.1 may reasonably determine, but in no event later than the
later of (i) 60 Business Days following the end of the Pre-Emptive
Right Acceptance Period; or (ii) the fifth Business Day following
the expiration or termination of all waiting periods under any
competition or anti-combines legislation applicable to such
issuance. The delivery of certificates or other instruments
evidencing such New Securities shall be made by the Corporation on
such date against payment of the purchase price therefor.
(f) The Corporation may issue New Securities without complying with the
provisions of this Section 4.1 if the New Securities are Permitted
Additional Securities.
4.2 Future Shares and Options
The Corporation agrees that, as a condition precedent to the grant or
issuance of any securities (including Convertible Securities) to a Person that,
giving effect to such grant or issuance, would hold in excess of five percent
(5%) of the outstanding Common Shares (calculated on as-if converted to Common
Shares basis), including pursuant to the Additional Investment, whether now
authorized or not, it will require that the holder of such securities sign an
Assumption Agreement if required by EdgeStone or the Corporation, and if the
purchaser is a corporation, such agreement will also be signed by any Person who
is a Controlling Shareholder of such corporation; provided, however, that if any
such grant or issuance is pursuant to the exercise or conversion of any
Convertible Security granted or issued prior to the date of this Agreement, the
Corporation shall only be required to use its commercially reasonable efforts to
comply with the foregoing covenant.
ARTICLE 5
RESTRICTIONS ON TRANSFER OF SHARES
5.1 General Prohibition on Transfer
No Shares or Convertible Securities now or in the future held by a
Shareholder or any interest therein may be dealt with or Transferred except as
contemplated in this Agreement. A purported Transfer of any Shares or
Convertible Securities in violation of this Agreement shall not be valid. Any
Shareholder that purports to Transfer any Shares or Convertible Securities in
violation of this Agreement agrees to donate and hereby donates to the
Corporation all dividends and distributions paid or made on any Shares or
Convertible Securities so Transferred during the period of the prohibited
Transfer. The provisions of the immediately preceding sentence are in addition
to, and not in lieu of, any other remedies to enforce the provisions of this
Agreement.
Any permitted Transfer made in compliance with this Agreement shall
require the approval of the Board of Directors which shall be provided in
accordance with the provisions of Section 2.1.
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5.2 Permitted Transfers
Each Shareholder may Transfer any Shares or Convertible Securities held by
it, pursuant to and in accordance with Article 5 or Article 6 and in the case of
the following Transfers, without being subject to the requirements of Sections
6.1, 6.2 and 6.3:
(a) to a Permitted Transferee;
(b) in the case of Shares held by a Permitted Transferee of the
Shareholder, back to the Shareholder;
(c) to any Person with the prior written consent of the Board and an
Investors Majority; or
(d) to the Corporation pursuant to: (i) the redemption rights under the
Articles of Amendment; or (iii) any put right in this Agreement.
5.3 Upstream Transfers by Xxxxxxxx Entities
Xxxxxxxx hereby agrees that he shall not Transfer any securities or other
interests in any Xxxxxxxx Entity or permit the grant or issuance of any
securities or other interests in any Xxxxxxxx Entity, and each Xxxxxxxx Entity
hereby agrees that it shall not permit any Transfer, grant or issuance of any of
its securities or other interests, if, as a result of such Transfer, grant or
issuance, Xxxxxxxx or the Xxxxxxxx Group would cease to Control the Xxxxxxxx
Entity, or, if after giving effect to such Transfer, grant or issuance, Xxxxxxxx
or the Xxxxxxxx Group would not be able to cause the Xxxxxxxx Entity to fully
and faithfully perform and discharge its obligations under this Agreement and
comply with the terms and conditions of this Agreement.
5.4 No Registration Unless Transferee is Bound
Other than transfers pursuant to Section 5.5, if a Shareholder purports to
Transfer any Shares or Convertible Securities, no Transfer shall be made or be
effective, no application shall be made to the Corporation or to the
Corporation's transfer agent to register the Transfer, and the Corporation shall
not register the Transfer on its securities register, until the proposed
transferee (and, in the case of a transferee that is not a natural person, other
than a public corporation and other than in the case of a Transfer by
EdgeStone), the Persons who Control the proposed transferee enter into, or in
the case of Convertible Securities, agree upon the acquisition of any Shares to
enter into, an Assumption Agreement.
5.5 Transfers to an Affiliate
If a Shareholder purports to Transfer Shares to a Permitted Transferee or
pursuant to Section 5.2(b) or 5.2(c), no Transfer shall be made or effective, no
application shall be made to the Corporation or the Corporation's transfer agent
to register the Transfer, and the Corporation shall not register the Transfer on
its securities register until, the Shareholder and the transferee have executed
and delivered an Assumption Agreement and such other documents as may be
reasonably requested by the Corporation, in which the Shareholder and the
transferee: (i) represent and warrant that the transferee qualifies as a
Permitted Transferee or otherwise qualifies as a recipient of a Transfer
pursuant to 5.2(b) or 5.2(c); (ii) agree that each shall ensure
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that the transferee shall continue to so qualify at all times and that, other
than in the case of a Transfer by EdgeStone to a Person listed in the definition
of "EdgeStone Group", if the transferee is a corporation, the shareholder(s) of
that transferee and the shareholder(s) of each of its direct and indirect
shareholders who are not natural persons agree that no shares in that transferee
shall be Transferred, other than a Transfer between members of the Xxxxxxxx
Group, without first Transferring (or causing to be Transferred) the Shares held
back to the Shareholder; and (iii) agree that the transferring Shareholder shall
continue to be bound by all the provisions of this Agreement.
5.6 Continuing Obligations of Transferor
In the event of any Transfer of Shares to a Permitted Transferee or
pursuant to Section 5.2(b) or 5.2(c), the transferor shall, at all times after
such Transfer: (i) be jointly and severally liable with the transferee for the
observance and performance of the covenants and obligations of the transferee
under this Agreement; and (ii) indemnify the other Parties against any loss,
damage or expense incurred as a result of the failure of the transferee to
comply with the provisions of this Agreement.
5.7 Shareholders to Facilitate Permitted Transfers
Each Party to this Agreement shall facilitate any Transfer of Shares in
accordance with this Agreement on a timely basis, including promptly providing
any required consents.
5.8 Corporation to Facilitate Permitted Transfers
The Corporation shall facilitate any Transfer of Shares in accordance with
this Agreement on a timely basis, including promptly providing such assistance
as the transferring Shareholder may reasonably request to facilitate such
Transfer, subject to the provisions of Section 10.1. In no event shall the
Corporation be required to disclose information that it is prohibited from
disclosing by contract or otherwise by law.
5.9 Pledge of Shares
No Shareholder shall, directly or indirectly, pledge or otherwise grant or
allow a Lien to exist in respect of any Shares held by that Shareholder, without
the prior written consent of the Corporation and EdgeStone, such consent not to
be unreasonably withheld or delayed.
5.10 EdgeStone Group
The Parties acknowledge and agree that EdgeStone acts as a nominee and
holds its Shares and Convertible Securities, and shall be permitted to hold any
Shares or Convertible Securities that it may hereafter acquire, as bare trustee
for EdgeStone Capital Equity Fund II-A L.P. and its parallel investors listed on
Schedule D annexed hereto. The Parties hereby agree that Schedule D may be
amended from time to time to add the name of any Person for whom EdgeStone
purchases Shares or Convertible Securities as nominee pursuant to the EdgeStone
Purchase Option. In such capacity, EdgeStone shall cause the Shares registered
in its name to be voted in the manner contemplated herein. EdgeStone represents
and warrants that it has the authority to
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bind all the parallel investors and other Persons from time to time listed on
Schedule D annexed hereto to the terms of this Agreement.
Notwithstanding anything to the contrary in this Agreement, the following
rights and privileges of EdgeStone in this Agreement shall also apply and enure
to the benefit of, and be exercisable by, (i) for so long as EdgeStone or any
other member of the EdgeStone Group is a Shareholder, each member of the
EdgeStone Group who from time to time holds any Shares or Convertible
Securities, and (ii) at the option of EdgeStone, any transferee or transferees
of any Shares or Convertible Securities held by EdgeStone (subject to compliance
by EdgeStone with Section 6.1, 6.2 and 6.3, if applicable, with respect to the
Transfer of such Shares or Convertible Securities to such transferee):
(a) the reporting and access rights of EdgeStone in Sections 2.10 and
2.11;
(b) the rights respecting the purchase and sale of Shares and
Convertible Securities in Sections 4.1, 6.1, 6.2 and 6.3;
(c) the right to require the Corporation to purchase its Shares or
Convertible Securities as part of any put initiated by EdgeStone
pursuant to Section 6.8 of this Agreement; and
(d) the benefit of the terms and provisions of Sections 6.4, 6.10 and
Article 7.
The rights and entitlements in (a)-(d) above are hereby accepted by
EdgeStone as agent and trustee of the Persons referred to in clause (i) or (ii)
above to the extent such Persons become holders of Shares or Convertible
Securities, and each of the parties to this Agreement agrees that EdgeStone may
enforce such rights and entitlements in favour of such Persons.
The rights and privileges of EdgeStone pursuant to Section 2.2 and Section
2.8 and the covenants in favour of EdgeStone in Article 3 may, at the option of
EdgeStone, be assigned in whole but not in part by EdgeStone to a Person who
acquires its Shares or Convertible Securities in accordance with the terms of
this Agreement, and the benefit of such covenants shall be applicable, mutatis
mutandis, to such assignee.
5.11 Sales to a Direct Competitor
Notwithstanding any provision to the contrary, no Shareholder may Transfer
any Shares to a direct competitor of the Business, unless such Transfer is
approved by the Corporation.
This Section 5.11 shall not apply to a Transfer of Shares pursuant to a
transaction to which Section 6.4 or Article 7 applies.
ARTICLE 6
RIGHTS OF FIRST REFUSAL, TAG-ALONG, DRAG-ALONG AND PUT RIGHTS
6.1 Transfer Notice
In the event that any Shareholder (the "Transferring Shareholder")
receives from any Person, acting as principal and dealing at arm's length with
the Shareholder (the "Third Party
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Offeror"), a bona fide written offer to purchase (other than pursuant to a
Transfer permitted by Section 5.2) Shares or Convertible Securities held by the
Transferring Shareholder (the "Third Party Offer"), which the Transferring
Shareholder wishes to accept (subject to compliance with Section 6.2 and 6.3),
the Transferring Shareholder will give notice (the "Transfer Notice") to the
Corporation and to each of the Shareholders (other than any Shareholder that is
also a Transferring Shareholder) (the "Other Shareholders") setting forth:
(a) the identity of the Third Party Offeror;
(b) if the Third Party Offeror is a corporation, the names of the
principal shareholders, directors and officers of the Third Party
Offeror;
(c) the number and classes of Shares or Convertible Securities proposed
to be sold by the Transferring Shareholder (the "Offeror's
Securities");
(d) the price of and terms of payment for the Offeror's Securities; and
(e) a summary of any other material terms for such sale including the
proposed closing date.
The Transfer Notice shall contain an offer to sell the Offeror's Securities to
the Other Shareholders at the price and on the terms set forth in the Transfer
Notice. The Transfer Notice shall include a full and complete copy of the
written offer delivered by the Third Party Offeror. In all circumstances the
proposed consideration for any Offeror's Securities must be in cash and/or
Marketable Securities. The offer contained in the Transfer Notice shall be
irrevocable except with the consent of the Other Shareholders and shall be open
for acceptance for a period of 20 Business Days after the date upon which the
Transfer Notice was received by the Other Shareholders (the "Acceptance
Period").
All Transfer Notices and Drag-Along Notices given under this Article 6
must be given concurrently to all Other Shareholders and the Corporation.
6.2 Rights of First Refusal
Upon receipt of a Transfer Notice and subject to all of the provisions of
this Section 6.2, the Other Shareholders shall have the following rights and
options:
(a) Each of the Other Shareholders shall have the right to purchase up
to its Pro Rata Share of the Offeror's Securities at the price and
on the terms and conditions contained in the Transfer Notice.
(b) Within the Acceptance Period, each of the Other Shareholders may
give to the Transferring Shareholder a notice in writing (an
"Acceptance Notice") accepting the offer contained in the Transfer
Notice and specifying the maximum number of the Offeror's Securities
it wishes to acquire (which number may be greater than or less than
its Pro Rata Share). Each of the Other Shareholders shall have the
right to purchase up to its Pro Rata Share of the Offeror's
Securities (which for purposes of this Section 6.2 shall be
calculated based on holdings on the day immediately prior to the
delivery of the Transfer Notice), as nearly as may be
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determined without division into fractions and, if available, a
number of the Offeror's Securities greater than its Pro Rata Share
up to a stated maximum. Any Other Shareholder who does not give an
Acceptance Notice within the Acceptance Period shall be deemed to
have declined to purchase any of the Offeror's Securities. If any
Other Shareholder does not give an Acceptance Notice within the
Acceptance Period or specifies in its Acceptance Notice a number of
Shares less than its Pro Rata Share, the resulting unaccepted
Offeror's Securities shall be deemed to have been offered by the
Transferring Shareholder to such of the Other Shareholders who
specified in their respective Acceptance Notices a desire to acquire
a number of the Offeror's Securities greater than their Pro Rata
Share, and each such Other Shareholder is, subject to the maximum
number of the Offeror's Securities specified in its Acceptance
Notice, entitled to acquire its Pro Rata Share (calculated relative
to each of the other Shareholders wishing to purchase more than its
Pro Rata Share) of the unaccepted Offeror's Securities based upon
the number of Shares (calculated on an as-if converted to Common
Shares basis) beneficially owned by such Other Shareholders
(calculated based on holdings on the day immediately prior to the
delivery of the Transfer Notice), as between themselves, or in such
other proportion as such Other Shareholders may agree in writing. If
the Other Shareholders, or any of them, give Acceptance Notices
within the Acceptance Period confirming their agreement to purchase
all of the Offeror's Securities, the sale of the Offeror's
Securities to such Other Shareholders shall be completed within 15
Business Days of the expiry of the Acceptance Period.
(c) If the Other Shareholders do not give notice of acceptance prior to
the expiry of the Acceptance Period which would result in the
purchase of all, but not less than all, of the Offeror's Securities,
the Transferring Shareholder will, notwithstanding any notices of
acceptance of the Offeror's Securities, subject to the provisions of
Section 6.3, have the right to sell the Offeror's Securities to the
Third Party Offeror for a period of 60 Business Days from the
expiration of the Acceptance Period for a price not less than that
provided for in the Transfer Notice and on terms and conditions not
materially more favourable than those set out in the Transfer
Notice, provided that such Third Party Offeror first executes and
delivers to the Corporation an Assumption Agreement. If such
Transfer is not consummated within such 60 Business Day period, the
Transferring Shareholder will not Transfer any of the Offeror's
Securities without again complying with all of the provisions of
Section 6.1 and Section 6.2.
(d) Any Transfer entered into in connection with this Section 6.2 shall
not provide a Collateral Benefit to any Shareholder or any Affiliate
or Related Party thereof.
(e) For greater certainty, no rights shall arise under this Article 6 in
respect of any purchases by Other Shareholders pursuant to the
exercise of rights under this section.
(f) The provisions of Sections 6.1 and 6.2 shall not apply to the
Transfer of any Shares pursuant to the provisions of Section 6.3,
6.4 or Article 7 and which are exercised in accordance with the
terms thereof.
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(g) Each Other Shareholder may assign its right to exercise its right of
first refusal under this 6.2, in whole or in part, to any of its
Affiliates, or, in the case of EdgeStone or any member of the
Xxxxxxxx Group, to any member or members of the EdgeStone Group or
the Xxxxxxxx Group, as the case may be, provided such member or
members (and Controlling Persons) have first entered into an
Assumption Agreement.
6.3 Tag-Along Rights
Upon receipt of a Transfer Notice, any Other Shareholder(s) may elect to
participate in the proposed Transfer by delivering written notice to the
Corporation and Transferring Shareholder within the Acceptance Period. Each of
the Other Shareholders so electing will be entitled to sell in the contemplated
Transfer, the same proportion (on an as-if-converted to Common Shares basis) of
the Shares and Convertible Securities held by each such Other Shareholder,
respectively, as the proportion of the Transferring Shareholder's total holdings
which the Transferring Shareholder proposes to sell pursuant to the Transfer
Notice (on an as-if-converted to Common Shares basis), on the same terms (other
than price) set forth in the Transfer Notice, and at a price determined as
follows:
(a) if the Transferring Shareholder is proposing to sell Common Shares
within two (2) years of the date hereof:
(i) any Common Shares to be sold by an Other Shareholder shall be
sold at the same price per share as the Common Shares proposed
to be sold by the Transferring Shareholder, as set forth in
the Transfer Notice;
(ii) any Preferred Shares to be sold by an Other Shareholder shall
be sold at a price per share calculated as follows:
(A) if the sale price per Share of the Common Shares is at
least two (2) times the Issue Price, any Preferred
Shares shall be sold at the same sale price per Common
Share, multiplied by the number of Common Shares into
which the Preferred Shares are then convertible;
(B) if the sale price per Share of the Common Shares is less
than two (2) times the Issue Price, any Preferred Shares
shall be sold at the same sale price per Common Share
plus the lesser of (i) an amount equal to the Issue
Price; and (ii) the difference between the sale price
per Share of the Common Shares and two (2) times the
Issue Price, such result to be multiplied by the number
of Common Shares into which the Preferred Shares are
then convertible;
(iii) any Convertible Securities to be sold by an Other Shareholder
shall be sold at a price per Convertible Security equal to:
(A.) the value of the Common Shares underlying such
Convertible Securities, where such Common Shares are valued at
the same price per share as the Common Shares proposed to be
sold by the Transferring Shareholder, as set forth in
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the Transfer Notice, less (B.) any amount payable by the
holder of the Convertible Securities on the exercise or
conversion thereof;
(b) if the Transferring Shareholder is proposing to sell Common Shares
on or after two (2) years from the date hereof:
(i) any Common Shares to be sold by an Other Shareholder shall be
sold at the same price per share as the Common Shares proposed
to be sold by the Transferring Shareholder, as set forth in
the Transfer Notice;
(ii) any Preferred Shares to be sold by an Other Shareholder shall
be sold at a price per share equal to the sum of (A) an amount
for each Common Share (other than Additional Common Shares)
then issuable on the conversion of the Preferred Shares equal
to the same price per share as the Common Shares proposed to
be sold by the Transferring Shareholder; and (B) the Issue
Price;
(iii) any Convertible Securities to be sold by an Other Shareholder
shall be sold at a price per Convertible Security equal to:
(A.) the value of the Common Shares underlying such
Convertible Securities, where such Common Shares are valued at
the same price per share as the Common Shares proposed to be
sold by the Transferring Shareholder, as set forth in the
Transfer Notice, less (B.) any amount payable by the holder of
the Convertible Securities on the exercise or conversion
thereof;
(c) if the Transferring Shareholder is proposing to sell Preferred
Shares:
(i) any Common Shares to be sold by an Other Shareholder shall be
valued at a price per share equal to X minus Y (subject to
appropriate adjustment to reflect changes in the Conversion
Value) (the "Notional Common Share Value"), where X is equal
to the same price per share as the Preferred Shares proposed
to be sold by the Transferring Shareholder, as set forth in
the Transfer Notice, and Y is equal to the Issue Price;
(ii) any Preferred Shares to be sold by an Other Shareholder shall
be sold at the same price per share as the Preferred Shares
proposed to be sold by the Transferring Shareholder, as set
forth in the Transfer Notice; and
(iii) any Convertible Securities (other than Preferred Shares) to be
sold by an Other Shareholder shall be sold at a price per
Convertible Security equal to: (A.) the Notional Common Share
Value of the Common Shares underlying such Convertible
Securities, less (B.) any amount payable by the holder of the
Convertible Securities on the exercise or conversion thereof.
(d) if the Transferring Shareholder is proposing to sell Convertible
Securities (other than Preferred Shares), only Shareholders holding
the same type of Convertible Securities with identical provisions
(other than the number of underlying
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securities in respect of which the Convertible Securities are
exercisable) as the Convertible Securities which are the subject of
the Transfer Notice may exercise Tag-Along Rights, and any such
Convertible Securities shall be sold at the same price for each of
the Convertible Securities (based on a unit basis) proposed to be
sold by the Transferring Shareholder, as set forth in the Transfer
Notice. The Shareholders shall have no right to exercise Tag-Along
Rights pursuant to this Section 6.3 in respect of Common Shares,
Preferred Shares or other Convertible Securities which are not
identical to the Convertible Securities which are the subject of the
Transfer Notice.
For greater certainty, no rights shall arise under this Section 6.3 as a
result of any purchases in accordance with the exercise of rights of first
refusal under Section 6.2 nor shall the provisions of Sections 6.1 and 6.3 apply
to the Transfer of any Shares to which the provisions of Section 6.4 or Article
7 apply and which are exercised in accordance with the terms thereof.
Notwithstanding the foregoing:
(i) if any transaction or series of transactions contemplated by
this Section 6.3 would result in a Change of Control Event,
the Shareholders shall not complete the proposed transaction
unless the aggregate consideration payable by the Third Party
Offeror pursuant to this Section 6.3 is allocated in
accordance with the Articles of Amendment as if it were a
"Change of Control Event" thereunder;
(ii) if any transaction or series of transactions contemplated by
this Section 6.3 would constitute a Partial Sale Event, the
Transferring Shareholder shall not complete the proposed
transaction unless the Corporation has fulfilled its
obligations under the Articles to redeem all Preferred Shares
in respect of which a redemption request has been made
pursuant to the Articles of Amendment upon the happening of a
Partial Sale Event.
Any purchase and sale agreement entered into in conjunction with this
Section 6.3 shall:
(a) contain only several (not joint and several) representations,
warranties and covenants from any holder of Shares with recourse
limited to that Shareholder's pro rata portion of the aggregate
purchase price to all Shareholders;
(b) contain a limitation on the liability each Shareholder assumes, with
respect to all indemnities, if any, provided to the Offeree, to that
Shareholder's pro rata portion of the aggregate purchase price to
all Shareholders;
(c) not require the Shareholders that participate in the transaction
pursuant to this Section 6.3 to provide representations or
warranties or covenants related to the Corporation but shall require
them to provide typical title, ownership and authority to sell
representations. Notwithstanding the foregoing, the Shareholders
shall be subject to indemnity obligations to the Transferring
Shareholder by reason of any breach of representations and
warranties relating to the Corporation subject to the limitations
set forth in clause (b) above;
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(d) not provide a Collateral Benefit to any Shareholder or any Affiliate
or Related Party thereof (other than the right to receive the
purchase price calculated in accordance with the provisions above);
and
(e) be conditional upon completion of the purchase by the Third Party
Offeror of the Shares held by the Transferring Shareholder which are
subject to the Transfer Notice.
Any Shareholder not giving notice within the Acceptance Period under this
Section 6.3 shall be deemed to have declined to exercise its tag-along rights
under this Section 6.3
If any of the Other Shareholders exercises its rights hereunder, the
purchase and sale of the Shares and Convertible Securities of the Corporation to
the Third Party Offeror pursuant to the Transfer Notice shall be completed at
the same time as the purchase and sale of the Offeror's Securities and as part
of the same closing.
To the extent that the Other Shareholders do not exercise their rights
hereunder, the Transferring Shareholder shall be entitled to sell the Shares
specified in the Transfer Notice in accordance with the terms thereof for a
period of 60 Business Days after the expiry of the Acceptance Period. If the
sale is not completed within such 60 Business Day period, the provisions of
Article 6 shall again apply to any proposed sale of Shares and so on from time
to time.
6.4 Drag-Along Rights
(a) If any Shareholder receives from a third party (the "Third Party")
acting as principal and dealing at arm's length with the
Transferring Shareholder, a bona fide written offer (the "Third
Party Offer") to purchase all (but not less than all) of the Shares
(which transaction may include, without limitation, an offer
pursuant to a merger, amalgamation, consolidation or similar
transaction), and the Third Party Offer is accepted by Shareholders
holding at least fifty percent (50%) of the votes attached to the
outstanding Shares held by parties to this Agreement (calculated on
an as-if-converted to Common Shares basis) (which Shareholders must
include EdgeStone unless the Third Party Offer is a Qualifying
Offer) (the "Accepting Shareholders"), the Accepting Shareholders
shall be entitled to obtain from the Third Party an offer (a
"Drag-Along Offer") to purchase all of the Shares of the Corporation
held by the Shareholders other than the Accepting Shareholders (the
"Forced Shareholders") on the same terms and conditions as contained
in the Third Party Offer, subject to the provisions of Section
6.4(b). If the consideration in respect of the Drag-Along Offer
includes consideration other than cash or cash equivalents, the
Drag-Along Offer shall, if necessary, include a valuation prepared
in accordance with Section 6.5. The Drag-Along Offer shall be
irrevocable. For the purposes of this Agreement, a "Qualifying
Offer" is a Third Party Offer: (i) received before April 22, 2006;
and (ii) pursuant to which the holders of the Series A Shares
purchased by EdgeStone pursuant to the Subscription Agreement
(including any Series A Shares purchased pursuant to the EdgeStone
Purchase Option) would be entitled to receive aggregate proceeds,
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payable in cash, equal to not less than two (2) times the aggregate
amount of the Issue Price for each Series A Share held by such
Persons.
(b) The Drag-Along Offer shall:
(i) not provide a Collateral Benefit to any Shareholder or any
Affiliate or Related Party thereof (other than, to the extent
that proceeds are distributed in accordance with the Articles
of Amendment, in the case of any holder of Preferred Shares,
the right of such holder to receive the Series A Liquidation
Preference per Share or the Series B Liquidation Preference
per Share, as applicable);
(ii) require each of the Shareholders to provide such
representations, warranties and indemnities as are reasonably
requested by the Third Party; and
(iii) provide that each such Shareholder's liability for
representations, warranties and indemnities provided to the
Third Party shall be limited to such Shareholder's share of
the proceeds received from the transaction.
(c) The Forced Shareholders shall be obliged to accept the Drag-Along
Offer (or otherwise take all necessary action to cause the
Corporation to consummate the proposed transaction, as applicable)
within 3 Business Days of receipt or such other period agreeable to
the Accepting Shareholders. The acceptance of the Drag-Along Offer
shall be made in writing and a copy of the acceptance (or of the
accepted Drag-Along Offer) shall be delivered to the Accepting
Shareholders within such 3 Business Day period.
(d) If any of the Forced Shareholders do not deliver an acceptance of
the Drag-Along Offer within the 3 Business Day period referred to
above, the Secretary of the Corporation (the "Drag-Along Offer
Attorney") shall be entitled to accept the Drag-Along Offer on
behalf of such Forced Shareholders and to deliver the acceptance to
the Third Party and, for such purpose, each of the Forced
Shareholders hereby appoints the Drag-Along Offer Attorney as its
attorney, on the terms set forth in Section 11.2, with full power of
substitution, in the name of the Forced Shareholder to accept the
Drag-Along Offer and to execute and deliver all documents and
instruments to give effect to such acceptance and to establish a
binding contract of purchase and sale between the Forced Shareholder
and the Third Party with respect to all of the Shares and other
securities held by the Forced Shareholder and to execute and deliver
all deeds, transfers, assignments and assurances necessary to
effectively Transfer such Shares to the Third Party. Each of the
Shareholders agrees that it will perform the agreement resulting
from acceptance of the Drag-Along Offer in accordance with its terms
and will ratify and confirm all that the Drag-Along Offer Attorney
may do or cause to be done pursuant to the foregoing.
Notwithstanding that certificates or instruments evidencing the
Shares may not have been delivered by any Forced Shareholder to the
Third Party, upon completion of the Third Party's obligations under
the Third Party Offer:
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(i) the purchase of Shares from the Forced Shareholder shall be
deemed to have been fully completed and the records of the
Corporation may be amended accordingly;
(ii) all right, title, benefit and interest, both at law and in
equity, in and to the Shares shall be conclusively deemed to
have been transferred and assigned to and become vested in the
Third Party; and
(iii) all right, title, benefit and interest of such Forced
Shareholder and of any other Person (other than the Third
Party) having an interest in such Shares, legal or equitable,
in any capacity whatsoever shall cease.
(e) The purchase and sale of Shares in accordance with the provisions of
the Drag-Along Offer shall be completed at the same time as the
completion of the purchase and sale of Shares and/or securities
between the Accepting Shareholders and the Third Party in accordance
with the Third Party Offer and as part of the same closing within 60
Business Days after expiry of the 3 Business Day period referred to
in Section 6.4(c).
(f) If, at any time, the Corporation receives a Third Party Offer to
purchase all or substantially all of the assets of the Corporation
(a "Drag-Along Asset Sale") which has been approved by the Accepting
Shareholders, the Shareholders hereby agree to cast such votes and
sign such resolutions and other instruments as may be necessary or
desirable to be obtained from them, in their capacity as
shareholders of the Corporation, in order to evidence their approval
of and to permit such transaction(s) of purchase and sale. For
greater certainty, the distribution of proceeds under any such
Drag-Along Asset Sale shall be made in accordance with the Articles
of Amendment. If any Shareholder does not comply with the
requirements set out in this Section 6.4(f) within 3 Business Days
of being requested to do so by the Corporation, the Secretary of the
Corporation (the "Drag-Along Asset Sale Attorney") shall be entitled
to execute and deliver such documentation and cast any such votes on
behalf of such Shareholder and, for such purpose, each of the
Shareholders hereby appoints the Drag-Along Asset Sale Attorney as
its attorney, on the terms set forth in Section 11.2, in the name of
the Shareholder, to execute and deliver instruments and cast votes,
all as aforesaid. The Drag-Along Asset Sale Attorney shall have the
authority, for and on behalf of the Corporation, to receive and
distribute the proceeds of the Drag-Along Asset Sale in accordance
with the Articles of Amendment, and the Corporation and each of the
Shareholders hereby ratify and confirm all that the Drag-Along Asset
Sale Attorney may do or cause or done pursuant to the foregoing.
(g) In the event that a Drag-Along Offer is made in connection with a
Third Party Offer and the Shares held by the Accepting Shareholders
and the Forced Shareholders constitute less than all of the Shares
of the Corporation, the Corporation agrees to take all steps
necessary to facilitate the Third Party's compulsory acquisition
pursuant to Part XVII of the CBCA of all Shares of the Corporation
not already purchased by the Third Party.
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6.5 Valuation of Non-Cash Consideration
Any valuation of non-cash consideration included in a Third Party Offer
will be, in the case of: (i) Marketable Securities, calculated based on the
weighted average closing price of those securities on the exchange or market on
which the securities are primarily traded for the twenty trading days ended at
the close of business on the day prior to delivery of the applicable notice, and
(ii) other non-cash consideration, the fair market value thereof as determined
in good faith by the Board of Directors, provided, that, if any Shareholder
objects to any such determination within ten (10) days of receiving notice
thereof, such fair market value will be determined by an independent investment
banking or business valuation firm mutually agreeable to the Board of Directors
and an Investors Majority (the costs of which shall be borne by the
Corporation).
6.6 Zarlink Put Rights
(a) Subject to Section 6.10, if, on or prior to September 1, 2006 (the
"2006 Put Date"), the Corporation has not completed an Initial
Public Offering, Zarlink shall have the right, exercisable for a
period of ninety (90) days after the 2006 Put Date (the "Zarlink Put
Period"), but not the obligation, to send a notice (the "Zarlink Put
Notice") to the Corporation requiring the Corporation to purchase
all or any portion of the 10,000,000 Common Shares (subject to
appropriate adjustment for share dividends, share splits, capital
reorganization, combinations and the like) (the "Zarlink Purchased
Securities") held on the date of this Agreement by Zarlink, upon and
subject to the terms and conditions set out in this Section 6.6.
(b) The purchase price for the Zarlink Purchased Securities shall be
$2.85 per Common Share (subject to appropriate adjustment for share
dividends, share splits, capital reorganization, combinations and
the like) payable in full in cash or by certified cheque without
withholding, deduction or set-off in any manner whatsoever (other
than any withholding required or expressly permitted by applicable
tax law).
(c) Subject to Section 6.10, the transaction of purchase and sale in
respect of the Zarlink Purchased Securities shall take place as soon
as reasonably practicable but in no event later than ninety (90)
days after the delivery of the Zarlink Put Notice.
(d) If Zarlink fails to deliver a Zarlink Put Notice within the Zarlink
Put Period, its rights pursuant to this Section 6.6 shall terminate
and be of no further force or effect.
6.7 PTIC Put Right
(a) Subject to Section 6.10, if, on or prior to the 2006 Put Date, the
Corporation has not completed an Initial Public Offering, PTIC shall
have the right, exercisable for a period of ninety (90) days after
the 2006 Put Date (the "PTIC Put Period"), but not the obligation,
to send a notice (the "PTIC Put Notice") to the Corporation
requiring the Corporation to purchase all or any portion of the
16,000,000 Series
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B Shares (subject to appropriate adjustment for share dividends,
share splits, capital reorganizations, combinations or the like)
held on the date of this Agreement by PTIC, or the Common Shares
issued on the conversion thereof (the "PTIC Purchased Securities"),
upon and subject to the terms and conditions set out in this Section
6.7.
(b) The purchase price for each of the PTIC Purchased Securities shall
be:
(i) for each Series B Share comprised in the PTIC Purchased
Securities, $1.00 (subject to appropriate adjustment for share
dividends, share splits, capital reorganizations, combinations
and the like);
(ii) for each Common Share comprised in the PTIC Purchased
Securities that has been issued on the conversion of a Series
B Share, a price per Common Share equal to $1.00 divided by
the number of Common Shares issued upon the conversion of such
Series B Share (all subject to appropriate adjustment for
share dividends, share splits, capital reorganizations,
combinations and the like); and
(iii) an amount equal to interest on the aggregate amount payable
pursuant to clause (i) and (ii) above accrued at a rate of 7%
per annum commencing on August 31, 2001 until the date of
delivery to the Corporation of the PTIC Put Notice and
compounded semi-annually.
In no event shall the aggregate amount payable to PTIC pursuant to
clause (i) and (ii) above for all of the Shares issued or issuable
to PTIC on the date hereof exceed $16,000,000. The purchase price
for the PTIC Purchased Securities shall be payable in full in cash
or by certified cheque without withholding, deduction or set-off in
any manner whatsoever (other than any withholding required or
expressly permitted by applicable tax law).
(c) Subject to Section 6.10, the transaction of purchase and sale in
respect of the PTIC Purchased Securities shall take place as soon as
reasonably practicable but in no event later than ninety (90) days
after the delivery of the PTIC Put Notice.
(d) If PTIC fails to deliver a PTIC Put Notice within the PTIC Put
Period, its rights pursuant to this Section 6.7 shall terminate and
be of no further force or effect.
6.8 EdgeStone Preferential Put Right
(a) Upon the occurrence of an EdgeStone Put Event, EdgeStone shall have
the right, but not the obligation, exercisable at any time and from
time to time after the EdgeStone Put Event but in no event later
than ninety (90) days after the earlier of (i) the delivery of the
PTIC Put Notice; and (ii) the delivery of the Zarlink Put Notice by
sending a notice to the Corporation (the "EdgeStone Preferential Put
Notice"), to require the Corporation to purchase all but not less
than all of the Series A Shares then held by EdgeStone or any other
Person referred to in Section
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5.10 (the "EdgeStone Preferential Purchased Securities"), upon and
subject to the terms and conditions set out in this Section 6.8.
(b) The purchase price for the EdgeStone Preferential Purchased
Securities shall be the sum of: (a.) $1.00 per share (subject to
appropriate adjustment for share dividends, share splits, capital
reorganizations, combinations and the like) plus an amount equal to
the amount of any dividends declared but unpaid on such shares,
which aggregate amount shall be payable in cash or by certified
cheque; plus (b.) the issuance of that number of fully-paid and
non-assessable Common Shares equal to the number of Common Shares
(other than Additional Common Shares) then issuable on the
conversion of the EdgeStone Preferential Purchased Securities. The
purchase price shall be paid in full without withholding, deduction
or set-off in any manner whatsoever (other than any withholding
required or expressly permitted by applicable tax law).
(c) The transaction of purchase and sale in respect of the EdgeStone
Preferential Purchased Securities shall take place as soon as
reasonably practicable but in any event no event later than ninety
(90) days after the date of delivery to the Corporation of the
EdgeStone Preferential Put Notice (the "Preferential Put Outside
Date"). To the extent that any cash portion of the purchase price is
not fully paid on or before the Preferential Put Outside Date, the
Corporation shall pay interest on such portion of the unpaid
purchase price from the Preferential Put Outside Date to the date of
payment in full of the purchase price at a rate equal to the Prime
Rate in effect on the Preferential Put Outside Date, calculated but
not compounded daily.
(d) Notwithstanding any other term or provision of this Section 6.8, the
put rights under this Section 6.8 shall only apply with respect to:
(i) Series A Shares issued on the Closing; (ii) Series A Shares
issued pursuant to the EdgeStone Purchase Option; and (iii) any
Series A Shares issued as result of any share dividends, share
splits, capital reorganizations, combinations or the like affecting
the shares referred to in clause (i) or (ii) above.
6.9 EdgeStone Common Put Rights
(a) Following the purchase of the EdgeStone Preferential Purchased
Securities contemplated by Section 6.8 hereof, then at any time
after the first to occur of a Partial Sale Event or the Redemption
Trigger Date, EdgeStone shall have the right, but not the
obligation, exercisable at any time and from time to time within
ninety (90) days after EdgeStone receives notice in writing of the
happening of such event by sending a notice to the Corporation (the
"EdgeStone Common Put Notice"), to require the Corporation to
purchase all or any portion of the Common Shares or Convertible
Securities then held by EdgeStone or any other Person referred to in
Section 5.10 (the "EdgeStone Common Purchased Securities"), upon and
subject to the terms and conditions set out in this Section 6.9.
With respect to each exercise of its rights in this Section 6.9, the
date on which EdgeStone delivers an EdgeStone Common Put Notice to
the Corporation in
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connection with such exercise is referred to herein as the
"EdgeStone Valuation Date".
(b) The purchase price for the EdgeStone Common Purchased Securities
shall be:
(i) for each Common Share, the Fair Market Value of such Common
Share on the applicable EdgeStone Valuation Date, as
determined in accordance with Appendix 3; and
(ii) for each Convertible Security, (A.) the Fair Market Value of
the Common Shares underlying such Convertible Securities on
the EdgeStone Valuation Date, as determined in accordance with
Appendix 3, less (B.) any amount payable by the holder on the
exercise or conversion of such Convertible Securities.
The purchase price shall be paid in full in cash or by certified
cheque without withholding, deduction or set-off in any manner
whatsoever (other than any withholding required or expressly
permitted by applicable tax law).
(c) The transaction of purchase and sale in respect of the EdgeStone
Common Purchased Securities shall take place as soon as reasonably
practicable but in no event later than ninety (90) days after the
applicable EdgeStone Valuation Date (the "Common Put Outside Date").
To the extent that any cash portion of the purchase price is not
fully paid on or before the Common Put Outside Date, the Corporation
shall pay interest on such portion of the unpaid purchase price from
the Common Put Outside Date to the date of payment in full of the
purchase price at a rate equal to the Prime Rate in effect on the
Common Put Outside Date, calculated daily but not compounded.
(d) EdgeStone's exercise of the put rights pursuant to this Section 6.9,
or its failure to deliver an EdgeStone Common Put Notice in any
instance, does not limit any subsequent exercise of, or otherwise
derogate from, EdgeStone's put rights pursuant this Section 6.9.
(e) Notwithstanding any other term or provision of this Section 6.9, the
put rights under this Section 6.9 shall only apply with respect to:
(i) Common Shares issued on the conversion of the Series A Shares
issued on the Closing; (ii) Common Shares issued on the conversion
of the Series A Shares issued pursuant to the EdgeStone Purchase
Option; (iii) the EdgeStone Warrants and any Common Shares issued on
the exercise thereof; and (iv) any Common Shares issued as result of
any share dividends, share splits, capital reorganization,
combinations or the like affecting the shares referred to in clause
(i), (ii) or (iii) above.
6.10 Priorities as between Zarlink, PTIC and EdgeStone
Any Put Notice delivered to the Corporation by Zarlink, PTIC or EdgeStone
(the "Putting Shareholders") shall be delivered concurrently to each of the
other Putting Shareholder(s) who, at the applicable time, has an exercisable put
right pursuant to Section 6.6,
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6.7 or 6.8 of this Agreement (the "Other Putting Shareholders"). The twenty (20)
Business Day period commencing on the date the first Putting Shareholder
delivers its Put Notice (the "First Put Notice") to the Other Putting
Shareholders is referred to herein as the "Standstill Period". The following
priorities shall apply to the repurchase of securities, and payment by the
Corporation of any amounts in respect thereof, pursuant to the First Put Notice
and any Put Notice delivered during the Standstill Period:
(a) in priority to any repurchase by the Corporation of the Zarlink
Purchased Securities or the PTIC Purchased Securities, or any
payment to Zarlink pursuant to Section 6.6 or PTIC pursuant to
Section 6.7 in respect thereof in the event that EdgeStone has
delivered the EdgeStone Preferential Put Notice: (i) the Corporation
shall repurchase all of the EdgeStone Preferential Purchased
Securities, and pay the purchase price therefor to the holders
thereof, all in accordance with the provisions of Section 6.8; and
(ii) the Corporation shall pay any and all taxes properly payable by
the Corporation in respect of the repurchase of such EdgeStone
Preferential Purchased Securities; and
(b) as soon as reasonably practicable after payment of the amounts
required to paid pursuant to clause (a) above (but in any event no
later than thirty (30) days after the payment of such amounts): (i)
the Zarlink Purchased Securities (in the event that Zarlink has
delivered the Zarlink Put Notice) and the PTIC Purchased Securities
(in the event that PTIC has delivered the PTIC Put Notice) shall be
repurchased, and the purchase price thereof shall be paid, pro rata
on a pari passu basis as between Zarlink and PTIC in accordance with
the provisions of Section 6.6 and 6.7, respectively; and (ii) the
Corporation shall pay any and all taxes properly payable by the
Corporation in respect of the repurchase of the Zarlink Purchased
Securities and/or the PTIC Purchased Securities.
After expiry of the Standstill Period, any Shares put to the Corporation
pursuant to Section 6.6, 6.7 or 6.8 shall be purchased by the Corporation in the
order in which the Put Notices in respect thereof are delivered to the
Corporation.
6.11 Incorporation of Newco
In the event that the put rights contemplated by Section 6.6, Section 6.7,
Section 6.8 or Section 6.9 are exercised by one or more of Zarlink, PTIC and
EdgeStone, respectively, the Corporation shall have the right to satisfy its
obligations to pay the purchase price under such put rights by arranging for a
third party ("Newco"), which may be a sister corporation of the Corporation, to
pay the purchase price for the Zarlink Purchased Securities, the PTIC Purchased
Securities or the EdgeStone Preferential Purchased Securities, as the case may
be. Upon payment by Newco of the purchase price for the Zarlink Purchased
Securities, the PTIC Purchased Securities or the EdgeStone Preferential
Purchased Securities, as the case may be, the Corporation shall have no further
obligations to Zarlink under Section 6.6, to PTIC under Section 6.7 or to
EdgeStone under Section 6.8, as the case may be.
In addition, the Corporation and Shareholders agree to negotiate in good
faith to consider alternative structures to satisfy the put rights in a tax
efficient manner.
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6.12 Covenants to Facilitate Put/Redemption
Within 10 days of receipt of an EdgeStone Preferential Put Notice, an
EdgeStone Common Put Notice or a redemption request under the Articles of
Amendment, the Corporation shall notify EdgeStone as to whether or not (i) it
requires external financing or lender or other third party consent to complete
the purchase or redemption of the EdgeStone Preferential Purchased Securities,
the EdgeStone Common Purchased Securities or the Shares in respect of which a
redemption request was sent pursuant to the Articles of Amendment, as applicable
and if it anticipates applicable statutory solvency or liquidity provisions may
restrict the Corporation's ability to implement the purchase or redemption, as
applicable, or (ii) the applicable purchase or redemption price will be fully
satisfied from the Corporation's existing cash or other resources without the
need for any third party consent and without triggering any applicable statutory
solvency restriction. If the Corporation notifies EdgeStone such external
financing or third party consent is required or it anticipates applicable
statutory solvency or liquidity provisions may restrict the Corporation's
ability to implement the purchase or redemption, as applicable (a "Notice of
Required Financing/Consent"), the Corporation shall:
(a) in good faith use its reasonable efforts to diligently obtain such
financing and/or consents on a timely basis;
(b) use reasonable efforts to take such actions as may be necessary to
ensure no statutory solvency restrictions will apply to restrict the
purchase or redemption;
(c) if appropriate, retain an investment bankers or others to assist
with any required financing; and
(d) provided that EdgeStone is then a Shareholder, keep EdgeStone and
all other parties regularly informed on its progress in obtaining
such financing and/or third party consent including meeting with
representatives of EdgeStone or the other Parties to this Agreement
if requested to do so.
ARTICLE 7
EXIT RIGHT
7.1 Exit Right
(a) In the event that:
(i) EdgeStone has exercised its rights under Section 6.9 and,
giving effect to such exercise, EdgeStone would cease to hold
any Shares or Convertible Securities (other than EdgeStone
Warrants), if the Corporation has not paid to EdgeStone in
full the purchase price for the EdgeStone Common Purchased
Securities as contemplated in Section 6.9 within: (x) 90 days
following the EdgeStone Valuation Date; or (y) if the
Corporation has given a Notice of Required Financing/Consent,
150 days following the EdgeStone Valuation Date; or
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(ii) on the occurrence of an event triggering a redemption right
under the Articles of Amendment, EdgeStone elects to require
the Corporation to redeem all of its Series A Shares, if the
Corporation has not paid to EdgeStone the amounts required to
be paid upon such event as set out in the Articles of
Amendment within: (x) 90 days, or (y) if the Corporation has
given a Notice of Required Financing/Consent, 150 days
following after receipt by the Corporation of the request for
redemption,
then, provided that the Redemption Trigger Date has passed and
provided that EdgeStone has not ceased to be a Shareholder,
EdgeStone shall be entitled, at any time thereafter and in its sole
discretion, to give written notice (an "Exit Notice") to the
Corporation and each of the Shareholders stating that EdgeStone
wishes to cause a Sale Transaction to occur.
(b) Upon delivery of an Exit Notice by EdgeStone to the Corporation and
the Shareholders:
(i) the Corporation and Shareholders will cooperate as necessary
or reasonably desirable on a timely basis to seek bona fide
offers from third parties on such terms as EdgeStone may
specify for the completion of the Sale Transaction;
(ii) EdgeStone shall have the full power and authority to effect a
Sale Transaction including seeking the advice of, canvassing
and/or retaining (at the expense of the Corporation) one or
more investment dealers in connection with providing advice
generally as to how best to achieve a Sale Transaction; and
(iii) EdgeStone shall also have the power and authority to solicit
offers for a Sale Transaction which it determines in its sole
discretion to be acceptable.
(c) Upon receipt by the Corporation or EdgeStone of any offer in respect
of a Sale Transaction acceptable to EdgeStone from a Person at arm's
length to EdgeStone (an "Offer"), the Corporation will provide a
copy of the Offer to EdgeStone and the other Shareholders, or, if
the Offer is received by EdgeStone, EdgeStone shall provide a copy
to the Corporation and the other Shareholders. If the Offer is
delivered to the Corporation, EdgeStone shall have a period of 30
days from receipt of the Offer to indicate whether or not it
approves of the Offer by providing written notice to the Corporation
and the other Shareholders.
(d) If EdgeStone approves an Offer, the Corporation and each of the
Shareholders agree to take all actions necessary to effect the sale
of the Corporation pursuant to the Offer and to immediately cause
the liquidation and distribution of any resulting proceeds to the
Shareholders in accordance with its articles and by-laws or pursuant
to the Offer, including giving effect to the value of the
liquidation preference contained in the share conditions relating to
the Series A Shares and Series B Shares, and all applicable laws.
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(e) Each Shareholder other than EdgeStone hereby constitutes and
appoints EdgeStone, on the terms set forth in Section 11.2, with
full power of substitution, as the attorney for such Shareholder and
in such Shareholder's name, place and stead and for such
Shareholder's use and benefit, to sign, execute, certify,
acknowledge, swear to, file, deliver and record any and all
agreements, certificates, instruments and other documents which
EdgeStone may deem necessary, desirable, or appropriate for the
purposes of effecting the rights conferred by this Article 7 other
than those relating to tax as the same may be amended, modified or
supplemented from time to time provided that the representations,
warranties and indemnities given by such Shareholder shall be
limited to typical title, ownership and authority to sell
representations.
(f) Each of the Shareholders hereby waives any and all claims such
Shareholder may have against any of the other Shareholders (and any
of their Affiliates and their respective partners, members,
directors, officers, employees, representatives or agents), or
against any member of the Board of Directors of the Corporation,
that such Shareholder or director of the Corporation has acted
improperly or breached any duty owed to such Shareholder, to any
other Shareholder of the Corporation, or to the Corporation or
otherwise, by virtue of (A) such other Shareholder voting its Shares
to approve any transaction contemplated by this Article 7 or to
elect a Board of Directors of the Corporation reasonably believed by
such other Shareholder to be in favour of such transaction or (B)
such director voting to approve or otherwise consenting to such
transaction.
(g) As used in this Article 7, a "Sale Transaction" shall mean: (i) a
merger, amalgamation, consolidation or other business combination or
refinancing of the Corporation or any Subsidiary; (ii) a sale or
other disposition of all, or substantially all of the capital stock
of the Corporation or any Subsidiary; (iii) a sale, lease, exchange,
Transfer or other disposition (including, without limitation, by
merger, consolidation or otherwise) of all or substantially all of
the assets of the Corporation or any Subsidiary; (iv) a public
offering under applicable securities legislation (whether or not an
Initial Public Offering); (vi) a share buy-back or a
recapitalization of the Corporation; or (v) any other transaction
that EdgeStone deems advisable in order to maximize shareholder
value; provided that, in no event, shall a Collateral Benefit be
obtained by holders of Series A Shares.
The provisions of this Article 7 will continue to apply until an Offer is
approved by EdgeStone and a transaction in respect thereof is completed or the
amount due to EdgeStone is paid.
7.2 Corporation and Other Shareholders to Facilitate Exit
The Corporation shall facilitate any Sale Transaction pursuant hereto on a
timely basis, including, subject to the provisions of Section 10.1, promptly
setting up and maintaining a comprehensive data room, providing access to such
employees, customers and suppliers as any potential purchaser, underwriter or
agent may reasonably request, preparing and amending comprehensive and
appropriate disclosure documents on a timely basis, providing any necessary
consents and approvals, executing and delivering a purchase and sale agreement,
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transition services agreement and other documentation required by the purchaser
on a commercially reasonable basis, including typical representations,
warranties and covenants in the context of the Offer. The Shareholders shall act
to facilitate any Sale Transaction pursuant hereto on a timely basis, including
by providing any necessary consents or approvals, executing and delivering a
purchase and sale agreement and other documentation required by the intended
purchaser on a commercially reasonable basis, including, subject to Section
7.1(e), typical representations, warranties and covenants in the context of the
Offer, and voting all Shares held, or which that party is entitled to vote, in
favour of the Offer.
ARTICLE 8
CLOSING PROCEDURES
If a purchase and sale of any Shares and/or securities of the Corporation
is made pursuant to this Agreement, the following shall apply:
8.1 Payment of Purchase Price and Delivery of Certificates
Payments on account of the purchase price shall be made by negotiable
cheque, certified by a Canadian chartered bank or trust company or by wire
transfer of funds to an account of a Canadian chartered bank or by official bank
draft drawn on a Canadian chartered bank against receipt by the purchaser of the
share certificate or certificates representing the Shares or securities being
purchased, duly endorsed for transfer in blank.
8.2 Title
The acceptance by the vendor of payment (including an agreement to pay)
for the Shares and/or securities being purchased and sold shall constitute a
representation and warranty by the vendor that the vendor has good and
marketable title to the Shares and/or securities, free and clear of any Lien
except as contemplated in this Agreement. In addition, the vendor shall deliver
to the purchaser all documents, instruments and do all acts and things as the
purchaser may reasonably request, whether before or after completion of the
transaction, to vest title in the purchaser.
8.3 Failure to Complete Sale
If, at the time of closing, the vendor does not complete the sale for any
reason, other than due to the breach of the purchasing party, the purchaser
shall have the right to deposit (including by post-dated cheque) the purchase
price for the Shares to be purchased and sold for the account of the vendor in
an account with the bankers of the Corporation and that deposit shall constitute
valid and effective payment of the purchase price to the vendor. Thereafter, the
purchaser shall have the right to execute and deliver any deeds, stock
transfers, assignments, releases and other documents as may, in the reasonable
opinion of the purchaser, be necessary or desirable to complete the transaction.
If payment of the purchase price is so deposited, then from and after the date
of deposit, notwithstanding that certificates or instruments evidencing the
Shares and/or securities may not have been delivered to the purchaser:
(a) the purchase shall be deemed to have been fully completed and the
records of the Corporation may be amended accordingly;
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(b) all right, title, benefit and interest, both at law and in equity,
in and to the subject Shares and/or securities shall be conclusively
deemed to have been transferred and assigned to and become vested in
the purchaser; and
(c) all right, title, benefit and interest of the vendor and of any
other Person (other than the purchaser) having any interest in the
subject Shares and/or securities, legal or equitable, in any
capacity whatsoever, shall cease.
8.4 Purchaser Appointed as Attorney
Each Shareholder hereby appoints, on the terms set forth in Section 11.2,
in case the Shareholder is a vendor of Shares and/or securities under this
Agreement who fails to do anything duly required in connection with a sale by
that vendor, each other Shareholder who may from time to time be a purchaser of
any such Shares and/or securities, as the vendor's attorney, with full power of
substitution, in the name of the vendor but on behalf of and at the expense of
the purchaser, to execute and deliver all deeds, transfers, assignments and
assurances necessary to effectively Transfer the interest being sold to the
purchaser or its nominees.
8.5 Taxes
At the time of the sale, the vendor shall provide to the purchaser either:
(a) a statutory declaration that the vendor is not a non-resident of
Canada for purposes of the Income Tax Act (Canada); or
(b) a certificate from Canada Revenue Agency under Section 116 of that
Act with a certificate limit at least equal to the proceeds payable
to such vendor,
provided that if the vendor delivers no declaration or certificate, the
purchaser shall be entitled to deduct from the purchase price payable to the
vendor an amount equal to the amount of tax for which the purchaser may be
liable under the Income Tax Act (Canada) (or any applicable comparable
legislation).
8.6 Deliveries on Closing
If, after completion of the transaction of purchase and sale, the vendor
will not own any Shares or other securities of the Corporation, the vendor shall
deliver or cause its nominees to deliver, at the time of completion of the sale,
a written resignation from all positions on the Board of Directors and from any
offices and employment with the Corporation, as reasonably requested by the
Corporation.
8.7 Governmental Approvals
If any Governmental Approval is required in respect of a purchase of
Shares and/or securities of the Corporation by a Third Party (a "purchaser")
under any provision of this Agreement, then, notwithstanding anything contained
in this Agreement, the time period specified in this Agreement for the closing
of such transaction shall be extended for an additional 30 Business Days to
permit the purchaser to obtain the necessary Governmental Approval. Any such
application for Governmental Approval shall be the sole responsibility of the
purchaser who
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shall also be responsible for all costs and expenses incurred in connection
therewith. The Other Shareholders and the Corporation shall use reasonable
efforts to cooperate with the purchaser in any application for Governmental
Approval and EdgeStone shall be provided with the opportunity to provide input
into and shall be consulted in respect of any submission made in respect of any
such Governmental Approval.
ARTICLE 9
SHARE CERTIFICATES
9.1 Restrictive Legends
In addition to any other legend otherwise prescribed by law or contract,
for so long as this Agreement remains in effect, the certificates representing
any shares of capital stock or other securities of the Corporation held by any
Shareholder will bear restrictive legends in substantially the following form:
"The securities represented by this share certificate
are subject to certain restrictions with respect to the
voting and the transfer of such securities set forth in
a Shareholders' Agreement dated as of April 23, 2004 by
and among the issuer of such securities and the
registered holder of this share certificate (or such
holder's predecessor-in-interest) and certain others. A
copy of such Shareholders' Agreement is on file and may
be inspected by the registered holder of this
certificate at the registered office of the issuer."
ARTICLE 10
CONFIDENTIALITY COVENANTS
10.1 Confidentiality
(a) No Party will, at any time or under any circumstances, without the
consent of the Board of Directors, directly or indirectly
communicate or disclose to any Person (other than the other Parties
and employees, agents, advisors and representatives of such Person
or Parties) or make use of (except in connection with its interest
in the Corporation) any confidential knowledge or information
howsoever acquired by such Party relating to or concerning the
customers, products, technology, trade secrets, systems or
operations, or other confidential information regarding the
property, business and affairs, of the Corporation, except:
(i) information that is or becomes generally available to the
public (other than by disclosure by such Party or its
employees, agents, advisors or representatives contrary to
this Section);
(ii) information that is reasonably required to be disclosed by a
Party to protect its interests in connection with any
valuation or legal proceeding under this Agreement;
(iii) information that is required to be disclosed by law or by the
applicable regulations or policies of any regulatory agency of
competent jurisdiction or any stock exchange; or
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(iv) by a Shareholder, in connection with a proposed Transfer of
its Shares and/or Convertible Securities in the Corporation,
but only if such Shareholder obtains a prior written covenant
of confidentiality in form acceptable to the Corporation,
acting reasonably, from the Person to whom it proposes to
disclose such information.
(b) Notwithstanding Section 10.1(a), EdgeStone and any member of the
EdgeStone Group may:
(i) disclose confidential information to members of the EdgeStone
Group provided such members have agreed to be subject to
certain confidentiality provisions as contemplated in the
constating documents of EdgeStone Capital Equity Fund II-A,
L.P.;
(ii) disclose confidential information to EdgeStone's advisory
committee or investment committee;
(iii) report confidential information regarding EdgeStone's
investment in the Corporation, regarding the Corporation's
financial statements, other financial information regarding
the Corporation that the Corporation has provided to
non-shareholder parties, that EdgeStone is otherwise required
to report to members of the EdgeStone Group in connection with
its investment in the Corporation and as otherwise agreed
between the Corporation and EdgeStone (save and except where
such use or disclosure would have a Material Adverse Effect on
the Business of the Corporation);
(iv) in connection with its right to sell Shares in accordance with
the provisions of this Agreement or otherwise effect a
transaction as contemplated in Article 7, to disclose
confidential information to the potential purchaser in respect
of such proposed sale or transaction, provided the potential
purchaser agrees to be bound by the confidentiality
obligations set out in this Section 10.1, as well as a
covenant of the potential purchaser not to use or allow the
use for any purpose of the confidential information or notes,
summaries or other material derived from the review of the
confidential information, except to determine whether to
purchase Shares from EdgeStone or otherwise acquire the
Corporation; and
(v) any nominee of EdgeStone on the Board of Directors or any
Observer may discuss the Business of the Corporation and any
Subsidiary, including confidential information, with the
investment committee, officers, directors, partners, employees
and advisors of EdgeStone and its Affiliates.
(c) Each of the Parties acknowledges that disclosure of any confidential
information regarding the Corporation in contravention of this
Section may cause significant harm to the Corporation and the
Subsidiaries and that remedies at law may be
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inadequate to protect against a breach of this Section. Accordingly,
each of the Parties acknowledges that the Corporation is entitled,
in addition to any other relief available to it, to the granting of
injunctive relief without proof of actual damages or the requirement
to establish the inadequacy of any of the other remedies available
to it. Each of the Parties covenants not to assert any defence in
proceedings regarding the granting of an injunction or specific
performance based on the availability to the Corporation of any
other remedy.
10.2 Acknowledgement
The covenants contained in Section 10.1 are given by the Shareholders
(each, a "Covenantor") acknowledging that each of them has specific knowledge of
the affairs of the Corporation and the Subsidiaries and that the other
Shareholders would not have entered into or permitted the Corporation to enter
into the transactions contemplated in this Agreement or in the Other Agreements
without the Covenantors having provided such covenants.
10.3 Reasonable Obligations not Exhaustive
Each Shareholder acknowledges that the obligations contained in this
Article 10 are not in substitution for any obligations which the Shareholder may
now or hereafter owe to the Corporation, any of the Subsidiaries or any other
Shareholder and which exists apart from this Article and do not replace any
rights of the Corporation, any of the Subsidiaries or any Shareholder with
respect to any such obligation.
Each of the Shareholders hereby agrees that, without in any way derogating
from any other covenants provided by him, all the restrictions in this Article
10 are reasonable and valid and all defences to the strict enforcement thereof
by the Corporation and/or the other Shareholders are hereby waived.
10.4 Survival
Notwithstanding any other term or provision hereof (including, without
limitation, Section 11.3), the provisions of this Article 10 shall survive the
termination of this Agreement.
ARTICLE 11
GENERAL
11.1 All Securities Subject to Agreement
Each of the Shareholders agrees that it shall be bound by the terms of
this Agreement with respect to all Shares and securities in the capital of the
Corporation held by it from time to time.
11.2 Terms of Power of Attorney
If any Shareholder is deemed to appoint an attorney pursuant to Section
6.4(d), 6.4(f), 7.1(e) or 8.4 of this Agreement, such appointment, being coupled
with an interest, is irrevocable by the Shareholder and shall not be revoked by
the insolvency or bankruptcy of the Shareholder. Any such Shareholder hereby
authorizes its attorney appointed pursuant to Section 6.4(d), 6.4(f),
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7.1(e) or 8.4 to take any action necessary or advisable in connection with
Section 6.4(d), 6.4(f), 7.1(e) or 8.4, respectively, hereby giving such attorney
full power and authority to do and perform each and every act or thing
whatsoever required or advisable to be done in connection with the foregoing as
fully as such Shareholder might or could do so personally, and hereby ratifying
and confirming all that such attorney shall lawfully do or cause to be done by
virtue thereof. Any such power of attorney is not intended to be a continuing
power of attorney within the meaning of and governed by the Substitute Decisions
Act (Ontario), or any similar power of attorney under equivalent legislation in
any of the provinces or territories of Canada (a "CPOA"). The execution of this
Agreement shall not terminate any CPOA granted by a Shareholder previously and
any such power of attorney shall not be terminated by the execution by a
Shareholder in the future of a CPOA, and each Shareholder hereby agrees not to
take any action that results in the termination of any such power of attorney.
11.3 Term
Except as otherwise expressly provided in this Agreement, this Agreement
shall come into force and effect as of the date of this Agreement and shall
continue in force in accordance with the terms hereof. Subject to Section 11.4,
this Agreement shall terminate upon: (i) the completion of an Initial Public
Offering; or (ii) the written agreement of all of the Parties hereto; provided
that, except as contemplated by Section 5.10, the rights of a Shareholder under
this Agreement shall cease earlier on that date as of which such Shareholder
ceases to own any Shares or securities in the capital of the Corporation.
11.4 Termination Not to Effect Rights or Obligations
A termination of this Agreement or any provision of this Agreement shall
not affect or prejudice any rights or obligations which have accrued or arisen
under this Agreement prior to the time of termination, and such rights and
obligations shall survive the termination of this Agreement.
11.5 Time of the Essence
Time shall be of the essence of this Agreement and of every part hereof,
and no extension or variation of this Agreement shall operate as a waiver of
this provision.
11.6 Further Assurances
Each of the Shareholders covenants and agrees to vote (or cause to be
voted) its Shares in the capital of the Corporation, and to take all other
necessary or desirable action within its control and to the extent permitted by
law so as to give full effect to the provisions of this Agreement; provided that
no Shareholder shall be obligated to waive any of its rights hereunder or in
respect of its Shares or agree to any reduction in the stated capital of its
Shares.
11.7 Arbitration
Subject to Section 11.13, all disputes arising out of or in connection
with this Agreement, or in respect of any legal relationship associated with or
derived from this Agreement, shall be arbitrated and finally resolved pursuant
to the Arbitration Act, 1991 (Ontario). Such arbitration
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shall be conducted by a single arbitrator. The arbitrator shall be appointed by
agreement between the parties or, failing agreement, such arbitrator shall be
appointed in accordance with Section 10 of the Arbitration Act, 1991 (Ontario).
The place of arbitration shall be the City of Ottawa in the Province of Ontario
unless the dispute involves EdgeStone, in which circumstance it may elect as
part of the process of selecting the arbitrator that the place of arbitration
shall be the City of Toronto in the Province of Ontario. The language of the
arbitration shall be English. Any notice or other document, including a notice
commencing arbitration, may be served by sending it to the addressee by
facsimile in accordance with Section 11.8 hereof. The decision arrived at by the
arbitrator, howsoever constituted, shall be final and binding and no appeal
shall lie therefrom.
11.8 Notices
All notices, requests, payments, instructions or other documents to be
given hereunder will be in writing or by written telecommunication, and will be
deemed to have been duly given if (i) delivered personally (effective upon
delivery), (ii) mailed by certified mail, return receipt requested, postage
prepaid (effective five Business Days after dispatch), (iii) sent by a
reputable, established courier service that guarantees next Business Day
delivery (effective the next Business Day), or sent by air mail or by commercial
express overseas air courier, with receipt acknowledged in writing by the
recipient (effective upon the date of such acknowledgement), or (iv) sent by
telecopier followed within 24 hours by confirmation by one of the foregoing
methods (effective upon receipt of the telecopy in complete, readable form),
addressed as follows (or to such other address as the recipient party may have
furnished to the sending party for the purpose pursuant to this Section 11.8):
if to the Corporation to:
Mitel Networks Corporation
000 Xxxxxx Xxxxx
Xxxxxx, XX
X0X 0X0
Attention: Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
Mitel Networks Corporation
000 Xxxxxx Xxxxx
Xxxxxx, XX
X0X 0X0
Attention: Chief Financial Officer, and VP Finance
Fax: (000) 000-0000
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And with a copy to:
Mitel Networks Corporation
000 Xxxxxx Xxxxx
Xxxxxx, XX
X0X 0X0
Attention: Corporate Legal Counsel
Fax: (000) 000-0000
And with a copy to:
Osler, Xxxxxx & Xxxxxxxx XXX
Xxxxx 0000
00 X'Xxxxxx Xxxxxx
Xxxxxx, XX
X0X 0X0
Attention: J. Xxxxx Xxxxxx
Fax: (000) 000-0000
if to EdgeStone:
EdgeStone Capital Equity Fund II Nominee, Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx
Fax: (000) 000-0000
Fax: (000) 000-0000
if to Zarlink:
Zarlink Semiconductor Inc.
000 Xxxxxx Xxxxx
X.X. Xxx 00000
Xxxxxx, Xxxxxxx X0X 0X0
Attention: Mr. Xxx XxXxxxxx
Fax: (000) 000-0000
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if to Systems, Knowledge, WCC or Xxxxxxxx:
c/o Xxxxxx Xxxxxx International Corporation
000 Xxxxxxx Xxxxx
Xxxxx X, Xxxxx 000
Xxxxxx, Xxxxxxx X0X 0X0
Attn: Dr. T.H. Xxxxxxxx and Xxxx Xxxxxxxx
Fax: (000) 000-0000
if to PTIC:
Power Technology Investment Corporation
751, Square Victoria
Xxxxxxxx, Xxxxxx X0X 0X0
Attn: Mr. Xxxxx Xxxxx
Fax: (000) 000-0000
11.9 Waivers, Amendments
Except as otherwise expressly provided in this Agreement, (i) no amendment
or waiver of this Agreement shall be binding unless executed in writing by the
Party to be bound thereby, and (ii) no waiver of any provision of this Agreement
shall constitute or be deemed to constitute a waiver of any other provision nor
shall any such waiver constitute a continuing waiver; provided, however, that
any amendment or waiver of this Agreement or any provision thereof shall be
binding on all Parties, and each Party shall sign an instrument evidencing same,
if such amendment or waiver has been consented to in writing (whether signed in
one or more counterparts) by the Corporation and holders of not less than
sixty-six and two-thirds percent (66 2/3%) of the outstanding Shares which are
subject to this Agreement (on an as-if converted to Common Shares basis), which
holders must:
(a) in all circumstances include EdgeStone;
(b) in the event of an amendment or waiver affecting Section 6.6 or 6.10
include Zarlink;
(c) in the event of an amendment or waiver affecting Section 6.7 or 6.10
include PTIC; and
(d) in the event of an amendment or waiver affecting any Shareholder in
a manner that is materially and adversely different from the manner
in which such amendment or waiver affects the other Shareholders,
include the Shareholder who is differently affected.
11.10 Counterparts
This agreement may be executed in several counterparts, each of which so
executed shall be deemed to be an original and such counterparts together shall
be but one and the same instrument. Each Party agrees that the delivery of this
Agreement by facsimile shall have the same force and effect as delivery of
original signatures.
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11.11 Successors and Assigns
Except as provided in Section 5.10 or as otherwise specifically permitted
herein, neither this Agreement nor any of the rights of any of the Shareholders
may be assigned without the prior written consent of the other parties to this
Agreement. Except as otherwise provided herein, this Agreement shall enure to
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, other personal representatives, successors and
permitted assigns and transferees of Shares or Convertible Securities.
11.12 Application of this Agreement
The terms of this Agreement shall apply mutatis mutandis to any securities
of the Corporation resulting from the conversion, reclassification,
redesignation, subdivision or consolidation or other change of the Shares.
11.13 Equitable Relief
Each of the parties acknowledges that any breach by such Party of his,
her, or its obligations under this Agreement would cause substantial and
irreparable damage to one or more of the other parties and that money damages
would be an inadequate remedy therefor. Accordingly, each Party agrees that the
other parties or any of them will be entitled to an injunction, specific
performance, and/or other equitable relief to prevent the breach of such
obligations.
The rest of this page is intentionally left blank.
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IN WITNESS WHEREOF, each of the parties has executed this Shareholders Agreement
on and as of the date first above written.
MITEL NETWORKS CORPORATION
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
Title: CFO
MITEL SYSTEMS CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxx
Title: Officer
MITEL KNOWLEDGE CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxx
Title: Officer
EDGESTONE CAPITAL EQUITY FUND II-B GP,
INC., as agent for EdgeStone Capital
Equity Fund II-A, L.P. and its
parallel investors
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Officer
EDGESTONE CAPITAL EQUITY FUND II
NOMINEE, INC., as nominee for EdgeStone
Capital Equity Fund II-A, L.P. and its
parallel investors
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Officer
ZARLINK SEMICONDUCTOR INC.
By: /s/ Xxxxxx XxXxxxxx
-----------------------------------
Name: Xxxxxx XxXxxxxx
Title: Sr. VP & General Counsel
POWER TECHNOLOGY INVESTMENT CORPORATION
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Executive Vice President
Finance
XXXXXX XXXXXX CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------
Name: Xxxx Xxxxxxxx
Title: Officer
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
/s/ X. Xxxxxxx ) /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------- ) ----------------------------------
X. Xxxxxxx ) Xx. Xxxxxxx X. Xxxxxxxx
APPENDIX 1
DEFINITIONS
"2006 Put Date" has the meaning set forth in Section 6.6(a);
"Acceptance Notice" has the meaning set out in Section 6.2(b);
"Acceptance Period" has the meaning set out in Section 6.1;
"Accepting Shareholders" has the meaning set out in Section 6.4;
"Act" means the Canada Business Corporations Act;
"Additional Common Shares" has the meaning set forth in the Articles of
Amendment;
"Additional Investment" means the issue and sale by the Corporation of: (i) up
to five million (5,000,000) additional Series A Shares at a price per Series A
Share of not less than $1.00 and otherwise on terms no more favourable and
within the time frame contemplated in the Subscription Agreement; and (ii) any
Series A Shares issuable to EdgeStone on account of the exercise of the
EdgeStone Purchase Option;
"Affiliate" of a Person means any Person that would be deemed to be an
"affiliated entity" of such first-mentioned Person under Rule 45-501 promulgated
under the Securities Act (Ontario) as it exists on the date of this Agreement;
"Annual Budget" means the annual budget and business plan of the Corporation,
including a detailed operating budget and a capital budget and the sources of
financing thereof, with detailed supporting assumptions;
"arm's length" has the meaning ascribed to such term for the purposes of the
Income Tax Act (Canada);
"Articles of Amendment" means the articles of amendment of the Corporation
creating the Preferred Shares attached as Schedule B hereto;
"as-if converted to Common Shares basis" means, at any time and from time to
time, assuming the conversion or exchange of all outstanding Preferred Shares
and all other securities of the Corporation convertible or exchangeable into
Common Shares which are fully-vested and exercisable, convertible or
exchangeable on the date of the calculation at the respective Conversion Rate or
conversion prices or exchange rates, as the case may be, applicable at such time
including, without limitation, the exercise of the EdgeStone Warrants which are
exercisable on the date of the calculation for the number of Common Shares
issuable thereunder;
"Associate" has the meaning ascribed thereto in the Act;
"Assumption Agreement" means the assumption agreement substantially in the form
attached hereto as Schedule C;
"Audit Committee" has the meaning set out in Section 2.5;
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"Board of Directors" has the meaning set out in Section 2.1;
"Business" means the business of developing, selling, licensing, distributing,
servicing and maintaining, as applicable, enterprise and customer premises
business communications solutions and services, including advanced voice over
internet protocol, video and data communications platforms, desktop phones,
Internet appliances and client and server software applications and code
(including applications for customer relationship management and mobility,
messaging and multimedia collaboration);
"Business Day" means any day, other than a Saturday or Sunday, on which
chartered banks in Ottawa, Ontario are open for commercial banking business
during normal banking hours;
"Change of Control Event" means:
(a) (A) an amalgamation of the Corporation with other corporation (other
than with a Subsidiary of the Corporation), (B) a statutory
arrangement involving the Corporation or (C) any other transaction
involving the shares of the Corporation, whether by a single
transaction or series of transactions, pursuant to which
(i) any person, together with his or its Affiliates hereafter
acquires the direct or indirect "beneficial ownership" (as
defined in the Act of all of the issued and outstanding shares
in the capital of the Corporation; and
(ii) the nature of the transaction (or series of transactions) is
such that the consideration (whether in the form of cash,
securities or other property) in connection with such
transaction (or series of transactions) would be received by
the shareholders of the Corporation, and not by the
Corporation
provided, however, that the Series A Majority Holders shall have the
right, on behalf of all Series A Holders, to waive the treatment of
any of such event as a "Change of Control Event" (provided that any
such waiver must be in writing signed by the Series A Majority
Holders and shall only be effective as to the particular event in
respect of which the waiver is executed).
"Closing" means the issuance and sale of the Series A Shares by the Corporation
to EdgeStone on the date of this Agreement;
"Collateral Benefit" means any agreement, commitment or understanding with a
Shareholder that has the effect of providing to that Shareholder (or anyone
acting not at arm's length to that Shareholder), directly or indirectly,
consideration of greater value than that offered to other Shareholders,
excluding consideration paid or to be paid to a Shareholder (or anyone not at
arm's length with a Shareholder) for goods and/or services rendered or provided
or to be rendered or provided by that Shareholder (or anyone not at arm's length
with that Shareholder) where the amount of such consideration is not more than
that which would be negotiated between arm's length parties on market terms,
provided, for greater certainty, that the following shall be deemed not to
constitute a Collateral Benefit: (i) any preference pursuant to Section 6.10 of
this Agreement; (ii) any payment of the Series A Liquidation Preference per
Share in favour of the
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holders of the Series A Shares in accordance with the Articles of Amendment;
(iii) any payment of the Series B Liquidation Preference per Share in favour of
the holders of the Series B Shares in accordance with the Articles of Amendment;
and (iv) any management fees, merchant banking commissions or similar fees or
charges paid to EdgeStone for services performed for the Corporation;
"Common Share Offering" means the offering, issuance and sale by the Corporation
of Common Shares for an aggregate purchase price of not more than $10,000,000 on
the terms set forth and within the time frame contemplated in the Subscription
Agreement;
"Common Shares" means the common shares in the capital of the Corporation,
including the common shares currently issued and any common shares that may be
issued after the date hereof;
"Compensation Committee" has the meaning set out in Section 2.5;
"Controlling Shareholder" means any Person who is party to this Agreement and
who Controls a Shareholder (and shall, for greater certainty, includes Xxxxxxxx
as the Controlling Shareholder of the Xxxxxxxx Entities);
"Control" means, with respect to any Person at any time,
(a) holding, as owner or other beneficiary, other than solely as
the beneficiary of an unrealized security interest, directly
or indirectly through one or more intermediaries: (A.) more
than fifty percent (50%) of the voting securities of that
Person; or (B.) securities of that Person carrying votes
sufficient to elect or appoint the majority of individuals who
are responsible for the supervision or management of that
Person; or
(b) the exercise of de facto control of that Person whether direct
or indirect and whether through the ownership of securities,
by contract or trust or otherwise;
and the terms "Controls", "Controlling" and "Controlled" have corresponding
meanings;
"Controlled Shareholder" means any Shareholder that is Controlled by a
Controlling Shareholder who is a party to this Agreement;
"Conversion Value" has the meaning set forth in the Articles of Amendment;
"Convertible Security" means any option, warrant, right or other security, other
than Shares, which entitles the holder to acquire from the issuer thereof
another security or to convert or exercise such security into another security
in the capital of such issuer and includes the EdgeStone Warrants;
"Covenantor" has the meaning set out in Section 10.2;
"Debt Obligations" has the meaning set out in Appendix 2;
"Drag-Along Offer" has the meaning set out in Section 6.4;
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"EdgeStone Group" means:
(a) any Affiliate of EdgeStone;
(b) any other Person, provided that EdgeStone or any Affiliate thereof
has the exclusive right to exercise all rights of EdgeStone
transferred hereunder on behalf of such Person;
(c) any Person whose funds are managed by EdgeStone or an Affiliate of
EdgeStone;
(d) upon the termination or dissolution of any limited partnership or
other entity that is a Person referred to in clause (b), (A) the
beneficial holders of interests in such Person, and (B) any other
Person referred to in clause (b), whether or not, in either case, an
Affiliate described in clause (a) has the exclusive right to
exercise the rights of EdgeStone transferred hereunder on behalf of
such beneficial holder or Persons; and
(e) EdgeStone Capital Equity Fund II-A, L.P. and/or any Person which
agrees to invest with it on a parallel or co-investment basis (and
the respective partners thereof, if any) in the manner contemplated
in the constating documents of EdgeStone Capital Equity Fund II-A,
L.P.
"EdgeStone Liquidation Entitlement" means, in respect of each Share held by a
member of the EdgeStone Group, an amount equal to the sum of:
(a) the Series A Liquidation Preference per Share; and
(b) the Series A Participation Amount per Share;
"EdgeStone Nominee" means a director of the Corporation nominated by EdgeStone
pursuant to Section 2.2;
"EdgeStone Purchase Option" means the option of EdgeStone to purchase Series A
Shares with an aggregate purchase price of up $5,000,000 pursuant to Section 3.2
of the Subscription Agreement;
"EdgeStone Common Purchased Securities" has the meaning set out in Section
6.9(a);
"EdgeStone Preferential Purchased Securities" has the meaning set out in Section
6.8(a);
"EdgeStone Put Event" means the occurrence of:
(a) the delivery by Zarlink to the Corporation of the Zarlink Put
Notice;
(b) the delivery by PTIC to the Corporation of the PTIC Put Notice;
"EdgeStone Common Put Notice" has the meaning set out in Section 6.9(a);
"EdgeStone Preferential Put Notice" has the meaning set out in Section 6.8(a);
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"EdgeStone Valuation Date" has the meaning set out in Section 6.9(a);
"EdgeStone Warrants" means the Series 1 Warrants and Series 2 Warrants to
purchase Common Shares granted by the Corporation to EdgeStone on the date
hereof, and any additional warrants granted on the exercise of the EdgeStone
Purchase Option;
"Exit Notice" has the meaning set out in Section 7.1(a);
"Forced Shareholders" has the meaning set out in Section 6.4(a);
"Governmental Approval" means the consent of any Governmental Body which may be
required at any time and from time to time to ensure that the purchase of all or
any part of the Shares and/or securities of the Corporation held by a
Shareholder is not in contravention of any law, regulation or published policy
of, or administered by, such Governmental Body or which may be required in order
to ensure that, notwithstanding the purchase of such shares of all or any part
of the Shares or securities held by the Shareholders, the holding or continued
holding by the Corporation or any Subsidiary of any franchise, licence, permit
or other permission or authority required to carry on its respective business is
unaffected;
"Governmental Body" means any body of a state or government, any international
body or body assembling several states or provinces, any body, board,
commission, office or other authority, instituted or constituted by a state or a
government, by a law or otherwise, any public or private body, board,
commission, office exercising governmental or quasi-governmental functions or
regulatory or autoregulatory functions on behalf of a state or another
governmental body or otherwise having jurisdiction, as well as any body, office,
commission, board, arbitration or judicial tribunal, quasi-judicial or
administrative tribunal, either national, provincial or governmental, foreign or
international, as well as any court or common law tribunal;
"Initial Public Offering" means the initial public offering of Common Shares or
other securities in the capital of the Corporation or the securities in the
capital of a Successor Corporation or any other transaction, as a result of
which (in either case) the shares of the Corporation or the Successor
Corporation are listed and posted for trading, traded or quoted on one or more
of the Toronto Stock Exchange, the New York Stock Exchange or the NASDAQ
National Market System (provided, that, any filing of a registration statement
or similar instrument with the SEC under the U.S. Exchange Act in fulfillment of
the Corporation's existing obligations as a foreign private issuer shall be
deemed not to constitute an Initial Public Offering for the purposes of this
Agreement);
"Investors Majority" means the holders of not less than fifty percent (50%) of
the Shares held by all of the Shareholders, calculated on an as-if converted to
Common Shares basis, which holders must include EdgeStone;
"Issue Price" has the meaning set forth in Schedule "A" or "B" of the Articles
of Amendment as the context requires;
"Lien" means any and all liens, claims, mortgages, hypothecs, security
interests, charges, encumbrances, and restrictions on transfer of any kind,
except, in the case of references to securities, any of the same arising under
applicable corporate or securities laws solely by reason
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of the fact that such securities were issued pursuant to exemptions from
registration or prospectus requirements under such securities laws or otherwise
arising pursuant to this Agreement or the Registration Rights Agreement;
"Marketable Securities" means equity securities of an issuer which are listed on
an established nationally recognized exchange in Canada or the United States,
which: (i) do not represent in excess of 10% of the relevant issuer's
outstanding securities of the same class or a class into which such securities
are immediately convertible or exchangeable without cost to the holder; (ii)
have a Public Float of at least $150 million; (iii) have had average daily
trading volumes for the 10 trading days prior to distribution of at least
$5,000,000; and (iv) are not subject to any statutory, regulatory, contractual
or other hold period or resale restriction other than a restriction requiring
the filing of a notice only (without requiring any approval);
"Material Adverse Effect" means, with reference to the Corporation or any of the
Subsidiaries, a material adverse effect on the condition (financial or
otherwise), operations, business, assets, or prospects of the Corporation and
the Subsidiaries taken as a whole, other than any such Material Adverse Effect
resulting from industry-wide conditions affecting the industry in which the
Corporation and the Subsidiaries carry on business or conditions affecting the
economy in general;
"Xxxxxxxx Entity" means Systems, Knowledge and WCC so long as it is a
Shareholder and any other Shareholder that is or may be under the Control of
Xxxxxxxx from time to time;
"Xxxxxxxx Group" means
(a) Xx. Xxxxxxx X. Xxxxxxxx, his spouse or former spouse, any lineal
descendant of Xx. Xxxxxxx X. Xxxxxxxx, any spouse or former spouse
of any such lineal descendant, and their respective legal personal
representatives;
(b) the trustee or trustees of any trust (including without limitation a
testamentary trust) for the exclusive benefit of any one or more
members of the Xxxxxxxx Group;
(c) any corporation all of the issued and outstanding shares of which
are beneficially owned by any one or more members of the Xxxxxxxx
Group;
(d) any partnership all of the partnership interests in which are
beneficially owned by any one or more members of the Xxxxxxxx Group;
and
(e) any charitable foundation Controlled by any one or more members of
the Xxxxxxxx Group,
and, for this purpose, a trustee or trustees referred to in clause (b)
above shall be deemed to beneficially own any shares or partnership
interests held by them.
"New Securities" shall mean any Shares or other equity securities of the
Corporation, whether now authorized or not, and includes any Convertible
Securities;
"Notice of Required Financing/Consent" has the meaning set out in Section 6.12;
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"Observer" has the meaning set out in Section 2.7;
"Offer" has the meaning set out in Section 7.1(c);
"Offeror's Securities" has the meaning set out in Section 6.1;
"Other Agreements" means the Registration Rights Agreement, and with respect to
EdgeStone, the Subscription Agreement and all of the agreements, instruments,
certificates, and other documents, including the EdgeStone Warrants, executed
and delivered by or on behalf of the Corporation or EdgeStone or any of their
respective Affiliates at the Closing or otherwise in connection with the
Subscription Agreement and the transactions contemplated herein or therein;
"Partial Sale Event" means
(a) (A) an amalgamation of the Corporation with another corporation
(other than with a Subsidiary of the Corporation), (B) a statutory
arrangement involving the Corporation, (C) the sale, exchange or
other disposition of outstanding shares of the Corporation, or (D)
any other transaction involving the Corporation (other than a public
offering of securities of the Corporation), whether by a single
transaction or series of transactions, pursuant to which, in the
case of (A), (B), (C) or (D) above, any Person, together with his or
its Affiliates (other than members of the Xxxxxxxx Group), hereafter
acquires the direct or indirect "beneficial ownership" (as defined
in the Act) of securities of the Corporation representing more than
50% but less than all of the issued and outstanding shares in the
capital of the Corporation; or
(b) any event, whether by a single transaction or a series of
transactions, that results in Xx. Xxxxxxx X. Xxxxxxxx and/or Persons
Controlled by Xx. Xxxxxxx X. Xxxxxxxx holding in the aggregate less
than 100,000,000 of the issued and outstanding shares in the capital
of the Corporation (subject to appropriate adjustments for stock
dividends, stock splits, stock consolidations, capital
reorganizations and the like occurring after the date hereof),
calculated on an as-if-converted to Common Shares basis.
"Party" or "Parties" means one or more of the Corporation, the Shareholders,
Xxxxxxxx and any other Person who becomes a party to this Agreement by virtue of
a Transfer of Shares or Convertible Securities or otherwise;
"Permitted Additional Securities" means:
(a) any Common Shares issued or issuable upon conversion of any
Preferred Shares currently outstanding or that may hereafter be
issued in accordance with the provisions of Section 2.8;
(b) any option to purchase Common Shares granted under the Stock Option
Plan and/or Common Shares allotted for issuance, issued or issuable
pursuant to the Stock Option Plan, and any Common Shares or
Convertible Securities allotted for issuance, issued or issuable to
employees, officers, directors or consultants of the
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Corporation in accordance with any other stock option plan, stock
purchase plan or other stock compensation program of the Corporation
approved by the Board of Directors;
(c) any Common Shares issued on exercise of the EdgeStone Warrants;
(d) any equity securities issued pursuant to the Additional Investment
including Common Shares issuable upon conversion or exercise of any
Convertible Securities issued pursuant to the Additional Investment;
(e) any Additional Common Shares;
(f) any Common Shares issued pursuant to the Common Share Offering;
(g) any equity securities issued pursuant to a Qualified IPO;
(h) any Common Shares or Convertible Securities issued in connection
with an acquisition of assets or a business; provided, that: (i) the
cost of such acquisition is less than $10,000,000; (ii) any such
transaction is approved by the Board of Directors; and (iii) the
maximum aggregate number of Common Shares (including Common Shares
issuable on the conversion or exercise of Convertible Securities)
that may be issued pursuant to this clause (h) shall not exceed five
percent (5%) of the aggregate number of Common Shares issued and
outstanding on the date hereof, all calculated on an as-if Converted
to Common Shares basis;
(i) any Common Shares or Convertible Securities issued to or in
connection with any of the following (i) licensors of technology to
the Corporation; (ii) lending or leasing institutions in connection
with obtaining debt financing; or (iii) any other technology
licensing, equipment leasing or other commercial arrangements of a
non-equity financing nature; provided, that: (A) any such
transaction or transactions is approved by the Board of Directors;
and (B) the maximum aggregate number of Common Shares (including
Common Shares issuable on the conversion or exercise of Convertible
Securities) that may be issued pursuant to this clause (i) shall not
exceed five percent (5%) of the aggregate number of Common Shares
issued and outstanding on the date hereof, all calculated on an
as-if Converted to Common Shares basis;
(j) any equity securities issued to bona fide consultants or
professional advisors of the Corporation as part of the
consideration for services received by the Corporation from such
consultants or professional advisors;
(k) any equity securities issued in respect of subdivisions,
consolidations, stock dividends or capital reorganizations approved
in accordance with Section 2.8;
(l) any warrants to acquire Common Shares issued to TPC pursuant to the
TPC Agreement, and any issuance of Common Shares pursuant to the
exercise of such warrants; and
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(m) any equity securities issued to CIBC World Markets Inc. as
compensation for acting as lead agent, or any sub-agent thereof,
with respect to the transactions contemplated by this Agreement and
the Other Agreements and any Common Shares or Convertible Securities
issuable upon conversion thereof;
"Permitted Transferee" of any Person means:
(a) in the case of a Person who is a natural person: (A) the spouse of
such Person; (B) any lineal descendant of such Person or a spouse of
any such descendant; (C) a trust (including, without limitation, a
testamentary trust) solely for the benefit of one or more of such
Person, the spouse of such Person or any lineal descendant of such
Person or a spouse of any such descendant; (D) any self-directed
RRSP controlled by such Person; or (E) a corporation of which all of
the outstanding shares of each class of shares of such corporation
are beneficially owned, or in the case of Xxxxxxxx (if Xxxxxxxx
hereafter becomes a direct Shareholder) Controlled, directly or
indirectly, in any manner (including, without limitation, through
intermediary corporations or trusts), by one or more of such Person,
the spouse of such Person, any lineal descendant of such Person or a
spouse of any such descendant or such trust; and includes the legal
personal representative(s) of such Person or any Person referred to
in (A);
(b) in the case of a corporation: (A) any shareholder of such
corporation, if such shareholder either alone or together with one
or more Permitted Transferees of such shareholder beneficially owns,
or in the case of Xxxxxxxx (if Xxxxxxxx hereafter becomes a direct
Shareholder) Controlled, directly or indirectly, in any manner
(including, without limitation, through intermediary corporations or
trusts), all of the outstanding shares of each class of shares in
the capital of such corporation; (B) any Permitted Transferee of
such shareholder; or (C) an Affiliate, all of the shares of which
are owned by such corporation and/or any Permitted Transferee (other
than under this subclause (b)) of such corporation;
(c) in the case of a Person which is a trustee: (A) any beneficiary of
such trust; (B) another trustee, provided that the class of
beneficiaries is limited to Permitted Transferees of the
beneficiaries of the original trust; or (C) any Permitted Transferee
of such beneficiary;
(d) in the case of a Person which is an estate of a deceased Person, a
Permitted Transferee of such deceased person determined pursuant to
this definition as if such Person were not deceased or a legal
personal representative of such Person holding on behalf of such
Permitted Transferees;
(e) in the case of EdgeStone, any member of the EdgeStone Group; and
(f) in the case of any member of the Xxxxxxxx Group, includes any other
member of the Xxxxxxxx Group.
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"Person" includes any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural Person in his capacity as
trustee, executor, administrator, or other legal representative;
"Pre-Emptive Right Notice" has the meaning set out in Section 4.1(a);
"Preferred Shares" means the Series A Shares and the Series B Shares;
"Prime Rate" means the prime rate of interest charged by the Corporation's
principal banker to its most credit-worthy customers from time to time;
"Pro Rata Share" in respect of a given Shareholder or other Person having rights
or entitlements pursuant to Section 5.10, means that Shareholders' or other
Person's proportionate share of all outstanding Shares held by all such
Shareholders or other Persons on an as-if converted to Common Shares basis and
for greater certainty, in the case of EdgeStone, its Pro Rata Share shall
include the maximum number of Shares issuable upon exercise of the EdgeStone
Warrants which are exercisable on the date of the calculation;
"PTIC Purchased Securities" has the meaning set out in Section 6.7(a);
"PTIC Put Notice" has the meaning set out in Section 6.7(a);
"Public Float" means, in respect of a class of securities, the market value of
the securities of such class, excluding securities that are beneficially owned,
directly or indirectly, or over which control or direction is exercised by
persons or companies that alone or together with their respective Associates and
Affiliates, beneficially own or exercise control or direction over more than 10%
of the issued and outstanding securities of such class, provided that securities
that would be excluded because a portfolio manager of a pension fund, mutual
fund or non-redeemable investment fund exercises control or direction over them
need only be excluded if the portfolio manager is an Affiliate of the issuer of
those securities;
"Put Notice" means a Zarlink Put Notice, a PTIC Put Notice or an EdgeStone Put
Notice;
"Qualified IPO" has the meaning set forth in the Articles of Amendment;
"Qualifying Offer" has the meaning set forth in Section 6.4(a);
"Redemption Trigger Date" has the meaning set out in the Articles of Amendment;
"Registration Rights Agreement" means the registration rights agreement entered
into between the Corporation and each of the other Parties hereto (other than
Xxxxxxxx) on the date hereof;
"Related Party" means with respect to any individual Shareholder, the Person to
whom that Shareholder is legally married at the relevant time and the child or
grandchild or other direct lineal descendants of that Shareholder, a trust any
of the beneficiaries of which are any one or more of the foregoing, and where
the context permits, upon the death of a Related Party, includes his or her
legal personal representative and/or a corporation of which any one or more of
the foregoing are the legal and beneficial owners of all the outstanding shares
(including options, warrants or other rights to acquire shares) of that
corporation;
S-11
"Sale Transaction" has the meaning set out in Section 7.1(g);
"Series A Liquidation Preference per Share" means the amount per share to be
distributed to the holders of the Series A Shares pursuant to Section 4.1(a)(i)
or (ii) of Schedule "A" to the Articles of Amendment;
"Series A Participation Amount per Share" means the amount per share to be
distributed to the holders of the Series A Shares pursuant to Section
4.1(a)(iii) of Schedule "A" to the Articles of Amendment;
"Series A Shares" means the Class A Convertible Preferred Shares, Series 1 in
the capital of the Corporation, including the Class A Convertible Preferred
Shares, Series 1 currently issued and any Class A Convertible Preferred Shares,
Series 1 that may be issued after the date hereof;
"Series B Liquidation Preference per Share" means the amount per share to be
distributed to the holders of the Series B Shares pursuant to Section 4.1(a)(i)
or (ii) of Schedule "B" to the Articles of Amendment;
`Series B Participation Amount Per Share" means the amount per share to be
distributed to the holders of Series B Shares pursuant to Section 4.1(a)(iii) of
Schedule "B" to the Articles of Amendment;
"Series B Shares" means the Class B Convertible Preferred Shares, Series 1 in
the capital of the Corporation, including the Class B Convertible Preferred
Shares, Series 1 currently issued and any Class B Convertible Preferred Shares,
Series 1 that may be issued after the date hereof;
"Shares" means, collectively, the Common Shares and the Preferred Shares;
"Shareholders" means, collectively, EdgeStone, Systems, Knowledge, Zarlink, PTIC
and WCC together with such other Persons who may becomes a party to this
Agreement as a shareholder of the Corporation, and "Shareholder" means each of
such Persons individually;
"Stock Option Plan" means the stock option plan of the Corporation, as amended
from time to time in accordance with the provisions of this Agreement;
"Subscription Agreement" has the meaning set out in the Recitals to this
Agreement;
"Subsidiary" means: (i) any corporation, at least a majority of whose
outstanding Voting Shares is owned, directly or indirectly, by the Corporation
or by one or more of its subsidiaries, or by the Corporation and by one or more
of its subsidiaries; (ii) any general partnership, at least a majority of whose
outstanding partnership interests shall at the time be owned by the Corporation,
or by one or more of its subsidiaries, or by the Corporation and one or more of
its subsidiaries; and (iii) any limited partnership of which the Corporation or
any of its subsidiaries is a general partner;
"Successor Corporation" has the meaning specified in Section 1.4 of the
Registration Rights Agreement;
"Third Party" has the meaning set out in Section 6.4;
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"Third Party Offer" has the meaning set out in Section 6.4;
"Third Party Offeror" has the meaning as set out in Section 6.1;
"TPC" means Her Majesty the Queen in Right of Canada, as represented by the
Minister of Industry;
"TPC Agreement" means TPC Agreement No. 720-481443 dated October 10, 2003
between the Corporation, TPC, March Networks Corporation and Mitel Knowledge
Corporation;
"Transfer" (whether used as a noun or a verb) refers to any sale, pledge,
assignment, encumbrance, gift, or other disposition or transfer of Shares or
Convertible Securities (including without limitation the Preferred Shares), or
any legal or beneficial interest therein, including any tender or transfer in
connection with any merger, recapitalization, reclassification, or tender or
exchange offer (for all or any part of the Corporation's equity securities),
whether or not the person making any such Transfer votes for or against any
transaction involving any such Transfer, and includes any agreement to effect
any such transaction;
"Transfer Notice" has the meaning set out in Section 6.1;
"Transferring Shareholder" has the meaning set out in Section 6.1;
"Valuator" has the meaning set out in Appendix 3;
"Voting Shares" means shares, interests, participations or other equivalents in
the equity interests (however designated), including Preferred Shares, of a
person having ordinary voting power for the election of the majority of the
directors (or the equivalent) of such person, other than shares, interests,
participations or other equivalents having such power only by reason of
contingency;
"Zarlink Purchased Securities" has the meaning set out in Section 6.6(a); and
"Zarlink Put Notice" has the meaning set out in Section 6.6(a).
