1
EXHIBIT (c)(1)
to 14D-1
===============================================================================
DATED: September 26, 1999
ACQUISITION AGREEMENT
By and Among
NETMANAGE, INC.
NETMANAGE BID CO.
and
SIMWARE INC.
Dated as of September 26, 1999
===============================================================================
2
TABLE OF CONTENTS
PAGE
ARTICLE I THE TENDER OFFER.......................................................................1
1.1 The Offer.........................................................................1
1.2 Company Action....................................................................3
1.3 Directors.........................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................5
2.1 Organization of the Company.......................................................5
2.2 Company Capital Structure.........................................................6
2.3 Obligations With Respect to Capital Stock.........................................6
2.4 Authority.........................................................................7
2.5 Securities Filings; the Company Financial Statements..............................8
2.6 Absence of Certain Changes or Events..............................................9
2.7 Taxes.............................................................................9
2.8 Title to Properties; Absence of Liens and Encumbrances...........................11
2.9 Intellectual Property............................................................11
2.10 Compliance; Permits; Restrictions................................................14
2.11 Litigation.......................................................................14
2.12 Brokers' and Finders' Fees.......................................................14
2.13 Canadian Pension and Other Benefit Plans.........................................15
2.14 U.S. Employee Benefit Plans......................................................17
2.15 Employees; Labor Matters.........................................................17
2.16 Environmental Matters............................................................17
2.17 Agreements, Contracts and Commitments............................................19
2.18 Change of Control Payments.......................................................20
2.19 Board Approval...................................................................20
2.20 Fairness Opinion.................................................................20
2.21 Year 2000 Compliance.............................................................20
2.22 Offer Documents..................................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER..............................21
3.1 Organization and Qualification...................................................21
3.2 Corporate Power, Authorization and Enforceability................................21
3.3 No Conflict; Required Filings and Consents.......................................21
3.4 Offer Documents..................................................................22
3.5 Available Funds..................................................................22
3.6 Agreements Contracts and Commitments.............................................22
ARTICLE IV COVENANTS............................................................................23
4.1 Conduct of Business by the Company...............................................23
4.2 Access to Information; Confidentiality...........................................25
4.3 No Solicitation; Break-up Fee....................................................25
-i-
3
TABLE OF CONTENTS
(continued)
PAGE
----
4.4 Public Announcements.............................................................27
4.5 Notification of Certain Matters..................................................27
4.6 Actions by Company...............................................................28
4.7 Officers' and Directors' Indemnification; Insurance..............................28
4.8 Additional Agreements............................................................28
4.9 Other Actions by the Company.....................................................29
4.10 Company Options..................................................................29
4.11 Stockholder Litigation...........................................................29
ARTICLE V TERMINATION, AMENDMENT AND WAIVER.....................................................30
5.1 Termination......................................................................30
5.2 Procedure and Effect of Termination..............................................31
5.3 Fees and Expenses................................................................31
5.4 Amendment........................................................................32
5.5 Waiver...........................................................................32
ARTICLE VI MISCELLANEOUS........................................................................32
6.1 Severability.....................................................................32
6.2 Notices..........................................................................32
6.3 Entire Agreement; No Third Party Beneficiaries; No Assignment....................34
6.4 Interpretation; Knowledge........................................................34
6.5 Counterparts.....................................................................35
6.6 Other Remedies; Specific Performance.............................................35
6.7 Governing Law....................................................................35
6.8 Rules of Construction............................................................35
6.9 WAIVER OF JURY TRIAL.............................................................36
ANNEX I Conditions of the Offer
4
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "AGREEMENT") is made and entered into as
of this 26th day of September, 1999, by and among NetManage, Inc., a Delaware
corporation ("PARENT"), NetManage Bid Co., an unlimited liability company formed
under the laws of Nova Scotia and an indirect wholly-owned subsidiary of Parent
("PURCHASER"), and Simware Inc., a corporation incorporated under the CBCA (the
"COMPANY").
RECITALS
A. The Boards of Directors of Parent, Purchaser and the Company have
each unanimously approved the terms and conditions of the acquisition of the
Company by Purchaser (the "ACQUISITION") upon the terms and subject to the
conditions set forth herein.
B. Pursuant to the Acquisition, Purchaser will acquire each issued and
outstanding Common Share of the Company at a price of U.S. $3.75 net per Share
to the seller in cash and without interest thereon (the "OFFER PRICE"). In order
to accomplish the Acquisition, Purchaser shall first commence a
tender offer (the "OFFER") by Purchaser under (i) Section 14(d)(1) of the
Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and (ii)
Canadian Securities Laws (as defined below), to purchase all outstanding Common
Shares, without nominal or par value, of the Company (Common Shares are referred
to herein as the "SHARES").
C. The Board of Directors of the Company has unanimously resolved to
recommend the acceptance of the Offer to the stockholders of the Company and
determined that the consideration to be paid for each Share in the Offer is fair
to the stockholders and that the Offer is in the best interests of the
stockholders.
NOW, THEREFORE, intending to be legally bound hereby, the parties agree
as follows:
ARTICLE I
THE TENDER OFFER
1.1 THE OFFER.
(a) Provided that this Agreement shall not have been terminated
pursuant to Section 5.1 and none of the events set forth in clause (iii) of
Annex I shall have occurred or be existing, Purchaser shall, and Parent shall
cause Purchaser to, within five business days after the public announcement of
the execution of this Agreement commence (within the meaning of Rule 14d-2 under
the Exchange Act) the Offer at the Offer Price by mailing to holders of record
of Shares a takeover bid offer and circular (the "OFFER AND CIRCULAR") with
respect to the Offer which shall include a form of letter of transmittal (the
"LETTER OF TRANSMITTAL").
(b) The obligations of Purchaser to consummate the Offer and to accept
for payment and pay for any of the Shares tendered shall be subject to the
conditions set forth on
5
-2-
Annex I, including that a minimum of not less than sixty-six and two-thirds
percent (66 2/3%) of the Shares outstanding on a fully diluted basis (including
for purposes of such calculation all Shares issuable upon exercise of all vested
and unvested stock options, and conversion of convertible securities or other
rights to purchase or acquire Shares) being validly tendered and not withdrawn
prior to the expiration of the Offer (the "MINIMUM CONDITION"). The per Share
amount shall be net to the seller in cash, upon the terms and subject to the
conditions of the Offer and subject to reduction for any applicable federal
back-up or other applicable withholding or stock transfer taxes. The Offer shall
remain open until 12:00 Midnight, New York City time, on October 29, 1999
(twenty (20) business days following the commencement of the Offer). As used in
this Agreement, the "EXPIRATION DATE" means 12:00 Midnight, New York City time,
on October 29, 1999, unless Purchaser extends the Offer as permitted by this
Agreement, in which case the "Expiration Date" means the latest time and date to
which the Offer is extended.
(c) Purchaser expressly reserves the right in its sole discretion to
waive any conditions to the Offer, to increase the price per Share payable in
the Offer, to extend the duration of the Offer, or to make any other changes in
the terms and conditions of the Offer; provided, however, that no such change
may be made which decreases the price per Share payable in the Offer, reduces
the maximum number of Shares to be purchased in the Offer, imposes conditions to
the Offer in addition to those set forth in Annex I or amends any other material
terms of the Offer in a manner materially adverse to the Company's stockholders,
and provided, further, that the Offer may not, without the Company's prior
written consent, be extended beyond November 19, 1999.
(d) The Offer shall be made by means of the Offer and Circular, which
shall contain the terms set forth in this Agreement and the conditions set forth
in Annex I. Concurrently with the commencement of the Offer, Parent and
Purchaser shall file (i) with the Ontario Securities Commission and other
provincial and territorial securities commissions or similar authorities in
Canada (the "CANADIAN SECURITIES REGULATORS"), the Offer and Circular and Letter
of Transmittal, and (ii) with the Securities and Exchange Commission (the "SEC")
a tender offer statement on Schedule 14D-1 reflecting the Offer (together with
all exhibits, amendments and supplements thereto, the "SCHEDULE 14D-1"). The
Company and its counsel shall be given an opportunity to review and shall be
reasonably satisfied with the Offer and Circular and the Schedule 14D-1 in the
form in which such document is originally filed with the applicable Canadian
Securities Regulators and the SEC, respectively, and all amendments and
supplements thereto, prior to the time at which such documents and all documents
related thereto are filed with the applicable Canadian Securities Regulators and
the SEC. Parent and Purchaser agree to provide the Company and its counsel with
any comments which Parent, Purchaser or their counsel may receive from the
Canadian Securities Regulators, the SEC or the staff of the SEC with respect to
such documents promptly after receipt thereof. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), Purchaser will
purchase by accepting for payment and will pay for Shares validly tendered and
not properly withdrawn, as promptly as practicable after the expiration of the
Offer, and in any event within ten days after expiration of the Offer, provided
that Purchaser may extend the Offer for any period of time thereafter in
accordance with (c) above. The Schedule 14D-1 will contain or will incorporate
by reference the Offer and Circular (or portions thereof) and forms of the
related Letter of Transmittal and summary advertisements (which Schedule 14D-1,
Offer and Circular, Letter of Transmittal and other documents, together with any
supplements or amendments thereto, are referred
6
-3-
to herein collectively as the "OFFER DOCUMENTS"). Parent, Purchaser and the
Company agree promptly to correct any information provided by any of them for
use in the Offer Documents that shall have become false or misleading, and
Parent and Purchaser further agree to take all steps necessary to cause the
Offer and Circular and Schedule 14D-1 as so corrected to be filed with the SEC
and the Canadian Securities Regulators, as the case may be, and the other Offer
Documents as so corrected to be disseminated to the Company's stockholders, in
each case as and to the extent required by (i) all applicable securities laws in
each of the provinces and territories of Canada, the respective regulations and
rules under such laws and the applicable published policy statements of the
Canadian Regulatory Authorities in such provinces (collectively, the "CANADIAN
SECURITIES LAWS") and (ii) applicable U.S. federal securities laws. The Offer
Documents will, on the date filed, comply in all material respects with all
provisions of applicable U.S. federal securities laws and Canadian Securities
Laws.
(e) Purchaser agrees that, after the Shares are taken up and paid for
under the Offer, it will utilize the compulsory acquisition provisions of the
CBCA if permitted to do so under the CBCA. If the statutory right of acquisition
described above is not available, then Purchaser will seek to cause a special
meeting of stockholders of the Company to be called to consider a statutory
arrangement, amalgamation, merger, reorganization, consolidation,
recapitalization or other combination (a "SUBSEQUENT ACQUISITION TRANSACTION")
of the Company with the Purchaser or an affiliate of the Purchaser, if possible
to do so under, and subject to compliance with, all applicable laws, including
Canadian Securities Laws and U.S. federal securities laws. Any such Subsequent
Acquisition Transaction will be conducted in accordance with the "Going Private
Transaction" provisions of Ontario Securities Commission Policy Statement No.
9.1 ("POLICY 9.1") and Quebec Securities Commission Policy Statement No. Q-27
("POLICY Q-27"). Purchaser intends that the consideration offered under any
Subsequent Acquisition Transaction proposed by it would be identical to the
consideration offered under the Offer. Nothing herein shall be construed to
prevent the Purchaser from acquiring, directly or indirectly, additional shares
in the open market, in privately negotiated transactions, in another takeover
bid, tender or exchange offer, in settlement or appraisal proceedings or
otherwise in accordance with applicable laws, fully in consummation of the
Offer.
1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that (i) its Board of Directors has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Acquisition, are fair to and in the best
interests of the Company's stockholders, (B) approved and adopted this Agreement
and the transactions contemplated hereby and (C) resolved to recommend that the
stockholders of the Company accept the Offer and tender their Shares to
Purchaser in accordance with the Letter of Transmittal (provided, however, that
subject to the provisions of Section 4.3 such recommendation may be withdrawn,
modified or amended in connection with a Superior Proposal (as defined in
Section 4.3)) and (ii) Alliant Partners ("BANKER") has rendered to the Board of
Directors of the Company its written opinion (which opinion is permitted to be
included in writing in the Directors' Circular and the Schedule 14D-9 (as
defined in Section 1.2(b)), to the effect that the consideration to be received
by the stockholders pursuant to each of the Offer and the Acquisition is fair to
the stockholders from a financial point of view. The Company hereby consents to
the inclusion in the Offer Documents of the recommendation of the Company's
Board of Directors described in the first
7
-4-
sentence of this Section 1.2(a), and has obtained the consent of Banker to the
inclusion in the Schedule 14D-9 of a copy of the written opinion referred to in
clause (ii) above.
(b) Concurrently with the mailing of the Offer Documents, the Company
(i) shall mail to stockholders of record and to each of the directors of the
Company and shall file with the applicable Canadian Regulatory Authorities a
Directors' Circular (together with all documents, supplements, and exhibits)
including the opinion of Banker referred to in paragraph 1.2(a), and (ii) file
with the SEC, concurrently with the filing by Parent and Purchaser of the
Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9 under
the Exchange Act relating to the Offer (together with all exhibits, amendments
and supplements thereto as well as the Information Statement required pursuant
to Section 14(f) under the Exchange Act, collectively the "SCHEDULE 14D-9"),
which shall contain, included as an exhibit, the Directors' Circular, and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Exchange Act. The Directors' Circular and the Schedule 14D-9, as the case may
be, and each amendment thereto, will, on the date filed, comply in all material
respects with the provisions of Canadian Securities Laws and applicable U.S.
federal securities laws, as the case may be. The Company, Parent and Purchaser
agree promptly to correct any information provided by any of them for use in the
Directors' Circular and Schedule 14D-9 that shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Directors' Circular and Schedule 14D-9 as so corrected to be filed with the
SEC and the applicable Canadian Securities Regulators, as the case may be, and
the Schedule 14D-9 and Directors' Circular as so corrected to be disseminated to
the stockholders, in each case as and to the extent required by applicable
Canadian Securities Laws and U.S. federal securities laws. The Company will
comply with the laws of the Province of Quebec relating to the use of French
language in connection with the Directors' Circular to be delivered to the
stockholders. Parent and its counsel shall be given the opportunity to review
and shall be reasonably satisfied with the Directors' Circular and the Schedule
14D-9 in the form in which such document is originally filed with the Canadian
Securities Regulators and the SEC, respectively, and all amendments and
supplements thereto, prior to the time at which such documents and all documents
related thereto are filed with the Canadian Regulatory Authorities and the SEC.
The Company shall provide Purchaser and its counsel with any comments the
Company or its counsel may receive from the SEC with respect to the Schedule
14D-9 promptly after receipt of such comments.
(c) The Company agrees to use its reasonable commercial efforts to cause
the senior officers and directors of the Company to support the Offer. The
Company has been advised by all of its directors and executive officers, and by
Banker and its affiliates that, as of the date of this Agreement, each intends
to tender all outstanding Shares beneficially owned by such person to Purchaser
pursuant to the Offer unless to do so would subject such person to liability
under Section 16(b) of the Exchange Act.
(d) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each of a recent date,
and shall promptly furnish Purchaser with such additional information, including
updated lists of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request in connection with communicating the Offer and any amendments or
supplements thereto to the
8
-5-
Company's stockholders. Subject to the requirements of applicable laws and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Acquisition, Parent and
Purchaser shall hold in confidence the information contained in any of such
labels and lists.
1.3 DIRECTORS. Promptly upon the acquisition by Purchaser pursuant to
the Offer of such number of Shares which satisfies the Minimum Condition and
from time to time thereafter, Parent shall be entitled to designate such number
of directors of the Company's Board of Directors and any committee thereof, as
is proportionate to the percentage of outstanding Shares owned by Purchaser and
its affiliates, subject to compliance with applicable law. The Company shall,
upon request by Parent, subject to applicable law, promptly exercise its
reasonable commercial efforts to increase the size of the Board of Directors to
the extent permitted by its Certificate of Incorporation and/or secure the
resignations of such number of directors as is necessary to enable Parent's
designees to be elected to the Board of Directors and shall exercise its
reasonable commercial efforts to enable Parent's designees to be so elected. The
Company shall take, at its expense, all action necessary to effect any such
election, including, if applicable, mailing to its stockholders the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in form and substance reasonably satisfactory to Parent and its
counsel. Following the election or appointment of Parent's designees pursuant to
this Section 1.3, any amendment or termination of this Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or
Purchaser or waiver of the Company's rights hereunder, shall require the
concurrence of a majority of the Company's directors (or the concurrence of the
director, if there is only one remaining) then in office who are directors on
the date hereof, or are directors (other than directors designated by Parent in
accordance with this Section 1.3) designated by such persons to fill any vacancy
(the "CONTINUING DIRECTORS").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (which for purposes of this Article II shall include the
Company and each of its subsidiaries unless the context otherwise requires)
represents and warrants to Parent and Purchaser, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent and Purchaser dated as of the date hereof and certified by a
duly authorized officer of the Company (the "Company Schedules"), as follows:
2.1 ORGANIZATION OF THE COMPANY.
(i) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
below) on the Company.
9
-6-
(ii) The Company has delivered to Parent a true and complete list
of all of the Company's subsidiaries, indicating the jurisdiction of
incorporation of each subsidiary, the jurisdictions in which such subsidiary is
qualified or licensed, and the Company's and any other person's equity interest
therein. All shares of subsidiaries owned of record by persons other than the
Company are owned beneficially (or the substantive equivalent) by the Company.
(iii) The Company has delivered or made available to Parent a
true and correct copy of the Certificate of Incorporation and Bylaws of the
Company and similar governing instruments of each of its subsidiaries, each as
amended to date, and each such instrument is in full force and effect. Neither
the Company nor any of its subsidiaries is in violation of any of the provisions
of its Certificate of Incorporation or Bylaws or equivalent governing
instruments.
(iv) When used in connection with the Company, the term "MATERIAL
ADVERSE EFFECT" means, for purposes of this Agreement, any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of Company and its
subsidiaries taken as a whole. Except where the context otherwise requires, as
used in this Article II, the "Company" includes the Company's subsidiaries.
2.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of an unlimited number of Common Shares, without nominal or par
value, of which there were 6,962,747 shares issued and outstanding as of August
31, 1999 and an unlimited number of Preferred Shares without nominal or par
value, issuable in series, of which no shares are issued or outstanding. All
outstanding Common Shares are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement or
document to which the Company is a party or by which it is bound. As of
September 1, 1999, the Company had reserved an aggregate of 1,857,337 Common
Shares, net of exercises, for issuance to employees, consultants and
non-employee directors pursuant to the Company's Employee Stock Option Plan
("the Option Plan") as well as options issued outside the Option Plan and 29,288
Common Shares for issuance pursuant to the Company's Employee Share Purchase
Plan. As of September 1, 1999, there were options outstanding to purchase an
aggregate of 1,450,839 Common Shares, issued to employees, consultants and
non-employee directors pursuant to the Option Plan and otherwise. All of the
Company Common Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable. The Company has delivered to Parent a complete and accurate list
of each person who held restricted stock or options, the name of the holder of
such shares or option, the exercise price of such option, the number of shares
which will have vested at such date, the vesting schedule for such shares or
option, and has identified on such list whether the lapsing of the Company's
repurchase rights or exercisability of such option will be accelerated in any
way by the transactions contemplated by this Agreement, and has indicated the
extent of acceleration, if any.
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of the Company, or any securities exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities the Company owns, directly or indirectly
through one or more
10
-7-
subsidiaries, there are no equity securities, partnership interests or similar
ownership interests of any class of any subsidiary of the Company, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company or any of its subsidiaries is a
party or by which it is bound obligating the Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition, of any shares of capital stock, partnership interests or similar
ownership interests of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement. There are no registration rights and, to the knowledge of the
Company, as of the date of this Agreement, there are no voting trusts, proxies
or other agreements or understandings with respect to any equity security of any
class of the Company or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its subsidiaries.
2.4 AUTHORITY.
(i) The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and, if applicable, Purchaser, constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity. The execution and delivery of this
Agreement by the Company do not, and the performance of this Agreement by the
Company will not, (i) conflict with or violate the Certificate of Incorporation
or Bylaws of the Company or the equivalent organizational documents of any of
its subsidiaries, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair the
Company's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other material instrument or obligation to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or its or any of their respective properties are bound or
affected. The Company Schedules list all material consents, waivers and
approvals under any of the Company's or any of its subsidiaries' agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
(ii) No consent, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other governmental authority or
11
-8-
instrumentality, foreign or domestic ("GOVERNMENTAL ENTITY"), is required by or
with respect to the Company in connection with the execution and delivery of
this Agreement, except for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
Canadian Securities Laws and U.S. federal and state securities laws and the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), the Competition Act (Canada) (the "COMPETITION ACT"), the Investment
Canada Act and the securities or antitrust laws of any foreign country, and
(iii) such other consents, authorizations, filings, approvals and registrations
which if not obtained or made would not be material to the Company, Parent or
Purchaser or have a material adverse effect on the ability of the parties to
consummate the Offer.
2.5 SECURITIES FILINGS; THE COMPANY FINANCIAL STATEMENTS.
(i) The Company has filed in a timely manner all forms, reports
and documents required to be filed with the applicable Canadian Securities
Regulators and the SEC since its initial public offering and has made available
to Parent such forms, reports and documents in the form filed with the Canadian
Securities Regulators and the SEC. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the "COMPANY REPORTS." As of their respective
dates, the Company Reports (i) were prepared in accordance with the requirements
of Canadian Securities Laws, the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the Exchange Act, as the case may be, and the rules and
regulations thereunder applicable to such the Company Reports, and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
the Company's subsidiaries is required to file any forms, reports or other
documents with the Canadian Securities Regulators or the SEC.
(ii) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company Reports (the
"COMPANY FINANCIALS"), including any Company Reports filed after the date hereof
until the Closing, (x) complied as to form in all material respects with the
published rules and regulations of Canadian Securities Laws and the SEC with
respect thereto, (y) was prepared in accordance with Canadian generally accepted
accounting principles ("GAAP") and has been reconciled with the rules and
regulations of the SEC, in each case, applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by Canadian
Securities Laws or rules promulgated by the Securities and Exchange Commission
under the Exchange Act) and (z) fairly presented the consolidated financial
position of the Company and its subsidiaries as at the respective dates thereof
and the consolidated results of the Company's operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments. The balance sheet
of the Company contained in the Company Reports as of April 30, 1999 is
hereinafter referred to as the "COMPANY BALANCE SHEET." Except as disclosed in
the Company Financials, since the date of the Company Balance Sheet neither the
Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are,
12
-9-
individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its subsidiaries taken as a
whole, except liabilities (i) provided for in the Company Balance Sheet, or (ii)
incurred since the date of the Company Balance Sheet in the ordinary course of
business consistent with past practices and immaterial in the aggregate.
(iii) The Company has heretofore furnished to Parent a complete
and correct copy of any amendments or modifications to the Company Reports,
which have not yet been filed with the Canadian Securities Regulators and the
SEC, as the case may be, but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the Company
with the Canadian Securities Regulators pursuant to Canadian Securities Laws and
the SEC pursuant to the Securities Act or the Exchange Act.
(iv) The Company has previously provided Parent with a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the Canadian Securities Regulators or the SEC to agreements,
documents or other instruments which previously were filed by the Company or any
of its subsidiaries with the Canadian Securities Regulators or the SEC pursuant
to Canadian Securities Laws or the Securities Act or the Exchange Act.
(v) The Company has previously furnished to Parent, copies of all
reports, assessments or valuations which could be considered to be "prior
valuations" for the purpose of Policy 9.1 or Policy Q-27.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet, except as reflected in the Company Reports, there has not been:
(i) any event having a Material Adverse Effect on the Company, (ii) any material
change by the Company in its accounting methods, principles or practices, except
as required by concurrent changes in GAAP, or (iii) any material revaluation by
the Company of any of its assets, including, without limitation, writing down
the value of capitalized inventory or writing off notes or accounts receivable
other than in the ordinary course of business.
2.7 TAXES.
(i) Definition of Taxes. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all Canadian federal, provincial, municipal
and local taxes and all U.S. federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, health, health insurance, disability, education, land transfer,
social services, social security, Canada, Quebec and other government pension
plan premiums, and other tax or governmental fee of any kind whatsoever,
together with all interest, penalties and additions imposed with respect to such
amounts and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
13
-10-
(ii) Tax Returns and Audits.
(A) The Company and each of its subsidiaries have timely filed
all federal, provincial, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") relating to Taxes required to be
filed by the Company and each of its subsidiaries, except such Returns which are
not material to the Company, and have timely paid all Taxes shown to be due on
such Returns.
(B) Except as is not material to the Company, the Company and
each of its subsidiaries as of the Effective Time will have withheld with
respect to its employees all Canadian federal and provincial income taxes, all
federal and state income taxes, the Federal Insurance Contribution Act ("FICA"),
the Federal Unemployment Tax Act ("FUTA") and other Taxes required to be
withheld in the United States and Canada.
(C) Except as is not material to the Company, neither the Company
nor any of its subsidiaries has been delinquent in the payment of any Tax nor is
there any Tax deficiency outstanding, proposed or assessed against the Company
or any of its subsidiaries, nor has the Company or any of its subsidiaries
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(D) Except as is not material to the Company, no audit or other
examination of any Return of the Company or any of its subsidiaries is presently
in progress, nor has the Company or any of its subsidiaries been notified of any
request for such an audit or other examination.
(E) Except as is not material to the Company, no adjustment
relating to any Returns filed by the Company or any of its subsidiaries has been
proposed formally or informally by any Tax authority to the Company or any of
its subsidiaries or any representative thereof.
(F) Except as is not material to the Company, neither the Company
nor any of its subsidiaries has any liability for unpaid Taxes which has not
been accrued for or reserved on the Company Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(G) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, 404 or 162(m) of the U.S. Tax
Code.
(H) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the U.S. Tax Code or agreed to have
Section 341(f)(2) of the U.S. Tax Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the U.S. Tax Code) owned by the
Company.
(I) Neither the Company nor any of its subsidiaries is party to
or has any obligation under any tax-sharing or allocation agreement or
arrangement.
14
-11-
(J) The Canadian federal and provincial income and capital tax
liabilities of the Company and its subsidiaries have been assessed by the
relevant taxing authorities and notices of assessment have been issued to each
such entity by the relevant taxing authorities for all taxation years up to and
including the taxation year specified on Schedule 2.7.
(K) For purposes of the Income Tax Act (Canada) or any applicable
provincial or municipal taxing statute, no persons or group of persons has ever
acquired or had the right to acquire control of the Company or any of its
subsidiaries.
(L) Neither the Company nor any of its subsidiaries (except
Simware Corp.) are "engaged in a trade or business within the United States" or
have a "permanent establishment" in the United States.
2.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(i)The Company Schedules list the real property owned by the
Company. The Company Schedules list all real property leases to which the
Company is a party and each amendment thereto. All such current leases are in
full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a claim in an amount
greater than $100,000.
(ii) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its material
tangible properties and material assets, real, personal and mixed, used or held
for use in its business, free and clear of any liens, pledges, charges, claims,
security interests or other encumbrances of any sort ("LIENS"), except as
reflected in the Company Financials or in the Company Schedules and except for
liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.9 INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have the
following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i)
all Canadian, United States, international and foreign patents
and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing;
(iii) all copyrights, copyrights registrations and applications
therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and
applications therefor throughout the world; (v) all trade names,
logos, common law trademarks and service marks, trademark and
service ▇▇▇▇ registrations and
15
-12-
applications therefor throughout the world; (vi) all databases
and data collections and all rights therein throughout the world;
and (vii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the
Company.
"REGISTERED INTELLECTUAL PROPERTY" means all Canadian, United
States, international and foreign: (i) patents and patent
applications (including provisional applications); (ii)
registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights
and applications for copyright registration; and (iv) any other
Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued, filed
with, or recorded by any state, government or other public legal
authority.
(i) Schedule 2.9 lists all of the Registered Intellectual
Property owned by, or filed in the name of, the Company (the "COMPANY REGISTERED
INTELLECTUAL PROPERTY").
(ii) Schedule 2.9 lists all proceedings or actions before any
court, tribunal (including the United States Patent and Trademark Office ("PTO")
or equivalent authority anywhere in the world) related to any Company
Intellectual Property.
(iii) No Company Intellectual Property or product or service of
the Company is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by the Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property.
(iv) Each item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
in connection with such Registered Intellectual Property have been made and all
necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in Canada and the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property.
(v) Except as set forth in Schedule 2.9: (i) the Company owns and
has good and exclusive title to each item of Company Intellectual Property,
including all Company Registered Intellectual Property listed on Schedule 2.9,
free and clear of any lien or encumbrance; and (ii) the Company is the exclusive
owner of all trademarks and trade names used in connection with the operation or
conduct of the business of the Company, including the sale of any products or
the provision of any services by the Company.
(vi) The Company owns exclusively, and has good title to, all
copyrighted works that are Company products or which the Company otherwise
purports to own.
(vii) To the extent that any work, invention, or material has
been developed or created by a third party for the Company, the Company has a
written agreement with such third party
16
-13-
with respect thereto and the Company thereby has obtained ownership of, and is
the exclusive owner of, all Intellectual Property in such work, material or
invention by operation of law or by valid assignment.
(viii) Except as set forth in Schedule 2.9, the Company has not
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was Company Intellectual Property, to any third
party.
(ix) Schedule 2.9 lists all material contracts, licenses and
agreements to which the Company is a party (i) with respect to Company
Intellectual Property licensed or transferred to any third party; or (ii)
pursuant to which a third party has licensed or transferred any Intellectual
Property to the Company, with a potential value or cost in excess of $10,000.
Schedule 2.9 lists any agreements pursuant to which the Company has licensed any
Company Intellectual Property or products to any third party that differs in any
material respect from its standard form.
(x) The contracts, licenses and agreements listed on Schedule 2.9
are in full force and effect. The consummation of the transactions contemplated
by this Agreement will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of such contracts, licenses and
agreements. The Company is in compliance in all material respects with, and has
not breached any term any of such contracts, licenses and agreements and, to the
knowledge of the Company, all other parties to such contracts, licenses and
agreements are in compliance in all material respects with, and have not
breached any term of, such contracts, licenses and agreements. Following the
completion of the Acquisition, Purchaser will be permitted to exercise all of
the Company's rights under the contracts, licenses and agreements listed on
Schedule 2.9 to the same extent the Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.
(xi) Schedule 2.9 lists all contracts, licenses and agreements
between the Company and any third party wherein or whereby the Company has
agreed to, or assumed, any obligation or duty to warrant, indemnify, hold
harmless or otherwise assume or incur any obligation or liability with respect
to the infringement or misappropriation by the Company or such third party of
the Intellectual Property of any third party.
(xii) The operation of the business of the Company as such
business currently is conducted, or is reasonably is contemplated to be
conducted, including the Company's design, development, manufacture, marketing
and sale of the products or services of the Company (including with respect to
products currently under development) has not, does not and will not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction.
(xiii) The Company has not received notice from any third party
that the operation of the business of the Company or any act, product or service
of the Company, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction. There have been, and are, no claims asserted against
17
-14-
any customer of the Company which allege that the customer's use or distribution
of the Company's products violates any Intellectual Property of any third party.
(xiv) The Company has taken all steps that are reasonably
required to protect the Company's rights in the Company's confidential
information and trade secrets or any trade secrets or confidential information
of third parties provided to the Company, and, without limiting the foregoing,
the Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information / confidentiality agreement substantially in
the Company's standard form and all current and former employees and contractors
of the Company have executed such an agreement.
2.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(i) Neither the Company nor any of its subsidiaries is, in any
material respect, in conflict with, or in default or violation of (i) any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which the Company or any of its subsidiaries or any of
their respective properties is bound or affected, or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other material instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties is bound or affected.
To the knowledge of the Company, no investigation or review by any Governmental
Entity is pending or threatened against the Company or any of its subsidiaries,
nor has any Governmental Entity indicated an intention to conduct the same.
There is no material agreement, judgment, injunction, order or decree binding
upon the Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Company or any of its subsidiaries, any acquisition of material
property by the Company or any of its subsidiaries or the conduct of business by
the Company as currently conducted.
(ii) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to the operation of the business of the Company (collectively, the
"COMPANY PERMITS"). The Company and its subsidiaries are in compliance in all
material respects with the terms of the Company Permits.
2.11 LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which the Company or any of its
subsidiaries has received any notice of assertion nor, to the Company's
knowledge, is there a threatened action, suit, proceeding, claim, arbitration or
investigation against the Company or any of its subsidiaries which reasonably
would be likely to be material to the Company. To the knowledge of the Company,
no Governmental Entity has at any time challenged or questioned in writing the
legal right of the Company to manufacture, offer or sell any of its products in
the present manner or style thereof.
2.12 BROKERS' AND FINDERS' FEES. Except for fees payable to
Banker pursuant to an engagement letter dated August 4, 1998, a copy of which
has been provided to Parent, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
18
-15-
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.13 CANADIAN PENSION AND OTHER BENEFIT PLANS
(i) The Company has accurately disclosed to Parent and Purchaser
the existence of all Pension/Benefit Plans (as defined below).
(ii) Current and complete copies of all written Pension/Benefit
Plans, where oral, written summaries of the material terms thereof, have been
provided or made available to the Parent and the Purchaser together with current
and complete copies of all documents relating to the Pension/Benefit Plans,
including as applicable: (i) all documents establishing, creating or amending
any Pension/Benefit Plan; (ii) all trust agreements, funding agreements,
insurance contracts, investment management agreements and investment policies;
(iii) all financial statements and accounting statements and reports, and
investment reports for each of the last three years and the three most recent
actuarial reports; (iv) all reports, returns, filings and material
correspondence with any regulatory authority in the last three years; (v) all
booklets, summaries or manuals prepared for or circulated to, and written
communications of a general nature prepared for or distributed to, employees
concerning any Pension/Benefit Plan; and (vi) all legal opinions, consulting
reports and correspondence with respect to the administration or funding of any
Pension/Benefit Plan, or the investment of funds included thereunder.
(iii) Each Pension/Benefit Plan is, and has been, established,
registered, qualified, administered and invested, in compliance in all material
respects with (i) the terms thereof and (ii) all applicable laws; and the
Company and its subsidiaries have not received, in the last three years, any
notice from any person questioning or challenging such compliance (other than in
respect of any claim related solely to that person).
(iv) All material obligations under the Pension/Benefit Plans
(whether pursuant to the terms thereof or applicable law) have been satisfied,
and there are no outstanding material defaults or violations thereunder by the
Company or any of its subsidiaries, nor does the Company have any knowledge of
any material default or violation by any other party to any Pension/Benefit
Plan.
(v) Except as required by applicable law, there have been no
amendments, modifications or restatements of any Pension/Benefit Plans made, or
any improvements in benefits promised, under the Pension/Benefit Plans since
January 1, 1999, and none of the Pension/Benefit Plans provide for benefit
increases or the acceleration of funding obligations that are contingent upon or
will be triggered by the entering into of this Agreement or the completion of
the transactions contemplated hereby.
(vi) All payments, contributions or premiums required to be paid
to or in respect of each Pension/Benefit Plan have been paid in a timely fashion
in accordance with the terms thereof and all applicable laws, and no Taxes (as
defined in Section 2.7), penalties or fees are owing or exigible under any
Pension/Benefit Plan.
19
-16-
(vii) There is no proceeding, action, suit or claim (other than
routine claims for the payment of benefits) pending or, to the knowledge of the
Company, threatened involving any Pension/Benefit Plan or its assets.
(viii) No event has occurred respecting any Pension/Benefit Plan
which would entitle any person (without the consent of the Company) to windup or
terminate any Pension/Benefit Plan, in whole or in part, or which could
reasonably be expected to adversely effect the tax status thereof.
(ix) There are no going concern unfunded actuarial liabilities,
past service unfunded liabilities or solvency deficiencies respecting any of the
Pension/Benefit Plans.
(x) No changes have occurred in respect of any Pension/Benefit
Plan since the date of the most recent financial, accounting, actuarial or other
report, as applicable, issued in connection with any Pension/Benefit Plan and
delivered to Parent and Purchaser pursuant to Section 3.13(ii), which could
reasonably be expected to render any of the information contained in the
relevant report misleading in any material respect.
(xi) Neither the Company nor any of its subsidiaries has received
or applied for any payment of surplus out of any Pension/Benefit Plan.
(xii) Neither the Company nor any of its subsidiaries has taken
any contribution holidays under any Pension/Benefit Plan.
(xiii) There have been no withdrawals or transfers of assets from
any Pension/Benefit Plan other than in accordance with the terms of such
Pension/Benefit Plans and applicable laws.
(xiv) All employee data necessary to administer each
Pension/Benefit Plan is in the possession of the Company and is in all material
respects complete, correct and in a form which is sufficient for the proper
administration of the Pension/Benefit Plans in accordance with the terms of such
Pension/Benefit Plans and applicable laws, and none of the Pension/Benefit
Plans, other than the pension plans and any group registered retirement savings
plan or supplemental pension or retirement plan, provide benefits to retired
employees or to the beneficiaries or dependents of retired employees.
(xv) None of the Pension/Benefit Plans require or permit a
retroactive increase in premiums or payments, and the level of insurance
reserves, if any, under any insured Pension/Benefit Plan is reasonable and
sufficient to provide for all incurred but unreported claims.
For purposes of this Agreement, the term "PENSION/BENEFIT PLANS" shall
mean (i) all plans, arrangements, agreements, programs, policies or practices,
whether oral or written, formal or informal, funded or unfunded, regulated or
unregulated, to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or under which the Company
or any of its subsidiaries has any liability or contingent liability, relating
to: (a) retirement savings or pensions, including any defined benefit pension
plan, defined contribution pension plan, group registered retirement savings
plan, deferred profit sharing plan, or supplemental
20
-17-
pension or retirement plan; or (b) bonuses, profit sharing, deferred
compensation, incentive compensation, hospitalization, health, medical or dental
treatment or expenses, disability, supplementary unemployment insurance
benefits, employee loans, vacation pay, severance or termination pay or other
benefit plan with respect to any of its employees or former employees,
individuals working on contract with it or other individuals providing services
to it of a kind normally provided by employees, or those eligible dependents of
any such persons (including all amendments to any of the foregoing); and (ii)
all statutory plans which the Company or any of its subsidiaries is required to
comply with, including the Canada or Quebec Pension Plans and plans administered
pursuant to applicable provincial health tax, workers' compensation and
unemployment insurance legislation (including all amendments to any of the
foregoing); provided, however, that Pension/Benefit Plans shall not include any
U.S. Employee Benefit Plans (as that term is used in Section 2.14).
2.14 U.S. EMPLOYEE BENEFIT PLANS. The Company has no employees in the
United States and no employee benefit plan governed by United States law.
2.15 EMPLOYEES; LABOR MATTERS. To the Company's knowledge, no employee
of the Company (i) is in violation of any term of any employment contract,
patent disclosure agreement, non-competition agreement, or any restrictive
covenant to a former employer relating to the right of any such employee to be
employed by the Company because of the nature of the business conducted or
presently proposed to be conducted by the Company or to the use of trade secrets
or proprietary information of others and (ii) has given notice to the Company,
nor is the Company otherwise aware, that any employee intends to terminate his
or her employment with the Company except for terminations of a nature and
number that are consistent with the Company's prior experience. To the Company's
knowledge, there are no activities or proceedings of any labor union to organize
any employees of the Company or any of its subsidiaries and there are no
strikes, or material slowdowns, work stoppages or lockouts, or threats thereof
by or with respect to any employees of the Company or any of its subsidiaries.
The Company and its subsidiaries are and have been in compliance in all material
respects with all applicable laws regarding employment practices, terms and
conditions of employment, and wages and hours.
2.16 ENVIRONMENTAL MATTERS.
(i) Except as set forth in Schedule 2.16 and except to the extent
that the inaccuracy of any of the following (or the circumstances giving rise to
such inaccuracy), individually or in the aggregate, could not reasonably be
expected to be materially adverse to the Company and its subsidiaries on a
consolidated basis:
(a) (A) the Company and its subsidiaries are, and during the
past five years have been, in compliance with all applicable Environmental Laws
(as defined below); and (B) the Company has no reason to believe that any of
them will not, or will incur material expense to, timely attain or maintain
compliance with any Environmental Laws applicable to any of their current
operations or properties or to any of their planned operations;
(b) (A) the Company and its subsidiaries hold all
Environmental Permits (as defined below) (each of which is in full force and
effect) required for any of their current
21
-18-
operations and for any property owned, leased, or otherwise operated by any of
them, and are, and its subsidiaries have been, in compliance will all such
Environmental Permits; and (B) the Company has no reason to believe that: any
Environmental Permits held by the Company and its Subsidiaries will not be, or
will entail material expense to be, timely renewed or complied with; any
additional Environmental Permits required of any of them for current operations
or for any property owned, leased, or otherwise operated by any of them, or for
any of their planned operations, will not be, or will entail material expense to
be, timely granted or complied with; or any transfer or renewal of, or
reapplication for, any Environmental Permit required as a result of the
transactions contemplated by this Agreement will not be, or will entail material
expense to be, timely effected;
(c) no review by, or approval of, any governmental
authority or other person is required under any Environmental Law in connection
with the execution or delivery of this Agreement;
(d) neither the Company nor any of its subsidiaries has
received any Environmental Claim (as defined below) against any of them, and the
Company has no knowledge of any such Environmental Claim being threatened;
(e) (A) Hazardous Materials are not present on any
property owned, leased, or operated by the Company or any of its subsidiaries,
that could reasonably likely form the basis of any Environmental Claim against
any of them; and (B) the Company has no reason to believe that Hazardous
Materials are present on any other property that could be reasonably likely to
form the basis of any Environmental Claim against any of them;
(f) the Company has no knowledge of any material
Environmental Claim pending or threatened, or of the presence or suspected
presence of any Hazardous Materials that could be reasonably likely to form the
basis of any Environmental Claim, in any case against any person or entity
(including, without limitation, any predecessor of the Company or any of its
subsidiaries) whose liability the Company or any of its subsidiaries has or may
have retained or assumed either contractually or by operation of law, or against
any real or personal property which the Company or any of its subsidiaries
formerly owned, leased, or operated, in whole or in part.
(ii) To the knowledge of the Company, the Company and its
subsidiaries have disclosed to Parent and Purchaser all material facts which the
Company reasonably believes could form the basis of a material Environmental
Claim against the Company or any of its subsidiaries; all material costs the
Company reasonably expects it and any of its subsidiaries to incur to comply
with Environmental Laws during the next three years; all material costs the
Company and any of its subsidiaries expect to incur for ongoing, and reasonably
anticipated, investigation and remediation of Hazardous Materials (including,
without limitation, any payments to resolve any threatened or asserted
Environmental Claim for investigation and remediation costs); and any other
material matter affecting the Company or any of its subsidiaries relating to any
Environmental Law.
(iii) For purposes of this Agreement, the terms below shall have
the following meanings:
22
"Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, lien, demand letter, or
notice (written or oral) of non-compliance, violation, or liability, by
any entity asserting liability or potential liability (including,
without limitation, liability or potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties)
arising out of, relating to, based on or resulting from (a) the
presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, (b) circumstances forming the basis
of any violation or alleged violation of any Environmental Laws or
Environmental Permits, or (c) otherwise relating to obligations or
liabilities under any Environmental Law.
"Environmental Laws" means all Canadian or United States federal,
state, provincial, and local statutes, rules, regulations, ordinances,
orders, decrees and common law, and any requirement of any other
governmental authority having the force of law, relating in any manner
to pollution or protection of human health, or of the environment
(including, without limitation, indoor air, ambient air, surface water,
groundwater, land surface, subsurface strata, or plant or animal
species).
"Environmental Permits" means all permits, licenses,
registrations, exemptions and other filings with or authorizations by
any governmental authority under any Environmental Law.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any
fraction thereof), petroleum products, asbestos, asbestos-containing
materials, pollutants, contaminants, radioactivity, and all other
materials and forces, whether or not defined as any of the foregoing,
that are regulated pursuant to any Environmental Laws or that could
result in liability under any Environmental Laws.
2.17 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in the
Company Schedules, neither the Company nor any of its subsidiaries is a party to
or is bound by:
(i) any employment or consulting agreement, contract or
commitment with any officer or director level employee or member of the
Company's Board of Directors, other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit the Company's or any of its subsidiaries'
ability to terminate employees at will;
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan, stock purchase plan or
restricted stock purchase agreement, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
23
-20-
(iii) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification agreements
between the Company or any of its subsidiaries and any of its officers or
directors;
(iv) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company or any of its subsidiaries to
engage in any line of business or compete with any person or granting any
exclusive distribution rights;
(v) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture or other business enterprise; or
(vi) any material joint marketing or development agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound of the type described in clauses
(i) through (vi) above (any such agreement, contract or commitment, as well as
any agreement, contract or commitment that is an exhibit to any Company Report,
a "COMPANY CONTRACT") in such a manner as would permit any other party to cancel
or terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.
2.18 CHANGE OF CONTROL PAYMENTS. The Company Schedules set forth each
plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers and directors of the
Company as a result of or in connection with the Offer, and the nature and
amount of any such obligation.
2.19 BOARD APPROVAL. The Board of Directors of the Company has, as of
the date of this Agreement (A) determined that this Agreement and the
transactions contemplated hereby, including each of the Offer, are fair to and
in the best interests of the stockholders, (B) approved and adopted this
Agreement and the transactions contemplated hereby and (C) resolved to recommend
that the stockholders of the Company accept the Offer.
2.20 FAIRNESS OPINION. The Company's Board of Directors has received a
written opinion from Banker to the effect that, in the context of the
transactions contemplated hereby, the consideration to be received by the
stockholders pursuant to the Offer is fair from a financial point of view.
2.21 YEAR 2000 COMPLIANCE. All of the current versions of the Company?s
products (including products currently under development) will record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products record,
store, process, calculate and present calendar dates on or before December 31,
1999, or calculate any information
24
-21-
dependent on or relating to such dates (collectively, "Year 2000 Compliant").
The Company's material internal computer and technology products and systems are
Year 2000 Compliant, except for upgrades or replacements which may be made
without disruption to the Company's operations and for which the cost to the
Company is estimated to be less than $100,000 in aggregate.
2.22 OFFER DOCUMENTS. None of the Directors' Circular, the
Schedule 14D-9, nor any of the information supplied by the Company for inclusion
in the Offer Documents, shall, at the respective times that the Directors'
Circular, the Schedule 14D-9, the Offer Documents or any amendments or
supplements thereto are filed with the Canadian Securities Regulators or the
SEC, as the case may be, or are first published, sent or given to stockholders,
as the case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Directors' Circular and the Schedule 14D-9 will
comply in all material respects as to form and substance with the requirements
of Canadian Securities Laws, the Exchange Act and the rules and regulations
thereunder, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to
the Company that:
3.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Purchaser is a
corporation duly organized validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted.
3.2 CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Each of Parent
and Purchaser has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate all the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Purchaser, the performance by each of Parent and Purchaser of
their respective obligations hereunder and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of Parent and Purchaser and no
other corporate action on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of appropriate Acquisition documents as
required by [Canadian law]). This Agreement has been duly executed and delivered
by each of Parent and Purchaser and is a legal, valid and binding obligation of
each of Parent and Purchaser, enforceable against Parent and Purchaser in
accordance with its terms.
3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of all applicable requirements referred
to in Section 3.3 (b) below, the execution and delivery of this Agreement by
Parent and Purchaser, the compliance by Parent and Purchaser with the
provisions hereof and the consummation by Parent and Purchaser of the
transactions contemplated hereby will not conflict with or violate (i) any
statute,
25
-22-
law, ordinance, rule, regulation, order, writ, judgment, award, injunction,
decree or ruling applicable to Parent or Purchaser or any of their properties,
other than such conflicts or violations which individually or in the aggregate
do not and will not have a material adverse effect on the business, properties,
assets, results of operations or financial condition of Parent and Purchaser,
taken as a whole, or (ii) conflict with or violate the Certificate of
Incorporation or Bylaws of Parent or Purchaser.
(b) Other than in connection with or in compliance with the
provisions of Canadian Securities Laws, the Delaware General Corporation Law
("DGCL"), the Exchange Act, the "takeover" or "blue sky" laws of various states,
the Competition Act, the Investment Canada Act and the HSR Act, (i) neither
Parent nor Purchaser is required to submit any notice, report, registration,
declaration or other filing with any Governmental Entity in connection with the
execution or delivery of this Agreement by Parent and Purchaser or the
performance by Parent and Purchaser of their obligations hereunder or the
consummation by Parent and Purchaser of the transactions contemplated by this
Agreement and (ii) no waiver, consent, approval, order or authorization of any
Governmental Entity is required to be obtained by Parent or Purchaser in
connection with the execution or delivery of this Agreement by Parent and
Purchaser or the performance by Parent and Purchaser of their obligations
hereunder or the consummation by Parent and Purchaser of the transactions
contemplated by this Agreement.
3.4 OFFER DOCUMENTS. None of the Offer Documents, nor any of the
information supplied by Parent and Purchaser for inclusion in the Directors'
Circular and the Schedule 14D-9, shall at the respective times the Directors'
Circular and the Schedule 14D-1 or the Offer Documents or any amendments or
supplements thereto are filed with the Canadian Securities Regulators or the
SEC, as the case may be, or are first published, sent or given to stockholders
or upon the expiration of the Offer, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein in the light
of the circumstances under which they were made not misleading (except for
information supplied by the Company for inclusion in the Directors' Circular,
the Schedule 14D-1 and the Offer Documents, as to which Parent and Purchaser
make no representation).
3.5 AVAILABLE FUNDS. Parent has or has available to it, and will make
available to Purchaser, all funds necessary to satisfy all of Parent's and
Purchaser's obligations under this Agreement and in connection with the
transaction contemplated hereby, including, without limitation, the obligation
to purchase all outstanding Shares pursuant to the Offer and to pay all related
fees and expenses in connection with the Offer.
3.6 AGREEMENTS CONTRACTS AND COMMITMENTS. Neither the Parent nor the
Purchaser is party to any agreement, contract or commitment that would be
breached or violated by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereunder or would be reasonably
expected to cause any third party to seek injunctive relief with respect to the
transactions contemplated hereunder.
26
-23-
ARTICLE IV
COVENANTS
4.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the time Purchaser takes up and pays for the
Shares (the "EFFECTIVE TIME"), the Company (which for the purposes of this
Article 4 shall include the Company and each of its subsidiaries) agrees, except
to the extent that Parent shall otherwise consent in writing, to carry on its
business in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance with all applicable laws and
regulations, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others with which it has business dealings. In addition, the Company will
promptly notify Parent of any breach of its representations, warranties or
covenants under this Agreement.
In addition, except as permitted by the terms of this Agreement (other
than as provided in Article 4.1 of the Company Schedules), without the prior
written consent of Parent, the Company shall not do any of the following, and
shall not permit any of its subsidiaries to do any of the following:
(i) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or restricted stock, or reprice
options granted under any employee, consultant or director stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(ii) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(iii) Transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company's
intellectual property or other proprietary rights, or enter into grants to
future patent rights, other than in the ordinary course of business, consistent
with past practice;
(iv) Buy any Intellectual Property of a third party or enter into
any license agreement with respect to the Intellectual Property of any third
party for an acquisition or license, the price for which exceeds $50,000
individually or in the aggregate, other than "shrink wrap", "click wrap"; and
similar widely available commercial end-user licenses;
(v) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any capital
stock or split, combine or reclassify any capital
27
-24-
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any capital stock.
(vi) Repurchase or otherwise acquire, directly or indirectly, any
shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date hereof.
(vii) Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than (i)
the issuance of Shares, pursuant to the exercise of stock options therefor
outstanding as of the date of this Agreement, and (ii) Shares issuable pursuant
to the Employee Share Purchase Plan;
(viii) Cause, permit or propose any amendments to any charter
document or Bylaw (or similar governing instruments of any subsidiaries);
(ix) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of the Company, or enter into
any joint ventures, strategic partnerships or alliances;
(x) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company, except in the ordinary course of business
consistent with past practice;
(xi) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire debt securities, or
guarantee any debt securities of others;
(xii) Adopt or amend any employee benefit or employee stock
purchase or employee option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director or employee, or increase
the salaries or wage rates of its officers or employees other than in the
ordinary course of business, consistent with past practice, or change in any
material respect any management policies or procedures;
(xiii) Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business;
(xiv) Make any grant of exclusive rights to any third party;
or
28
-25-
(xv) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement involving payments of $50,000 or
more to which the Company or any subsidiary thereof is a party or waive, release
or assign any material rights or claims thereunder;
(xvi) Materially revalue any of its assets or, except as required
by GAAP, make any change in accounting methods, principles or practices;
(xvii) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes in an amount in excess of $50,000 in the
aggregate;
(xviii) Commence any litigation or settle any litigation for an
amount in excess of the greater of $50,000 in the aggregate or the amount
reserved in respect thereof in the Company Balance Sheet, as set forth in
Section 4.1 of the Company Schedules;
(xix) Agree in writing or otherwise to take any of the actions
described in (i) through (xviii) above.
4.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to and in accordance with the terms and conditions of
that certain letter dated February 9, 1999 between Parent and the Company (the
"CONFIDENTIALITY AGREEMENT"), from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its subsidiaries, officers, directors,
employees and agents to, afford the officers, employees and agents of Parent,
Purchaser and their affiliates and the attorneys, accountants, banks, other
financial institutions and investment banks working with Parent or Purchaser,
and their respective officers, employees and agents, reasonable access at all
reasonable times and on reasonable prior notice to its officers, employees,
agents, properties, books, records and contracts, and shall furnish Parent,
Purchaser and their affiliates and the attorneys, banks, other financial
institutions and investment banks working with Parent or Purchaser, all
financial, operating and other data and information as they reasonably request.
(b) Subject to the requirements of law, Parent and Purchaser
shall, and shall require their officers, employees and agents, and the
attorneys, banks, other financial institutions and investment banks who obtain
such information to, hold all information obtained pursuant to this Agreement or
the Confidentiality Agreement in accordance with the terms and conditions of the
Confidentiality Agreement.
(c) No investigation pursuant to this Section 4.2 shall affect
any representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
4.3 NO SOLICITATION; BREAK-UP FEE.
29
-26-
(a) From and after the date of this Agreement until the earlier
of the Effective Time or termination of this Agreement pursuant to its terms,
the Company and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or encourage submission
of, any proposals or offers by any person, entity or group (other than Parent
and its affiliates, agents and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. For the purposes of this Agreement, an "ACQUISITION PROPOSAL"
with respect to an entity means any proposal or offer relating to (i) any
merger, consolidation, sale of substantial assets, plan or arrangement,
reorganization, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transactions involving the entity or any
subsidiaries of the entity (other than sales of assets or inventory in the
ordinary course of business or as permitted under the terms of this Agreement),
(ii) sale of outstanding shares of capital stock of the entity (including
without limitation by way of a tender offer or an exchange offer), (iii) the
acquisition by any person of beneficial ownership or a right to acquire
beneficial ownership of, or the formation of any "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
which beneficially owns, or has the right to acquire beneficial ownership of,
10% or more of the then outstanding shares of capital stock of the entity; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. The Company will
immediately cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
Company will (i) notify Parent as promptly as practicable if any inquiry or
proposal is made or any information or access is requested in connection with an
Acquisition Proposal or potential Acquisition Proposal and (ii) as promptly as
practicable notify Parent of the terms and conditions of any such Acquisition
Proposal. In addition, subject to the other provisions of this Section 4.3(a),
from and after the date of this Agreement until the earlier of the Effective
Time and termination of this Agreement pursuant to its terms, the Company and
its subsidiaries will not, and will instruct their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, make or authorize any public statement,
recommendation or solicitation in support of any Acquisition Proposal made by
any person, entity or group (other than Parent).
(b) Notwithstanding the provisions of paragraph (a) above, prior
to consummation of the Offer, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (c), below, furnish information to any
person, entity or group after such person, entity or group has delivered to the
Company in writing, an unsolicited bona fide Acquisition Proposal which the
Board of Directors of the Company in its good faith reasonable judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable than the Offer to the stockholders of the
Company from a financial point of view and for which financing, to the extent
required, is then committed or which, in the good faith reasonable judgment of
the Board of Directors of the Company (based upon the advice of independent
financial
30
-27-
advisors), is reasonably capable of being financed by such person, entity or
group and which is likely to be consummated (a "SUPERIOR PROPOSAL"). In the
event the Company receives a Superior Proposal, nothing contained in this
Agreement (but subject to the terms hereof) will prevent the Board of Directors
of the Company from recommending such Superior Proposal to the Company's
stockholders, provided that (i) the Board determines, in good faith, after
consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law; (ii) the Company shall not recommend to
its stockholders a Superior Proposal until at least 48 hours after Parent's
receipt of a copy of such Superior Proposal (or a description of the terms and
conditions thereof, if not in writing), and (iii) the Company shall not
recommend to its stockholders a Superior Proposal unless the Company shall have
terminated this Agreement and paid the Break-up Fee pursuant to Section
5.1(d)(ii). Recommendation of a Superior Proposal in accordance with this
Section 4.3(b) shall not constitute a breach of this Agreement.
(c) Notwithstanding anything to the contrary herein, the Company
will not provide any non-public information to a third party unless: (x) the
Company provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (y)
such non-public information has been previously delivered to Parent.
(d) Nothing contained in this Section 4.3 shall prohibit the
Company from at any time taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Company Board, after consultation with outside counsel, failure so to
disclose would constitute a breach of its fiduciary duties to the Company's
stockholders under applicable law; provided, however, that neither the Company
nor its Board of Directors nor any committee thereof shall, except as permitted
by Section 4.3(b), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Acquisition or this Agreement or approve or
recommend, or propose to approve or recommend, an Acquisition Proposal;
provided, further, that the taking of a position by the Company pursuant to Rule
14e-2(a)(2) or (3) of the Exchange Act in respect of an Acquisition Proposal
shall not be deemed a withdrawal, a modification or a proposal to withdraw or
modify its position with respect to the Acquisition for purposes hereof.
4.4 PUBLIC ANNOUNCEMENTS. Parent and Purchaser on the one hand and the
Company on the other hand will consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the Acquisition or the other transactions contemplated hereby, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law. This Section 4.4 shall supersede
any conflicting provisions in the Confidentiality Agreement.
4.5 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice (which notice shall
state that it is delivered pursuant to Section 4.5(a) of this Agreement) in
writing to Parent, and Parent and Purchaser shall give prompt notice in writing
to the Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time
31
-28-
from the date of this Agreement through the Effective Time and (ii) any failure
of the Company, Parent or Purchaser, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy in all material
respects any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement; provided, however, no such notification shall affect
the representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing (which notice
shall state that it is delivered pursuant to Section 5.6(b) of this Agreement)
to Parent of (i) any act, omission to act, event or occurrence which, with the
passage of time or otherwise, would likely have a Material Adverse Effect on the
Company and (ii) any material contingent liability of the Company or any of its
subsidiaries for which such party reasonably believes it will, with the passage
of time or otherwise, become liable; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties hereunder.
4.6 ACTIONS BY COMPANY. Subject to the terms and conditions hereof, the
Company shall, and shall cause its subsidiaries to, cooperate with Parent and
Purchaser and take all such actions as may be reasonably requested by Parent and
Purchaser to accomplish the Acquisition.
4.7 OFFICERS' AND DIRECTORS' INDEMNIFICATION; INSURANCE.
(a) Parent agrees that from and after the Effective Time all
rights to indemnification or exculpation now existing in favor of the officers
and directors of the Company (collectively, the "Indemnified Parties") as
provided in its Certificate of Incorporation, Bylaws or the CBCA, shall survive
the Offer and shall continue in full force and effect for a period of six years
from the Effective Time.
(b) On or prior to the Effective Time, Parent shall cause the
Company to obtain six years "tail" coverage under the Company's existing
directors' and officers' liability insurance covering the Indemnified Parties
who are currently covered by such insurance, on terms and conditions no less
favorable to such directors and officers than those in effect on the date
hereof, provided that in no event shall Parent or the Company be required to
expend for such tail coverage more than 150% of the current year's annual
premium, net of premium credits available.
4.8 ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions hereof, each of the
parties to this Agreement agrees to use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement and to cooperate with each other
in connection with the foregoing.
(b) Subject to the terms and conditions hereof, each of the
parties to this Agreement agrees to use (i) all reasonable efforts to obtain all
necessary waivers, consents and approvals from other parties to loan agreements,
leases, licenses and other contracts, and (ii) all
32
-29-
reasonable efforts to obtain all necessary consents, approvals and
authorizations as required to be obtained under any Canadian federal, provincial
or local laws, any U.S. federal, state or foreign law or regulations, including,
but not limited to, those required under the Competition Act, the Investment
Canada Act and the HSR Act, to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, to lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, to effect all necessary registrations and filings,
including, but not limited to, filings under the Competition Act, the Investment
Canada Act, HSR Act and submissions of information requested by Governmental
Entities, and to fulfill all conditions to this Agreement.
4.9 OTHER ACTIONS BY THE COMPANY. If any "fair price," "moratorium,"
"control share acquisition," "shareholder protection" or other form of
anti-takeover statute, regulation or charter provision or contract is or shall
become applicable to the Offer or the transactions contemplated hereby, the
Company and the Board of Directors of the Company shall grant such approvals and
take such actions as are necessary under such laws and provisions so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute, regulation, provision or contract on the transactions
contemplated hereby.
4.10 COMPANY OPTIONS.
(a) Immediately upon expiration of the Offer and acceptance of
the Shares for payment, either (i) the Company will terminate the Option Plan
and other outstanding options after giving all optionees the required notice of
termination and permitting them to exercise all options, vested and unvested, on
a net excercise basis, or (ii) if requested by Parent, the Company will cancel
each outstanding option, whether vested or unvested, in exchange for cash
payments equal to the Offer Price minus the exercise price per share of such
option, multiplied by the number of shares subject to the Option, which cash
payment shall be reduced by any applicable withholding taxes and be without
interest.
(b) Parent and Purchaser will cause the Company to terminate the
Employee Share Purchase Plan (the "Purchase Plan") as of the date of the
Subsequent Acquisition Transaction. At such time, each participant in the
current offering period under the Purchase Plan will be paid an amount equal to
Offer Price minus the purchase price of shares in the current offering period
(Can. $4.00), multiplied by the number of shares that would have been purchased
by them under the Purchase Plan if it had remained in effect through December
31, 1999. No offering period will be commenced under the Purchase Plan covering
any period after 1999, whether or not the Subsequent Acquisition Transaction
occurs after December 31, 1999.
4.11 STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to any of the
transactions contemplated by this Agreement until the purchase of Company Common
Stock pursuant to the Offer, and thereafter, shall give Parent the opportunity
to direct the defense of such litigation and, if Parent so chooses to direct
such litigation, Parent shall give the Company and its directors an opportunity
to participate in such litigation; provided,
33
-30-
however, that no settlement of such litigation shall be agreed to without
Parent's consent; and provided further that no settlement requiring a payment by
a director shall be agreed to without such director's consent.
ARTICLE V
TERMINATION, AMENDMENT AND WAIVER
5.1 TERMINATION. This Agreement may be terminated, at any time prior to
the Effective Time, whether before or after approval by the stockholders of the
Company:
(a) by mutual written agreement of the Boards of Directors of Parent
and the Company;
(b) by either Parent or the Company:
(i)if the Offer shall be terminated or expire without any Shares
having been purchased pursuant to the Offer; provided, however, that a party
shall not be entitled to terminate this Agreement pursuant to this Section
5.1(b)(i) if it is in material breach of its representations and warranties,
covenants or other obligations under this Agreement; or
(ii) if any court of competent jurisdiction in Canada or the
United States or other Canadian or United States governmental body shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Offer and such order, decree, ruling or
other action shall have become final and nonappealable;
(c) by Parent:
(i)if the Board of Directors of the Company or any committee
thereof shall have approved, or recommended that stockholders of the Company
accept or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified its approval of, or recommendation that
the stockholders of the Company accept the Offer or shall have resolved to do
any of the foregoing;
(iii) if the Company shall have failed to include in the
Directors' Circular and Schedule 14D-9 the recommendation of the Board of
Directors of the Company that the stockholders of the Company accept the Offer;
(iv) prior to the purchase of Shares pursuant to the Offer, in
the event that the conditions to the Offer set forth in clause (i) or (ii) of
Annex I shall not be satisfied or if any of the events set forth in clause (iii)
thereof shall have occurred; or
(v)if the Company is in material breach of any of its covenants
or obligations under this Agreement, or any representation or warranty of the
Company contained in
34
-31-
this Agreement shall have been incorrect, in any material respect, when made or
shall have since ceased to be true and correct in any material respect;
(d) by the Company
(i)if the Offer shall not have been commenced in accordance with
Section 1.1, or Parent or Purchaser shall have failed to take up and pay for
validly tendered Shares in violation of the terms of the Offer within ten days
after the expiration of the Offer; provided, however, that the Company shall not
be entitled to terminate this Agreement pursuant to this Section 5.1(d)(i) if it
is in material breach of its representations and warranties, covenants or other
obligations under this Agreement;
(ii) if the Board of Directors of the Company has resolved to,
and in fact does, recommend to the Company's Stockholders that they accept a
Superior Proposal, provided that all the provisions of Section 4.3 have been
fully complied with, and provided further that the Company shall have paid to
Parent the entire Break-up Fee as provided in Section 5.3 (b); or
(iii) prior to the purchase of Shares pursuant to the Offer, if
Parent or Purchaser is in material breach of any of its covenants or obligations
under this Agreement, or any representation or warranty of Parent or Purchaser
contained in this Agreement shall have been incorrect, in any material respect,
when made or shall have since ceased to be true and correct in any material
respect.
5.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement by the Company
or Parent or both of them pursuant to Section 5.1, the terminating party shall
provide written notice of such termination to the other party and this Agreement
shall forthwith become void and there shall be no liability on the part of
Parent, Purchaser or the Company, except as set forth in this Section 5.2 and in
Sections 4.2(b) and 5.3, The foregoing shall not relieve any party for liability
for damages actually incurred as a result of any breach of this Agreement.
Sections 4.2(b), 5.2, 5.3 and Article VI shall survive the termination of this
Agreement.
5.3 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement and whether or
not the transactions contemplated by the Offer and this Agreement are
consummated, all costs and expenses incurred in connection with the transactions
contemplated by the Offer and this Agreement shall be paid by the party
incurring such expenses.
(b) The Company shall pay to Parent, in same day funds, upon demand,
a fee of $2,500,000 (the "BREAK-UP FEE"), if any of the following shall occur:
(i)if the Board of Directors of the Company or any committee
thereof shall have approved, or recommended that stockholders of the Company
accept or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
35
-32-
(ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified its approval of, or recommendation that
the stockholders of the Company accept or approve (as the case may be), the
Offer or shall have resolved to do any of the foregoing; or
(iii) if the Company shall have failed to include in the
Directors' Circular and the Schedule 14D-9 the recommendation of the Board of
Directors of the Company that the stockholders of the Company accept the Offer.
(c) The Break-up Fee shall not be deemed to be liquidated damages,
and the right to the payment of the Break-up Fee shall be in addition to (and
not a maximum payment in respect of) any other damages or remedies at law or in
equity to which Parent or Purchaser may be entitled as a result of the Company's
violation or breach of any term or provision of this Agreement.
5.4 AMENDMENT. This Agreement may be amended by each of the parties by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that (i) such amendment shall be
in writing signed by all of the parties, and (ii) any such waiver, amendment or
supplement by the Company shall be effective as against the Company only if
approved by a majority of the Continuing Directors.
5.5 WAIVER. At any time prior to the Effective Time, any party hereto,
by action taken by its Board of Directors, may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto or
(ii) subject to the provisions of Section 5.4, waive compliance with any of the
agreements of any other party or with any conditions to its own obligations. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party by a duly authorized officer of such party. Notwithstanding the above, any
waiver given shall not apply to any subsequent failure of compliance with
agreements of the other party or conditions to its own obligations.
ARTICLE VI
MISCELLANEOUS
6.1 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
6.2 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given, or made
as of the date delivered if sent via telecopier or delivered personally
(including, without limitation, delivery by commercial carrier warranting
next-day delivery) to the parties at the following addresses (or at such other
address for a
36
-33-
party as shall be specified by similar notice, except that notices of changes of
address shall be effective upon receipt):
(a) If to Parent or Purchaser:
NetManage, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
With copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Ogilvy, Renault
Suite 1600
▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
NetManage Bid Co.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Financial Officer
37
-34-
(b) If to the Company:
Simware Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
With copies to:
Fraser ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
6.3 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; NO ASSIGNMENT. This
Agreement, Annex I, the documents delivered pursuant hereto or in connection
herewith, and the Confidentiality Agreement (i) constitute the entire agreement
and supersede all other prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof, (ii) are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder (except as expressly set forth in
Section 4.7 with respect to present officers and directors of the Company), and
(iii) may not be assigned, except that Parent or Purchaser may assign their
rights hereunder in whole or in part to one or more direct or indirect
subsidiaries or affiliates of Parent which, in written instruments reasonably
satisfactory to the Company, shall agree to make all representations and
warranties of Purchaser set forth herein and shall agree to assume all of such
party's obligations hereunder and be bound by all of the terms and conditions of
this Agreement; provided, however, that no such assignment shall relieve the
assignor of its obligations hereunder.
6.4 INTERPRETATION; KNOWLEDGE.
(i) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
38
-35-
When reference is made herein to "THE BUSINESS OF" an entity, such reference
shall be deemed to include the business of all direct and indirect subsidiaries
of such entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "KNOWLEDGE" means,
with respect to any matter in question, that any of the Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer or Controller (or principal
accounting officer if different from the foregoing) of the parties, as the case
may be, have actual knowledge of such matter.
(iii) All references in this Agreement to "dollars" or "$" shall
refer to United States Dollars unless otherwise indicated.
6.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
6.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the Northern District of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served upon
them in any manner authorized by the laws of the State of California for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
6.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
39
-36-
6.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
*****
40
-37-
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
NETMANAGE, INC.
By:
---------------------------------
▇▇▇ ▇▇▇▇, Chief Executive Officer
NETMANAGE BID CO.
By:
---------------------------------
▇▇▇ ▇▇▇▇, Chief Executive Officer
SIMWARE INC.
By:
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, President and
Chief Executive Officer
*****SIGNATURE PAGE -- ACQUISITION AGREEMENT *****
41
ANNEX I
CONDITIONS OF THE OFFER
The term "AGREEMENT" as used in this Annex I shall mean the Acquisition
Agreement to which this Annex I is attached, and all capitalized terms used in
this Annex I and not defined in this Annex I shall have the respective meanings
set forth in the Agreement.
Notwithstanding any other provision of the Offer, and in addition to
(and not in limitation of) Purchaser's rights to extend and amend the Offer at
any time in accordance with the terms of the Agreement, Purchaser shall not be
required to accept for payment, purchase or pay for and Purchaser may elect to
terminate or amend the Offer and to postpone the acceptance of, and payment for,
subject to compliance with Canadian Securities Laws and Rule 14e-1(c) under the
Exchange Act (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer), any Shares tendered pursuant to the
Offer if:
(i) any waiting period (and any extension thereof) under the
Competition Act and Investment Canada Act applicable to the purchase of Shares
pursuant to the Offer shall not have expired or been terminated;
(ii) the Minimum Condition is not satisfied; or
(iii) at any time on or after the date of the Agreement, any of
the following events shall have occurred:
(A) there shall have been any action taken or threatened,
or any statute, rule, regulation, judgment, temporary restraining order,
preliminary or permanent injunction or other order, decree or ruling proposed,
sought, promulgated, enacted, entered, enforced or deemed applicable to the
Offer by any Governmental Entity or arbitration panel that could reasonably be
expected to, directly or indirectly, (1) make the acceptance for payment or the
payment for, or the purchase of some or all of the Shares pursuant to the Offer
illegal or otherwise delay, restrict or prohibit consummation of the Offer, (2)
result in a delay in or restrict the ability of Purchaser, or render Purchaser
unable, to accept for payment, pay for or purchase some or all of the Shares,
(3) require the divestiture by Parent, Purchaser, the Company or any of their
respective subsidiaries or affiliates of all or any portion of the business,
assets or property of any of them or any Shares or impose any material
limitation on the ability of any of them to conduct their business and own such
assets, properties or Shares, (4) impose any material limitation on the ability
of Parent, Purchaser or their affiliates to acquire or hold or to exercise
effectively all rights of ownership of the Shares, including the right to vote
any Shares purchased by any of them on all matters properly presented to the
stockholders of the Company, (5) result in a material diminution in the benefits
expected to be derived by Parent or Purchaser as a result of the transactions
contemplated by the Offer or the Agreement, or (6) impose any material condition
to the Offer or the Agreement unacceptable to Parent or Purchaser; or
42
-2-
(B) the Company shall have breached, or failed to comply
with, in any material respect, any of its covenants or obligations under the
Agreement or any representation or warranty of the Company in the Agreement
shall have been incorrect, in any material respect, when made or shall have
since ceased to be true and correct in any material respect; or
(C) the Board of Directors of the Company or any committee
thereof shall have (1) withdrawn or modified (including without limitation, by
amendment of the Directors' Circular or the Schedule 14D-9) in a manner adverse
to Parent or Purchaser its approval or recommendation of the Offer, (2) approved
or recommended any Acquisition Proposal by a third party other than the Offer,
(3) publicly resolved to do any of the foregoing, or (4) upon a request to
reaffirm the Company's approval or recommendation of the Offer, the Board of
Directors of the Company shall fail to do so within two business days after such
request is made; or
(D) the Agreement shall have been terminated in accordance
with its terms, or the Offer shall have been terminated with the consent of the
Company; or
(E) there shall have occurred any Material Adverse Effect
on the Company, or any event, fact or change which could reasonably be expected
to result in a Material Adverse Effect on the Company.
The foregoing conditions are for the sole benefit of Parent, Purchaser
and their affiliates and may be asserted by Parent or Purchaser regardless of
the circumstances giving rise to such condition, or may be waived by Parent or
Purchaser in whole or in part at any time and from time to time in the sole
discretion of Parent or Purchaser. The failure by Parent or Purchaser at any
time, to exercise its rights with respect to the foregoing conditions shall not
be deemed a waiver of any such condition, and each condition shall be deemed an
ongoing condition with respect to which Parent or Purchaser may assert its
rights at any time and from time to time.
43
1
COMPANY SCHEDULES
SCHEDULE 2.5 SECURITIES FILINGS; THE COMPANY FINANCIAL STATEMENTS
1. Copies of pre-1997 securities filings have not been specifically
provided to the Parent. Copies are available upon request.
SCHEDULE 2.7 TAXES
(ii) Tax Returns and Audits
A Revenue Canada audit for 1994 and 1995 has been completed. The Company
is appealing the assessment but all amounts payable under the assessment have
been recorded in the books of the Company. The Ministry of Finance (Ontario) has
proposed adjustments based on its audit of 1994 and 1995 to parallel the Revenue
Canada assessment. The Ministry of Finance (Ontario) has also informed the
Company that it intends to conduct an audit for 1996 and 1997.
There is an outstanding assessment by the Ministry of Finance (Ontario)
in respect of Ontario Retail Sales Taxes involving approximately $144,000 (see
Tab 17 of Disclosure Binders). The potential liability was paid from cash and
fully expensed in 1997.
SCHEDULE 2.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES
(i) List of real property owned by the Company.
Nil.
List of real property leases to which Company is a party, and each
amendment thereto.
(a) Lease agreement between 841037 Ontario Limited, as lessor, and
Simware Inc., as lessee, signed on January 31, 1992, for the
lease of premises located at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
expiring on October 31, 2004.
(b) Lease agreement between Guardian Assurance PLC, as lessor, and
Simware Limited, as lessee, signed on June 23, 1997, for the
lease of ▇▇▇▇▇
▇▇
▇
▇▇ ▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ Wing, Centennial Court,
Easthampstead Road, Bracknell, Berkshire, UK, expiring on June
23, 2002.
(c) Lease agreement between Guardian Assurance PLC, as lessor, and
Simware Limited, as lessee, for the lease of Suite C5, Centennial
Court, First Floor South Wing, Easthampstead Road, Bracknell,
Berkshire, UK expiring on November 29, 2003.
(d) Lease agreement between Mechelen Pand N.V., as lessor, and
Simware Ltd., as lessee, signed on May 28, 1999, for the lease of
2800 Mechelen, Generaal de Wittelaan, Intercity Business Park,
Mechelen, Belgium, expiring on June 30, 2008, and with either
party having the ability to terminate the lease at each of July
1, 2002 and July 1, 2005.
(e) Lease agreement between HQ Global Workplaces, Inc., as lessor,
and Simware Inc., as lessee, signed on August 11, 1999, for the
lease of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ #▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, U.S.A., expiring on
August 31, 2000.
(f) Lease and service agreement between American Executive Centers,
Inc., as lessor, and Simware Inc., as lessee, for the lease of
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, Office #55, King of Prussia,
Pennsylvania, 19406, U.S.A., expiring
on June 20, 2000.
(ii) Liens
(a) General Security Agreement in favour of the Royal Bank of Canada.
(b) Security interest in favour of Hewlett-Packard (Canada) Ltd. in
respect of equipment and other.
(c) Security interest in favour of AT&T Capital Canada, Ltd. in
respect of equipment and other.
(d) Security interest in favour of AT&T Capital Canada, Ltd. in
respect of equipment and other.
(e) Security interest in favour of MTC Leasing Inc. in respect of a
projector, number 14459-47577.
45
3
2.9 INTELLECTUAL PROPERTY
(i) List of all Registered Intellectual Property owned by, or filed in the
name of, the Company (the "Company Registered Intellectual Property").
REGISTERED TRADE-MARKS
* Due to administrative delays in indexing new correspondence and applications
at the various trade-▇▇▇▇ offices, the information available to us in
compiling these tables may not include correspondence filed by third parties
within the past 1-3 months, as such information may not be available for
public inspection.
CANADA
TAB TRADE-▇▇▇▇ REG. NO. REG. DATE RENEWAL DUE
--- ------------------- -------- --------- -----------
1. SIMPC 377,480 Dec. 21, 1990 Dec. 21, 2005
2. SIM 3278 377,762 Dec. 28, 1990 Dec. 28, 2005
3. SIMWARE 377,879 Jan. 11, 1991 Jan. 11, 2006
4. SIM/DIALOUT 379,850 Feb. 15, 1991 Feb. 15, 2006
5. SIM ACCESS 379,866 Feb. 15, 1991 Feb. 15, 2006
6. SIM SESSION 379,867 Feb. 15, 1991 Feb. 15, 2006
7. SIMMAC 392,407 Dec. 27, 1991 Dec. 27, 2006
8. MAC3270 395,719 Mar. 13, 1992 Mar. 13, 2007
9. SPLITSECOND 402,858 Sept. 18, 1992 Sept. 18, 2007
10. SIMPC MASTER 405,043 Nov. 20, 1992 Nov. 20, 2007
11. SECOND LOOK 409,550 Mar. 12, 1993 Mar. 12, 2008
12. A 2 B 409,551 Mar. 12, 1993 Mar. 12, 2008
13. SIMHLLAPI 431,591 Aug. 5, 1994 Aug. 5, 2009
14. REXXWARE 439,282 Feb. 10, 1995 Feb. 10, 2010
15. YOU CAN GET THERE 478,930 July 23, 1997 July 23, 2012
FROM HERE
16. SALVO CONNECT 488,885 Jan. 30, 1998 Jan. 30, 2013
17. SALVO 489,004 Feb. 2, 1998 Feb. 2, 2013
18. SALVO VISTA 495,820 June 10, 1998 June 10, 2013
19. SALVO IMPACT 506,382 Jan. 12, 1999 Jan. 12, 2014
20. INFORMATION OBJECTS 510,550 April 8, 1999 April 8, 2014
21. INFORMATION RULES 513,624 July 29, 1999 July 29, 2014
46
4
UNITED STATES OF AMERICA
TAB TRADE-▇▇▇▇ REG. NO. REG. DATE RENEWAL DUE
--- ---------- -------- --------- -----------
22. SIM 3278 1,335,173 May 14, 1985 Renewal Due Date: May 14, 2005
23. SIMWARE 1,435,322 April 7, 1987 Renewal Due Date: April 7, 2007
24. SIMMAC 1,657,279 Sept. 17, 1991 Renewal Due Date: Sept. 17, 2001
25. SPLITSECOND 1,658,088 Sept. 24, 1991 Renewal Due Date: Sept. 24, 2001
26. A 2 B 1,842,285 June 28, 1994 Section 8 Declaration due
Due Date: June 28, 2000;
Renewal Due Date: June 28, 2004
27. SECOND LOOK 1,843,505 July 5, 1994 Section 8 Declaration due
Due Date: July 5, 2000;
Renewal Due Date: July 5, 2004
28. REXXWARE 2,010,636 Oct. 22, 1996 Section 8 Declaration due
Due Date: Oct. 22, 2002;
Renewal Due Date: Oct. 22, 2006
29. SALVO 2,272,564 August 24, 1999 Section 8 Declaration due
Due Date: Aug. 24, 2005;
Renewal Due Date: ▇▇▇. ▇▇, ▇▇▇▇
▇▇▇▇▇▇
TAB TRADE-▇▇▇▇ REG. NO. REG. DATE RENEWAL DUE
--- ---------- -------- --------- -----------
30. SIMWARE 1,642,954 Nov. 21, 1990 Nov. 21, 2000
31. REXXWARE 94 528,044 July 7, 1994 July 7, 2004
47
5
GERMANY
TAB TRADE-▇▇▇▇ REG. NO. REG. DATE RENEWAL DUE
--- ---------- -------- --------- -----------
32. REXXWARE 2 903 572 Mar. 23, 1995 July 8, 2004
33. SALVO 396 30 Oct. 22, 1996 July 31, 2006
UNITED KINGDOM
TAB TRADE-▇▇▇▇ REG. NO. REG. DATE RENEWAL DUE
--- ---------- -------- --------- -----------
34. REXXWARE 1,577,620 Feb. 21, 1997 July 7, 2001
35. SALVO 2,104,674 July 9, 1996 July 9, 2006
EUROPE
TAB TRADE-▇▇▇▇ REG. NO. REG. DATE RENEWAL DUE
--- ---------- -------- --------- -----------
36. SALVO 364,588 June 16, 1998 August 31, 2006
REGISTERED PATENTS
1. Title: "Method for High Speed Data Transfer"
CANADIAN REGISTRATION:
Patent Number: 2019131
Date Granted and Issued: October 29, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ REGISTRATION:
Patent Number: 5,086,402
Date Granted and Issued: February 4, 1992
48
6
(ii) Other than the trade-▇▇▇▇ Oppositions and Section 45 actions to which
Simware Inc. is a party (as disclosed in the following tables), there
are no other proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office ("PTO") or
equivalent authority anywhere in the world) related to any Company
Intellectual Property.
PROCEEDINGS INITIATED BY THE CORPORATION
I. OPPOSITIONS BY SIMWARE INC.
CANADA (ACTIVE)
TRADE-▇▇▇▇ & SERIAL NO. STATUS OF
TAB APPLICANT & FILING DATE OPPOSITION
--- ---------------- ------------- ----------
65. OSIM & Design 855,156 Rule 42 evidence due
Originalsim Inc. September 4, 1997 Applicants deadline:
October 19, 1999
66. ORIGINALSIM 847,228 Rule 42 evidence due
Originalsim Inc. June 6, 1997 Applicants deadline:
October 19, 1999
67. SIMEX 848,389 Rule 41 evidence due
ANDREAS RU(beta) June 18, 1997 Opponent's deadline:
November 28, 1999
II. SECTION 45 PROCEEDINGS BY SIMWARE INC.
CANADA
TRADE-▇▇▇▇ &
TAB OWNER REG. NO. STATUS
---- ------------------- -------- ------
78. PETRO SIM & Design 360,876 Registration expunged
Petro Simulator Systems Inc. February 11, 1994
79. INSITE 407,462 Registration expunged
Silcom Research Limited July 22, 1999
49
7
PROCEEDINGS INITIATED AGAINST THE CORPORATION
Nil.
(v) Other than as disclosed below, searches of Simware Inc.'s records and of
the records of the Canadian Intellectual Property Office, Trade-▇▇▇▇
▇▇▇▇▇▇, confirmed that Simware Inc. owns and has good exclusive title to
each item of intellectual property, including all Company registered
intellectual property listed on the aforementioned tables, free and
clear of any lien or encumbrance and in particular, that Simware Inc. is
the exclusive owner of all trade-marks used in connection with the
operation and conduct of the business of the Company.
1. The General Security Agreement in favour of the Royal Bank of
Canada extends to intellectual property.
(viii) Third parties to which the Company has transferred ownership of, or
granted any exclusive license with respect to, any Intellectual Property
that is or was Company Intellectual Property.
Nil.
(ix) Material contracts, licenses and agreements to which the Company is a
party:
(i) With respect to Company Intellectual Property licensed or
transferred to any third party.
1. In the ordinary course of business, the Company licenses
the use of its Intellectual Property to third parties.
(ii) Pursuant to which a third party has licensed or transferred any
Intellectual Property to the Company with a potential value or
cost greater than $10,000.
1. OEM Software License Agreement between RSA Data Security
Inc. and Simware Inc., dated October 5, 1992.
50
8
2. OEM Customer Agreement between Microdyne Corporation and
Simware Inc., dated September 30, 1994.
3. OEM License and Distribution Agreement between ▇▇▇▇
Technologies Inc. and Simware Inc., dated May 3, 1995.
4. OEM License Agreement between The Wollongong Group Inc.
and Simware Inc., dated June 30, 1994.
5. VAR License Agreement between Visigenic Software, Inc. and
Simware Inc., dated June 28, 1996.
6. OEM Software License Agreement between Relay Technology
Inc. and Simware Inc., dated May 31, 1996.
7. Partner Subscription License between DartCom Incorporated
and Simware Inc., dated March 12, 1997.
8. Reseller Agreement between MetaInfo, Inc. and Simware
Inc., dated June 30, 1998.
9. License Agreement between Monotype Typography, Inc. and
Simware Inc., dated August 8, 1994.
10. OEM Software Program License Agreement between Mortice
▇▇▇▇ Systems Inc. and Simware Inc., dated October 14,
1997.
11. Software License Agreement between NeoLogic Systems, Inc.
and Simware Inc.
12. License Agreement between ▇▇▇▇ ▇▇▇▇▇▇▇▇ and Simware Inc.,
dated February 6, 1997.
13. License Agreement between ▇▇▇ ▇▇▇▇▇▇ Software Corporation
and Simware Inc., dated April 23, 1999.
51
9
Agreements pursuant to which the Company has licensed any Company
Intellectual Property or products to any third party that differ
in any material respect from its standard form.
1. Nil, other than licenses to U.S. and Canadian Governments
which are completed in accordance with their standard
procurement practices.
(xi) Contracts, licenses and agreements between the Company and any third
party whereby the Company has agreed to indemnify, warrant, hold
blameless, etc. any misappropriation or infringement by the Company or
third party of the Intellectual Property of any third party.
1. The Company's standard license agreement contains
intellectual property indemnification provisions.
(xiv) To the knowledge of the Company, infringement or misappropriation of
Company Intellectual Property by a Person.
Nil.
(xv) Claims related to any product or service of the Company.
Nil.
SCHEDULE 2.17 AGREEMENTS, CONTRACTS AND COMMITMENTS
(i) Letters of hire (and, in the case of ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, his employment
agreement) with the following individuals specify severance entitlements
on termination of employment:
1. ▇▇▇▇▇ ▇▇▇▇▇
2. ▇▇▇▇ ▇▇▇▇▇▇▇
3. ▇▇▇ ▇▇▇▇▇▇▇▇
4. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Greenwood)
5. ▇▇▇▇ ▇▇▇▇▇▇▇▇
52
10
6. ▇▇▇ ▇▇▇▇▇▇
7. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
8. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
9. ▇▇▇▇ ▇▇▇▇
(ii) Any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan, stock purchase plan or restricted
stock purchase agreement, any of which the benefits will be increased or
accelerated with the occurrence of the transaction contemplated.
1. Pursuant to the Employee Stock Option Plan, all options (vested
or unvested) will accelerate.
2. Pursuant to the Employee Share Purchase Plan, the Company intends
to permit employees to purchase their full 1999 entitlement prior
to closing.
(iii) Agreement of indemnification or guaranty.
Nil.
(iv) Agreement, contract or commitment containing a covenant limiting the
Company's or its subsidiaries' freedom to carry on business or to
compete with any person or to grant any exclusive distribution rights.
Nil.
(v) Agreement, contract or commitment currently in force relating to
disposition or acquisition of assets, etc.
Nil.
(vi) Any material joint marketing or development agreement.
- IBM Independent Software Vendor's Agreement dated September 29,
1998.
53
11
SCHEDULE 2.18 CHANGE OF CONTROL PAYMENTS
1. Agreement dated February 23, 1998 between the Company and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇.
2. Agreement dated March 25, 1998 between the Company and ▇▇▇▇ ▇▇▇▇▇▇▇.
3. Agreement dated February 23, 1998 between the Company and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇.
