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ACQUISITION AGREEMENT

Asset Purchase Agreement

ACQUISITION AGREEMENT | Document Parties: KRONOS INC | 4246659 Canada Inc. You are currently viewing:
This Asset Purchase Agreement involves

KRONOS INC | 4246659 Canada Inc.

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Title: ACQUISITION AGREEMENT
Governing Law: Massachusetts     Date: 10/12/2004
Industry: Software and Programming     Law Firm: Stikeman Elliott LLP     Sector: Technology

ACQUISITION AGREEMENT, Parties: kronos inc , 4246659 canada inc.
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EXHIBIT 2.1

ACQUISITION AGREEMENT

 

          THIS AGREEMENT dated as of October 5, 2004



AMONG:

 

          4246659 Canada Inc. , a corporation incorporated under the laws of Canada



 

         (the “ Purchaser ”)



 

          OF THE FIRST PART,



AND:

 

          KRONOS INCORPORATED , a corporation incorporated under the laws of The Commonwealth of Massachusetts



 

         (“ Purchaser Parent ”)



 

          OF THE SECOND PART,



AND:

 

          AD OPT TECHNOLOGIES INC. , a corporation incorporated under the laws of Canada



 

         (the “ Company ”)



 

          OF THE THIRD PART.



         WHEREAS the boards of directors of each of Purchaser Parent and the Purchaser has approved this Agreement and the transactions contemplated hereby;

         AND WHEREAS the board of directors of the Company (the “ Board ”) has approved this Agreement and the transactions contemplated hereby;

         AND WHEREAS the Purchaser has, concurrently with the execution of this Agreement, entered into an agreement with Crescendo Partner II, L.P. Series T which provides, among other things, that Crescendo Partner II, L.P. Series T will deposit under the Offer all Common Shares beneficially owned, either directly or indirectly, by it, including any Common Shares issuable upon the exercise of currently outstanding stock options or other rights granted by the Company to acquire Common Shares (collectively the “ AShares ”), subject only to certain exceptions set forth in such agreement;

         AND WHEREAS certain capitalized terms in this Agreement have the meanings ascribed thereto in this Agreement or in Schedule A , as appropriate;


         NOW THEREFORE , in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby Purchaser Parent, the Purchaser and the Company hereby agree as follows:

ARTICLE I
THE OFFER

1.1      Covenants of Purchaser Parent and the Purchaser

 

(a)

Timing – Purchaser Parent agrees to cause the Purchaser to make an offer (the “ Offer ”) on the terms set forth in Schedule B to all holders and for 100% of the Shares at a price of $6.25 per share as promptly as reasonably practical after the date hereof but in any event not later than October 20, 2004 (the “ Offer Deadline ”).



 

(b)

Offer Documents – Purchaser Parent and the Purchaser shall prepare the Offer, the take-over bid circular and the related letter(s) of transmittal and notice(s) of guaranteed delivery (collectively, the “ Offer Documents ”) with respect to the Offer in both English and French in compliance with all applicable provincial securities laws, rules and regulations and published policies thereunder (collectively, the “ Securities Laws ”). Prior to being mailed to holders of record of Shares (the “ Shareholders ”) and to holders of securities carrying the right to purchase Shares and filed with the Securities Authorities (as hereinafter defined), the Company and its counsel shall be given an opportunity to review the Offer Documents, which shall be delivered in accordance with the notice provisions of Section 6.3, and comment thereon. Purchaser Parent and the Purchaser shall provide the Company with a final copy of the Offer Documents to be mailed to all Shareholders prior to the mailing to Shareholders. Purchaser Parent shall cause the Purchaser to file the Offer Documents on a timely basis with the appropriate securities commissions and other regulatory authorities in Canada (the “ Securities Authorities ”). The Offer Documents, when filed with the Securities Authorities and mailed to the Shareholders, shall contain all information that is required to be included therein in accordance with the Securities Laws, and shall in all material respects comply with the requirements of the Securities Laws. The terms of the Offer shall comply with the terms of this Agreement. In making the Offer, Purchaser Parent and the Purchaser shall comply in all material respects with the provisions of the Securities Laws.



1.2      Approval of the Company

 

(a)

The Company hereby represents and warrants that the Board, after consultation with its advisers, by a resolution of such Board, and upon receiving the recommendation of the Special Committee of the Board, has unanimously: (i) determined that the Offer, including the price per Share offered pursuant to the Offer, is fair to the holders of the Shares and that this Agreement and the transactions contemplated hereby are in the best interests of the Company; (ii) approved this Agreement and the transactions contemplated hereby; and (iii) resolved to recommend that the Shareholders accept the Offer and tender their Shares to the Purchaser.

 




 

(b)

Subject to Section 4.4, the Company (i) shall prepare and make available to Purchaser Parent and the Purchaser, for mailing by the Purchaser, concurrently with the Offer Documents, sufficient copies of a directors’ circular (together with all amendments, supplements and exhibits thereto, the “ Directors’ Circular ”) in English and in French, which shall reflect the determinations and recommendation referred to in Section 1.2(a) together with a fairness opinion of TD Securities Inc. and (ii) shall take all reasonable action to support the Offer. The Company shall comply in all material respects with all Securities Laws in respect of the Offer. Prior to being mailed to Shareholders and filed with the Securities Authorities, Purchaser Parent, the Purchaser and their counsel shall be provided with a copy of the Directors’ Circular for their review and comment thereon, which shall be delivered in accordance with the notice provisions of Section 6.3. Each of Purchaser Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees to provide the other and their respective counsel in writing with any written comments, notices or communications either of them or their respective counsel may receive from the Securities Authorities with respect to the Offer, the Offer Documents and the Directors’ Circular promptly after the receipt of such comments.



ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PURCHASER PARENT AND THE PURCHASER

         Purchaser Parent and the Purchaser hereby jointly and severally (solidarily) represent and warrant to the Company that:

2.1      Corporate Organization

         Each of Purchaser Parent and the Purchaser is a company duly incorporated and validly existing under the laws of its jurisdiction of incorporation and has all necessary corporate power, authority, capacity and right to enter into this Agreement and complete the transactions contemplated by this Agreement.


2.2      Authority; Enforceability of Agreement

         Each of Purchaser Parent and the Purchaser has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of Purchaser Parent and the Purchaser, the performance by them of their respective obligations hereunder, and the consummation by them of the transactions contemplated hereby have been duly and validly authorized and no other corporate proceedings on the part of Purchaser Parent or the Purchaser are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Purchaser Parent and the Purchaser and, assuming the due and valid authorization, execution, and delivery of this Agreement by the Company, constitutes a legally valid and binding agreement enforceable by the Company against them in accordance with its terms, subject, however, to the usual limitations with respect to enforcement imposed by law in connection with bankruptcy or similar proceedings and the availability of equitable remedies.

2.3      Conflicting Provisions

         Neither Purchaser Parent nor the Purchaser is, and at the date of the Offer and the Effective Time will not be, a party to, bound or affected by or subject to, and none of their respective properties or assets are, and at the date of the Offer and the Effective Time none will be, bound or affected by or subject to, any agreement, charter or by-law provision, statute, regulation, judgment, order, decree, Law, note, bond, mortgage, indenture, contract, lease, license, permit, franchise or other instrument or obligation that would be violated, contravened, breached by, or under which default would occur as a result of, or that would give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, or the creation of any Lien on any of the properties or assets of Purchaser Parent or the Purchaser as a result of, the execution and delivery of this Agreement, the performance of their respective obligations hereunder, and the consummation of the transactions contemplated hereby and which default, violation, contravention or breach would materially impair or would prevent them from consummating the transactions contemplated hereby.

2.4      Consents

         No consent, waiver, approval, authorization, permit, exemption, registration, licence or declaration of or by, or filing (other than pursuant to the Securities Laws) with, or notification to any domestic, foreign or supranational government or subdivision thereof, administrative, governmental or regulatory authority, agency, commission, court, tribunal or body or self-regulatory organization or any elected or appointed official (each, a “ Governmental Entity ”) is required to be made or obtained by Purchaser Parent or the Purchaser in connection with: (i) the execution and delivery by them of this Agreement; (ii) the consummation by them of any of the transactions contemplated hereby; or (iii) the performance by them of any of their obligations hereunder, and except for any consent, waiver, approval, authorization, exemption, registration, licence, declaration, filing or notification, of which the failure to have, make or receive, individually or in the aggregate, would not prevent them from consummating the transactions contemplated hereby.


2.5      Sufficient Funds

         The Purchaser currently has in place adequate arrangements to ensure that the required funds are available to effect payment of all Shares deposited under the Offer.

2.6      Ownership of Shares

         The Purchaser, together with its associates and affiliates, is the registered or beneficial owner of, or directly or indirectly exercises control or direction over, no Shares. No Person is acting jointly or in concert with Purchaser Parent or the Purchaser in connection with the Offer. In addition, neither Purchaser Parent nor the Purchaser has entered into an agreement or made arrangements of any kind to acquire Shares (other than as contemplated in this Agreement).

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to Purchaser Parent and the Purchaser that:

3.1      Corporate Organization

         The Company is a company duly incorporated and validly existing under the CBCA. Each of the Company’s Subsidiaries is a corporation or other business entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization. Each of the Company and each of its Subsidiaries, to the extent applicable, (a) has all necessary corporate power, authority, capacity and right (i) to enter into this Agreement, (ii) to complete the transactions contemplated hereby, (iii) to own, operate or lease its properties and assets, and (iv) to carry on its business as it is now being conducted and (b) is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties and assets owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such power or authority, or the failure to be so qualified, licensed or in good standing, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Data Room contains a complete and correct copy of the articles of incorporation and the by-laws or comparable organizational documents, each as amended to the date hereof, of the Company and each of its Subsidiaries. The Company is not in default under, or in violation of, its articles of incorporation or by-laws, and each of its Subsidiaries is not in violation of its comparable organizational documents.


3.2      Capitalization; Subsidiaries

 

(a)

The authorized Share Capital of the Company consists only of an unlimited number of Shares. The rights and privileges of the Shares are set forth in the Company’s articles of incorporation, as amended and/or restated to the date hereof, heretofore provided to the Purchaser. As of the date hereof, there are 10,916,606 Shares issued and outstanding. As at the date hereof, up to a maximum of 1,092,533 Shares may be issued pursuant to outstanding share option entitlements. The Data Room contains information with respect to the holders of all outstanding Company share options and the number, exercise prices, and expiration dates of each grant to such holders. All the outstanding Shares are, and all Shares that may be issued pursuant to the exercise of outstanding Company share options will, when issued in accordance with the respective terms of the applicable share options, be, duly authorized, validly issued, fully paid and non-assessable and are not and will not be subject to or issued in violation of any pre-emptive rights. There are no bonds, debentures, notes or other Indebtedness having voting rights (or convertible into securities having such rights) in respect of the Company or any of its Subsidiaries (“ Voting Debt ”), whether issued by the Company or any of its Subsidiaries, issued and outstanding. Except as described in the fourth sentence of this Section 3.2(a), there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating the Company or any of its Subsidiaries to issue, transfer, or sell, or to cause to be issued, transferred, or sold, any shares of the Share Capital or Voting Debt of, or other equity interest in, the Company or any of its Subsidiaries or securities or obligations of any kind convertible into or exchangeable for any shares of the Share Capital or Voting Debt of, or other equity interest in, the Company, any of its Subsidiaries or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment, nor is there outstanding any stock appreciation rights, phantom equity or similar rights, agreements, arrangements or commitments based upon the book value, income or any other attribute of the Company or any of its Subsidiaries. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of the Share Capital of any of its Subsidiaries. No Subsidiary of the Company owns any Shares. There are no registration rights, and there is no rights agreement, “poison pill” anti-takeover plan or other agreement or understanding to which the Company or any of its Subsidiaries is a party or by which it or they are bound with respect to the Share Capital of the Company or any of its Subsidiaries.

 




 

(b)

3911357 Canada Inc., Total Care Technologies PTY Ltd. and Total Care Technologies International Inc., are all the Subsidiaries of the Company. All outstanding shares of the Share Capital in each Subsidiary: (i) are owned, directly or indirectly, by the Company free and clear of all pledges, claims, liens, charges, mortgages, hypothecs, assignments, conditional sales, encumbrances or security interests of any kind or nature whatsoever (whether statutory or otherwise) (collectively, “ Liens ”); (ii) have been duly authorized and validly issued and are fully paid and non-assessable; and (iii) are free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such Share Capital or other ownership interests) that would prevent the Purchaser from operating the business of such Subsidiary immediately after the Effective Time in materially the same manner as operated on the date hereof. Other than the Subsidiaries of the Company or as set forth on Schedule 3.2(b) , the Company does not own or control, directly or indirectly, any equity interest in any Person.



3.3      Authority; Enforceability of Agreement

         The Company has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder, and the consummation by the Company of the transactions contemplated by this Agreement have been duly and validly authorized by the Board and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid authorization, execution, and delivery of this Agreement by the Purchaser and Purchaser Parent, constitutes a legally valid and binding agreement enforceable by the Purchaser and Purchaser Parent against the Company in accordance with its terms, subject, however, to the usual limitations with respect to enforcement imposed by Law in connection with bankruptcy or similar proceedings and the availability of equitable remedies.

3.4      Conflicting Provisions

         Neither the Company nor any of its Subsidiaries is a party to, bound or affected by or subject to, and none of their properties or assets is, and at the date of the Offer and the Effective Time none will be, bound or affected by or subject to, any agreement, charter or by-law provision, statute, regulation, judgment, order, decree, Law, note, bond, mortgage, indenture, contract, lease, license, permit, franchise or other instrument or obligation that would be violated, contravened, breached by, or under which default would occur as a result of, or that would give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, or the creation of any Lien on any of the properties or assets of the Company or any of its Subsidiaries as a result of, the execution and delivery of this Agreement, the performance of the Company’s obligations hereunder, and the consummation of the transactions contemplated hereby and, with respect only to all such defaults, violations, contraventions, and breaches other than those of any charter or by-law provision, which default, violation, contravention or breach would constitute a Material Adverse Effect or would prevent the Company from consummating the transactions contemplated hereby.


3.5      Consents

         No consent, waiver, approval, authorization, permit, exemption, registration, licence or declaration of or by, or filing (other than pursuant to the Securities Laws) with, or notification to any Governmental Entity is required to be made or obtained by the Company in connection with: (i) the execution and delivery by the Company of this Agreement; (ii) the consummation by the Company of any of the transactions contemplated hereby; or (iii) the performance by the Company of any of its obligations hereunder, except for any consent, waiver, approval, authorization, permit, exemption, registration, licence, declaration, filing or notification, of which the failure to have, make or receive, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

3.6      Public Disclosure

 

(a)

The Company has complied in all material respects with its obligations to file all forms, reports, statements, schedules, proxy statements, certifications, and documents required to be filed by the Company with the Securities Authorities since January 1, 2001 (as they have been amended since the time of their filing, and including any documents filed as exhibits, annexes or schedules thereto, collectively, the “ Reports ”), and complete and correct copies of all such Reports are available to the Purchaser through public sources. Each Report complied in all material respects with the applicable requirements of the Securities Laws, as in effect on the date so filed. None of such Reports (including any financial statements, schedules, documents or exhibits included or incorporated by reference therein) or any other document, as of the date of filing pursuant to the Securities Laws and of any amendment or supplement and, in the case of any proxy statement, at the date mailed to shareholders and at the date of the meeting, contained any misrepresentation (as defined in the QSA).



 

(b)

The audited consolidated financial statements of the Company (including any related notes thereto) for the fiscal year ended December 31, 2003 and the unaudited consolidated financial statements for the fiscal interim periods ended March 31 and June 30, 2004 (collectively, the “ Financial Statements ”), which have previously been furnished to the Purchaser and are included in the Reports, have been prepared in accordance with Canadian generally accepted accounting principles, applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries at the dates thereof and the consolidated results of its operations and changes in cash flows for the periods indicated.

 




 

(c)

The management of the Company has disclosed, based on its most recent evaluation, to the Company’s outside auditors and the audit committee of the Board any fraud known to management of the Company, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.



 

(d)

Except where same would not result in a Material Adverse Effect, since December 31, 2003, neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion, or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices.



 

(e)

Except as and to the extent set forth on the consolidated balance sheet of the Company and its Subsidiaries at June 30, 2004, including the notes to the financial statements of the Company for its fiscal period then ended, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in the notes thereto prepared in accordance with Canadian generally accepted accounting principles, except for liabilities or obligations incurred in the ordinary course of business consistent with past practice since June 30, 2004 that would not reasonably be expected to constitute, individually or in the aggregate a Material Adverse Effect.



3.7      Absence of Changes

         From December 31, 2003 to the date hereof, except as set forth in the Reports:

 

(a)

there has not been any Material Adverse Effect; and



 

(b)

the businesses of the Company and each of its Subsidiaries have been conducted only in the ordinary course of business consistent with past practice.



         Except as set forth on Schedule 3.7 , since two business days prior to the date hereof, there has been not any action taken by the Company or any of its Subsidiaries that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 4.1.


3.8      Absence of Litigation

         There are no suits, claims, grievances, actions, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties, assets or rights of the Company or any of its Subsidiaries, before any Governmental Entity or arbitrator, that: (i) individually or in the aggregate constitute or would reasonably be expected to constitute a Material Adverse Effect; or (ii) seek to delay or prevent the consummation of the transactions contemplated hereby, and as to each of the foregoing, to the knowledge of the Company, there are no bases or grounds on which such a suit, claim, action, proceeding or investigation could be commenced with a reasonable likelihood of success. As of the date hereof, neither the Company nor any of its Subsidiaries nor any of their respective properties or assets is or are subject to any order, writ, judgment, injunction, decree, determination or award which would, individually or in the aggregate, constitute or would reasonably be expected to constitute a Material Adverse Effect or that could prevent or delay the consummation of the transactions contemplated hereby.

3.9      Environmental

         Except as would not reasonably expected to have a Material Adverse Effect:

 

(a)

the Company, its Subsidiaries, and their operations, activities, equipment, buildings, immoveables and the properties they own, lease, occupy or have the custody of, including the Leased Premises, have at all times during the time owned, leased, occupied or having been under the custody of the Company or its Subsidiaries, been and are currently in compliance with all Environmental Laws;



 

(b)

the Company and its Subsidiaries have obtained and hold all Environmental Permits required for their operations and activities; each Environmental Permit is valid and in force and the operations and activities of the Company and its Subsidiaries are in compliance with the conditions set out in the Environmental Permits; the Company does not have any knowledge of any grounds for revocation, change, expiry or annulment of any Environmental Permits;



 

(c)

the Company, its Subsidiaries, and their respective employees, agents, directors and officers have never been declared guilty of committing an offence for a violation of Environmental Laws and have never been imposed a fine or have never otherwise settled such a prosecution;



 

(d)

to the knowledge of the Company, there are no Contaminants in, on or under the equipment, buildings, immoveables or properties owned, leased, occupied by or under the custody of the Company and its Subsidiaries, including the Leased Premises, the presence of which was caused by the Company or any of its Subsidiaries and constitutes a violation of Environmental Laws;

 




 

(e)

to the knowledge of the Company, the waste, residual materials, effluents and air emissions generated by the operations or the activities of the Company and its Subsidiaries have at all time been and are treated, stored, handled, disposed of, Released, transported and eliminated in accordance with all Environmental Laws;



 

(f)

the Company and its Subsidiaries have not received any written or oral notice or request for information in the context of any environmental federal, provincial, regional or municipal investigation or inspection;



 

(g)

to the knowledge of the Company, there is no underground or aboveground storage tank in, on or under the Leased Premises, the presence of which would constitute a violation of Environmental Laws;



 

(h)

to the knowledge of the Company, there are no PCBs, asbestos, urea formaldehyde, methane, ozone-depleting substances, lead-based paint, radon, mould or radioactive substances in, on or under the equipment, buildings, immoveables or properties owned, leased or occupied by or under the custody of the Company and its Subsidiaries, including the Leased Premises, the presence of which would constitute a violation of Environmental Laws; and



 

(i)

there is no action, order, decision, directive, declaration, decree, judgment, suit or proceeding, pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries, or their respective employees, agents, shareholders, directors and officers, or involving the Company, the Subsidiaries or their assets, by or before any tribunal, commission, agency or any Governmental Entity (including Environment Canada, Transport Canada, Fisheries and Oceans Canada, the Ministry of the Environment (Quebec) and the Ministry of Natural Resources (Quebec)) alleging violation of Environmental Laws, and to the knowledge of the Company, there is no event or fact based on which such action, order, decision, directive, declaration, decree, judgment, suit or proceeding may be instituted.



3.10      Owned and Leased Real Properties

 

(a)

Neither the Company nor any Subsidiary currently owns, nor has owned during the last two years, any real property.



 

(b)

The Data Room contains all leases, accepted offers to lease, amendments, extensions, agreements and other documents related thereto (collectively “ Company Leases ”) and the location of the premises (the “ Leased Premises ”) subject to the Company Leases. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any other party to any Company Lease, is in default, nor with the giving of notice, the lapse of time or the happening of any other event or condition, will be in default, under any of the Company Leases, except where the existence of such defaults, individually or in the aggregate, has not had, and would not reasonably be expected to have a Material Adverse Effect. Each of the Company Leases creates a good and valid leasehold estate in the property thereby demised, is in full force and effect and is enforceable in accordance with its terms and shall not cease to be in full force and effect as a result of the transactions contemplated by this Agreement, except to the extent any failure to be in full force and effect would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the knowledge of the Company, all of the covenants to be performed by any other party under the Company Leases have been fully performed, except for any failure to perform that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Neither the Company nor any of its Subsidiaries leases, subleases or licenses any real property to any Person other than the Company and its Subsidiaries.

 


3.11      Material Contracts

 

(a)

Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and except as disclosed in the Data Room or otherwise made available to the Purchaser or as permitted pursuant to Section 4.1 and except for currency exchange contracts entered into by the Company, which as of September 30, 2004 totalled US$2,500,000 at an average rate of 1.3481 Canadian dollars expiring between October 2004 and January 2005, neither the Company nor any of its Subsidiaries is a party to or bound by (i) any agreement relating to the incurring of indebtedness by the Company or any of its Subsidiaries for borrowed money in an amount in excess in the aggregate of $250,000 (collectively, “ Instruments of Indebtedness ”), (ii) any “material contract” (as such term is used in Section 12.2 of National Instrument 51-102-Continuous Disclosure Obligations), (iii) any agreement that involves expenditures in excess of $150,000, (iv) any non-competition or exclusive dealing agreement, or any other agreement or obligation that purports to limit or restrict in any respect (A) the ability of the Company or its Subsidiaries to solicit customers, (B) the ability of any non-Subsidiary affiliate of the Company to solicit customers, or (C) the manner in which, or the localities in which, all or any portion of the business of the Company and its Subsidiaries or, following consummation of the transactions contemplated by this Agreement, the Purchaser and its Subsidiaries, is or would be conducted, (v) any customer contract having a value of at least $200,000 over a twelve-month period, (vi) any joint venture or partnership agreement, (vii) any agreement that grants any right of first refusal or right of first offer or similar right or that limits or purports to limit the ability of the Company or any of its Subsidiaries to own, operate, sell, transfer, pledge or otherwise dispose of any assets or business, (viii) any contract or agreement providing for any payments of at least $100,000 individually or $250,000 in the aggregate that are conditioned, in whole or in part, on a change of control of the Company or any of its Subsidiaries, (ix) a contract containing a “most favoured nation” clause or other term providing preferential pricing or treatment to a third party, and (x) a contract containing a “change of control” provision that would be triggered by the transactions contemplated by this Agreement, including a provision that would require the consent or approval of a third party or would trigger a default as a result of the transactions contemplated by this Agreement (the agreements, contracts and obligations listed in clauses (i) through (x) being referred to herein as “ Material Contracts ”).

 




 

(b)

Each Material Contract is valid and binding on the Company (or, to the extent a Subsidiary of the Company is a party, such Subsidiary) and, to the knowledge of the Company, any other party thereto, and each Material Contract is in full force and effect except when such failure would not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in breach or default under any Material Contract or is aware of any condition that with the passage of time or the giving of notice or both would result in such a breach or default, except in each case where any such breaches or defaults would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary of the Company knows of, or has received notice of, any breach or default under (nor, to the knowledge of the Company, does there exist any condition which with the passage of time or the giving of notice or both would result in such a breach or default under) any Material Contract by any other party thereto except where any such violation or default would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, prior to the date hereof, the Company has made available to the Purchaser true and complete copies of all Material Contracts.



 

(c)

Except as disclosed in the Data Room, there are no provisions in any Instrument of Indebtedness that provide any restrictions on the repayment of the outstanding Indebtedness thereunder of at least $100,000, or that require that any financial payment of at least $100,000 (other than payment of outstanding principal and accrued interest), be made in the event of the repayment of the outstanding Indebtedness thereunder prior to expiration. For purposes of this Agreement, “ Indebtedness ” of a Person shall mean (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes and similar instruments, (iii) all leases of such Person capitalized in accordance with Canadian generally accepted accounting principles, and (iv) all obligations of such Person under sale-and-lease back transactions, agreements to repurchase securities sold and other similar financing transactions.

 


3.12      Employee Benefit Plans

 

(a)

Neither the Company nor its Subsidiaries has or has had in place a pension plan.



 

(b)

The Data Room contains a list identifying all material Employee Benefit Arrangements and all Material Employment Agreements and, except where the same would not result in a Material Adverse Effect:



 

(i)

all of the Employee Benefit Arrangements are and have been established, registered, qualified, invested and administered, in all material respects and to the extent required, in accordance with their terms and all Laws. Neither the Company, any of its Subsidiaries, nor, to the knowledge of the Company, any agent or delegate of any of the foregoing has breached any fiduciary obligation with respect to the administration or investment of any Employee Benefits Arrangement. Except as disclosed in the Data Room, the Company may unilaterally amend or terminate, in whole or in part, each Employee Benefits Arrangement subject only to approvals required by Laws;



 

(ii)

all obligations regarding the Employee Benefit Arrangements, including contribution obligations, have been satisfied; there are no outstanding defaults or violations by any party to any Employee Benefit Arrangement; and no penalties, contributions or fees are owing or exigible under or in respect of any Employee Benefit Arrangement. Except as disclosed in the Data Room, no commitments to improve or otherwise amend any Employee Benefit Arrangement have been made by the Company or any of its Subsidiaries (as applicable) except as required by applicable Laws;



 

(iii)

no Employee Benefit Arrangement is subject to any pending investigation, examination or other proceeding, action or claim initiated by any Governmental Entity, or by any other party (other than routine claims for benefits), and to the knowledge of the Company, there exists no state of facts that could reasonably be expected to give rise to any such investigation, examination or other proceeding, action or claim or to affect the registration of any Employee Benefit Arrangements required to be registered;



 

(iv)

no insurance policy or any other agreement affecting any Employee Benefits Arrangement requires or permits a retroactive increase in contributions, premiums or other payments due thereunder. The level of insurance reserves under each insured Employee Benefit Arrangement is reasonable and sufficient to provide for all incurred but unreported claims;

 




 

(v)

except as disclosed in the Data Room, to the knowledge of the Company, no employee or former employee (or beneficiary of either) of the Company or any of its Subsidiaries is now, or after completing additional service or applying at a future date will be, entitled to receive any benefits (other than benefits under any pension or retirement plans), including death or medical benefits (whether or not insured) beyond retirement or other termination of employment, other than as applicable Law requires; and



 

(vi)

except as disclosed in the Data Room, to the knowledge of the Company, no Employee Benefit Arrangement contains any provision or is subject to any Law that would accelerate or vest any benefit or require severance, termination or other payments or trigger any liabilities as a result of the transactions this Agreement contemplates; and, subject to Section 4.8, no payments under any Employee Benefit Arrangement would, individually or collectively, be nondeductible under applicable Law.



3.13      Labour and Employees

 

(a)

The Data Room contains with respect to all directors, officers and employees earning an annual base salary of at least $100,000 and Significant Independent Contractors working for the Company or any of its Subsidiaries, whether actively at work or not, a list of their salaries, wage rates, commissions, consulting fees, positions and status as full time or part time employees. For purposes of this Section 3.13(a), “ Significant Independent Contractor ” means an independent contractor who is either an individual or the sole person employed by an entity and who provides services for which, in the 12 month period ending on August 31, 2004, such independent contractor is paid more than $100,000.



 

(b)

No employees of the Company or of any of its Subsidiaries are represented by any labour union or any collective bargaining organization. No labour organization or group of employees of the Company or any of its Subsidiaries has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or, to the knowledge of the Company, threatened to be brought or filed, with the Commission des Relations du travail de Quebec (the Quebec Labour Relations Board) or any other labour relations Governmental Entity nor has there been any such events in the last three years.



 

(c)

With respect to employees of the Company and its Subsidiaries, except as would not reasonably be expected to have a Material Adverse Effect or as disclosed in the Data Room, the Company and its Subsidiaries comply and have complied with all Laws relating to employees, employment, and employment practices, terms and conditions of employment and wages and hours, including any such Law relating to employment standards, vacation pay, overtime pay, occupational health and safety, pay equity, employment equity, employment discrimination, workers’ compensation, family and medical leave, and immigration, and no claims or investigations are pending or, to the Company’s knowledge, threatened with respect to such Law or agreements, either by private individuals or by Governmental Entities.

 




 

(d)

There is not now, nor within the past three years has there been, any unfair labour practice complaint against the Company or any of its Subsidiaries pending or, to the Company’s knowledge, threatened, before the Commission des Relations du travail de Quebec (the Quebec Labour Relations Board) or any other comparable Governmental Entity or any workers’ council, except where the same would not result in a Material Adverse Effect.



 

(e)

There are no outstanding loans made by the Company or any of its Subsidiaries to any director, officer, or independent contractor (for greater certainty, travel advances or advances against commissions of less than $20,000 are not considered as a loan for the purposes of this paragraph).



3.14      Intellectual Property and Confidentiality

 

(a)

The Data Room contains, all patents, patent applications, trademark registrations and trademark applications, service mark registrations and service mark applications, certification mark registrations and certification mark applications, copyright registrations and copyright registration applications, domain names, mask works registrations and mask works registration applications, both domestic and foreign, that are owned by the Company or any of its Subsidiaries (collectively, “ Registered Intellectual Property ”), in each case enumerating specifically the applicable filing or registration number, title, jurisdiction in which filing was made or from which registration issued, date of filing or issuance, names of all registrant(s) and current registered owner(s), as applicable. The Data Room also contains (i) any inter partes proceedings or actions before any court, tribunal (including the United States and Canadian Patent and Trademark Offices), Internet registration authority or equivalent authority anywhere in the world related thereto and (ii) the date on which such registrations will expire or by which time the rights therein will have to be renewed or extended to prevent expiration, lapse or other loss. The Registered Intellectual Property and all other material computer software, source codes, trade secrets, trademarks, trade names, service marks, certification marks, copyrights, know-how, methods, processes, procedures, apparatus, equipment, industrial property, discoveries, inventions, patent disclosures, designs, drawings, plans, specifications, engineering data, manuals, development projects, research and development work in progress, technology or other proprietary rights or confidential information, whether foreign or domestic, that are owned by the Company or any of its Subsidiaries are referred to as the “ Owned Intellectual Property .” Except as disclosed in the Data Room, the Company and its Subsidiaries own all right, title and interest in and to the Owned Intellectual Property validly and beneficially, free and clear of all material Liens, with the sole and exclusive right to use the same, subject to those licenses granted to others by the Company or any of its Subsidiaries and disclosed in the Data Room. The names of all joint owners of any jointly owned Owned Intellectual Property are disclosed in the Data Room. The Registered Intellectual Property (i) has been duly filed in a timely manner and recorded in the name of the Company or its Subsidiaries; (ii) is in full force and effect; (iii) has been prosecuted diligently; and (iv) has not been used or enforced or failed to be used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of any registration, application and/or filing related thereto. The Company and Subsidiaries have complied with their duty of candour and disclosure to the United States and Canadian Patent and Trademark Offices and any relevant foreign patent office with respect to all patent applications filed by or on behalf of the Company or any of its Subsidiaries (the “ Patent Applications ”) and have made no material misrepresentation in the Patent Applications. Except as disclosed in the Data Room, the Company and its Subsidiaries have no knowledge of any information, including any prior art, which would impact the patentability or enforceability of any Registered Intellectual Property.

 




 

(b)

The Data Room contains a list of (i) all material licenses, assignments and other transfers of rights or interests (including any covenants not to asserts rights) in or to Owned Intellectual Property granted to others by the Company or any of its Subsidiaries, other than “shrinkwrap” license agreements, and (ii) all material licenses, assignments and other transfers of rights or interests in or to patents, patent applications, trademark registrations and trademark applications, service mark registrations and service mark applications, certification mark registrations and certification mark applications, copyright registrations and copyright registration applications, domain names, mask works registrations, mask works registration applications, computer software, source codes, trade secrets, trademarks, trade names, service marks, certification marks, copyrights, know-how, methods, processes, procedures, apparatus, equipment, industrial property, discoveries, inventions, patent disclosures, designs, drawings, plans, specifications, engineering data, manuals, development projects, research and development work in progress, technology or other proprietary rights or confidential information, whether foreign or domestic, granted to the Company or any of its Subsidiaries by others, other than as granted pursuant to the Company’s or its Subsidiaries’ purchase of products or services in the ordinary course of business or software programs that are licensed to the Company or any of its Subsidiaries in the ordinary course of business pursuant to license agreements (such items in this clause (ii), “ Licensed Intellectual Property ,” and, together with the Owned Intellectual Property, the “ Intellectual Property ”). None of the Intellectual Property is subject to termination or cancellation or change in its terms or provisions as a result of this Agreement or the transactions contemplated by this Agreement.



 

(c)

To the knowledge of the Company, except as disclosed in the Data Room, there is no unauthorized use, infringement or misappropriation of any Intellectual Property. The Intellectual Property constitutes all the intellectual property necessary or appropriate to conduct the businesses of the Company and its Subsidiaries as presently conducted in all material respects, and upon consummation of the transactions contemplated by this Agreement, the Purchaser and its Subsidiaries shall (i) have good, valid and, except as disclosed in the Data Room, unencumbered title to all Owned Intellectual Property and (ii) have valid right to use all Licensed Intellectual Property to the same extent such Licensed Intellectual Property and Owned Intellectual Property are currently used in the businesses of the Company and its Subsidiaries. All Licensed Intellectual Property is being used by the Company and its Subsidiaries only pursuant to the agreements disclosed in the Data Room; the Company or its Subsidiaries have paid, if applicable, all royalties, costs and expenses relating thereto; and neither the Company nor its Subsidiaries are in default under said agreements except where such failure to pay or default would not reasonably be expected to have individually or in the aggregate, a Material Adverse Effect.



 

(d)

Except as disclosed in the Data Room, no claim has been asserted or, to the knowledge of the Company, is threatened by any Person nor does the Company have knowledge of any valid ground for any bona fide claims (i) to the effect that the manufacture, sale, offer for sale, importation or use of any trademark, service mark, certification mark, domain name, product, service or process as used (currently or in the past) or offered or proposed for manufacture, use, offer for sale, importation or sale by the Company infringes, misappropriates, violates, dilutes or constitutes the unauthorized use of any copyright, trade secret, patent, trademark, tradename or other intellectual property right of any Person, except where such assertion or threat would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (ii) challenging the ownership, scope, validity or enforceability of any Intellectual Property. The Company has provided or made available to the Purchaser complete and accurate copies of all written documentation in the possession of the Company or any of its Subsidiaries related to any asserted or threatened claim or dispute concerning Owned Intellectual Property.

 




 

(e)

No Intellectual Property is subject to any Law or agreement restricting in any manner the licensing, assignment or other transfer, use or enforceability thereof by the Company. Except as disclosed in the Data Room or in the ordinary course of business, the Company has not entered into any agreement to indemnify any other Person against any charge of infringement of any intellectual property. The Company and its Subsidiaries have the exclusive right to file, prosecute and maintain all applications and registrations with respect to the Owned Intellectual Property.



 

(f)

Each employee of the Company and each Subsidiary and each independent contractor of the Company and each Subsidiary has executed valid and binding written agreements expressly assigning to the Company or a Subsidiary all right, title and interest in any inventions and works of authorship, whether or not patentable, invented, created, developed, conceived and/or reduced to practice in the course of such employee’s employment or such independent contractor’s work for the Company or the relevant Subsidiary, and all intellectual property rights therein, and has waived all moral rights therein to the extent legally permissible.



 

(g)

(i) The Company and each of its Subsidiaries has the right to use all trade secrets, customer lists, hardware designs, programming processes, source codes, databases, software and other information required for its products, services or its business as presently conducted or contemplated; (ii) the Company and each of its Subsidiaries has taken all reasonable measures to protect and preserve the security and confidentiality of its trade secrets and other confidential information; (iii) to the knowledge of the Company, all trade secrets and other confidential information of the Company or its Subsidiaries are not part of the public domain or knowledge, nor, to the knowledge of the Company, have they been misappropriated by any Person having an obligation to maintain such trade secrets or other confidential information in confidence for the Company or its Subsidiaries; (iv) to the knowledge of the Company, no employee or contractor of the Company or any of its Subsidiaries has used any trade secrets or other confidential information of any other Person in the course of their work for the Company or any such Subsidiary; and (v) except as disclosed in the Data Room, no university, government agency (whether federal or state) or other organization that has sponsored research and development conducted by the Company or any of its Subsidiaries has any claim of right to or ownership of or other encumbrance upon any of the Owned Intellectual Property.



 

(h)

No Intellectual Property of the Company or any of its Subsidiaries or product, technology or service of the Company or any of its Subsidiaries is subject to any inter partes proceeding or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by the Company or such Subsidiary. No (i) product, technology, service or publication of the Company or any of its Subsidiaries, or (ii) material published or distributed by the Company or any statemen


 
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