EXHIBIT 2.1
ACQUISITION AGREEMENT
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THIS AGREEMENT dated as of
October 5, 2004
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AMONG:
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4246659 Canada Inc. , a corporation
incorporated under the laws of Canada
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AND:
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KRONOS INCORPORATED , a corporation
incorporated under the laws of The Commonwealth of
Massachusetts
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AND:
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AD OPT TECHNOLOGIES INC. , a corporation
incorporated under the laws of Canada
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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
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(a)
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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
”).
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(b)
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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.
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1.2
Approval of the Company
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(a)
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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.
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(b)
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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.
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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
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(a)
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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.
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(b)
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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.
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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
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(a)
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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).
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(b)
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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.
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(c)
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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.
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(d)
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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.
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(e)
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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.
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3.7
Absence of Changes
From December 31, 2003 to the date hereof, except as set forth
in the Reports:
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(a)
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there has not
been any Material Adverse Effect; and
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(b)
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the businesses
of the Company and each of its Subsidiaries have been conducted
only in the ordinary course of business consistent with past
practice.
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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:
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(a)
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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;
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(b)
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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;
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(c)
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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;
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(d)
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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;
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(e)
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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;
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(f)
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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;
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(g)
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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;
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(h)
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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
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(i)
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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.
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3.10
Owned and Leased Real Properties
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(a)
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Neither the
Company nor any Subsidiary currently owns, nor has owned during the
last two years, any real property.
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(b)
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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.
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3.11
Material Contracts
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(a)
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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
”).
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(b)
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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.
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(c)
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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.
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3.12
Employee Benefit Plans
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(a)
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Neither the
Company nor its Subsidiaries has or has had in place a pension
plan.
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(b)
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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:
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(i)
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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;
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(ii)
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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;
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(iii)
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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;
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(iv)
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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;
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(v)
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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
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(vi)
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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.
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3.13
Labour and Employees
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(a)
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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.
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(b)
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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.
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(c)
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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.
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(d)
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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.
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(e)
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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).
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3.14
Intellectual Property and Confidentiality
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(a)
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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.
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(b)
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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.
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(c)
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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.
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(d)
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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.
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(e)
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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.
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(f)
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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.
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(g)
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(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.
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(h)
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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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