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SHARE PURCHASE AGREEMENT

 

This SHARE PURCHASE AGREEMENT (together with the Disclosure Schedules and the other schedules hereto, the “ Agreement ”) is effective as of April 1, 2016, by and among Senstar Corporation, a corporation incorporated under the laws of the Province of Ontario, Canada (“ Buyer ”), Aimetis Corp., a corporation incorporated under the laws of Canada (the “ Company ”), the Persons listed on Annex A hereto (each, a “ Vendor ” and, collectively, the “ Vendors ”) and Marc Holtenhoff, in his capacity as the Holder Agent.  Capitalized terms used and not otherwise defined herein have the meanings set forth in Article 11 .

 

RECITALS

 

WHEREAS, the Vendors own beneficially and of record all of the issued and outstanding shares of the Company; and

 

WHEREAS, Buyer desires to purchase from the Vendors, and the Vendors desire to sell to Buyer, all of the Vendors’ right, title and interest in and to the issued and outstanding Company Shares, after which the Company shall become a wholly owned subsidiary of Buyer (the “ Acquisition ”);

 

NOW, THEREFORE, in consideration of the premises, and the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by the parties), intending to be legally bound hereby, the parties hereby agree as follows:

 

ARTICLE 1

PURCHASE AND SALE OF SHARES

 

1.1             Purchase and Sale of Company Shares; Treatment of Company Options . 

 

(a)            Purchase and Sale of Company Preferred Shares .  Pursuant to the terms and subject to the conditions set forth herein, at the Closing, each Vendor who is a holder of Company Preferred Shares (a “ Preferred Share Vendor ”) shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from each such Vendor, all right, title and interest in and to all of the Company Preferred Shares held by such Vendor immediately prior to the Closing, free and clear of all Liens. The purchase price to be paid by Buyer to such Vendor with respect to the Company Preferred Shares shall consist of a payment in cash (without interest) in an amount equal to the product of the Preferred Per Share Amount multiplied by the number of Company Preferred Shares held by such Vendor.

 

(b)            Purchase and Sale of Company Common Shares .  Pursuant to the terms and subject to the conditions set forth herein, at the Closing, each Vendor who is a holder of Company Common Shares (a “ Common Share Vendor ”) shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from such Vendor, all right, title and interest in and to all of the Company Common Shares held by such Vendor immediately prior to Closing, free and clear of all Liens. The purchase price to be paid by Buyer to such Vendor with respect to such Company Common Shares shall consist of a payment in cash (without interest) in an amount equal to the product of the Common Per Share Amount multiplied by the number of Company Common Shares held by such Vendor.

 

(c)            Escrow . At Closing, the Buyer shall deposit an amount equal to the Escrow Amount into an account in the name of the Escrow Agent, in accordance with the provisions of the Escrow Agreement, and such amount shall be reduced from the amount otherwise payable to the Vendors at Closing such that each Vendor shall be deemed to have contributed out of its portion of the Purchase Price an amount equal to the product of the Escrow Amount multiplied by such Vendor’s Adjusted Pro-Rata Portion of the Escrow Amount.

 

(d)           RESERVED

 

(e)            Vested/Unvested Company Options .  Pursuant to the terms and subject to the conditions set forth herein, at the Closing, each: (i) vested, unexpired and unexercised Company Option; and  (ii) unvested, unexpired and unexercised Company Option, outstanding immediately prior to the Closing shall be accelerated (in the case of each unvested Company Option) surrendered and cancelled in consideration for a payment in cash (without interest) equal to the product of (A) the aggregate number of Company Common Shares that are subject to such Company Option immediately prior to the Closing, multiplied by (B) the excess, if any, of (x) the Common Per Share Amount, minus (y) the applicable exercise price per Company Common Share of such Company Option (the “ Option Cancellation Payment ”). If the exercise price per share of any Company Option is equal to or greater than the Common Per Share Amount, such Company Option shall be cancelled without any cash payment being made in respect thereof. Upon the surrender and cancellation of each vested Company Option in accordance with this Section 1.1(e) , each Optionholder shall cease to have any rights with respect thereto, except the right to receive from Buyer the consideration payable with respect thereto pursuant to this Section 1.1(e) , and each Company Option surrendered by such Optionholder shall be cancelled and of no further force and effect. Any amounts payable pursuant to this Section 1.1(e) shall: (i) in respect of any employee of the Company or its Subsidiaries, be made in accordance with the Company’s standard payroll procedures and shall be subject to applicable withholding taxes and other source deductions required by law; and (ii) in respect of any non-employee of the Company or its Subsidiaries, be paid on Closing and shall be subject to applicable withholding taxes. Prior to the Closing, the Board of Directors of the Company shall take all actions that are necessary and appropriate to effectuate the provisions of this Section 1.1(e) , including without limitation, adopting all resolutions, providing any required notices and obtaining any necessary consents.  Any notices, consents or other written communications to holders of Company Options will be subject to the review and approval of Buyer.

 

(f)            Option Cancellation Agreement; Appointment of the Holder Agent . Company’s obligation to issue cash in exchange for Company Options (if any) pursuant to Section 1.1(e) is subject to and conditioned upon each of the holders of such Company Options delivering to Company on or prior to the Closing a duly executed Option Cancellation Agreement and appointing the Holder Agent as agent and attorney-in-fact for each of the holders of such Company Options as and to the extent provided by this Agreement.

 

(g)            Maximum Amount of Consideration to be Paid at Closing . Notwithstanding anything to the contrary set forth herein, in no event shall the aggregate amount paid to the Company Holders at Closing pursuant to this Section 1.1 in consideration for Company Shares and Company Options held by them exceed an amount equal to the Purchase Price minus the Indemnification Escrow Amount plus the Option Cancellation Payments.

 

1.2             Delivery of the Closing Payment Certificate; Calculation of Purchase Price . 

 

(a)           Three (3) Business Days prior to the Closing Date the Company shall prepare in good faith and deliver to Buyer a certificate, in form and substance reasonably satisfactory to Buyer (the “ Closing Payment Certificate ”) certified by the Chief Executive Officer and the Chief Financial Officer of the Company, to be complete and correct as of the Closing Date, setting forth:

 

(i)             (A) the Company’s calculation of the Common Per Share Amount and the Preferred Per Share Amount, and (B) the Company Transaction Expenses (whether paid, unpaid, payable or not payable prior to the Closing Date);

 

(ii)            the Capitalization Table;

 

(iii)            a calculation of each Vendor’s Pro-Rata Portion and Adjusted Pro-Rata Portion;

 

(iv)           each Vendor’s Adjusted Pro-Rata Portion of the Escrow Amount and Holder Agent Reserve; and

 

(v)            the aggregate amount to be paid to each Vendor at Closing in accordance with Section 1.1 hereof, less the amounts contemplated in (iv) above; and

 

(vi)           wiring instructions with respect to each Vendor.

 

(b)           For purposes hereof, the “ Purchase Price ” means an amount equal to (A) Twenty Two Million Three Hundred and Fifty Thousand Canadian Dollars (CAD$22,350,000); minus (B) the Company Transaction Expenses minus (C) the aggregate of all Option Cancellation Payments.

 

1.3             The Closing .  The closing (“ Closing ”) of the Acquisition shall take place at the offices of the Buyer at 119 John Cavanaugh Dr, Ottawa, ON, K0A 1L0 Canada, on April 1, 2016   following the satisfaction or waiver of all of the conditions set forth in this Section 1.3(except those conditions which, by their terms, are to be satisfied at the Closing), or shall be held remotely by exchange of documents and signatures (including via email and including by way of PDF files) on such other date as is mutually acceptable to Buyer and the Holder Agent. The date of the Closing hereunder is referred to herein as the “ Closing Date ” and the Closing Date will be deemed to have occurred at 12:01 a.m. Ottawa, Ontario time on the date upon which the Closing occurs.

 

(a)            Payment of Cash .  At Closing:

 

(i)             Each of the Vendors hereby irrevocably direct the Buyer to, and the Buyer shall, deposit with Gowling WLG (Canada) LLP, legal counsel to the Company, in accordance with this Article 1 and the Closing Payment Certificate, the cash payable pursuant to Section 1.2(a)(v) hereof in exchange for share certificates evidencing the outstanding Company Shares (duly endorsed in blank for transfer);

 

(ii)            Buyer shall deposit with the Escrow Agent, for deposit into the Escrow Fund, an amount equal to the Escrow Amount.  Each Vendor shall be deemed to have contributed such Vendor's Adjusted Pro-Rata Portion of the Escrow Amount to the Escrow Fund, rounded to the nearest cent (with amounts greater than or equal to CAD$0.005 rounded up); and

 

(iii)           Buyer shall deliver to the Holder Agent, or as it may direct, the Holder Agent Reserve.

 

(b)            Delivery of Share Transfer Deeds; Shareholders Register .  At Closing, the Company shall deliver to Buyer share certificates, duly executed by the respective Vendors of the Company (or accompanied by a stock transfer power in respect of such shares) in favor of the Buyer. If any Vendor does not have a share certificate to be delivered, such Vendor shall deliver a stock transfer power together with such Vendor's affidavit which confirms that such share certificates are not in the possession of or under the control of such Vendor and an indemnity against any claim that may be made against the Buyer or the Company with respect to such share certificates, which indemnity shall be in a form reasonably satisfactory to Buyer. At Closing, the Company shall record the transfer of the Company Shares to the Buyer (or as Buyer shall otherwise direct in writing) on the Company’s shareholders’ register and shall deliver new share certificates for the Company Shares to Buyer.

 

(c)           Other Closing Deliverables. In addition to the documents specified in Sections 1.2 and this Section 1.3, at Closing, the Company shall deliver to Buyer the following:

 

(i)             Escrow Agreement executed by the Holder Agent and the Escrow Agent.

 

(ii)            Option Cancellation Agreements executed by each holder of Company Options who has not fully exercised such Company Options prior to the date hereof.

 

(iii)           Resignation letters executed by each director of the Company, specified in Schedule 1.3(c)(iii), effective immediately prior to the Closing Date.

 

(iv)          Employment amendment agreements executed by the Company and each of Marc Holtenhoff and Justin Schorn pursuant to which the non-competition period set out therein is extended to 12 months.

 

(v)           Executed Letters from each of the Company’s advisors to whom Company Transaction Expenses are payable pursuant to which such advisor confirms that no additional fees or expenses are or will become payable to him/her/it by the Company other than the amounts set forth in the Final Expense Statement.

 

(vi)          Each of the consents, approvals and waivers listed in Section 3.29(b) of the Company Disclosure Schedule, each of which shall be in full force and effect as of the Closing Date and in form and substance satisfactory to Buyer.

 

(vii)          All Governmental or Regulatory Authority Approvals (including, but not limited to any consents and Approvals set forth in Section 3.29(a) of the Company Disclosure Schedule) necessary for the consummation of the Acquisition and the other transactions contemplated hereby, shall have been obtained and shall be in full force and effect, and any applicable waiting periods shall have been expired or terminated.

 

(viii)                   Legal opinions from Gowling WLG (Canada) LLP, legal counsel to the Company, as to the matters set forth in as to the matters set forth in Exhibit B .

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES REGARDING VENDORS

 

Each Vendor hereby represents and warrants, severally and individually and not jointly, to Buyer that each of the statements in this Article 2 is true, correct and complete as of the date hereof and as of the Closing, subject only to such exceptions as are specifically disclosed with respect to specific numbered sections and lettered subsections of this Article 2 in the disclosure schedule and schedule of exceptions, delivered herewith and dated as of the date hereof, and organized with corresponding numbered sections and lettered subsections (the “ Vendor Disclosure Schedule ”).

 

2.1             Organization . Such Vendor, if not a natural person, is duly organized, validly existing and, to the extent such concept is applicable, in good standing under the Laws of its jurisdiction of incorporation or organization and all other jurisdictions in which its ownership of property or conduct of business requires it to be qualified.

 

2.2             Power; Authorization . Such Vendor has all requisite power and authority to execute, deliver and perform his, her or its obligations under this Agreement and the Ancillary Agreements to which such Vendor is a party and to consummate the transactions contemplated hereunder and thereunder. The execution, delivery and performance of this Agreement and the Ancillary Agreements to which such Vendor is a party have been duly authorized by such Vendor.  All organizational actions and proceedings required to be taken by or on the part of such Vendor to authorize and permit the execution, delivery and performance by such Vendor of this Agreement and the Ancillary Agreements to which such Vendor is a party, have been duly and properly taken. This Agreement has been, and each of the Ancillary Agreements to which such Vendor is a party has been or will be, duly executed and delivered by such Vendor. This Agreement constitutes, and each Ancillary Agreement to which such Vendor is a party constitutes, or will constitute, when so duly executed and delivered, a valid and binding obligation of such Vendor, enforceable in accordance with its terms, in each case subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

2.3            Title to Company Shares . Such Vendor is the record and beneficial owner of the Company Shares set forth opposite such Vendor’s name on Annex A hereto, free and clear of all Liens or any other restrictions on transfer other than restrictions on transfer arising under applicable securities Laws or the restrictions set forth in the Company’s Charter Documents, which shall have been waived or cancelled prior to Closing. Except as set forth on Annex A hereto and on Section ‎ 3.3(c) of the Company Disclosure Schedule, such Vendor does not hold or own (whether beneficially or of record) any Company Shares, Company Options or any other securities of the Company, and does not have any rights to purchase or acquire any securities of the Company except as contemplated in the Company’s Charter Documents, which shall have been waived or cancelled prior to Closing. At the Closing, such Vendor shall transfer to Buyer good and marketable title to the Company Shares owned by such Vendor, free and clear of all Liens or any other restrictions on transfer other than restrictions on transfer arising under applicable securities Laws or under the Charter Documents of the Company.

 

2.4             No Conflict; Required Filings and Consents.

 

(a)           The execution and delivery by such Vendor of this Agreement does not, and the execution and delivery of the Ancillary Agreements to which such Vendor is a party and the performance of this Agreement and such Ancillary Agreements will not, (i) if such Vendor is an entity, conflict with or violate any provision of the organizational documents of such Vendor; (ii) assuming that all consents, approvals, authorizations and permits described on Section 2.4(b) of the Vendor Disclosure Schedule have been obtained and all filings and notifications described on Section 2.4(b) of the Vendor Disclosure Schedule have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to such Vendor or any of his, her or its Company Shares; (iii) except as set forth on Section 2.4(a) of the Vendor Disclosure Schedule, (A) require any consent or approval under, (B) result in any breach of or any loss of any benefit under, (C) constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or (D) give to others any right of termination, vesting, amendment, acceleration or cancellation of, any material Contract to which such Vendor is a party or to which any of his, her or its Company Shares are subject; or (iv) result in the creation of a Lien on such Vendor’s Company Shares.

 

(b)           Except as set forth on Section 2.4(b) of the Vendor Disclosure Schedule, the execution and delivery by such Vendor of this Agreement and the Ancillary Agreements to which such Vendor is a party does not and will not, and the performance of this Agreement and the Ancillary Agreements to which such Vendor is a party by such Vendor` will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental or Regulatory Authority.

 

2.5             Litigation . Except as set forth on Section 2.5 of the Vendor Disclosure Schedule, there is no Action or Proceeding pending or, to such Vendor’s knowledge, threatened against or affecting such Vendor, which could reasonably adversely affect the ability of such Vendor to consummate the transactions contemplated by this Agreement or any of the Ancillary Agreements to which such Vendor is a party.

 

2.6             Brokers . No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or similar fee or commission in connection with the transactions contemplated by this Agreement or any of the Ancillary Agreements to which such Vendor is a party based on any Contract to which such Vendor is a party or that is otherwise binding upon such Vendor.

 

2.7             No Company Liability . Except as set out in the existing shareholders agreement (that shall be terminated prior to the Closing) or as disclosed in Section 2.7 of the Vendor Disclosure Schedule, such Vendor does not, directly or indirectly have any active or pending claim or demand against the Company, whether in the form of any Action or Proceeding, Contract or Liability whatsoever.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

 

The Company represents and warrants to Buyer that each of the statements in this Article 3 is true, correct and complete as of the date hereof and as of the Closing, subject only to such exceptions as are disclosed with respect to specific numbered sections and lettered subsections of this Article 3 in the disclosure schedule and schedule of exceptions, delivered herewith and dated as of the date hereof, and organized with corresponding numbered sections and lettered subsections (the “ Company Disclosure Schedule ”).

 

3.1             Organization and Qualification . The Company is a corporation duly organized, validly existing and in good standing under the Laws of Canada.  Each of the Company Subsidiaries is duly organized, validly existing and, if applicable, in good standing under the laws of its jurisdiction of formation.  Each of the Company and its Subsidiaries has the corporate power to own its properties and to carry on its business as currently conducted.  Each of the Company and its Subsidiaries is duly qualified or licensed to do business and, if applicable, in good standing as an extra-provincial or foreign corporation in each jurisdiction in which such qualification, licensure or standing is required by Law, except where the failure to do so would not be material to the Company and its Subsidiaries, taken as a whole.  Each of the Company and its Subsidiaries has made available to Buyer a true and correct copy of its Charter Documents.   Section 3.1 of the Company Disclosure Schedule lists the directors and officers of the Company and each Company Subsidiary as of the date hereof. The operations being conducted by the Company and each Company Subsidiary are not now and have never been conducted by the Company or any Company Subsidiary under any other name.   Section 3.1 of the Company Disclosure Schedule also lists (a) each jurisdiction in which the Company is qualified or licensed to do business (b) each jurisdiction in which a Company Subsidiary is qualified or licensed to do business, and (c) every state or foreign jurisdiction in which the Company or any Company Subsidiary has employees or facilities.

 

3.2             Authority Relative to this Agreement .  The Company has full corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which the Company is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Company of this Agreement and the Ancillary Agreements to which the Company is a party and the consummation by the Company of the transactions contemplated hereby and thereby, and the performance by the Company of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary action by the Board of Directors and, to the extent required, the Vendors and otherwise as may be required by the Charter Documents of the Company, and no other action on the part of the Board of Directors or the Vendors or any other party is required to authorize the execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements to which the Company is a party and the consummation by the Company of the transactions contemplated hereby and thereby. This Agreement and the Ancillary Agreements to which the Company is a party have been or will be, as applicable, duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof (and, in the case of the Ancillary Agreements to which Buyer is a party, thereof) by Buyer, as applicable, each constitutes or will constitute, as applicable, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to the enforcement of creditors’ rights generally and by general principles of equity.

 

3.3             Company Shares .

 

(a)           As at the date hereof, the authorized capital of the Company consists of an unlimited number of Company Common Shares, of which 5,780,989   have been issued, and an unlimited number of Company Preferred Shares, of which 3,333,334 have been issued, and an unlimited number of Class A Preference Shares, none of which have been issued, and there are no other shares of any class or series in the capital of the Company that are issued and authorized. The Company has reserved 920,000 Company Common Shares for issuance under the Company Option Plan, 702,500 of which are issuable pursuant to the exercise of outstanding options granted under the Company Option Plan as of the date of this Agreement, and 217,500 of which remain available for issuance under the Company Option Plan as of the date of this Agreement. All of the issued and outstanding shares in the capital of the Company will, at Closing, have been duly authorized and validly issued and outstanding as fully paid and non-assessable shares in the capital of the Company. No Company Shares are held in treasury or are authorized or reserved for issuance except as hereinbefore contemplated. Except as set out in Section 3.3(a) of the Company Disclosure Schedule, there are no accrued but unpaid dividends payable by the Company on any Company Shares. All such shares and options were granted in compliance with all applicable securities laws of Canada and in compliance with any applicable grants of pre-emptive rights.

 

(b)           Except for the Company Option Plan and Company Options granted thereunder, the Company has not adopted, sponsored or maintained any option plan or any other plan or agreement providing for, or made any grant or award of, any equity or equity-linked compensation to any Person. All Company Options are evidenced by share option agreements or other award agreements disclosed in Section 3.3(b) of the Company Disclosure Schedule. Each grant of Company Options was duly authorized by all necessary corporate action, including, as applicable, approval by the Board of Directors of the Company (or a duly constituted and authorized committee thereof) and any required shareholder approval by the necessary number of votes or written consents; such grant was made in accordance with the terms of the Company Option Plan and all applicable Laws. Except for the Company Options and the Company Preferred Shares, there are no outstanding subscriptions, options, warrants, rights (including “phantom” stock rights), preemptive rights or other contracts, commitments, understandings, plans or arrangements, including any right of conversion or exchange under any outstanding security, instrument or agreement, obligating the Company to issue or sell any shares of the Company or to grant, extend or enter into any option with respect thereto, whether granted under the Company Option Plan or otherwise. 

 

(c)            Section 3.3(c) of the Company Disclosure Schedule sets forth a spreadsheet (the “ Capitalization Table ”), which includes:

 

(i)             all registered holders of Company Shares, the number of Company Shares held by such registered holder and the respective certificate numbers; and

 

(ii)            all holders of Company Options, whether or not each such holder is an employee of the Company, the number of Company Common Shares issuable upon the exercise of each Company Option, the grant date of each Company Option and the date of expiration of each Company Option.

 

(d)           Except as set out in the Charter Documents of the Company, no Company Shares have been issued subject to a repurchase option on the part of the Company.

 

(e)           Except as set out in the Charter Documents of the Company, there are no preemptive rights or agreements, arrangements or understandings (written or oral) to issue preemptive rights with respect to the issuance or sale of Company Shares created by  any agreement or other arrangement (written or oral) to which the Company is a party or to which it is bound and there are no agreements, arrangements or understandings (written or oral) to which the Company is a party pursuant to which the Company has the right to elect to satisfy any Liability by issuing Company Shares or Equity Equivalents other than the Company Option Plan.

 

(f)           True and complete copies of all agreements and instruments relating to or issued under the Company Option Plan have been made available to Buyer and such agreements and instruments have not been amended, modified or supplemented, and there is no agreement, arrangement or understanding (written or oral) to amend, modify or supplement such agreements or instruments in any case from the form provided to Buyer. Except for the Company’s Charter Documents, the Company is not a party or subject to any agreement, arrangement or understanding (written or oral), and, to the Company’s knowledge, there is no agreement, arrangement or understanding (written or oral) between or among any Persons which affects, restricts or relates to voting, giving of any written consent, or dividend right with respect to or the transferability of any Company Shares, including any voting trust agreement or proxy.

 

3.4             Subsidiaries .  The Company's Subsidiaries are the Company’s only subsidiaries and the Company has never had any other subsidiaries.  Except as set forth in Section 3.4 of the Company Disclosure Schedule, there are no options, warrants, calls, rights, convertible securities, commitments or agreements of any character, written or oral, to which any Company Subsidiary is a party or by which any Company Subsidiary is bound obligating such Subsidiary to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of its capital stock or obligating such subsidiary to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement.  There are no outstanding or authorized stock appreciation, phantom stock, profit participation (other than bonuses paid in the ordinary course of business), or other similar rights with respect to any Company Subsidiary.  Neither the Company nor any Company Subsidiary has agreed, is obligated to make, or is bound by any contract under which it may become obligated to make any future investment in, or capital contribution to, any other Person.  Except as set forth in Section 3.4 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary directly or indirectly owns any equity or similar interest in or any interest convertible, exchangeable or exercisable for, any equity or similar interest in, any Person.

 

3.5             No Conflicts .  The execution and delivery by the Company of this Agreement and the Ancillary Agreements to which the Company is a party do not, and the performance by the Company of its obligations under this Agreement and the Ancillary Agreements to which the Company is a party and the consummation of the transactions contemplated hereby and thereby do not and will not, subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.5(b) of the Company Disclosure Schedule:

 

(a)           Conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Company’s or any Company Subsidiary's Charter Documents;

 

(b)           Conflict with or result in a violation or breach of any Law or Order applicable to the Company, any Company Subsidiary, or any of their respective Assets and Properties; or

 

(c)           (i) Conflict with or result in a material violation or breach of, (ii) constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, (iii) require the Company or any Company Subsidiary to obtain any consent (including any consent to the disclosure of Personal Information to Buyer), approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, (iv) result in or give to any Person any right of termination, cancellation, acceleration or modification in or with respect to, (v) result in or give to any Person any additional right or entitlement to any increased, additional, accelerated or guaranteed payment or performance under, (vi) result in the creation or imposition of (or the obligation to create or impose) any Lien upon the Company, any Company Subsidiary or any of their respective Assets and Properties under, or (vii) result in the loss of any material benefit under, any of the terms, conditions or provisions of any contract to which the Company or any Company Subsidiary is a party or by which any of the Company’s or any Company Subsidiary's Assets and Properties is bound.

 

3.6             Books and Records .  The minute books and shareholder register and other similar records of the Company have been made available to Buyer or its counsel prior to the execution of this Agreement, and are complete and correct in all material respects.  Such minute books contain a true and complete record of all actions taken at all meetings and by all written consents in lieu of meetings of the shareholders, directors, committees of the Board of Directors of the Company from the date of the Company’s inception through the date hereof.

 

3.7             Company Financial Statements .

 

(a)           Attached to Section 3.7(a) of the Company Disclosure Schedule is a true, correct and complete copy of the Company Financials.  The Company Financials have been prepared in accordance with GAAP applied on a basis consistent throughout the periods indicated and consistent with each other (except as may be indicated in the notes thereto as delivered to Buyer prior to the date hereof). Except as set forth in Section 3.7(a) of the Company Disclosure Schedule, the Company Financials present fairly the consolidated financial condition and operating results of the Company (including assets, liabilities, profit, loss and cash flows) as of the dates and during the periods indicated therein.  Since the Audited Financial Statement Date, there has been no change in any accounting policies, principles, methods or practices, including any change with respect to reserves (whether for bad debts, contingent liabilities or otherwise), of the Company. No audit firm has ever declined or indicated its inability to issue an opinion with respect to any financial statements of the Company.

 

(b)           The Company and its Subsidiaries have at all times (i) made and kept accurate books and records in all material respects and (ii) maintained a system of internal accounting controls consistent with a company of its size and scope of operations sufficient to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP.

 

(c)           The accounts and notes receivable of the Company and its Subsidiaries reflected on the Company Financials, and all accounts and notes receivable arising subsequent to the Audited Financial Statement Date and outstanding as of the Closing Date, (i) arose from bona fide sales transactions in the ordinary course of business, consistent with past practice, and, except as set out in Section 3.7(c) of the Company Disclosure Schedule, are payable on ordinary trade terms, (ii) are legal, valid and binding obligations of the respective debtors enforceable in accordance with their respective terms, (iii) are not subject to any valid set-off or counterclaim and (iv) do not represent obligations for goods sold on consignment.

 

(d)           Except as set out in Section 3.7(d) of the Company Disclosure Schedule, all inventory of the Company and its Subsidiaries reflected on the balance sheet included in the Company Financials consisted, and all inventory acquired since the Audited Prepared Financial Statement Date consists, of a quality and quantity usable and salable in the ordinary course of business.  Except as disclosed in the notes to the 2015 Audited Financial Statements, all items included in the inventory of the Company and its Subsidiaries are the property of the Company and its Subsidiaries free and clear of any Lien and are not held by the Company on consignment from others and conform in all material respects to all standards applicable to each inventory or its use or sale imposed by Governmental or Regulatory Authorities.

 

(e)           Except as reflected or reserved against in the Company Financials (including the notes thereto), there is no Liability of the Company or its Subsidiaries, other than: (i) Liabilities incurred in the ordinary course of business consistent with past practice; or (ii) contemplated in or in accordance with the provisions of this Agreement (including Company Transaction Expenses) or disclosed in the Company Disclosure Schedule.

 

3.8             Absence of Changes .  Since the Audited Financial Statement Date, there has not been any Company Material Adverse Effect.  In addition, without limiting the generality of the foregoing, except as expressly required by this Agreement or as disclosed in Section 3.8 of the Company Disclosure Schedule, since the Audited Financial Statement Date:

 

(a)           Neither the Company nor any of its Subsidiaries has entered into, approved or resolved to enter into any Contract in connection with any transaction involving a Business Combination;

 

(b)           Except as disclosed in Section 3.8(b) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has altered or entered into any Contract or other commitment to alter, its debt or equity interest in any corporation, association, joint venture, partnership or business entity in which the Company or any of its Subsidiaries directly or indirectly holds any interest (or any right to acquire any interest) on the date hereof;

 

(c)           Except as disclosed in Section 3.8(c) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has entered into any transaction with any of their respective officers, directors, shareholders, Affiliates or Associates, other than pursuant to any Contract identified in Sections 3.22(a) or 3.24 of the Company Disclosure Schedule or other than pursuant to any contract of employment and listed in Section 3.22(a) of the Company Disclosure Schedule;

 

(d)           The Company has not declared or set aside or paid any dividend on or made any other distribution (whether in cash, stock or property) in respect of any Company Shares or Equity Equivalent, or effected or approved any split, combination or reclassification of any Company Shares or Equity Equivalent or issued or authorized the issuance of any other securities in respect of, in lieu of or in substitution for any Company Shares or Equity Equivalent, or repurchased, redeemed or otherwise acquired, directly or indirectly, any Company Shares or Equity Equivalent, except repurchases of Company Shares pursuant to agreements with Company employees, officers, directors and consultants relating to repurchases at cost upon termination of service with the Company;

 

(e)           Except for (i) the issuance of Company Common Shares upon exercise or conversion of then-outstanding Company Options listed in Section 3.3(c) of the Company Disclosure Schedule, or (ii) the issuance prior to the date hereof of options available for grant under the Company’s then-existing Company Option Plan in the ordinary course of business to employees hired after the Audited Financial Statement Date who are not officers of the Company, on terms and in amounts consistent with past practice, or (iii) as contemplated in Section 1.1(e) above, (A) the Company has not issued, granted, delivered, sold or authorized or proposed to issue, grant, deliver or sell, or purchased or proposed to purchase, any Company Shares or Equity Equivalents, (B) the Company has not modified, waived or amended terms, or the rights of any holder, of any outstanding Company Shares or Equity Equivalent (including to reduce or alter the consideration to be paid to the Company upon the exercise of any outstanding Company Option or other Equity Equivalent) and (C) there has not been any agreement, arrangement, plan, commitment or understanding with respect to any such modification, waiver or amendment;

 

(f)           There has not been any amendment to the Company’s or any of its Subsidiaries' Charter Documents;

 

(g)           There has not been any transfer (by way of a License or otherwise) to any Person of any right to any Company Intellectual Property, except for non-exclusive Licenses in the ordinary course of business.

 

(h)           Except as disclosed in Section 3.8(h) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has made or agreed to make any disposition or sale of, waiver of any right to, license or lease of, or incurrence of any Lien on, any of their respective Asset and Property, other than dispositions of inventory or nonexclusive licenses of products in the ordinary course of business consistent with past practice;

 

(i)            Neither the Company nor any of its Subsidiaries has made or agreed to make any purchase of any Asset or Property of any Person other than in the ordinary course of business consistent with past practice;

 

(j)            Neither the Company nor any of its Subsidiaries has made or agreed to make any capital expenditure or commitment for additions to property, plant or equipment of the Company or any of its Subsidiaries, as applicable, constituting capital assets in an amount exceeding CAD$50,000 in the case of any individual expenditure or CAD$75,000 in the aggregate;

 

(k)           Neither the Company nor any of its Subsidiaries has made or agreed to make any write-off, write-down or revaluation of, any determination to write off, write-down, or revalue, any of their respective Assets and Properties, or change any reserves or liabilities associated therewith except for depreciation and amortization in accordance with GAAP consistently applied;

 

(l)            Neither the Company nor any of its Subsidiaries has made or agreed to make payment, discharge or satisfaction, in an amount exceeding CAD$50,000 in any one case or CAD$75,000 in the aggregate, of any claim, Liability or obligation (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business or Liabilities reflected or reserved against in the Company Financials;

 

(m)           Except as disclosed in Section 3.8(m) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has failed to pay or otherwise satisfy any Liability of the Company presently due and payable, except such Liabilities which are being contested in good faith by appropriate means or procedures and which, both individually and in the aggregate, are immaterial in amount;

 

(n)           Except as disclosed in Section 3.8(n) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has incurred or guaranteed any Indebtedness or issued or sold any debt securities of the Company or its Subsidiaries or guaranteed any debt securities of any other Person;

 

(o)           Neither the Company nor any of its Subsidiaries has granted or paid or made any commitment to grant or pay any severance, change of control, retention, incentive or termination payment to any current or former director, officer, employee, independent contractor, dependent contractor or consultant, except payments required by Law or as disclosed in Section 3.8(o) of the Company Disclosure Schedule;

 

(p)           Except pursuant to a Contract disclosed to Buyer pursuant to Sections 3.8(c) or 3.22(a) of the Company Disclosure Schedule or as set out in Section 3.8(p) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has granted or approved (i) any increase in salary, rate of commissions, rate of consulting fees or any other compensation or benefits of any current or former officer, director, shareholder, employee, independent contractor, dependent contractor or consultant of the Company or of any of its Subsidiaries; (ii) any consideration of any nature whatsoever (other than payments contemplated in (i) above)) to any current or former officer, director, shareholder, employee, independent contractor, dependent contractor or consultant of the Company or of any of its Subsidiaries; (iii) established or modified any target, goal, pool or similar provision under, or any salary range, increased guideline or similar provision in respect of, any Plan, employment Contract or other employee compensation arrangement or independent contractor or dependent contractor Contract or other compensation arrangement;  (iv) established, adopted, entered into, amended, modified or terminated (partially or completely) any Plan, including entering into, amending, modifying or terminating any Contract in respect of any Plan; or (v) paid or agreed or made any commitment to pay any discretionary or stay bonus other than bonuses paid in a manner consistent with past practice, which are specified i n Section 3.8(p) of the Company Disclosure Schedule;

 

(q)           Except as specified in Section 1.1(e) above and disclosed in Section 3.8(q) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has taken any action to accelerate the vesting or payment of any compensation or benefits under any Plan nor taken any action to fund or in any other way secure the payment of compensation or benefits under any Plan;

 

(r)            Except as disclosed in Section 3.8(r) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has hired or retained any employee or independent contractor whose aggregate annual compensation (disregarding discretionary bonuses) exceeds CAD$100,000;

 

(s)           Neither the Company nor any of its Subsidiaries has (i) made, changed or rescinded any Tax election, (ii) settled or compromised any claim, notice, audit report or assessment in respect of Taxes, (iii) changed any Tax accounting period, (iv) adopted or changed any method of Tax accounting, (v) filed any amended Tax Return, (vi) entered into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to any Tax, (vii) surrendered any right to claim a Tax refund, or (viii) consented to any extension or waiver of the statute of limitations period applicable to any Tax claim or assessment;

 

(t)            Neither the Company nor any of its Subsidiaries has made any change in accounting policies, principles, methods, practices or procedures (including for bad debts, contingent liabilities or otherwise, respecting capitalization or expense of research and development expenditures, depreciation or amortization rates or timing of recognition of income and expense);

 

(u)           Other than in the ordinary course of business, neither the Company nor any of its Subsidiaries has made any representation or proposal to, or engaged in any substantive discussion with, any holder (or any representative of any holder) of any Indebtedness, or to or with any Person which has issued a letter of credit which benefits the Company;

 

(v)           Neither the Company nor any of its Subsidiaries has commenced or terminated, or made any material change in, any line of business;

 

(w)            Neither the Company nor any of its Subsidiaries has failed to renew any insurance policy, no insurance policy of the Company or of any of its Subsidiaries has been cancelled or materially amended, and the Company and any of its Subsidiaries have given all notices and presented all claims (if any) under all such policies in a timely fashion;

 

(x)           There has been no amendment or non-renewal of any of the Company’s or any of its Subsidiaries' Approvals, and each of them has used commercially reasonable efforts to maintain such Approvals and has observed in all material respects all Laws and Orders applicable to the conduct of the their respective businesses or any of their respective Assets and Properties;

 

(y)           Except as disclosed in Section 3.8(y) of the Company Disclosure Schedule, there has been no physical damage, destruction or other casualty loss (whether or not covered by insurance) affecting any of the real or personal property or equipment of the Company or any of its Subsidiaries, ordinary wear and tear excepted;

 

(z)           The Company has not repurchased, cancelled or modified the terms of any Company Shares, Equity Equivalent, Company Option or other financial instrument that derives value from its convertibility into Company Shares or any Equity Equivalent, other than transactions entered into in the ordinary course of business and pursuant to either (i) contractual provisions, or (ii) the Company Option Plan, in each case as in effect at the time of execution and delivery of this Agreement, and the documents evidencing any such Company Option amendment have been made available to Buyer; and

 

(aa)          Neither the Company nor any of its Subsidiaries has entered into or approved any Contract, arrangement or understanding (whether written or oral) or acquiesced in respect of any arrangement or understanding, to do, take, engage in, cause or permit any action or occurrence having the effect of any of the foregoing, including with respect to any Business Combination not otherwise restricted by the foregoing.

 

3.9             Taxes .

 

(a)           Except as set out in Section 3.9(a) of the Company Disclosure Schedule, the Company and its Subsidiaries have duly and timely filed or caused to be timely filed with the appropriate Tax Authority all Tax Returns required to be filed by, or with respect to, the Company and its Subsidiaries. All such Tax Returns are true, complete and accurate in all material respects. The Company or any of its Subsidiaries are not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by a Tax Authority in a jurisdiction where the Company or any of its Subsidiaries do not file a Tax Return that the Company or any of its Subsidiaries are or may be subject to Tax by that jurisdiction. All Taxes due and owing (whether or not shown on any Tax Returns) by the Company or any of its Subsidiaries have been timely paid including all installments on account of Taxes that are due and payable before the Closing Date, and the Company and the Subsidiaries have duly and timely paid all assessments and reassessments they have received in respect of all Taxes.

 

(b)           Except as disclosed in Section 3.9(b) of the Company Disclosure Schedule, the unpaid Taxes of the Company or any of its Subsidiaries did not, as of the Audited Financial Statement Date, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Audited Financial Statements (rather than in any notes thereto). Since the Audited Financial Statement Date, the Company or any of its Subsidiaries have not incurred any liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.

 

(c)           Except as set out in Section 3.9(c) of the Company Disclosure Schedule, no deficiencies for Taxes with respect to the Company or any of its Subsidiaries have been claimed, proposed or assessed or re-assessed by any Tax Authority that have not been fully paid or finally settled. There are no pending or, to the knowledge of the Company, threatened audits, assessments, re-assessments or other actions for or relating to any liability in respect of Taxes of the Company. There are no matters under discussion with any Tax Authority, or known to the Company, with respect to Taxes that are likely to result in an additional liability for Taxes with respect to the Company or any of its Subsidiaries.

 

(d)           The Company has delivered or made available to Buyer complete and accurate copies of all Tax Returns of the Company or any of its Subsidiaries (and any of their respective predecessors) for the 2012, 2013 and 2014 taxable years and, promptly upon their availability, for the most recent taxable year, and complete copies of all audit or examination reports and statements of deficiencies assessed or re-assessed against or agreed to by the Company or any of its Subsidiaries (or any their respective predecessors) for such years. The Company or any of its Subsidiaries (or any of their respective predecessors) have not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment, re-assessment or deficiency, nor has any request been made in writing for any such extension or waiver. No power of attorney with respect to any Taxes of the Company or any of its Subsidiaries has been executed or filed with any Tax Authority, other than powers of attorney granted to tax or accounting advisors of the Company or its Subsidiaries in the ordinary course.

 

(e)           There are no Liens for Taxes upon any property or asset of the Company or any of its Subsidiaries (other than statutory liens for current Taxes not yet due and payable).  The Company has not acquired property from any person in circumstances where the Company did or could have become liable for any Taxes payable by that person.

 

(f)              The Company or any of its Subsidiaries are not, and have never been, a party to or bound by any Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar Contract.

 

(g)           The Company or any of its Subsidiaries have never been a member of any consolidated, combined, affiliated, aggregate or unitary group of persons for purposes of determining Tax liability or filing any Tax Returns.

 

(h)           Except as set out in Section 3.9(h) of the Company Disclosure Schedule, the Company and its Subsidiaries have withheld and remitted all Taxes required under applicable Tax Law to have been withheld and remitted in connection with amounts paid or credited to any of their respective employees, independent contractors, creditors, shareholders or other Persons.

 

(i)            Except as set out in Section 3.9(i) of the Company Disclosure Schedule (which Schedule identifies the countries in relation to each such entity), neither the Company nor any of its Subsidiaries has, nor has it ever had, a permanent establishment in any country other than its respective country of incorporation, and has not directly or indirectly engaged in a trade or business or activity in any country other than its respective country of incorporation that subjected the Company or any such Subsidiary to any Taxes in such country.

 

(j)            Neither the Company nor any of its Subsidiaries has received any requirement from any Tax Authority pursuant to Section 224 of the Tax Act which remains unsatisfied in any respect.

 

(k)           None of sections 80 to 80.04, both inclusive, of the Tax Act has applied or will apply to the Company and its Subsidiaries at any time up to and including the Closing Date.  Neither the Company nor any of its Subsidiaries has any unpaid amounts that may be required to be included in income under Section 78 of the Tax Act for a taxation year ending after the Closing Date.

 

(l)            The Company is a registrant for the purposes of the ETA and its registration numbers are set out in S ection 3.9(l) of the Company Disclosure Schedule.  All input tax credits claimed by the Company and the Subsidiaries pursuant to the ETA have been, in all material respects, correctly calculated and documented.

 

(m)          Except as disclosed in Section 3.9(m) of the Company Disclosure Schedule, the Company and its Subsidiaries keep Books and Records in compliance with section 230 of the Tax Act and similar provisions of any other applicable Law in respect of Taxes.

 

(n)           The Company Shares are not taxable Canadian property within the meaning of the Tax Act.

 

For purposes of this Section 3.9, any reference to the Company shall be deemed to include any Person that merged with or was liquidated into the Company.

 

 

(ii)            To the knowledge of the Company, there is no fact or circumstance that, either alone or together with other facts and circumstances, could reasonably be expected to give rise to any material Action or Proceeding against, relating to or affecting the Company, any of its Subsidiaries, or any of their respective Assets and Properties; and

 

(iii)            The Company or any of its Subsidiaries have not received notice, and the Company does not otherwise have knowledge of, any Order outstanding against the Company or any of its Subsidiaries.

 

(b)           Prior to the execution of this Agreement, the Company has made available to Buyer all responses of counsel for the Company to auditor requests for information for the period since January 1, 2012 (together with any updates provided by such counsel) regarding Actions or Proceedings pending or threatened against, relating to or affecting the Company or any of its Subsidiaries.

 

3.11           Compliance with Laws, Orders and Permits .

 

(a)           Except as set out in Section 3.11(a) of the Company Disclosure Schedule, the Company and each of its Subsidiaries have conducted their respective businesses in material compliance with all applicable Laws relating to the operation and conduct of such business or any of their respective properties or facilities; and neither the Company nor any of its Subsidiaries has received written notice (whether material or not) of any violation or alleged violation, or non-written notice of a violation or alleged violation of any such Laws.  To the knowledge of the Company, no event has occurred, and no condition exists, that would reasonably be expected to (with or without notice or lapse of time) constitute or result directly or indirectly in a material violation by the Company or any of its Subsidiaries of, or a failure on the part of the Company or any of its Subsidiaries to comply with, any applicable Law, Order or Permit relating to the operation and conduct of its business or any of its properties or facilities, including any Environmental Law, Environmental Permit, any provision of the Corruption of Foreign Public Officials Act (Canada), and any provision of any Law, Order or Permit relating to national security, political contributions, corrupt activities or notification, reporting and record-keeping.

 

(b)           Without limiting the generality of the foregoing, neither the Company, any of its Subsidiaries, nor to the knowledge of the Company, any agent, employee or other Persons associated with or acting on behalf of the Company or any of its Subsidiaries, has, directly or indirectly, used any funds of the Company or  any of its Subsidiaries for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, made any unlawful payment to any foreign or domestic government official or employee or to any foreign or domestic political party or campaign from corporate funds, violate any provision of the Corruption of Foreign Public Officials Act (Canada), as amended, or any other applicable Law, or made any bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment.

 

(c)           The Company and its Subsidiaries are in possession of all material authorizations, licenses, permits, certificates, approvals and clearances of any Governmental or Regulatory Authority necessary for them to own, lease and operate their respective properties or to conduct their business consistent with past practice (collectively, the “ Permits ”). All applications for or renewals of all such Permits have been timely filed and made and no such Permit will expire or be terminated as a result of the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements. All of such Permits are in full force and effect and will remain in full force and effect immediately following the Closing, and the Company and its Subsidiaries are in compliance with the foregoing without any conflict with the valid rights of others.

 

3.12           Employee Benefit Plans.

 

(a)            Section 3.12(a) of the Company Disclosure Schedule sets forth a true and complete list of each Plan. A true, accurate and complete copy of each written Plan (as amended to date) have been provided to the Buyer. The Company represents that it does not have Plans which are not in written form.

 

(b)           All Plans are, and have been, established, registered, insured, qualified, administered, funded and invested in accordance with the terms of such Plans including the terms of the documents that support such Plans and all applicable Laws. Without limiting the generality of the foregoing, all obligations of the Company and its Subsidiaries due prior to Closing under or in respect of the Plans (whether pursuant to the terms thereof or any applicable Law) have been satisfied, and there are no outstanding defaults or violations thereunder by the Company or its Subsidiaries, and no Taxes, non-Tax related interest, penalties or fees are owing or exigible under any of the Plans. In addition, all obligations of the Company and its Subsidiaries due prior to the Closing under or in respect of the statutory benefit plans excluded from the definition of “Plans” have been satisfied and there are no outstanding defaults or violations thereunder by the Company or any of its Subsidiaries.

 

(c)           Each of the Plans, which purports to qualify as a particular type of plan under the Tax Act or which has or purports to have Tax-favoured treatment, meets all requirements in effect under the Tax Act for such qualification or treatment and has complied with the provisions of the Tax Act and the administrative practices of the Tax Authority applicable to that type of plan or treatment.  No event has occurred respecting any Plan which would result in the revocation of the registration of such Plan or entitle any Person (without consent of the Company) to wind up or terminate any Plan, in whole or in part, or which could otherwise reasonably be expected to adversely affect the tax status of any such Plan.

 

(d)           There are no improvements, increases or changes promised to the benefits provided under the Plans nor is there any pattern of ad hoc benefit increases. None of the Plans provide for benefit increases or the acceleration of, or an increase in, funding obligations that are contingent upon, or will be triggered by the completion of the transactions contemplated herein. Except as set out in Section 3.12(d) of the Company Disclosure Schedule, the entering into of this Agreement or completion of the transactions contemplated herein will not result in any payment (including bonus, golden parachute, retirement or other enhanced benefit) becoming payable under any Plan. The Company and its Subsidiaries are the only participating employers of each Plan. Except as set out in Section 3.12(d) of the Company Disclosure Schedule, no independent contractor or dependent contractor is eligible to participate in any Plan.

 

(e)           None of the Plans is subject to any applicable pension standards legislation. There are no unfunded liabilities in respect of any Plan including going concern unfunded liabilities, solvency deficiencies or wind-up deficiencies where applicable. Except as set out in Section 3.12(e) of the Company Disclosure Schedule, none of the Plans provide benefits beyond retirement or other termination of service to current and former directors, officers, shareholders, independent contractors, dependent contractors, consultants or employees and their respective beneficiaries or dependents, other than as set out in the written employment agreements of the Company or its Subsidiaries or as required under applicable Law.

 

(f)           There is no Action or Proceeding (other than routine claims for payments of benefits) pending or, to the knowledge of the Company, threatened involving any Plan or its assets. None of the Company or its Subsidiaries has any knowledge of any default or violation by any other Person in respect of the Plans.

 

(g)           Except as set out in Section 3.12(g) of the Company Disclosure Schedule, no material changes have occurred in respect of each of the Plans since the date of its most recent financial, accounting or other report, as applicable, filed with the Tax Authority and any other applicable Governmental or Regulatory Authority (where applicable) in connection with that Plan, nor have there been any events occurring prior to the most recent financial, accounting or other report which are not disclosed in that report which could reasonably be expected to adversely affect the relevant report (including rendering it misleading in any material respect) or to have materially affected the funding or financial status of that Plan. No Plan is subject to any retroactive adjustment of premiums, contributions or payments.

 

3.13           Employees; Labour Relations  Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement, letters of understanding, letters of intent or other written communication with any trade union or association or organization that may qualify as a trade union or association, and there is no unfair labour practice or labour arbitration or labour board proceedings pending with respect to the Company, or any of its Subsidiaries, or, to the knowledge of the Company, threatened, and there are no facts or circumstances known to the Company that could reasonably be expected to give rise to such an Action  or Proceeding. To the knowledge of the Company, there is no organizational effort presently underway or threatened involving any employees or contractors of the Company or any of its Subsidiaries, or any of the employees or contractors performing work for the Company and its Subsidiaries but provided by an outside employment agency or contracting agency, if any. No employee of the Company or its Subsidiaries is represented by a union in respect of his or her employment with the Company or its Subsidiaries. There has been no work stoppage, strike or other concerted action by employees of the Company.

 

(b)           Except as set forth in Section 3.13(b) of the Company Disclosure Schedule, each employee, independent contractor and dependent contractor are subject to written employment agreements, contracts of engagement or service agreements, true, accurate and complete copies of which have been made available to the Buyer.  Each employee, independent contractor and dependent contractor that is not subject to a written employment agreement, contract of engagement or service agreement (as applicable) may be terminated by the Company or any of its Subsidiaries at any time with or without cause and without any severance or other Liability to the Company or any of its Subsidiaries except as required by applicable Law. Except as set forth in Section 3.13(b) of the Company Disclosure Schedule,   each Person who is an independent contractor or dependent contractor of the Company or its Subsidiaries is properly classified as an independent contractor or dependent contractor, respectively, for purposes of all employment-related Laws and all Laws concerning the status of independent contractors and dependent contractors. A list setting forth the name of each employee, independent contractor, dependent contractor and consultant, together with the entity that he or she is employed by or providing services to, the Person’s position or function, date of hire, annual base salary or wage or compensation, vacation entitlement and number of days accrued (as of January 1, 2016) and any applicable variable compensation arrangements including commissions, incentive or bonus arrangements has been provided to the Buyer. Except as set out in Section 3.13(b) of the Company Disclosure Schedule and the Closing Payment Certificate, the completion of the transactions contemplated by this Agreement will not result in any payment or increased payment becoming due from the Company or any of its Subsidiaries to any of their respective current or former officers, directors, employees, contractors or consultants, and to the knowledge of the Company, except as set forth in Section 3.13(b) of the Company Disclosure Schedule,   no employee of the Company or any of its Subsidiaries has made any threat, or otherwise revealed an intent, to terminate his or her relationship with the Company or any of its Subsidiaries, for any reason, including because of the consummation of the transactions contemplated by this Agreement. Except as set forth in Section 3.13(b) of the Company Disclosure Schedule, the Company and its Subsidiaries are not a party to any agreement for the provision of labour from any outside agency. To the knowledge of the Company, there has been no Action or Proceeding by any employee or contractor of any such outside agency with regard to any employee or contractor assigned to work for the Company or any of its Subsidiaries, and no Action or Proceeding by any Governmental or Regulatory Authority with regard to any such employee or contractor, during the three (3) years immediately preceding the date of this Agreement. No employee is on short-term or long-term disability leave, workers’ compensation leave, parental leave or other extended absence.

 

(c)           There has been no Action or Proceeding during the three (3)   years immediately preceding the date of this Agreement based on sex, sexual or other harassment, age, disability, race or other discrimination or common law claims, including claims of wrongful termination, by any employee or contractor of the Company or any of its Subsidiaries, or by any employee or contractor performing work for the Company or any of its Subsidiaries, but provided by an outside employment or contracting agency, and to the knowledge of the Company there are no facts or circumstances that could reasonably be expected to give rise to such an Action or Proceeding. Except as set forth in Section 3.13(c) of the Company Disclosure Schedule, the Company and its Subsidiaries have complied in all material respects with all employment-related and contractor-related Laws, including but not limited to employment standards, labour relations, workers’ compensation, pay equity, human rights, occupational health and safety, the payment of social security and similar taxes, equal employment opportunity, employment discrimination, human rights, accessibility, employee safety, and the Company and its Subsidiaries have not received any notice during the three (3) years immediately preceding the date of this Agreement of any claim that any of them has not complied in any material respect with any Law relating to the employment of employees or all laws related to contractors, or that it is liable for any arrearage of wages or any Tax or penalty for failure to comply with any of the foregoing. Without limiting the generality of the foregoing, except as set forth in Section 3.13(c) of the Company Disclosure Schedule, each individual that renders services to the Company or its Subsidiaries who is classified by the Company or its Subsidiaries as an independent contractor or other non-employee status or an overtime exempt or overtime non-exempt employee is properly so classified for all purposes, including (i) Tax and Tax reporting purposes, (ii) eligibility to participate in any Plan, (iii) employment standards purposes, and (iv) requirements imposed by applicable Law relating to the wages or other compensation. There are no outstanding decisions, orders, charges, tickets, notices or settlements or pending settlements under employment-related and contractor-related Laws, including employment standards, labour relations, workers’ compensation, pay equity, human rights, occupational health and safety, that place any obligation on the Company or its Subsidiaries to do or refrain from doing any act.

 

(d)           The Company has furnished Buyer with true, correct and complete copies of all written employment contracts, employee policies, employee handbooks and employee manuals, as well as all Contracts with independent and dependent contractors.

 

(e)           To the knowledge of the Company, no officer, employee, contractor or consultant of the Company or any of its Subsidiaries is bound by, subject to or obligated under any Contract or subject to any Order or Law that would interfere with the Company’s and its Subsidiaries' business as presently conducted or as presently proposed to be conducted.

 

(f)           All current assessments under all workers compensation legislation in relation to the Company, its Subsidiaries and their respective contractors and subcontractors have been paid or accrued and the Company and its Subsidiaries have not been subject to any additional or penalty assessment under such legislation which has not been paid or has been notices of any audit.  Moreover, the Company’s accident cost experience is such that there are no pending nor, to the knowledge of the Company, potential penalty assessments, experience rating changes or claims which could adversely affect the Company’s or any of its Subsidiaries' premium payments or accident cost experience or result in any additional payments in connection with the Company or any of its Subsidiaries.

 

(g)           The Essential Employees remain employed by the Company or its Subsidiaries and have not given any notice or other indication to the Company that they are not willing or do not intend to be employed by the Company or any of their respective Subsidiaries, following the Closing.

 

(h)           Except as set forth in Section 3.13(h) of the Company Disclosure Schedule, all accruals for unpaid vacation pay, premiums for employment and parental insurance, health premiums, Canada Pension Plan premiums, accrued wages, salaries and commissions and Plan payments have been reflected in the Books and Records.

 

3.14           Real Property .

 

(a)            Section 3.14(a) of the Company Disclosure Schedule contains a true and correct list of each parcel of real property leased, utilized and/or operated by the Company and its Subsidiaries (as lessor or lessee or otherwise) (the “ Leased Real Property ”).

 

(b)           The Company owns no real property other than Company-owned leasehold improvements, if any, on the Leased Real Property.

 

(c)           Subject to the terms of its respective leases, the Company and its Subsidiaries have a valid and subsisting leasehold estate in and the right to quiet enjoyment of each of the Leased Real Properties for the full term of the leases (including renewal periods) relating thereto. Each Lease Document referred to in Section 3.14(e) below is a legal, valid and binding agreement, enforceable in accordance with its terms (in each case subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law)), of the Company, its Subsidiaries, and, to the knowledge of the Company, of each other Person that is a party thereto, and there is no, and the Company and its Subsidiaries have not received notice of any, default by the Company or its Subsidiaries (or any condition or event which, after notice or lapse of time or both, would constitute a default) thereunder. The Company and its Subsidiaries do not owe brokerage commissions or finder’s fees with respect to any such Leased Real Property.

 

(d)           All improvements on the Leased Real Property (A) to the knowledge of the Company, comply with and are operated in accordance with applicable Laws (including Environmental Laws) and all applicable Liens, Approvals, Contracts, covenants and restrictions and (B) are in all material respects in good operating condition and in a state of good maintenance and repair, ordinary wear and tear excepted, and such improvements are in all material respects adequate and suitable for the purposes for which they are presently being used and there is no condemnation or appropriation proceeding pending or, to the knowledge of the Company, threatened against any of such real property or any of the improvements thereon.

 

(e)           True and correct copies of the documents under which the Leased Real Property is leased, subleased (to or by the Company or its Subsidiaries, or otherwise), utilized, and/or operated (the “ Lease Documents ”) have been made available to Buyer. The Lease Documents are unmodified and in full force and effect, and there are no other Contracts between the Company, its Subsidiaries and any other Person claiming an interest in the interest of the Company or any of its Subsidiaries in the Leased Real Property or otherwise relating to the use and occupancy of the Leased Real Property.

 

3.15           Environmental Matters . Each of the Company and its Subsidiaries (i) has complied in all material respects with all Environmental Laws; (ii) has not received as of the date hereof any written notice of any alleged claim, complaint, violation of, or Liability under any Environmental Law (including any claim or complaint from any employee alleging exposure to Hazardous Materials); (iii) has not disposed of, emitted, discharged, handled, stored, transported, used or released any Hazardous Materials, arranged for the disposal, discharge, storage or release of any Hazardous Materials, in each case, in violation of Environmental Laws; (iv) except as set forth in Section 3.15 of the Company Disclosure Schedule, has not entered into any agreement that requires it to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with respect to Liabilities arising out of Environmental Laws or the Hazardous Materials related activities of the Company or its Subsidiaries; and (v) has delivered to Buyer or made available for inspection by Buyer and its agents, representatives and employees all records in the Company’s possession or control concerning the Hazardous Materials activities of the Company and all environmental audits and environmental assessments of any facility owned, leased or used at any time by the Company or any of its Subsidiaries, conducted at the request of, or otherwise in the possession or control of the Company or any of its Subsidiaries.  There are no Hazardous Materials in, on, or under any properties owned, leased or used at any time by the Company or any of its Subsidiaries, such as would or would be reasonably expected to give rise to any material Liability or corrective or remedial obligation of the Company or any of its Subsidiaries under any Environmental Laws.

 

3.16           Tangible Personal Property .  Except as set forth in Section 3.16 of the Company Disclosure Schedule, the Company and its Subsidiaries are in possession of and has good and marketable title to, or has valid leasehold interests in or valid rights under Contract to use, all tangible personal property used in the conduct of their business, including all tangible personal property reflected on the Company Financials and tangible personal property acquired since the Audited Financial Statement Date, other than property disposed of since such date in the ordinary course of business consistent with past practice which is not material in nature or amount. All such tangible personal property (including plant, property and equipment) is free and clear of all Liens and constitute all of the tangible personal property necessary and sufficient for the conduct by the Company and its Subsidiaries of their business as presently conducted, and is in good working order and condition in all material respects, ordinary wear and tear excepted, and its use complies in all material respects with all applicable Laws.

 

3.17           Intellectual Property .

 

Notwithstanding anything to the contrary, (A) the representations and warranties in this Section 3.17 shall be the sole representations and warranties of the Company with respect to matters relating to Intellectual Property and Technology and (B) the representations and warranties in Sections 3.17(l) or 3.17(m) shall be the sole representations and warranties of the Company with respect to matters relating to any infringement, misappropriation or violation of Intellectual Property of a third party.

 

(a)            Section 3.17(a) of the Company Disclosure Schedule contains a true and complete list of all Company Registered Intellectual Property as of the date hereof, including the following: (i) for each patent and patent application, the patent number or application serial number for each jurisdiction in which the patent or application has been filed or from which the registration issued, such jurisdiction, the date of filing or issuance, the names of all inventors, applicants, registrants and assignees, and the present status thereof; (ii) for each registered trademark, trade name or service mark, the application serial number or registration number, for each country, province or state in which the mark or application has been filed or from which the registration issued, such country, province or state, the date of filing or issuance, the names of all applicants, registrants and assignees, the class of goods covered, and the present status thereof; (iii) for any URL or domain name, the registration date, any renewal date and name of registry; (iv) for each registered mask work, the date of first commercial exploitation, the registration number and date of registration, for each by country, province and state; (v) for each registered copyrighted work, the number and date of registration for each by country, province and state in which a copyright application has been registered, and (vi) any proceedings or actions pending as of the date hereof before any court or tribunal (including the PTO or equivalent authority anywhere in the world) relating to any of the Company Registered Intellectual Property.

 

(b)           Each item of Company Registered Intellectual Property is valid, subsisting and enforceable, provided that no representation is made as to whether patents or trademarks will be issued from applications filed or the scope thereof, and all necessary registration, maintenance, renewal fees, annuity fees and taxes in connection with the Company Registered Intellectual Property have been paid and all necessary documents and certificates in connection with the Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States, Canada or foreign jurisdictions in accordance with applicable Law for the purposes of obtaining and maintaining such Registered Intellectual Property, and all assignments (and licenses where required) of the Company Registered Intellectual Property have been duly recorded with the appropriate Government or Regulatory Authority. Section 3.17(b) of the Company Disclosure Schedule includes a true and complete list of all material actions that must be taken with respect to Governmental or Regulatory Authorities within one hundred eighty (180) days after the Closing Date with respect to any of the Company Registered Intellectual Property, including the payment of any registration, maintenance, renewal fee, annuity fee and Tax or the filing of any document, application or certificate for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Company Registered Intellectual Property. The Company and its Subsidiaries have complied with all notice and marking requirements required by applicable Law for the Company Registered Intellectual Property. In each case in which the Company or any of its Subsidiaries have acquired sole and exclusive ownership of any Intellectual Property from any Person, the Company or the applicable Subsidiary has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Intellectual Property (including the right to seek past and future damages with respect to such Intellectual Property) to the Company or the applicable Subsidiary and, to the maximum extent required to protect the Company’s or such Subsidiary's ownership rights in and to such Intellectual Property in accordance with all applicable Laws, the Company and its Subsidiaries have recorded each such assignment of Company Registered Intellectual Property with the relevant Governmental or Regulatory Authority, including the United States Patent and Trademark Office, the U.S. Copyright Office, the Canadian Intellectual Property Office, or their respective equivalents in all relevant foreign jurisdictions.

 

(c)           The Company and its Subsidiaries have complied with the duty of candor and disclosure to the United States Patent and Trademark Office, the Canadian Intellectual Property Office, and any relevant foreign patent office and other applicable Law with respect to any patent applications filed by or on behalf of the Company and its Subsidiaries, and has made no material misrepresentation in such patent applications.  The Company is not aware of any information material to a determination of patentability regarding the patent applications not called to the attention of the United States Patent and Trademark Office, the Canadian Intellectual Property Office, or any relevant foreign patent office, including any information that would preclude the grant of a patent for such patent applications. The Company has no knowledge of any information that would preclude the Company or any of its Subsidiaries from having clear title to such patent applications and to the patents which have issued or which may issue therefrom. To the knowledge of the Company, all printed publications and patent references material to the patentability of the inventions claimed in such patent applications have been disclosed to those patent offices so requiring.

 

(d)            Section 3.17(d)(i) of the Company Disclosure Schedule sets forth a true and complete list of all Licenses and other Contracts pursuant to which the Company or any of its Subsidiaries licenses or otherwise receives rights under any Licensed IP, including all Licenses and other Contracts pursuant to which each of the Company and its Subsidiaries is granted rights in any such Technology or Intellectual Property that is (A) embedded or incorporated into or distributed with any Company Product, (B) used by the Company or any of its Subsidiaries in the development or support of any Company Product, or (C) used or held for use by the Company or any of its Subsidiaries for any other purpose, but excluding any Non-Critical IP.   Section 3.17(d)(ii) of the Company Disclosure Schedule sets forth all Licenses and other Contracts pursuant to which the Company or any Subsidiary has licensed or otherwise granted any rights under any Technology or Company Intellectual Property during the period commencing on January 1, 2013 and ending on the day immediately prior to the Closing Date and in an amount equal to or greater than $50,000 paid to the Company or any Subsidiary.

 

(e)           The Company Intellectual Property includes all the Intellectual Property used in, or held for use in, or necessary for the conduct of the business of the Company and its Subsidiaries as presently conducted and, except as set forth in Section 3.17(e) of the Company Disclosure Schedule, as required to permit the Company to make available for license version 7.0.0 of the Company’s Symphony software, including Intellectual Property necessary for the (i) design, development and manufacture of the Internally Developed Company Products and (ii) the distribution, marketing, use, import, license and sale of the Company Products. The Company and its Subsidiaries (i) own exclusively all right, title and interest in and to the Owned IP and Company Technology, except for non-exclusive licenses granted under End User License Agreements, in each case free and clear of any Liens; and (ii) have valid and enforceable rights under Contracts and Licenses to use all other Intellectual Property and Technology used in, or held for use in, or necessary for the conduct of the business of the Company and its Subsidiaries as presently conducted and, except as set forth in Section 3.17(e) of the Company Disclosure Schedule, as required to permit the Company to make available for license version 7.0.0 of the Company’s Symphony software. All rights in any Intellectual Property and Technology licensed to the Company and its Subsidiaries will not cease to be valid and enforceable rights of the Company and its Subsidiaries solely by reason of the execution, delivery and performance of this Agreement, or by any ancillary agreements executed in connection with this Agreement, or the consummation of the transactions contemplated hereby or thereby.

 

(f)           None of the Owned IP is required to be licensed or otherwise made available to any forum, consortium, standards body, or similar entity. Each of the Company and its Subsidiaries has not made any submission or contribution to, and is not subject to any License or other Contract with, any standards bodies or other entities for a determination of essentiality to or inclusion in an industry standard or that would obligate the Company or any Subsidiary to grant licenses or other rights to, or otherwise impair its control of, any Owned IP, Company Technology, Company Products, nor, to the knowledge of the Company, has any third-party request been made for such licenses or other rights in connection with the activities of or any participation in any forum, consortium, standards body, or similar entity.

 

(g)           Except as set out Section 3.17(g) of the Company Disclosure Schedule, (i) no Open Source Software is incorporated (either directly by the Company or any of its Subsidiaries, or indirectly, by the incorporation of third party software that itself incorporates Open Source Software) into any of the Company Products, and (ii) no Company Product is intermingled, bundled or distributed with or derived from or contains part of any Open Source Software or uses or links to any libraries or routines that constitute Open Source Software. Except as set out Section 3.17(g) of the Company Disclosure Schedule, the Company and its Subsidiaries have not used and do not use any Open Source Software that requires, as a condition of use, modification or distribution of such Open Source Software, that other software incorporated into, derived from or distributed with such Open Source Software be (A) disclosed or distributed in source code form, (B) licensed for the purpose of making derivative works, or (C) be redistributable at no charge or for a nominal charge.

 

(h)            Section 3.17(h) of the Company Disclosure Schedule lists all Licenses and other Contracts between the Company, any of its Subsidiaries and any other Person wherein or whereby the Company or any of its Subsidiaries has agreed to, or assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any obligation or Liability or provide a right of rescission with respect to the infringement or misappropriation by the Company, any of its Subsidiaries, or such other Person of the Intellectual Property of any Person other than the Company or Subsidiaries.

 

(i)            Except as set out in Section 3.17(i) of the Company Disclosure Schedule, there is no License or other Contract between the Company, any of its Subsidiaries, and any other Person with respect to Company Intellectual Property under which there is any material dispute (and, to the Company’s knowledge, there are no facts or circumstances that may reasonably be expected to lead to a dispute) regarding the scope of such License or Contract, or performance under such License or Contract, including with respect to any payment to be made or received by the Company or any of its Subsidiaries thereunder.

 

(j)            Except as set out in Section 3.17(j) of the Company Disclosure Schedule, none of the Company and its Subsidiaries is bound by, and no Company Intellectual Property or Company Technology is subject to, any agreement containing any covenant or other provision that in any way limits or restricts the ability of the Company or any of its Subsidiaries to use or exploit any Company Intellectual Property or Company Technology anywhere in the world. The Company and its Subsidiaries have not transferred ownership of, or granted any exclusive license with respect to, any Owned IP or Company Technology to any other Person. Except as set out in Section 3.17(j) of the Company Disclosure Schedule, the Company and its Subsidiaries are not obligated to provide any consideration (whether financial or otherwise) or account to any third party with respect to any exercise of rights by the Company or any Subsidiary, or any of their successors, in any Owned IP, Company Technology, or Internally Developed Company Product.

 

(k)           To the knowledge of the Company, no Person has interfered with, violated, infringed upon, misappropriated, or otherwise misused any Owned IP, or is currently doing so.  The Company and its Subsidiaries have not brought any Action or Proceeding for infringement or violation of Owned IP. There is no Action or Proceeding pending or, to the knowledge of the Company, threatened (i) alleging infringement, misappropriation or any other violation of any Intellectual Property of any Person by the Company, any of its Subsidiaries or any Company Product, or (ii) challenging the scope, ownership, validity, or enforceability of any Owned IP. Without limiting the foregoing, no interference, opposition, reexamination, or similar proceeding initiated by a third party is or has been pending or, to the Company’s knowledge, threatened, with respect to any Company Registered Intellectual Property.  None of the Company Registered Intellectual Property has been adjudged invalid or unenforceable in whole or part and all Company Registered Intellectual Property is valid and enforceable.

 

(l)            Except as set out in Section 3.17(l) of the Company Disclosure Schedule, the Company’s and its Subsidiaries' past or current use of Owned IP, Company Technology or Licensed IP (other than Non-Critical IP) does not infringe upon or misappropriate or otherwise violate the Intellectual Property Rights of any third party and the Company and its Subsidiaries have not received any notice alleging any such infringement or misappropriation. Neither the Owned IP nor the Company Technology is subject to any outstanding judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Government or Regulatory Authority (other than office actions and correspondence regarding pending patent applications and trademark applications) restricting or otherwise affecting the rights of the Company or any of its Subsidiaries with respect thereto.

 

(m)           The operation of the business of the Company and its Subsidiaries, including the design, development, distribution, marketing, manufacture, use, import, license, and sale of the Company Products does not (and did not at any time) infringe or misappropriate the Intellectual Property rights of any Person. Without limiting the generality of the foregoing, the Company and its Subsidiaries have not made any delivery of source code in violation of the terms of any agreement between the Company and any other Person.

 

(n)           (i) To the knowledge of the Company, there has been no misappropriation or disclosure of any trade secrets of the Company or any of its Subsidiaries; (ii) to the knowledge of the Company, no employee, independent contractor or agent of the Company or any of its Subsidiaries has misappropriated any trade secrets or other confidential Intellectual Property or Technology of any other person in the course of performance as an employee, independent contractor or agent of the Company or its Subsidiaries; and (iii) to the knowledge of the Company, no employee, independent contractor or agent of the Company or any of its Subsidiaries is in default or breach of any term of any employment agreement, nondisclosure agreement, assignment of invention agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of any Intellectual Property or Technology of the Company or of any of its Subsidiaries. The Company and its Subsidiaries have not disclosed any material confidential information of the Company and the Subsidiaries that is not pursuant to a confidentiality agreement. The Company and its Subsidiaries have not disclosed any third party confidential information that is protected by a confidentiality agreement in breach of that confidentiality agreement.

 

(o)           Except as set out in Section 3.17(o) of the Company Disclosure Schedule, each of the Company and its Subsidiaries has a legal, valid and binding written agreement with each of its present and former employees who participated in the development, creation, conception or reduction to practice of any Owned IP or any Internally Developed Company Product, enforceable in accordance with its terms, pursuant to which each such employee has assigned, and the Company or its Subsidiaries, as applicable, has obtained exclusive ownership of, all Owned IP created by such employee in the scope of his or her provision of services for, or employment by, the Company or such Subsidiary. To the extent any Person who is not a current or former employee of the Company or any of its Subsidiaries (an “ Independent Contractor ”) participated in the development, creation, conception or reduction to practice of any Owned IP, the Company or its Subsidiary, as applicable, has a legal, valid and binding written agreement with such Independent Contractor with respect thereto, enforceable in accordance with its terms, by which such Independent Contractor has assigned, and the Company or such Subsidiary has obtained exclusive ownership of, all such Intellectual Property by operation of law or by valid assignment of any such rights, or and each such agreement is listed in Section 3.17(o) of the Company Disclosure Schedule.

 

(p)           No Owned IP, Company Technology, Company Product or, to the knowledge of the Company, Licensed IP, is subject to any Order, Action, settlement, or “march in” right that restricts, or that could reasonably be expected to restrict, in any manner the use, transfer or licensing of any Company Intellectual Property by the Company or any of its Subsidiaries, or that may affect the validity or use of such Company Intellectual Property, Company Technology, or Company Product. No Owned IP, Company Technology, or Company Product is subject to any restriction, constraint, control, supervision or limitation as a result of (i) the receipt or use by the Company or any of its Subsidiaries, or any of their respective current or former directors, officers, employees, independent contractors and consultants of any funding, facilities, personnel or support from any Government or Regulatory Authority, foundation or any public or private university, college, or other educational institution or research center in the development of any Owned IP, Company Technology, or  Company Product, or (ii) to the knowledge of the Company, the involvement in, contribution to, or creation or development of any Owned IP, Company Technology, or Company Product by any current or former director, officer, or independent contractor of or consultant to the Company or any of its Subsidiaries who performed services for or held any position with any Government or Regulatory Authority, foundation or any public or private university, college, or other educational institution or research center.

 

(q)            Section 3.17(q) of the Company Disclosure Schedule contains a true and complete list of all Contracts pursuant to which the Company or any of its Subsidiaries has: (i) provided the right to receive (whether contingent or otherwise) Deposit Materials to a third party; or (ii); deposited or may be required to deposit Deposit Materials or other Technology in escrow so that a licensee or other Person might obtain access to it upon the occurrence of any release condition, in each case whether pursuant to an escrow arrangement or otherwise.  No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expected to, result in the delivery, license, or disclosure of any Deposit Materials to any other Person (other than escrow agents and their employees) who is not, as of the date of this Agreement, an employee of the Company or its Subsidiaries.  Neither the execution nor the delivery of this Agreement or the consummation of any of the transactions contemplated by this Agreement will result in the release from escrow of any Deposit Materials to any other Person who is not, as of the date of this Agreement, an employee of the Company or of any of its Subsidiaries.

 

(r)           The Internally Developed Company Products do not (i) contain any defect or error in design, materials or workmanship that would materially and adversely affect the use, functionality, or performance of such Company Products (taken as a whole); or (ii) contain any Harmful Code. The Company Products comply in all material respects with all applicable standards of each   standards body, forum and consortium, applicable in the jurisdictions in which such Products are sold, that issues standards with respect to such Company Products and with the feature specifications and performance standards set forth in the Company Product data sheets in respect of such Company Product at the time of its sale. To the knowledge of the Company, there are no outstanding claims (or facts that may reasonably lead to a claim) for breach of warranty by the Company, its Subsidiaries, or any Company Products in connection with such standards and specifications.

 

(s)           Neither this Agreement nor any transaction or agreement contemplated by this Agreement, will result in or cause, with or without notice or the lapse of time or both, the granting by Buyer, its affiliates or the Company of any right or license with respect to any Company Intellectual Property to any Person pursuant to any License or other Contract to which the Company is a party.

 

3.18           Personal Information

 

(a)           The Company and each of its Subsidiaries is, and has at all times during the last three years been, in material   compliance with all Privacy Requirements relating to the collection, use, retention and disclosure of Personal Information.

 

(b)           The Company and each of its Subsidiaries have obtained all required consents to its collection, use, retention and disclosure of the Personal Information from individuals to whom such Personal Information relates or, where such consents are obtained from a third party, the Company and each of its Subsidiaries have verified that the third party has the consent of the individual to whom the information relates to disclose the Personal Information to the Company or its applicable Subsidiaries.

 

(c)           The collection, use, retention and disclosure of Personal Information by the Company and each of its Subsidiaries is, and has at all times during the last three years been, within the scope of the consent provided by the individual to whom the Personal Information relates.

 

(d)           To the Company's knowledge, the Personal Information is accurate and complete, and the Company and each of its Subsidiaries have corrected all inaccurate Personal Information of which it has been notified by the individual to whom the Personal Information relates upon proof of such inaccuracy.

 

(e)           True and complete copies of all privacy policies and privacy procedures of the Company and each of its Subsidiaries currently in effect have been made available to the Buyer, and all such privacy policies and procedures comply with, and since the date of approval by the Company and each of its Subsidiaries each such company has complied, in material respects   with, all Applicable Privacy Laws and all Privacy Requirements applicable to such company.

 

(f)

 

(i)            Neither the Company nor any of its Subsidiaries has received any communication from any regulator with respect to issues involving the collection, use, disclosure, retention or destruction of Personal Information by such company, including any claims of unauthorized access to or disclosure of such Personal Information;

 

(ii)           no complaint against the Company or any of its Subsidiaries alleging non-compliance with any Privacy Requirement has been found by any Governmental or Regulatory Authority to be well-founded, and no order or judgment has been made against the Company or any of its Subsidiaries by any Governmental or Regulatory Authority based on any finding of non-compliance with any such Privacy Requirements;

 

(iii)          no unresolved complaint or other proceeding against the Company or any of its Subsidiaries relating to any such alleged non-compliance is now pending by or before any Governmental or Regulatory Authority regarding Applicable Privacy Laws; and

 

(iv)          to the Company's knowledge, no event has occurred that could give rise to any such complaint or proceeding against the Company or any of its Subsidiaries.

 

(g)           The Personal Information has not been subject to any loss or unauthorized disclosure or access while under the control of the Company or any of its Subsidiaries or to the knowledge of the Company any service provider acting on behalf of the Company or any of its Subsidiaries.

 

(h)           Except as set out in Section 3.18(h) of the Company Disclosure Schedule, all service providers of the Company and its Subsidiaries to which the Company or any of its Subsidiaries has provided Personal Information have executed agreements pursuant to which the service providers agree to use and disclose such Personal Information only to provide services to the Company or the applicable Subsidiaries, to limit access to the Personal Information to employees and contractors who have a need to access such Personal Information in order to provide the services to the Company or the applicable Subsidiaries and who are bound by a duty of confidentiality, and to notify the Company or the applicable Subsidiary in the event of any unauthorized disclosure of or access to such Personal Information.

 

(i)            The completion of the Acquisition will not result in a breach or violation of any Applicable Privacy Law or Privacy Requirements by the Company or any of its Subsidiaries.

 

(j)            There are no Approvals required in order for the Company or any of its Subsidiaries to continue to use and disclose the Personal Information following the completion of the Acquisition in a manner consistent with such company's use and disclosure of the Personal Information immediately prior to the completion of the Acquisition.

 

3.19           CASL .

 

(a)           From and after July 1, 2014, neither the Company nor any of its Subsidiaries has received any complaint from any Person that (A) such Person has received a “commercial electronic messages”, as such term is defined in CASL (“CEMs”) sent by or on behalf of such company that the company was not permitted to send to such Person or for which the content of the CEM did not comply with CASL, or (B) that the unsubscribe mechanism contained in a CEM sent by such company was not functional or that such company failed to give effect to any unsubscribe request within ten (10) business days of receipt.

 

(b)           Neither the Company nor any of its Subsidiaries has received any inquiries, notices of investigation or enforcement actions with respect to its compliance with CASL from the Canadian Radio-television and Telecommunications Commission (“CRTC”), or been assessed any administrative monetary penalties by the CRTC or entered into an undertakings with the CRTC as a result of non-compliance with CASL.  No complaints have been filed with the CRTC with respect to the Company’s or any of its Subsidiaries’ compliance with CASL.

 

(c)           From and after January 15, 2015, neither the Company nor any of its Subsidiaries has, in the course of a commercial activity, installed or caused to be installed a computer program on any other Person’s computer system within the meaning of CASL without its consent.

 

3.20           Export and Import Control Laws .

 

(a)            Except as set forth in Section 3.20(a) of the Company Disclosure Schedule, the Company and each of its Subsidiaries have, at all times, conducted its export and import transactions in compliance with all applicable Export and Import Control Laws.  Without limiting the foregoing but notwithstanding Section 3.20(a):  (i) the Company and each of its Subsidiaries have obtained all export licenses, registrations and other approvals and Permits required for its exports of products, software, technical data, and technologies under applicable Export and Import Control Laws; (ii) the Company and each of its Subsidiaries is in compliance with the terms of all applicable Export and Import Approvals; (iii) neither the Company nor any of its Subsidiaries has received any written, or to the Company’s knowledge, oral communication alleging that it is not or may not be in compliance with, or has, or may have any, liability under any such applicable export licenses, registrations or other approvals, or otherwise in respect of Export and Import Control Laws; (iv) there are no pending or, to the Company’s knowledge, threatened claims, charges, investigations, violations, settlements, civil or criminal enforcement actions, lawsuits, or other court actions against the Company or any of its Subsidiaries with respect to any Export and Import Control Laws; (v) there are no actions, conditions or circumstances pertaining to the Company’s or any of its Subsidiaries' export or import transactions that are reasonably expected to give rise to any future claims, charges, investigations, violations, settlements, civil or criminal actions, lawsuits, or other court actions under the Export and Import Control Laws; and (vi) the Company and each of its subsidiaries have in place adequate controls and systems, consistent with a company of its size and scope of operations, to ensure compliance with Export and Import Laws.

 

(b)            Except as set forth in Section 3.20(a) of the Company Disclosure Schedule, the Company has not made any voluntary disclosure to any Governmental or Regulatory Authority with respect to possible violations of Export and Import Control Laws, and, to the Company’s knowledge, there is no circumstance or event that requires such a voluntary disclosure or voluntary self-disclosure to be made.

 

(c)           No approvals from Governmental or Regulatory Authority are required for the Company or any of its Subsidiaries to retain any Export and Import Approvals following the consummation of the transaction contemplated hereunder.

 

3.21           Warranty Obligations

 

(a)            Section 3.21(a) of the Company Disclosure Schedule sets forth (i) all Contracts of the Company and its Subsidiaries containing warranties and guarantees of the Company and its Subsidiaries in respect of any of the Company’s Products, which are currently in effect (the “ Warranty Obligations ”), and (ii) each of the Warranty Obligations which is currently subject to any claim or, to the knowledge of the Company, threatened claim.

 

(b)           The Company Products (taken as a whole) comply in all material respects with all Warranty Obligations, and no salesperson, employee or agent of the Company or any of its Subsidiaries is authorized to undertake any obligation to any customer or other Person in excess of such Warranty Obligations.

 

3.22           Contracts

 

(a)            Section 3.22(a)(1) of the Company Disclosure Schedule contains a true and complete list of each of the Contracts (as amended or supplemented) to which the Company or any of its Subsidiaries is a party or by which any of their respective Assets and Properties is bound.  True and complete copies of all such Contracts or, if not reduced to writing, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any terms thereof, have been made available to Buyer prior to the execution of this Agreement.

 

(b)           Each Contract required to be disclosed in Section 3.22(a)(1) of the Company Disclosure Schedule is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms against the Company and/or its Subsidiaries, and to the knowledge of the Company, each other party thereto (in each case subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights generally and subject, as to enforceability, to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law)); the Company and each of its Subsidiaries is not, nor has it received any claim or notice that it is; and to the knowledge of the Company, no other party to such Contract is, or has received any claim or notice that it is, in violation or breach of or default under any such material provision of such Contract (or with notice or lapse of time or both, would be in violation or breach of or default of a material provision of any such Contract).

 

(c)           Except as disclosed in Section 3.22(c) of the Company Disclosure Schedule in, none of the Company or any of its Subsidiaries is a party to or bound by any Contract that automatically terminates or allows termination by the other party thereto upon consummation of any of the transactions contemplated by this Agreement or any of the Ancillary Agreements.

 

3.23           Insurance .    Section 3.23(a) of the Company Disclosure Schedule contains a true and complete list (including the names and addresses of the insurers, the expiration dates of the policies, the annual premiums thereof and the period of time covered thereby) of all liability, property, directors’ and officers’ liability and other insurance policies (other than any insurance policy or program administered by a Government or Regulatory Authority and required by applicable Law) currently in effect that insure any of the business, operations, directors, officers or employees of the Company and its Subsidiaries or affect or relate to the ownership, use or operation of any of the Assets and Properties of the Company and its Subsidiaries, that (a) have been issued to the Company or any of its Subsidiaries, or (b) to the knowledge of the Company, have been issued to any other Person for the benefit of the Company.  Except as set forth in Section 3.23(a) of the Company Disclosure Schedule, the insurance coverage provided by the policies set forth in Section 3.23(a) of the Company Disclosure Schedule will not terminate or lapse by reason of any of the transactions contemplated by this Agreement or any of the Ancillary Agreements.  Each policy listed in Section 3.23(a) of the Company Disclosure Schedule is valid and binding and in full force and effect, all premiums due thereunder have been paid when due and neither the Company nor a Subsidiary has received any notice of cancellation or termination in respect of any such policy or is in default thereunder, and the Company has no knowledge of any reason or state of facts that could reasonably be expected to lead to the cancellation of such policies or of any threatened termination of, or material premium increase with respect to, any of such policies.  The insurance policies listed in Section 3.23(a) of the Company Disclosure Schedule are in amounts and have coverages required by any Contract to which the Company or any of its Subsidiaries is a party or by which any of their respective Assets and Properties are bound.

 

(b)            Section 3.23(b) of the Company Disclosure Schedule contains a list of all claims made under any insurance policies covering the Company and/or its Subsidiaries in the two years immediately preceding the date of this Agreement.  The Company and its Subsidiaries have not received notice that any insurer under any policy listed (or required to be listed) in Section 3.23(b) of the Company Disclosure Schedule is denying, disputing or questioning liability with respect to a claim thereunder or defending under a reservation of rights clause.

 

3.24           Affiliate Transactions .  Except as set forth in the Company’s Charter Documents or on Sections 3.24 or 3.13   of the Company Disclosure Schedule, (i) there is no Contract or Liability between the Company or any of its Subsidiaries, on the one hand, and (A) any current or former officer, director, shareholder or other security holder, or to the Company’s knowledge, any Affiliate or Associate of the Company, or (B) any Person who, to the Company’s knowledge, is an Associate of any such current or former officer, director, shareholder or Affiliate, on the other hand, and (ii) the Company and its Subsidiaries do not beneficially own, directly or indirectly, any Investment Assets of any such current or former officer, director, shareholder, Affiliate or Associate.

 

(b)           Each of the Contracts and Liabilities listed in Section 3.24 of the Company Disclosure Schedule was entered into or incurred, as the case may be, on terms no less favorable to the Company or its Subsidiaries (in the reasonable judgment of the Company) than if such Contract or Liability was entered into or incurred on an arm’s-length basis on competitive terms. Any Contract listed in Section 3.24 of the Company Disclosure Schedule to which the Company or any of its Subsidiaries is a party was approved in accordance with applicable Law.

 

(c)           No claim for indemnification has been made by any director or officer of the Company or any of its Subsidiaries and, to the knowledge of the Company, no basis exists for any such claim for indemnification.

 

3.25           Brokers; Company Third Party Expenses .  Except as set forth on Section 3.25 of the Company Disclosure Schedule, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or similar fee or commission in connection with this Agreement or any of the Ancillary Agreements or any of the transactions contemplated hereby or thereby based on arrangements made by or on behalf of the Company. Section  3.25 of the Company Disclosure Schedule sets forth all Contracts with respect to Company Transaction Expenses.

 

3.26           Banks and Brokerage Accounts .   Section 3.26 of the Company Disclosure Schedule sets forth a true and complete list of the names and locations of all banks, trust companies, securities brokers and other financial institutions at which the Company and its Subsidiaries have an account or a safe deposit box or maintains a banking, custodial, trading or other similar relationship.

 

3.27           Powers of Attorney .  Except as set forth on Section 3.27 of the Company Disclosure Schedule, there are no outstanding powers of attorney executed by or on behalf of either the Company or any of its Subsidiaries in favour of any Person.