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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
___________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
Commission File Number 0-25346
___________________
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0772104
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
224 South 108th Avenue (402) 334-5101
Omaha, Nebraska 68154 (Registrant's telephone number,
(Address of principal executive offices, including area code)
including zip code)
___________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _x_ No ___
The number of shares of the issuer's Class A Common Stock, par value $.005
per share, outstanding as of May 10, 2001 was 36,619,293 (including 1,081,570
Exchangeable Shares of TSA Exchangeco Limited which can be exchanged on a
one-for-one basis for shares of the issuer's Class A Common Stock and 48,430
options to purchase shares of the issuer's Class A Common Stock at an exercise
price of one cent per share issued to MessagingDirect Ltd. shareholders).
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TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets as of March 31, 2001 and September 30, 2000................... 3
Condensed Consolidated Statements of Income for the three and six months ended March 31, 2001 and
2000................................................................................................ 4
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2001 and 2000.... 5
Notes to Condensed Consolidated Financial Statements................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................................... 16
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................................................... 17
Item 4. Submission of Matters to a Vote of Security Holders................................................. 18
Item 6. Exhibits and Reports on Form 8-K.................................................................... 18
Signature..................................................................................................... 18
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
March 31, September 30,
2001 2000
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 20,749 $ 23,400
Marketable securities 2,698 8,106
Billed receivables, net of allowances of $7,974 and $5,941, respectively 60,905 63,556
Accrued receivables 56,639 51,659
Prepaid income taxes 5,586 2,710
Deferred income taxes 17,258 11,208
Other 10,958 13,134
------------ ------------
Total current assets 174,793 173,773
Property and equipment, net 17,303 19,614
Software, net 35,130 26,757
Intangible assets, net 95,571 65,254
Long-term accrued receivables 27,615 27,018
Investments and notes receivable 2,235 6,146
Note receivable from executive officer 3,000 2,000
Deferred income taxes 2,614 2,958
Other 7,104 6,632
------------ ------------
Total assets $ 365,365 $ 330,152
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 22,612 $ 18,396
Accounts payable 10,898 16,023
Accrued employee compensation 7,500 7,472
Accrued liabilities 22,791 20,003
Deferred revenue 45,162 43,373
------------ ------------
Total current liabilities 108,963 105,267
Long-term debt 447 532
Long-term deferred revenue 13,907 13,993
Other 987 -
------------ ------------
Total liabilities 124,304 119,792
------------ ------------
Stockholders' equity:
Class A Common Stock 183 165
Additional paid-in capital 221,512 170,946
Retained earnings 67,078 85,033
Treasury stock, at cost (35,258) (35,258)
Accumulated other comprehensive income (12,454) (10,526)
------------ ------------
Total stockholders' equity 241,061 210,360
------------ ------------
Total liabilities and stockholders' equity $ 365,365 $ 330,152
============ ============
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except per share amounts)
Three Months Ended March 31, Six Months Ended March 31,
--------------------------------- ----------------------------------
2001 2000 2001 2000
-------------- -------------- --------------- --------------
Revenues:
Software license fees $ 45,159 $ 46,508 $ 87,626 $ 81,761
Maintenance fees 17,420 17,204 33,385 33,889
Services 13,913 11,677 30,117 26,856
------------ ------------ ------------ ------------
Total revenues 76,492 75,389 151,128 142,506
Expenses:
Cost of software license fees 11,233 11,084 22,824 21,909
Cost of maintenance and services 18,011 17,264 36,722 34,056
Research and development 10,722 9,968 20,791 18,428
Selling and marketing 18,247 18,204 37,942 35,765
General and administrative 16,050 15,159 32,177 29,797
Amortization of goodwill and
purchased intangibles 3,413 1,758 5,780 3,935
------------ ------------ ------------ ------------
Total expenses 77,676 73,437 156,236 143,890
------------ ------------ ------------ ------------
Operating income (loss) (1,184) 1,952 (5,108) (1,384)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 716 717 1,540 1,664
Interest expense (749) (72) (1,368) (135)
Other (988) (51) (715) 132
Non-recurring items - - (14,311) -
------------ ------------ ------------ ------------
Total other income (expense) (1,021) 594 (14,854) 1,661
------------ ------------ ------------ ------------
Income (loss) before income taxes (2,205) 2,546 (19,962) 277
Income tax benefit (provision) (1,399) (995) 2,006 (109)
------------ ------------ ------------ ------------
Net income (loss) $ (3,604) $ 1,551 $ (17,956) $ 168
============ ============ ============ ============
Earnings per share information:
Weighted average shares outstanding:
Basic 34,556 31,707 33,105 31,873
============ ============ ============ ============
Diluted 34,556 32,172 33,105 32,364
============ ============ ============ ============
Earnings per share:
Basic $ (0.10) $ 0.05 $ (0.54) $ 0.01
============ ============ ============ ============
Diluted $ (0.10) $ 0.05 $ (0.54) $ 0.01
============ ============ ============ ============
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Six Months Ended March 31,
--------------------------------------
2001 2000
-------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (17,956) $ 168
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 4,132 4,079
Amortization 13,142 10,026
Non-recurring items 14,311 -
Changes in operating assets and liabilities:
Billed and accrued receivables (1,406) (1,083)
Other current and noncurrent assets (8,517) (12,130)
Accounts payable (6,279) 2,356
Deferred revenue 909 1,593
Other current liabilities 663 (11,422)
------------ ------------
Net cash used in operating activities (1,001) (6,413)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (1,539) (3,368)
Additions to software (3,636) (5,670)
Acquisition of business, net of cash received 587 (3,053)
Additions to investments and notes receivable (420) (1,081)
Note receivable from executive officer (1,000) -
------------ ------------
Net cash used in investing activities (6,008) (13,172)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of Class A Common Stock 811 931
Proceeds from exercise of stock options 152 1,661
Purchases of Class A Common Stock - (13,343)
Net borrowings on lines of credit 3,313 -
Payments of long-term debt 436 77
------------ ------------
Net cash provided by (used in) financing activities 4,712 (10,674)
------------ ------------
Effect of exchange rate fluctuations on cash (354) 578
------------ ------------
Decrease in cash and cash equivalents (2,651) (29,681)
Cash and cash equivalents, beginning of period 23,400 70,482
------------ ------------
Cash and cash equivalents, end of period $ 20,749 $ 40,801
============ ============
See notes to condensed consolidated financial statements.
TRANSACTION SYSTEMS ARCHITECTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Consolidated Financial Statements
Transaction Systems Architects, Inc. ("TSA" or the "Company"), a Delaware
corporation, develops, markets, installs and supports a broad line of software
products and services primarily focused on facilitating electronic payments and
electronic commerce. In addition to its own products, the Company distributes or
acts as a sales agent for software developed by third parties. The products and
services are used principally by financial institutions, retailers and e-payment
processors, both in domestic and international markets.
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated. The condensed consolidated financial
statements at March 31, 2001, and for the three and six months ended March 31,
2001 and 2000, are unaudited and reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results for the
interim periods. The condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2000. The results of operations for the
three and six months ended March 31, 2001 are not necessarily indicative of the
results for the entire fiscal year ending September 30, 2001.
2. Revenue Recognition
The Company generates revenues from licensing software and providing
postcontract customer support (maintenance or "PCS") and other professional
services. The Company uses written contracts to document the elements and
obligations of arrangements with its customers. Arrangements that include the
licensing of software typically include PCS, and at times, include other
professional services. PCS includes the right to unspecified upgrades on a
when-and-if-available basis and ongoing technical support. The other
professional services may include training, installation or consulting. The
Company also performs services for customers under arrangements that do not
include the licensing of software.
Revenues under multiple-element arrangements, which may include several
software products or services sold together, are allocated to each element based
upon the residual method in accordance with American Institute of Certified
Public Accountants Statement of Position ("SOP") 98-9, "Software Revenue
Recognition, With Respect to Certain Arrangements." Under the residual method,
the fair value of the undelivered elements is deferred and subsequently
recognized. The Company has established sufficient vendor specific objective
evidence of fair value for PCS and other professional services based upon the
price charged when these elements are sold separately. Accordingly, software
license fees revenues are recognized under the residual method in arrangements
in which the software is licensed with PCS and/or other professional services,
and the undelivered elements of the arrangement are not essential to the
functionality of the delivered software.
The Company recognizes software license fees upon execution of the signed
contract, delivery of the software to the customer, determination that the
software license fees are fixed or determinable, and determination that the
collection of the software license fees is probable. The software license is
typically for a term of up to 60 months and does not include a right of return.
The term for the PCS element of a software arrangement is typically for a period
shorter than the term of the software license, and can be renewed by the
customer over the remaining term of the software license. PCS or maintenance
revenues are recognized ratably over the term of the arrangement on a
straight-line basis. The other professional services element of a software
arrangement is typically accounted for separately as the services are performed
for time-and-materials contracts or on a percentage-of-completion basis for
fixed-price contracts. In those instances where the services are essential to
the functionality of any other element of the arrangement, contract accounting
is applied to both the software and services elements of the arrangement.
The Company follows two methods for pricing its software licenses. Under
the first method, the software license is priced based upon the number of
transactions processed by the customer ("transaction-based pricing"). Under
transaction-based pricing, the customer is allowed to process a contractually
predetermined maximum volume of transactions per month for a specified period of
time. Once the customer's transaction volume exceeds this maximum volume level,
the customer is required to pay additional license fees for each incremental
volume level. Under the second method, the software license is priced on a per
copy basis and tiered to recognize different performance levels of the
customer's processing hardware ("designated-equipment-group pricing"). Under
designated-equipment-group pricing, the customer pays a license fee for each
copy of the software for a specified period of time.
Licensees are typically given two payment options. Under the first payment
option, the licensee can pay a combination of an Initial License Fee ("ILF"),
where the licensee pays a portion of the total software license fees at the
beginning of the software license term, and a Monthly License Fee ("MLF"), where
the licensee pays the remaining portion of the software license fees over the
software license term. In certain arrangements, the customer is contractually
committed to making MLF payments for a minimum number of months. If the customer
decides to terminate the arrangement prior to paying the minimum MLF payments,
the remaining minimum MLF payments become due and payable. Under the second
payment option, the Company offers a Paid-Up-Front ("PUF") payment option,
whereby the total software license fees are due at the beginning of the software
license term. Under either payment option, the Company is not obligated to
refund any payments received from the customer. In the combination ILF and MLF
payment option, the Company recognizes the ILF portion of the software license
fees upon delivery of the software, assuming all other revenue recognition
criteria were met. In the PUF payment option, the Company recognizes the total
software license fees upon delivery of the software, assuming all other revenue
recognition criteria were met.
In addition to SOP 98-9, the Company accounts for its software arrangements
in accordance with SOP 97-2, "Software Revenue Recognition." The primary
software revenue recognition criteria outlined in SOP 97-2 include: evidence of
an arrangement; delivery; fixed or determinable fees; and collectibility. SOP
97-2 specifies that extended payment terms in a software licensing arrangement
may indicate that the software license fees are not deemed to be fixed or
determinable. In addition, if payment of a significant portion of the software
license fees is not due until more than twelve months after delivery, the
software license fees should be presumed not to be fixed or determinable, and
thus should be recognized as the payments become due. However, SOP 97-2
specifies that if the Company has a standard business practice of using extended
payment terms in software licensing arrangements and has a history of
successfully collecting the software license fees under the original terms of
the software licensing arrangement without making concessions, the Company can
overcome the presumption that the software license fees are not fixed or
determinable. If the presumption is overcome, the Company should recognize the
software license fees when all other SOP 97-2 revenue recognition criteria are
met.
The Company has concluded that for certain software arrangements where the
customer is contractually committed to make MLF payments that extend beyond
twelve months, the "fixed or determinable" presumption has been overcome and
software license fees revenue should be recognized upon meeting the other SOP
97-2 revenue recognition criteria. In making this determination, the Company
considered the characteristics of the software product, the customer purchasing
the software, the similarity of the economics of the software arrangements with
previous software arrangements and the actual history of successfully collecting
under the original terms without providing concessions. The software license
fees recognized under these arrangements are referred to as "Recognized-Up-Front
MLFs." The present value of Recognized-Up-Front MLFs, net of third party
royalties, recognized during the three months ended March 31, 2001 and 2000
totaled approximately $2.8 million and $5.4 million, respectively. The present
value of Recognized-Up-Front MLFs, net of third party royalties, recognized
during the six months ended March 31, 2001 and 2000 totaled approximately $11.9
million and $10.5 million, respectively. The discount rates used to determine
the present value of these software license fees, representing the Company's
incremental borrowing rates, ranged from 9.50% to 11.00% during the six months
ended March 31, 2001, and from 10.25% to 11.00% during the six months ended
March 31, 2000. Recognized-Up-Front MLFs that have been recognized in software
license fees revenues by the Company, but not yet billed, are reflected in
accrued receivables in the accompanying condensed consolidated balance sheets.
3. Non-Recurring Items
The Company continually evaluates its investment holdings and long-lived
assets for evidence of impairment. During the three months ended December 31,
2000, after considering current market conditions for technology companies and
specific information regarding those companies in which the Company has an
ownership interest, the Company determined that the declines in market value for
certain of its investment holdings were "other than temporary" and a charge to
earnings for the declines in market value was required. Therefore, the Company
recorded a non-cash charge of $12.4 million in the three months ended December
31, 2000.
In addition, due to unfavorable market conditions in the fourth quarter of
fiscal 2000, the Company postponed its planned initial public offering ("IPO")
of its wholly-owned subsidiary, Insession Technologies, Inc. Due to the time
period which had elapsed without proceeding with this transaction and continuing
uncertainty in market conditions, the Company expensed costs associated with the
planned IPO totaling $1.9 million in the three months ended December 31, 2000.
4. Acquisition
In January 2001, the Company acquired all of the outstanding securities of
MessagingDirect Ltd. ("MDL"). MDL provides software applications to facilitate
the secure delivery and e-processing of electronic statements and bills.
Shareholders of MDL received 3,357,351 shares of Class A Common Stock (or
Exchangeable Shares of TSA Exchangeco Limited which can be converted on a
one-for-one basis for shares of TSA Class A Common Stock or options to purchase
shares of TSA Class A Common Stock) with a fair market value at the time of
purchase of approximately $49.5 million. The share exchange was accounted for
using the purchase method of accounting. An independent valuation of MDL was
performed and used as an aid in determining the fair market value of each
identifiable intangible asset. Accordingly, the excess purchase price over the
estimated fair value of each identifiable tangible and intangible asset acquired
was allocated to goodwill, which is being amortized using the straight-line
method over five years. Preliminarily, approximately $38.3 million of the
purchase price was allocated to goodwill and $11.8 million to software.
5. Common Stock and Earnings Per Share
Earnings per share ("EPS") has been computed in accordance with SFAS No.
128, "Earnings Per Share." Basic EPS is calculated by dividing net income
available to common stockholders (the numerator) by the weighted average number
of common shares outstanding during the period (the denominator). Diluted EPS is
computed by dividing net income available to common stockholders, adjusted for
the effect of any outstanding dilutive securities (the numerator), by the
weighted average number of common shares outstanding, adjusted for the dilutive
effect of outstanding dilutive securities (the denominator).
For the three and six months ended March 31, 2001, basic and diluted EPS
are the same, as any outstanding dilutive securities were antidilutive due to
the net loss in both periods. If the Company had reflected net income for the
three and six months ended March 31, 2001, weighted average shares from stock
options of 3,867,881 and 3,869,482, respectively, would have been excluded from
the computation of diluted EPS because the exercise prices of the stock options
were greater than the average market price of the Company's common shares. The
differences between the basic and diluted EPS denominators for the three and six
months ended March 31, 2000, which amounted to approximately 465,000 and 491,000
shares, respectively, were due to the dilutive effect of the Company's
outstanding stock options using the treasury stock method. For the three and six
months ended March 31, 2000, weighted average shares from stock options of
1,366,291 and 1,349,679, respectively, have been excluded from the computation
of diluted EPS because the exercise prices of the stock options were greater
than the average market price of the Company's common shares.
Exchangeable Shares and options received by shareholders of MDL (see Note
4) that have not yet been converted into TSA Class A Common Stock are included
in Class A Common Stock for presentation purposes on the March 31, 2001
condensed consolidated balance sheet, and are included in common shares
outstanding for EPS computations for the three and six months ended March 31,
2001.
6. Comprehensive Income
The Company's components of other comprehensive income were as follows (in
thousands):
Three Months Ended December 31, Six Months Ended March 31,
------------------------------ ------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
Net income (loss) $ (3,604) $ 1,551 $ (17,956) $ 168
Other comprehensive income (loss):
Foreign currency translation adjustments (5,112) 111 (4,573) (1,012)
Unrealized investment holding gain, net of reclassification
adjustment of $8,052 in the six months ended March 31, 2001 842 6,080 2,645 10,767
-------------- -------------- -------------- --------------
Comprehensive income (loss) $ (7,874) $ 7,742 $ (19,884) $ 9,923
============== ============== ============== ==============
The Company's components of accumulated other comprehensive income at each
balance sheet date were as follows (in thousands):
Foreign Unrealized Accumulated
Currency Investment Other
Translation Holding Comprehensive
Adjustments Gain (Loss) Loss
-------------- ------------- --------------
Balance, September 30, 2000 $ (4,723) $ (5,803) $ (10,526)
Fiscal 2001 year-to-date activity (4,573) (5,407) (9,980)
Reclassification adjustment for loss included
in net income (loss) - 8,052 8,052
-------------- ------------- --------------
Balance, March 31, 2001 $ (9,296) $ (3,158) $ (12,454)
============== ============= ==============
7. Line-of-Credit Facilities
As of March 31, 2001, the Company has a $25.0 million bank line-of-credit
with a large United States bank. This line is secured by certain trade
receivables of TSA. Among other restrictions, the Company must maintain a
minimum accounts receivable balance, minimum tangible net worth and minimum
working capital levels at each reporting date. As of March 31, 2001, these
minimum amounts to be maintained were $35.0 million of billed receivables less
than 90 days past due, $147.0 million of tangible net worth and $50.0 million of
working capital. After obtaining a waiver from the U.S. bank due to
non-compliance with the minimum tangible net worth covenant, the Company is in
compliance with all debt covenants as of March 31, 2001. The Company also has a
line-of-credit with a large foreign bank in the amount of 3.0 million British
Pounds, which translates to approximately $4.2 million. The foreign line
requires the Company to maintain minimum tangible net worth within the Company's
wholly-owned subsidiary, ACI Worldwide (EMEA) Ltd.
Interest on the U.S. line-of-credit accrues at an annual rate equal to
either the bank's "base rate" less .75% or the LIBOR rate plus 1.75% and is
payable at the end of each month. Interest on the foreign line-of-credit accrues
at an annual rate of 1% above the bank's "base rate." During the three and six
months ended March 31, 2001, the Company recorded interest expense of $0.5
million and $1.0 million, respectively, related to the two line-of-credit
facilities. The carrying amounts of the Company's line-of-credit facilities
approximate fair value due to their variable interest rates. Current borrowings
outstanding as of March 31, 2001 totaled approximately $21.2 million. The
foreign bank line-of-credit expires on August 9, 2001. Subsequent to March 31,
2001, the U.S. bank reduced the amount of the line-of-credit from $25.0 million
to $15.0 million and extended the line-of-credit expiration date from May 31,
2001 to June 30, 2001.
8. Segment Information
In fiscal 2000, the Company reorganized its business into four business
units or segments: Consumer e-Payments, Electronic Business Infrastructure,
Corporate Banking e-Payments and Health Payment Systems. Prior period segment
information has been restated to reflect these reorganizations. The Company's
chief operating decision makers review business unit financial information,
presented on a consolidated basis, accompanied by disaggregated information
about revenues and operating income by business unit. The Company does not track
assets by business unit.
The Company plans to direct the majority of its focus on the Consumer
e-Payments and Electronic Business Infrastructure business units. The Company
recently discontinued pursuing strategic alternatives for the Electronic
Business Infrastructure business unit since the value of the products and
services it offers exceeds current technology company market valuations. The
Company is considering various alternatives for the Corporate Banking e-Payments
and Health Payments Systems business units, including possible sales, spin-offs,
strategic alliances, partnerships, third-party investors and initial public
offerings.
Consumer e-Payments products represent the Company's largest product line
and include its most mature and well-established applications which are used
primarily by financial institutions, retailers and e-payment processors. Its
products are used to route and process transactions for automated teller machine
networks; process transactions from traditional point of sale devices, wireless
devices and the Internet; handle PC and phone banking transactions; control
fraud and money laundering; process electronic benefit transfer transactions;
authorize checks; establish frequent shopper programs; automate settlement, card
management and claims processing; and issue and manage multi-functional
applications on smart cards. Electronic Business Infrastructure products
facilitate communication, data movement, monitoring of systems and business
process automation across computing systems, involving mainframes, distributed
computing networks and the Internet. Corporate Banking e-Payments products offer
high-value payments processing, bulk/recurring payments processing, wire room
processing, global messaging, integration payments management and continuous
link settlement processing. Health Payment Systems products allow large
corporations and health-care payment processors to automate claims eligibility
determination, claims capture and claims payments.
No single customer accounted for more than 10% of the Company's
consolidated revenue during the three and six months ended March 31, 2001 and
2000. The following are revenues and operating income (loss) for the Company's
business unit segments for the three and six months ended March 31, 2001 and
2000 (in thousands):
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ ------------------------------------
2001 2000 2001 2000
---------------- ---------------- ---------------- ----------------
Revenues:
Consumer e-Payments $ 56,776 $ 53,629 $ 114,328 $ 101,345
Electronic Business Infrastructure 10,860 11,290 20,144 22,166
Corporate Banking e-Payments 7,650 9,609 14,258 17,250
Health Payment Systems 1,206 861 2,398 1,745
---------------- ---------------- ---------------- ----------------
$ 76,492 $ 75,389 $ 151,128 $ 142,506
================ ================ ================ ================
Operating loss:
Consumer e-Payments $ 1,328 $ (1,617) $ 2,224 $ (6,069)
Electronic Business Infrastructure (353) 2,428 (1,110) 4,212
Corporate Banking e-Payments (1,737) 1,206 (4,634) 498
Health Payment Systems (422) (65) (1,588) (25)
---------------- ---------------- ---------------- ----------------
Operating loss $ (1,184) $ 1,952 $ (5,108) $ (1,384)
================ ================ ================ ================
The Company's products are sold and supported through distribution networks
covering the geographic regions of the Americas, Europe/Middle East/Africa
("EMEA") and Asia/Pacific. The following are revenues and long-lived assets for
these geographic regions (in thousands):
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ ------------------------------------
2001 2000 2001 2000
---------------- ---------------- ---------------- ----------------
Revenues:
United States $ 31,928 $ 35,240 $ 63,933 $ 66,062
Americas - other 11,256 8,310 20,242 17,176
Total Americas 43,184 43,550 84,175 83,238
EMEA 24,793 24,584 51,783 44,806
Asia/Pacific 8,515 7,255 15,170 14,462
---------------- ---------------- ---------------- ----------------
$ 76,492 $ 75,389 $ 151,128 $ 142,506
================ ================ ================ ================
March 31, September 30,
2001 2000
---------------- ----------------
Long-lived assets:
United States $ 100,638 $ 107,925
Americas - other 25,645 5,337
Total Americas 126,283 113,262
EMEA 32,916 11,659
Asia/Pacific 1,144 1,482
---------------- ----------------
$ 160,343 $ 126,403
================ ================
9. Accounting Pronouncements Issued But Not Yet Effective
In December 1999, the Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements," which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the SEC. SAB No.
101 requires, among other things, that license and other up-front fees be
recognized over the term of the agreement, unless the fees are in exchange for
products delivered or services performed that represent the culmination of a
separate earnings process. The Company is required to be in conformity with the
provisions of SAB No. 101 no later than the fourth quarter of fiscal 2001. The
Company is currently reviewing SAB No. 101 and has not determined the impact of
its adoption on the Company's financial position or results of operations.
In September 2000, the Financial Accounting Standards Board issued SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 140, which replaced SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," revises the standards for accounting for securitizations and
other transfers of financial assets and collateral and requires certain
disclosures, but carries over most of SFAS No. 125's provisions without
reconsideration. SFAS No. 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March 31,
2001. The Company currently conforms to the requirements of SFAS No. 125 and
the adoption of SFAS No. 140 is not expected to have a material impact on the
Company's financial position or results of operations.
TRANSACTION SYSTEMS ARCHITECTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company develops, markets, installs and supports a broad line of
software products and services primarily focused on facilitating electronic
payments and electronic commerce. In addition to its own products, TSA
distributes software developed by third parties. The products and services are
used principally by financial institutions, retailers and e-payment processors,
both in domestic and international markets.
Business Segments
The Company's products and services are organized into four business units
- - Consumer e-Payments, Electronic Business Infrastructure, Corporate Banking
e-Payments and Health Payment Systems. The Company plans to direct the majority
of its focus on the Consumer e-Payments and Electronic Business Infrastructure
business units. Products in the Consumer e-Payments business unit represent the
Company's largest product line and include its most mature and well-established
applications. Products and services offered by this business unit, except
community banking products, are marketed and supported through ACI Worldwide Inc
("ACI"), a wholly-owned subsidiary of the Company. ACI sells and supports the
products and services through three distribution networks: the Americas,
Europe/Middle East/Africa ("EMEA") and Asia/Pacific. Each distribution network
primarily has its own sales force and supplements this with reseller and/or
distributor networks. The community banking products are marketed and supported
by Regency Systems, Inc., a wholly-owned subsidiary of the Company. Products and
services offered by the other three business units are marketed and supported
primarily through their own sales and support organizations. The following table
sets forth total revenues and operating income (loss) for the Company's four
business unit segments for the periods indicated (in thousands):
Three Months Ended March 31, Six Months Ended March 31,
------------------------------------ ------------------------------------
2001 2000 2001 2000
---------------- ---------------- ---------------- ----------------
Revenues:
Consumer e-Payments $ 56,776 $ 53,629 $ 114,328 $ 101,345
Electronic Business Infrastructure 10,860 11,290 20,144 22,166
Corporate Banking e-Payments 7,650 9,609 14,258 17,250
Health Payment Systems 1,206 861 2,398 1,745
---------------- ---------------- ---------------- ----------------
$ 76,492 $ 75,389 $ 151,128 $ 142,506
================ ================ ================ ================
Operating loss:
Consumer e-Payments $ 1,328 $ (1,617) $ 2,224 $ (6,069)
Electronic Business Infrastructure (353) 2,428 (1,110) 4,212
Corporate Banking e-Payments (1,737) 1,206 (4,634) 498
Health Payment Systems (422) (65) (1,588) (25)
---------------- ---------------- ---------------- ----------------
Operating loss $ (1,184) $ 1,952 $ (5,108) $ (1,384)
================ ================ ================ ================
Backlog
The following table sets forth the Company's recurring and non-recurring
revenue backlog, by business unit, at each balance sheet date (in thousands):
Recurring Revenue Non-recurring Revenue
Backlog Backlog
------------------------------------ ------------------------------------
March 31, Sept. 30, March 31, Sept. 30,
2001 2000 2001 2000
---------------- ---------------- ---------------- ----------------
Consumer e-Payments $ 95,800 $ 101,100 $ 37,100 $ 39,100
Electronic Business Infrastructure 17,200 19,200 3,800 2,100
Corporate Banking e-Payments 17,000 16,100 12,500 12,900
Health Payment Systems 1,700 2,800 2,000 2,300
---------------- ---------------- ---------------- ----------------
$ 131,700 $ 139,200 $ 55,400 $ 56,400
================ ================ ================ ================
The Company defines recurring revenue backlog to be all monthly license
fees, maintenance fees and facilities management fees specified in executed
contracts to the extent that the Company contemplates recognition of the related
revenue within one year. The Company includes in its non-recurring revenue
backlog all fees (other than recurring) specified in executed contracts to the
extent that the Company contemplates recognition of the related revenue within
one year. There can be no assurance that contracts included in recurring or
non-recurring revenue backlog will actually generate the specified revenues or
that the actual revenues will be generated within the one-year period.
Results of Operations
The following table sets forth certain financial data and the percentage of
total revenues of the Company for the periods indicated (amounts in thousands):
Three Months Ended March 31, Six Months Ended March 31,
--------------------------------------------- ----------------------------------------------
2001 2000 2001 2000
--------------------- ---------------------- ---------------------- ---------------------
% of % of % of % of
Amount Revenue Amount Revenue Amount Revenue Amount Revenue
--------- --------- ----------- --------- ---------- --------- ---------- ---------
Revenues:
ILFs and PUFs $ 30,422 39.8 % $ 26,918 35.7 % $ 50,521 33.4 % $ 42,322 29.7 %
MLFs (other than
Recognized-Up-Front MLFs) 11,974 15.6 14,187 18.8 25,218 16.7 28,907 20.3
Recognized-Up-Front MLFs 2,763 3.6 5,403 7.2 11,887 7.9 10,532 7.4
--------- ------ --------- ------ ---------- ------ ---------- ------
Software license fees 45,159 59.0 46,508 61.7 87,626 58.0 81,761 57.4
Maintenance fees 17,420 22.8 17,204 22.8 33,385 22.1 33,889 23.8
Services 13,913 18.2 11,677 15.5 30,117 19.9 26,856 18.8
--------- ------ --------- ------ --------- ------ ---------- ------
Total revenues 76,492 100.0 75,389 100.0 151,128 100.0 142,506 100.0
--------- ------ ---------- ------ ---------- ------ ---------- ------
Expenses:
Cost of software license fees 11,233 14.7 11,084 14.7 22,824 15.1 21,909 15.4
Cost of maintenance and service 18,011 23.5 17,264 23.0 36,722 24.3 34,056 23.9
Research and development 10,722 14.0 9,968 13.2 20,791 13.8 18,428 12.9
Selling and marketing 18,247 23.8 18,204 24.1 37,942 25.1 35,765 25.1
General and administrative 16,050 21.0 15,159 20.1 32,177 21.3 29,797 20.9
Amortization of goodwill and
purchased intangibles 3,413 4.5 1,758 2.3 5,780 3.8 3,935 2.8
--------- ------ ---------- ------ ---------- ------ ---------- ------
Total expenses 77,676 101.5 73,437 97.4 156,236 103.4 143,890 101.0
--------- ------ ---------- ------ ---------- ------ ---------- ------
Operating income (loss) (1,184) (1.5) 1,952 2.6 (5,108) (3.4) (1,384) (1.0)
--------- ------ ---------- ------ ---------- ------ ---------- ------
Other income (expense):
Interest income 716 0.9 717 1.0 1,540 1.0 1,664 1.2
Interest expense (749) (1.0) (72) (0.1) (1,368) (0.9) (135) (0.1)
Other (988) (1.3) (51) (0.1) (715) (0.5) 132 0.1
Non-recurring items - - - - (14,311) (9.4) - -
--------- ------ ---------- ------ ---------- ------ ---------- ------
Total other income (expense (1,021) (1.4) 594 0.8 (14,854) (9.8) 1,661 1.2
--------- ------ ---------- ------ ---------- ------ ---------- ------
Income (loss) before income taxes (2,205) (2.9) 2,546 3.4 (19,962) (13.2) 277 0.2
Income tax benefit (provision) (1,399) (1.8) (995) (1.3) 2,006 1.3 (109) (0.1)
--------- ------ ---------- ------ ---------- ------ ---------- ------
Net income (loss) $ (3,604) (4.7)% $ 1,551 2.1 % $ (17,956) (11.9)% $ 168 0.1 %
========= ====== ========== ====== ========== ====== ========== ======
Revenues. Total revenues for the second quarter of fiscal 2001 increased
1.5%, or $1.1 million, from the comparable period in fiscal 2000. Total revenues
for the first six months of fiscal 2001 increased $8.6 million, or 6.1%, over
the first six months of fiscal 2000. The three-month increase is the result of a
$2.2 million, or 19.1%, increase in services revenue offset by a $1.3 million,
or 2.9%, decrease in software license fees revenue. The six-month increase is
the result of a $5.9 million, or 7.2%, increase in software license fees revenue
and a $3.3 million, or 12.1%, increase in services revenue, offset by a $0.5
million, or 1.5%, decrease in maintenance fee revenue.
During the first quarter of fiscal 2000, the Company's large bank and
merchant customers and potential new customers, in effect, locked down their
systems in preparation for the Year 2000. This Year 2000 lock-down had a
negative impact on the Company's Consumer e-Payments software license fees and
services revenues due to the less than expected demand by customers and
potential new customers to upgrade and enhance their current systems. In
addition, since the Year 2000 cutover, the Company has found its customers
increasingly scrutinizing their information technology purchases, which has led
to further delays in software and services purchases. The Company believes
overall demand for its products and services is increasing at a gradual pace.
However, the Company believes that customer demand for its products and services
will be slow to return to growth levels experienced prior to fiscal 2000.
The increase in ILF and PUF revenue for the second quarter and the first
six months of fiscal 2001 is a result of an increased demand for the Company's
Consumer e-Payments products, offset by a decrease in demand for the Company's
Electronic Business Infrastructure ICE product and a decrease in revenue
associated with a significant Corporate Banking e-Payment customer project. In
addition, the Company changed its sales compensation plans in fiscal 2001 for
its Consumer e-Payments sales force to emphasize PUF contracts for both customer
renewals and new customers rather than emphasizing ILF/MLF contracts. This
change resulted in an increase in PUF revenue and a decrease in MLF revenue for
the second quarter and the first six months of fiscal 2001.
Maintenance fee revenues decreased in the first quarter of fiscal 2001 due
to a decrease in customer demand for the Company's enhanced maintenance support.
During the second quarter of fiscal 2001, demand for the Company's enhanced
maintenance support returned to normal levels.
The growth in services revenue is the result of increased demand for
technical and project management services, which is primarily the result of an
increased installed base of the Company's Consumer e-Payments products.
Expenses. Total operating expenses for the second quarter of fiscal 2001
increased $4.2 million, or 5.8%, over the comparable period of fiscal 2000.
Total operating expenses for the first six months of fiscal 2001 increased $12.3
million, or 8.6%, over the first six months of fiscal 2000. Amortization of
goodwill and purchased intangibles has increased between fiscal years related to
the acquisitions of WorkPoint Systems, Inc. in April 2000, Hospital Health Plan
Corporation in May 2000 and MessagingDirect Ltd. in January 2001. Other changes
in operating expense line items are discussed below.
Cost of software license fees for the second quarter of fiscal 2001 was
comparable to the second quarter of fiscal 2000. For the six months ended March
31, 2001, cost of software license fees increased $0.9 million over the
comparable period of fiscal 2000. This increase was due primarily to an increase
in royalties owed to the owners of third-party products.
Cost of maintenance and services for the second quarter of fiscal 2001
increased $0.7 million, or 4.3%, over the comparable period in fiscal 2000. For
the six months ended March 31, 2001, cost of maintenance and services increased
$2.7 million, or 7.8%, over the comparable period of fiscal 2000. These
increases were the result of personnel-related expenses supporting maintenance
fees and services revenues, which increased $2.7 million, or 4.5%, for the first
six months of fiscal 2001 over the comparable period of fiscal 2000.
Research and development ("R&D") costs for the second quarter of fiscal
2001 increased $0.8 million, or 7.6%, over the comparable period in fiscal 2000.
For the six months ended March 31, 2000, R&D costs increased $2.4 million, or
12.8%, over the comparable period of fiscal 2000. R&D consists primarily of
compensation and related costs for R&D employees and contractors. R&D costs as a
percentage of total revenues for the three and six months ended March 31, 2001
were 14.0% and 13.8%, respectively, as compared to 13.2% and 12.9%,
respectively, for comparable periods of fiscal 2000. The Company capitalizes
costs related to certain internally-developed software when the resulting
products reach technological feasibility. Software development costs capitalized
in the first six months of fiscal 2001 and 2000 totaled approximately $2.6
million and $4.1 million, respectively.
Selling and marketing costs for the second quarter of fiscal 2001 was
comparable to the second quarter of fiscal 2000. For the six months ended March
31, 2001, selling and marketing costs increased $2.2 million, or 6.1%, over the
comparable period of fiscal 2000. The increase for the first six months of
fiscal 2001 is due to an increase in sales personnel and marketing activities in
each of the four business units.
General and administrative costs for the second quarter of fiscal 2001
increased $0.9 million, or 5.9%, over the comparable period in fiscal 2000. For
the six months ended March 31, 2001, general and administrative costs increased
$2.4 million, or 8.0%, over the comparable period of fiscal 2000. The increase
is attributable to an increase in bad debts expense and occupancy costs, offset
by a decrease in personnel-related expenses. The decrease in personnel-related
expenses is due to the consolidation of the Company's Consumer Banking,
Electronic Commerce and Internet Banking operating units into the Consumer
e-Payments business unit during the fourth quarter of fiscal 2000. During the
quarter ending June 30, 2001, the Company will incur approximately $2.8 million
as severance benefits to certain former executive officers in connection with
their resignations.
Other Income and Expenses. The increase in interest expense in fiscal 2001
is due to an increase in borrowings on the Company's line-of-credit facilities.
Other expenses resulted primarily from foreign currency translation losses
recognized by the Company.
The Company continually evaluates the carrying value of its investment
holdings and long-lived assets for evidence of impairment. During the first
quarter of fiscal 2001, after considering current market conditions for
technology companies and specific information regarding those companies in which
the Company has an ownership interest, the Company determined that the declines
in market value for certain of its investment holdings were "other than
temporary" and a charge to earnings of $12.4 million for the declines in market
value was required. The Company also expensed costs associated with the
withdrawn IPO of Insession Technologies, Inc. totaling $1.9 million in the first
quarter of fiscal 2001. These charges are reflected as non-recurring items under
other expenses.
Income Taxes. The effective tax rate for the first six months of fiscal
2001 was approximately 10% as compared to 41% for all of fiscal 2000. The
effective tax rate for the first six months of fiscal 2001 was less than that of
the comparable period for fiscal 2000 primarily due to non-deductible
amortization expense associated with acquisitions accounted for as purchases and
non-recognition of tax benefits for operating losses in certain foreign
locations.
As of March 31, 2001, the Company has deferred tax assets of $31.5 million
and deferred tax liabilities of $2.6 million. Each quarter, the Company
evaluates its historical operating results as well as its projections for the
future to determine the realizability of the deferred tax assets. This analysis
indicated that $19.9 million of the net deferred tax assets were more likely
than not to be realized. Accordingly, the Company has a valuation allowance of
$9.0 million as of March 31, 2001. The Company intends to analyze the
realizability of the net deferred tax assets at each future reporting period.
Such analysis may indicate that the realization of various deferred tax benefits
is more likely than not and, therefore, the valuation reserve may be adjusted
accordingly.
Liquidity and Capital Resources
As of March 31, 2001, the Company's principal sources of liquidity
consisted of $20.7 million in cash and cash equivalents, and available bank
lines of credit totaling approximately $29.2 million, with outstanding
borrowings of approximately $21.2 million. The bank lines are subject to
maintenance of certain covenants.
The Company's net cash flows used in operating activities for the first six
months of fiscal 2001 amounted to $1.0 million as compared to $6.4 million used
during the first six months of fiscal 2000. The growth of the Company's billed
and accrued receivables during the first six months of fiscal 2001 and 2000 are
the primary reasons for the negative operating cash flows in the first six
months of fiscal 2001 and 2000.
A contributor to the Company's cash management program is the factoring of
accrued receivables, whereby an interest in Company receivables is transferred
on a non-recourse basis to third-party financial institutions in exchange for
cash. During the first six months of fiscal 2001 and 2000, the Company generated
operating cash flows from the factoring of accrued receivables of $8.5 million
and $11.1 million, respectively. The Company has approximately $15 million of
accrued receivables that may be sold in the future to third-party financial
institutions under this program. The Company is actively pursuing the sale of a
portion of these receivables as a means to generate cash, but there can be no
assurance that the Company will be successful in its efforts to sell any of
these receivables.
The Company's net cash flows used in investing activities totaled $6.0
million and $13.2 million in the first six months of fiscal 2001 and 2000,
respectively. The decrease in cash used in investing activities was due to a
decrease in acquisition-related expenditures, and decreased purchases of
software, property and equipment, offset by an additional advance during the
first quarter of fiscal 2001 in the amount of $1.0 million to the Company's CEO
as part of his employment and incentive compensation package. The acquisition of
business amount in fiscal 2000 consists of the final payment of $3.1 million
related to the acquisition of Insession Inc.
The Company's net cash flows provided by financing activities was $4.7
million in the first six months of fiscal 2001 as compared to net cash flows
used in financing activities of $10.7 million in the first six months of fiscal
2000. During the first six months of 2001, the Company had net borrowings on its
bank line-of-credit facilities of $3.3 million. During the first six months of
fiscal 2000, pursuant to a stock repurchase program approved by the Company's
Board of Directors, the Company acquired 500,300 shares at an average cost of
$26.67 per share, totaling approximately $13.3 million. The Company used cash
flow from operations to fund the common stock repurchases.
The Company is considering various alternatives for the Corporate Banking
e-Payments and Health Payments Systems business units, including possible sales,
spin-offs, strategic alliances, partnerships, third-party investors and initial
public offerings. The Company recently discontinued pursuing strategic
alternatives for the Electronic Business Infrastructure business unit since the
value of the products and services it offers exceeds current technology company
market valuations.
The Company believes that its existing sources of liquidity, including cash
provided by operating activities (which improved sequentially in the second
quarter of fiscal 2001 over the first quarter of fiscal 2001 as a result of cost
containment initiatives that have been implemented, accounts receivable
improvements and an emphasis on PUF contracts) along with cash generated from
its factoring program and borrowings available under its line-of-credit
facilities, will satisfy the Company's projected working capital and other cash
requirements for the foreseeable future. Any cash received upon successful
divestiture of either of the business units described above would reduce the
Company's reliance on borrowings under its line-of-credit facilities.
In December 2000, the Company entered into an amendment to its primary
line-of-credit facility increasing the aggregate commitment from $25.0 million
to $30.0 million. The increased commitment expired on March 31, 2001.
Consequently, as of March 31, 2001, the commitment under its primary
line-of-credit facility returned to $25.0 million. In May 2001, the Company and
its U.S. bank agreed to amend the Company's primary line-of-credit facility
reducing the line-of-credit facility from $25.0 million to $15.0 million and
extending the facility's maturity date from May 31, 2001 to June 30, 2001. The
Company is currently negotiating with several financial institutions for a
replacement line-of-credit. Although no assurances can be given, the Company
believes a replacement line-of-credit of approximately $25.0 million will be in
place prior to June 30, 2001.
Forward-Looking Statements
The statements in this report regarding projected results are preliminary
and "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. In addition, this report contains other
forward-looking statements including statements regarding the Company's or third
parties' expectations, predictions, views, opportunities, plans, strategies,
beliefs and statements of similar effect. The forward-looking statements in this
report are subject to a variety of risks and uncertainties. Actual results could
differ materially. Factors that could cause actual results to differ include but
are not limited to the following:
o The corporate divestiture strategy is subject to numerous factors,
including market conditions and perception, demand for the other
businesses by potential investors or potential acquirers, personnel,
tax, business, general economic conditions, viability of businesses as
stand-alone operations, and other factors that could affect the
Company's decisions and ability to separate businesses, to divest,
raise capital, or implement other alternatives for such businesses,
and to implement other aspects of the Company's corporate strategy.
There can be no assurance that the Company will implement any aspect
of the corporate strategy or that if implemented the strategy will be
successful.
o The Year 2000 lock-down has interrupted the Company's normal sales
cycle and therefore is likely to have a negative impact on the
Company's revenues and net income for the remainder of fiscal 2001 and
beyond. The Company also believes customer demand for system upgrades
and enhancements will be slow to return to normal growth levels, as
many of the Company's customers upgraded and enhanced their systems
prior to the Year 2000. There can be no assurance that the Company's
growth rates will return to historical levels.
o The acquisition of MessagingDirect is subject to numerous risks,
including the following: (i) MessagingDirect is in a highly
competitive industry, (ii) MessagingDirect does not have a significant
market presence, significant revenues, or widespread acceptance or
prolonged use of its products, (iii) MessagingDirect has not been
profitable, (iv) the electronic statement presentation and electronic
bill presentment and payment markets may not achieve the predicted
growth rates, (v) MessagingDirect's products, personnel, and
operations may be difficult to combine with those of the Company, the
products may not be accepted by the Company's customer base, and there
will be significant integration costs of combining the businesses, and
(vi) the acquisition will have a dilutive impact on earnings per share
and amortization of intangible assets will have an adverse effect on
earnings.
o The Company is subject to risks of conducting international operations
including difficulties in staffing and management, reliance on
independent distributors, fluctuations in foreign currency exchange
rates, compliance with foreign regulatory requirements, variability of
foreign economic conditions, and changing restrictions imposed by U.S.
export laws.
o The Company will continue to derive a majority of its total revenues
from licensing its BASE24 family of software products and providing
services and maintenance related to those products. Any reduction in
demand for, or increase in competition with respect to, BASE24
products would have a material adverse effect on the Company's
financial condition and results of operations.
o The Company's business is concentrated in the banking industry, making
it susceptible to a downturn in that industry.
o Fluctuations in quarterly operating results may result in volatility
in the Company's stock price. No assurance can be given that operating
results will not vary. The Company's stock price may also be volatile,
in part, due to external factors such as announcements by third
parties or competitors, inherent volatility in the high-technology
sector and changing market conditions in the industry.
o The diversion of management's time and attention to the search for a
new permanent CEO, and related transition issues, may temporarily
dilute management's focus on the Company's day-to-day operations.
For a detailed discussion of these and other risk factors, interested
parties should review the Company's filings with the Securities and Exchange
Commission, including Exhibit 99.01 to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 2000.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's market risk for the
six months ended March 31, 2001. See the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 2000 for additional discussions
regarding quantitative and qualitative disclosures about market risk.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) On January 11, 2001, TSA or its subsidiaries issued the securities listed
below in exchange for all of the outstanding securities of MessagingDirect
Ltd. ("MDL"), an Alberta, Canada company. The issuances were exempt from
registration pursuant to Section 3(a)(10) of the Securities Act of 1933, as
amended. The securities were issued pursuant to a plan of arrangement which
was approved by the Court of Queen's Bench (Alberta), Canada after holding
a hearing. The securities were issued pursuant to the plan of arrangement
to the then securityholders of MDL (or with respect to the share of TSA
Special Voting preferred stock discussed below, to a trustee for the
benefit of certain of such securityholders). The court's order approving
the plan of arrangement stated that the court was satisfied that the terms
and conditions of the plan of arrangement were fair and reasonable to the
MDL securityholders, both procedurally and substantively. The court was
advised before the hearing that its approval would constitute the basis for
a claim to the Section 3(a)(10) exemption. MDL securityholders were given
notice of the hearing and the right to appear.
o 1,778,429 shares of TSA Class A Common Stock.
o 1,410,942 shares of Exchangeable Shares of TSA Exchangeco Limited, a
Nova Scotia subsidiary of TSA. The Exchangeable Shares can be
exchanged on a one-for-one basis into shares of TSA's Class A Common
Stock. The holders of Exchangeable Shares have rights to direct the
voting of the share of TSA Special Preferred Stock described below.
o One share of TSA Special Preferred Voting Stock. This share was issued
to Wells Fargo Bank Minnesota, National Association, as Trustee of the
trust created for the benefit of holders of the Exchangeable Shares,
to be held of record by the Trustee for and on behalf of, and for the
use and benefit of, the holders of the Exchangeable Shares. The
Special Preferred Voting Stock entitles the Trustee to cast the number
of votes equal to the number of Exchangeable Shares outstanding,
voting as a single class with the Class A Common Stock. Each holder of
Exchangeable Shares is entitled to instruct the Trustee on how to vote
with respect to such holder's Exchangeable Shares.
o Options to purchase 167,980 shares of TSA Class A Common Stock. These
options were issued to holders of MessagingDirect Ltd. employee stock
options to replace those options. The replacement options have an
exercise price of one cent per share of TSA Class A Common Stock
because, pursuant to the terms of the acquisition, the number of
shares covered by the options was reduced by a formula intended to
replicate a cashless exercise.
On January 11, 2001, TSA Exchangeco Limited issued 600,000 shares of
nonvoting, Canadian dollar denominated preferred stock with a 7% per annum
dividend rate, to another TSA subsidiary which in turn sold them to ten TSA
management level employees who are not executive officers and who each
purchased 60,000 of the shares. The sale was exempt from registration
pursuant to Section 4(2) of the Securities Act. The securities were offered
only to these ten employees, the employees agreed to resale restrictions,
and the certificates representing the securities were legended. The
purchase price for the preferred shares was $1,490,000 Canadian dollars,
which equated to one million U.S. dollars on the date of issuance. The
preferred shares are exchangeable by the holders for TSA Class A Common
Shares after two years from the date of issuance of the preferred shares or
earlier upon a change of control of TSA. Subject to adjustments, the number
of TSA Class A Common Stock shares issuable upon exchange of a preferred
share (the "Ratio") is equal to the quotient of the purchase price of the
preferred stock (plus any accrued and unpaid dividends) and 115% of the
Canadian dollar equivalent of the average market price for TSA Class A
Common Stock for the 20-day trading period ended prior to the date of
issuance of the preferred shares as determined in the manner set out in the
preferred share provisions. As of the date of issuance of the preferred
shares and subject to adjustments, the total number of TSA Class A Common
Stock shares that would be issuable upon exchange of all of the preferred
shares was 67,679. TSA Exchangeco Limited or other TSA subsidiaries may
elect to redeem the preferred shares after two years from the date of their
issuance, or earlier upon a change of control of TSA or termination of
employment of the holder, for TSA Class A Common Stock with a market value
(as determined based on an average market price) at the time of redemption
equal to the greater of (i) the purchase price (plus any accrued and unpaid
dividends) or (ii) the fair market value of the preferred shares. If there
is no agreement on the fair market value, then it will be determined
pursuant to the preferred share provisions which provide, in general, that
it will equal the number of TSA shares determined pursuant to the Ratio
plus the then present value of any unpaid dividends payable with respect to
periods after the early redemption through the mandatory redemption date.
If the preferred shares have not been earlier exchanged or redeemed, then
they are to be mandatorily redeemed for cash equal to the purchase price
plus any accrued but unpaid dividends on the fifth anniversary date of
their issuance.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Stockholders was held on February 20, 2001.
Each matter voted upon at such meeting and the number of shares cast for,
against or withheld, and abstained are as follows:
1. Election of directors to hold office until the next Annual Meeting of
Stockholders:
Nominee For Withheld
William E. Fisher 27,268,567 1,393,620
Charles E. Noell, III 27,199,864 1,462,323
Jim D. Kever 27,200,629 1,461,558
Larry G. Fendley 27,304,888 1,357,299
Roger K. Alexander 27,306,779 1,355,408
Gregory J. Duman 27,201,638 1,460,549
2. Proposal to amend the Company's 1999 Stock Option Plan to increase the
number of shares for which options may be granted under the plan:
For: 20,254,528 Against: 8,111,395 Abstain: 296,264
3. Proposal to amend the Company's 1999 Employee Stock Purchase Plan to
increase the number of shares which may be sold under the plan:
For: 28,083,063 Against: 290,599 Abstain: 288,525
4. Proposal to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors:
For: 28,563,100 Against: 66,475 Abstain: 32,612
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
2.12 Combination Agreement, dated as of October 24, 2000, among Transaction
Systems Architects, Inc., Transaction Systems Architects Nova Scotia
Company, TSA Exchangeco Limited and MessagingDirect Ltd.
2.13 Plan of Arrangement under Section 186 of the Business Corporations
Act (Alberta)
2.14 Voting and Exchange Trust Agreement, dated as of January 11, 2001, among
Transaction Systems Architects, Inc., Transaction Systems Architects Nova
Scotia Company, TSA Exchangeco Limited and Wells Fargo Bank Minnesota,
National Association
2.15 Support Agreement, dated as of January 11, 2001, among Transaction
Systems Architects, Inc., Transaction Systems Architects Nova Scotia
Company and TSA Exchangeco Limited
(b) Reports on Form 8-K:
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSACTION SYSTEMS ARCHITECTS, INC.
(Registrant)
Dated: May 15, 2001 By: /s/ EDWARD C. FUXA
----------------------------------------
Edward C. Fuxa
Principal Accounting Officer and Controller
Execution Copy
COMBINATION AGREEMENT
AMONG
TRANSACTION SYSTEMS ARCHITECTS, INC.,
TRANSACTION SYSTEMS ARCHITECTS NOVA SCOTIA COMPANY,
TSA EXCHANGECO LIMITED
AND
MESSAGINGDIRECT LTD.
Execution Copy
COMBINATION AGREEMENT
COMBINATION AGREEMENT, dated as of October 24, 2000, among Transaction
Systems Architects, Inc., a Delaware corporation ("TSA"), Transaction Systems
Architects Nova Scotia Company, a Nova Scotia unlimited company ("TSA Holdco"),
TSA Exchangeco Limited, a Nova Scotia limited company ("TSA Exchangeco") and
MessagingDirect Ltd., an Alberta corporation ("MDL").
RECITALS
WHEREAS, the respective boards of directors of TSA, TSA Holdco, TSA
Exchangeco and MDL deem it advisable and in the best interests of their
respective shareholders to combine their respective businesses by TSA Exchangeco
acquiring shares of MDL pursuant to this Agreement and the Plan of Arrangement;
WHEREAS, in furtherance of such combination, the respective boards of
directors of TSA and MDL have approved the transactions contemplated by this
Agreement and the board of directors of MDL has agreed to submit the Plan of
Arrangement and the other transactions contemplated hereby to its shareholders
and the Court of Queen's Bench of Alberta for approval;
WHEREAS, concurrently with the execution of this Agreement, the MDL
Principal Securityholders have executed a Principal Securityholders' Agreement,
agreeing, among other things, to vote in favor of the Plan of Arrangement and
the transactions contemplated by this Agreement;
WHEREAS, the transactions contemplated by this Agreement and the Plan
of Arrangement are structured in a manner to meet the requirements of Section 85
of the Income Tax Act (Canada) for the purpose of: (1) permitting the deferral
of tax by the Canadian resident shareholders of MDL; and (2) meeting the
requirements of Section 338 of the United States Internal Revenue Code,
including the transfer of certain non-voting preferred stock to one or more
third parties for the purpose of permitting TSA Exchangeco to obtain a step-up
in the tax basis of the assets of MDL; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Plan of Arrangement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions
Unless the context otherwise requires, the terms defined below in this
Article I shall have, for the purposes of this Agreement, the respective
meanings set forth below:
"ABCA" means the Business Corporations Act (Alberta), S.A. 1981, c. B-15;
"Additional Consideration" has the meaning ascribed thereto in Subsection
2.2(f);
"Affiliate" has the meaning ascribed to that term in the ABCA;
"Affiliate Letter" means a letter whereby SEC Affiliates of MDL make certain
investment representations and acknowledge certain restrictions under applicable
securities Laws on the resale of the securities issuable pursuant to the Plan of
Arrangement, substantially in the form attached as Exhibit 9.9(a);
"Agreement" means this Combination Agreement together with the MDL Disclosure
Letter and all Exhibits thereto;
"Alternative Proposal Fee" means an amount equal to the lesser of: (a)
$2,400,000.00, or (b) five percent (5%) of the product derived by multiplying
3,357,500 by the Average Trading Price, which amount is in addition to the TSA
Expenses;
"Ancillary Agreements" means the Principal Securityholders' Agreement, the
Support Agreement, the Voting and Exchange Trust Agreement and the Escrow
Agreement;
"Arrangement" means the arrangement contemplated by the Plan of Arrangement;
"Articles of Arrangement" mean the articles of arrangement of MDL to be filed
pursuant to Section 186 of the ABCA;
"Associate" has the meaning ascribed to that term in the ABCA;
"Average Trading Price" means the simple average of the closing sale price of a
TSA Class A Common Share as reported by the National Association of Securities
Dealers on the NASDAQ for the thirty (30) consecutive trading days immediately
preceding two (2) trading days prior to the MDL Securityholders' Meeting;
"Business Combination Transaction" means any of the following involving MDL but
not involving TSA or its Affiliates as the other party to such transaction: (1)
any merger, amalgamation, consolidation, share exchange, business combination or
other similar transaction; (2) except as set forth in the letter from MDL to TSA
dated October 22, 2000, any sale, lease, exchange, transfer or other disposition
(other than a pledge or mortgage) of 90% or more of the assets of MDL or
MessagingDirect (UK) Limited (other than MDL IP Rights) or any MDL IP Rights
having a value in excess of $7,500,000.00 in a single transaction or series of
transactions; or (3) the acquisition by a Person or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) of beneficial ownership of 25%
or more of the then issued and outstanding MDL Class A Shares or other voting or
equity interests of MDL or the shares of MessagingDirect (UK) Limited whether by
tender offer, take-over bid or otherwise;
"Business Day" means any day, other than a Saturday, a Sunday or a day which is
a statutory or civic holiday in the Province of Alberta or the State of
Nebraska;
"Canadian Dollar Equivalent" means in respect of an amount expressed in currency
other than Canadian dollars (the "Foreign Currency Amount") on any date, the
product obtained by multiplying (a) the Foreign Currency Amount by (b) the noon
spot exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the board of directors of TSA
Exchangeco to be appropriate for such purpose;
"Canadian Generally Accepted Accounting Principles" or "Canadian GAAP" means
such recommendations as the Canadian Institute of Chartered Accountants includes
in its handbook concerning accounting treatment or statement of presentation;
"Canadian Prospectus" means a preliminary prospectus or prospectus filed or to
be filed with any securities commission or regulatory authority in any province
or territory of Canada;
"Canadian Resident" means a resident of Canada for the purposes of the ITA;
"Closing" means the closing of the transactions contemplated herein on the
Closing Date;
"Closing Date" means the date determined in accordance with Section 7.1 or such
earlier or later date as may be agreed upon by the parties;
"Code" means the United States Internal Revenue Code of 1986;
"Compensation Warrants" means the warrants issued by MDL to Yorkton Securities
Inc., the particulars of which are listed in Subsection 3.2(a) of the MDL
Disclosure Letter;
"Court" means the Court of Queen's Bench of Alberta;
"Design Documentation" means any documentation, specifications, manuals, user
guides, promotional material, internal notes and memos, technical documentation,
drawings, flow charts, diagrams, source language statements, demo disks,
benchmark test results, and other written materials related to, associated with
or used or produced in the development of any of the software products of the
MDL Companies;
"Distribution Agreement" means the distribution agreement between MDL and TSA or
a TSA Affiliate dated as of October 24, 2000;
"Dollars" or "$" means United States dollars except where Canadian funds are
expressly indicated;
"Effective Date" means the date that the Articles of Arrangement are filed
pursuant to the ABCA;
"Effective Time" means 12:01 a.m. (Edmonton, Alberta time) on the Effective
Date;
"Employees" or "Employee" means any active or inactive person or individual,
including any officer, independent or dependent contractor employed or engaged
by a MDL Company;
"Encumbrance" means any security interest, lien, charge, pledge, encumbrance,
mortgage, hypothec, lease, adverse claim, or title retention agreement of any
nature or kind;
"Escrow Agent" means Wells Fargo Bank Minnesota, N.A. as designated under the
Escrow Agreement;
"Escrow Agreement" means the agreement to be entered into on the Closing Date
among the TSA Companies, the Indemnifying Shareholders, the Shareholder Agent
(as such term is defined therein) and the Escrow Agent, substantially in the
form attached as Exhibit 2.4;
"Escrowed Shares" means 20% of the aggregate number of Exchangeable Shares and
TSA Class A Common Shares delivered by TSA Exchangeco on the Effective Date as
consideration for MDL Class A Shares pursuant to the Arrangement;
"Exchange Act" means the United States Securities Exchange Act of 1934;
"Exchange Ratio" means the number which equals the quotient derived by dividing
3,157,500 by the Fully-Diluted Share Capital, subject to adjustment pursuant to
Section 2.7 (Adjustment for Exchange Ratio Prior to Effective Date);
"Exchangeable Shares" has the meaning ascribed to such term in the Plan of
Arrangement attached hereto;
"Fully-Diluted Share Capital" means the sum of (i) the outstanding MDL Class A
Shares, plus (ii) the MDL Class A Shares issuable upon exercise of the MDL
Options less the quotient derived by dividing (A) the aggregate exercise price
for the MDL Class A Shares purchasable under such MDL Options by (B) the product
derived by multiplying (I) the Exchange Ratio by (II) the Average Trading Price,
plus (iii) the MDL Class A Shares issuable upon conversion and exchange of the
Stonebridge Options and the Compensation Warrants pursuant to Subsection 2.2(b).
For the purposes of this calculation, all dollar amounts shall be calculated
using Canadian dollars or the Canadian Dollar Equivalent.
"Governmental Entity" means any court, tribunal, administrative agency,
regulatory body or commission or other governmental authority or
instrumentality, whether federal, provincial, state, local or other and whether
domestic or foreign and for greater certainty shall include securities
commissions and regulatory authorities in each Canadian province or territory;
"Hazardous Materials" means any pollutant, contaminant, hazardous or toxic
material, regulated biological, chemical or physical agents used, treated,
stored, processed, generated, manufactured, disposed, handled, transported,
released, spilled, produced, discharged or emitted by any Person;
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements Act
of 1976;
"Indemnifying Shareholders" means all MDL Securityholders who receive either
Exchangeable Shares or TSA Class A Common Shares under the Plan of Arrangement
at the Effective Time;
"Intellectual Property Rights" means all worldwide industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, software (including source code and object code form),
nonproductized software technology, trademarks, trademark applications, trade
names, service marks, service mark applications, copyright, copyright
applications, mask works, franchises, licenses, know-how, trade secrets,
customer lists, proprietary processes and formulae, all source and object code,
algorithms, architecture, structure, display screens, layouts, inventions,
development tools, designs, processes, works of authorship, computer programs
and technical data and information and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records;
"ITA" means the Income Tax Act of Canada, R.S.C. 1985, c.1 (5th Supp.);
"Law" means any federal, state, provincial, territorial, municipal or other law,
statute, regulation, code, recommendation, notice, judgment, treaty, directive,
ordinance, writ, injunction, decree, by-law, order, restriction, official plan
or stated policy, whether domestic or foreign; and "Laws" means all of the
foregoing;
"Liabilities" means any and all debts, liabilities or obligations of any nature
or kind whatsoever, whether known or unknown, due or to become due, accrued,
absolute, contingent, unliquidated or otherwise;
"Losses" means any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, deficiencies, costs and expenses
(including without limitation, all legal and other professional fees and
disbursements), interest, penalties, costs of investigation and defence and
amounts paid in settlement arising directly or indirectly as a consequence of
such matter;
"Material Adverse Effect" means, when used with respect to any entity or group
of entities, any event, change or effect, that is materially adverse to the
financial condition, properties, assets, Liabilities, businesses, operations,
results of operations or long-term prospects of such entity or group, taken as a
whole;
"MDL" means MessagingDirect Ltd., an Alberta corporation;
"MDL Balance Sheet" means the unaudited June 30, 2000 consolidated balance sheet
of MDL, a copy of which is attached hereto as Exhibit 3.4;
"MDL Balance Sheet Date" means June 30, 2000;
"MDL Class A Shares" means one or more of the outstanding Class A common shares
of MDL;
"MDL Companies" means, collectively, MDL and the MDL Subsidiaries;
"MDL Contracts" means all written or oral contracts, agreements and other
instruments which bind any of the MDL Companies;
"MDL Disclosure Letter" means the letter delivered by MDL to TSA
contemporaneously with this Agreement;
"MDL Financial Statements" means (i) the audited consolidated balance sheets of
MDL as of December 31, 1999, March 31, 1999 and February 28, 1998 and the
related consolidated statements of loss and deficit and cash flows for the
periods ended December 31, 1999, reported on by KPMG, Chartered Accountants, and
Wooldridge & Company, Chartered Accountants, and (ii) the unaudited consolidated
balance sheet of MDL as of June 30, 2000 and the related consolidated statements
of loss and deficit and cash flows for the six months ended June 30, 2000,
certified to TSA by the V. P. Finance of MDL, in his capacity as a Senior
Officer;
"MDL IP Rights" means all Intellectual Property Rights which any of the MDL
Companies own, or have the right to use, sell or license;
"MDL Options" means the options issued by MDL under MDL's Stock Option Plan, the
particulars of which are listed on Subsection 3.2(a) of the MDL Disclosure
Letter;
"MDL Principal Securityholders" means the parties listed in Subsection 3.2(a)
of the MDL Disclosure Letter;
"MDL Securities" means, collectively, the MDL Class A Shares, the MDL Options,
the Stonebridge Options and the Compensation Warrants;
"MDL Securityholder" means a holder of a MDL Security;
"MDL Securityholders Meeting" means the meeting of all of the MDL
Securityholders (or such MDL Securityholders as directed by the Court) called
for the purpose of considering and approving the Arrangement under Section 186
of the ABCA;
"MDL Subsidiaries" means, collectively, MessagingDirect (UK) Limited, a U.K.
company, Messaging Direct (U.S.) Inc., a Delaware company, MessagingDirect AP
(Pty) Ltd., an Australian company and Messaging Inc., a Delaware company;
"NASDAQ" means the Nasdaq National Market or any successor systems;
"Ordinary Course" means the ordinary course of business consistent with past
custom and practice;
"Permitted Encumbrances" means the Encumbrances listed in Section 3.18
(Ownership of Property) of the MDL Disclosure Letter;
"Person" includes any individual, firm, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with or without
share capital, limited liability corporation, unlimited liability company,
unincorporated association, trust, trustee, executor, administrator or other
legal personal representative, regulatory body or agency, government or
government agency, authority or entity however designated or constituted;
"Plan of Arrangement" means the plan of arrangement, substantially in the form
attached as Exhibit 2.1, as amended, modified or supplemented from time to time
in accordance with its terms;
"Plans" collectively means every Compensation Plan, Benefit Plan and Stock Plan
whether written or unwritten, formal or informal, maintained or contributed to
or required to be contributed to by any Person for the benefit of any Employee
or former Employee or their dependents or beneficiaries. "Compensation Plan"
includes every bonus, deferred compensation, incentive compensation, severance
or termination pay, pay in lieu of notice, plan, program, agreement or
arrangements including compensation practices and policies applicable to such
Employees and former Employees. "Benefit Plan" includes every health, or other
medical, life, disability or other insurance, supplemental unemployment benefit,
pension, retirement, profit sharing, supplemental retirement and other employee
benefit plan, program, agreement or arrangement including practices and policies
regarding vacations, sick leave, leaves of absence and all perquisites of
employment, other than employee benefit programs mandated by Law. "Stock Plan"
includes every stock purchase, stock option, restricted stock award and stock
appreciation rights, plan, program, agreement or arrangement;
"Principal Securityholders' Agreement" means the agreement between the TSA
Companies and the MDL Principal Securityholders, executed contemporaneously with
this Agreement;
"Proxy Materials" means any material to be mailed to the MDL Securityholders in
connection with the approval and adoption by the MDL Securityholders of the
Arrangement (including the Articles of Arrangement giving effect thereto) and
related matters;
"Registration Statement" means the Registration Statement on Form S-3 to be
filed by TSA with the SEC to register the TSA Class A Common Shares to be issued
upon the exchange of the Exchangeable Shares;
"Replacement TSA Options" has the meaning ascribed to such term in Subsection
2.2(g);
"SEC" means the United States Securities and Exchange Commission;
"SEC Affiliate" shall have the meaning attributed to the term "affiliate" as
set forth in the U.S. Securities Act;
"Senior Officer" has the meaning ascribed thereto in the Securities Act, S.A.
1981, c.S-6.1 and in the case of MDL or the MDL Companies refers to the Senior
Officers of MDL and MessagingDirect (U.K.) Limited and in the case of TSA,
refers to the Senior Officers of TSA;
"Shareholders Agreement" means the agreement dated as of December 30, 1999
between MDL, Yorkton Securities Inc., and Stephen E. Kille, R. Stephen Hole,
Donald D. Pare, Montage IT Services Inc., and Stonebridge Merchant Capital
Corp.;
"Stonebridge Options" means the options issued by MDL to Stonebridge Merchant
Capital Corp., the particulars of which are listed on Subsection 3.2(a) of the
MDL Disclosure Letter;
"Superior Proposal" means any bona fide written inquiry, offer or proposal for a
Business Combination Transaction that in the good faith determination of the
board of directors of MDL, after consultation with its financial advisors and
with outside legal counsel (a) is reasonably capable of being completed, taking
into account all legal, financial, regulatory and other aspects of such proposal
and the party making such proposal, and (b) would, if consummated in accordance
with its terms, reasonably be expected to result in a transaction more
favourable to the MDL Securityholders from a financial point of view than the
transaction contemplated by this Agreement;
"Support Agreement" means the agreement among the TSA Companies, substantially
in the form attached as Exhibit 7.2(b)(i);
"Tax" or "Taxes" means all income, capital, payroll, sales and use, value added,
goods and services, documentary, stamp, transfer and real property taxes and
customs and excise duties, whether foreign, federal, provincial, state or
municipal (including tax withholdings, employer health taxes, workers'
compensation assessments, penalties and surcharges, Canada and Quebec Pension
Plans and employment insurance premiums, contributions and remittances) and
including any interest, penalties or surcharges attributable thereto;
"Tax Returns" means all returns, declarations, reports, statements, claims for
refund, amended returns and declarations of estimated taxes (including any
attached schedules) or other written information (including elections,
declarations, disclosures, estimates and informational returns) required to be
supplied to a Taxing Authority in connection with or relating to Taxes;
"Taxing Authority" means Canada Customs and Revenue Agency, the United States
Internal Revenue Service or any other taxing authority, including, without
limitation, any value added tax or sales tax authority;
"Trustee" means the trustee as designated under the Voting and Exchange Trust
Agreement;
"TSA" means Transaction Systems Architects, Inc., a Delaware corporation;
"TSA Balance Sheet Date" means June 30, 2000;
"TSA Class A Common Shares" means one or more of the voting shares of TSA, par
value $0.005 per share, having voting rights of one vote per share, and any
other securities into which such shares may be changed;
"TSA Companies" means, collectively, TSA, TSA Holdco and TSA Exchangeco;
"TSA Exchangeco" means TSA Exchangeco Limited, a Nova Scotia limited company;
"TSA Expenses" shall mean all out-of-pocket expenses and fees actually incurred
or accrued by any of the TSA Companies in connection with this Agreement and the
Arrangement prior to the termination of this Agreement, including without
limitation, all fees and expenses of legal counsel, accountants, financial
advisors, in connection with the negotiation, preparation, execution,
performance and termination of this Agreement, the structuring of the
Arrangement, any agreements relating thereto and any filings to be made in
connection therewith;
"TSA Holdco" means Transaction Systems Architects Nova Scotia Company, a Nova
Scotia unlimited company;
"TSA IP Rights" means all Intellectual Property Rights which any of TSA and its
Affiliates own, or have the right to use, sell or license;
"TSA SEC Documents" means each report, schedule, effective registration
statement and definitive proxy statement (other than preliminary material) filed
by TSA as a registrant with the SEC or the NASDAQ after September 30, 1997;
"TSA Subsidiaries" means each corporation, partnership, company, joint venture
and other entity in which TSA beneficially owns or controls, directly or
indirectly, more than 50% of the equity, voting rights, profits interest,
capital or other similar interest thereof;
"US GAAP" means such recommendations as the American Institute of Certified
Public Accountants includes in its handbook concerning accounting treatment or
statement of presentation;
"U.S. Securities Act" means the United States Securities Act of 1933; and
"Voting and Exchange Trust Agreement" means the agreement between the TSA
Companies and the Trustee, substantially in the form attached as Exhibit
7.2(b)(ii).
1.2 Interpretation not affected by headings, etc
The division of this Agreement into Articles, Sections and other
portions and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
and/or a letter refer to the specified Article or Section of this Agreement. The
terms "this Agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to this Agreement (including the Schedules and Exhibits
hereto) and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplementary or ancillary hereto.
1.3 Currency
Unless otherwise specifically indicated, all sums of money referred to
in this Agreement are expressed in lawful money of the United States of America.
1.4 Number, etc
Unless the context otherwise requires, words importing the singular
shall include the plural and vice versa and words importing any gender shall
include all genders.
1.5 Date for any action
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day which is a Business Day.
1.6 Accounting Matters
Unless otherwise stated, all accounting terms used in this Agreement
with respect to MDL shall have the meanings attributable thereto under Canadian
GAAP and all determinations of an accounting nature with respect to MDL required
to be made shall be made in a manner consistent with Canadian GAAP and
practices, consistently applied. Unless otherwise stated, all accounting terms
used in this Agreement with respect to TSA shall have the meanings attributable
thereto under United States GAAP and all determinations of an accounting nature
with respect to TSA required to be made shall be made in a manner consistent
with United States GAAP and practices, consistently applied.
1.7 Statutory References
Any reference in this Agreement to a statute includes such statute as
amended, consolidated or re-enacted from time to time, all rules and regulations
made thereunder, all amendments to such rules and regulations from time to time,
and any statute, rule or regulation which supersedes such statute, rule or
regulations.
1.8 Knowledge
Each reference herein to the knowledge of a party means, unless
otherwise specified, the knowledge of such party's Senior Officers following due
inquiry.
ARTICLE II
STRUCTURE OF THE TRANSACTION
2.1 Court Approval
As soon as reasonably practicable after execution of this Agreement,
MDL will apply to the Court pursuant to Section 186 of the ABCA for an interim
order in form and substance reasonably satisfactory to TSA providing for, among
other things, the calling and holding of the MDL Securityholders Meeting for the
purpose of considering and if deemed advisable, approving the Arrangement under
Section 186 of the ABCA and pursuant to this Agreement and the Plan of
Arrangement. If the MDL Securityholders approve the Arrangement, MDL will take
the necessary steps to submit the Arrangement to the Court and apply for a final
order of the Court approving the Arrangement in such fashion as the Court may
direct. Upon receipt of the final order and satisfaction of all conditions set
forth in Articles VIII and IX or waiver of such conditions, the Articles of
Arrangement shall be filed with the Registrar under the ABCA giving effect to
the Arrangement and the transactions specified in Section 2.2 of the Plan of
Arrangement shall occur and shall be deemed to occur in the order specified
without any further act or formality.
2.2 Arrangement
Subject to the provisions of Sections 2.3 (Dissenting Shares) and 2.4
(Escrow of Shares) hereof and all as subject to the Plan of Arrangement, at the
Effective Time, without any action on the part of the holders thereof, and in
the following sequence:
(a) The MDL Stock Option Plan will be amended to permit acceleration of
vesting of the MDL Options and adoption of the MDL Stock Option Plan
by TSA.
(b) Each Stonebridge Option and Compensation Warrant will be converted
into and exchanged for the number of fully-paid and non-assessable MDL
Class A Shares equal to (i) the number of MDL Class A Shares
purchasable on the Effective Date pursuant to such Stonebridge Option
or Compensation Warrant, as applicable, less (ii) the quotient derived
by dividing (A) the aggregate exercise price for the MDL Class A
Shares purchasable under such Stonebridge Option or Compensation
Warrant, by (B) the product derived by multiplying (I) the Exchange
Ratio by (II) the Average Trading Price. For purposes of this
calculation, all dollar amounts will be calculated using Canadian
dollars or the Canadian Dollar Equivalent.
(c) Prior to the Effective Date and in accordance with the Plan of
Arrangement, each holder of a MDL Class A Share will have completed an
election form to elect to receive Exchangeable Shares or TSA Class A
Common Shares from TSA Exchangeco in exchange for their MDL Class A
Shares or will be deemed to have elected to receive TSA Class A Common
Shares.
(d) Each TSA Elected Share (as such term is defined in the Plan of
Arrangement) will, pursuant to the terms hereof, be transferred to TSA
Exchangeco in exchange for a number of fully paid and non-assessable
TSA Class A Common Shares based on the Exchange Ratio. The name of
each such holder will be removed from the register of MDL Class A
Shares and added to the register of TSA Class A Common Shares. TSA
Exchangeco will be recorded as the registered holder of such MDL Class
A Shares so exchanged and will be deemed to be the legal and
beneficial owner thereof. In lieu of fractional TSA Class A Common
Shares, each holder of a MDL Class A Share who otherwise would be
entitled to receive a fraction of a TSA Class A Common Share on the
exchange of all such holder's MDL Class A Shares will be paid by TSA
Exchangeco an amount determined as set forth in the Plan of
Arrangement.
(e) Each Exchangeable Elected Share (as such term is defined in the Plan
of Arrangement) will, pursuant to the terms hereof, be transferred to
TSA Exchangeco in exchange for a number of fully paid and
non-assessable Exchangeable Shares based on the Exchange Ratio. The
name of each such holder will be removed from the register of MDL
Class A Shares and added to the register of Exchangeable Shares. TSA
Exchangeco will be recorded as the registered holder of such MDL Class
A Shares so exchanged and will be deemed to be the legal and
beneficial owner thereof. In lieu of fractional Exchangeable Shares,
each holder of a Class A Share who otherwise would be entitled to
receive a fraction of an Exchangeable Share on the exchange of all
such holder's MDL Class A Shares will be paid by TSA Exchangeco an
amount determined as set forth in the Plan of Arrangement.
(f) Each holder of a TSA Elected Share shall receive additional TSA Class
A Common Shares from TSA Exchangeco ("Additional Consideration"). The
amount of the Additional Consideration payable to each holder of a TSA
Elected Share will equal the product derived by multiplying (i)
200,000, by (ii) the quotient derived by dividing the number of TSA
Elected Shares held by such holder by the aggregate number of TSA
Elected Shares. In lieu of fractional TSA Class A Common Shares, each
holder of a TSA Elected Share who otherwise would be entitled to
receive a fraction of a TSA Class A Common Share will be paid by TSA
Exchangeco an amount determined in accordance with the Plan of
Arrangement.
(g) Each of the MDL Options will be converted into an option to purchase
("Replacement TSA Option") that number of TSA Class A Common Shares
equal to (i) the product of the number of MDL Class A Shares subject
to such MDL Option at the Effective Time multiplied by the Exchange
Ratio, less (ii) the quotient derived by dividing (A) the aggregate
exercise price for the MDL Class A Shares subject to such MDL Option
by (B) the Average Trading Price. The exercise price of each TSA Class
A Common Share subject to such Replacement TSA Option will equal $0.01
per share. If the foregoing calculation results in an exchanged MDL
Option being exercisable for a fraction of a TSA Class A Common Share,
then the number of TSA Class A Common Shares subject to such option
will be rounded down to the nearest whole number of shares. The
obligations of MDL under the MDL Options as so converted shall be
assumed by TSA. For purposes of this calculation, all dollar amounts
will be calculated using Canadian dollars or the Canadian Dollar
Equivalent.
(h) In consideration of the grant of the Liquidation Call Right,
Redemption Call Right and Retraction Call Right (as such terms are
defined in the Plan of Arrangement), TSA will issue to and deposit
with the Trustee the Special Voting Share to be thereafter held of
record by the Trustee as trustee for and on behalf of, and for the use
and benefit of, the holders of the Exchangeable Shares in accordance
with the Voting and Exchange Trust Agreement.
(i) All of the Escrowed Shares will be deposited with the Escrow Agent
under the Escrow Agreement.
2.3 Dissenting Shares
Holders of MDL Class A Shares may exercise rights of dissent with
respect to such shares in connection with the Arrangement pursuant to and in the
manner set forth in the Plan of Arrangement as may be modified by the Interim
Order or the Final Order. MDL shall give TSA (i) prompt notice of any written
demands of a right of dissent, withdrawals of such demands, and any other
instruments served pursuant to the ABCA and received by MDL, and (ii) the
opportunity to participate in all negotiations and proceedings (to the extent
permitted by any judicial authority having jurisdiction) with respect to such
rights. MDL shall not, except with the prior written consent of TSA, voluntarily
make any payment with respect to any such rights or offer to settle or settle
any such rights. All payments to such dissenting shareholders shall be the sole
responsibility of MDL.
2.4 Escrow of Shares
At the Effective Time, MDL shall deliver to the Escrow Agent, a
certificate or certificates representing the Escrowed Shares for the purposes of
securing any indemnity obligations of the Indemnifying Shareholders, all as more
particularly described in the Escrow Agreement.
2.5 Other Effects of the Arrangement
At the Effective Time: (a) the persons recommended by TSA will be
elected as directors of MDL; (b) the persons designated by TSA will be elected
as officers of MDL; and (c) the Arrangement will, from and after the Effective
Time, have all of the effects provided by applicable Law, including the ABCA.
2.6 Exchange of Call Rights for Put Rights
The Liquidation Call Right, Redemption Call Right and Retraction Call
Right (as such terms are defined in the Plan of Arrangement) to be granted to
TSA (which, subject to the terms of the Plan of Arrangement, may be assigned or
delegated by TSA to TSA Holdco) pursuant to the terms of the Plan of Arrangement
will be granted by the holders of Exchangeable Shares (other than TSA and its
Affiliates) to TSA as consideration for the Voting Rights, Exchange Rights and
Automatic Exchange Rights (as such terms are defined in the Voting and Exchange
Trust Agreement) to be granted by TSA to the Trustee for the benefit of the MDL
Securityholders in the Voting and Exchange Trust Agreement.
2.7 Adjustments to Exchange Ratio Prior to Effective Date
If, after the Exchange Ratio has been set but prior to the Effective
Time, TSA recapitalizes its outstanding capital stock through a subdivision of
its outstanding shares into a greater number of shares, or a combination of its
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its outstanding shares into the same or a different number
of shares of other classes, or declares a dividend on its outstanding shares
payable in shares of its capital stock or securities convertible into shares of
its capital stock, or completes a rights offering for TSA Class A Common Shares
solely to its existing shareholders at a price less than market price, or grants
a material option solely to existing shareholders to acquire TSA Class A Common
Shares at a price less than market price and the record date for any such action
is prior to the Effective Time, then the Exchange Ratio will be adjusted
proportionately.
2.8 Total Number of Shares
For the avoidance of doubt, subject to Section 2.7, the total of (i)
the TSA Class A Common Shares (including the TSA Class A Common Shares
underlying the Replacement TSA Options) and (ii) the Exchangeable Shares to be
issued or transferred by the TSA Companies hereunder shall equal 3,357,500, less
the number of such shares to which MDL Securityholders exercising rights of
dissent would otherwise be entitled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MDL
Except as set forth in the MDL Disclosure Letter, MDL hereby represents
and warrants to the TSA Companies that:
3.1 Organization, Good Standing, Qualification and Power
Each of the MDL Companies is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, or
continuance, as applicable, has all requisite corporate power and authority
necessary to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary.
Section 3.1 of the MDL Disclosure Letter sets forth a correct and complete list
of the MDL Companies, together with the jurisdiction of incorporation,
continuance or organization of each MDL Company, a list of the shareholders of
each MDL Company, the number of shares held by each shareholder and a correct
and complete list of each jurisdiction in which each MDL Company is legally
qualified or registered to transact business as a foreign corporation under
applicable Law. MDL has delivered to TSA complete and correct copies of the
articles or certificates of incorporation (or similar documents) and bylaws of
each of the MDL Companies, in each case as amended to the date of this Agreement
and currently in effect. None of the MDL Companies is in violation of any of the
provisions of its articles or certificates of incorporation, as applicable, or
bylaws or equivalent organizational documents.
3.2 Capital Structure
(a) Stock and Options. The authorized share capital of MDL consists of an
unlimited number of MDL Class A Shares, an unlimited number of Class B
Preferred Shares and an unlimited number of Class C Preferred Shares.
The issued and outstanding capital of MDL is listed in Section 3.2(a)
of the MDL Disclosure Letter. All issued and outstanding shares of
each of the MDL Companies have been duly authorized and validly issued
and are fully paid and non-assessable, are not subject to preemptive
rights, are not subject to any right of rescission, and all MDL
Securities have been offered, issued, sold and delivered by each of
the MDL Companies in compliance with all registration, qualification
and prospectus requirements (or applicable exemptions therefrom) of
applicable Laws. Section 3.2(a) of the MDL Disclosure Letter sets
forth a correct and complete list of each holder of MDL Securities,
including, (i) in the case of each MDL Class A Share, the name of the
holder thereof, the last known province or state of residence of such
holder (as listed in the share register) and the number of MDL Class A
Shares held by such holder, (ii) in the case of each MDL Option or
Stonebridge Option, the name of the holder thereof, the last known
province or state of residence of such holder (as listed in the option
register), the grant date of such Option, the number of MDL Class A
Shares issuable upon exercise thereof, the per share exercise price
and the vesting schedule applicable thereto, (iii) in the case of each
Compensation Warrant, the name of the holder thereof, the exercise
price thereof, the issue date and expiration date thereof and the
number of MDL Class A Shares issuable upon exercise thereof, and (iv)
noting the MDL Principal Securityholders.
(b) No Other Subsidiaries. Except for the MDL Subsidiaries, MDL does not
have any equity interest, direct or indirect, in any corporation,
partnership, joint venture or other business entity. All of the equity
interests in the MDL Subsidiaries are held beneficially by MDL free
and clear of any Encumbrance except for security granted to the
Toronto-Dominion Bank.
(c) No Other Commitments. Except for the MDL Options, the Stonebridge
Options and the Compensation Warrants and the obligations of MDL under
this Agreement, there are no Stock Plans, options, warrants, calls,
rights (including, without limitation, stock appreciation rights),
commitments, conversion rights, or agreements of any character to
which any of the MDL Companies is a party or bound obligating any of
the MDL Companies to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of the MDL Companies or securities
convertible into or exchangeable for shares of any of the MDL
Companies, or obligating any of the MDL Companies to grant, extend or
enter into any such option, warrant, call, right, commitment,
conversion right or agreement. There are no voting trusts or other
agreements or understandings to which any of the MDL Companies is a
party or, to the knowledge of MDL, among any of the MDL
Securityholders, with respect to the voting of the shares of any of
the MDL Companies, other than the Shareholders Agreement which will
terminate on the Closing Date.
(d) Registration Rights.
(i) General. Except as noted in Section 3.2 of the MDL Disclosure
Letter, MDL has not registered, is not in the process of
registering and is not under any obligation to register under any
applicable Laws (including the U.S. Securities Act) or MDL
Contract, any of its presently outstanding securities or any
securities issuable upon conversion or exercise thereof.
(ii) Canada. Except as noted in Section 3.2 of the MDL Disclosure
Letter, MDL has not filed a Canadian Prospectus, is not in the
process of filing a Canadian Prospectus and is not under any
obligation to file a Canadian Prospectus, by any applicable Laws
or MDL Contract, in respect of a distribution of any of its
presently outstanding securities or any securities issuable upon
conversion or exercise thereof.
(e) Shareholders Rights Plan. MDL does not have any shareholders rights
protection plan or similar plan or agreement.
(f) No Reporting Issuer Status. MDL is not a reporting issuer or its
equivalent in any Canadian province or territory other than Alberta,
Manitoba and Ontario.
3.3 Authority
(a) Corporate Action. MDL has all requisite corporate power and authority
to enter into this Agreement and the Ancillary Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the Arrangement (subject to Court approval of the Plan of
Arrangement and approval by the MDL Securityholders) and the other
transactions contemplated by this Agreement and such Ancillary
Agreements. The execution and delivery by MDL of this Agreement and
the Ancillary Agreements to which it is a party and the consummation
by MDL of the Arrangement (subject to its approval by the MDL
Securityholders and Court approval of the Plan of Arrangement) and the
other transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of MDL. This
Agreement has been duly executed and delivered by MDL and is, and the
Ancillary Agreements to which it is a party when executed and
delivered in accordance with the terms hereof shall be, valid and
binding obligations of MDL, enforceable in accordance with their
respective terms, except that such enforceability may be subject to
(i) bankruptcy, insolvency, reorganization or other similar Laws
affecting or relating to enforcement of creditors' rights generally
and (ii) general equitable principles.
(b) No Conflict. Neither the execution, delivery and performance by MDL of
this Agreement or of any of the Ancillary Agreements to which it is a
party, nor the consummation by MDL of the transactions contemplated
hereby or thereby nor compliance with the provisions hereof or thereof
by MDL will: (i) conflict with, or result in any violations of, the
articles of incorporation or bylaws or the comparable governing
instruments of any of the MDL Companies, (ii) except as set forth in
Subsection 3.3(b) of the MDL Disclosure Letter, result in any breach
or violation of or cause a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation contained
in, or give rise to any claim or the loss of any benefit under, or
result in the creation of any Encumbrance upon any of the properties
or assets of any of the MDL Companies under, any term, condition or
provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease or other material agreement, judgment, order, decree,
Law, rule, license or permit applicable to any of the MDL Companies or
their respective properties or assets, other than any such breaches,
defaults, losses, or Encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on MDL, or (iii)
violate or conflict with any Law.
(c) Governmental Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained by any of the MDL Companies in
connection with the execution and delivery of this Agreement or any of
the Ancillary Agreements to which MDL is a party or the consummation
of the transactions contemplated hereby or thereby, except as listed
in Section 3.3 of the MDL Disclosure Letter or where the failure to
obtain such consents, approvals, etc., would not prevent or delay the
consummation of the Arrangement or otherwise prevent MDL from
performing its obligations under this Agreement and would not
reasonably be expected to have a Material Adverse Effect on MDL.
3.4 Financial Statements
MDL has provided to TSA true and complete copies of the MDL Financial
Statements. The MDL Financial Statements present fairly, in all material
respects, the consolidated financial position and the consolidated results of
operations and changes in financial position of the MDL Companies as of the
dates or for the periods presented therein in conformity with Canadian GAAP
applied on a basis consistent with prior periods, except as otherwise noted
therein and subject in the case of interim financial statements to normal and
recurring year-end audit adjustments.
3.5 Absence of Undisclosed Liabilities
Except for: (a) the Liabilities provided for in the MDL Balance Sheet;
(b) Liabilities of the MDL Companies incurred since the MDL Balance Sheet Date
in the Ordinary Course; and (c) Liabilities for repurchase of MDL Class A Shares
which may arise upon the exercise of rights of dissent in connection with the
Arrangement and which shall not give rise to any right of indemnification in
favour of TSA, there are no material Liabilities of the MDL Companies. All
reserves established by MDL and set forth in the MDL Balance Sheet are
reasonably adequate.
3.6 Receivables
The receivables shown on the MDL Balance Sheet arose in the Ordinary
Course and have been collected or are collectible in the book amounts thereof,
less an amount not in excess of the allowance for doubtful accounts provided for
in such balance sheet. Except as noted in Section 3.6 of the MDL Disclosure
Letter, the receivables of MDL arising after the date of the MDL Balance Sheet
and prior to the Closing Date arose or will arise in the Ordinary Course and
have been collected or are or will be collectible in the book amounts thereof,
consistent with the past practice of MDL, less an appropriate allowance for
doubtful accounts.
3.7 Compliance with Applicable Laws
The MDL Companies are in compliance, in all material respects, and have
conducted their businesses so as to comply, in all material respects, with all
Laws applicable to their operations and with respect to which compliance is a
condition of engaging in the business thereof. There are no judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against any of the MDL Companies or
against any of the property or business of any of the MDL Companies, which are
continuing in effect and could reasonably be expected to have a Material Adverse
Effect on the MDL Companies.
3.8 Litigation
Except as set forth in Section 3.8 of the MDL Disclosure Letter, there
is no suit, action, arbitration, demand, claim or proceeding pending, or to the
knowledge of MDL, threatened, against any of the MDL Companies or any of their
respective officers or investors (in their capacity as such). Except as listed
in Section 3.8 of the MDL Disclosure Letter, there is no judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against any of the MDL Companies or any of their respective properties or
assets, nor is there any governmental inquiry or investigation pending, or to
the knowledge of MDL, threatened against any of the MDL Companies or the
properties, assets or business of any of them before any Governmental Entity
with regard to any of the MDL Companies nor is there a basis for such a
justifiable and valid inquiry, proceeding, governmental inquiry or
investigation. There is no action, suit, proceeding or investigation by any of
the MDL Companies that is currently pending or that any of the MDL Companies
intends to initiate. MDL has made available to TSA correct and complete copies
of all audit response letters prepared by its counsel for its auditors in
connection with the last two completed audits of MDL's Financial Statements and
any such correspondence since the date of the last such audit.
3.9 Employees
(a) List of Employees. Section 3.9(a) of the MDL Disclosure Letter lists
the names and titles of all Employees and directors of the MDL
Companies as of August 31, 2000 together with particulars of their
compensation, (including any bonus or commission arrangement),
position, start date, jurisdiction of residence, their age, and if
absent on workers' compensation or state benefits or insurance, sick
leave, short term disability or long term disability, pregnancy,
maternity, parental, bereavement or adoption leave, or any other
approved or statutory leave of absence or layoff.
(b) Employment Agreements. Section 3.9(b) of the MDL Disclosure Letter
lists all of the Compensation Plans and written employment, services,
agency, consulting, agreements or contracts or arrangements with
Employees and directors of the MDL Companies, all of which are
enforceable in accordance with their terms. MDL has provided TSA with
a true and correct copy of each such agreement, contract or
arrangement. Except to the extent set forth in Section 3.9(b) of the
MDL Disclosure Letter, there are no written or oral employment
agreements or contracts with Employees or directors of the MDL
Companies which are not terminable by the MDL Companies upon providing
that period of notice or, at the applicable MDL Companies' option, pay
in lieu of notice, required by applicable Law or by providing
reasonable notice under common law. Except for the Employees or
directors of the MDL Companies, none of the MDL Companies has any
obligation to make any wage or salary payments to any Person. Except
for changes specifically contemplated in the Plan of Arrangement and
except as listed in Section 3.9(b) of the MDL Disclosure Letter, there
were no changes in compensation since April 1, 1999 out of the
Ordinary Course and there are no increases or modifications (including
acceleration) in compensation or benefits planned or announced to the
Employees.
(c) No Union or Collective Agreement. None of the MDL Companies is or has
been a party to or bound by any collective agreement; no labour or
trade union claims to represent the Employees, or has been certified
or recognized as bargaining agent for such Employees; none of the
Employees is represented or has been represented by any labour or
trade union and none of the MDL Companies has any knowledge of any
current labour union organizing activities among their respective
Employees, nor does any question concerning representation exist
concerning such MDL Employees. There are no outstanding applications
for recognition or certification or any other proceedings in which a
labour or trade union is claiming or seeking exclusive authority to
bargain collectively for any Employees, nor have there been any such
activities within the past 3 years.
(d) except to the extent set forth in Section 3.9(d) of the MDL Disclosure
Letter:
(i) There is no unfair labour practice charge or complaint against
any of the MDL Companies outstanding, pending, or to the
knowledge of MDL, threatened, against or affecting any of the MDL
Companies.
(ii) There is no strike, cessation of work, refusal to work,
industrial or trade dispute or other labour disturbance
outstanding, pending, or to the knowledge of MDL, threatened,
against or affecting any of the MDL Companies, none of the
Employees is currently engaged in a labour disturbance,
industrial dispute or trade dispute and there has not been any
labour disturbance, industrial dispute or trade dispute during
the past 3 years.
(iii)Except as may be jointly initiated by TSA and MDL pursuant to
the terms of this Agreement, consummation of the transaction
contemplated by this Agreement will not cause or result in the
termination of employment of any Employee and will not entitle
any such Employee or director of a MDL Company to pay in lieu of
notice of termination, termination pay, severance pay, retiring
allowance, retirement benefit or any other payment under any
written or oral agreement with any of the MDL Companies and will
not cause or result in any obligation on the part of any of the
MDL Companies to make any payment of any amount greater than
$5,000, or provide any compensation of any nature or kind
whatsoever, to any of their respective Employees or directors.
(iv) The MDL Companies have not failed to pay when due all obligations
of the MDL Companies, whether arising by operation of Law,
contract, past custom or otherwise, for wages, salaries,
remuneration, compensation bonuses, commissions, vacation and
holiday pay, sick pay or leave, termination or severance pay or
pay in lieu of notice of termination, or any other form of
compensation payable to any Employees or directors of MDL, in
respect of the services rendered by any of them.
(v) All unpaid vacation pay, bonuses, commissions and other Employee
benefit payments payable to Employees but not yet due have been
accrued in the MDL Balance Sheet and its books and records and
such amounts are set forth on Section 3.9(b) of the MDL
Disclosure Letter as of August 31, 2000.
(vi) None of the MDL Companies has any liability of any kind to any
Employee, except for compensation or remuneration and benefits
payable to such Employee or to which such Employee may be
entitled, in the Ordinary Course. Except as set forth in Section
3.9 of the MDL Disclosure Letter, there are no outstanding loans
or advances made or granted by any of the MDL Companies to any
Employee or director of any MDL Company.
(vii)The MDL Companies have withheld all amounts required by Law to
be withheld from payments made by them with respect to all of
their respective Employees, including without limitation, those
with respect to Tax withholdings, social security contributions
(including National Insurance contributions), Canada Pension Plan
contributions and unemployment or employment insurance premiums
and remittances, and has not failed to remit such amounts to the
appropriate authorities within the times required by Law.
(viii) Except as listed in Section 3.9(a) of the MDL Disclosure
Letter, no Employee is on long-term disability leave, short-term
disability leave or extended absence, or is receiving, or to the
knowledge of the MDL Companies, has made application for,
workers' compensation or workplace safety and insurance benefits.
(ix) There are no outstanding inspection orders against any of the MDL
Companies under any applicable Laws. There have been no serious
accidents or incidents affecting worker health or safety for
which any of the MDL Companies has responsibility and, to the
knowledge of MDL, no Employee has suffered any illness, disease,
injury or death as a result of his or her employment by any of
the MDL Companies or as a result of having handled or becoming
exposed to or otherwise having been harmed by any Hazardous
Material which may have been present at the workplace during the
course of his or her employment by any of the MDL Companies.
(x) All current employer contributions, assessments and filings,
including but not limited to, experience rating surcharges,
payroll premiums, non-compliance charges, contributions, or any
other amounts required under any applicable workers compensation
or workplace safety and insurance Laws have been paid or filed by
the MDL Companies and any deficiencies in payments have been
properly accrued and are recorded on their respective books. None
of the MDL Companies has been subject to any special or penalty
assessment or surcharge, including but not limited to, experience
rating surcharges under such Laws, and to the knowledge of MDL,
there are no circumstances that would permit or result in a
special or penalty assessment or surcharge under such Laws or any
applicable experience rating plan or program. There are no
existing or potential claims relating to compensation, pensions
or benefits against any of the MDL Companies.
(xi) No complaint or charge with respect to or relating to any of the
MDL Companies is outstanding, pending, or to MDL's knowledge,
threatened, against or affecting any of the MDL Companies before
the applicable human rights commission or board of inquiry or any
other agency responsible for the prevention of discriminatory or
unlawful employment practices.
(xii)There are no complaints, claims, proceedings, questions, issues
or matters outstanding, pending, or to MDL's knowledge,
threatened, against or affecting in any forum by or on behalf of
any Employee or any applicant for employment or classes of the
foregoing, alleging breach of any actual, express or implied
contract of employment, wrongful dismissal or any other
discriminatory, wrongful or tortious conduct in connection with
the employment relationship, or concerning any Employee or
director of any MDL Company.
(xiii) None of the MDL Companies is subject to the provisions of the
Employment Equity Act, S.C. 1995, Chap. 44 and similar applicable
Laws. Nor are any of them a party to any federal, state,
provincial or municipal contractors program which has as its
purpose the achievement of a work environment in which barriers
to equal participation and treatment of employees have been
removed.
3.10 Employee Benefits
(a) The Plans. Section 3.10 of the MDL Disclosure Letter contains a true
and complete list of all of the Benefit Plans. There exists no
undertaking or commitment, to create any additional Benefit Plan or to
change any existing Benefit Plan that would affect any Employee or
former Employee or their dependents or beneficiaries;
(b) Copies of the Plans. There are no actuarial valuation reports, cost
certificates, funding, financial or information returns or statements
in respect of any Benefit Plan and there are no advance income tax
rulings, professional opinions and material correspondence relating to
the Compensation Plans or Benefit Plans including, without limitation,
internal memoranda and determination letters received from the U.S.
Internal Revenue Service. MDL has made available to TSA true and
complete copies of each of the following documents:
(i) each of the written Benefit Plans, and all amendments thereto,
and a written description of each unwritten Benefit Plan;
(ii) most recent description of each of the Benefit Plans that has
been provided to the Employees, and any and all such other
descriptive materials provided to them including employee
booklets;
(iii)any trust agreement, insurance contract or other funding or
related agreement in relation to each Benefit Plan to which any
of the MDL Companies is a party or bound;
(c) No Actions or Violations. There are no outstanding complaints,
actions, suits, investigations, proceedings, grievances, arbitrations,
or claims pending, or, to the knowledge of MDL, threatened, by any
Person relating to any of the Benefit Plans. All past due obligations
regarding the Benefit Plans have been satisfied and there are no
accrued or pending obligations of the Benefit Plans out of the
Ordinary Course. There are no outstanding material defaults or
violations by any Person relating to any Benefit Plan, and no Tax is
owing or exigible and overdue under any of the Benefit Plans;
(d) Operation in Accordance with Law. Each of the Benefit Plans and each
fund established thereunder has been established, operated,
administered, and invested in all material respects in accordance with
its terms and with the requirements of all applicable Laws and each of
the Benefit Plans is in good standing under, has been duly registered
where required by, and is qualified in accordance with, such Laws. No
fact or circumstance exists that could adversely affect the tax-exempt
status of any tax-exempt Benefit Plan;
(e) Full Payment. All contributions, premiums or other amounts required to
be paid or provided by any Person to or under the Benefit Plans have
been duly made in accordance with the terms of each of the Benefit
Plans and applicable Laws. Each of the Benefit Plans is fully funded
or fully insured and no unfunded Liability or other deficit exists
thereunder;
(f) No Improper Withdrawals. There have been no improper withdrawals,
applications or transfers of assets from any Benefit Plan or the
trusts or other funding media relating thereto;
(g) No Multi-Employer Plans. None of the Benefit Plans is a multi-employer
pension plan or a defined benefit pension plan as defined under
applicable pension Law. No Benefit Plan is maintained in connection
with any trust described in Section 501 (e)(9) of the Code, and no
Benefit Plan is subject to Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 412 of the Code.
Nothing done or omitted to be done and no transaction or holding of
any asset under or in connection with any Benefit Plan has or will
make any of the MDL Companies, or any officer or director thereof,
subject to any liability under Title I of ERISA;
(h) No Notification. No notification is required to be given to any
Governmental Entity having jurisdiction over any of the Benefit Plans
with respect to the consummation of the transactions contemplated by
this Agreement in relation to such Benefit Plans;
(i) No Post-Retirement Benefits. Except as disclosed in Section 3.10 of
the MDL Disclosure Letter, none of the Benefit Plans provides benefits
to Employees beyond their retirement or termination of service, or to
the beneficiaries or dependants of former Employees;
(j) No Limitations on Amendment and Termination of Plans. Other than
provisions of applicable Laws, no condition exists that would prevent
the amendment or termination of any Benefit Plan;
(k) No Material Increase in Costs. There has been no amendment to, written
interpretation or announcement (whether written or oral) by any of the
MDL Companies relating to, or change in employee participation or
coverage under, any Benefit Plan which would materially increase the
expense of maintaining such Benefit Plan above the level of expenses
incurred in respect thereof for the most recent fiscal year; and
(l) Deductibility. There is no contract, agreement, plan or arrangement
covering any Employee or former Employee that could give rise to the
payment by any of the MDL Companies of any amount that would not be
deductible pursuant to the terms of Sections 162 or 280G of the Code.
3.11 Absence of Certain Changes or Events
Except as disclosed in Section 3.11 of the MDL Disclosure Letter and as
expressly contemplated in this Agreement and the Ancillary Agreements, since the
MDL Balance Sheet Date, the MDL Companies have conducted their respective
businesses only in the Ordinary Course and with respect to the MDL Companies
there has not occurred:
(a) any change in the financial condition, properties, assets,
Liabilities, businesses, operations, results of operations or
prospects of the MDL Companies, that could reasonably be expected to
have a Material Adverse Effect on the MDL Companies;
(b) any amendments or changes in the articles of incorporation or bylaws
or the memorandum and articles of association, as applicable;
(c) any damage, destruction or loss, whether covered by insurance or not,
that could reasonably be expected to have a Material Adverse Effect on
the MDL Companies;
(d) any redemption, repurchase or other acquisition by the MDL Companies
of MDL Class A Shares, or any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or
property) with respect to MDL Class A Shares;
(e) any material increase in, or material modification (including
acceleration) of, any Benefit Plan or Stock Plan made to, for, or
with, any of their Employees, except for acceleration of vesting under
the MDL Stock Option Plan;
(f) any material change in their accounting methods, principles or
practices;
(g) any writing down or writing off of the value of any assets other than
in the Ordinary Course;
(h) any acquisition or sale of a material amount of property or assets,
except for sales to customers in the Ordinary Course;
(i) any alteration in any term of any outstanding MDL Security; or any
other securities of the MDL Companies;
(j) (A) any incurrence, assumption or guarantee of any debt for borrowed
money except for borrowed money incurred through MDL's line of credit
with the TD Bank, the balance of which does not exceed
CAN$1,000,000.00; (B) any issuance or sale of any securities
convertible into or exchangeable for debt securities of any of the MDL
Companies; (C) any agreement to act as surety for any obligation of a
third party; or (D) except as set forth in Section 3.2(a) of the MDL
Disclosure Letter, any issuance or sale of options or other rights to
acquire, directly or indirectly, debt securities of any of the MDL
Companies or any securities convertible into or exchangeable for any
such debt securities;
(k) other than in the Ordinary Course or, in respect of non-material
amounts, any creation or assumption of any Encumbrance on any asset;
(l) any making of any loan, advance or capital contribution to or
investment in any Person other than (i) travel loans or advances made
in the Ordinary Course, (ii) other loans and advances in an aggregate
amount which does not exceed $50,000 outstanding at any time, and
(iii) term or demand deposits or money market funds of major financial
institutions;
(m) other than in the Ordinary Course, any entering into, amendment of,
waiver, release, relinquishment, failure in any material respect to
perform under, occurrence of any material default under, or
termination or non-renewal of any material contract (including,
without limitation, any material customer or supplier contract), lease
transaction, commitment or other right or obligation;
(n) any transfer or grant of a material right (including, without
limitation, any of the MDL IP Rights), other than in the Ordinary
Course, or any grant of an exclusive right;
(o) any agreement, arrangement or other transaction with any Associate of
any of the MDL Companies;
(p) any agreement or arrangement made by any MDL Company to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement materially
untrue or incorrect as of the date when made unless otherwise
disclosed;
(q) any (i) failure to maintain in full force and effect substantially the
same level and type of insurance coverage as in effect on the MDL
Balance Sheet Date or (ii) change in any insurance coverage or the
issuance of any insurance policy, except in the Ordinary Course;
(r) any sale, assignment, transfer, license or encumbrance of any tangible
or intangible asset, including any Intellectual Property Right, except
for sales, assignments, transfers, licenses and Encumbrances in the
Ordinary Course;
(s) the entering into any lease or contract for the purchase or sale or
license of any property, real or personal, except in the Ordinary
Course;
(t) any failure to maintain their equipment and other assets in good
working condition and repair according to the standards they have
maintained to the date of this Agreement, subject only to ordinary
wear and tear;
(u) any issuance or sale of any shares of their capital stock of any class
or any other of their securities, or issuance or creation of any
warrants, obligations, subscriptions, options, convertible securities
or other commitments to issue shares of capital stock, or acceleration
of the vesting of any outstanding option or other security;
(v) any merger, consolidation or reorganization with, or the acquisition
of, any entity, or the entering into of any agreement to do any of the
foregoing; or
(w) any agreement to any audit assessments by any Taxing Authority in
excess of $25,000 in the aggregate.
3.12 Agreements
Section 3.12 of the MDL Disclosure Letter sets forth a complete list of
the following MDL Contracts, complete and correct copies of which have been made
available to TSA for review:
(a) continuing contract for the future purchase, sale, development or
manufacture of products, material, supplies, equipment, software or
services requiring payment to or from any MDL Company (i) in an amount
in excess of $25,000 per annum which is not terminable on 60 days or
less notice without material cost or other liability at, or at any
time after, the Effective Time or in which any of the MDL Companies
has granted or received manufacturing rights or most favored nations
pricing provisions rights relating to any product, group of products
or territory, or (ii)(A) in which any of the MDL Companies has granted
or received any distribution, marketing or other Intellectual Property
Rights, (B) which require consent or are otherwise terminable upon a
change of control of MDL or (C) in which any of the MDL Companies has
granted or received marketing, distribution or exclusive market rights
relating to any product, group of products or territory;
(b) contract providing for the development of software for, or license of
software to, any of the MDL Companies, or other Intellectual Property
Rights used or incorporated in any of the products of any of the MDL
Companies;
(c) indenture, mortgage, promissory note, loan agreement, guarantee or
other agreement or commitment for the borrowing of money, for a line
of credit or for a leasing transaction of a type required to be
capitalized in accordance with Canadian GAAP, involving an amount in
excess of $25,000;
(d) lease or other agreement under which any of the MDL Companies is
lessee of or holds or operates any items of tangible personal property
or real property owned by any third party and under which payments to
such third party exceed $25,000 per annum;
(e) agreement or arrangement for the sale of any assets, properties or
rights having a value in excess of $25,000;
(f) agreement which restricts any MDL Company from engaging in any aspect
of its business or competing in any line of business in any geographic
area or in any functional area or that requires any of the MDL
Companies to distribute or use exclusively a third party technology or
product;
(g) agreement between or among any of the MDL Companies regarding
intercompany loans, revenue or cost sharing, ownership or license of
MDL IP Rights, intercompany royalties or dividends or similar matters;
(h) written dealer, distributor, sales representative, original equipment
manufacturer, value added remarketer, subcontractor or other agreement
for the ongoing distribution of the products and services of any of
the MDL Companies;
(i) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other material agreement that is not otherwise disclosed elsewhere
in the MDL Disclosure Letter, the breach or termination of which would
have a Material Adverse Effect on the MDL Companies;
(j) agreements relating to the acquisition or grant of MDL IP Rights or
other material agreements relating to the products or services of any
MDL Company except for software licenses to end-users and
non-exclusive distribution and sales agency agreements in the Ordinary
Course;
(k) any agreement by any MDL Company regarding directors and officers
indemnification;
(l) any agreement, contract or commitment by any MDL Company relating to
material capital expenditures or involving future obligations in
excess of $25,000;
(m) any voting trust or shareholders agreement between or among any of the
MDL Companies and the MDL Securityholders;
(n) any tax sharing or tax indemnification agreement between or among any
of the MDL Companies; and
(o) any material agreement pursuant to which either the execution of this
Agreement or any of the Ancillary Agreements by MDL or the
consummation of the transactions contemplated hereby or thereby will
or may result in (i) a breach by any of the MDL Companies of any term,
provision or condition of such agreement, or (ii) the ability of the
other party thereto to terminate such agreement or materially change
any of the terms, provisions or conditions thereof.
3.13 No Defaults
Except as disclosed in Section 3.13 of the MDL Disclosure Letter, all
provisions of the MDL Contracts which relate to MDL IP Rights and all material
provisions of other material MDL Contracts are valid and enforceable obligations
of the applicable MDL Companies and, to MDL's knowledge, of the other parties
thereto, enforceable against each such party in accordance with its terms
(subject to bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors' rights generally and general
equitable principles). None of the MDL Companies has been notified of any claim
that any material provision of any MDL Contract relating to any MDL IP Right, or
of any other material MDL Contract, is not valid and enforceable in accordance
with its terms (subject to bankruptcy, insolvency, reorganization or other
similar laws affecting or relating to enforcement of creditors' rights generally
and general equitable principles) for the periods stated therein. None of the
MDL Companies is in default under, and to the knowledge of MDL, there exists no
event, condition or occurrence which, after notice or lapse of time, or both,
would constitute such a default by any of the MDL Companies under, any contract
or agreement (other than this Agreement) to which any of the MDL Companies is a
party and which would, if terminated due to such default, have a Material
Adverse Effect on the MDL Companies or any of them. To MDL's knowledge, no other
party to any MDL Contract relating to any MDL IP Right or to any other material
MDL Contract is in material default thereunder, nor, to MDL's knowledge, does
there exist any event, condition or occurrence which, after notice or lapse of
time, or both, would constitute such a default by any such other party which
would, if terminated due to such default, have a Material Adverse Effect on the
MDL Companies.
3.14 Taxes
(a) Tax Returns. Each of the MDL Companies has timely filed, or caused to
be filed, all Tax Returns required to be filed by them (all of which
returns were correct and complete in all material respects). Except
for Taxes incurred since December 31, 1999 in the Ordinary Course,
each of the MDL Companies has paid or withheld, or caused to be paid
or withheld, all Taxes that are due and payable, or MDL has provided
adequate accruals in accordance with Canadian GAAP in its financial
statements for the periods ending December 31, 1999 and Taxes incurred
subsequent thereto in the Ordinary Course, for any Taxes for any
period up to and including those periods covered by such statements
that have not been paid, whether or not shown as being due on any
returns. Since the MDL Balance Sheet Date, no material Tax liability
has been assessed, proposed to be assessed, incurred or accrued other
than in the Ordinary Course. Except for any Taxes for which MDL has
provided adequate accruals in accordance with Canadian GAAP in its
financial statements ending December 31, 1999 and Taxes incurred
subsequent thereto in the Ordinary Course, the MDL Companies have
withheld from all payments made by them, or otherwise collected, and
have remitted all required amounts in respect of Taxes required to be
withheld, collected or remitted when due by them to the applicable
Taxing Authority within the required time periods. Except for any
Taxes for which MDL has provided adequate accruals in accordance with
Canadian GAAP in its financial statements ending December 31, 1999 and
Taxes incurred subsequent thereto in the Ordinary Course, none of the
MDL Companies has any liability for the Taxes of any other Person.
(b) No Audits. Except as set forth in Section 3.14 of the MDL Disclosure
Letter, there are no audits or investigations in progress, pending or,
to the knowledge of MDL, threatened by any Taxing Authority, against
any of the MDL Companies or any of the assets of any of the MDL
Companies, and none of the MDL Companies has received any notification
that any material issues have been raised (and are currently pending)
by any Taxing Authority in connection with any of the Tax Returns
referred to above, and no waivers of statutes of limitations have been
given or requested with respect to any of the MDL Companies. Except
for any Taxes for which MDL has provided adequate accruals in
accordance with Canadian GAAP in its financial statements ending
December 31, 1999 and Taxes incurred subsequent thereto in the
Ordinary Course, there are no material proposed (but unassessed)
additional Taxes, none have been asserted and no Tax liens have been
filed other than for Taxes not yet due and payable. Notices of
Determination have neither been requested nor issued by any of the MDL
Companies.
(c) No material amount in respect of any outlay or expense that is
deductible for the purposes of computing the income of any of the MDL
Companies for the purposes of the ITA has been owing by any of the MDL
Companies, as the case may be, for longer than two years to a person
not dealing at arm's length (for the purposes of the ITA) with any of
the MDL Companies at the time the outlay or expense was incurred.
There are no circumstances which exist and would result in, or which
have existed and resulted in, Section 80 of the ITA applying to any of
the MDL Companies. Except as set forth in Section 3.14 of the MDL
Disclosure Letter, none of the MDL Companies has either directly or
indirectly transferred property to or supplied services to or acquired
property or services from a Person with whom it was not dealing at
arm's length (for the purposes of the ITA) for consideration other
than consideration equal to the fair market value of the property or
services at the time of the transfer, supply or acquisition of the
property or services. None of the MDL Companies has entered into any
advance pricing agreement with any Taxing Authority. None of the MDL
Companies nor any corporation to which MDL is related (for the
purposes of the ITA) is a corporation whose principal business is (i)
the lending of money to persons with whom such corporation is dealing
at arm's length (for the purposes of the ITA); (ii) the purchasing of
debt obligations issued to such persons; or (iii) a combination
thereof. Except as set forth in Section 3.14 of the MDL Disclosure
Letter, none of the MDL Companies (i) has made an election to be
treated as a "consenting corporation" under Section 341(f) of the
Code, or (ii) is a party to any Tax sharing or other similar agreement
or arrangement of any nature with any other person pursuant to which
any of the MDL Companies has or could have any Liabilities in respect
of Taxes.
(d) Except as set forth in Section 3.14 of the MDL Disclosure Letter, any
net operating loss carryforwards and research and development tax
credits reflected in the MDL Financial Statements are valid and
reasonably estimated and will be unaffected by the consummation of the
transactions contemplated hereby.
(e) None of the MDL Securities constitute "Taxable Quebec Property" as
such term is defined in the Taxation Act (Quebec).
3.15 Intellectual Property
(a) The MDL Companies own, or, as applicable, have the right to use, sell,
distribute or license all Intellectual Property Rights necessary or
required for the conduct of the business of the MDL Companies as
currently conducted. Except for software licenses to end-users and
non-exclusive distribution and sales agency agreements in the Ordinary
Course, Section 3.15 of the MDL Disclosure Letter sets forth a
complete and correct list of all MDL IP Rights and specifies whether
each such right is owned by or licensed (including sublicensed) to the
MDL Companies and other agreements pursuant to which any of the MDL
Companies or any other Person is authorized to use, sell, distribute
or license any MDL IP Rights and identifies any licenses (other than
software licenses to end-users and non-exclusive distribution and
sales agency agreements in the Ordinary Course) which will terminate
by its terms within twenty-four (24) months after the date hereof.
(b) Except as set forth in Subsection 3.3(b) of the MDL Disclosure Letter,
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not
constitute a breach of any agreements relating to MDL IP Rights, will
not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any MDL IP Right or impair the right of
any of the MDL Companies to use, sell or license any MDL IP Right or
portion thereof;
(c) Except as set forth in Section 3.15 of the MDL Disclosure Letter,
there are no royalties, honoraria, fees or other payments in excess of
$25,000 per annum payable by any of the MDL Companies to any Person in
respect of any MDL IP Rights by reason of the publication, use or
distribution of products or services or in connection with the conduct
of the business of any of the MDL Companies or otherwise;
(d) Neither the manufacture, marketing, license, sale or lawful use of any
product currently licensed or sold by any of the MDL Companies or
currently under development by any of the MDL Companies violates any
license or agreement between any of the MDL Companies and any third
party or infringes any Intellectual Property Right of any other
Person; and there is no pending or, to the knowledge of MDL,
threatened, claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any MDL IP Right nor is
there any basis for any such claim, nor has MDL received any notice
asserting that any MDL IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any
other party, nor is there any basis for any such assertion;
(e) MDL has taken reasonable and practicable steps designed to safeguard
and maintain the secrecy and confidentiality of, and its proprietary
rights in, all MDL IP Rights provided that TSA hereby covenants that
it will not assert a claim for breach of this warranty based on the
grants by MDL of the rights in respect of the MDL IP Rights as
expressly set forth in the written agreements listed in Section 3.15
of the MDL Disclosure Letter (the "Subject Agreements"). MDL agrees
that the foregoing covenant shall not prevent TSA from asserting a
claim: (i) based on any other matter, information or facts not set
forth in the Subject Agreement; or (ii) for indemnification pursuant
to this Agreement for any claim, including a claim with respect or
relating to a Subject Agreement or the MDL IP Rights referred to in a
Subject Agreement, asserted by a third party. All Employees involved
in the development of products or product documentation have executed
and delivered to the applicable MDL Company an agreement regarding the
protection of proprietary information and the assignment to the
applicable MDL Company of all Intellectual Property Rights arising
from the services performed for the MDL Companies by such Persons; and
copies of the forms of all such agreements have been delivered to TSA.
No Employees claim an ownership interest in any MDL IP Rights as a
result of having been involved in the development of such property
while employed by or consulting to any MDL Company, or otherwise;
(f) Any and all Intellectual Property Rights currently being developed or
developed in the past by any Employee while in the employ of any of
the MDL Companies, is or will be the sole property of such MDL
Company. It is not necessary for the conduct of the business of such
MDL Company to utilize any inventions of any Employee made prior to
his/her employment by the MDL Companies, other than those that have
been assigned to such MDL Company pursuant to an agreement signed by
such Employee;
(g) None of the MDL Companies has received nor has any knowledge regarding
any injunctions or claims from any Governmental Entity or from clients
or consumers in respect of material failures affecting any products
sold by any of the MDL Companies nor in respect of any requirement to
recall said products. In addition, except as disclosed in Section 3.15
of the MDL Disclosure Letter, there are no defects or errors in any
Design Documentation which defects or errors could reasonably be
expected to have a Material Adverse Effect on the MDL Companies. No
portion of the MDL IP Rights contains any unauthorized disabling
mechanism or protection feature designed to prevent its use, computer
virus, worm software lock, drop dead device, Trojan-horse routine,
trap door, time bomb or any other codes or instructions that may be
used to access, modify, delete, damage or disable any of the
intellectual property or any computer system on which any of the
software comprising part thereof is installed or in connection with
which they may operate;
(h) Section 3.15 of the MDL Disclosure Letter sets forth a complete and
correct list of all applications, registrations, filings and other
formal actions made or taken pursuant to applicable Law to perfect or
protect the interest of MDL in MDL IP Rights, including, without
limitation, all patents, patent applications, trademarks and service
marks, trademark and service mark applications, copyrights and
copyright applications and there is no cancellation, termination or
expiration of any such registration or patent that is reasonably
foreseeable and is not intended to be renewed or extended by any of
the MDL Companies. None of the MDL Companies is using any confidential
information or trade secrets of any former employer of any Employees;
and
(i) Section 3.15 of the MDL Disclosure Letter sets forth a complete
and correct list of any material software licenses to end-users
and all non-exclusive distribution and sales agency agreements.
3.16 Fees and Expenses
Except for payments to be made by MDL to National Bank Financial Inc.
pursuant to a letter agreement dated June 30, 2000, as amended by a letter
agreement dated October 23, 2000, none of the MDL Companies has paid or become
obligated to pay any fee or commission to any broker, investment banker or other
Person acting in a similar capacity on behalf of or under the authority of MDL,
finder or intermediary, directly or indirectly, in connection with the
transactions contemplated by this Agreement.
3.17 Insurance
(a) Policies. Each of the MDL Companies maintains, and at all times since
the later of August 31, 1998 and the date of its incorporation has
maintained, fire and casualty, general liability, business
interruption, product liability, sprinkler and water damage and any
other insurance that MDL believes or believed to be reasonably prudent
for its business. Section 3.17 of the MDL Disclosure Letter contains a
list of all such insurance policies presently in effect, and correct
and complete copies of all such policies along with a history of
claims made under such policies have been provided to TSA. Each of the
MDL Companies has fully paid all payments presently due under the
terms of each of the foregoing insurance policies and none of the MDL
Companies has received notice of intent to cancel any of the foregoing
insurance policies.
(b) Insurance Claims. MDL does not have any knowledge of any state of
facts or the occurrence of any event, which reasonably might (i) form
the basis for any claim against any of the MDL Companies not
reasonably expected to be fully covered by the insurance policies
referred to in Section 3.17 to the MDL Disclosure Letter, and which
exceeds $25,000 in liability, or (ii) increase the insurance premiums
paid by MDL, in excess of $25,000 per annum in the aggregate, or
affect the availability of the insurance coverage listed in Section
3.17 to the MDL Disclosure Letter on substantially the same terms as
now in effect.
3.18 Ownership of Property
(a) List of Property. None of the MDL Companies owns any real property.
Section 3.18 of the MDL Disclosure Letter sets forth a brief
description of all real property leased to the MDL Companies. Except
for the Permitted Encumbrances disclosed in Section 3.18 of the MDL
Disclosure Letter, each of the MDL Companies holds a valid leasehold
interest in property of which it is a lessee and has good and
marketable title to all of its personal property, free and clear of
all Encumbrances. The tangible personal property owned or leased by
each of the MDL Companies is adequate for the operation of the
business of such MDL Company as currently conducted. None of the MDL
Companies is in violation of any Law applicable to the operation of
leased properties, or has received any notice of violation with which
it has not complied.
(b) No Property Owned by MDL Securityholders. Neither the MDL
Securityholders nor their Associates own, hold or possess, in their
individual or any other capacities, any property, whether tangible or
intangible, used in the business of MDL which is material,
individually or in the aggregate, to the financial condition,
operations, or business of the MDL Companies.
3.19 Environmental Matters
(a) During the period that the MDL Companies have leased or owned their
respective properties or owned or operated any facilities, there have
been no disposals, releases, emissions, spills, discharges or
threatened releases of Hazardous Materials on, from or under such
properties or facilities which could reasonably be expected to result
in a material violation of any applicable Law. MDL has no knowledge of
any presence, disposals, releases, emissions, spills, discharges or
threatened releases of Hazardous Materials on, from or under any of
such properties or facilities, which may have occurred prior to any of
the MDL Companies having taken possession of any of such properties
and facilities which could reasonably be expected to result in a
material violation of any applicable Law.
(b) None of the properties, facilities and operations of the MDL Companies
is in material violation of any Laws relating to protection of the
environment, occupational health and safety, industrial hygiene or
Hazardous Materials. During the time that the MDL Companies have owned
or leased their respective properties and facilities, none of the MDL
Companies nor, to the knowledge of MDL, any third party, has used,
generated, manufactured, processed, treated, disposed of, handled or
stored on, under or about such properties or facilities or transported
to or from such properties or facilities any Hazardous Materials.
(c) During the time that the MDL Companies have owned or leased their
respective properties and facilities, there has been no litigation
brought or, to the knowledge of MDL, threatened, against any of the
MDL Companies, or any settlement reached by any of the MDL Companies
with, any party or parties alleging the presence, disposal, emission,
spill, discharge, release or threatened release of any Hazardous
Materials on, from or under any such properties or facilities.
3.20 Interested Party Transactions
Section 3.20 of the MDL Disclosure Letter sets forth a current list of
all directors, officers and Associates of each of the MDL Companies. Except as
disclosed in Section 3.20 of the MDL Disclosure Letter or expressly contemplated
herein or in connection with the transactions contemplated hereby, no MDL
Securityholder, officer or director of any of the MDL Companies or any Associate
of any such Person or of the MDL Companies has had, either directly or
indirectly, or proposes to have a material interest in: (a) any Person that
purchases from or sells, licenses or furnishes to any of the MDL Companies any
goods, property, technology or intellectual or other property rights or
services; or (b) any current or proposed contract or agreement to which any of
the MDL Companies is or proposes to be a party or by which it may be bound or
affected. Except as disclosed in Section 3.20 of the MDL Disclosure Letter,
there are no defaults or claims under such current or proposed contracts or
agreements referred to above in (b).
3.21 Board Approval
The board of directors of MDL has, on or before the date hereof, (i)
approved this Agreement, the Ancillary Agreements to which MDL is a party and
the Plan of Arrangement, (ii) determined that the Plan of Arrangement is in the
best interests of MDL and is fair to the MDL Securityholders, (iii) resolved to
recommend that the MDL Securityholders approve the Arrangement, and (iv) taken
all other action necessary to authorize the calling of a shareholders meeting
and for the adoption and implementation of the Arrangement other than the
preparation and delivery of the Proxy Materials and the filing of the Articles
of Arrangement giving effect to the Arrangement and the making of certain
applications in accordance with applicable Law.
3.22 Vote Required
Except as may otherwise be ordered by the Court or required by the
Ontario Securities Commission, the affirmative vote of two-thirds of the votes
cast by the MDL Securityholders is the only vote of the holders of any class or
series of MDL's shares or of any securities convertible into or exchangeable for
such capital stock necessary to approve the Plan of Arrangement and there are no
agreements between MDL and any of the MDL Securityholders or among any of such
MDL Securityholders that relate in any manner to the procedure for such voting
which have not been waived.
3.23 Disclosure
(a) No representation or warranty made by the MDL Companies in this
Agreement, nor any document, written information, financial statement,
certificate or Exhibit prepared and furnished or to be prepared and
furnished by MDL or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken
together, contains any untrue statement of a material fact when made,
or omitted to state a material fact necessary to make the statements
or facts contained herein or therein not misleading in light of the
circumstances under which they were made or furnished.
(b) None of the information supplied or to be supplied by MDL for
inclusion in the Registration Statement contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading or will, at the time the Registration
Statement becomes effective under the U.S. Securities Act, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
3.24 Restrictions on Business Activities
There is no agreement, judgment, injunction, order or decree binding
upon any of the MDL Companies that has or could reasonably be expected to have
the effect of prohibiting or materially impairing any business practice of any
of the MDL Companies, any acquisition of property by any of the MDL Companies or
the conduct of business by any of the MDL Companies as currently conducted.
3.25 Books and Records
(a) The books, records and accounts of the MDL Companies (i) have been
maintained in accordance with good business practices on a basis
consistent with prior years, (ii) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the
assets of the MDL Companies and (iii) accurately and fairly reflect
the basis for the MDL Financial Statements. MDL has devised and
maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; and
(B) transactions are recorded as necessary (1) to permit preparation
of the MDL Financial Statements in conformity with Canadian GAAP, or
any other criteria applicable to such statements and (2) to maintain
accountability for assets.
(b) The minute books of the MDL Companies which have been provided to TSA
contain accurate and complete copies of the minutes of every meeting
of their respective shareholders and their boards of directors and any
committee thereof since their incorporation except for confidential
minutes that record the MDL board of directors' deliberation
specifically on the decision to approve the transaction contemplated
by this Agreement. No resolutions have been passed, enacted, consented
to or adopted by the board of directors of MDL or any committee
thereof or shareholders of the MDL Companies, except for those
contained in such minute books, which accurately reflect all
transactions referred to in such minutes. The corporate records of the
MDL Companies are up to date and have been maintained in accordance
with all applicable Laws and are complete and accurate in all material
respects.
3.26 Customers
Section 3.26 of the MDL Disclosure Letter sets forth a true and
complete list of customers of the MDL Companies within the last twelve (12)
months involving payment in excess of $10,000 per annum. Except as set forth in
Section 3.26 of the MDL Disclosure Letter, since January 1, 2000, none of the
MDL Companies has lost its relationship with any of its material customers. None
of the MDL Companies has been notified that it will lose or might lose, or
suffer any diminution in, its relationship with any such customers. No
representative of any such customer has advised any of the MDL Companies that,
in the event of a sale or change of control of MDL, any of the MDL Companies
would lose, or suffer any diminution in, its relationship with any such customer
nor does MDL expect any such loss or diminution.
3.27 Competition Act
The MDL Companies and its Affiliates do not have assets in Canada that
exceed CDN$35 million in aggregate value and did not have gross revenues from
sales in, from or into Canada, that exceed CDN$35 million in aggregate value,
determined for purposes of and in the manner prescribed by the Competition Act
(Canada) and the Notifiable Transactions Regulations promulgated thereunder.
3.28 Investment Canada Matters
None of the MDL Companies provides any financial or transportation
services, engages in the production of uranium or carries on a "cultural
business" within the meaning of the Investment Canada Act, and the value of the
assets of MDL and of all other entities in Canada the control of which is
acquired, directly or indirectly, for the purposes of the Investment Canada Act
is less than CDN$192 million.
3.29 Fairness Opinions
MDL's board of directors has received a written opinion from National
Bank Financial Inc. that the Exchange Ratio is fair from a financial point of
view to the holders of MDL Class A Shares.
3.30 Sales of MDL Securities
Except as set forth in Section 3.30 of the MDL Disclosure Letter,
neither MDL nor anyone acting on its behalf has offered securities of MDL or any
part thereof or any similar securities for issuance or sale to, or solicited any
offer to acquire any of such securities from, anyone so as to render the
issuance and sale of any such securities not exempt from the registration
requirements of all applicable securities Laws.
3.31 Governmental Authorizations and Licenses
The MDL Companies hold all material licenses, authorizations, consents,
approvals, permits (including all necessary environmental permits, concessions,
certificates and other franchises of any Governmental Entity) required to
operate their businesses, the absence of any of which would have a Material
Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TSA COMPANIES
Each of the TSA Companies jointly and severally represent and warrant
to MDL that:
4.1 Organization, Good Standing, Qualification and Power
Each of the TSA Companies is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation, has all
requisite corporate power and authority necessary to own, lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary. TSA has delivered to MDL complete and correct copies of
the certificate of incorporation and bylaws of TSA and the memorandum and
articles of association of TSA Holdco and TSA Exchangeco in each case as amended
to the date of this Agreement and currently in effect. None of the TSA Companies
is in violation of any of the provisions of its articles of incorporation or
bylaws or memorandum and articles of association, as applicable.
4.2 Capital Structure
The authorized capital stock of TSA consists of 50,000,000 shares of
Class A Common Stock, par value $0.005 per share, 5,000,000 shares of Class B
Common Stock, par value $0.005 per share and 5,450,000 shares of Preferred
Stock, par value $0.01 per share. As of the close of business on October 20,
2000, there were outstanding:
(a) 33,100,967 shares of Class A Common Stock,
(b) no shares of Class B Common Stock,
(c) no shares of Preferred Stock,
(d) no warrants to purchase any TSA capital stock, and
(e) vested and unvested employee stock options to purchase 4,267,554
shares of TSA Class A Common Stock.
All issued and outstanding shares of TSA capital stock have been duly authorized
and validly issued and are fully paid and non-assessable and are not subject to
preemptive rights.
4.3 Authority
(a) Corporate Action. Each of the TSA Companies has all requisite
corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the Arrangement
(subject to Court approval of the Plan of Arrangement and approval by
the MDL Securityholders) and the other transactions contemplated by
this Agreement and such Ancillary Agreements. The execution and
delivery by each of the TSA Companies of this Agreement and the
Ancillary Agreements to which it is a party and the consummation by
the TSA Companies of the Arrangement (subject to its approval by the
MDL Securityholders and Court approval of the Plan of Arrangement) and
the other transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of each of
the TSA Companies. This Agreement has been duly executed and delivered
by each of the TSA Companies and is, and the Ancillary Agreements to
which it is a party when executed and delivered in accordance with the
terms hereof shall be, valid and binding obligations of each of the
TSA Companies, enforceable in accordance with their respective terms,
except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization or other similar Laws affecting or relating
to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) No Conflict. Neither the execution, delivery and performance by the
TSA Companies of this Agreement or of any of the Ancillary Agreements
to which it is a party, nor the consummation by either of the TSA
Companies of the transactions contemplated hereby or thereby nor
compliance with the provisions hereof or thereof by either of the TSA
Companies will: (i) conflict with, or result in any violations of, the
articles of incorporation or bylaws or the comparable governing
instruments of any of the TSA Companies, (ii) result in any breach or
violation of or cause a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation contained
in, or give rise to any claim or the loss of any benefit under, or
result in the creation of any Encumbrance upon any of the properties
or assets of any of the TSA Companies under, any term, condition or
provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease or other material agreement, judgment, order, decree,
Law, rule, license or permit applicable to any of the TSA Companies or
their respective properties or assets, other than any such breaches,
defaults, losses, or Encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on TSA, or (iii)
violate or conflict with any Law.
(c) Governmental Consents. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained by any of the TSA Companies in
connection with the execution and delivery of this Agreement or any of
the Ancillary Agreements to which any of the TSA Companies is a party
or the consummation of the transactions contemplated hereby or
thereby, except (i) as required under the NASDAQ rules, the Exchange
Act, the U.S. Securities Act or applicable state securities Laws; (ii)
as specified in Sections 9.12 (Governmental Approvals) and 9.13 (HSR
Act) or; (iii) where the failure to obtain such consents, approvals,
etc., would not prevent or delay the consummation of the Arrangement
or otherwise prevent TSA from performing its obligations under this
Agreement and would not reasonably be expected to have a Material
Adverse Effect on TSA.
4.4 SEC Documents and Financial Statements
(a) SEC Documents. TSA has delivered or made available (either directly or
through EDGAR) to MDL true and complete copies of the TSA SEC
Documents.
(b) Financial Statements. The financial statements of TSA included in the
TSA SEC Documents were prepared in accordance with US GAAP applied on
a consistent basis during the periods involved (except as may have
been indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by US GAAP) and fairly present in all
material respects (subject, in the case of the unaudited statements,
to normal, year-end audit adjustments) the consolidated financial
position of TSA and the TSA Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and cash
flows for the respective periods then ended.
(c) Truthfulness. The TSA SEC Documents, on the date filed with the SEC
(and except as modified, replaced, superseded or otherwise rectified
by statements or information contained in a subsequent TSA SEC
Document), complied in all material respects with the requirements of
the Exchange Act (subject to any noncompliance which would not be
reasonably expected to have a Material Adverse Effect on TSA) and
contained no untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(d) The TSA SEC Documents include all reports required to be filed by TSA
under the Exchange Act during the preceding twelve months and TSA has
not filed a request for confidential treatment with respect to any
such reports during that period.
(e) Except for: (i) the Liabilities provided for in the financial
statements of TSA included in the TSA SEC Documents, and (ii)
Liabilities of TSA and its Affiliates incurred since the date of such
financial statements in the Ordinary Course, there are no known
material Liabilities of TSA and its Affiliates which are material to
TSA and its Affiliates taken as a whole. All reserves established by
TSA and set forth in such financial statements are reasonably
adequate.
4.5 Compliance with Law
TSA and its Affiliates are in compliance and have conducted their
businesses so as to comply with all Laws applicable to their operations and with
respect to which compliance is a condition of engaging in the business thereof
except where such non-compliance could not reasonably be expected to have a
Material Adverse Effect on TSA and its Affiliates. There are no judgments or
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration) against any of TSA or its
Affiliates or against any of their property or business which are continuing in
effect and could reasonably be expected to have a Material Adverse Effect on TSA
and its Affiliates.
4.6 Absence of Certain Changes or Events
Except as disclosed in the TSA SEC Documents, since the TSA Balance
Sheet Date, TSA has conducted its business only in the Ordinary Course and there
has not occurred:
(a) any change in the financial condition, properties, assets (including
TSA IP Rights), Liabilities, businesses, operations, material
contracts, results of operations or prospects of TSA that individually
or collectively could reasonably be expected to have a Material
Adverse Effect on TSA and its Affiliates;
(b) any amendments or changes in the Restated Certificate of Incorporation
or bylaws of TSA;
(c) any damage, destruction or loss, whether covered by insurance or not,
that could reasonably be expected to have a Material Adverse Effect on
TSA and its Affiliates;
(d) any material alteration in any term of any outstanding security of TSA
and its Affiliates; or
(e) any agreement or arrangement made by TSA to take any action which, if
taken prior to the date hereof, would have made any representation or
warranty set forth in this Agreement materially untrue or incorrect as
of the date when made unless otherwise disclosed.
4.7 Investment Canada Act
As of the date hereof, TSA is a "WTO Investor" within the meaning of
the Investment Canada Act.
4.8 TSA Class A Common Shares
The TSA Class A Common Shares, when issued directly in consideration
for MDL Class A Shares or upon the exchange of the Exchangeable Shares (all as
in accordance with the Plan of Arrangement), will be validly issued, fully paid
and non-assessable and will be free and clear of all Encumbrances attributable
to, or arising due to, any action or omission of TSA.
4.9 Intellectual Property
TSA has disclosed in the TSA SEC Documents any information regarding
any claim or specific event with respect to TSA IP Rights which could reasonably
be expected to have a Material Adverse Effect on TSA and its Affiliates.
4.10 Restrictions on Business Activities
There is no agreement, judgment, injunction, order or decree binding
upon any of TSA or its Affiliates that has, or could reasonably be expected to
have, the effect of prohibiting or materially impairing any material business
practice of any of TSA or its Affiliates, any material acquisition of property
by any of TSA or its Affiliates or the conduct of business by any of TSA or its
Affiliates as currently conducted.
4.11 TSA Holdco and TSA Exchangeco
(a) TSA Holdco has been incorporated pursuant to the Nova Scotia Companies
Act as an unlimited company. TSA is the indirect beneficial holder of
all of the issued and outstanding shares of TSA Holdco.
(b) TSA Exchangeco has been incorporated pursuant to the Nova Scotia
Companies Act as a limited company. TSA Holdco is the direct
beneficial holder of all of the issued and outstanding voting shares
of TSA Exchangeco.
4.12 No Dividends
As of the date of this Agreement, no record dates have been fixed by
TSA for the declaration, setting aside or payment of any dividends or other
distributions in respect of the TSA Class A Common Shares which have not yet
been made; and, since the date of TSA's last 10-Q filing with the SEC, no
dividend or other distribution (whether in cash, stock or property) has been
made with respect to the TSA Class A Common Shares.
4.13 Disclosure
No representation or warranty made by the TSA Companies in this
Agreement, nor any document, written information, certificate or Exhibit
prepared and furnished or to be prepared and furnished by TSA or its
representatives pursuant hereto or in connection with the transactions
contemplated hereby, when taken together, and subject to Subsection 4.4(c)
contains any untrue statement of a material fact when made, or omitted to state
a material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were made
or furnished.
ARTICLE V
MDL COVENANTS
5.1 Advice of Changes
During the period from the date of this Agreement until the earlier of
the Closing Date and the termination of this Agreement in accordance with its
terms, MDL will promptly advise TSA in writing (a) of any event or fact
occurring subsequent to the date of this Agreement which becomes known to MDL
that would render any representation or warranty of MDL contained in this
Agreement, if made on or as of the date of such event or the Effective Time,
untrue, inaccurate or incomplete in any material respect, (b) of any Material
Adverse Effect on the MDL Companies which becomes known to MDL, and (c) of any
breach by MDL of any covenant or agreement contained in this Agreement. After
the end of each monthly and quarterly accounting period ending after the date of
this Agreement and before the earlier of the Effective Time and the termination
of this Agreement in accordance with its terms, MDL shall deliver to TSA (i)
within twenty (20) Business Days after the end of each monthly accounting
period, an unaudited consolidated statement of income for the MDL Companies and
an unaudited unconsolidated balance sheet, statement of operations and statement
of changes in financial position for each of the MDL Companies and (ii) within
thirty (30) Business Days after the end of each quarterly accounting period, an
unaudited consolidated balance sheet, statement of operations and statement of
changes in financial position for MDL, all of which financial statements shall
be prepared in the Ordinary Course, in Canadian dollars and in accordance with
MDL's books and records and Canadian GAAP, and shall fairly present the
consolidated financial position of the MDL Companies as of their respective
dates and the results of the MDL Companies' operations for the periods then
ended.
5.2 Maintenance of Business
During the period from the date of this Agreement until the earlier of
the Effective Time and the termination of this Agreement in accordance with its
terms, MDL will use, and will cause each of the MDL Subsidiaries to use, all
commercially reasonable efforts to carry on and preserve its business and its
relationships with customers, suppliers and Employees in substantially the same
manner as it has prior to the date hereof. If any of the MDL Companies becomes
aware of any material deterioration in the relationship with any material
customer, supplier or key Employee, MDL will promptly bring such information to
the attention of TSA in writing and, if requested by TSA, MDL will use
commercially reasonable efforts to restore the relationship.
5.3 Conduct of Business
Subject to the fact that a transaction involving its business is
contemplated by this Agreement, during the period from the date of this
Agreement until the earlier of the Effective Time and the termination of this
Agreement in accordance with its terms, MDL will continue to conduct its
business and use its commercially reasonable efforts to maintain its business
relationships in the Ordinary Course and, except as expressly contemplated
herein, will not, without the prior consent of TSA, such consent not to be
unreasonably withheld or delayed:
(a) borrow any money except through MDL's line of credit with the TD Bank
provided that the balance of such line of credit does not exceed
CAN$1,000,000.00;
(b) enter into any transaction not in the Ordinary Course having a value
calculated by reference to MDL's obligations thereunder in excess of
$25,000;
(c) encumber or permit to be encumbered any of its assets except for
purchase money security interests or similar security interests
granted in a specific asset to secure the purchase price therefor
granted in the Ordinary Course not in excess of $100,000;
(d) dispose of any portion of its assets not in the Ordinary Course;
(e) enter into any material lease or contract for the purchase or sale or
license of any real property or for any personal property except in
the Ordinary Course not in excess of $100,000;
(f) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained to
the date of this Agreement, subject only to ordinary wear and tear;
(g) pay (or make any oral or written commitments or representations to
pay) any bonus, increased salary or special remuneration to any
Employee (except for normal salary increases and bonuses to Employees
disclosed in the MDL Disclosure Letter) or enter into or vary the
terms of any employment, consulting or severance agreement with any
Employee, pay any severance or termination pay, grant any stock option
or issue any restricted stock or other securities, or enter into or
modify any Plan;
(h) enter into any agreement, arrangement or other transaction with any
Associate of any of the MDL Companies;
(i) revalue any of its assets or properties other than the writing off of
accounts receivable in the Ordinary Course;
(j) declare, set aside or pay any cash or stock dividend or other
distribution in respect of shares of MDL, or redeem or otherwise
acquire any of its shares;
(k) amend or terminate any material contract, agreement or license to
which it is a party except for those amendments or terminations in the
Ordinary Course, which are not material in amount or effect;
(l) lend any amount to any Person other than an amount which is less than
$25,000 in the aggregate and incurred in the Ordinary Course;
(m) guarantee or act as a surety for any obligation of any Person other
than acting as a guarantor or surety in the Ordinary Course for one of
the MDL Companies;
(n) waive or release any material right or claim;
(o) issue or sell any of its shares of any class or issue or create any
warrants, obligations, subscriptions, options, convertible securities
or other commitments to issue shares, or accelerate the vesting of any
outstanding option or other security except as otherwise contemplated
herein or in the Ancillary Agreements or the Plan of Arrangement;
(p) split or combine its outstanding shares of any class or enter into any
recapitalization or agreement affecting the number or rights of
outstanding shares of any class or affecting any other of its
securities;
(q) amalgamate, merge, consolidate or reorganize with, or acquire any
entity or any interest in any entity, or enter into any agreement to
do any of the foregoing;
(r) amend its articles of incorporation or bylaws except as contemplated
by this Agreement;
(s) grant any interest in MDL IP Rights except to license software to
end-users or to grant non-exclusive distribution or sales agency
rights all in the Ordinary Course;
(t) grant any exclusive distribution rights;
(u) agree to any audit assessments by any Taxing Authority in excess of
$25,000 in the aggregate except in respect of the existing SRTC audit;
(v) reduce in amount or scope any insurance coverage or issue any
certificates of insurance;
(w) implement any material change in its accounting principles, practices
or methods, other than as may be required by Canadian GAAP and/or US
GAAP; or
(x) agree to do, or permit any MDL Companies to do, or agree to do, any of
the things described in the preceding clauses in this Section 5.3.
5.4 Shareholder Approval
As soon as reasonably practicable but in no event more than sixty (60)
days from the date of this Agreement, MDL shall take all procedural action
necessary, subject to and in accordance with applicable Law, its articles of
incorporation and bylaws and any outstanding shareholder agreements, to mail to
the MDL Securityholders notice of the MDL Securityholders Meeting, where it
shall seek the approval and adoption of, the Plan of Arrangement (including the
Articles of Arrangement giving effect thereto) and related matters by the MDL
Securityholders. MDL shall provide to TSA reasonable opportunity to review and
comment upon the Proxy Materials (which shall include the recommendation of the
board of directors of MDL referred to in Section 3.21 (Board Approval)) proposed
to be mailed to the MDL Securityholders in connection with the foregoing
approval. If prior to the date of the MDL Securityholders Meeting (i) MDL has
provided written notice to TSA that TSA is in breach of any representation,
warranty, covenant or agreement set forth in this Agreement on the part of TSA
and the board of directors of MDL has determined in good faith and has advised
TSA in such notice that it believes that such breach has or can reasonably be
expected to have a Material Adverse Effect on TSA and is by its nature curable;
and (ii) therefore, pursuant to Subsection 10.1(b) hereof TSA has fifteen (15)
Business Days (the "Cure Period") within which to cure the breach; and (iii) the
MDL Securityholders Meeting is scheduled to be held during the Cure Period, then
the MDL Securityholders Meeting shall be adjourned until three (3) Business Days
following the expiry of the Cure Period.
5.5 Regulatory Approvals
During the term of this Agreement, MDL will promptly execute and file,
or join in the execution and filing of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any Governmental Entity, which may be reasonably required, or which TSA may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. MDL will use its commercially reasonable efforts
to promptly obtain all such authorizations, approvals and consents. Without
limiting the generality of the foregoing, as promptly as practicable after the
execution of this Agreement, MDL shall file a pre-merger notification report
under the HSR Act and the Investment Canada Act if required by Law. MDL shall
provide TSA with the reasonable opportunity to review and comment upon the Plan
of Arrangement application materials proposed to be filed with the Court.
5.6 Necessary Consents
During the term of this Agreement, MDL will use commercially reasonable
efforts to obtain such written consents and take such other actions as may be
necessary or appropriate in addition to those set forth in Section 5.5
(including, without limitation, those consents and actions required of MDL or to
be delivered by MDL all as set forth in Article IX (Conditions Precedent to
Obligations of the TSA Companies) to allow the consummation of the transactions
contemplated hereby and to allow MDL to carry on its business after the
Effective Time.
5.7 Access to Information
Subject to the terms of the Mutual Non-Disclosure Agreement entered
into between TSA and MDL on May 10, 2000, during the term of this Agreement, MDL
will allow TSA and its agents reasonable access to the files, books, records and
offices of the MDL Companies, including, without limitation, all information
relating to each MDL Companies' Taxes, commitments, contracts, leases, licenses,
products, MDL IP Rights, and real, personal and intangible property and
financial condition as TSA may reasonably request. MDL will use its commercially
reasonable efforts to cause its accountants and personnel to cooperate with TSA
and its agents in making available to TSA all financial and other information
reasonably requested except for confidential minutes that record the MDL board
of directors' deliberation specifically on the decision to approve the
transaction contemplated by this Agreement and excepting that TSA and its agents
shall be restricted in their access to any source code comprising a part of the
MDL IP Rights in a manner consistent with the terms of the Distribution
Agreement.
5.8 Satisfaction of Conditions Precedent
During the term of this Agreement, MDL will use its commercially
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Article IX and MDL will use its commercially
reasonable efforts to cause the Plan of Arrangement and the other transactions
contemplated by this Agreement to be consummated and shall take such
commercially reasonable steps as are appropriate so that the representations and
warranties of MDL in this Agreement remain complete and correct on and as of the
Closing Date.
5.9 No Other Negotiations
(a) From and after the date of this Agreement until the later of (i) one
hundred (100) days from the date of this Agreement; and (ii) the
execution of the Distribution Agreement but in no event more than one
hundred and fifty (150) days from the date of this Agreement, the MDL
Companies shall not, and shall not permit their respective Employees,
representatives, investment bankers, agents and Affiliates to,
directly or indirectly, (i) solicit, initiate, continue or engage in
discussions or negotiations with any Person, encourage submission of
any inquiries, proposals or offers by, or take any other action
intended or designed to facilitate the efforts of, any Person relating
to a possible Business Combination Transaction, (ii) provide
information with respect to any of the MDL Companies, or afford any
access to the properties, books or records of the MDL Companies, to
any Person, relating to a possible Business Combination Transaction,
(iii) make or authorize any statement, recommendation or solicitation
in support of any possible Business Combination Transaction by any
Person, or (iv) enter into an agreement with any Person, providing for
a possible Business Combination Transaction.
(b) Notwithstanding the foregoing Subsection 5.9(a), nothing shall prevent
MDL or its board of directors from (i) furnishing information
regarding MDL to any Person in connection with a Business Combination
Transaction or engaging in discussions or negotiations with respect
thereto if and only to the extent that (A) the board of directors of
MDL determines in good faith, after consultation with its financial
and legal advisors that such possible Business Combination Transaction
is reasonably likely to result in a Superior Proposal, (B) the board
of directors of MDL determines in good faith, after consultation with
its outside legal counsel and financial advisers, that such action is
reasonably required in order for the board of directors of MDL to
comply with its fiduciary duties under applicable Law, (C) the Person
who has requested such information has executed and delivered to MDL a
non-disclosure agreement that is not less restrictive than the
non-disclosure agreements in effect between MDL and TSA, (D) prior to
furnishing such information or entering into such discussions or
negotiations, MDL provides written notice to TSA that it is furnishing
information to, or entering into discussions or negotiations with,
another Person which notice identifies such Person and (E) MDL keeps
TSA informed of the status of any such discussions or negotiations. In
addition, nothing in Section 5.9(a) above shall prevent the board of
directors of MDL from recommending a Superior Proposal to the MDL
Securityholders provided however that MDL (i) shall provide TSA with
at least forty-eight (48) hours prior written notice of its intentions
to hold any meeting at which the board of directors of MDL is
reasonably expected to consider a possible Business Combination
Transaction, and (ii) MDL shall not recommend to the MDL
Securityholders the Superior Proposal for at least two (2) Business
Days after MDL has provided TSA with the material terms of such
Superior Proposal.
(c) Nothing in Section 5.9(a) shall prevent the board of directors of MDL
from withdrawing, amending or modifying its recommendation in favor of
the transaction consummating the Arrangement at any time prior to the
approval of the Plan of Arrangement by the MDL Securityholders if (i)
a Superior Proposal is made to MDL and is not withdrawn, and (ii)
neither MDL nor any of its representatives shall have violated any of
the restrictions set forth in Section 5.9. Except as may be limited by
applicable Law, MDL shall call, give notice of, convene and hold the
MDL Securityholders Meeting pursuant to the terms of this Agreement
(regardless of whether the recommendation of the board of directors of
MDL shall have been withdrawn, amended or modified or the board of
directors determines that the Agreement is no longer advisable and
recommends that the MDL Securityholders reject it).
(d) MDL shall immediately cease and cause to be terminated any existing
discussions or negotiations with any Person (other than TSA) conducted
heretofore with respect to any of the foregoing, including, without
limitation, any discussions or negotiations with third parties
regarding the issuance of securities of MDL or other investment(s) in
MDL by such third parties whether or not such investments would result
in a change of control of MDL. MDL agrees not to release any third
party from any confidentiality or standstill agreement with respect to
any of the foregoing to which MDL is a party.
(e) MDL shall use its commercially reasonable efforts to ensure that the
Employees, agents and Associates of the MDL Companies and any bankers,
investment bankers or other agents, advisors or representatives
retained by MDL are aware of the restrictions described in this
Section 5.9, and shall be responsible for any breach of this Section
5.9 by such bankers, investment bankers, Employees, agents, advisors,
representatives or Associates.
5.10 Cooperation
MDL and TSA have discussed a strategy for approaching existing and
prospective customers in an effort to ensure that the business objectives of the
transactions contemplated hereby will be achieved and the business of MDL is not
harmed after execution of this Agreement until the Closing Date. To the extent
permitted by applicable Law and the contractual and other legal obligations of
MDL and TSA to their respective customers, MDL will cooperate with TSA in
developing this strategy and MDL agrees to approach customers on a joint basis
with TSA consistent with the agreed strategy.
5.11 Canadian Clearance Certificates
(a) Persons. MDL will use its commercially reasonable efforts to cause
each Person who holds, or will hold, a MDL Security immediately prior
to the Effective Time to deliver to MDL, at or before such time:
(i) a certificate confirming that such MDL Securityholder is a
Canadian Resident; or
(ii) in the case of a MDL Securityholder who is not a Canadian
Resident, a certificate satisfactory to TSA Exchangeco acting
reasonably, issued pursuant to Subsection 116(2) or 116(4) of the
ITA, with respect to the MDL Security exchanged or disposed of,
and, in the case of a certificate under Subsection 116(2) of the
ITA, having as the "certificate limit", as defined in Subsection
116(2) of the ITA, an amount no less than the cost (which may be
equal to the fair market value of the Exchangeable Shares or TSA
Class A Common Shares and cash (if any) received by such holder)
to TSA Exchangeco of the MDL Security.
(b) Partnerships. In the case of a MDL Securityholder who is a
partnership, MDL will use its commercially reasonable efforts to cause
such MDL Securityholder to also provide a certificate confirming the
name and address of each member thereof and the percentage of
partnership interest held by each member.
(c) Withholding if no certificate. In the event that a holder of a MDL
Security fails to deliver the requisite certificates described above
at or before the exchange or disposition of such MDL Security, TSA
Exchangeco shall be entitled to deduct and withhold from any
consideration otherwise payable to any such holder such amounts as TSA
Exchangeco is required or permitted to deduct and withhold with
respect to such payment under the ITA or any other provision of
applicable Tax Law, in each case, as amended or succeeded; provided
that such withheld amount shall not be remitted prior to two (2)
Business Days prior to the date such amount is required by Law to be
remitted (the "Remittance Date") and where such certificate is
delivered prior to the Remittance Date, such withheld amount shall be
released to the holder except to the extent such amounts were withheld
or deducted pursuant to another provision of applicable Tax Law. To
the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the holder
of the MDL Security in respect of which such deduction and withholding
was made, provided that such withheld amounts are actually remitted to
the appropriate Taxing Authority and a receipt evidencing such
remittance is delivered to the holder. To the extent that the amount
so required or permitted to be deducted or withheld from any payment
to a holder exceeds the cash portion of the consideration otherwise
payable to the holder, TSA Exchangeco is hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary
to provide sufficient funds to TSA Exchangeco to enable it to comply
with such deduction or withholding requirement and TSA Exchangeco
shall notify the holder thereof and remit to such holder any unapplied
balance of the net proceeds of such sale. If the proceeds of such sale
are insufficient to fund the required withholding, such holder shall
forthwith pay to TSA Exchangeco or remit to the applicable Taxing
Authority the deficiency. The holder shall bear all reasonable costs
and expenses associated with any sale by TSA Exchangeco pursuant to
the two immediately preceding sentences.
(d) Other Exchanges. On any conversion and exchange of Stonebridge Options
or Compensation Warrants, on any exchange of MDL Options for TSA
Replacement Options, on any exchange of MDL Class A Shares for TSA
Class A Common Shares or Exchangeable Shares or on any subsequent
exchange of Exchangeable Shares for TSA Class A Common Shares, the
requirements set forth in this Section 5.11 shall also be applicable
with the necessary changes.
5.12 Insurance Policies
None of the MDL Companies shall take, or omit to take, any action which
would cause any of the insurance policies disclosed in Section 3.17 (Insurance)
above to cease to be in full force and effect immediately following the Closing
Date.
5.13 Employee Incentive Arrangements
MDL agrees that it will implement the employee incentive arrangements
relating to certain key Employees on a basis that is consistent with employee
incentive arrangements implemented for the benefit of key employees of other TSA
business units.
ARTICLE VI
TSA COVENANTS
6.1 Advice of Changes
During the period from the date of this Agreement until the earlier of
the Effective Time and the termination of this Agreement in accordance with its
terms, TSA will promptly advise MDL in writing (a) of any event or fact
occurring subsequent to the date of this Agreement which becomes known to TSA
that would render any representation or warranty of any of the TSA Companies
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect, (b) if any Material
Adverse Effect on TSA and its Affiliates which becomes known to TSA and (c) of
any breach by TSA of any covenant or agreement contained in this Agreement. TSA
will provide or otherwise make available to MDL (either directly or through
EDGAR) a copy of all publicly available materials filed by TSA with the SEC
promptly after each such filing is made.
6.2 Regulatory Approvals
TSA will promptly execute and file, or join in the execution and
filing, of any application or other document that may be necessary in order to
obtain the authorization, approval or consent of any Governmental Entity that
may be reasonably required, or which MDL may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement. TSA
will use its commercially reasonable efforts to promptly obtain all such
authorizations, approvals and consents. Without limiting the generality of the
foregoing, as promptly as practicable after the execution of this Agreement, TSA
shall file a pre-merger notification report under the HSR Act and the Investment
Canada Act if required by Law.
6.3 Necessary Consents
During the term of this Agreement, each of the TSA Companies will use
its commercially reasonable efforts to obtain such written consents and take
such other actions as may be necessary or appropriate in addition to those set
forth in Section 6.2 (including without limitation, those consents and action
required of TSA set forth in Article VIII (Conditions Precedent to Obligations
of MDL)) to allow the consummation of the transactions contemplated hereby.
6.4 Satisfaction of Conditions Precedent
During the term of this Agreement, TSA will use its commercially
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Article VIII, and TSA will use its commercially
reasonable efforts to cause the Plan of Arrangement and the other transactions
contemplated by this Agreement to be consummated and shall take such
commercially reasonable steps as are appropriate so that the representations and
warranties of the TSA Companies in this Agreement remain complete and correct on
and as of the Closing Date.
6.5 Employee Incentive Arrangements
TSA agrees that it will cause MDL to implement the employee incentive
arrangements relating to certain key Employees on a basis that is consistent
with employee incentive arrangements implemented for the benefit of key
employees of other TSA business units.
6.6 Issuance and Listing of TSA Class A Common Share
For so long as any Exchangeable Shares or Replacement TSA Options are
held by holders other than TSA and its Affiliates, TSA will cause the TSA Class
A Common Shares which are to be issued directly in consideration for MDL Class A
Shares or to be issued from time to time upon exchange of the Exchangeable
Shares or upon exercise of Replacement TSA Options, to be quoted on the NASDAQ
or such other exchange or quotation system to the same extent as TSA stock is
quoted generally, subject only to official notice of issuance.
6.7 Registration Statement
TSA shall prepare and file the Registration Statement with the SEC on a
timely basis. TSA shall use commercially reasonable efforts to ensure that the
Registration Statement shall become effective under the U.S. Securities Act and
shall remain effective so long as any Exchangeable Shares are outstanding. As
soon as reasonably practicable after the Effective Date, TSA shall prepare and
file with the SEC a registration statement on Form S-8 (or other appropriate
form) with respect to the TSA Class A Common Shares subject to Replacement TSA
Options. TSA shall use commercially reasonable efforts to ensure that such
registration statement shall remain effective so long as any Replacement TSA
Options are outstanding.
6.8 Non-Solicitation
Upon execution of this Agreement and for a period of one hundred and
eighty (180) days from the date that this Agreement is terminated pursuant to
Article X, TSA and its Affiliates will not directly or indirectly recruit,
solicit, induce or otherwise promote or encourage any Employee to terminate his
or her employment or otherwise cease his or her relationship with any of the MDL
Companies. In addition, neither TSA nor any Affiliate of TSA will hire or employ
or use under any subcontracting arrangement any present or former MDL Employee
of any of the MDL Companies for a period of one hundred and eighty (180) days
from the date that this Agreement is terminated pursuant to Article X without
the prior written consent of an authorized executive of MDL.
6.9 Cooperation
MDL and TSA have discussed a strategy for approaching existing and
prospective customers in an effort to ensure that the business objectives of the
transactions contemplated hereby will be achieved and the business of MDL is not
harmed after execution of this Agreement until the Closing Date. To the extent
permitted by applicable Law and the contractual and other legal obligations of
MDL and TSA to their respective customers, TSA will cooperate with MDL in
developing this strategy and TSA agrees to approach customers on a joint basis
with MDL consistent with the agreed strategy.
6.10 Access to Information
Subject to the terms of the Mutual Non-Disclosure Agreement entered
into between MDL and TSA on May 10, 2000 and provided that each Person having
access to any TSA information also enters into a non-disclosure agreement with
TSA (in form and substance satisfactory to TSA) agreeing not to sell or trade
TSA Class A Common Shares so long as any information reviewed is in the
non-public domain, during the term of this Agreement, TSA will allow MDL and its
agents reasonable access to the files, books, records and offices of TSA,
including, without limitation, all information relating to the Taxes,
commitments, contracts, leases, licenses, and products of TSA and its
Affiliates, the TSA IP Rights, and real, personal and intangible property and
financial condition of TSA and its Affiliates as MDL may reasonably request. TSA
will use commercially reasonable efforts to cause its accountants and personnel
to cooperate with MDL and its agents in making available to MDL all financial
and other information reasonably requested. MDL acknowledges that certain of
such information may be competitively sensitive and that disclosure thereof
shall be limited to the extent necessary for the purpose of preserving for TSA
the value inherent in its property, including the TSA IP Rights.
6.11 Continuing Ownership
(a) TSA will continue to be the indirect beneficial holder of all of the
issued and outstanding shares of TSA Holdco. A Delaware special
purpose corporation (directly or indirectly wholly-owned by TSA) will
be the direct holder of the issued and outstanding shares of TSA
Holdco.
(b) TSA Holdco will continue to be the direct beneficial holder of all of
the issued and outstanding voting shares of TSA Exchangeco. Non-voting
preferred shares of TSA Exchangeco will be transferred to one or more
third parties in connection with the Closing. The TSA Companies hereby
undertake that the provisions attaching to such non-voting preferred
shares will be appended as Appendix C to the Plan of Arrangement as
soon as reasonably practicable but in no event later than fifteen (15)
Business Days after execution of this Agreement. Such preferred shares
will be entitled to cumulative dividends but the preferred share
provisions will provide that no dividends will be paid on the
preferred shares if TSA Exchangeco is in default of its dividend
obligations on the Exchangeable Shares. The preferred shares may also
be redeemable and retractable. MDL hereby consents to the necessary
amendments to the Plan of Arrangement and other applicable Ancillary
Agreements to reflect the existence and terms of such preferred
shares.
6.12 Preparation of Proxy Materials
TSA will cooperate with MDL in the preparation and drafting of the
Proxy Materials. The information to be supplied by TSA for inclusion in the
Proxy Materials shall be supplied by TSA as soon as reasonably practicable but
in no event later than twenty (20) Business Days following the request for such
information.
6.13 Establishment of Escrow
Simultaneously with the execution and delivery of the Escrow Agreement,
TSA Exchangeco shall deposit with the Escrow Agent certificates representing the
Escrowed Shares.
ARTICLE VII
CLOSING MATTERS
7.1 The Closing
Subject to the termination of this Agreement as provided in Article X
(Termination) below, the Closing will take place on the Closing Date at the
offices of Baker & McKenzie, Suite 2100, 181 Bay Street, Toronto, Ontario and at
a time to be mutually agreed upon by the parties. The Closing Date shall be no
later than the fifth (5th) Business Day after all conditions precedent set forth
herein shall have been satisfied or waived, unless another place, time and date
is mutually selected by MDL and TSA. Concurrently with the Closing, the Articles
of Arrangement giving effect to the Plan of Arrangement will be filed with the
Registrar under the ABCA.
7.2 Ancillary Agreements/Reservation of Shares
(a) Provided that the conditions set forth in Articles VIII and IX
(Conditions Precedent) of this Agreement have been satisfied or
waived, MDL shall, on the Closing Date, file the Articles of
Arrangement giving effect to the Plan of Arrangement pursuant to the
ABCA.
(b) Provided that the conditions set forth in Articles VIII and IX
(Condition Precedent) of this Agreement have been satisfied or waived,
on the Closing Date the following Ancillary Agreements shall be
executed and delivered by the parties thereto:
(i) The TSA Companies shall execute and deliver the Support
Agreement;
(ii) The TSA Companies and the Trustee shall execute and deliver the
Voting and Exchange Trust Agreement; and
(iii)The TSA Companies, the Shareholder Agent and the Escrow Agent
shall execute and deliver the Escrow Agreement.
On or before the Closing Date, the board of directors of TSA shall have
adopted a resolution (i) designating and issuing the TSA Special Voting
Share (as defined in the Plan of Arrangement), and such resolution
shall be in full force and effect, (ii) authorizing the issuance of
such number of TSA Class A Common Shares as shall be required to
accommodate any acquisition of MDL Class A Shares or the immediate
exchange of Exchangeable Shares, and (iii) adopting the MDL Stock
Option Plan and authorizing the issuance of the Replacement TSA
Options. On or before the Closing Date, TSA shall have reserved for
issuance such number of TSA Class A Common Shares as shall be necessary
to give effect to the exchanges contemplated hereby and by the Plan of
Arrangement.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF MDL
The obligations of MDL hereunder are subject to the fulfillment or
satisfaction on or before the Closing Date of each of the following conditions
(any one or more of which may be waived by MDL, but only in a writing signed by
MDL):
8.1 Accuracy of Representations and Warranties
The representations and warranties of TSA set forth in Article IV shall
be true and accurate in all material respects on and as of the Closing Date with
the same force and effect as if they had been made on the Closing Date except
for changes contemplated by this Agreement (including, without limitation,
Section 6.1 (Advice of Changes) and MDL shall receive a certificate to such
effect executed by an officer of TSA.
8.2 Covenants
TSA shall have performed and complied in all material respects with all
of its covenants required to be performed by TSA under this Agreement or the
Plan of Arrangement on or before the Closing Date, and MDL shall receive a
certificate to such effect signed by an officer of TSA.
8.3 Absence of Material Adverse Effect
There shall not have occurred any event or change since the date hereof
that has a Material Adverse Effect on TSA and its Affiliates. For the sake of
clarity, a material decrease in the price of TSA Class A Common Shares does not
itself constitute a Material Adverse Effect on TSA and its Affiliates.
8.4 Compliance with Law
There shall be no order, decree or ruling by any Governmental Entity or
threat thereof, or any applicable Law enacted, entered, enforced or deemed
applicable to the Plan of Arrangement, that would prohibit or render illegal the
transactions contemplated by this Agreement.
8.5 Shareholder Approval
The Arrangement shall have been approved and adopted by the MDL
Securityholders in accordance with applicable Law and MDL's articles of
incorporation and bylaws, and, provided that MDL shall have filed the Articles
of Arrangement giving effect to the Arrangement, such Articles of Arrangement
shall have become legally effective to give effect to the Plan of Arrangement as
of the Effective Time.
8.6 No Legal Action
No temporary restraining order, preliminary injunction or permanent
injunction or other order preventing the consummation of the Arrangement or any
other transaction contemplated hereby shall have been issued by any Governmental
Entity and remain in effect, nor shall any proceeding seeking any of the
foregoing be pending.
8.7 Governmental Approvals
All necessary orders, approvals and consents required to consummate the
Arrangement and this Agreement and the Ancillary Agreements shall have been
obtained from applicable Governmental Entities including without limitation the
following:
(a) Orders, decisions or rulings of the applicable securities commissions
and regulatory authorities (including approval of the Proxy Materials,
if required);
(b) Final order of the Court approving the Arrangement; and
(c) Orders, decisions or rulings required under applicable Law (including
"blue sky" Laws) and the rules of the NASDAQ.
8.8 Exemption
An exemption from registration under Section 3(a)(10) of the U.S.
Securities Act shall be available for the issuance of Replacement TSA Options,
Exchangeable Shares and TSA Class A Common Shares issued at Closing in exchange
for MDL Class A Shares or MDL Options.
8.9 HSR Act
The parties shall have complied with the requirements of the HSR Act,
if applicable.
8.10 Tax Status
There shall not have occurred any change in the ITA or the regulations
thereunder enacting into Law a change first proposed from and after the date
hereof, or any proposal made from and after the date hereof by the Minister of
Finance of Canada to amend the ITA or the regulations thereunder which, if
enacted, would result in the exchange of MDL Class A Shares for Exchangeable
Shares not being eligible for election under Subsection 85(1) or Subsection
85(2) of the ITA, to the extent that such exchange would have been eligible for
election under Subsection 85(1) or 85(2) if such change had not been enacted;
and there shall not have been any official or administrative pronouncement or
action announced or adopted after the date hereof or judicial decision rendered
after the date hereof interpreting or applying the ITA or the regulations
thereunder, that would result in or could reasonably be expected to result in
any of the foregoing.
8.11 Delivery of Agreements
Each of the following agreements, in form and substance satisfactory to
MDL, shall have been executed by all parties thereto except for MDL and the
Shareholder Agent and delivered to MDL:
(a) the Voting and Exchange Trust Agreement;
(b) the Support Agreement; and
(c) the Escrow Agreement.
8.12 Effectiveness of the Registration Statement
The Registration Statement shall be effective under the U.S. Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose and no
similar proceeding in respect of the Registration Statement shall have been
initiated or threatened by the SEC.
8.13 Opinion of TSA's Counsel
MDL shall have received from Baker & McKenzie, Canadian and U.S.
counsel to TSA, opinions described in Exhibit 8.13 in connection with the
transactions contemplated by this Agreement and subject to the customary
qualifications and reliances.
8.14 Consents, Waivers, Etc
TSA shall have received all written consents, assignments, waivers,
authorizations or other certificates necessary to provide for the continuation
in full force and effect of any and all material contracts and leases of the TSA
Companies and for the TSA Companies to consummate the transactions contemplated
hereby, except when the failure to receive such consents, or other certificates
would not have a Material Adverse Effect on TSA and its Affiliates.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE TSA COMPANIES
The obligations of the TSA Companies hereunder are subject to the
fulfillment or satisfaction on or before the Closing Date of each of the
following conditions (any one or more of which may be waived by TSA, but only in
a writing signed by TSA):
9.1 Accuracy of Representations and Warranties
The representations and warranties of MDL set forth in Article III (as
qualified by the MDL Disclosure Letter) shall be true and accurate in all
material respects on and as of the Closing Date with the same force and effect
as if they had been made at the Closing except for changes contemplated by this
Agreement (including, without limitation, Section 5.1), the Ancillary Agreements
and the Plan of Arrangement and TSA shall receive a certificate to such effect
executed by MDL's Chief Executive Officer.
9.2 Covenants
MDL shall have performed and complied in all material respects with all
of its covenants required to be performed by it under this Agreement or the Plan
of Arrangement on or before the Closing Date, and TSA shall receive a
certificate to such effect signed by MDL's Chief Executive Officer.
9.3 Absence of Material Adverse Effect
There shall not have occurred any event or change since the date hereof
that has a Material Adverse Effect on MDL and the MDL Subsidiaries.
9.4 Compliance with Law
There shall be no order, decree or ruling by any Governmental Entity or
threat thereof, or any applicable Law enacted, entered, enforced or deemed
applicable to the Plan of Arrangement, that would prohibit or render illegal the
transactions contemplated by this Agreement.
9.5 Opinion of MDL's Counsel
TSA shall have received from Miller Thomson LLP, Canadian counsel to
MDL, opinions described in Exhibit 9.5 in connection with the transactions
contemplated by this Agreement and subject to the customary qualifications and
reliances.
9.6 Consents, Waivers, Etc
MDL shall have received all written consents, assignments, waivers,
authorizations or other certificates necessary to provide for the continuation
in full force and effect of any and all material contracts and leases of the MDL
Companies and for MDL to consummate the transactions contemplated hereby, except
when the failure to receive such consents, or other certificates would not have
a Material Adverse Effect on MDL. For the avoidance of doubt and without
limitation of the foregoing, consents under the contracts listed in Subsection
3.3(b) of the MDL Disclosure Letter will be required.
9.7 MDL Approvals
The Arrangement shall have been approved and adopted by the MDL
Securityholders in accordance with applicable Law and MDL's articles of
incorporation and bylaws.
9.8 Plan of Arrangement
Articles of Arrangement giving effect to the Arrangement shall have
been filed with the Registrar under the ABCA and become legally effective to
give effect to the Plan of Arrangement as of the Effective Time.
9.9 Delivery of Agreements
The Principal Securityholders' Agreement and the Estoppel Certificates
(as such term is defined in the Principal Securityholders' Agreement) shall be
unamended and in full force and effect. In addition, each of the following
agreements, in form and substance satisfactory to TSA, shall have been executed
by all parties thereto except for the TSA Companies and delivered to TSA:
(a) an Affiliate Letter executed by each SEC Affiliate of MDL, including
executive officers, directors and holders of 10% or more of the MDL
Class A Shares; and
(b) the Escrow Agreement.
9.10 No Legal Action
No temporary restraining order, preliminary injunction or permanent
injunction or other order preventing the consummation of the Arrangement or any
other transaction contemplated hereby shall have been issued by any Governmental
Entity and remain in effect, nor shall any proceeding seeking any of the
foregoing be pending.
9.11 Termination of Certain Agreements
Each of the following agreements shall have been terminated: (i) the
Shareholders Agreement; and (ii) Special Warrant Indenture dated December 30,
1999 between MDL and CIBC Mellon Trust Company. If the Agency Agreement dated
December 30, 1999 between MDL and Yorkton Securities Inc., has not been
terminated prior to the Closing, as of the Closing Date, MDL shall have
satisfied all of its covenants pursuant thereto and not be in default of any
provision thereto.
9.12 Governmental Approvals
All necessary orders, approvals and consents required to consummate the
Arrangement and this Agreement and the Ancillary Agreements as listed in Section
3.3 (Authority) of the MDL Disclosure Letter shall have been obtained from
applicable Governmental Entities including without limitation the following:
(a) Orders, decisions or rulings of the applicable securities commissions
and regulatory authorities (including approval of the Proxy Materials,
if required);
(b) Final order of the Court approving the Arrangement in form and
substance reasonably satisfactory to TSA; and
(c) Orders, decisions or rulings required under applicable Law (including
"blue sky" Laws) and the rules of the NASDAQ.
9.13 HSR Act
The parties shall have complied with the requirements of the HSR Act,
if applicable.
9.14 Resignation of Directors and Officers
Each member of the board of directors of MDL and each officer of all of
the MDL Companies shall have delivered to TSA an instrument resigning such
person's position as of the Effective Time.
9.15 Dissenting Shareholders
MDL shall not have received on or prior to the Effective Time notice
from the holders of more than 5% of the MDL Securities (who have a right to
dissent) of their intention to exercise rights of dissent under Section 184 of
the ABCA or pursuant to an order of the Court.
9.16 Exemption from Registration for Exchangeable Shares
An exemption from registration under Section 3(a)(10) of the U.S.
Securities Act shall be available for the issuance of Replacement TSA Options,
Exchangeable Shares and TSA Class A Common Shares issued at Closing in exchange
for MDL Class A Shares or MDL Options.
9.17 Effectiveness of the Registration Statement
The Registration Statement shall be effective under the U.S. Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose and no
similar proceeding in respect of the Registration Statement shall have been
initiated or threatened by the SEC.
ARTICLE X
TERMINATION OF AGREEMENT
10.1 Termination
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the Plan of Arrangement by the MDL
Securityholders and by the Court:
(a) by mutual agreement of MDL and TSA;
(b) by MDL, if there has been a breach by TSA of any representation,
warranty, covenant or agreement set forth in this Agreement on the
part of TSA, or if any representation of TSA shall have become untrue,
in either case which has or can reasonably be expected to have a
Material Adverse Effect on TSA and its Affiliates and which TSA fails
to cure within fifteen (15) Business Days after written notice thereof
from MDL (except that no cure period shall be provided for a breach by
TSA which by its nature cannot be cured);
(c) by MDL, if the conditions set forth in Subsections 5.9(b) and 5.9(c)
have been satisfied and (i) the board of directors of MDL fails to
recommend or withdraws its recommendation of this Agreement or the
Plan of Arrangement or shall have resolved to do so pursuant to
Section 5.9 (No Other Negotiations); or (ii) if the board of directors
of MDL shall have recommended to the MDL Securityholders a Superior
Proposal or resolved to do so. Notwithstanding the opening language of
this Section 10.1, MDL's right to terminate in this Subsection only
arises after the MDL Securityholders fail to approve the Plan of
Arrangement at the MDL Securityholders Meeting or any adjournment
thereof and MDL has paid up to $1,000,000.00 of the TSA Expenses as
required by Section 11.3 (Termination Fees and Expenses).
(d) by TSA, if there has been a breach by MDL of any representation,
warranty, covenant or agreement set forth in this Agreement on the
part of MDL, or if any representation of MDL shall have become untrue,
in either case which has or can reasonably be expected to have a
Material Adverse Effect on the MDL Companies or TSA, and which MDL
fails to cure within fifteen (15) Business Days after written notice
thereof from TSA (except that no cure period shall be provided for a
breach by MDL which by its nature cannot be cured);
(e) by TSA, (i) if the board of directors of MDL fails to recommend or
withdraws its recommendation of this Agreement or the Plan of
Arrangement or shall have resolved to do so; or (ii) if the board of
directors of MDL shall have recommended to the MDL Securityholders any
Business Combination Transaction or resolved to do so; or (iii) if an
offer to acquire 50% of more of the outstanding MDL Class A Shares is
commenced, and the board of directors of MDL fails to recommend
against the MDL Securityholders tendering their MDL Class A Shares
into such offer;
(f) by TSA, if the MDL Securityholders fail to approve the Plan of
Arrangement at the MDL Securityholders Meeting;
(g) by TSA or MDL, if the Court fails to issue an interim or final order
approving the Plan of Arrangement;
(h) by MDL or TSA, if all the conditions for Closing the Arrangement shall
not have been satisfied or waived on or before 5:00 p.m., Toronto time
on the date which is one hundred and twenty (120) days following
execution of this Agreement or such later date as may be agreed upon
in writing by MDL and TSA, other than as a result of a breach of this
Agreement by the terminating party; or
(i) by MDL or TSA, if a permanent injunction or other order by any
Governmental Entity shall have been issued and shall have become final
and non-appealable that would (i) make illegal or otherwise restrain
or prohibit the consummation of the Arrangement or any other
transaction contemplated hereby, (ii) prohibit TSA's ownership or
operation of all or any portion of the business or assets of the MDL
Companies or (iii) compel TSA to dispose of or hold separate all or
any portion of the business or assets of the MDL Companies.
10.2 Notice of Termination
Any termination of this Agreement under Section 10.1 above will be
effective by the delivery of written notice by the terminating party to the
other party hereto.
10.3 Effect of Termination
In the case of any termination of this Agreement as provided in this
Article X, this Agreement shall be of no further force and effect (except as
provided in Article XI). Termination or expiration of this Agreement and the
Ancillary Agreements through any means and for any reason shall not relieve the
parties of any obligation occurring prior thereto and shall be without prejudice
to the rights and remedies of either party with respect to any prior breach of
any provision of this Agreement. No termination of this Agreement shall affect
the obligations of the parties contained in the Mutual Non-Disclosure Agreement
entered into between TSA and MDL on May 10, 2000.
10.4 Effect of Termination on Distribution Agreement
In the case of any termination of this Agreement as provided in this
Article X, the Distribution Agreement shall contemporaneously terminate only if
this Agreement is terminated: (a) by MDL, pursuant to (i) Subsection 10.1(b); or
(ii) Subsection 10.1(h) due to a breach by TSA of any representation, warranty,
covenant or agreement set forth in this Agreement on the part of TSA which has,
or can reasonably be expected to have, a Material Adverse Effect on TSA and its
Affiliates; or (b) by TSA, pursuant to Subsection 10.1(h) due to a breach by MDL
of any representation, warranty, covenant or agreement set forth in this
Agreement on the part of MDL which has not, or cannot reasonably be expected to
have, a Material Adverse Effect on the MDL Companies. For the sake of clarity,
unless one of the foregoing conditions is satisfied, the Distribution Agreement
shall be unaffected by termination of this Agreement.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; INDEMNITY
11.1 Survival of Representations and Warranties
All representations, warranties and covenants of MDL and each of the
TSA Companies, respectively, contained in this Agreement will survive,
regardless of any investigation made by, or on behalf of, the parties to this
Agreement, until the first (1st) anniversary of the Effective Time or as noted
below in Section 11.2. Notwithstanding anything in this Agreement, the aggregate
liability of the TSA Companies whether to MDL or to the MDL Securityholders
shall in no event exceed the aggregate value of 20% of the TSA Class A Common
Shares delivered at Closing and TSA Class A Common Shares underlying the
Exchangeable Shares based on the Average Trading Price.
11.2 Survival of Certain Covenants
Certain covenants of the parties contained herein shall not be extinguished by
the Closing or the termination of this Agreement in accordance with the terms of
Article X hereof in the following manner:
(a) The covenants of the parties contained in Sections 12.7 (Expenses),
12.8 (Legal Fees), 12.10 (No Personal Liability) and 12.12 (Further
Assurances) shall survive both the Closing and the termination of this
Agreement in accordance with the terms of Article X hereof;
(b) The covenants of TSA and its Affiliates, contained in Section 6.8
(Non-Solicitation) and the covenants of the parties contained in
Section 12.13 (Public Announcement) of this Agreement shall survive
the termination of this Agreement in accordance with the terms of
Article X hereof and remain operative and in full force and effect for
the periods stated therein;
(c) The covenants of MDL and TSA contained in, respectively, Section 5.13
and 6.5 (Employee Inventive Arrangements) of this Agreement shall
survive the Closing and shall remain operative and in full force and
effect; and
(d) The covenant of TSA contained in Section 6.7 (Registration Statement)
shall survive the Closing and remain in full force and effect until
there are no Exchangeable Shares held by holders other than TSA and
its Affiliates.
11.3 Termination Fees and Expenses
(a) MDL shall pay TSA the Alternative Proposal Fee and the TSA Expenses
if:
(i) this Agreement is terminated pursuant to Subsections 10.1(c) or
10.1(e) and any Business Combination Transaction is thereafter
consummated within nine (9) months of such termination;
(ii) this Agreement is terminated pursuant to Subsection 10.1(f) as a
result of the failure of the MDL Securityholders to approve the
Arrangement and a Business Combination Transaction proposal shall
have been made prior to such vote, and any Business Combination
Transaction is thereafter consummated within nine (9) months of
such termination; or
(iii)this Agreement is terminated pursuant to Subsection 10.1(g) as a
result of the failure of the Court to issue an interim or final
order approving this Agreement and the Arrangement and a Business
Combination Transaction proposal shall have been made prior to
such termination and any Business Combination Transaction is
thereafter consummated within nine (9) months of such
termination.
(b) MDL shall not be required to pay TSA Expenses in excess of one million
dollars ($1,000,000.00) pursuant to this Section 11.3.
(c) Payment of the TSA Expenses by MDL to TSA arising pursuant to the
terms of Subsection 11.3(a)(i) shall be made prior to termination of
this Agreement. Payment of the Alternative Proposal Fee by MDL to TSA
arising pursuant to the terms of Subsection 11.3(a)(i) shall be made
contemporaneously with the consummation of such Business Combination
Transaction. For the sake of clarity, even if a Business Combination
Transaction is not consummated within nine (9) months of a termination
pursuant to Subsections 10.1(c) or 10.1(e), MDL shall be required to
pay the TSA Expenses prior to such termination but shall not be
required to pay the Alternative Proposal Fee.
(d) Payment of the Alternative Proposal Fee and the TSA Expenses by MDL to
TSA arising pursuant to the terms of Subsection 11.3(a)(ii) or (iii)
shall be made contemporaneously with the consummation of such Business
Combination Transaction.
11.4 Indemnification of the Indemnitees
Without limiting any other rights the Indemnitees (as such term is
defined in the Plan of Arrangement) may have as against Persons other than the
Indemnifying Shareholders in respect of Losses suffered by TSA and its
Affiliates in connection with this Agreement, at the Effective Time, the
Indemnitees shall be entitled to exercise the rights set forth in Section 7.1 of
the Plan of Arrangement and in the Escrow Agreement against the Indemnifying
Shareholders in the event of any Losses suffered or incurred by an Indemnitee
resulting from the inaccuracy or breach of any representation or warranty of
MDL, any breach of or failure to perform any covenant or agreement of MDL in the
Combination Agreement or in any certificate furnished by MDL pursuant to the
Combination Agreement at Closing or any of the Indemnifying Shareholders or any
other matter set forth herein to the extent and on the terms set forth in the
Escrow Agreement. The Indemnitees' sole remedy for such indemnification from the
Indemnifying Shareholders is as set out in Section 7.1 of the Plan of
Arrangement and the Escrow Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Governing Law
The laws of the Province of Alberta, Canada (irrespective of its choice
of law principles) will govern the validity of this Agreement, the construction
of its terms and the interpretation and enforcement of the rights and duties of
the parties hereto.
12.2 Assignment Binding Upon Successors and Assigns
None of the parties hereto may assign any of its rights or obligations
hereunder or under the Ancillary Agreements without the prior written consent of
the other parties hereto or thereto. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The TSA Companies expressly agree and acknowledge that the
representations, warranties and covenants of the TSA Companies herein are for
the benefit of and shall inure to the benefit of the MDL Securityholders in
addition to MDL.
12.3 Severability
If any provision of this Agreement, or the application thereof, will
for any reason and to any extent be invalid or unenforceable, the remainder of
this Agreement and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the greatest extent possible, the economic, business, legal and
other purposes of the void or unenforceable provision.
12.4 Facsimile and Counterparts
This Agreement may be executed by facsimile and in any number of
counterparts, each of which will be deemed to be an original as regards any
party whose signature appears thereon and all of which together will constitute
one and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
12.5 Other Remedies
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with, and not
exclusive of, any other remedy conferred hereby or by Law on such party, and the
exercise of any one remedy will not preclude the exercise of any other.
12.6 Amendment and Waivers
Any term or provision of this Agreement may be amended, and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a writing
signed by the party to be bound thereby. The waiver by a party of any breach
hereof or default in the performance hereof will not be deemed to constitute a
waiver of any other default or any succeeding breach or default. The Agreement
may be amended by the parties hereto at any time before or after approval of the
MDL Securityholders, but, after such approval, no amendment will be made which
by applicable Law requires the further approval of the MDL Securityholders
without obtaining such further approval.
12.7 Expenses
Each party will bear its respective fees and expenses (including the
fees and expenses of legal counsel, accountants and investment bankers) incurred
with respect to this Agreement, and the transactions contemplated hereby;
provided, that, in the event that this transaction is consummated, the total of
all such fees and expenses incurred by MDL and for which it shall be responsible
(including the fees and expenses described in Section 3.16 hereof) shall not
exceed CDN$1,800,000.00. MDL has provided TSA with a budget of all such fees and
expenses required in connection with the completion of the transactions
contemplated by this Agreement and shall use its commercially reasonable efforts
to consummate such transactions without exceeding the budgeted amount and shall
not enter into any agreement or take any action inconsistent with the foregoing.
If MDL's aggregate fees and expenses exceed CDN$1,800,000.00, then such excess
amount shall be paid by the Indemnifying Shareholders pursuant to Section 7.1 of
the Plan of Arrangement and the terms of the Escrow Agreement.
12.8 Legal Fees
Should suit be brought to enforce or interpret any part of this
Agreement, the prevailing party will be entitled to recover, as an element of
the costs of suit and not as damages, reasonable legal fees to be fixed by the
court (including, without limitation, costs, expenses and fees on any appeal).
The prevailing party will be entitled to recover its costs of suit, regardless
of whether such suit proceeds to final judgment.
12.9 Notices
All notices and other communications pursuant to this Agreement shall
be in writing and deemed to be sufficient if contained in a written instrument
and shall be deemed given if delivered personally, by facsimile, sent by
nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to MDL to:
MessagingDirect Ltd.
#900, 10117 Jasper Avenue
Edmonton, Alberta
T5J 1W8
Attention: Chief Executive Officer
Facsimile: (780) 424-4925
with a copy to:
Miller Thomson LLP
2700 Commerce Place
10155-102 Street
Edmonton, AB
T5J 4G8
Attention: Joseph Yurkovich
Facsimile: (780) 424-5866
with a copy to:
Miller Thomson LLP
20 Queen Street West, Suite 2400
Toronto, Ontario
M5H 3S1
Attention: Barbara Doherty
Facsimile: (416) 595-8695
If to any TSA Company:
Transaction Systems Architects, Inc.
224 South 108th Avenue
Suite 7
Omaha, Nebraska
68154
Attention: General Counsel and Secretary
Facsimile: (402) 390-8077
with a copy to:
Baker & McKenzie
181 Bay Street
Suite 2100
Toronto, Ontario
M5J 2T3
Attention: Kathleen M. Orysiuk
Facsimile: (416) 863-6275
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a facsimile, when the party receiving such copy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the Business Day following dispatch,
and (d) in the case of mailing, on the tenth Business Day following such
mailing.
12.10 No Personal Liability
(a) No director or officer of any MDL Company shall have, in such
capacity, any personal liability to any Person under this Agreement or
any other document delivered in connection with the Arrangement on
behalf of a MDL Company. For the sake of clarity, if a director or
officer of a MDL Company is also a MDL Securityholder, the foregoing
limitation shall not apply to such Person's liability as a MDL
Securityholder or under the Principal Securityholder Agreement.
(b) No director or officer of TSA or any Affiliate of TSA shall have, in
such capacity, any personal liability to any Person under this
Agreement or any other document delivered in connection with the
Arrangement on behalf of TSA or any Affiliate of TSA.
12.11 No Joint Venture
Nothing contained in this Agreement will be deemed or construed as
creating a joint venture or partnership between any of the parties. No party is
by virtue of this Agreement authorized as an agent, employee or legal
representative of any other party. No party will have the power to control the
activities and operations of any other and their status is, and at all times,
will continue to be, that of independent contractors with respect to each other.
No party will have any power or authority to bind or commit any other. No party
will hold itself out as having any authority or relationship in contravention of
this Section.
12.12 Further Assurances
Each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements and to give such
further written assurances as may be reasonably requested by any other party to
evidence and reflect the transactions described herein and contemplated hereby
and to carry into effect the intents and purposes of this Agreement.
12.13 Public Announcement
Upon execution of this Agreement, TSA and MDL promptly will issue a
joint press release approved by both parties announcing the Plan of Arrangement.
Thereafter, TSA or MDL may issue such press releases, and make such other
disclosures regarding the Plan of Arrangement, as each determines (after
consultation with legal counsel) are required under applicable Laws or by the
NASDAQ, provided that to the extent reasonably practicable each will provide
advance notice to the other of the form and content of any such disclosure and
opportunity to comment promptly thereon, and shall in any case promptly deliver
to the other a copy of such disclosure in the form released. Notwithstanding the
foregoing, before the earlier of the Effective Time and the termination of this
Agreement in accordance with its terms, MDL shall, prior to the issuance of any
disclosure regarding its financial results for any period, provide to TSA a copy
of such disclosure substantially in the form to be released.
12.14 Entire Agreement
This Agreement and the exhibits hereto and the Ancillary Agreements
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Mutual Non-Disclosure
Agreement referred to in Section 10.3 (Effect of Termination), which shall
remain in full force and effect. The express terms hereof control and supersede
any course of performance or usage of the trade inconsistent with any of the
terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Combination
Agreement as of the date first above written.
TRANSACTION SYSTEMS ARCHITECTS, INC.
By:______________________________________
Name:
Title:
TRANSACTION SYSTEMS ARCHITECTS
NOVA SCOTIA COMPANY
By:______________________________________
Name:
Title:
TSA EXCHANGECO LIMITED
By:______________________________________
Name:
Title:
MESSAGINGDIRECT LTD.
By:______________________________________
Name:
Title:
F:\jnh 2000\Project Mozart\Execution Copies\Combo Execution Copy1.doc
LIST OF EXHIBITS
Exhibit 2.1 - Plan of Arrangement
Exhibit 2.4 - Escrow Agreement
Exhibit 3.4 - MDL Balance Sheet
Exhibit 7.2(b)(i) - Support Agreement
Exhibit 7.2(b)(ii) - Voting and Exchange Trust Agreement
Exhibit 8.13 - Opinion of TSA's counsel
Exhibit 9.5 - Opinion of MDL's counsel
Exhibit 9.9(a) - Affiliate Letter
TABLE OF CONTENTS
ARTICLE I INTERPRETATION.......................................................2
1.1 Definitions...........................................................2
1.2 Interpretation not affected by headings, etc..........................9
1.3 Currency.............................................................10
1.4 Number, etc..........................................................10
1.5 Date for any action..................................................10
1.6 Accounting Matters...................................................10
1.7 Statutory References.................................................10
1.8 Knowledge............................................................10
ARTICLE II STRUCTURE OF THE TRANSACTION.......................................11
2.1 Court Approval.......................................................11
2.2 Arrangement..........................................................11
2.3 Dissenting Shares....................................................13
2.4 Escrow of Shares.....................................................13
2.5 Other Effects of the Arrangement.....................................13
2.6 Exchange of Call Rights for Put Rights...............................13
2.7 Adjustments to Exchange Ratio Prior to Effective Date................14
2.8 Total Number of Shares...............................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MDL.............................14
3.1 Organization, Good Standing, Qualification and Power.................14
3.2 Capital Structure....................................................15
3.3 Authority............................................................16
3.4 Financial Statements.................................................17
3.5 Absence of Undisclosed Liabilities...................................17
3.6 Receivables..........................................................17
3.7 Compliance with Applicable Laws......................................18
3.8 Litigation...........................................................18
3.9 Employees............................................................18
3.10 Employee Benefits.................................................21
3.11 Absence of Certain Changes or Events..............................23
3.12 Agreements........................................................26
3.13 No Defaults.......................................................27
3.14 Taxes.............................................................28
3.15 Intellectual Property.............................................29
3.16 Fees and Expenses.................................................31
3.17 Insurance.........................................................32
3.18 Ownership of Property.............................................32
3.19 Environmental Matters.............................................33
3.20 Interested Party Transactions.....................................33
3.21 Board Approval....................................................33
3.22 Vote Required.....................................................34
3.23 Disclosure........................................................34
3.24 Restrictions on Business Activities...............................34
3.25 Books and Records.................................................35
3.26 Customers.........................................................35
3.27 Competition Act...................................................35
3.28 Investment Canada Matters.........................................36
3.29 Fairness Opinions.................................................36
3.30 Sales of MDL Securities...........................................36
3.31 Governmental Authorizations and Licenses..........................36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE TSA COMPANIES................36
4.1 Organization, Good Standing, Qualification and Power.................36
4.2 Capital Structure....................................................37
4.3 Authority............................................................37
4.4 SEC Documents and Financial Statements...............................38
4.5 Compliance with Law..................................................39
4.6 Absence of Certain Changes or Events.................................39
4.7 Investment Canada Act................................................40
4.8 TSA Class A Common Shares............................................40
4.9 Intellectual Property................................................40
4.10 Restrictions on Business Activities...............................40
4.11 TSA Holdco and TSA Exchangeco.....................................40
4.12 No Dividends......................................................41
4.13 Disclosure........................................................41
ARTICLE V MDL COVENANTS.......................................................41
5.1 Advice of Changes....................................................41
5.2 Maintenance of Business..............................................42
5.3 Conduct of Business..................................................42
5.4 Shareholder Approval.................................................44
5.5 Regulatory Approvals.................................................44
5.6 Necessary Consents...................................................44
5.7 Access to Information................................................45
5.8 Satisfaction of Conditions Precedent.................................45
5.9 No Other Negotiations................................................45
5.10 Cooperation.......................................................47
5.11 Canadian Clearance Certificates...................................47
5.12 Insurance Policies................................................48
5.13 Employee Incentive Arrangements...................................48
ARTICLE VI TSA COVENANTS......................................................49
6.1 Advice of Changes....................................................49
6.2 Regulatory Approvals.................................................49
6.3 Necessary Consents...................................................49
6.4 Satisfaction of Conditions Precedent.................................49
6.5 Employee Incentive Arrangements......................................50
6.6 Issuance and Listing of TSA Class A Common Share.....................50
6.7 Registration Statement...............................................50
6.8 Non-Solicitation.....................................................50
6.9 Cooperation..........................................................50
6.10 Access to Information.............................................51
6.11 Continuing Ownership..............................................51
6.12 Preparation of Proxy Materials....................................52
6.13 Establishment of Escrow...........................................52
ARTICLE VII CLOSING MATTERS...................................................52
7.1 The Closing..........................................................52
7.2 Ancillary Agreements/Reservation of Shares...........................52
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF MDL.......................53
8.1 Accuracy of Representations and Warranties...........................53
8.2 Covenants............................................................53
8.3 Absence of Material Adverse Effect...................................53
8.4 Compliance with Law..................................................53
8.5 Shareholder Approval.................................................54
8.6 No Legal Action......................................................54
8.7 Governmental Approvals...............................................54
8.8 Exemption............................................................54
8.9 HSR Act..............................................................54
8.10 Tax Status........................................................54
8.11 Delivery of Agreements............................................55
8.12 Effectiveness of the Registration Statement.......................55
8.13 Opinion of TSA's Counsel..........................................55
8.14 Consents, Waivers, Etc............................................55
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TSA COMPANIES...........55
9.1 Accuracy of Representations and Warranties...........................56
9.2 Covenants............................................................56
9.3 Absence of Material Adverse Effect...................................56
9.4 Compliance with Law..................................................56
9.5 Opinion of MDL's Counsel.............................................56
9.6 Consents, Waivers, Etc...............................................56
9.7 MDL Approvals........................................................57
9.8 Plan of Arrangement..................................................57
9.9 Delivery of Agreements...............................................57
9.10 No Legal Action...................................................57
9.11 Termination of Certain Agreements.................................57
9.12 Governmental Approvals............................................57
9.13 HSR Act...........................................................58
9.14 Resignation of Directors and Officers.............................58
9.15 Dissenting Shareholders...........................................58
9.16 Exemption from Registration for Exchangeable Shares...............58
9.17 Effectiveness of the Registration Statement.......................58
ARTICLE X TERMINATION OF AGREEMENT............................................58
10.1 Termination.......................................................58
10.2 Notice of Termination.............................................60
10.3 Effect of Termination.............................................60
10.4 Effect of Termination on Distribution Agreement...................60
ARTICLE XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNITY...61
11.1 Survival of Representations and Warranties........................61
11.2 Survival of Certain Covenants.....................................61
11.3 Termination Fees and Expenses.....................................61
11.4 Indemnification of the Indemnitees................................62
ARTICLE XII MISCELLANEOUS.....................................................63
12.1 Governing Law.....................................................63
12.2 Assignment Binding Upon Successors and Assigns....................63
12.3 Severability......................................................63
12.4 Facsimile and Counterparts........................................63
12.5 Other Remedies....................................................63
12.6 Amendment and Waivers.............................................64
12.7 Expenses..........................................................64
12.8 Legal Fees........................................................64
12.9 Notices...........................................................64
12.10 No Personal Liability.............................................66
12.11 No Joint Venture..................................................66
12.12 Further Assurances................................................66
12.13 Public Announcement...............................................67
12.14 Entire Agreement..................................................67
16
PLAN OF ARRANGEMENT
UNDER SECTION 186
OF THE BUSINESS CORPORATIONS ACT (ALBERTA)
ARTICLE 1 INTERPRETATION
1.1 Definitions
In this Plan of Arrangement unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the respective
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:
"ABCA" means the Business Corporation Act (Alberta), S.A. 1981, c. B-15;
"Affiliate" has the meaning ascribed to that term in the ABCA;
"Arrangement" means the arrangement contemplated by this Plan of Arrangement;
"Additional Consideration" has the meaning ascribed thereto in Subsection
2.2(f);
"Articles of Arrangement" means the articles of arrangement of MDL in respect of
this Plan of Arrangement to be filed pursuant to Section 186 of the ABCA;
"Average Trading Price" means the simple average of the closing sale price of a
TSA Class A Common Share as reported by the National Association of Securities
Dealers on the NASDAQ for the thirty (30) consecutive trading days immediately
preceding two (2) trading days prior to the MDL Securityholders' Meeting;
"Business Day" means any day, other than a Saturday, a Sunday or a day which is
a statutory or civic holiday in the Province of Alberta or the State of
Nebraska;
"Canadian Dollar Equivalent" has the meaning ascribed to that term in the
Exchangeable Share Provisions;
"Canadian Resident" means a resident of Canada for the purposes of the ITA;
"Class A Shares" means one or more of the Class A common shares of MDL existing
prior to the Effective Time;
"Combination Agreement" means the combination agreement among TSA, TSA Holdco,
TSA Exchangeco and MDL;
"Compensation Warrants" means the warrants issued by MDL to Yorkton Securities
Inc.;
"Court" means the Court of Queen's Bench of Alberta;
"Depositary" means MDL;
"Dividend Amount" has the meaning attributed to that term in the Exchangeable
Share Provisions;
"Effective Date" means the date that the Articles of Arrangement are filed
pursuant to the ABCA;
"Effective Time" means 12:01 a.m. (Edmonton, Alberta time) on the Effective
Date;
"Election Deadline" means 5:00 p.m. (Edmonton, Alberta time) on the date which
is two (2) Business Days following the MDL Securityholders Meeting;
"Eligible Holder" means a holder of Class A Shares who is not a U.S. Resident;
"Equivalent Ratio Adjustment" has the meaning ascribed to that term in the
Exchangeable Share Provisions;
"Equivalent Stock Subdivision" has the meaning ascribed to that term in the
Exchangeable Share Provisions;
"Escrow Agent" means the person designated as such pursuant to the Escrow
Agreement;
"Escrow Agreement" means the agreement to be entered into on the Effective Date
among TSA, TSA Holdco, TSA Exchangeco, the Indemnifying Shareholders, the
Shareholder Agent (as such term is defined therein) and the Escrow Agent;
"Escrowed Shares" means 20% of the aggregate number of Exchangeable Shares and
TSA Class A Common Shares delivered by TSA Exchangeco on the Effective Date as
consideration for Class A Shares;
"Exchange Ratio" means 0.15528842, subject to adjustment, if any, as provided
herein;
"Exchangeable Elected Share" means any Class A Share (including Class A Shares
issued pursuant to Subsection 2.2(b) and other than Class A Shares held by
Dissenting Shareholders who are ultimately entitled to be paid the fair value of
the Class A Shares held by them), that the Eligible Holder thereof shall have
elected, in a duly completed Letter of Transmittal and Election Form deposited
with the Depositary no later than the Election Deadline, to transfer to TSA
Exchangeco in exchange for a fraction of an Exchangeable Share based on the
Exchange Ratio;
"Exchangeable Elected Share Consideration" means a certificate representing that
number (rounded down to the nearest whole number pursuant to Section 4.4 (No
Fractional Shares)) of Exchangeable Shares which such holder has the right to
receive together with any dividends or distributions with respect thereto
pursuant to Section 4.3 (Distributions with respect to Unsurrendered
Certificates) less any amounts withheld pursuant to Section 4.7 (Withholding
Rights);
"Exchangeable Shares" means the exchangeable shares in the capital of TSA
Exchangeco which upon the filing of the Articles of Arrangement, shall have the
attributes set forth in the Exchangeable Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges, restrictions and
conditions attaching to the Exchangeable Shares, which are set forth in Appendix
B annexed hereto;
"Exchangeable Share Voting Event" has the meaning attributed to that term in
the Exchangeable Share Provisions;
"Exempt Exchangeable Share Voting Event" has the meaning attributed to that term
in the Exchangeable Share Provisions;
"Excess Transaction Fees" has the meaning ascribed to that term in Section 7.1;
"Final Order" means the final order of the Court approving the Arrangement, as
such order may be amended by the Court at any time and from time to time prior
to the Effective Time or if appealed, then unless such appeal is withdrawn or
denied, as affirmed;
"Fractional Share Amount" has the meaning ascribed to that term in the
Exchangeable Share Provisions;
"Indemnifying Shareholders" means all MDL Securityholders who receive either
Exchangeable Shares or TSA Class A Common Shares under this Plan of Arrangement
at the Effective Time;
"Indemnitee" has the meaning ascribed to that term in Section 7.1;
"Interim Order" means the interim order of the Court in relation to the
Arrangement, as such order may be amended by the Court at any time and from time
to time;
"ITA" means the Income Tax Act (Canada) R.S.C. 1985, c.1 (5th Supp.);
"Law" means any federal, state, provincial, territorial, municipal or other law,
statute, regulation, code, recommendation, notice, judgment, treaty, directive,
ordinance, writ, injunction, decree, by-law, order, restriction, official plan
or stated policy, whether domestic or foreign; and "Laws" means all of the
foregoing;
"Letter of Transmittal and Election Form" means the letter of transmittal and
election form for use by holders of Class A Shares, in the form to be included
with the Proxy Materials;
"Liquidation Amount" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Liquidation Call Purchase Price" has the meaning ascribed thereto in Section
5.1;
"Liquidation Call Right" has the meaning ascribed thereto in Section 5.1;
"Liquidation Date" has the meaning ascribed thereto in the Exchangeable Share
Provisions;
"Loss" means any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, deficiencies, costs and expenses
(including without limitation, all legal and other professional fees and
disbursements), interest, penalties, costs of investigation and defence and
amounts paid in settlement arising directly or indirectly as a consequence of
such matter;
"MDL" means MessagingDirect Ltd., an Alberta corporation;
"MDL Options" means the options issued by MDL under MDL's Stock Option Plan;
"MDL Securities" means, collectively, the Class A Shares, the MDL Options, the
Compensation Warrants and the Stonebridge Options;
"MDL Securityholder" means a holder of a MDL Security;
"MDL Securityholders Meeting" means the meeting of all of the MDL
Securityholders (or such MDL Securityholders as directed by the Court) called
for the purpose of considering and approving the Arrangement under Section 186
of the ABCA;
"MDL Shareholder" means a holder of a Class A Share;
"NASDAQ" means the Nasdaq National Market or any successor systems;
"NSCA" means the Companies Act (Nova Scotia), R.S.N.S. 1989, C.81;
"Person" includes any individual, firm, partnership, limited partnership, joint
venture, syndicate, sole proprietorship, company or corporation with or without
share capital, limited liability corporation, unlimited liability company,
unincorporated association, trust, trustee, executor, administrator or other
legal personal representative, regulatory body or agency, government or
government agency, authority or entity however designated or constituted;
"Preferred Shares" means the preferred shares in the capital of TSA Exchangeco
which TSA Exchangeco has created as an additional class of authorized stock,
having the attributes set forth in Appendix C hereto;
"Proxy Materials" means any material to be mailed to the MDL Securityholders in
connection with the approval and adoption by the MDL Securityholders of this
Plan of Arrangement (including the Articles of Arrangement giving effect
thereto) and related matters;
"Redemption Call Purchase Price" has the meaning ascribed thereto in Section
5.2;
"Redemption Call Right" has the meaning ascribed thereto in Section 5.2;
"Redemption Date" has the meaning ascribed thereto in the Exchangeable Share
Provisions;
"Replacement TSA Option" has the meaning ascribed thereto in Subsection 2.2(g);
"Retraction Call Right" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Special Voting Share" has the meaning ascribed thereto in the Voting and
Exchange Trust Agreement;
"Stonebridge Options" means the options issued by MDL to Stonebridge Merchant
Capital Corp.;
"Tax" or "Taxes" means all income, capital, payroll, sales and use, value added,
goods and services, documentary, stamp, transfer and real property taxes and
customs and excise duties, whether foreign, federal, provincial, state or
municipal (including tax withholdings, employer health taxes, workers'
compensation assessments, penalties and surcharges, Canada and Quebec Pension
Plans and employment insurance premiums, contributions and remittances) and
including any interest, penalties or surcharges attributable thereto;
"Tax Election Deadline" means 5:00 p.m. (Edmonton, Alberta time) on the date
which is ninety (90) days following the Effective Date;
"Taxing Authority" means Canada Customs and Revenue Agency, the United States
Internal Revenue Service or any other taxing authority, including, without
limitation, any value added tax or sales tax authority;
"Transfer Agent" means TSA Exchangeco or any duly appointed transfer agent for
the time being of the Exchangeable Shares and if there is more than one such
agent, then the principal Canadian agent;
"Trustee" means Wells Fargo Bank Minnesota, National Association;
"TSA" means Transaction Systems Architects, Inc., a Delaware corporation;
"TSA Class A Common Shares" means the voting shares of TSA, par value $0.005 per
share, having voting rights of one vote per share, and any other securities into
which such shares may be changed;
"TSA Control Transaction" has the meaning attributed to that term in the
Exchangeable Share Provisions;
"TSA Elected Share" means any Class A Share (including Class A Shares issued
pursuant to Subsection 2.2(b) and other than Class A Shares held by Dissenting
Shareholders who are ultimately entitled to be paid the fair value of the Class
A Shares held by them), that the holder thereof, shall have elected, in a duly
completed Letter of Transmittal and Election Form deposited with the Depositary
no later than the Election Deadline, to transfer to TSA Exchangeco in exchange
for a fraction of a TSA Class A Common Share, based on the Exchange Ratio, or
that is deemed to be a TSA Elected Share pursuant to Subsection 2.2(c) or
Subsection 2.3(a);
"TSA Elected Share Consideration" means a certificate representing that number
(rounded down to the nearest whole number pursuant to Section 4.4 (No Fractional
Shares)) of TSA Class A Common Shares which such holder has the right to receive
together with any dividends or distributions with respect thereto pursuant to
Section 4.3 (Distributions with respect to Unsurrendered Certificates) less any
amounts withheld pursuant to Section 4.7 (Withholding Rights);
"TSA Exchangeco" means TSA Exchangeco Limited, a Nova Scotia limited company;
"TSA Holdco" means Transaction Systems Architects Nova Scotia Company, a Nova
Scotia unlimited company;
"TSA Spin-Out Decision Date" has the meaning attributed to that term in the
Exchangeable Share Provisions;
"U.S. Resident" means a resident of the United States for purposes of the
United States Internal Revenue Code of 1986; and
"Voting and Exchange Trust Agreement" has the meaning attributed to that term in
the Exchangeable Share Provisions.
1.2 Interpretation not affected by headings, etc.
The division of this Plan of Arrangement into Articles, Sections and other
portions and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
and/or a letter refer to the specified Article or Section of this Plan of
Arrangement or Appendix thereto as specified. The terms "this Plan of
Arrangement", "hereof", "herein" and "hereunder" and similar expressions refer
to this Plan of Arrangement (including the Schedules and Appendixes hereto) and
not to any particular Article, Section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto. Any capitalized terms
not otherwise defined herein shall bear the meanings attributed to such terms in
the Combination Agreement.
1.3 Currency
Unless otherwise specifically indicated, all sums of money referred to in this
Plan of Arrangement are expressed in lawful money of the United States of
America.
1.4 Governing Law
The parties agree that this Plan of Arrangement shall be governed and construed
in accordance with the substantive laws of the Province of Alberta and the laws
of Canada applicable therein. The parties do hereby submit and attorn to the
jurisdiction of the Courts of the Province of Alberta in any action or
proceeding which may be commenced with respect to the enforcement of this Plan
of Arrangement.
1.5 Number, etc.
Unless the context otherwise requires, words importing the singular shall
include the plural and vice versa and words importing any gender shall include
all genders.
1.6 Date for any action
In the event that any date on which any action is required to be taken hereunder
by any of the parties hereto is not a Business Day, such action shall be
required to be taken on the next succeeding day which is a Business Day.
1.7 Statutory References
Any reference in this Plan of Arrangement to a statute includes such statute as
amended, consolidated or re-enacted from time to time, all rules and regulations
made thereunder, all amendments to such rules and regulations from time to time,
and any statute, rule or regulation which supersedes such statute, rule or
regulations.
ARTICLE 2 ARRANGEMENT
2.1 Binding Effect
This Plan of Arrangement will become effective at, and be binding at and after,
the Effective Time on:
(a) MDL;
(b) TSA;
(c) TSA Holdco;
(d) TSA Exchangeco;
(e) All holders and beneficial holders of Class A Shares;
(f) All holders of MDL Options, Stonebridge Options and Compensation Warrants;
(g) All holders and beneficial holders of Exchangeable Shares; and
(h) All holders and beneficial holders of TSA Class A Common Shares issued
at Closing in exchange for Class A Shares or issued in exchange for
Exchangeable Shares from time to time.
2.2 Arrangement
At the Effective Time, the following transactions will occur and will be deemed
to occur in the following order without any further act (including any action on
the part of the holders thereof) or formality:
(a) The MDL Stock Option Plan will be amended as set out in Appendix A to
permit acceleration of vesting of the MDL Options and adoption of the MDL
Stock Option Plan by TSA;
(b) Each Stonebridge Option and Compensation Warrant will be converted into and
exchanged for the number of fully-paid and non-assessable Class A Shares
equal to (i) the number of Class A Shares purchasable on the Effective Date
pursuant to such Stonebridge Option or Compensation Warrant, as applicable,
less (ii) the quotient derived by dividing (A) the aggregate exercise price
for the Class A Shares purchasable under such Stonebridge Option or
Compensation Warrant, by (B) the product derived by multiplying (I) the
Exchange Ratio by (II) the Average Trading Price. The holders of
Stonebridge Options and Compensation Warrants may deliver their notices of
exercise in lieu of a certificate for Class A Shares for the purposes of
Sections 4.1 and 4.2. For purposes of this calculation, all dollar amounts
will be calculated using Canadian dollars or the Canadian Dollar
Equivalent;
(c) Each Class A Share in respect of which a duly completed Letter of
Transmittal and Election Form has not been deposited with the Depositary on
or prior to the Election Deadline (other than Class A Shares held by
Dissenting Shareholders who are ultimately entitled to be paid the fair
value of the Class A Shares held by them) will be deemed to be a TSA
Elected Share;
(d) Each TSA Elected Share will, pursuant to the terms hereof, be transferred
to TSA Exchangeco in exchange for a number of fully paid and non-assessable
TSA Class A Common Shares based on the Exchange Ratio. The name of each
such holder will be removed from the register of Class A Shares and added
to the register of TSA Class A Common Shares. TSA Exchangeco will be
recorded as the registered holder of such Class A Shares so exchanged and
will be deemed to be the legal and beneficial owner thereof. If the
calculation of the number of TSA Class A Common Shares based on the
Exchange Ratio results in an entitlement to a fractional interest in a TSA
Class A Common Share, such entitlement shall be dealt with as set forth in
Section 4.4 (No Fractional Shares) hereto;
(e) Each Exchangeable Elected Share will, pursuant to the terms hereof, be
transferred to TSA Exchangeco in exchange for a number of fully paid and
non-assessable Exchangeable Shares based on the Exchange Ratio. The name of
each such holder will be removed from the register of Class A Shares and
added to the register of Exchangeable Shares. TSA Exchangeco will be
recorded as the registered holder of such Class A Shares so exchanged and
will be deemed to be the legal and beneficial owner thereof. If the
calculation of the number of Exchangeable Shares based on the Exchange
Ratio results in an entitlement to a fractional interest in an Exchangeable
Share, such entitlement shall be dealt with as set forth in Section 4.4 (No
Fractional Shares) hereto;
(f) Each holder of a TSA Elected Share will receive additional TSA Class A
Common Shares from TSA Exchangeco ("Additional Consideration"). The amount
of the Additional Consideration payable to each holder of a TSA Elected
Share will equal the product derived by multiplying (i) 200,000, by (ii)
the quotient derived by dividing the number of TSA Elected Shares held by
such holder by the aggregate number of TSA Elected Shares. In lieu of
fractional TSA Class A Common Shares, each holder of a TSA Elected Share
who otherwise would be entitled to receive a fraction of a TSA Class A
Common Share will be paid by TSA Exchangeco an amount determined as set
forth in Section 4.4 (No Fractional Shares) hereto;
(g) Each of the MDL Options will be converted into an option to purchase
("Replacement TSA Option") that number of TSA Class A Common Shares equal
to (i) the product of the number of MDL Class A Shares subject to such MDL
Option at the Effective Time multiplied by the Exchange Ratio, less (ii)
the quotient derived by dividing (A) the aggregate exercise price for the
MDL Class A Shares subject to such MDL Option by (B) the Average Trading
Price. The exercise price per share of TSA Class A Common Shares subject to
such Replacement TSA Option will equal $0.01 per share. If the foregoing
calculation results in an exchanged MDL Option being exercisable for a
fraction of a TSA Class A Common Share, then the number of TSA Class A
Common Shares subject to such option will be rounded down to the nearest
whole number of shares. The obligations of MDL under the MDL Options as so
converted will be assumed by TSA. For purposes of this calculation, all
dollar amounts will be calculated using Canadian dollars or the Canadian
Dollar Equivalent;
(h) In consideration of the grant of the Liquidation Call Rights, Redemption
Call Rights and Retraction Call Rights, TSA will issue to and deposit with
the Trustee the Special Voting Share to be thereafter held of record by the
Trustee as trustee for and on behalf of, and for the use and benefit of,
the holders of the Exchangeable Shares in accordance with the Voting and
Exchange Trust Agreement; and
(i) All of the Escrowed Shares will be deposited with the Escrow Agent under
the Escrow Agreement.
2.3 Elections
(a) Each Person who, at or prior to the Election Deadline, is a holder of
record of Class A Shares, will be entitled, with respect to all or a
portion of such shares, to make an election at or prior to the Election
Deadline to receive Exchangeable Shares or TSA Class A Common Shares in
exchange for such holder's Class A Shares on the basis set forth herein and
in the Letter of Transmittal and Election Form; provided that,
notwithstanding anything to the contrary herein, a holder of Class A Shares
who is not an Eligible Holder will not be entitled to elect to receive
Exchangeable Shares and any such election otherwise made by any such holder
will be deemed to be an election to receive a TSA Class A Common Share.
(b) Each holder of Stonebridge Options or Compensation Warrants will be
entitled, with respect to all or a part of such Stonebridge Options or
Compensation Warrants, to make an election at or prior to the Election
Deadline to receive Exchangeable Shares or TSA Class A Common Shares in
exchange of such holder's Stonebridge Options or Compensation Warrants on
the basis set forth herein and in the Letter of Transmittal and Election
Form; provided that, notwithstanding anything to the contrary herein, a
holder of Stonebridge Options or Compensation Warrants who is a U.S.
Resident will not be entitled to elect to receive Exchangeable Shares and
any such election otherwise made by any such holder will be and be deemed
to be an election to receive a TSA Class A Common Share.
(c) Eligible Holders who have elected to receive Exchangeable Shares from TSA
Exchangeco in exchange for their Class A Shares pursuant to Subsections (a)
and (b) above, will be entitled to make a joint income tax election with
TSA Exchangeco pursuant to Section 85 of the ITA (and the analogous
provisions of provincial income tax law) with respect to the transfer of
such Class A Shares to TSA Exchangeco by providing a duly completed Tax
election form together with any required supporting schedules, signed and
forwarded by the Eligible Holders to MDL on or before the Tax Election
Deadline, all as provided for in the Proxy Materials. Thereafter, subject
to the election forms and other documents complying with the provisions of
the ITA (or applicable provincial income tax law), the forms will be signed
by TSA Exchangeco and forwarded by mail to the appropriate Taxing
Authority, with a copy thereof to the Eligible Holder all as provided for
in the Proxy Materials.
2.4 Adjustments to Exchange Ratio Prior to Effective Date
If, after the Exchange Ratio has been set but prior to the Effective
Time, TSA recapitalizes its outstanding capital stock through a
subdivision of its outstanding shares into a greater number of shares,
or a combination of its outstanding shares into a lesser number of
shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of
other classes, or declares a dividend on its outstanding shares payable
in shares of its capital stock or securities convertible into shares of
its capital stock, or completes a rights offering for TSA Class A
Common Shares solely to its existing shareholders at a price less than
market price, or grants a material option solely to existing
shareholders to acquire any TSA Class A Common Shares at a price less
than market price and the record date for any such action is prior to
the Effective Time, then the Exchange Ratio will be adjusted
proportionately.
ARTICLE 3 RIGHTS OF DISSENT
3.1 Rights of Dissent
(a) MDL Shareholders may exercise rights of dissent with respect to their Class
A Shares pursuant to and in the manner set forth in Section 184 of the ABCA
(as modified by the Interim Order) and this Section 3.1 in connection with
the Arrangement provided that, notwithstanding Subsection 184(5) of the
ABCA, the written objection to the Arrangement resolution referred to in
Subsection 184(5) of the ABCA must be received by MDL not later than 5:00
p.m. (Edmonton, Alberta time) on the Business Day preceding the MDL
Securityholders' Meeting and MDL Shareholders who duly exercise such rights
of dissent and who:
(i) Are ultimately entitled to be paid fair value for their Class A Shares
shall be deemed to have transferred such Class A Shares to MDL for
cancellation on the Effective Date; or
(ii) Are ultimately not entitled, for any reason, to be paid the fair value
for their Class A Shares, shall be deemed to have participated in the
Arrangement on the same basis as any non-dissenting MDL Shareholder.
In either case, MDL, TSA Exchangeco, TSA Holdings or TSA shall not be
required to recognize such holders as MDL Shareholders on and after
the Effective Date, and the names of such persons shall be deleted
from the register of MDL Shareholders on the Effective Date.
(b) In connection with payment to an MDL Shareholder of fair value for such MDL
Shareholder's Class A Shares upon exercise of such MDL Shareholders'
dissent rights, MDL shall be entitled to deduct and withhold from any
consideration otherwise payable to any such holder such amounts as MDL is
required or permitted to deduct and withhold with respect to such payment
under the ITA or any other provision of applicable Tax Law; provided that
such withheld amount shall not be remitted prior to two (2) Business Days
prior to the date such amount is required by Law to be remitted (the
"Remittance Date") and where certificates issued pursuant to Subsections
116(2) or 116(4) of the ITA are delivered prior to such Remittance Date,
such withheld amount shall be released to such holder except to the extent
that amounts were not withheld or deducted pursuant to another provision of
applicable Tax Law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes hereof as having been
paid to the holder of the Class A Shares in respect of which such deduction
and withholding was made, provided that such withheld amounts are actually
remitted to the appropriate Taxing Authority and a receipt evidencing such
remittance is delivered to such holder.
ARTICLE 4 CERTIFICATES AND FRACTIONAL SHARES
4.1 Exchange of Certificates for TSA Class A Common Shares
At or promptly after the Effective Time, TSA Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Class A Shares transferred
pursuant to Subsection 2.2(d), certificates representing that whole number of
TSA Class A Common Shares to be delivered pursuant to Subsection 2.2(d). Upon
surrender to the Depositary of a certificate which immediately prior to the
Effective Time represented outstanding Class A Shares that were transferred to
TSA Exchangeco in exchange for TSA Class A Common Shares, together with such
other documents and instruments as would have been required to effect a transfer
of the shares formerly represented by such certificate under the ABCA and the
by-laws of MDL and such additional documents and instruments as the Depositary
may reasonably require (including a declaration of residency for the purposes of
income Tax), the holder of such surrendered certificate shall be entitled to
receive from TSA Exchangeco in exchange therefor, and the Depositary shall
deliver (a) to the Escrow Agent, twenty percent (20%) of the TSA Class A Common
Shares issuable to such holder at the Effective Time, to be held and distributed
in accordance with the terms of the Escrow Agreement and (b) to such holder, the
balance of the TSA Elected Share Consideration and Additional Consideration. In
the event of a transfer of ownership of Class A Shares that is not registered in
the transfer records of MDL, a certificate representing the proper number of TSA
Class A Common Shares may be issued to the transferee if the certificate
representing such Class A Shares is presented to the Depositary, accompanied by
all documents required to evidence and effect such transfer. Until surrendered
as contemplated by this Section 4.1, each certificate which immediately prior to
the Effective Time represented outstanding Class A Shares that were transferred
to TSA Exchangeco in exchange for TSA Class A Common Shares shall be deemed at
any time after the Effective Time, subject to Section 4.6 (Extinguishment of
Rights), to represent only the right to receive upon such surrender the TSA
Elected Share Consideration.
4.2 Issuance of Certificates Representing Exchangeable Shares
At or promptly after the Effective Time, TSA Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Class A Shares transferred to TSA
Exchangeco pursuant to Subsection 2.2(e), certificates representing the whole
number of Exchangeable Shares issued pursuant to Subsection 2.2(e). Upon
surrender to the Depositary of a certificate which immediately prior to the
Effective Time represented outstanding Class A Shares that were transferred to
TSA Exchangeco in exchange for Exchangeable Shares, together with such other
documents and instruments as would have been required to effect a transfer of
the shares formerly represented by such certificate under the ABCA and the
by-laws of MDL and such additional documents and instruments as the Depositary
may reasonably require (including a declaration of residency for the purposes of
income Tax), the holder of such surrendered certificate shall be entitled to
receive from TSA Exchangeco in exchange therefor, and the Depositary shall
deliver (a) to the Escrow Agent, twenty percent (20%) of the Exchangeable Shares
issuable to such holder at the Effective Time, to be held and distributed in
accordance with the terms of the Escrow Agreement and (b) to such holder, the
balance of the Exchangeable Elected Share Consideration. In the event of a
transfer of ownership of Class A Shares that is not registered in the transfer
records of MDL, a certificate representing the proper number of Exchangeable
Shares may be issued to the transferee if the certificate representing such
Class A Shares is presented to the Depositary, accompanied by all documents
required to evidence and effect such transfer. Until surrendered as contemplated
by this Section 4.2, each certificate which immediately prior to the Effective
Time represented outstanding Class A Shares that were transferred to TSA
Exchangeco in exchange for Exchangeable Shares shall be deemed at any time after
the Effective Time, subject to Section 4.6 (Extinguishment of Rights), to
represent only the right to receive upon such surrender the Exchangeable Elected
Share Consideration.
4.3 Distributions With Respect to Unsurrendered Certificates
No dividends or other distributions declared or made after the Effective Time
with respect to Exchangeable Shares or TSA Class A Common Shares with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
certificate which, immediately prior to the Effective Time, represented
outstanding Class A Shares that were exchanged pursuant to Subsection 2.2(d) or
2.2(e), and no interest will be earned or payable on these proceeds unless and
until such certificate shall be surrendered in accordance with Section 4.1 or
4.2. Subject to applicable Law and to Section 4.6 (Extinguishment of Rights), at
the time of such surrender of any such certificate (or, in the case of clause
(iii) below, at the appropriate payment date), there shall be paid to the record
holder of the certificates representing whole Exchangeable Shares or TSA Class A
Common Shares, as the case may be, without interest, (i) the amount of any
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Exchangeable Shares or TSA Class A
Common Shares, as the case may be, and (ii) the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
Exchangeable Shares or TSA Class A Common Shares, as the case may be.
4.4 No Fractional Shares
No certificates representing fractional Exchangeable Shares or TSA Class A
Common Shares, as the case may be, shall be issued pursuant to Section 4.1 or
4.2 and no dividend, stock split or other change in the capital structure of TSA
Exchangeco shall relate to any such fractional security and such fractional
interests shall not entitle the owner thereof to vote or to exercise any rights
as a security holder of MDL, TSA Exchangeco or TSA, as the case may be. In the
event that the calculation of a person's entitlement to Exchangeable Shares or
TSA Class A Common Shares pursuant to Subsection 2.2(d), 2.2(e) or 2.2(f)
results in an entitlement to a fractional interest in an Exchangeable Share or
TSA Class A Common Shares, as the case may be, then the number of Exchangeable
Shares or TSA Class A Common Shares to which such person is entitled will be
rounded down to the nearest whole number of Exchangeable Shares or TSA Class A
Common Shares, as the case may be.
4.5 Lost Certificates
If any certificate which immediately prior to the Effective Time represented
outstanding Class A Shares that were exchanged pursuant to Subsection 2.2(d) or
2.2(e) has been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such certificate to be lost, stolen or
destroyed, the Depositary will issue in exchange for such lost, stolen or
destroyed certificate, the Exchangeable Elected Share Consideration or TSA
Elected Share Consideration deliverable in accordance with such holder's Letter
of Transmittal and Election Form. When authorizing such payment in exchange for
any lost, stolen or destroyed certificate, the Person to whom certificates are
to be issued shall, as a condition precedent to the issuance thereof, give a
bond satisfactory to TSA Exchangeco or TSA and their respective transfer agents,
as the case may be, in such sum as TSA Exchangeco or TSA may direct, or
otherwise indemnify TSA Exchangeco or TSA and their respective transfer agents
against any claim that may be made against MDL, TSA Exchangeco or TSA or their
respective transfer agents with respect to the certificate alleged to have been
lost, stolen or destroyed.
4.6 Extinguishment of Rights
(a) Any certificate which immediately prior to the Effective Time represented
outstanding Class A Shares that were exchanged pursuant to Subsection
2.2(d) and has not been deposited, with all other instruments required by
Section 4.1 (Exchange of Certificates for TSA Class A Common Shares), on or
prior to the sixth anniversary of the Effective Date shall cease to
represent a claim or interest of any kind or nature as a MDL
Securityholder. On such date, the TSA Class A Common Shares to which the
former registered holder of the certificate referred to in the preceding
sentence was ultimately entitled shall be deemed to have been surrendered
to TSA Exchangeco together with all entitlements to dividends,
distributions and interests thereon held for such former registered holder
for no consideration.
(b) Any certificate which immediately prior to the Effective Time represented
outstanding Class A Shares that were exchanged pursuant to Subsection
2.2(e) and has not been deposited, with all other instruments required by
Section 4.2 (Issuance of Certificates Representing Exchangeable Shares), on
or prior to the earlier of: (i) the first anniversary of the Redemption
Date or Liquidation Date or (ii) the sixth anniversary of the Effective
Date, shall cease to represent a claim or interest of any kind or nature as
a MDL Securityholder. On such date, the Exchangeable Shares to which the
former registered holder of the certificate referred to in the preceding
sentence was ultimately entitled shall be deemed to have been surrendered
to TSA Exchangeco together with all entitlements to dividends,
distributions and interests thereon held for such former registered holder
for no consideration.
In either case, none of TSA, TSA Holdco, TSA Exchangeco, MDL and the Depositary
shall be liable to any person in respect of any TSA Class A Common Shares or
Exchangeable Shares (or dividends, distributions and interest in respect
thereof) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law.
4.7 Withholding Rights
Each Person who holds, or has a right to hold, a MDL Security at or immediately
prior to the Effective Date, shall deliver to MDL or its designee, at or before
the Effective Date:
(a) a certificate confirming that such MDL Securityholder is a Canadian
Resident; or
(b) in the case of a MDL Securityholder who is not a Canadian Resident, a
certificate satisfactory to TSA Exchangeco acting reasonably, issued
pursuant to Subsection 116(2) of the ITA, with respect to the MDL Security
exchanged or disposed of, having as the "certificate limit", as defined in
Subsection 116(2) of the ITA, an amount no less than the cost of the MDL
Security (which may be equal to the fair market value of the Exchangeable
Shares or TSA Class A Common Shares, as the case may be, and any cash
receivable by such MDL Securityholder) to TSA Exchangeco.
In the case of a holder of a MDL Security who is a partnership, the holder shall
also provide a certificate confirming the name and address of each member
thereof and the percentage of partnership interest held by each member.
In the event that a holder of a MDL Security fails to deliver one of the
requisite certificates described above at or before the exchange or disposition
of such MDL Security, TSA Exchangeco shall be entitled to deduct and withhold
from any consideration otherwise payable to any such holder such amounts as TSA
Exchangeco is required to deduct and withhold with respect to such payment under
the ITA or any other provision of applicable Tax Law; provided that such
withheld amount shall not be remitted prior to two (2) Business Days prior to
the date such amount is required by Law to be remitted (the "Remittance Date")
and where such certificate, or a certificate issued pursuant to Subsection
116(4) satisfactory to TSA Exchangeco, acting reasonably, is delivered prior to
such Remittance Date, such withheld amount shall be released to such holder
except to the extent that amounts were withheld or deducted pursuant to another
provision of applicable Tax Law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes hereof as having been
paid to such holder of the MDL Security in respect of which such deduction and
withholding was made provided that such withheld amounts are actually remitted
to the appropriate Taxing Authority and a receipt evidencing such remittance is
delivered to such holder. To the extent that the amount so required to be
deducted or withheld from any payment to a holder exceeds the cash portion of
the consideration otherwise payable to such holder, TSA Exchangeco, as agent for
such holder, is hereby authorized to sell or otherwise dispose of such portion
of the consideration as is necessary to provide sufficient funds to TSA
Exchangeco to enable it to comply with such deduction or withholding requirement
and TSA Exchangeco shall notify such holder thereof and remit any unapplied
balance of the net proceeds of such sale. If the proceeds of such sale are
insufficient to fund the required withholding, such holder shall forthwith pay
the deficiency to TSA Exchangeco or remit same to the applicable Taxing
Authority. Such holder shall bear all reasonable costs and expenses associated
with any sale by TSA Exchangeco pursuant to the two immediately preceding
sentences.
With the necessary changes, the requirements in this Section 4.7 shall apply
upon the conversion and exchange of any Stonebridge Options or Compensation
Warrants for Class A Shares, upon the exchange of Class A Shares for TSA Class A
Common Shares, upon the exchange of Class A Shares for Exchangeable Shares and,
with delivery to TSA Exchangeco or its designee, upon the exchange of
Exchangeable Shares for TSA Class A Common Shares.
4.8 Stamp or other Transfer Taxes
Pursuant to the terms of Section 5.8 of the Voting and Exchange Trust Agreement,
a holder of Exchangeable Shares or TSA Class A Common Shares, as the case may
be, shall also be required to pay any documentary, stamp, transfer or other
similar Taxes that may be payable in respect of any transfer involved in the
issuance or delivery of the TSA Class A Common Shares to a Person other than
such holder.
ARTICLE 5 CERTAIN RIGHTS OF TSA TO ACQUIRE EXCHANGEABLE SHARES
5.1 TSA Liquidation Call Right
(a) TSA shall have the overriding right (the "Liquidation Call Right"), in the
event of and notwithstanding the proposed liquidation, dissolution or
winding-up of TSA Exchangeco or any other distribution of the assets of TSA
Exchangeco for the purposes of winding-up its affairs pursuant to Article 5
of the Exchangeable Share Provisions, to purchase from all but not less
than all of the holders of Exchangeable Shares (other than TSA and its
Affiliates) on the Liquidation Date all but not less than all of the
Exchangeable Shares held by each such holder on payment by TSA of an amount
per share equal to: (i) the Current Market Price (as defined in the
Exchangeable Share Provisions) of one TSA Class A Common Share on the last
Business Day prior to the Liquidation Date, which shall be satisfied in
full by TSA delivering or causing to be delivered to such holder one TSA
Class A Common Share (subject to any Equivalent Ratio Adjustment), plus
(ii) the Dividend Amount; plus (iii) the Fractional Share Amount
(collectively the "Liquidation Call Purchase Price") without interest. In
the event of the exercise of the Liquidation Call Right by TSA, each holder
shall be obligated to sell all of the Exchangeable Shares held by the
holder to TSA on the Liquidation Date on payment by TSA to the holder of
the Liquidation Call Purchase Price for each such share;
(b) To exercise the Liquidation Call Right, TSA must notify the Transfer Agent
in writing, as agent for the holders of Exchangeable Shares, and TSA
Exchangeco of TSA's intention to exercise such right at least thirty (30)
Business Days before the Liquidation Date in the case of a voluntary
liquidation, dissolution or winding up of TSA Exchangeco and at least five
(5) Business Days before the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding up of TSA Exchangeco. TSA will notify
the Transfer Agent accordingly if it does not intend to exercise the
Liquidation Call Right. The Transfer Agent will notify the holders of
Exchangeable Shares as to whether or not TSA has exercised the Liquidation
Call Right forthwith after the expiry of the date by which the same may be
exercised by TSA. If TSA exercises the Liquidation Call Right, on the
Liquidation Date, TSA will purchase and the holders will sell all of the
Exchangeable Shares then outstanding for a price per share equal to the
Liquidation Call Purchase Price;
(c) Prior to the Liquidation Date, each holder of Exchangeable Shares
shall deliver to TSA:
(i) a certificate confirming that such holder is a Canadian Resident; or
(ii) in the case of a holder who is not a Canadian Resident, a certificate
satisfactory to TSA acting reasonably, issued pursuant to Subsection
116(2) of the ITA, with respect to the Exchangeable Shares exchanged
or disposed of, having as the "certificate limit", as defined in
Subsection 116(2) of the ITA, an amount no less than the cost of the
Exchangeable Shares (which may be equal to the fair market value of
the TSA Class A Common Shares and any cash receivable by such holder
of Exchangeable Shares) to TSA or TSA Holdco, as the case may be.
In the case of a holder who is a partnership, the holder shall also provide
a certificate confirming the name and address of each member thereof and
the percentage of partnership interest held by each member.
In the event that a holder fails to deliver one of the requisite
certificates described above at or before the Liquidation Date or, if TSA
is required to deduct or withhold any amount pursuant to any other
provision of applicable Tax Law, TSA shall be entitled to deduct and
withhold from any consideration otherwise payable to any such holder such
amounts and by such means as set out in Section 4.7 (Withholding Rights)
above;
(d) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, TSA shall deposit with the
Transfer Agent, on or before the Liquidation Date, certificates
representing the aggregate number of TSA Class A Common Shares
deliverable by TSA in partial satisfaction of the total Liquidation
Call Purchase Price and a cheque or cheques in the amount of the
remaining portion, if any, of the total Liquidation Call Purchase
Price without interest. Provided that the total Liquidation Call
Purchase Price has been so deposited with the Transfer Agent (or
withheld pursuant to paragraph (c) and Section 4.7 above), on and
after the Liquidation Date the rights of each holder of Exchangeable
Shares will be limited to receiving such holder's proportionate part
of the total Liquidation Call Purchase Price payable by TSA without
interest upon presentation and surrender by the holder of certificates
representing the Exchangeable Shares held by such holder. The holder
shall on and after the Liquidation Date be considered and deemed for
all purposes to be the holder of the TSA Class A Common Shares
delivered to it. Upon surrender to the Transfer Agent of a certificate
or certificates representing Exchangeable Shares, together with such
other documents and instruments as may be required to effect a
transfer of Exchangeable Shares under the NSCA and the memorandum and
articles of association of TSA Exchangeco and such additional
documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or certificates
shall be entitled to receive in exchange therefor, and the Transfer
Agent on behalf of TSA shall deliver to such holder, certificates
representing the TSA Class A Common Shares to which the holder is
entitled and a cheque or cheques of TSA payable at par at any branch
of the bankers of TSA in payment of the remaining portion, if any, of
the total Liquidation Call Purchase Price. If TSA does not exercise
the Liquidation Call Right in the manner described above, on the
Liquidation Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Liquidation Amount
otherwise payable by TSA Exchangeco in connection with the
liquidation, dissolution or winding-up of TSA Exchangeco pursuant to
Article 5 of the Exchangeable Share Provisions.
5.2 TSA Redemption Call Right
(a) TSA shall have the overriding right (the "Redemption Call Right"),
notwithstanding the proposed redemption of the Exchangeable Shares by
TSA Exchangeco pursuant to Article 7 of the Exchangeable Share
Provisions, to purchase from all but not less than all of the holders
of Exchangeable Shares (other than TSA and its Affiliates) on the
Redemption Date all but not less than all of the Exchangeable Shares
held by each such holder on payment by TSA to the holder of an amount
per share equal to (i) the Current Market Price (as defined in the
Exchangeable Share Provisions) of one TSA Class A Common Share on the
last Business Day prior to the Redemption Date which shall be
satisfied in full by causing to be delivered to such holder one TSA
Class A Common Share (subject to any Equivalent Ratio Adjustment)
plus; (ii) the Dividend Amount, plus (iii) the Fractional Share Amount
(collectively the "Redemption Call Purchase Price"). In the event of
the exercise of the Redemption Call Right by TSA, each holder shall be
obligated to sell all of the Exchangeable Shares held by the holder to
TSA on the Redemption Date on payment by TSA to the holder of the
Redemption Call Purchase Price for each such share.
(b) To exercise the Redemption Call Right, TSA must notify the Transfer
Agent in writing, as agent for the holders of Exchangeable Shares, and
TSA Exchangeco of TSA's intention to exercise such right at least
forty (40) Business Days before the Redemption Date, except in the
case of a redemption occurring as a result of a TSA Control
Transaction, a TSA Spin-Out Decision Date, an Exchangeable Share
Voting Event or an Exempt Exchangeable Share Voting Event, in which
case TSA shall so notify the Transfer Agent and TSA Exchangeco on or
before the Redemption Date. The Transfer Agent will notify the holders
of the Exchangeable Shares as to whether or not TSA has exercised the
Redemption Call Right forthwith after the date by which the same may
be exercised by TSA. If TSA exercises the Redemption Call Right, on
the Redemption Date, TSA will purchase and the holders will sell all
of the Exchangeable Shares then outstanding for a price per share
equal to the Redemption Call Purchase Price;
(c) Prior to the Redemption Date, each holder of Exchangeable Shares shall
deliver to TSA:
(i) a certificate confirming that such holder is a Canadian Resident;
or
(ii) in the case of a holder who is a not a Canadian Resident, a
certificate satisfactory to the purchaser acting reasonably,
issued pursuant to Subsection 116(2) of the ITA, with respect to
the Exchangeable Shares exchanged or disposed of a certificate
under Subsection 116(2) of the ITA having as the "certificate
limit", as defined in Subsection 116(2) of the ITA, an amount no
less than the cost of the Exchangeable Shares (which may be equal
to the fair market value of the TSA Class A Common Shares and any
cash receivable by such holder of Exchangeable Shares) to TSA or
TSA Holdco, as the case may be.
In the case of a holder who is a partnership, the holder shall also provide
a certificate confirming the name and address of each member thereof and
the percentage of partnership interest held by each member.
In the event that a holder fails to deliver one of the requisite
certificates described above or, if TSA is required to deduct or withhold
any other amount pursuant to any provision of applicable Tax Law, at or
before the Redemption Date, TSA shall be entitled to deduct and withhold
from any consideration otherwise payable to any such holder such amounts
and by such means as set out in Section 4.7 (Withholding Rights) above;
(d) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Redemption Call Right, TSA shall deposit with the Transfer
Agent, on or before the Redemption Date, certificates representing the
aggregate number of TSA Class A Common Shares deliverable by TSA in partial
satisfaction of the total Redemption Call Purchase Price and a cheque or
cheques in the amount of the remaining portion, if any, of the total
Redemption Call Purchase Price. Provided that the total Redemption Call
Purchase Price has been so deposited with the Transfer Agent (or withheld
pursuant to paragraph (c) and Section 4.7 above), on and after the
Redemption Date the rights of each holder of Exchangeable Shares will be
limited to receiving such holder's proportionate part of the total
Redemption Call Purchase Price payable by TSA upon presentation and
surrender by the holder of certificates representing the Exchangeable
Shares held by such holder. The holder shall on and after the Redemption
Date be considered and deemed for all purposes to be the holder of the TSA
Class A Common Shares delivered to such holder without interest. Upon
surrender to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares
under the NSCA and the memorandum and articles of association of TSA
Exchangeco and such additional documents and instruments as the Transfer
Agent may reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and the
Transfer Agent on behalf of TSA shall deliver to such holder, certificates
representing the TSA Class A Common Shares to which the holder is entitled
and a cheque or cheques of TSA payable at par at any branch of the bankers
of TSA in payment of the remaining portion, if any, of the total Redemption
Call Purchase Price. If TSA does not exercise the Redemption Call Right in
the manner described above, on the Redemption Date the holders of the
Exchangeable Shares will be entitled to receive in exchange therefor the
redemption price otherwise payable by TSA Exchangeco in connection with the
redemption of the Exchangeable Shares pursuant to Article 7 of the
Exchangeable Share Provisions.
5.3 TSA Retraction Call Right
TSA shall have an overriding Retraction Call Right.
5.4 Assignment and Delegation
TSA shall be permitted to assign or delegate the Liquidation Call
Right, the Redemption Call Right and Retraction Call Right to TSA
Holdco with the result that all references to TSA in this Plan of
Arrangement and the Exchangeable Share Provisions with respect to the
Liquidation Call Right, the Redemption Call Right and Retraction Call
Right in respect of which the assignment or delegation is made shall be
deemed to refer to TSA Holdco.
5.5 No Liens
The Exchangeable Shares and the TSA Class A Common Shares issued pursuant to
this Plan of Arrangement and the TSA Class A Common Shares issued in exchange
for Exchangeable Shares from time to time shall be issued free and clear of any
lien, claim or encumbrance attributable to, or arising due to, any action or
omission of the issuer of such share.
ARTICLE 6 RESTRICTIONS ON RESALE OF EXCHANGEABLE SHARES AND OF TSA
CLASS A COMMON SHARES
6.1 Resale Restriction
Each holder of Exchangeable Shares (other than TSA and its Affiliates) shall be
prohibited from selling, transferring, conveying, hypothecating or encumbering
any of his Exchangeable Shares (or agreeing to do any of the foregoing)
(collectively referred to as "Trade" or "Trading") except in accordance with the
terms of this Plan of Arrangement. Following the exchange of the Exchangeable
Shares for TSA Class A Common Shares or the direct issuance of TSA Class A
Common Shares pursuant to the terms of this Plan of Arrangement, each holder of
such TSA Class A Common Shares shall be prohibited from Trading any of his TSA
Class A Common Shares except as follows:
(a) After thirty (30) days following the Effective Date, each holder of TSA
Class A Common Shares shall be permitted to Trade 33-1/3% of the aggregate
number of TSA Class A Common Shares issued or issuable in accordance with
the Plan of Arrangement, whether issued directly or upon exchange of his
Exchangeable Shares ("Total TSA Holdings");
(b) After ninety (90) days following the Effective Date, each holder of TSA
Class A Common Shares shall be permitted to Trade an additional 33-1/3% of
his Total TSA Holdings; and
(c) After one hundred and eighty-days (180) days following the Effective Date,
each holder of TSA Class A Common Shares shall be permitted to Trade an
additional 33-1/3% of his Total TSA Holdings, net of any Exchangeable
Shares and TSA Class A Common Shares held in escrow.
Notwithstanding the foregoing, this resale restriction shall not restrict TSA,
TSA Holdco, TSA Exchangeco or the Depositary from selling any TSA Class A Common
Shares as set out in Section 4.7 (Withholding Rights), nor shall it restrict the
holders from dealing with their TSA Class A Common Shares in the event of a
Redemption Date established in connection with a TSA Control Transaction, TSA
Spin-Out Decision Date, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event.
6.2 Legend
The certificates evidencing the Exchangeable Shares and the TSA Class A Common
Shares issued in respect thereof shall contain or have affixed thereto a legend,
in form and on terms approved by TSA, the terms of the resale restrictions set
forth above in Section 6.1.
6.3 Acknowledgment
Each holder of an Exchangeable Share (other than TSA and its Affiliates) or of a
TSA Class A Common Share, whether of record or beneficially, by virtue of
becoming and being such a holder pursuant to this Plan of Arrangement shall be
deemed to acknowledge and accept the resale restrictions set forth above in
Section 6.1.
ARTICLE 7 ESCROW AND APPOINTMENT OF SHAREHOLDER AGENT
7.1 Upon this Plan of Arrangement becoming effective on the Effective
Date, and without further action:
(a) The Escrow Agreement will become effective and bind the Indemnifying
Shareholders (including, for greater certainty, in their capacities as
Principal Securityholders (as such term is defined in the Principal
Securityholders Voting Agreement) under the Principal Securityholders
Voting Agreement);
(b) Each Indemnifying Shareholder is deemed to make the following covenant:
Each Indemnifying Shareholder hereby severally, to the extent of his or its
initial pro rata share of the Escrowed Shares as identified on Schedule I
of the Escrow Agreement, covenants and agrees to pay any and all fees and
expenses of MDL (including the fees and expenses of legal counsel,
accountants and investment bankers) incurred by MDL with respect to the
fees accrued relating to the Combination Agreement and this Plan of
Arrangement whether or not billed or due, to the extent such fees and
expenses exceed CDN$1,800,000.00 ("Excess Transaction Fees").
(c) Each Indemnifying Shareholder is deemed to give the following indemnity:
Subject to the terms and conditions of the Escrow Agreement, each
Indemnifying Shareholder shall severally, to the extent of its initial pro
rata share of the Escrowed Shares as identified on Schedule I of the Escrow
Agreement, indemnify and hold harmless TSA, TSA Holdco, TSA Exchangeco, MDL
and all other direct or indirect wholly-owned subsidiaries of TSA (the
"Indemnitees" and each an "Indemnitee") and each of them, from, against,
for and in respect of any and all Losses paid, suffered or incurred by, an
Indemnitee and resulting from, caused by, or arising out of (i) the
inaccuracy or breach of any representation or warranty of MDL contained in
or made pursuant to the Combination Agreement (including the MDL Disclosure
Letter referenced therein), or in any certificate furnished by MDL pursuant
to the Combination Agreement at Closing, or the failure to perform any
covenant or agreement of MDL made in the Combination Agreement; or (ii) the
failure of the Indemnifying Shareholders to pay Excess Transaction Fees.
(d) For greater certainty, any Loss shall include an interest component,
calculated at a floating rate equal to the prime rate of interest announced
from time to time by Wells Fargo Bank Minnesota, NA, accruing from the date
of actual payment or other realization by an Indemnitee of a Loss which is
ultimately determined to be subject to indemnification pursuant to this
Agreement, until the date of determination of the Recovery Amount (as such
term is defined in the Escrow Agreement) in respect of such Loss.
(e) The Indemnitees' sole remedy for such indemnification by the Indemnifying
Shareholders is as set out herein and in the Escrow Agreement.
ARTICLE 8 AMENDMENT AND FURTHER ASSURANCES
8.1 Plan of Arrangement Amendment
MDL reserves the right to amend, modify and/or supplement this Plan of
Arrangement at any time and from time to time provided that any such amendment,
modification or supplement must be contained in a written document that is (a)
agreed to by TSA, (b) filed with the Court and, if made following the MDL
Securityholders' Meeting, approved by the Court and (c) communicated to the MDL
Securityholders if and as required by the Court.
Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by MDL at any time prior to or at the MDL Securityholders' Meeting
(provided that TSA shall have consented thereto) with or without any other prior
notice or communication, and if so proposed and accepted by the MDL
Securityholders voting at the MDL Securityholders' Meeting (other than as may be
required under the Interim Order), shall become part of this Plan of Arrangement
for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement which is
approved or directed by the Court following the MDL Securityholders' Meeting
shall be effective only if: (a) it is consented to by MDL; (b) it is consented
to by TSA; and (c) it is consented to by the MDL Securityholders or the holders
of Exchangeable Shares or TSA Class A Common Shares, as the case may be, in the
manner required by the Court or applicable Law.
8.2 Appeal of Interim or Final Order
Any appeal of an Interim or Final Order made by MDL shall be made only with the
consent of TSA, such consent not to be unreasonably withheld or delayed, or by
MDL and TSA jointly.
8.3 Further Assurances
Notwithstanding that the transactions and events set out herein shall occur and
be deemed to occur in the order set out in this Plan of Arrangement without any
further act or formality, the MDL Securityholders, MDL, TSA, TSA Holdco and TSA
Exchangeco acknowledge that they will make, do and execute, or cause to be made,
done and executed all such further acts, deeds, agreements, transfers,
assurances, instruments or documents as may reasonably be required by any of
them in order to further, document or evidence any of the transactions or events
set out herein.
LIST OF APPENDICES AND SCHEDULES
APPENDIX A - Amended and Restated Stock Option Plan
APPENDIX B - Provisions Attaching to Exchangeable Shares
Schedule A - Notice of Retraction
Schedule B - TSA Liquidation Call Right
Schedule C - TSA Redemption Call Right
Schedule D - Support Agreement
APPENDIX C - Provisions Attaching to Preferred Shares
APPENDIX A TO THE
PLAN OF ARRANGEMENT
MESSAGINGDIRECT LTD.
(the "Corporation")
AMENDED AND RESTATED EMPLOYEE SHARE OPTION PLAN
ARTICLE 1 - DEFINITIONS
1.1 Definitions
In this Share Option Plan:
(a) AFFILIATE has the meaning ascribed to it in Section 2 of the
Business Corporations Act, Alberta, as amended from time to
time.
(b) BOARD means the Board of Directors of the CORPORATION;
(c) BUSINESS DAY means any day, other than a Saturday, Sunday or
statutory holiday in Alberta.
(d) COMMITTEE means the BOARD or any committee of the BOARD
designated by the BOARD as the committee for the purposes of
this PLAN.
(e) CORPORATION means MESSAGINGDIRECT LTD. or any AFFILIATE of
MESSAGINGDIRECT LTD. that adopts this Plan.
(f) ELIGIBLE PERSON means any director, officer, full time
employee of the CORPORATION or of any AFFILIATE, and any other
person as the COMMITTEE determines is providing key services
to the CORPORATION or any AFFILIATE and is accepted by the
COMMITTEE for the purposes of the PLAN as an ELIGIBLE PERSON.
(g) EXERCISE PRICE means an amount per SHARE in Canadian or United
States funds established by the COMMITTEE at the time of the
granting of an OPTION, at which SHARES may be purchased by the
OPTIONEE, as adjusted pursuant to Section 4.2 hereof;
(h) OPTION means an option to purchase SHARES granted to an
ELIGIBLE PERSON under this PLAN;
(i) OPTION DATE means with respect to each grant of an OPTION the
date upon which the COMMITTEE grants the OPTION;
(j) "PLAN" means this Share Option Plan, as amended;
(k) OPTIONEE means an ELIGIBLE PERSON to whom an OPTION has been
granted;
(l) SHARES means the common shares of the CORPORATION, or, in the
event of an adjustment contemplated by Section 4.2 hereof, the
other shares and securities to which an OPTIONEE may be
entitled upon exercise of an OPTION, as a result of the
adjustment;
ARTICLE 2 - PURPOSE OF THE PLAN
2.1 Purpose
The purpose of the PLAN is to assist the CORPORATION and its
AFFILIATES to attract, retain and motivate employees, officers, directors and
consultants by conveying a sense of pride of ownership and the potential to
achieve significant personal wealth by contributing to the successful growth of
the CORPORATION, and to be achieved by permitting such persons to participate in
the growth and development of the CORPORATION and its AFFILIATES through the
acquisition of OPTIONS.
ARTICLE 3 - ADMINISTRATION OF THE PLAN
3.1 Administration
The PLAN shall be administered by the COMMITTEE.
3.2 Powers
The COMMITTEE shall have the power, where consistent with the
general purpose and intent of the PLAN, and subject to the specific provisions
of the PLAN:
(a) to establish policies, procedures and to adopt rules and regulations for
carrying out the purposes, provisions and administration of the PLAN;
(b) to interpret and construe the PLAN and to determine all questions arising
out of the PLAN and any OPTION and any interpretation or construction made
by the COMMITTEE shall be final, binding and conclusive for all purposes;
(c) to determine which ELIGIBLE PERSONS will be granted OPTIONS;
(d) to determine the terms and provisions of any grant of OPTION, including the
time or times when any OPTION is exercisable and any restrictions on
exercise of the OPTION or on the SHARES to be issued on exercise of the
OPTION;
(e) to determine the terms and provisions of any agreements or documents
arising from the PLAN;
(f) to determine the number of SHARES covered by each OPTION; and
(g) to determine the EXERCISE PRICE.
ARTICLE 4 - SHARES SUBJECT TO PLAN
4.1 SHARES Available
The number of SHARES available for issuance upon exercise of
OPTIONS granted shall be as specified by the BOARD from time to time provided
that, subject to the provisions of Section 4.2, the total number of SHARES so
available together with those previously issued under the PLAN shall not exceed
five million (5,000,000) SHARES at the date of the grant of any OPTION. If any
OPTION shall lapse or terminate for any reason without having been exercised in
full, the unpurchased SHARES that are the subject of that OPTION shall be
available for future OPTIONS.
4.2 Adjustments
The number of SHARES subject to the PLAN, the number of SHARES
optioned and the EXERCISE PRICE shall be adjusted by the BOARD to give effect to
adjustments resulting from subdivisions or consolidations or reclassifications
or changes to, Class "A" shares or SHARES, the payment of stock dividends by the
CORPORATION (other than dividends in the ordinary course) or other relevant
changes in the capital of the CORPORATION.
ARTICLE 5 - ELIGIBILITY AND GRANT
5.1 Eligibility
Options may only be granted to ELIGIBLE PERSONS. Any member of
the COMMITTEE shall be eligible to be granted OPTIONS notwithstanding that such
person shall be a member of the COMMITTEE.
5.2 Grant
The COMMITTEE may, from time to time, grant OPTIONS to
ELIGIBLE PERSONS. Each ELIGIBLE PERSON who receives a grant of an OPTION shall
receive a written notification from the CORPORATION specifying the relevant
terms and provisions of the grant of the OPTION.
5.3 Term
In no event may the term of an OPTION exceed eight (8) years
from the OPTION DATE, unless extended pursuant to the adoption of the PLAN under
Article 9 hereof.
5.4 Non-Assignable
The OPTIONS granted hereunder are not assignable.
ARTICLE 6 - TERMINATION OF OPTION
6.1 Termination
Subject to Section 6.2 hereof, an OPTION shall expire and
terminate and be incapable of exercise immediately upon the OPTIONEE ceasing to
be an ELIGIBLE PERSON. A person other than a director, officer or full time
employee of the CORPORATION or of any AFFILIATE shall cease to be an ELIGIBLE
PERSON ten (10) BUSINESS DAYS after receipt of notice to that effect from the
CORPORATION.
6.2 Rights in Certain Circumstances
If before the expiry of an OPTION:
(a) the OPTIONEE ceases to be an ELIGIBLE PERSON as a result of a death or
employment terminating as a result of permanent disability, then the OPTION
may be exercised by the OPTIONEE or, in the event of death, by his legal
representative only within twelve (12) months of the date of death or
ceasing employment as a result of permanent disability or retirement but
only to the extent that the OPTIONEE was entitled to exercise the OPTION at
the date of death or termination of employment;
(b) the OPTIONEE ceases to be an ELIGIBLE PERSON as a result of resignation or
termination of employment, without cause, by the CORPORATION or an
AFFILIATE, then the OPTION may be exercised by the APPOINTEE only within
sixty (60) days of the resignation or termination but only to the extent
that the OPTIONEE was entitled to exercise the OPTION at the date of
resignation or termination;
(c) the OPTIONEE ceases to be an ELIGIBLE PERSON as a result of the OPTIONEE
receiving written notice to that effect from the CORPORATION as provided
for in Section 6.1 hereof, then the OPTION may be exercised by the OPTIONEE
only within sixty (60) days of the OPTIONEE ceasing to be an ELIGIBLE
PERSON but only to the extent that the OPTIONEE was entitled to exercise
the OPTION at the date that the OPTIONEE ceased to be an ELIGIBLE PERSON;
(d) the OPTIONEE ceases to be an ELIGIBLE PERSON as a result of termination of
employment, for cause, by the CORPORATION or an AFFILIATE, then the OPTION
may be exercised by the OPTIONEE only within five (5) days of the
termination but only to the extent that the OPTIONEE was entitled to
exercise the OPTION at the date of termination.
(e) an order is made by a court of competent jurisdiction pursuant to the
Matrimonial Property Act (Alberta) or other similar legislation purporting
to deal with any SHARES held by the OPTIONEE or there is a seizure or
attachment in any way of any SHARES held by the OPTIONEE for the payment of
any judgment or order, then the OPTION may be exercised by the OPTIONEE
only within five days of the occurrence of such event but only to the
extent that the OPTIONEE was entitled to exercise the OPTION as of the date
of the occurrence of such event;
(f) the OPTIONEE purports to sell, transfer, assign, pledge, hypothecate,
mortgage or encumber any of the SHARES held by the OPTIONEE, other than to
the CORPORATION, then the OPTION may be exercised by the OPTIONEE only
within five (5) days of the occurrence of such event but only to the extent
that the OPTIONEE was entitled to exercise the OPTION as of the date of the
occurrence of such event.
The foregoing provisions shall not have the effect of extending any OPTION
beyond the period for exercise in accordance with its terms.
ARTICLE 7 - AMENDMENT OR TERMINATION OF PLAN
7.1 Amendment or Termination
The PLAN may be amended by the BOARD as it may from time to
time deem advisable. The BOARD may, in its discretion, terminate or fix a date
for the termination of the PLAN. No amendment or termination of the PLAN may
increase any EXERCISE PRICE other than by way of an adjustment contemplated by
Section 4.2.
ARTICLE 8 - EXERCISE OF OPTIONS
8.1 Exercise
Subject to the provisions of the PLAN, an OPTION may be
exercised from time to time by delivery to the CORPORATION at its registered
office of a written notice of exercise addressed to the secretary of the
CORPORATION specifying the number of SHARES with respect to which the OPTION is
being exercised and accompanied by payment in full of the EXERCISE PRICE of the
SHARES to be purchased. Certificates for SHARES that are the subject of the
exercise of an OPTION shall be issued and delivered to the OPTIONEE within a
reasonable time following the receipt of the notice and payment.
ARTICLE 9 - ADOPTION
9.1 Upon Transaction Systems Architects, Inc. ("TSA") adopting this PLAN the
term of each OPTION due to expire on or after the date of the Combination
Agreement made inter alia, among TSA and the CORPORATION and on or before the
effective date thereunder shall be extended to February 28, 2001 and any then
outstanding unvested OPTION shall automatically accelerate and become fully
vested and immediately exercisable as of the effective date of the adoption of
the PLAN by TSA.
ARTICLE 10 - MISCELLANEOUS
10.1 Rights Prior to Exercise
An OPTIONEE shall not have any rights as a shareholder of the
CORPORATION with respect to any of the SHARES covered by an OPTION until the
OPTIONEE has exercised the OPTION in accordance with the terms of the PLAN.
Nothing herein or in an OPTION shall confer on the OPTIONEE any right or
interest whatsoever as a holder of SHARES or other securities of the CORPORATION
or any other right or interest in any property of the CORPORATION except as
herein expressly provided.
10.2 Employment Rights Not Conferred
Nothing in the PLAN or any OPTION shall confer upon any
OPTIONEE any right to continue in the employment of the CORPORATION or any
AFFILIATE or affect in any way the right of the CORPORATION or any AFFILIATE to
terminate the employment of an OPTIONEE at any time. Nothing in the PLAN or in
any OPTION shall be deemed or construed to constitute an agreement or an
expression of intent on the part of the CORPORATION or any AFFILIATE to extend
the employment of an OPTIONEE beyond the time that the OPTIONEE would normally
be retired pursuant to any provisions of any present or future retirement plan
or policy of the CORPORATION or any AFFILIATE, or beyond the time at which the
OPTIONEE would otherwise be retired pursuant to the provisions of any contract
of employment with the CORPORATION or an AFFILIATE.
10.3 Singular, Plural and Gender
Wherever the singular, plural, masculine, feminine or neuter
is used throughout this PLAN, the same shall be construed as meaning the
singular, plural, masculine, feminine or body corporate where the facts or
context so requires.
10.4 Governing Law
This PLAN shall be governed and applied in accordance with the
laws of the Province of Alberta, Canada.
10.5 Notice
Any notice permitted or contemplated to be given to an
OPTIONEE may be given by the CORPORATION in writing addressed to the address of
the OPTIONEE set forth in the OPTION CERTIFICATE or such other address as shall
have been specified by the OPTIONEE by written notification to the CORPORATION
and such a notice to the OPTIONEE shall be effective for all purposes of the
PLAN.
DATED at the City of Edmonton, in the Province of Alberta,
this _____ day of ______________________, 2001.
MESSAGINGDIRECT LTD.
Per: _______________________________________
Per: _______________________________________
The foregoing Amended and Restated Stock Option plan is hereby expressly adopted
by Transaction Systems Architects, Inc.
DATED at the City of Omaha, in the State of Nebraska, this _____ day of
______________________, 2001.
TRANSACTION SYSTEMS ARCHITECTS, INC.
Per: _______________________________________
Per: _______________________________________
APPENDIX B TO THE
PLAN OF ARRANGEMENT
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of TSA Exchangeco Limited shall have the
following rights, privileges, restrictions and conditions.
ARTICLE 1
INTERPRETATION
For the purposes of these share provisions:
"ABCA" means the Business Corporations Act (Alberta), S.A. 1981, c. B-15, as
amended;
"Affiliate" has the meaning ascribed to that term in the ABCA;
"Board of Directors" means the Board of Directors of the Corporation;
"Business Day" means any day, other than a Saturday, a Sunday or a day which is
a statutory or civic holiday in the Province of Alberta or the State of
Nebraska;
"Canadian Dollar Equivalent" means in respect of an amount expressed in currency
other than Canadian dollars (the "Foreign Currency Amount") on any date, the
product obtained by multiplying (a) the Foreign Currency Amount by (b) the noon
spot exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose;
"Canadian Resident" means a resident of Canada for the purposes of the ITA;
"Combination Agreement" means the combination agreement among TSA, TSA Holdco,
MDL and the Corporation;
"Common Shares" means the common shares of the Corporation;
"Corporation" means TSA Exchangeco Limited, a Nova Scotia limited company;
"Current Market Price" means, in respect of a TSA Class A Common Share on any
date, the Canadian Dollar Equivalent of the average closing price (computed and
rounded to the third decimal point) of TSA Class A Common Shares during a period
of twenty (20) consecutive trading days ending not more than three (3) trading
days before such date on the NASDAQ, or, if the TSA Class A Common Shares are
not then listed on the NASDAQ, on such other stock exchange or automated
quotation system on which the TSA Class A Common Shares are listed or quoted, as
the case may be, as may be selected by the Board of Directors for such purpose;
provided, however, that if in the opinion of the Board of Directors the public
distribution or trading activity of TSA Class A Common Shares during such period
does not create a market which reflects the fair market value of a TSA Class A
Common Share, then the Current Market Price of a TSA Class A Common Share shall
be determined by the Board of Directors based upon the advice of such qualified
independent financial advisors as the Board of Directors may deem to be
appropriate, and provided further that any such selection, opinion or
determination by the Board of Directors shall be conclusive and binding;
"Dividend Amount" means an amount equal to the full amount of all declared and
unpaid dividends on each Exchangeable Share with a dividend record date prior to
the effective date of the exchange of Exchangeable Shares for TSA Class A Common
Shares hereunder;
"Effective Date" means the date that the Articles of Arrangement are filed
pursuant to the ABCA;
"Equivalent Ratio Adjustment" has the meaning ascribed thereto in Section
3.1(b) of these share provisions;
"Equivalent Stock Subdivision" has the meaning ascribed thereto in Section
3.1(b) of these share provisions;
"Exchangeable Shares" mean the exchangeable non-voting shares of the Corporation
having the rights, privileges, restrictions and conditions set forth herein;
"Exchangeable Share Voting Event" means any matter in respect of which holders
of Exchangeable Shares are entitled to vote as shareholders of the Corporation,
other than an Exempt Exchangeable Share Voting Event, and, for greater
certainty, excluding any matter in respect of which holders of Exchangeable
Shares are entitled to vote (or instruct the Trustee to vote) in their capacity
as Holders under (and as that term is defined in) the Voting and Exchange Trust
Agreement;
"Exempt Exchangeable Share Voting Event" means any matter in respect of which
holders of Exchangeable Shares are entitled to vote as shareholders of the
Corporation in order to approve or disapprove, as applicable, any change to, or
in the rights of the holders of, the Exchangeable Shares, where the approval or
disapproval, as applicable, of such change would be required to maintain the
equivalence of the Exchangeable Shares and the TSA Class A Common Shares;
"Fractional Share Amount" means the amount of cash payable in lieu of a
fractional share that would otherwise be issuable to the holder of an
Exchangeable Share as a result of an Equivalent Ratio Adjustment;
"ITA" means the Income Tax Act (Canada) R.S.C. 1985, c.1 (5th Supp.), as
amended;
"Law" means any federal, state, provincial, territorial, municipal or other law,
statute, regulation, code, recommendation, notice, judgment, treaty, directive,
ordinance, writ, injunction, decree, by-law, order, restriction, official plan
or stated policy, whether domestic or foreign; and "Laws" means all of the
foregoing;
"Liquidation Amount" has the meaning ascribed thereto in Section 5.1 of these
share provisions;
"Liquidation Call Right" has the meaning ascribed thereto in Schedule B
attached hereto;
"Liquidation Date" has the meaning ascribed thereto in Section 5.1 of these
share provisions;
"MDL" means MessagingDirect Ltd., an Alberta corporation;
"NASDAQ" means the Nasdaq National Market or any successor systems;
"NSCA" means the Companies Act (Nova Scotia), R.S.N.S. 1989, C.81, as amended;
"Plan of Arrangement" means the Plan of Arrangement in respect of MDL, to which
Plan of Arrangement these share provisions are an appendix;
"Purchase Price" has the meaning ascribed thereto in Section 6.3 of these
share provisions;
"Redemption Call Purchase Price" has the meaning ascribed thereto in Schedule
C attached hereto;
"Redemption Call Right" has the meaning ascribed thereto in Schedule C
attached hereto;
"Redemption Date" means the date which is the earlier of: (i) the fifth (5th)
anniversary of the Effective Date; or (ii) the date, if any, established by the
Board of Directors for the redemption by the Corporation of all but not fewer
than all of the Exchangeable Shares (other than Exchangeable Shares held by TSA
and its Affiliates) pursuant to Article 7 of these share provisions if any of
the following occurs:
(a) the number of Exchangeable Shares outstanding is less than one-third (1/3)
of the number of Exchangeable Shares issued on the Effective Date and as
such number of shares may be adjusted as deemed appropriate by the Board of
Directors to give effect to any subdivision or consolidation of or stock
dividend on the Exchangeable Shares or TSA Class A Common Shares, any issue
or distribution of rights to acquire Exchangeable Shares or TSA Class A
Common Shares or securities exchangeable for or convertible into
Exchangeable Shares or TSA Class A Common Shares, any issue or distribution
of other securities or rights or evidences of indebtedness or assets, or
any other capital reorganization or other transaction affecting the
Exchangeable Shares or TSA Class A Common Shares, in which case the Board
of Directors may accelerate such redemption date as it may determine upon
at least forty (40) Business Days' prior written notice to the registered
holders of the Exchangeable Shares (other than TSA and its Affiliates);
(b) a TSA Control Transaction occurs, in which case, provided that the Board of
Directors determines in good faith and in its sole discretion that it is
not reasonably practicable to substantially replicate the terms and
conditions of the Exchangeable Shares in connection with such TSA Control
Transaction and that the redemption of all, but not fewer than all, of the
outstanding Exchangeable Shares is necessary to enable the completion of
such TSA Control Transaction in accordance with its terms, the Board of
Directors may accelerate such redemption date as it may determine upon such
number of days' prior written notice to the registered holders of the
Exchangeable Shares (other than TSA and its Affiliates) as the Board of
Directors may determine to be reasonably practicable in such circumstances
with a view to permitting holders of Exchangeable Shares sufficient time to
exchange their Exchangeable Shares prior to the record date for the
determination of the registered holders of TSA Class A Common Shares
entitled to participate in the TSA Control Transaction;
(c) an Exchangeable Share Voting Event is proposed, in which case, provided
that the Board of Directors has determined, in good faith and in its sole
discretion, that it is not reasonably practicable to accomplish the
business purpose intended by the Exchangeable Share Voting Event, which
business purpose must be bona fide and not for the primary purpose of
causing the occurrence of a Redemption Date, in any other commercially
reasonable manner that does not result in an Exchangeable Share Voting
Event, the Board of Directors may accelerate such redemption date to the
Business Day prior to the record date for any meeting or vote of the
holders of the Exchangeable Shares to consider the Exchangeable Share
Voting Event and the Board of Directors shall give such number of days'
prior written notice of such redemption to the registered holders of the
Exchangeable Shares (other than TSA and its Affiliates) as the Board of
Directors may determine to be reasonably practicable in such circumstances;
(d) an Exempt Exchangeable Share Voting Event is proposed and the holders of
the Exchangeable Shares (other than TSA and its Affiliates) fail to take
the necessary action at a meeting or by other resolution or action of
holders of Exchangeable Shares, to approve or disapprove, as applicable,
the Exempt Exchangeable Share Voting Event, in which case the redemption
date shall be the Business Day following the day on which the holders of
the Exchangeable Shares failed to take such action and the Board of
Directors shall give such number of days' prior written notice of such
redemption to the registered holders of the Exchangeable Shares (other than
TSA and its Affiliates) as the Board of Directors may determine to be
reasonably practicable in such circumstances; or
(e) a TSA Spin-Out Decision Date occurs in which case the Board of Directors
may accelerate such redemption date as it may determine, upon such number
of days' prior written notice to the registered holders of the Exchangeable
Shares (other than TSA and its Affiliates) as the Board of Directors may
determine, acting in good faith and in its sole discretion and with a view
to permitting holders of Exchangeable Shares sufficient time to exchange
their Exchangeable Shares prior to the record date for the determination of
the registered holders of TSA Class A Common Shares entitled to participate
in the TSA spin-out, to be reasonably practicable in such circumstances,
provided, however, that the accidental failure or omission to give any notice of
redemption under clauses (a), (b), (c), (d) or (e) above to less than 10% of
such holders of Exchangeable Shares (other than TSA and its Affiliates) shall
not affect the validity of any such redemption;
"Redemption Price" has the meaning ascribed thereto in Section 7.1 of these
share provisions;
"Retracted Shares" has the meaning ascribed thereto in Subsection 6.1 (a) of
these share provisions;
"Retraction Call Right" has the meaning ascribed thereto in Subsection 6.1 (c)
of these share provisions;
"Retraction Date" has the meaning ascribed thereto in Subsection 6.1 (b) of
these share provisions;
"Retraction Price" has the meaning ascribed thereto in Section 6.1 of these
share provisions;
"Retraction Request" has the meaning ascribed thereto in Section 6.1 of these
share provisions;
"Support Agreement" means the Support Agreement to be entered into among TSA,
TSA Holdco, and the Corporation on or before the Effective Date, a copy of which
is attached hereto as Schedule D;
"Tax" or "Taxes" means all income, capital, payroll, sales and use, value added,
goods and services, documentary, stamp, transfer and real property taxes and
customs and excise duties, whether foreign, federal, provincial, state or
municipal (including tax withholdings, employer health taxes, workers'
compensation assessments, penalties and surcharges, Canada and Quebec Pension
Plans and employment insurance premiums, contributions and remittances) and
including any interest, penalties or surcharges attributable thereto;
"Taxing Authority" means Canada Customs and Revenue Agency, the Internal Revenue
Service or any other taxing authority, including, without limitation, any value
added tax or sales tax authority;
"Transfer Agent" means TSA Exchangeco or any duly appointed transfer agent for
the time being of the Exchangeable Shares and if there is more than one such
agent, then the principal Canadian agent;
"Trustee" means Wells Fargo Bank Minnesota, National Association, and any
successor trustee appointed under the Voting and Exchange Trust Agreement;
"TSA" means Transaction Systems Architects, Inc., a Delaware corporation;
"TSA Call Notice" has the meaning ascribed thereto in Section 6.3 of these
share provisions;
"TSA Class A Common Shares" mean the voting shares of TSA, par value $0.005 per
share, having voting rights of one vote per share, and any other securities into
which such shares may be changed;
"TSA Control Transaction" means the earlier to occur of the occurrence of or
approval by the stockholders of TSA of (a) any statutory exchange, merger or
amalgamation involving TSA, (b) any sale, lease, exchange or other transfer (in
one transaction or a series of transactions) of all, or substantially all, of
the assets of TSA; (c) any tender offer for TSA; or (d) any Person becoming the
beneficial owner of 20% or more of the outstanding TSA common stock who was not
the beneficial owner of 20% or more of such stock prior to the date of the
Combination Agreement;
"TSA Dividend Declaration Date" means the date on which the board of directors
of TSA declares any dividend on the TSA Class A Common Shares;
"TSA Holdco" means Transaction Systems Architects Nova Scotia Company, a Nova
Scotia unlimited company;
"TSA Spin-Out Decision Date" means the earlier of: (i) the date on which the
board of directors of TSA resolves in good faith, and in its sole discretion, to
distribute any of the shares or other interests of an Affiliate of TSA (other
than TSA Exchangeco) or a business unit of TSA or its Affiliate to the holders
of TSA Class A Common Shares whether by dividend in kind, as satisfaction for
the purchase price on an exchange or repurchase of TSA stock in connection with
such distribution, or otherwise; or (ii) the date on which TSA reasonably
determines in good faith and in its sole discretion, based on the written advice
of its external tax advisor (which shall be a national accounting firm), that
the failure of TSA Exchangeco to redeem (or of TSA to acquire pursuant to the
exercise of its Redemption Call Right) the Exchangeable Shares would reasonably
be expected to create a significant risk of adversely impacting the U.S. federal
income tax treatment of any distribution of any of the shares or other interests
of an Affiliate of TSA (other than TSA Exchangeco) or a business unit of TSA or
its Affiliate to the holders of TSA Class A Common Shares or would reasonably be
expected to create a significant risk of adversely impacting TSA's ability to
receive, on a timely basis, a favourable private letter ruling from the U.S.
Taxing Authority as to the treatment of such distribution as a dividend in kind,
as satisfaction for the purchase price on an exchange or as the repurchase of
TSA stock; and
"Voting And Exchange Trust Agreement" means the Voting and Exchange Trust
Agreement dated as of on or before the Effective Date, among TSA, TSA Holdco,
the Corporation and the Trustee.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall be entitled to a preference over the
Common Shares and any other shares ranking junior to the Exchangeable
Shares, with respect to the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of
the Corporation among its shareholders for the purpose of winding up
its affairs. The Corporation will not pay a dividend on any shares
ranking junior to the Exchangeable Shares if the Corporation is in
default of any dividend obligations with respect to the Exchangeable
Shares.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable Law, on each TSA
Dividend Declaration Date, declare a dividend on each Exchangeable
Share:
(a) in the case of a cash dividend declared on the TSA Class A Common
Shares, in an amount in cash for each Exchangeable Share equal to the
Canadian Dollar Equivalent on the Business Day immediately preceding
the date of payment of the cash dividend declared on each TSA Class A
Common Share;
(b) in the case of a stock dividend declared on the TSA Class A Common
Shares to be paid in TSA Class A Common Shares (including a stock
split payable as a stock dividend), in such number of Exchangeable
Shares for each Exchangeable Share as is equal to the number of TSA
Class A Common Shares to be paid on each TSA Class A Common Share
unless in lieu of such stock dividend the Corporation elects in its
sole and absolute discretion to effect either: (i) a corresponding and
contemporaneous and economically equivalent subdivision (as determined
by the Board of Directors as contemplated by Section 3.5 hereof) of
the outstanding Exchangeable Shares (an "Equivalent Stock
Subdivision"); or (ii) an adjustment to the ratio of TSA Class A
Common Shares to be received in exchange for each Exchangeable Share
(an "Equivalent Ratio Adjustment") to provide a benefit to the holders
of the Exchangeable Shares that is equivalent to the benefit paid to
the holders of the TSA Class A Common Shares; or
(c) in the case of a dividend declared on the TSA Class A Common Shares in
property other than cash or TSA Class A Common Shares, in such type
and amount of property for each Exchangeable Share as is the same as
or economically equivalent to (to be determined by the Board of
Directors as contemplated by Section 3.5 hereof) the type and amount
of property declared as a dividend on each TSA Class A Common Share.
Such dividends shall be paid out of money, assets or property, as
applicable, of the Corporation properly applicable to the payment of
dividends, or in the case of a stock dividend contemplated by Section
3.1(b), out of authorized but unissued shares of the Corporation.
Notwithstanding the foregoing, a holder's right to receive a dividend
pursuant to Section 3.1(c) and the Corporation's obligation to declare
a dividend on the Exchangeable Shares or otherwise provide economic
equivalence shall be subject to TSA's overriding right to redeem the
Exchangeable Shares pursuant to the occurrence of a TSA Spin-Out
Decision Date as set out in Article 7.
3.2 Cheques of the Corporation payable at any branch of the bankers of the
Corporation shall be issued in respect of any cash dividends
contemplated by Section 3.1 (a) hereof and the sending of such a
cheque to each holder of an Exchangeable Share shall satisfy the cash
dividend represented thereby unless the cheque is not paid on
presentation. Certificates registered in the name of the registered
holder of Exchangeable Shares shall be issued or transferred in
respect of any stock dividends contemplated by Section 3.1 (b) hereof
and the sending of such a certificate to each holder of an
Exchangeable Share shall, absent non-receipt thereof, satisfy the
stock dividend represented thereby. Such other type and amount of
property in respect of any dividends contemplated by Section 3.1 (c)
hereof shall be issued, distributed or transferred by the Corporation
in such manner as it shall determine and the issuance, distribution or
transfer thereof by the Corporation to each holder of an Exchangeable
Share shall satisfy the dividend represented thereby. In all cases,
any such dividends shall be subject to any reduction or adjustment for
Tax required to be deducted and withheld from such dividends paid or
credited by the Corporation. No holder of an Exchangeable Share shall
be entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque that has not
been duly presented to the Corporation's bankers for payment or that
otherwise remains unclaimed for a period of six years from the date on
which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any
dividend declared on the Exchangeable Shares under Section 3.1 hereof
shall be the same dates as the record date and payment date,
respectively, for the corresponding dividend declared on the TSA Class
A Common Shares. The record date for the determination of the holders
of Exchangeable Shares entitled to receive Exchangeable Shares in
connection with any Equivalent Stock Subdivision under Subsection
3.1(b) hereof and the effective date of such Equivalent Stock
Subdivision shall be the same dates as the record and payment date,
respectively, for the corresponding stock dividend declared on the TSA
Class A Common Shares. The effective date of the Equivalent Ratio
Adjustment shall be the same date as the payment date for the
corresponding stock dividend declared on the TSA Class A Common
Shares.
3.4 If on any payment date for any dividend declared on the Exchangeable
Shares under Section 3.1 hereof the dividend is not paid in full on
all of the Exchangeable Shares then outstanding, any such dividend
that remains unpaid shall be paid on a subsequent date or dates
determined by the Board of Directors on which the Corporation shall
have sufficient moneys, assets or property properly applicable to the
payment of such dividends.
3.5 If the Board of Directors decides to provide economic equivalence
pursuant to Section 3.1 hereof then the Board of Directors shall
determine, in good faith and in its sole and absolute discretion (with
the assistance of such reputable and qualified independent financial
advisors and/or other experts as the Board of Directors may require),
such economic equivalence for the purposes of Section 3.1 hereof, and
each such determination shall be conclusive and binding on the
Corporation and its shareholders. In making such determination, the
following factors shall, without excluding other factors determined by
the Board of Directors to be relevant, be considered by the Board of
Directors:
(a) in the case of any stock dividend or other distribution payable in TSA
Class A Common Shares, the number of such shares issued in proportion
to the number of TSA Class A Common Shares previously outstanding;
(b) in the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase TSA Class A Common Shares (or
securities exchangeable for or convertible into or carrying rights to
acquire TSA Class A Common Shares), the relationship between the
exercise price of each such right, option or warrant and the Current
Market Price;
(c) in the case of the issuance or distribution of any other form of
property (including without limitation any securities of TSA of any
class other than TSA Class A Common Shares, any rights, options or
warrants other than those referred to in Subsection 3.5(b) above, any
evidences of indebtedness of TSA or any assets of TSA), the
relationship between the fair market value (as determined by the Board
of Directors in the manner above contemplated) of such property to be
issued or distributed with respect to each outstanding TSA Class A
Common Share and the Current Market Price of a TSA Class A Common
Share;
(d) in the case of any subdivision, re-division or change of the then
outstanding TSA Class A Common Shares into a greater number of TSA
Class A Common Shares or the reduction, combination or consolidation
or change of the then outstanding TSA Class A Common Shares into a
lesser number of TSA Class A Common Shares or any amalgamation,
merger, re-organization or other transaction effecting the TSA Class A
Common Shares, the effect thereof on the then outstanding shares of
TSA Class A Common Shares; and
(e) in all such cases, the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that such
consequences may differ from the taxation consequences to holders of
TSA Class A Common Shares as a result of differences between Tax Laws
of Canada, the United Kingdom and the United States (except for any
differing consequences arising as a result of differing marginal
taxation rates and without regard to the individual circumstances of
holders of Exchangeable Shares).
3.6 Except as provided in Sections 3.1 and 3.4, the holders of
Exchangeable Shares shall not be entitled to receive dividends in
respect thereof.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not in the circumstances described below at any time
without, but may at any time with, the approval of the holders of the
Exchangeable Shares given as specified in Article 10 of these share
provisions:
(a) pay any dividends on the Common Shares, or any other shares ranking
junior to the Exchangeable Shares, other than stock dividends payable
in Common Shares or such other shares ranking junior to the
Exchangeable Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable
Shares with respect to the payment of dividends or on any liquidation
distribution;
(c) redeem or purchase any other shares of the Corporation ranking equally
with the Exchangeable Shares with respect to the payment of dividends
or on any liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of the Corporation
ranking equally with, or superior to, the Exchangeable Shares other
than to the holders of Exchangeable Shares in accordance with these
share provisions.
The restrictions in Subsections 4.1(a), (b), (c) and (d) above shall not apply
if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared and paid to date on the TSA Class A Common Shares have been
declared and paid on the Exchangeable Shares. Nothing herein shall be
interpreted to restrict the Corporation from issuing additional Common Shares.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation
among its shareholders for the purpose of winding up its affairs,
subject to the exercise by TSA or TSA Holdco of the Liquidation Call
Right, a holder of Exchangeable Shares shall be entitled, subject to
applicable Law, to receive from the assets of the Corporation in
respect of each Exchangeable Share held by such holder on the
effective date (the "Liquidation Date") of such liquidation,
dissolution or winding-up, before or simultaneously with any
distribution of any part of the assets of the Corporation among the
holders of the Common Shares and before any distribution on any other
shares ranking junior to the Exchangeable Shares, an amount per share
equal to (i) subject to any Equivalent Ratio Adjustment, the Current
Market Price of one TSA Class A Common Share on the last Business Day
prior to the Liquidation Date, which shall be satisfied in full by the
Corporation causing to be delivered to such holder one TSA Class A
Common Share, plus (ii) the Dividend Amount; and (iii) the Fractional
Share Amount (collectively the "Liquidation Amount"). In connection
with payment of the Liquidation Amount, the Corporation shall be
entitled to deduct and withhold from any consideration otherwise
payable to any such holder such amounts as the Corporation or TSA, as
the case may be, is required or permitted to deduct and withhold with
respect to such payment under the ITA or any other provision of
applicable Tax Law, in each case, as amended or succeeded; provided
that such withheld amount shall not be remitted prior to two (2)
Business Days prior to that date such amount is required by Law to be
remitted (the "Remittance Date") and where certificates issued
pursuant to Subsection 116(2) or 116(4) of the ITA, if applicable, are
delivered prior to such Remittance Date, such withheld amount shall be
released to the holder except to the extent that amounts were withheld
or deducted pursuant to another provision of applicable Tax Law. To
the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to the holder
of the Exchangeable Shares in respect of which such deduction and
withholding was made, provided that such withheld amounts are actually
remitted to the appropriate Taxing Authority and a receipt evidencing
such remittance is delivered to such holder. To the extent that the
amount so required or permitted to be deducted or withheld from any
payment to a holder exceeds the cash portion of the consideration
otherwise payable to such holder, the Corporation or TSA, as the case
may be, as agent of such holder, is hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary
to provide sufficient funds to it to enable it to comply with such
deduction or withholding requirement and the Corporation or TSA, as
the case may be, shall notify such holder thereof and remit to such
holder any unapplied balance of the net proceeds of such sale. If the
proceeds of such sale are insufficient to fund the required
withholding, such holder shall forthwith pay to the Corporation or
TSA, as the case may be, or remit to the applicable Taxing Authority
the deficiency. Such holder shall bear all reasonable costs and
expenses associated with any sale by the Corporation or TSA, as the
case may be, pursuant to the two immediately preceding sentences.
5.2 On or promptly after the Liquidation Date, and subject to the exercise
by TSA of the Liquidation Call Right, the Corporation shall cause to
be delivered to the holders of the Exchangeable Shares the Liquidation
Amount for each such Exchangeable Share upon presentation and
surrender of the certificates representing such Exchangeable Shares,
together with such other documents and instruments as may be required
to effect a transfer of Exchangeable Shares under any applicable Law
and the memorandum and articles of association of the Corporation and
such additional documents and instruments as the Transfer Agent may
reasonably require, at the registered office of the Corporation or at
any office of the Transfer Agent as may be specified by the
Corporation by notice to the holders of the Exchangeable Shares.
Payment of the total Liquidation Amount for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder
recorded in the securities register of the Corporation for the
Exchangeable Shares or by holding for pick up by the holder at the
registered office of the Corporation or at any office of the Transfer
Agent as may be specified by the Corporation by notice to the holders
of Exchangeable Shares, on behalf of the Corporation of certificates
representing fully paid and non-assessable TSA Class A Common Shares
and a cheque of the Corporation payable at par at any branch of the
bankers of the Corporation in payment of the remaining portion, if
any, of the total Liquidation Amount (less any Tax required to be
deducted and withheld from the total Liquidation Amount by the
Corporation without interest). On and after the Liquidation Date, the
holders of the Exchangeable Shares shall cease to be holders of such
Exchangeable Shares and shall not be entitled to exercise any of the
rights of holders in respect thereof, other than the right to receive
their proportionate part of the total Liquidation Amount, unless
payment of the total Liquidation Amount for such Exchangeable Shares
shall not be made upon presentation and surrender of share
certificates in accordance with the foregoing provisions, in which
case the rights of the holders shall remain unaffected until the total
Liquidation Amount has been paid in the manner hereinbefore provided.
The Corporation shall have the right at any time on or after the
Liquidation Date to deposit or cause to be deposited the total
Liquidation Amount in respect of the Exchangeable Shares represented
by certificates that have not at the Liquidation Date been surrendered
by the holders thereof in a custodial account with any chartered bank
or trust company in Canada. Upon such deposit being made, the rights
of the holders of Exchangeable Shares after such deposit shall be
limited to receiving their proportionate part of the total Liquidation
Amount (less any Tax required to be deducted and withheld therefrom)
without interest for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of the total Liquidation Amount, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all
purposes to be the holders of the TSA Class A Common Shares delivered
to them. Any certificate which represented an Exchangeable Share that
has not been deposited, with all other instruments required by this
Section 5.2, on or prior to the first anniversary of the Liquidation
Date, shall cease to represent a claim or interest of any kind or
nature as a holder of an Exchangeable Share.
5.3 After the Corporation has satisfied its obligations to pay the holders
of the Exchangeable Shares the Liquidation Amount per Exchangeable
Share pursuant to Section 5.1 of these share provisions, such holders
shall not be entitled to share in any further distribution of the
assets of the Corporation.
5.4 If TSA or TSA Holdco exercise the Liquidation Call Right, the holders
of Exchangeable Shares shall be obligated to transfer their
Exchangeable Shares to TSA or TSA Holdco, as applicable, in accordance
with the terms of the Liquidation Call Right.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time,
subject to the exercise by TSA of the Retraction Call Right
and otherwise upon compliance with the provisions of this
Article 6, to require the Corporation to redeem any or all
of the Exchangeable Shares registered in the name of such
holder for an amount per share equal to (i) subject to any
Equivalent Ratio Adjustment, the Current Market Price of a
TSA Class A Common Share on the last Business Day prior to
the Retraction Date, which shall be satisfied in full by the
Corporation causing to be delivered to such holder one TSA
Class A Common Share for each Exchangeable Share presented
and surrendered by the holder, plus (ii) the Dividend Amount
and (iii) the Fractional Amount (collectively the
"Retraction Price"). To effect such redemption, the holder
shall present and surrender at the registered office of the
Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of
Exchangeable Shares the certificate or certificates
representing the Exchangeable Shares which the holder
desires to have the Corporation redeem, together with such
other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under applicable Law and
the memorandum and articles of association of the
Corporation and such additional documents and instruments as
the Transfer Agent may reasonably require, and together with
a duly executed statement (the "Retraction Request") in the
form of Schedule A hereto or in such other form as may be
acceptable to the Corporation:
(a) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by
such certificate or certificates (the "Retracted Shares")
redeemed by the Corporation;
(b) stating the Business Day on which the holder desires to have
the Corporation redeem the Retracted Shares (the "Retraction
Date"), provided that the Retraction Date shall be not less
than ten (10) Business Days nor more than fifteen (15)
Business Days after the date on which the Retraction Request
is received by the Corporation and further provided that, in
the event that no such Business Day is specified by the
holder in the Retraction Request, the Retraction Date shall
be deemed to be the fifteenth (15th) Business Day after the
date on which the Retraction Request is received by the
Corporation;
(c) acknowledging the overriding right (the "Retraction Call
Right") of TSA to purchase all but not fewer than all the
Retracted Shares directly from the holder and that the
Retraction Request shall be deemed to be a revocable offer by
the holder to sell the Retracted Shares to TSA in accordance
with the Retraction Call Right on the terms and conditions set
out in Section 6.3 below; and
(e) stating whether the holder is a Canadian Resident or is not a
Canadian Resident.
6.2 Subject to the exercise by TSA of the Retraction Call Right, upon
receipt by the Corporation or the Transfer Agent in the manner
specified in Section 6.1 hereof of a certificate or certificates
representing the number of Exchangeable Shares which the holder
desires to have the Corporation redeem, together with a Retraction
Request, and provided that the Retraction Request is not revoked by
the holder in the manner specified in Section 6.8, the Corporation
shall redeem the Retracted Shares effective at the close of business
on the Retraction Date and shall cause to be delivered to such holder
the total Retraction Price with respect to such shares. If only a part
of the Exchangeable Shares represented by any certificate are redeemed
(or purchased by TSA pursuant to the Retraction Call Right), a new
certificate for the balance of such Exchangeable Shares shall be
issued to the holder at the expense of the Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify TSA thereof and provide a copy of
such Retraction Request. In order to exercise the Retraction Call
Right, TSA must notify the Corporation in writing of its determination
to do so (the "TSA Call Notice") within five (5) Business Days of
notification to TSA by the Corporation of the receipt by the
Corporation of the Retraction Request. If TSA does not so notify the
Corporation within such five (5) Business Day period, the Corporation
will notify the holder as soon as possible thereafter that TSA will
not exercise the Retraction Call Right. If TSA delivers the TSA Call
Notice within such five (5) Business Day time period, and provided
that the Retraction Request is not revoked by the holder in the manner
specified in Section 6.8, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the Retracted
Shares to TSA in accordance with the Retraction Call Right. In such
event, the Corporation shall not redeem the Retracted Shares and TSA
shall purchase from such holder and such holder shall sell to TSA on
the Retraction Date the Retracted Shares for a purchase price (the
"Purchase Price") per share equal to the Retraction Price per share.
For the purposes of completing a purchase pursuant to the Retraction
Call Right, TSA shall deposit with the Transfer Agent, on or before
the Retraction Date, certificates representing TSA Class A Common
Shares and, if applicable, a cheque or cheques of TSA payable at par
at any branch of the bankers of TSA representing the aggregate
Dividend Amount less any amounts withheld on account of Tax required
by Law to be deducted and withheld therefrom. Provided that TSA has
complied with the immediately preceding sentence, the closing of the
purchase and sale of the Retracted Shares pursuant to the Retraction
Call Right shall be deemed to have occurred as at the close of
business on the Retraction Date and, for greater certainty, no
redemption by the Corporation of such Retracted Shares shall take
place on the Retraction Date. In the event that TSA does not deliver a
TSA Call Notice within such five (5) Business Day period, and provided
that Retraction Request is not revoked by the holder in the manner
specified in Section 6.8, the Corporation shall redeem the Retracted
Shares on the Retraction Date and in the manner otherwise contemplated
in this Article 6.
TSA shall be permitted to delegate or assign the Retraction Call Right
to TSA Holdco with the result that all references to TSA in these
share provisions with respect to the exercise of the Retraction Call
Right in respect of which the delegation or assignment is made shall
be deemed to refer to TSA Holdco.
6.4 A holder who is not a Canadian Resident shall deliver with each
Retraction Request a certificate satisfactory to the Corporation or
TSA, as the case may be, acting reasonably, issued pursuant to
Subsection 116(2) of the ITA, with respect to the Exchangeable Shares
being exchanged, having as the "certificate limit" as defined in
Subsection 116(2) of the ITA, an amount no less than the cost of the
Exchangeable Shares (which may be equal to the fair market value of
the TSA Class A Common Shares and any cash receivable by such holder
of Exchangeable Shares) to the Corporation or TSA, as the case may be.
In the case of a holder who is a partnership, the holder shall also
provide a certificate confirming the name and address of each member
thereof and the percentage of partnership interest held by each
member.
In the event that a holder fails to deliver one of the requisite
certificates described with such holder's Retraction Request or, if
the Corporation or TSA is required to deduct or withhold any amount
under any other provision of applicable Tax Law, the Corporation or
TSA, as the case may be, shall be entitled to deduct and withhold from
any consideration otherwise payable to any such holder such amounts as
the Corporation or TSA, as the case may be, is required or permitted
to deduct and withhold with respect to such payment under the ITA or
any other provision of applicable Tax Law, in each case, as amended or
succeeded; provided that such withheld amount shall not be remitted
prior to two (2) Business Days prior to the date such amount is
required by Law to be remitted (the "Remittance Date") and where such
certificate or a certificate issued pursuant to Subsection 116(4)
satisfactory to TSA Exchangeco, acting reasonably, is delivered prior
to such Remittance Date, such withheld amount shall be released to the
holder except to the extent that amounts were withheld or deducted
pursuant to another provision of applicable Tax Law. To the extent
that amounts are so withheld, such withheld amounts shall be treated
for all purposes hereof as having been paid to such holder of the
Exchangeable Shares in respect of such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate Taxing Authority and a receipt evidencing such remittance
is delivered to such holder. To the extent that the amount so required
or permitted to be deducted or withheld from any payment to a holder
exceeds the cash portion of the consideration otherwise payable to
such holder, the Corporation or TSA, as the case may be, as agent of
such holder, is hereby authorized to sell or otherwise dispose of such
portion of the consideration as is necessary to provide sufficient
funds to it to enable it to comply with such deduction or withholding
requirement and the Corporation or TSA, as the case may be, shall
notify such holder thereof and remit to such holder any unapplied
balance of the net proceeds of such sale. If the proceeds of such sale
are insufficient to fund the required withholding, such holder shall
forthwith pay to the Corporation or TSA, as the case may be, or remit
to the applicable Taxing Authority the deficiency. Such holder shall
bear all reasonable costs and expenses associated with any sale by the
Corporation or TSA, as the case may be, pursuant to the two
immediately preceding sentences.
6.5 The Corporation or TSA, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of
the holder recorded in the securities register of the Corporation for
the Exchangeable Shares or at the address specified in the holder's
Retraction Request or by holding for pick-up by the holder at the
registered office of the Corporation or at any office of the Transfer
Agent as may be specified by the Corporation by notice to the holders
of Exchangeable Shares, certificates representing fully paid and
non-assessable TSA Class A Common Shares registered in the name of the
holder or in such other name as the holder may request, and, if
applicable, a cheque payable at par at any branch of the bankers of
the Corporation or, as applicable, representing the aggregate Dividend
Amount or Fractional Share Amount in partial satisfaction of the
remaining portion of the total Retraction Price or the total Purchase
Price, as the case may be, in each case, less any amounts withheld on
account of Tax required to be deducted and withheld therefrom, and
such delivery of such certificates and cheques on behalf of the
Corporation or by TSA, as the case may be, or by the Transfer Agent
shall be deemed to be payment of and shall satisfy and discharge all
liability for the total Retraction Price or total Purchase Price, as
the case may be, to the extent that the same is represented by such
share certificates and cheques (plus any Tax deducted and withheld
therefrom and remitted to the proper Taxing Authority without
interest), unless such cheque is not paid on due presentation.
6.6 On and after the close of business on the Retraction Date, the holder
of the Retracted Shares shall cease to be a holder of such Retracted
Shares and shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive his
proportionate part of the total Retraction Price or total Purchase
Price, as the case may be, unless upon presentation and surrender of
certificates in accordance with the foregoing provisions, payment of
the total Retraction Price or the total Purchase Price, as the case
may be, shall not be made as provided in Section 6.5, in which case
the rights of such holder shall remain unaffected until the total
Retraction Price or the total Purchase Price, as the case may be, has
been paid in the manner hereinbefore provided. On and after the close
of business on the Retraction Date, provided that presentation and
surrender of certificates and payment of the total Retraction Price or
the total Purchase Price, as the case may be, has been made in
accordance with the foregoing provisions, the holder of the Retracted
Shares so redeemed by the Corporation or purchased by TSA shall
thereafter be considered and deemed for all purposes to be a holder of
the TSA Class A Common Shares delivered to it. Any certificate which
represented an Exchangeable Share that has not been deposited, with
all other instruments required by this Article 6, on or prior to the
sixth anniversary of the Effective Date, shall cease to represent a
claim or interest of any kind or nature as a holder of an Exchangeable
Share.
6.7 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of
Retracted Shares would be contrary to solvency requirements or other
provisions of applicable Law, including, without limitation, the NSCA
and United States securities Laws. If the Corporation believes that on
any Retraction Date it would not be permitted by any of such
provisions to redeem all the Retracted Shares tendered for redemption
on such date, and provided that TSA shall not have exercised the
Retraction Call Right with respect to all the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent of the
maximum number that may be so redeemed (rounded down to a whole number
of shares) as would not be contrary to such provisions and shall
notify the holder at least two (2) Business Days prior to the
Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by
the Corporation of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable Law, including, without
limitation, the NSCA and United States securities Laws, the
Corporation shall redeem the maximum number of whole Exchangeable
Shares which the Board of Directors determine the Corporation is, on
the Retraction Date, permitted to redeem, which shall be selected as
nearly as may be pro rata (disregarding fractions) in proportion to
the total number of Exchangeable Shares tendered for retraction by
each holder thereof and the Corporation shall issue to each holder of
Retracted Shares a new certificate, at the expense of the Corporation,
representing the Retracted Shares not redeemed by the Corporation
pursuant to Section 6.2 hereof. Provided that the Retraction Request
is not revoked by the holder in the manner specified in Section 6.8
and provided further that TSA shall not have exercised the Retraction
Call Right with respect to the Retracted Shares, the holder of any
such Retracted Shares not redeemed by the Corporation pursuant to
Section 6.2 of these share provisions as a result of liquidity or
solvency requirements or applicable Laws shall be deemed, by giving
the Retraction Request, to require TSA to purchase such Retracted
Shares from such holder on the Retraction Date or as soon as
practicable thereafter on payment by TSA to such holder of the
Purchase Price for each such Retracted Share, all as more specifically
provided in the Voting and Exchange Trust Agreement.
6.8 A holder of Retracted Shares may, by notice in writing given by such
holder to the Corporation before the close of business on the Business
Day immediately preceding the Retraction Date, withdraw its Retraction
Request in which event such Retraction Request shall be null and void
and, for greater certainty, the revocable offer constituted by the
Retraction Request to sell the Retracted Shares to TSA shall be deemed
to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable Law (including solvency restrictions which may
require redemption of fewer than all of the Exchangeable Shares on a
partial, pro-rata basis), and if TSA does not exercise the Redemption
Call Right, the Corporation shall on the Redemption Date redeem the
whole of the then outstanding Exchangeable Shares (other than those
held by TSA and its Affiliates) for an amount per share equal to (i)
subject to any Equivalent Ratio Adjustment, the Current Market Price
of a TSA Class A Common Share on the last Business Day prior to the
Redemption Date, which shall be satisfied in full by the Corporation
causing to be delivered to each holder of Exchangeable Shares one TSA
Class A Common Share for each Exchangeable Share held by such holder,
plus (ii) the Dividend Amount plus (iii) the Fractional Share Amount
(collectively the "Redemption Price").
7.2 In any case of a redemption of Exchangeable Shares under this Article
7, the Corporation shall, at least forty (40) Business Days before the
Redemption Date (other than a Redemption Date established in
connection with a TSA Control Transaction, a TSA Spin-Out Decision
Date, an Exchangeable Share Voting Event or an Exempt Exchangeable
Share Voting Event), send or cause to be sent to each holder of
Exchangeable Shares a notice in writing of the redemption by the
Corporation or the purchase by TSA under the Redemption Call Right, as
the case may be, of the Exchangeable Shares held by such holder. In
the case of a Redemption Date established in connection with a TSA
Control Transaction, a TSA Spin-Out Decision Date, an Exchangeable
Share Voting Event and an Exempt Exchangeable Share Voting Event, the
written notice of redemption by the Corporation or the purchase by TSA
under the Redemption Call Right will be sent on or before the
Redemption Date, on as many days prior written notice as may be
determined by the Board of Directors of the Corporation, acting in
good faith and in its sole discretion and with a view to permitting
the holders of Exchangeable Shares sufficient time to exchange their
Exchangeable Shares prior to the record date for determination of the
registered holders of TSA Class A Common Shares in order to
participate in a TSA Control Transaction or TSA Spin-Out Decision
Date, to be reasonably practicable in the circumstances. In any such
case, such notice shall set out the Redemption Price or the Redemption
Call Purchase Price, as the case may be, the Redemption Date and, if
applicable, particulars of the Redemption Call Right.
7.3 On or before the Redemption Date, a holder of Exchangeable Shares
shall deliver to the Corporation a certificate stating whether the
holder is a Canadian Resident or is not a Canadian Resident.
On or before the Redemption Date, a holder of Exchangeable Shares who
is not a Canadian Resident shall deliver to the Corporation a
certificate issued pursuant to Subsection 116(2) of the ITA, with
respect to the Exchangeable Shares being redeemed having as the
"certificate limit" as defined in Subsection 116(2) of the ITA, an
amount no less than the cost of the Exchangeable Shares (which may be
equal to the fair market value of the TSA Class A Common Shares and
any cash receivable by such holder) to the Corporation.
In the case of a holder who is a partnership, the holder shall also
provide a certificate confirming the name and address of each member
thereof and the percentage of partnership interest held by each
member.
In the event that a holder fails to deliver one of the requisite
certificates described or if the Corporation is required to deduct or
withhold any amount under any other provision of applicable Tax Law,
the Corporation shall be entitled to deduct and withhold from any
consideration otherwise payable to any such holder such amounts as the
Corporation is required or permitted to deduct and withhold with
respect to such payment under the ITA or any other provision of
applicable Tax Law, in each case, as amended or succeeded; provided
that such withheld amount shall not be remitted prior to two (2)
Business Days prior to the date such amount is required by Law to be
remitted (the "Remittance Date") and where such certificate or a
certificate issued pursuant to Subsection 116(4) satisfactory to the
Corporation, acting reasonably, is delivered prior to such Remittance
Date, such withheld amount shall be released to the holder except to
the extent that amounts were withheld or deducted pursuant to another
provision of applicable Tax Law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to such holder of the Exchangeable Shares
in respect of which such deduction and withholding was made, provided
that such withheld amounts are actually remitted to the appropriate
Taxing Authority and a receipt evidencing such remittance is delivered
to such holder. To the extent that the amount so required or permitted
to be deducted or withheld from any payment to a holder exceeds the
cash portion of the consideration otherwise payable to such holder,
the Corporation, as the case may be, as agent of such holder, is
hereby authorized to sell or otherwise dispose of (or itself take
title at the then-Current Market Price) such portion of the
consideration as is necessary to provide sufficient funds to it to
enable it to comply with such deduction or withholding requirement and
the Corporation shall notify such holder thereof and remit to such
holder any unapplied balance of the net proceeds of such sale. If the
proceeds of such sale are insufficient to fund the required
withholding, such holder shall forthwith pay to the Corporation or
remit to the applicable Taxing Authority the deficiency. Such holder
shall bear all reasonable costs and expenses associated with any sale
by the Corporation pursuant to the two immediately preceding
sentences.
7.4 On or after the Redemption Date and subject to the exercise by TSA of
the Redemption Call Right, the Corporation shall cause to be delivered
to the holders of the Exchangeable Shares to be redeemed the
Redemption Price for each such Exchangeable Share, upon presentation
and surrender at the registered office of the Corporation or at any
office of the Transfer Agent as may be specified by the Corporation in
such notice of the certificates representing such Exchangeable Shares,
together with such other documents and instruments as may be required
to effect a transfer of Exchangeable Shares under applicable Law and
the memorandum and articles of association of the Corporation and such
additional documents and instruments as the Transfer Agent may
reasonably require. Payment of the total Redemption Price for such
Exchangeable Shares shall be made by delivery to each holder, at the
address of the holder recorded in the securities register of the
Corporation or by holding for pick up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent as
may be specified by the Corporation in such notice, on behalf of the
Corporation of certificates representing fully paid and non-assessable
TSA Class A Common Shares and, if applicable, a cheque of the
Corporation payable at par at any branch of the bankers of the
Corporation in respect of the full amount of the Dividend Amount or
Fractional Share Amount comprising the total Redemption Price (less
any Tax required to be deducted and withheld from the total Redemption
Price by the Corporation without interest). On and after the
Redemption Date, the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of holders in
respect thereof, other than the right to receive their proportionate
part of the total Redemption Price, unless payment of the total
Redemption Price for such Exchangeable Shares shall not be made upon
presentation and surrender of certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall
remain unaffected until the total Redemption Price has been paid in
the manner hereinbefore provided. The Corporation shall have the right
at any time after the sending of notice of its intention to redeem the
Exchangeable Shares as aforesaid to deposit or cause to be deposited
the total Redemption Price for the Exchangeable Shares so called for
redemption, or of such of the said Exchangeable Shares represented by
certificates that have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption,
in a custodial account with any chartered bank or trust company in
Canada named in such notice, less any amounts withheld on account of
Tax required to be deducted and withheld therefrom. Upon the later of
such deposit being made and the Redemption Date, the Exchangeable
Shares in respect whereof such deposit shall have been made shall be
redeemed and the rights of the holders thereof after such deposit or
Redemption Date, as the case may be, shall be limited to receiving
their proportionate part of the total Redemption Price for such
Exchangeable Shares so deposited, against presentation and surrender
of the said certificates held by them, respectively, in accordance
with the foregoing provisions. Upon such payment or deposit of the
total Redemption Price, the holders of the Exchangeable Shares shall
thereafter be considered and deemed for all purposes to be holders of
the TSA Class A Common Shares delivered to them. Any certificate which
represented an Exchangeable Share that has not been deposited, with
all other instruments required by this Section 7.4, on or prior to the
first anniversary of the Redemption Date, shall cease to represent a
claim or interest of any kind or nature as a holder of an Exchangeable
Share.
7.5 If TSA or TSA Holdco exercises the Redemption Call Right, the holders
of Exchangeable Shares shall be obligated to transfer their
Exchangeable Shares to TSA or TSA Holdco, as the case may be, in
accordance with the terms of the Redemption Call Right.
ARTICLE 8
VOTING RIGHTS
8.1 Except as required by applicable Law and the provisions of Article 9
and Sections 10.1, 10.2 and 11.2, the holders of the Exchangeable
Shares shall not be entitled as such to receive notice of or to attend
any meeting of the shareholders of the Corporation or to vote at any
such meeting. The holders of the Exchangeable Shares shall, however,
be entitled to notice of meetings of the shareholders called for the
purpose of authorizing the liquidation, dissolution or winding up of
the Corporation.
ARTICLE 9
AMENDMENT, APPROVAL AND CONVERSION
9.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may beadded to, changed or removed but only with
the approval of the holders of the Exchangeable Shares given as
hereinafter specified.
9.2 Any approval given by the holders of the Exchangeable Shares to add
to, change or remove any right, privilege, restriction or condition
attaching to the Exchangeable Shares or any other matter requiring the
approval or consent of the holders of the Exchangeable Shares shall be
deemed to have been sufficiently given if it shall have been given in
accordance with applicable Law, including without limitation the NSCA,
subject to a minimum requirement that such approval be evidenced by
resolution passed by not less than two-thirds of the votes cast on
such resolution at a meeting of holders of Exchangeable Shares duly
called and held at which the holders of at least 25% of the
outstanding Exchangeable Shares at that time are present or
represented by proxy (excluding Exchangeable Shares beneficially owned
by TSA or an Affiliate of TSA). If at any such meeting the holders of
at least 25% of the outstanding Exchangeable Shares at that time are
not present or represented by proxy within one-half hour after the
time appointed for such meeting then the meeting shall be adjourned to
such date not less than five days thereafter and to such time and
place as may be designated by the chairman of such meeting. At such
adjourned meeting the holders of Exchangeable Shares present or
represented by proxy thereat may transact the business for which the
meeting was originally called and a resolution passed thereat by the
affirmative vote of not less than two-thirds of the votes cast on such
resolution at such meeting shall constitute the approval or consent of
the holders of the Exchangeable Shares.
9.3 Notwithstanding any other provision hereof, the Corporation shall be
entitled to convert at any time any outstanding Exchangeable Shares
into Common Shares with the consent of the holder of such Exchangeable
Shares (the "Corporation Conversion Right"). To exercise the
Corporation Conversion Right, the Corporation will send a written
request for the consent of a holder to convert a specified number of
Exchangeable Shares into Common Shares (the "Conversion Request"),
and, at a mutually agreed time, the Corporation shall convert each
such Exchangeable Share held by such holder who has given his or its
consent thereto for such number of Common Shares as would have an
equivalent value at the time of conversion (the "Conversion Amount")
upon presentation and surrender at the principal corporate office of
the Corporation of the certificate(s) representing such Exchangeable
Shares, together with such other documents and instruments as may be
required to effect a transfer of the Exchangeable Shares under
applicable Law and the memorandum and articles of association of the
Corporation and such additional documents and instruments, if any, as
the Corporation may reasonably require. Payment of the Conversion
Amount shall be made by delivery to the consenting holder, at the
address stated in the Conversion Request, of the specified number of
Common Shares, which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or
encumbrance.
ARTICLE 10
RECIPROCAL CHANGES, ETC. IN RESPECT OF TSA CLASS A COMMON SHARES
10.1 Each holder of an Exchangeable Share is deemed to acknowledge that the
Support Agreement provides, in part, that so long as there are
Exchangeable Shares outstanding which are not held by TSA or any
Affiliate of TSA, TSA will not without the prior approval of the
Corporation and the prior approval of the holders of the Exchangeable
Shares given in accordance with Section 9.2 of these share provisions:
(a) issue or distribute TSA Class A Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire TSA Class A Common Shares) to the holders of all or
substantially all of the then outstanding TSA Class A Common
Shares by way of stock dividend (or a stock split payable as a
stock dividend) or other distribution, other than an issue of TSA
Class A Common Shares (or securities exchangeable for or
convertible into or carrying rights to acquire TSA Class A Common
Shares) to holders of TSA Class A Common Shares who exercise an
option to receive dividends in TSA Class A Common Shares (or
securities exchangeable for or convertible into or carrying
rights to acquire TSA Class A Common Shares) in lieu of receiving
cash dividends; or
(b) issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding TSA Class A
Common Shares entitling them to subscribe for or to purchase TSA
Class A Common Shares (or securities exchangeable for or
convertible into or carrying rights to acquire TSA Class A Common
Shares); or
(c) issue or distribute to the holders of all or substantially all of
the then outstanding TSA Class A Common Shares:
(i) shares or securities of TSA of any class other than TSA
Class A Common Shares (other than shares convertible into or
exchangeable for or carrying rights to acquire TSA Class A
Common Shares);
(ii) rights, options or warrants other than those referred to in
Subsection 10.1(b) above,
(iii) evidences of indebtedness of TSA; or
(iv) assets of TSA;
unless the Corporation or TSA is permitted under applicable
Law to issue and distribute the same, or the economic
equivalent on a per share basis of, such rights, options,
securities, shares, evidences of indebtedness or other assets
to holders of the Exchangeable Shares other than TSA and its
Affiliates or to effect an Equivalent Stock Subdivision or an
Equivalent Ratio Adjustment and the Corporation or TSA issues
or distributes the same, or the economic equivalent of, such
rights, options, securities, shares, evidences of indebtedness
or other assets simultaneously to holders of the Exchangeable
Shares or effect an Equivalent Stock Subdivision or an
Equivalent Ratio Adjustment; provided that, for greater
certainty, the above restrictions shall not: (i) apply to any
securities issued or distributed by TSA in order to give
effect to and to consummate the transactions contemplated by,
and in accordance with, the Plan of Arrangement or (ii)
restrict TSA's overriding Redemption Call Right in the event
of a TSA Spin-Out Decision Date.
10.2 Each holder of an Exchangeable Share is deemed to acknowledge that the
Support Agreement further provides, in part, that so long as there are
Exchangeable Shares outstanding which are not held by TSA or any
Affiliate of TSA, TSA will not without the prior approval of the
Corporation and the prior approval of the holders of the Exchangeable
Shares given in accordance with Section 9.2 of these share provisions:
(a) subdivide, redivide or change the then outstanding TSA Class A
Common Shares into a greater number of TSA Class A Common Shares;
or
(b) reduce, combine or consolidate or change the then outstanding TSA
Class A Common Shares into a lesser number of TSA Class A Common
Shares; or
(c) reclassify or otherwise change the TSA Class A Common Shares or
effect an amalgamation, merger, reorganization or other
transaction affecting the TSA Class A Common Shares;
unless (i) the Corporation is permitted under applicable Law to
simultaneously make the same or an economically equivalent change
to, or in the rights of the holders of, the Exchangeable Shares,
and (ii) the same or an economically equivalent change is made
to, or in the rights of the holders of, the Exchangeable Shares.
The Support Agreement further provides, in part, that the
aforesaid provisions of the Support Agreement shall not be
changed without the approval of the holders of the Exchangeable
Shares given in accordance with Section 9.2 of these share
provisions.
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER THE SUPPORT AGREEMENT
11.1 The Corporation will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to
ensure performance and compliance by TSA and TSA Holdco with all
provisions of the Support Agreement applicable to the Corporation, TSA
and TSA Holdco, respectively, in accordance with the terms thereof
including, without limitation, taking all such actions and doing all
such things as shall be necessary or advisable to enforce to the
fullest extent possible for the direct benefit of the Corporation or
the holders of Exchangeable Shares all rights and benefits in favour
of the Corporation or the holders of Exchangeable Shares under or
pursuant to such agreement.
11.2 The Corporation shall not propose, agree to or otherwise give effect
to any amendment to, or waiver or forgiveness of its rights or
obligations under, the Support Agreement without the approval of the
holders of the Exchangeable Shares given in accordance with Section
9.2 of these share provisions other than such amendments, waivers
and/or forgiveness as may be necessary or advisable for the purposes
of:
(a) adding to the covenants of any or all parties to such agreement
for the protection of the Corporation or the holders of the
Exchangeable Shares;
(b) making such provisions or modifications not inconsistent with
these Exchangeable Share Provisions as may be necessary or
desirable with respect to matters or questions which, in the good
faith opinion of the Board of Directors of the Corporation, it
may be expedient to make, provided that such Board of Directors
shall be of the good faith opinion, after consultation with
counsel, that such provisions or modifications will not be
prejudicial to the interests of the holders of the Exchangeable
Shares; or
(c) making such changes or corrections to such agreement which, on
the advice of counsel to the Corporation, are reasonably required
for the purpose of curing or correcting any ambiguity or defect
or inconsistent provision or clerical omission or mistake or
manifest error, provided that in the opinion of the Board of
Directors of the Corporation, after consultation with counsel,
such changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
ARTICLE 12
LEGEND; CALL RIGHTS
12.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend, in form and on terms approved by the
Board of Directors, with respect to:
(a) the Support Agreement;
(b) the provisions of these share provisions relating to the
Liquidation Call Right, the Retraction Call Right and the
Redemption Call Right (a copy of which rights shall be attached
to each certificate); and
(c) the Voting and Exchange Trust Agreement (including the provisions
with respect to the voting rights, exchange right and automatic
exchange thereunder).
12.2 Each holder of an Exchangeable Share, whether of record or
beneficially, by virtue of becoming and being such a holder shall be
deemed to acknowledge each of the Liquidation Call Right, the
Retraction Call Right and the Redemption Call Right, in each case, in
favor of TSA and other permitted persons and the overriding nature
thereof in connection with the liquidation, dissolution or winding-up
of the Corporation or the retraction or redemption of Exchangeable
Shares, as the case may be, and to be bound thereby in favor of TSA
and other permitted persons as therein provided.
ARTICLE 13
MISCELLANEOUS
13.1 Any notice, request or other communication to be given to the
Corporation by a holder of Exchangeable Shares shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by
facsimile or by delivery to the registered office of the Corporation
and addressed to the attention of the Secretary. Any such notice,
request or other communication, if given by mail, facsimile or
delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
13.2 Any presentation and surrender by a holder of Exchangeable Shares to
the Corporation or the Transfer Agent of certificates representing
Exchangeable Shares in connection with the liquidation, dissolution or
winding up of the Corporation or the retraction or redemption of
Exchangeable Shares shall be made by registered mail (postage prepaid)
or by delivery to the registered office of the Corporation or to such
office of the Transfer Agent as may be specified by the Corporation,
in each case addressed to the attention of the Secretary of the
Corporation. Any such presentation and surrender of certificates shall
only be deemed to have been made and to be effective upon actual
receipt thereof by the Corporation or the Transfer Agent, as the case
may be. Any such presentation and surrender of certificates made by
registered mail shall be at the sole risk of the holder mailing the
same.
13.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in
writing and shall be valid and effective if given by mail (postage
prepaid) or by delivery to the address of the holder recorded in the
securities register of the Corporation or, in the event of the address
of any such holder not being so recorded, then at the last known
address of such holder. Any such notice, request or other
communication, if given by mail, shall be deemed to have been given
and received on the fifth (5th) Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been given
and received on the date of delivery. Accidental failure or omission
to give any notice, request or other communication to one or more
holders of Exchangeable Shares shall not invalidate or otherwise alter
or affect any action or proceeding to be taken by the Corporation
pursuant thereto.
13.4 If the Corporation determines that mail service is or is threatened to
be interrupted at the time when the Corporation is required or elects
to give any notice to the holders of Exchangeable Shares hereunder,
the Corporation shall, notwithstanding the provisions hereof, give
such notice by means of publication in The National Post, The Globe
and Mail, national edition, or any other English language daily
newspaper or newspapers of general circulation in Canada and in a
French language daily newspaper of general circulation in the Province
of Quebec, once in each of two (2) successive weeks, and notice so
published shall be deemed to have been given on the latest date on
which the first publication has taken place.
If, by reason of any actual or threatened interruption of mail service
due to strike, lock-out or otherwise, any notice to be given to the
Corporation would be unlikely to reach its destination in a timely
manner, such notice shall be valid and effective only if delivered
personally to the Corporation in accordance with Sections 13.1 or
13.2, as the case may be.
13.5 For greater certainty, the Corporation shall not be required for any
purpose under these share provisions to recognize or take account of
persons who are not so recorded in such securities register.
13.6 Except as otherwise provided by applicable Law, all Exchangeable
Shares acquired by the Corporation upon the redemption or retraction
thereof shall be cancelled.
SCHEDULE A
TO
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
NOTICE OF RETRACTION
To the Corporation, TSA and TSA Holdco:
This notice is given pursuant to Article 6 of the provisions (the "Share
Provisions") attaching to the share(s) represented by this certificate and all
capitalized words and expressions used in this notice which are defined in the
Exchangeable Share Provisions have the meanings ascribed to such words and
expressions in such Exchangeable Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the Retraction
Call Right referred to below, the undersigned desires to have the Corporation
redeem in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] _______________________ share(s) only.
The undersigned hereby notifies the Corporation that the Retraction Date shall
be _____________________________________.
NOTE: The Retraction Date must be a Business Day and must not be less than ten
(10) Business Days nor more than fifteen (15) Business Days after the date upon
which this notice is received by the Corporation. In the event that no such
Business Day is specified above, the Retraction Date shall be deemed to be the
fifteenth (15th) Business Day after the date on which this notice is received by
the Corporation.
The undersigned acknowledges the Retraction Call Right of TSA to purchase all
but not less than all the Retracted Shares from the undersigned and that this
notice shall be deemed to be a revocable offer by the undersigned to sell the
Retracted Shares to TSA in accordance with the Retraction Call Right on the
Retraction Date for the Retraction Price and on the other terms and conditions
set out in Section 6.3 of the Share Provisions. If TSA determines not to
exercise the Retraction Call Right, the Corporation will notify the undersigned
of such fact as soon as possible. This notice of retraction, and offer to sell
the Retracted Shares to TSA, may be revoked and withdrawn by the undersigned by
notice in writing given to the Corporation at any time before the close of
business on the Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that the Retraction Call Rights of TSA may, at the
option of TSA, be exercised by TSA or TSA Holdco.
The undersigned acknowledges that if, as a result of solvency provisions of
applicable Law, the Corporation is unable to redeem all Retracted Shares, the
undersigned will be deemed to have exercised the Exchange Right (as defined in
the Voting and Exchange Trust Agreement) so as to require TSA to purchase the
unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the Corporation, TSA and TSA
Holdco that the undersigned has good title to, and owns, the share(s)
represented by this certificate to be acquired by the Corporation or TSA, as the
case may be, free and clear of all liens, claims and encumbrances.
______________ _______________________ ______________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the securities and any cheque(s)
resulting from the retraction or purchase of the Retracted
Shares are to be held for pick-up by the shareholder at the
principal transfer office of Wells Fargo Bank Minnesota,
National Association (the "Transfer Agent") in South St.
Paul, Minnesota, failing which the securities and any
cheque(s) will be mailed to the last address of the
shareholder as it appears on the register.
The legal or beneficial owner of the Retracted Shares is for the purposes of the
Income Tax Act (Canada), as amended (please check one):
[ ] a resident of Canada
[ ] a non-resident of Canada
NOTE: A holder of Exchangeable Shares who is a non-resident of Canada for
Canadian income tax purposes is required to deliver a clearance certificate
which evidences that such shareholder has prepaid any Canadian income tax
arising on a capital gain realized on the retraction. In addition, similar
certificates may be required by provincial taxing authorities. A clearance
certificate must be obtained even in circumstances where the holder is not
subject to Canadian income tax on a retraction. In the event that a holder fails
to deliver the requisite certificates described above with this Notice of
Retraction, the purchaser of the Retracted Shares is entitled to deduct and
withhold from any consideration otherwise payable to any such holder such
amounts (including a portion of the TSA Class A Common Shares that would
otherwise be delivered on a Retraction) as the purchaser is required or
permitted to deduct and withhold with respect to such payment under Canadian or
provincial income tax law. The details of such withholding are set out more
fully in the Exchangeable Share Provisions.
NOTE: This section must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be deposited with
the Transfer Agent at its principal transfer office in South St. Paul,
Minnesota. The securities and any cheque(s) resulting from the retraction or
purchase of the Retracted Shares will be issued and registered in, and made
payable to, respectively, the name of the shareholder as it appears on the
register of the Corporation and the securities and cheque(s) resulting from such
retraction or purchase will be delivered to such shareholder as indicated above,
unless the form appearing immediately below is duly completed.
__________________________________ Date_____________________
Name of Person in Whose Name Securities or Cheque(s)
Are To Be Registered, Issued or Delivered (please print)
__________________________________ __________________________
Street Address or P.O. Box Signature of Shareholder
__________________________________ __________________________
City - Province/State Signature Guaranteed by
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining shares
of the Corporation will be issued and registered in the name of the shareholder
as it appears on the register of the Corporation, unless the share transfer
power on the share certificate is duly completed in respect of such shares.
SCHEDULE B
TO
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
TSA LIQUIDATION CALL RIGHT
(a) TSA shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of TSA Exchangeco or any
other distribution of the assets of TSA Exchangeco for the
purposes of winding-up its affairs pursuant to Article 5 of the
Exchangeable Share Provisions, to purchase from all but not less
than all of the holders of Exchangeable Shares (other than TSA
and its Affiliates) on the Liquidation Date all but not less than
all of the Exchangeable Shares held by each such holder on
payment by TSA of an amount per share equal to: (i) the Current
Market Price (as defined in the Exchangeable Share Provisions) of
one TSA Class A Common Share on the last Business Day prior to
the Liquidation Date, which shall be satisfied in full by TSA
delivering or causing to be delivered to such holder one TSA
Class A Common Share (subject to any Equivalent Ratio
Adjustment), plus (ii) the Dividend Amount; plus (iii) the
Fractional Share Amount (collectively the "Liquidation Call
Purchase Price") without interest. In the event of the exercise
of the Liquidation Call Right by TSA, each holder shall be
obligated to sell all of the Exchangeable Shares held by the
holder to TSA on the Liquidation Date on payment by TSA to the
holder of the Liquidation Call Purchase Price for each such
share;
(b) To exercise the Liquidation Call Right, TSA must notify the
Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and TSA Exchangeco of TSA's intention to
exercise such right at least thirty (30) Business Days before the
Liquidation Date in the case of a voluntary liquidation,
dissolution or winding up of TSA Exchangeco and at least five (5)
Business Days before the Liquidation Date in the case of an
involuntary liquidation, dissolution or winding up of TSA
Exchangeco. TSA will notify the Transfer Agent accordingly if it
does not intend to exercise the Liquidation Call Right. The
Transfer Agent will notify the holders of Exchangeable Shares as
to whether or not TSA has exercised the Liquidation Call Right
forthwith after the expiry of the date by which the same may be
exercised by TSA. If TSA exercises the Liquidation Call Right, on
the Liquidation Date, TSA will purchase and the holders will sell
all of the Exchangeable Shares then outstanding for a price per
share equal to the Liquidation Call Purchase Price;
(c) Prior to the Liquidation Date, each holder of Exchangeable Shares
shall deliver to TSA:
(i) a certificate confirming that such holder is a Canadian
Resident; or
(ii) in the case of a holder who is not a Canadian Resident, a
certificate satisfactory to TSA acting reasonably, issued
pursuant to Subsection 116(2) of the ITA, with respect to
the Exchangeable Shares exchanged or disposed of, having as
the "certificate limit", as defined in Subsection 116(2) of
the ITA, an amount no less than the cost of the Exchangeable
Shares (which may be the fair market value of the TSA Class
A Common Shares and any cash receivable by such holder of
Exchangeable Shares) to TSA or TSA Holdco as the case may
be.
In the case of a holder who is a partnership, the holder shall
also provide a certificate confirming the name and address of
each member thereof and the percentage of partnership interest
held by each member.
In the event that a holder fails to deliver one of the
requisite certificates described above at or before the
Liquidation Date or, if TSA is required to deduct or withhold
any amount pursuant to any other provision of applicable Tax
Law, TSA shall be entitled to deduct and withhold from any
consideration otherwise payable to any such holder such
amounts and by such means as set out in Section 4.7
(Withholding Rights) of the Plan of Arrangement;
(d) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, TSA shall deposit
with the Transfer Agent, on or before the Liquidation Date,
certificates representing the aggregate number of TSA Class A
Common Shares deliverable by TSA in partial satisfaction of the
total Liquidation Call Purchase Price and a cheque or cheques in
the amount of the remaining portion, if any, of the total
Liquidation Call Purchase Price without interest. Provided that
the total Liquidation Call Purchase Price has been so deposited
with the Transfer Agent (or withheld pursuant to paragraph (c)
above), on and after the Liquidation Date the rights of each
holder of Exchangeable Shares will be limited to receiving such
holder's proportionate part of the total Liquidation Call
Purchase Price payable by TSA without interest upon presentation
and surrender by the holder of certificates representing the
Exchangeable Shares held by such holder. The holder shall on and
after the Liquidation Date be considered and deemed for all
purposes to be the holder of the TSA Class A Common Shares
delivered to it. Upon surrender to the Transfer Agent of a
certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under the
NSCA and the memorandum and articles of association of TSA
Exchangeco and such additional documents and instruments as the
Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to
receive in exchange therefor, and the Transfer Agent on behalf of
TSA shall deliver to such holder, certificates representing the
TSA Class A Common Shares to which the holder is entitled and a
cheque or cheques of TSA payable at par at any branch of the
bankers of TSA in payment of the remaining portion, if any, of
the total Liquidation Call Purchase Price. If TSA does not
exercise the Liquidation Call Right in the manner described
above, on the Liquidation Date the holders of the Exchangeable
Shares will be entitled to receive in exchange therefor the
Liquidation Amount otherwise payable by TSA Exchangeco in
connection with the liquidation, dissolution or winding-up of TSA
Exchangeco pursuant to Article 5 of the Exchangeable Share
Provisions.
SCHEDULE C
TO
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
TSA REDEMPTION CALL RIGHT
(a) TSA shall have the overriding right (the "Redemption Call
Right"), notwithstanding the proposed redemption of the
Exchangeable Shares by TSA Exchangeco pursuant to Article 7 of
the Exchangeable Share Provisions, to purchase from all but not
less than all of the holders of Exchangeable Shares (other than
TSA and its Affiliates) on the Redemption Date all but not less
than all of the Exchangeable Shares held by each such holder on
payment by TSA to the holder of an amount per share equal to (i)
the Current Market Price (as defined in the Exchangeable Share
Provisions) of one TSA Class A Common Share on the last Business
Day prior to the Redemption Date which shall be satisfied in full
by causing to be delivered to such holder one TSA Class A Common
Share (subject to any Equivalent Ratio Adjustment) plus; (ii) the
Dividend Amount, plus (iii) the Fractional Share Amount
(collectively the "Redemption Call Purchase Price"). In the event
of the exercise of the Redemption Call Right by TSA, each holder
shall be obligated to sell all of the Exchangeable Shares held by
the holder to TSA on the Redemption Date on payment by TSA to the
holder of the Redemption Call Purchase Price for each such share.
(b) To exercise the Redemption Call Right, TSA must notify the
Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and TSA Exchangeco of TSA's intention to
exercise such right at least forty (40) Business Days before the
Redemption Date, except in the case of a redemption occurring as
a result of a TSA Control Transaction, a TSA Spin-Out Decision
Date, an Exchangeable Share Voting Event or an Exempt
Exchangeable Share Voting Event, in which case TSA shall so
notify the Transfer Agent and TSA Exchangeco on or before the
Redemption Date. The Transfer Agent will notify the holders of
the Exchangeable Shares as to whether or not TSA has exercised
the Redemption Call Right forthwith after the date by which the
same may be exercised by TSA. If TSA exercises the Redemption
Call Right, on the Redemption Date, TSA will purchase and the
holders will sell all of the Exchangeable Shares then outstanding
for a price per share equal to the Redemption Call Purchase
Price;
(c) Prior to the Redemption Date, each holder of Exchangeable Shares
shall deliver to TSA:
(i) a certificate confirming that such holder is a Canadian
Resident; or
(ii) in the case of a holder who is a not a Canadian Resident, a
certificate satisfactory to the purchaser acting reasonably,
issued pursuant to Subsection 116(2) of the ITA, with
respect to the Exchangeable Shares exchanged or disposed of
a certificate under Subsection 116(2) of the ITA having as
the "certificate limit", as defined in Subsection 116(2) of
the ITA, an amount no less than the cost of the Exchangeable
Shares (which may be the fair market value of the TSA Class
A Common Shares and any cash receivable by such holder of
Exchangeable Shares) to TSA or TSA Holdco, as the case may
be.
In the case of a holder who is a partnership, the holder shall
also provide a certificate confirming the name and address of
each member thereof and the percentage of partnership interest
held by each member.
In the event that a holder fails to deliver one of the
requisite certificates described above or, if TSA is required
to deduct or withhold any other amount pursuant to any
provision of applicable Tax Law, at or before the Redemption
Date, TSA shall be entitled to deduct and withhold from any
consideration otherwise payable to any such holder such
amounts and by such means as set out in Section 4.7
(Withholding Rights) of the Plan of Arrangement;
(d) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, TSA shall deposit
with the Transfer Agent, on or before the Redemption Date,
certificates representing the aggregate number of TSA Class A
Common Shares deliverable by TSA in partial satisfaction of the
total Redemption Call Purchase Price and a cheque or cheques in
the amount of the remaining portion, if any, of the total
Redemption Call Purchase Price. Provided that the total
Redemption Call Purchase Price has been so deposited with the
Transfer Agent (or withheld pursuant to paragraph (c) above), on
and after the Redemption Date the rights of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Redemption Call Purchase Price
payable by TSA upon presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such
holder. The holder shall on and after the Redemption Date be
considered and deemed for all purposes to be the holder of the
TSA Class A Common Shares delivered to such holder without
interest. Upon surrender to the Transfer Agent of a certificate
or certificates representing Exchangeable Shares, together with
such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the NSCA and the
memorandum and articles of association of TSA Exchangeco and such
additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor,
and the Transfer Agent on behalf of TSA shall deliver to such
holder, certificates representing the TSA Class A Common Shares
to which the holder is entitled and a cheque or cheques of TSA
payable at par at any branch of the bankers of TSA in payment of
the remaining portion, if any, of the total Redemption Call
Purchase Price. If TSA does not exercise the Redemption Call
Right in the manner described above, on the Redemption Date the
holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the redemption price otherwise payable by TSA
Exchangeco in connection with the redemption of the Exchangeable
Shares pursuant to Article 7 of the Exchangeable Share
Provisions.
SCHEDULE D
TO
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
SUPPORT AGREEMENT
SUPPORT AGREEMENT, dated as of January 11, 2001 among
Transaction Systems Architects, Inc., a Delaware corporation ("TSA"),
Transaction Systems Architects Nova Scotia Company, a Nova Scotia unlimited
company ("TSA Holdco"), and TSA Exchangeco Limited, a Nova Scotia limited
company ("TSA Exchangeco").
WHEREAS in connection with a combination agreement dated as of
October 24, 2000 among TSA, TSA Holdco, TSA Exchangeco and MessagingDirect
Ltd., an Alberta Corporation ("MDL"), (the "Combination Agreement"), TSA
Exchangeco is to issue exchangeable shares (the "Exchangeable Shares") to
certain holders of securities of MDL pursuant to the plan of arrangement to be
effected by Articles of Arrangement filed under the Business Corporations Act
(Alberta) contemplated by the Combination Agreement and attached as an exhibit
thereto (the "Plan of Arrangement");
WHEREAS, the Plan of Arrangement sets forth the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
WHEREAS, the parties to the Combination Agreement desire to
make appropriate provision and to establish a procedure whereby TSA, TSA
Holdco and TSA Exchangeco will take certain actions and make certain payments
and deliveries necessary to ensure that TSA Exchangeco will be able to make
certain payments and to deliver or cause to be delivered TSA Class A Common
Shares ("TSA Class A Common Shares") in satisfaction of the obligations of TSA
Exchangeco under the Exchangeable Share Provisions with respect to the payment
and satisfaction of dividends, Liquidation Amounts, Retraction Prices and
Redemption Prices, all in accordance with the Exchangeable Share Provisions;
and
WHEREAS, as part of the Plan of Arrangement and pursuant to
the Combination Agreement, the parties hereto are to execute and deliver a
Support Agreement substantially in the form of this Agreement on the Effective
Date (as defined in the Combination Agreement);
NOW THEREFORE in consideration of the respective covenants
and agreements provided in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms
Each term denoted herein by initial capital letters and not
otherwise defined herein shall have the meaning ascribed thereto in the
Exchangeable Share Provisions, unless the content requires otherwise.
1.2 Interpretation Not Affected by Headings, Etc.
The division of this Agreement into Articles, Sections and
other portions and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation hereof. Unless
otherwise indicated, all references to an "Article" or "Section" followed by a
number and/or a letter refer to the specified Article or Section of this
Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and
similar expressions refer to this Agreement (including the Schedules and
Exhibits hereto) and not to any particular Article, Section or other portion
hereof, but do not include any agreement or instrument supplementary or
ancillary hereto.
1.3 Number, Gender, Etc.
Words importing the singular number only shall include the
plural and vice versa. Words importing the use of any gender shall include all
genders.
1.4 Date For Any Action
If any date on which any action is required to be taken under
this Agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE II
COVENANTS OF TSA, TSA HOLDCO AND TSA EXCHANGECO
2.1 Covenants of TSA Regarding Exchangeable Shares
So long as any Exchangeable Shares not owned by TSA or its
Affiliates are outstanding, TSA will:
(a) not declare or pay any dividend on the TSA Class A Common Shares
unless: (i) TSA Exchangeco shall comply with the provisions of
Section 3.1 of the Exchangeable Share Provisions; and (ii) TSA
Exchangeco shall have sufficient money or other assets or
authorized but unissued securities available to enable the due
declaration and the due and punctual payment, in accordance with
applicable Law, of any dividend to be declared and paid by TSA
Exchangeco all in accordance with Section 3.1 of the Exchangeable
Share Provisions;
(b) advise TSA Exchangeco sufficiently in advance of the declaration
by TSA of any dividend on the TSA Class A Common Shares and take
all such other actions as are necessary, in cooperation with TSA
Exchangeco, to ensure that: (i) the respective declaration date,
record date and payment date for a dividend on the Exchangeable
Shares shall be the same declaration date, record date and
payment date for the corresponding dividend on the TSA Class A
Common Shares; or, (ii) the effective date for an Equivalent
Stock Subdivision or Equivalent Ratio Adjustment, as the case may
be, shall be the same as the payment date for the corresponding
stock dividend on the TSA Class A Common Shares;
(c) take all such actions and do all such things as are necessary or
desirable to enable and permit TSA Exchangeco, in accordance with
applicable Law, to pay and otherwise perform its obligations with
respect to the satisfaction of the Liquidation Amount, the
Retraction Price or the Redemption Price in respect of each
issued and outstanding Exchangeable Share (other than
Exchangeable Shares owned by TSA or its Affiliates) upon the
liquidation, dissolution or winding up of TSA Exchangeco, or any
other distribution of the assets of TSA Exchangeco among its
Shareholders for the purpose of winding up its affairs, the
delivery of a Retraction Request by a holder of Exchangeable
Shares or a redemption of Exchangeable Shares by TSA Exchangeco,
as the case may be, including, without limitation, all such
actions and all such things as are necessary or desirable to
enable and permit TSA Exchangeco to cause to be delivered TSA
Class A Common Shares to the holders of Exchangeable Shares in
accordance with the provisions of Articles 5, 6 or 7, as the case
may be, of the Exchangeable Share Provisions;
(d) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit TSA Exchangeco, TSA
Holdco or TSA, in accordance with applicable Law, to perform its
obligations contemplated in the Plan of Arrangement (including
the Exchangeable Share Provisions), including without limitation,
those obligations arising upon the exercise by it of the
Liquidation Call Right, the Retraction Call Right or the
Redemption Call Right, and further including, without limitation,
all such actions and all such things as are necessary or
desirable to enable and permit TSA Exchangeco, TSA Holdco or TSA
to cause TSA Class A Common Shares to be delivered to the holders
of Exchangeable Shares, in accordance with the provisions of the
Liquidation Call Right, the Retraction Call Right or the
Redemption Call Right, as the case may be; and
(e) not exercise its vote as a shareholder, directly or indirectly,
to initiate the voluntary liquidation, dissolution or winding up
of TSA Exchangeco or any other distribution of the assets of TSA
Exchangeco among its shareholders for the purpose of winding up
its affairs, nor take any action or omit to take, directly or
indirectly, any action that is designed to result in the
liquidation, dissolution or winding up of TSA Exchangeco or any
other distribution of the assets of TSA Exchangeco among its
shareholders for the purpose of winding up its affairs, subject
to the provision in section 2.9 herein that a reorganization of
TSA Exchangeco shall not be prohibited in circumstances outlined
therein.
2.2 Segregation of Funds
TSA will cause TSA Exchangeco to deposit a sufficient amount
of funds in a separate account of TSA Exchangeco and segregate a sufficient
amount of such assets and other property as is necessary to enable TSA
Exchangeco to pay dividends when due and to pay or otherwise satisfy the
applicable dividends, Liquidation Amount, Retraction Price or Redemption
Price, in each case for the benefit of holders from time to time of the
Exchangeable Shares (other than TSA and its Affiliates), and TSA Exchangeco
will use such funds, assets and other property so segregated exclusively for
the payment of dividends and the payment or other satisfaction of the
Liquidation Amount, the Retraction Price or the Redemption Price, as
applicable, net of any corresponding withholding tax obligations and for the
remittance of such withholding tax obligations.
2.3 Reservation of TSA Class A Common Shares
TSA hereby represents, warrants and covenants that it has
irrevocably reserved for issuance and will at all times while any Exchangeable
Shares (other than Exchangeable Shares held by TSA or its Affiliates) are
outstanding, keep available, free from pre-emptive and other rights, out of
its authorized and unissued share capital such number of TSA Class A Common
Shares (or other shares or securities into which TSA Class A Common Shares may
be reclassified or changed as contemplated by Section 2.7 hereof): (a) as is
equal to the sum of: (i) the number of Exchangeable Shares issued and
outstanding from time to time (other than those Exchangeable Shares that have
been acquired by TSA or its Affiliates); and (ii) the number of Exchangeable
Shares issuable upon the exercise of all rights to acquire Exchangeable Shares
outstanding from time to time; and (b) as are now and may hereafter be
required to enable and permit TSA Exchangeco to meet its obligations
hereunder, under the Voting and Exchange Trust Agreement, under the
Exchangeable Share Provisions and under any other security or commitment
pursuant to the Plan of Arrangement with respect to which TSA may now or
hereafter be required to issue TSA Class A Common Shares and to enable and
permit TSA Exchangeco, TSA Holdco, or TSA to meet its obligations under the
Automatic Exchange Rights (as defined in the Voting and Exchange Trust
Agreement), Exchangeable Share Provisions, Liquidation Call Right, the
Retraction Call Right and the Redemption Call Right.
2.4 Notification of Certain Events
In order to assist TSA in complying with its obligations
hereunder and to permit TSA Exchangeco, TSA Holdco, or TSA to exercise the
Liquidation Call Right, the Retraction Call Right and the Redemption Call
Right, TSA Exchangeco will notify TSA, and TSA Holdco (and with respect to (a)
below, the transfer agent of the Exchangeable Shares) of each of the following
events at the time set forth below:
(a) in the event of any determination by the Board of Directors of
TSA Exchangeco to institute voluntary liquidation, dissolution or
winding up proceedings with respect to TSA Exchangeco or to
effect any other distribution of the assets of TSA Exchangeco
among its shareholders for the purpose of winding up its affairs,
at least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding up or other distribution;
(b) immediately, upon the earlier of: (i) receipt by TSA Exchangeco
of notice of; and (ii) TSA Exchangeco otherwise becoming aware
of, any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding up of TSA Exchangeco or to effect any
other distribution of the assets of TSA Exchangeco among its
shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by TSA Exchangeco of a Retraction
Request;
(d) on the same date on which notice of redemption is given to the
holders of Exchangeable Shares, upon the determination of a
Redemption Date in accordance with the Exchangeable Share
Provisions; and
(e) as soon as practicable upon the issue by TSA Exchangeco of any
Exchangeable Shares or rights to acquire Exchangeable Shares
(other than the issue of Exchangeable Shares and rights to
acquire Exchangeable Shares in exchange for MDL Class A Shares
pursuant to the Arrangement).
2.5 Delivery of TSA Class A Common Shares
In furtherance of TSA's obligations under Sections 2.1 (c)
and 2.1 (d) hereof, upon notice from TSA Exchangeco, TSA Holdco or TSA of any
event that requires any such party to cause TSA Class A Common Shares to be
delivered to any holder of Exchangeable Shares, TSA shall forthwith allot or
reserve, issue and deliver or cause to be delivered to the relevant holder of
Exchangeable Shares as directed by TSA Exchangeco, TSA Holdco or TSA of the
requisite number of TSA Class A Common Shares to be allotted to or reserved
for, and received by and issued to the former holder of the surrendered
Exchangeable Shares. All such TSA Class A Common Shares shall be validly
issued, fully paid, non-assessable, and will be free and clear of any lien,
claim or encumbrance attributable to, or arising due to, any action or
omission of the issuer.
2.6 Issuance, Listing and Registration of TSA Class A Common
Shares
So long as any Exchangeable Shares not owned by TSA or its
Affiliates are outstanding, TSA will cause the TSA Class A Common Shares to be
issued from time to time upon exchange of the Exchangeable Shares to be quoted
on the NASDAQ or such other exchange or quotation system to the same extent as
TSA stock is quoted generally, subject only to official notice of issuance.
TSA will prepare and file the Registration Statement (as defined in the
Combination Agreement) with the SEC.
2.7 Economic Equivalence
So long as any Exchangeable Shares not owned by TSA or its
Affiliates are outstanding:
(a) TSA will not without the prior approval of TSA
Exchangeco and the prior approval of the holders of
the Exchangeable Shares given in accordance with
Section 9.2 of the Exchangeable Share Provisions:
(i) issue or distribute TSA Class A Common
Shares (or securities exchangeable for or
convertible into or carrying rights to
acquire TSA Class A Common Shares) to the
holders of all or substantially all of the
then outstanding TSA Class A Common Shares
by way of stock dividend (including a
stock split payable as a stock dividend)
or other distribution, other than an issue
of TSA Class A Common Shares (or
securities exchangeable for or convertible
into or carrying rights to acquire TSA
Class A Common Shares) to holders of TSA
Class A Common Shares who exercise an
option to receive dividends in TSA Class A
Common Shares (or securities exchangeable
for or convertible into or carrying rights
to acquire TSA Class A Common Shares) in
lieu of receiving cash dividends;
(ii) issue or distribute rights, options or
warrants to the holders of all or
substantially all of the then outstanding
TSA Class A Common Shares entitling them
to subscribe for or to purchase TSA Class
A Common Shares (or securities
exchangeable for or convertible into or
carrying rights to acquire TSA Class A
Common Shares); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding
TSA Class A Common Shares:
(A) shares or securities of TSA of any
class other than TSA Class A Common
Shares (other than shares
convertible into or exchangeable for
or carrying rights to acquire TSA
Class A Common Shares);
(B) rights, options or warrants other than those referred to in Section
2.7(a)(ii) above;
(C) evidences of indebtedness of TSA; or
(D) assets of TSA;
unless TSA or TSA Exchangeco is permitted under
applicable Law to issue or distribute the same, or
the economic equivalent on a per share basis of, such
rights, options, securities, shares, evidences of
indebtedness or other assets to holders of the
Exchangeable Shares other than TSA and its Affiliates
or to effect an Equivalent Stock Subdivision or
Equivalent Ratio Adjustment and TSA or TSA Exchangeco
issues or distributes the same, or the economic
equivalent of, such rights, options, securities,
shares, evidences of indebtedness or other assets
simultaneously to holders of the Exchangeable Shares
or effects an Equivalent Stock Subdivision or
Equivalent Ratio Adjustment; provided that, for
greater certainty, the above restrictions shall not:
(i) apply to any securities issued or distributed by
TSA in order to give effect to and to consummate the
transactions contemplated by, and in accordance with,
the Plan of Arrangement or (ii) restrict TSA's
overriding Redemption Call Right in the event of a
TSA Spin-Out Decision Date.
(b) TSA will not without the prior approval of TSA
Exchangeco and the prior approval of the holders of
the Exchangeable Shares given in accordance with
Section 9.2 of the Exchangeable Share Provisions:
(i) subdivide, redivide or change the then
outstanding TSA Class A Common Shares into a
greater number of TSA Class A Common Shares;
or
(ii) reduce, combine, consolidate or change the
then outstanding TSA Class A Common Shares
into a lesser number of TSA Class A Common
Shares; or
(iii) reclassify or otherwise change the TSA Class
A Common Shares or effect an amalgamation,
merger, reorganization or other transaction
affecting the TSA Class A Common Shares;
unless (x) TSA Exchangeco is permitted under
applicable Law to make the same or an economically
equivalent change to, or in the rights of holders of,
the Exchangeable Shares and (y) the same or an
economically equivalent change is made to, or in the
rights of the holders of, the Exchangeable Shares.
(c) Should the board of directors of TSA Exchangeco determine, in good
faith and in its sole and absolute discretion, to
provide economic equivalence for the purposes of
any event referred to in section 2.7 (a) or (b)
above, the board of directors of TSA Exchangeco
shall determine, in its sole and absolute
discretion, (with the assistance of such reputable
and qualified independent financial advisors and/or
other experts as the board of directors of TSA
Exchangeco may require) such economic equivalence,
and each such determination shall be conclusive and
binding on TSA Exchangeco, all TSA Exchangeco
security holders and TSA. In making such
determination of economic equivalence, the
following factors shall, without excluding other
factors determined by the board of directors of TSA
Exchangeco to be relevant, be considered by the
board of directors of TSA Exchangeco :
(i) in the case of any stock dividend or other
distribution payable in TSA Class A Common
Shares, the number of such shares issued in
proportion to the number of TSA Class A
Common Shares previously outstanding;
(ii) in the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase TSA
Class A Common Shares (or securities
exchangeable for or convertible into or
carrying rights to acquire TSA Class A
Common Shares), the relationship between
the exercise price of each such right,
option or warrant and the Current Market
Price;
(iii) in the case of the issuance or distribution of any other form of
property (including without limitation any
securities of TSA of any class other than
TSA Class A Common Shares, any rights,
options or warrants other than those
referred to in Subsection (b) above, any
evidences of indebtedness of TSA or any
assets of TSA), the relationship between
the fair market value (as determined by
the board of directors of TSA Exchangeco
in the manner above contemplated) of such
property to be issued or distributed with
respect to each outstanding TSA Class A
Common Share and the Current Market Price;
(iv) in the case of any subdivision, re-division or change of the then
outstanding TSA Class A Common Shares into
a greater number of TSA Class A Common
Shares or the reduction, combination or
consolidation or change of the then
outstanding TSA Class A Common Shares into
a lesser number of TSA Class A Common
Shares or any amalgamation, merger,
re-organization or other transaction
effecting the TSA Class A Common Shares,
the effect thereof on the then outstanding
shares of TSA Class A Common Shares; and
(v) the general taxation consequences of the relevant event to holders of
Exchangeable Shares to the extent that
such consequences may differ from the
taxation consequences to holders of TSA
Class A Common Shares as a result of
differences between Tax Laws of Canada,
the United Kingdom, and the United States
(except for any differing consequences
arising as a result of differing marginal
taxation rates and without regard to the
individual circumstances of holders of
Exchangeable Shares).
(d) TSA Exchangeco agrees that, to the extent required,
and subject to TSA's overriding Redemption Call
Right in the event of a TSA Spin-Out Decision Date,
upon due notice from TSA, TSA Exchangeco will use
its best efforts to take or cause to be taken such
steps as may be necessary for the purposes of
ensuring that appropriate dividends are paid or
other distributions are made by TSA Exchangeco, or
changes are made to the Exchangeable Shares or that
an Equivalent Ratio Adjustment is made, in order to
implement the required economic equivalence with
respect to TSA Class A Common Shares and
Exchangeable Shares as provided for in this Section
2.7.
2.8 Tender Offers, Etc.
In the event that a tender offer, share exchange offer, issuer
bid, take-over bid or similar transaction with respect to TSA Class A Common
Shares (an "Offer") is proposed by TSA or is proposed to TSA or its
shareholders and is recommended by the board of directors of TSA, or is
otherwise effected or to be effected with the consent or approval of the board
of directors of TSA and the Exchangeable Shares are not redeemed by TSA
Exchangeco or purchased by TSA Holdco (or TSA) pursuant to the Redemption Call
Right or Automatic Exchange Rights, TSA will use its reasonable efforts in
good faith to take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit holders of Exchangeable Shares
other than TSA and its Affiliates to participate in such Offer to the same
extent and on an economically equivalent basis as the holders of TSA Class A
Common Shares, without discrimination. Without limiting the generality of the
foregoing, TSA will use its reasonable efforts in good faith to ensure that
holders of Exchangeable Shares may participate in each such Offer without
being required to retract Exchangeable Shares as against TSA Exchangeco (or,
if so required, to ensure that any such retraction shall be effective only
upon, and shall be conditional upon, the closing of such Offer and only to the
extent necessary to tender or deposit to the Offer). Nothing herein shall
affect the rights of TSA Exchangeco to redeem (or TSA Holdco or TSA to
purchase pursuant to the Redemption Call Right or Automatic Exchange Rights)
Exchangeable Shares, as applicable, in the event of a TSA Control Transaction.
2.9 Ownership of Outstanding Shares of TSA Exchangeco
TSA covenants and agrees in favour of TSA Exchangeco that, as
long as any outstanding Exchangeable Shares are owned by any Person other than
TSA or its Affiliates, TSA will be and remain the direct or indirect
beneficial owner of all issued and outstanding voting shares in the capital of
TSA Exchangeco and of all of the issued and outstanding shares of TSA Holdco,
unless obtaining the prior approval of TSA Exchangeco and the prior approval
of the holders of the Exchangeable Shares given in accordance with Section 9.2
of the Exchangeable Share Provisions, and provided that this shall not
prohibit a reorganization of TSA Exchangeco or TSA Holdco which results in TSA
or its Affiliates assuming or succeeding to the rights and obligations of TSA
Exchangeco and TSA Holdco hereunder, but provided further that no such
reorganization shall result in the holders of Exchangeable Shares becoming
shareholders or otherwise beneficially interested in any body corporate or
other entity which does not afford its shareholders (or other equity holders)
limited liability.
2.10 TSA and Affiliates Not to Vote Exchangeable Shares
TSA covenants and agrees that it will appoint and cause to be
appointed proxy holders with respect to all Exchangeable Shares held by TSA
and its Affiliates, specifically including TSA Holdco, for the sole purpose of
attending each meeting of holders of Exchangeable Shares in order to be
counted as part of the quorum for each such meeting. TSA further covenants and
agrees that it will not, and will cause each of its Affiliates (including TSA
Holdco) not to, exercise any voting rights that may be exercisable by holders
of Exchangeable Shares from time to time pursuant to the Exchangeable Share
Provisions or pursuant to the provisions of the ABCA (or any successor or
other corporate statute by which TSA Exchangeco may in the future be governed)
with respect to any Exchangeable Shares held by it or by TSA Holdco, TSA or by
TSA's Affiliates in respect of any matter considered at any meeting of holders
of Exchangeable Shares.
2.11 Due Performance
On and after the Effective Date, TSA shall duly and timely
perform all of its obligations provided for in the Plan of Arrangement,
including any obligations that may arise upon the exercise of TSA's rights
under the Exchangeable Share Provisions.
ARTICLE III
GENERAL
3.1 Term
This Agreement shall come into force and be effective as of
the date hereof and shall terminate and be of no further force and effect at
such time as no Exchangeable Shares (or securities or rights convertible into
or exchangeable for or carrying rights to acquire Exchangeable Shares) are
held by any party other than TSA and any of its Affiliates.
3.2 Changes in Capital of TSA and TSA Exchangeco
Notwithstanding the provisions of Section 3.4 hereof, at all
times after the occurrence of any event effected pursuant to Section 2.7 or
2.8 hereof or otherwise, as a result of which either the TSA Class A Common
Shares or the Exchangeable Shares or both are in any way changed, this
Agreement shall forthwith be amended and modified as necessary in order that
it shall apply with full force and effect, mutatis mutandis, to all new
securities into which TSA Class A Common Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
3.3 Severability
If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the greatest extent possible, the economic,
businesses, legal and other purposes of the void or unenforceable provision.
3.4 Amendments, Modifications, Etc.
Subject to Section 3.2, 3.3 and 3.5, this Agreement may not
be amended or modified except by an agreement in writing executed by TSA
Exchangeco, TSA, and TSA Holdco and approved by the holders of the
Exchangeable Shares in accordance with Section 9.2 of the Exchangeable Share
Provisions.
3.5 Administrative Amendments
Notwithstanding the provisions of Section 3.4, the parties to
this Agreement may in writing, at any time and from time to time, without the
approval of the holders of the Exchangeable Shares, amend or modify this
Agreement as may be necessary or advisable for the purposes of:
(a) adding to the covenants of any or all parties to this
Agreement for the protection of TSA Exchangeco or the
holders of the Exchangeable Shares, provided that the
board of directors of each of TSA, TSA Exchangeco and
TSA Holdco shall be of the good faith opinion, after
consultation with counsel, that such additions will not
be prejudicial to the rights or interest of the holders
of Exchangeable Shares;
(b) making such provisions or modifications not inconsistent with this
Agreement as may be necessary or desirable with
respect to matters or questions which, in the good
faith opinion of the board of directors of each of
TSA Exchangeco, TSA Holdco and TSA, it may be
expedient to make, provided that each such board of
directors shall be of the good faith opinion, after
consultation with counsel, that such provisions or
modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares;
or
(c) making such changes or corrections to this Agreement, which, on the
advice of counsel, are reasonably required for the
purpose of curing or correcting any ambiguity or
defect or inconsistent provision or clerical omission
or mistake or manifest error, provided that in the
opinion of the board of directors of each of TSA
Exchangeco, TSA Holdco and TSA, after consultation
with counsel, such changes or corrections will not
be prejudicial to the interests of the holders of the
Exchangeable Shares.
3.6 Meeting to Consider Amendments
TSA Exchangeco, at the request of TSA, shall call a meeting
or meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval pursuant
to Section 3.4 hereof. Any such meeting or meetings shall be called and held
in accordance with the by-laws of TSA Exchangeco, the Exchangeable Share
Provisions and all applicable Laws.
3.7 Amendments Only in Writing
No amendment to or modification or waiver of any of the
provisions of this Agreement otherwise permitted hereunder shall be effective
unless made in writing and signed by all of the parties hereto.
3.8 Inurement
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, the holders from time to time of the Exchangeable
Shares and their respective successors and permitted assigns from time to
time, as well as to their respective heirs, executors, trustees,
administrators and other personal representatives.
3.9 Notices to Parties
All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally, by
facsimile, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to TSA, TSA Holdco or TSA Exchangeco:
Transaction Systems Architects, Inc.
224 South 108th Avenue
Suite 7
Omaha, Nebraska
68154
Attention: General Counsel and Secretary
Facsimile: (402) 390-8077
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a facsimile, when the party receiving such copy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the tenth business day following such
mailing.
3.10 Counterparts
This Agreement may be executed in any number of counterparts,
each of which will be an original as regards any party whose signature appears
thereon and all of which together will constitute one and the same instrument.
This Agreement will become binding when one or more counterparts hereof,
individually or taken together, will bear the signatures of all the parties
reflected hereon as signatories.
3.11 Jurisdiction
This Agreement shall be construed and enforced in accordance
with the laws of the Province of Alberta and the laws of Canada applicable
therein.
3.12 Attornment
Each of the parties hereto agrees that any action or
proceeding arising out of or relating to this Agreement may be instituted in
the courts of Alberta, waives any objection which it may have now or hereafter
to the venue of any such action or proceeding, irrevocably submits to the
jurisdiction of the said courts in any such action or proceeding, agrees to be
bound by any judgment of the said courts and not to seek, and hereby waives,
any review of the merits of any such judgment by the courts of any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
TRANSACTION SYSTEMS ARCHITECTS, INC.
By:
___________________________________
Name:
Title:
TRANSACTION SYSTEMS ARCHITECTS NOVA SCOTIA COMPANY
By:
___________________________________
Name: David P. Stokes
Title: President and Secretary
TSA EXCHANGECO LIMITED
By:
___________________________________
Name: David P. Stokes
Title: President and Secretary
APPENDIX C TO THE
PLAN OF ARRANGEMENT
PROVISIONS ATTACHING TO PREFERRED SHARES
OF TSA EXCHANGECO LIMITED
The Preferred Shares in the capital of TSA Exchangeco Limited shall
have the following rights, privileges, restrictions and conditions.
ARTICLE 1
INTERPRETATION
For the purposes of these share provisions:
"Affiliate" has the meaning ascribed to the term "affiliate" in the
NSCA;
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day, other than a Saturday, a Sunday or a day
which is a statutory or civic holiday in the State of Nebraska;
"Call and Right of First Refusal Agreement" means the Call and Right of
First Refusal Agreement with respect to the Preferred Shares to be entered into
by TSA Subco, TSA Holdco and the Corporation prior to the initial issuance of
the Preferred Shares;
"Call Notice" has the meaning ascribed thereto in Section 4.2 of
these share provisions;
"Canadian Dollar Equivalent" means in respect of an amount expressed in
currency other than Canadian dollars (the "Foreign Currency Amount") on any
date, the product obtained by multiplying (a) the Foreign Currency Amount by (b)
the noon spot exchange rate on such date for such foreign currency expressed in
Canadian dollars as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date for such foreign
currency expressed in Canadian dollars as may be deemed by the Board of
Directors to be appropriate for such purpose;
"Canadian Resident" means a resident of Canada for the purposes of
the ITA;
"Common Shares" means the common shares of the Corporation;
"Corporation" means TSA Exchangeco Limited, a Nova Scotia limited
company;
"Current Market Price" means, in respect of a TSA Class A Common Share
on any date, the Canadian Dollar Equivalent of the average closing price
(computed and rounded to the third decimal point) of TSA Class A Common Shares
during a period of twenty (20) consecutive trading days ending not more than
three (3) trading days before such date on the NASDAQ, or, if the TSA Class A
Common Shares are not then listed on the NASDAQ, on such other stock exchange or
automated quotation system on which the TSA Class A Common Shares are listed or
quoted, as the case may be, as may be selected by the Board of Directors for
such purpose; provided, however, that if in the opinion of the Board of
Directors the public distribution or trading activity of TSA Class A Common
Shares during such period does not create a market which reflects the fair
market value of a TSA Class A Common Share, then the Current Market Price of a
TSA Class A Common Share shall be determined by the Board of Directors based
upon the advice of such qualified independent financial advisors as the Board of
Directors may deem to be appropriate, and provided further that any such
selection, opinion or determination by the Board of Directors shall be
conclusive and binding or, if none of the foregoing is applicable, then the fair
market value of the TSA Class A Common Shares as determined in good faith by the
Board of Directors;
"Dividend Amount" means an amount equal to the full amount of all
accrued (whether or not declared) and unpaid dividends on each Preferred Share
at the Retraction Date, Early Redemption Date, Mandatory Redemption Date or
Liquidation Date, as applicable;
"Dividend Payment Date" has the meaning ascribed thereto in Section
2.1 (a);
"Dividend Period" has the meaning ascribed thereto in Section 2.1 (a);
"Early Redemption Call Purchase Price" has the meaning ascribed
thereto in the Call and Right of First Refusal Agreement;
"Early Redemption Call Right" means the overriding purchase right
provided pursuant to, and defined in, the Call and Right of First Refusal
Agreement;
"Early Redemption Date" means the date which is the earlier of: (i) the
date, if any, falling during the period commencing on the second anniversary of
the Effective Date and ending on the day immediately prior to the fifth
anniversary of the Effective Date, and established by the Board of Directors for
the redemption by the Corporation of all but not fewer than all of the Preferred
Shares pursuant to Article 5 of these share provisions; (ii) the date, if any,
being the date of, or any date following, the occurrence of a TSA Control
Transaction and established by the Board of Directors for the redemption by the
Corporation of all but not fewer than all of the Preferred Shares pursuant to
Article 5 of these share provisions; or (iii) with respect to a Holder who is an
employee of TSA or of an Affiliate of TSA, and only with respect to the
Preferred Shares held by such Holder, the date, if any, being the date of or any
date following the date of termination of the Holder's employment with TSA or
such Affiliate of TSA and established by the Board of Directors for the
redemption by the Corporation of all Preferred Shares of such holder pursuant to
Article 5 of these share provisions.
"Early Redemption Price" has the meaning ascribed thereto in Section
5.1 of these share provisions;
"Effective Date" means the date that the Preferred Shares are issued
by the Corporation;
"Exchangeable Shares" mean the exchangeable non-voting shares of the
Corporation;
"Fractional Share Amount" means the amount of cash payable in lieu of a
fractional TSA Class A Common Share that would otherwise be issuable to the
holder of a Preferred Share in respect of an exchange of Preferred Shares for
TSA Class A Common Shares hereunder on any retraction or redemption;
"ITA" means the Income Tax Act (Canada) R.S.C. 1985, c.1 (5th Supp.),
as amended;
"Law" means any federal, state, provincial, territorial, municipal or
other law, statute, regulation, code, recommendation, notice, judgment, treaty,
directive, ordinance, writ, injunction, decree, by-law, order, restriction,
official plan or stated policy, whether domestic or foreign; and "Laws" means
all of the foregoing;
"Liquidation Amount" means, with respect to the Preferred Shares, the
amount per share equal to the sum of the Subscription Price and the Dividend
Amount;
"Mandatory Redemption Date" means the date which is the fifth
anniversary of the Effective Date;
"Mandatory Redemption Price" has the meaning ascribed thereto in
Section 6.1 of these share provisions;
"NASDAQ" means the Nasdaq National Market or any successor systems;
"NSCA" means the Companies Act (Nova Scotia), R.S.N.S. 1989, C.81, as
amended;
"Preferred Shares" means the non-voting shares of the Corporation
having the rights, privileges, restrictions and conditions set forth herein;
"Present Value" means the present value on the Early Redemption Date,
calculated using the then-prevailing interest rate as determined by the Board of
Directors;
"Purchase Price" has the meaning ascribed thereto in the Call and
right of First Refusal Agreement;
"Ratio" means the number that is the quotient of: (i) the Liquidation
Amount; and (ii) 115% of the Current Market Price on the Effective Date. The
quotient shall be taken to five decimal places. If TSA recapitalizes its
outstanding capital stock through a subdivision of its outstanding shares into a
greater number of shares, or a combination of its outstanding shares into a
lesser number of shares, or reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes, or declares a dividend on its outstanding shares payable in shares of
its capital stock or securities convertible into shares of its capital stock, or
completes a rights offering for TSA Class A Common Shares solely to its existing
shareholders at a price less than market price, or grants a material option
solely to existing shareholders to acquire any TSA Class A Common Shares at a
price less than market price then the Exchange Ratio will be adjusted
proportionately to equitably reflect such event;
"Record Date" has the meaning ascribed thereto in Section 2.1;
"Remittance Date" has the meaning ascribed thereto in Section 3.1;
"Retracted Shares" has the meaning ascribed thereto in Subsection 4.1
(a) of these share provisions;
"Retraction Call Right" means the overriding purchase right provided
pursuant to and as defined in the Call and Right of First Refusal Agreement;
"Retraction Date" has the meaning ascribed thereto in Subsection
4.1(b) of these share provisions;
"Retraction Price" has the meaning ascribed thereto in Section 4.1 of
these share provisions;
"Retraction Request" has the meaning ascribed thereto in Section 4.1
of these share provisions;
"Right of First Refusal" means the right of first refusal provided
pursuant to and as defined in the Call and Right of First Refusal Agreement;
"Subscription Price" means the Canadian Dollar Equivalent of the paid
in purchase price per Preferred Share;
"Tax" or "Taxes" means all income, capital, payroll, sales and use,
value added, goods and services, documentary, stamp, transfer and real property
taxes and customs and excise duties, whether foreign, federal, provincial, state
or municipal (including tax withholdings, employer health taxes, workers'
compensation assessments, penalties and surcharges, Canada and Quebec Pension
Plans and employment insurance premiums, contributions and remittances) and
including any interest, penalties or surcharges attributable thereto;
"Taxing Authority" means Canada Customs and Revenue Agency, the
Internal Revenue Service or any other taxing authority, including, without
limitation, any value added tax or sales tax authority;
"Transfer Agent" means the transfer agent for the Preferred Shares that
may be engaged from time to time by the Corporation;
"TSA" means Transaction Systems Architects, Inc., a Delaware
corporation;
"TSA Class A Common Shares" mean the voting shares of TSA, par value
$0.005 per share, having voting rights of one vote per share, and any other
securities into which such shares may be changed;
"TSA Control Transaction" means the earlier to occur of the occurrence
of or approval by the stockholders of TSA of (a) any statutory exchange, merger
or amalgamation involving TSA, (b) any sale, lease, exchange or other transfer
(in one transaction or a series of transactions) of all, or substantially all,
of the assets of TSA; (c) any tender offer for TSA; or (d) any Person becoming
the beneficial owner of 20% or more of the outstanding TSA common stock who was
not the beneficial owner of 20% or more of such stock prior to the Effective
Date;
"TSA Holdco" means Transaction Systems Architects Nova Scotia
Company, a Nova Scotia unlimited company;
"TSA Subco" means a new wholly-owned subsidiary of the Corporation
incorporated under the laws of a Nova Scotia as an unlimited company;
ARTICLE 2
DIVIDENDS
2.1. Dividends:
(a) A holder of a Preferred Share shall be entitled to receive per share, out of
funds legally available for the purpose, cash dividends at a rate of seven per
cent (7.0 %) per annum applied to the Subscription Price. Such dividends shall
be cumulative from the Effective Date and shall be payable in arrears, when and
as declared by the Board of Directors of the Corporation, on January 11 of each
year (such date being referred to as the "Dividend Payment Date"), commencing on
January 11, 2002. The period from January 11, 2001 through January 11, 2002 and
each period between consecutive Dividend Payment Dates thereafter shall be
referred to as a "Dividend Period". Each such dividend shall be paid to the
holders of record of the Preferred Shares on the corresponding Record Date. The
term "Record Date" means the twentieth (20th) day preceding the Dividend Payment
Date, or such other date designated by the Board of Directors of the Corporation
with respect to the relevant dividend. Dividends on account of arrears for any
past Dividend Periods may be declared and paid at any time, without reference to
any Dividend Payment Date, to holders of record on such date, not exceeding 50
days preceding the payment date thereof, as may be fixed by the Board of
Directors. No dividends shall be payable in respect of any period less than a
full Dividend Period except as specifically provided in these share provisions.
(b) In the event that full cash dividends are not paid or made available to the
holders of all outstanding Preferred Shares, and funds available shall be
insufficient to permit payment in full in cash to all such holders of the
amounts to which they are then entitled, the entire amount available for payment
of such cash dividends shall be distributed among the holders of the Preferred
Shares ratably in proportion to the full amount to which they would otherwise be
respectively entitled, and any remainder not paid in cash to the holders of the
Preferred Shares shall cumulate as provided in (c) below.
(c) If, on any Dividend Payment Date, the Holders of the Preferred Shares shall
not have received the full dividends provided for in the other provisions of
this Section, then such dividends shall cumulate, whether or not earned or
declared, with additional dividends thereon for each succeeding full Dividend
Period during which such dividends shall remain unpaid. Unpaid dividends for any
period less than a full Dividend Period shall cumulate on a day-today basis and
shall be computed on the basis of a 365 day year.
(d) No dividends shall be paid on the Preferred Shares for so long as the
Corporation is in default of any obligation to declare or pay a dividend on the
Exchangeable Shares.
(e) For greater certainty, on a retraction or redemption of less than all of the
outstanding Preferred Shares, the Corporation shall not be required to pay the
Dividend Amount at such time on any Preferred Shares not designated for such
retraction or redemption.
2.2. Cheques of the Corporation payable at any branch of the bankers of the
Corporation shall be issued in respect of any cash dividends contemplated by
Section 3.1 hereof and the sending of such a cheque to each holder of a
Preferred Share shall satisfy the cash dividend represented thereby unless the
cheque is not paid on presentation. All dividends shall be subject to any
reduction or adjustment for Tax required to be deducted and withheld from such
dividends paid or credited by the Corporation. No holder of a Preferred Share
shall be entitled to recover by action or other legal process against the
Corporation any dividend that is represented by a cheque that has not been duly
presented to the Corporation's bankers for payment or that otherwise remains
unclaimed for a period of six years from the date on which such dividend was
payable.
2.3. Except as provided in Section 2.1, the holders of Preferred Shares
shall not be entitled to receive dividends in respect thereof.
2.4. The Corporation will not pay a dividend or make any distribution in respect
of any shares ranking junior to the Preferred Shares if the Corporation is then
in default of any dividend obligations with respect to the Preferred Shares.
ARTICLE 3
DISTRIBUTION ON LIQUIDATION
3.1. On any distribution of the assets of the Corporation among its shareholders
for the purpose of winding up its affairs, a holder of Preferred Shares shall be
entitled, subject to applicable Law, to receive from the assets of the
Corporation in respect of each Preferred Share held by such holder on the
effective date (the "Liquidation Date") of such liquidation, dissolution or
winding-up, after any distribution of any part of the assets of the Corporation
among the holders of the Exchangeable Shares and before any distribution on the
Common Shares and any other shares ranking junior to the Preferred Shares, an
amount per share equal to the Liquidation Amount. In connection with payment of
the Liquidation Amount, the Corporation shall be entitled to deduct and withhold
from any consideration otherwise payable to any such holder such amounts as the
Corporation, is required or permitted to deduct and withhold with respect to
such payment under the ITA or any other provision of applicable Tax Law, in each
case, as amended or succeeded; provided that such withheld amount shall not be
remitted prior to two (2) Business Days prior to that date such amount is
required by Law to be remitted and where certificates issued pursuant to
Subsection 116(2) or 116(4) of the ITA, if applicable, are delivered prior to
such required remittance date, such withheld amount shall be released to the
holder except to the extent that amounts were withheld or deducted pursuant to
another provision of applicable Tax Law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes hereof as
having been paid to the holder of the Preferred Shares in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate Taxing Authority and a receipt evidencing
such remittance is delivered to such holder. To the extent that the amount so
required or permitted to be deducted or withheld from any payment to a holder
exceeds the cash portion of the consideration otherwise payable to such holder,
the Corporation, as agent of such holder, is hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary to
provide sufficient funds to it to enable it to comply with such deduction or
withholding requirement and the Corporation, shall notify such holder thereof
and remit to such holder any unapplied balance of the net proceeds of such sale.
If the proceeds of such sale are insufficient to fund the required withholding,
such holder shall forthwith pay to the Corporation, or remit to the applicable
Taxing Authority, the deficiency. Such holder shall bear all reasonable costs
and expenses associated with any sale by the Corporation, pursuant to the two
immediately preceding sentences.
3.2. On or promptly after the Liquidation Date and subject to the terms hereof,
the Corporation shall cause to be delivered to the holders of the Preferred
Shares the Liquidation Amount for each such Preferred Share upon presentation
and surrender of the certificates representing such Preferred Shares, together
with such other documents and instruments as may be required to effect a
transfer of Preferred Shares under any applicable Law and the memorandum and
articles of association of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of the Preferred Shares.
Payment of the total Liquidation Amount for such Preferred Shares shall be made
by delivery to each holder, at the address of the holder recorded in the
securities register of the Corporation for the Preferred Shares or by holding
for pick up by the holder at the registered office of the Corporation a cheque
of the Corporation payable at par at any branch of the bankers of the
Corporation in payment thereof (less any Tax required to be deducted and
withheld from the total Liquidation Amount by the Corporation without interest).
On and after the Liquidation Date, the holders of the Preferred Shares shall
cease to be holders of such Preferred Shares and shall not be entitled to
exercise any of the rights of holders in respect thereof, other than the right
to receive their proportionate part of the total Liquidation Amount, unless
payment of the total Liquidation Amount for such Preferred Shares shall not be
made upon presentation and surrender of share certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time on or
after the Liquidation Date to deposit or cause to be deposited the total
Liquidation Amount in respect of the Preferred Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof in a custodial account with any chartered bank or trust company
in Canada. Upon such deposit being made, the rights of the holders of Preferred
Shares after such deposit shall be limited to receiving their proportionate part
of the total Liquidation Amount (less any Tax required to be deducted and
withheld therefrom) without interest for such Preferred Shares so deposited,
against presentation and surrender of the said certificates held by them,
respectively, in accordance with the foregoing provisions. Any certificate which
represented a Preferred Share that has not been deposited, with all other
instruments required by this Section 3.2, on or prior to the first anniversary
of the Liquidation Date, shall cease to represent a claim or interest of any
kind or nature as a holder of a Preferred Share.
3.3. After the Corporation has satisfied its obligations to pay the holders of
the Preferred Shares the Liquidation Amount per Preferred Share pursuant to
Section 3.1 of these share provisions, such holders shall not be entitled to
share in any further distribution of the assets of the Corporation.
ARTICLE 4
RETRACTION OF PREFERRED SHARES BY HOLDER
4.1. A holder of Preferred Shares shall be entitled: (i) upon the occurrence of
a TSA Control Transaction; or (ii) at any time during the period commencing on
the second anniversary of the Effective Date and ending on the day immediately
prior to the fifth anniversary of the Effective Date, subject to the exercise of
the Retraction Call Right and otherwise upon compliance with the provisions of
this Article 4, to require the Corporation to redeem any or all of the Preferred
Shares registered in the name of such holder for an amount per Preferred Share
(the "Retraction Price") equal to the product of: (a) the Current Market Price
on the Retraction Date; and (b) the Ratio.
The Retraction Price shall be satisfied in full by the Corporation causing to be
delivered to such holder that number of TSA Class A Common Shares equal to the
Ratio, provided that fractional TSA Class A Common Shares shall not be issued
and in lieu thereof the Corporation will deliver a cheque payable at par at any
branch of the bankers of the Corporation in respect of the Fractional Share
Amount, less any Tax required to be deducted or withheld therefrom. To effect
such redemption, the holder shall present and surrender at the registered office
of the Corporation the certificate or certificates representing the Preferred
Shares which the holder desires to have the Corporation redeem, together with
such other documents and instruments as may be required to effect a transfer of
Preferred Shares under applicable Law and the memorandum and articles of
association of the Corporation and such additional documents and instruments as
the Secretary of the Corporation may reasonably require, and together with a
duly executed statement (the "Retraction Request") in the form of Schedule A
hereto or in such other form as may be acceptable to the Corporation:
(a) specifying that the holder desires to have all or any number specified
therein of the Preferred Shares represented by such certificate or certificates
(the "Retracted Shares") redeemed by the Corporation;
(b) stating the Business Day on which the holder desires to have the Corporation
redeem the Retracted Shares (the "Retraction Date"), provided that the
Retraction Date shall be not less than ten (10) Business Days nor more than
fifteen (15) Business Days after the date on which the Retraction Request is
received by the Corporation and further provided that, in the event that no such
Business Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the fifteenth (15th) Business Day after
the date on which the Retraction Request is received by the Corporation;
(c) acknowledging the overriding right (the "Retraction Call Right") of TSA
Subco to purchase all but not fewer than all the Retracted Shares directly from
the holder and that the Retraction Request shall be deemed to be a revocable
offer by the holder to sell the Retracted Shares to TSA Subco in accordance with
the Retraction Call Right on the terms and conditions set out in Section 4.3
below; and
(d) stating whether the holder is a Canadian Resident or is not a
Canadian Resident.
4.2. Subject to the exercise by TSA Subco of the Retraction Call Right, upon
receipt by the Corporation in the manner specified in Section 4.1 hereof of a
certificate or certificates representing the number of Preferred Shares which
the holder desires to have the Corporation redeem, together with a Retraction
Request, and provided that the Retraction Request is not revoked by the holder
in the manner specified in Section 4.8, the Corporation shall redeem the
Retracted Shares effective at the close of business on the Retraction Date and
shall cause to be delivered to such holder the total Retraction Price with
respect to such shares. If only a part of the Preferred Shares represented by
any certificate are redeemed (or purchased by TSA Subco pursuant to the
Retraction Call Right), a new certificate for the balance of such Preferred
Shares shall be issued to the holder at the expense of the Corporation.
4.3. The Corporation acknowledges that it is bound by the Call and Right of
First Refusal Agreement to immediately notify TSA Subco upon receipt by the
Corporation of a Retraction Request and to provide a copy of such Retraction
Request to TSA Subco. If TSA Subco has notified the Corporation in writing of
its determination to exercise the Retraction Call Right (the "Call Notice")
within five (5) Business Days of notification to TSA Subco by the Corporation of
the receipt by the Corporation of the Retraction Request, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 4.8, the Retraction Request shall thereupon be considered only to be an
offer by the holder to sell the Retracted Shares to TSA Subco in accordance with
the Retraction Call Right. In such event, the Corporation shall not redeem the
Retracted Shares. In the event that TSA Subco does not deliver a TSA Call Notice
within such five (5) Business Day period or, notwithstanding anything else in
this Section 4.3, if TSA Subco has so delivered a TSA Call Notice but fails to
comply with its obligations to purchase the Retracted Shares, and provided that
Retraction Request is not revoked by the holder in the manner specified in
Section 4.8, the Corporation shall redeem the Retracted Shares on the Retraction
Date and in the manner otherwise contemplated in this Article 5.
Should TSA Subco assign the Retraction Call Right with respect to any
Retraction Request to TSA or an Affiliate of TSA pursuant to the Call and Right
of First Refusal Agreement, all references to TSA Subco in these share
provisions with respect to the exercise of the Retraction Call Right in respect
of which the assignment is made shall be deemed to refer to such assignee.
4.4. A holder who is not a Canadian Resident shall deliver with each Retraction
Request a certificate satisfactory to the Corporation or TSA Subco, as the case
may be, acting reasonably, issued pursuant to Subsection 116(2) of the ITA, with
respect to the Preferred Shares being exchanged, having as the "certificate
limit" as defined in Subsection 116(2) of the ITA, an amount no less than the
cost of the Preferred Shares (which may be equal to the fair market value of the
TSA Class A Common Shares and any cash receivable by the holder) to the
Corporation or TSA Subco, as the case may be.
In the case of a holder who is a partnership, the holder shall also
provide a certificate confirming the name and address of each member thereof and
the percentage of partnership interest held by each member.
In the event that a holder fails to deliver one of the requisite
certificates described with such holder's Retraction Request or, if the
Corporation is required to deduct or withhold any amount under any other
provision of applicable Tax Law, the Corporation shall be entitled to deduct and
withhold from any consideration otherwise payable to any such holder such
amounts as the Corporation is required or permitted to deduct and withhold with
respect to such payment under the ITA or any other provision of applicable Tax
Law, in each case, as amended or succeeded; provided that such withheld amount
shall not be remitted prior to two (2) Business Days prior to the date such
amount is required by Law to be remitted and where such certificate or a
certificate issued pursuant to Subsection 116(4) satisfactory to the
Corporation, acting reasonably, is delivered prior to such required remittance
date, such withheld amount shall be released to the holder except to the extent
that amounts were withheld or deducted pursuant to another provision of
applicable Tax Law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes hereof as having been paid to such
holder of the Preferred Shares in respect of such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate Taxing Authority and a receipt evidencing such remittance is
delivered to such holder. To the extent that the amount so required or permitted
to be deducted or withheld from any payment to a holder exceeds the cash portion
of the consideration otherwise payable to such holder, the Corporation, as agent
of such holder, is hereby authorized to sell or otherwise dispose of (or itself
take title thereto at the then-Current Market Price) such portion of the
consideration as is necessary to provide sufficient funds to it to enable it to
comply with such deduction or withholding requirement and the Corporation shall
notify such holder thereof and remit to such holder any unapplied balance of the
net proceeds of such sale. If the proceeds of such sale are insufficient to fund
the required withholding, such holder shall forthwith pay to the Corporation or
remit to the applicable Taxing Authority the deficiency. Such holder shall bear
all reasonable costs and expenses associated with any sale by the Corporation,
pursuant to the two immediately preceding sentences.
4.5. The Corporation, shall deliver to the relevant holder, at the address of
the holder recorded in the securities register of the Corporation for the
Preferred Shares or at the address specified in the holder's Retraction Request
or by holding for pick-up by the holder at the registered office of the
Corporation, certificates representing fully paid and non-assessable TSA Class A
Common Shares registered in the name of the holder or in such other name as the
holder may request, and, if applicable, a cheque payable at par at any branch of
the bankers of the Corporation in respect of any Fractional Share Amount, in
each case, less any amounts withheld on account of Tax required to be deducted
and withheld therefrom, and such delivery of such certificates and cheques on
behalf of the Corporation, shall be deemed to be payment of and shall satisfy
and discharge all liability for the total Retraction Price, to the extent that
the same is represented by such share certificates and cheques (plus any Tax
deducted and withheld therefrom and remitted to the proper Taxing Authority
without interest), unless such cheque is not paid on due presentation.
4.6. On and after the close of business on the Retraction Date, the holder of
the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
Retraction Price, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, the Retracted Shares are not purchased
pursuant to the exercise of the Retraction Call Right or if payment of the total
Retraction Price is not made as provided in Section 4.5, in which case the
rights of such holder shall remain unaffected until the total Retraction Price
has been paid in the manner hereinbefore provided. On and after the close of
business on the Retraction Date, provided that presentation and surrender of
certificates and other requisite documents has been made in accordance with the
foregoing provisions and either the Retraction Price has been satisfied or the
Retracted Shares have been purchased pursuant to the exercise of the Retraction
Call Right, the holder of the Retracted Shares so redeemed by the Corporation or
purchased by TSA Subco or its permitted assignee shall thereafter be considered
and deemed for all purposes to be a holder of the TSA Class A Common Shares
delivered to it.
4.7. Notwithstanding any other provision of this Article 4, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable Law,
including, without limitation, the NSCA and United States securities Laws. If
the Corporation believes that on any Retraction Date it would not be permitted
by any of such provisions to redeem all the Retracted Shares tendered for
redemption on such date, and provided that TSA Subco shall not have exercised
the Retraction Call Right with respect to all the Retracted Shares, the
Corporation shall only be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two (2) Business Days
prior to the Retraction Date as to the number of Retracted Shares which will not
be redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to solvency requirements or
other provisions of applicable Law, including, without limitation, the NSCA and
United States securities Laws, the Corporation shall redeem the maximum number
of whole Preferred Shares which the Board of Directors determine the Corporation
is, on the Retraction Date, permitted to redeem, which shall be selected as
nearly as may be pro rata (disregarding fractions) in proportion to the total
number of Preferred Shares tendered for retraction by each holder thereof and
the Corporation shall issue to each holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the Retracted
Shares not redeemed by the Corporation pursuant to Section 4.2 hereof.
4.8. A holder of Retracted Shares may, by notice in writing given by such holder
to the Corporation before the close of business on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to sell the Retracted
Shares to TSA Subco shall be deemed to have been revoked.
ARTICLE 5
EARLY REDEMPTION OF PREFERRED SHARES BY THE CORPORATION
5.1. Subject to applicable Law (including solvency restrictions which may
require redemption of fewer than all of the Preferred Shares on a partial,
pro-rata basis), and if TSA Subco or its permitted assignee does not exercise
the Early Redemption Call Right, the Corporation shall on the Early Redemption
Date redeem the whole of the then outstanding Preferred Shares (except where the
redemption is to be made only with respect to the Preferred Shares of a holder
who was an employee of TSA or of an Affiliate of TSA and whose employment has
been terminated, in which event only the Preferred Shares of the Holder will be
redeemed) on payment of an amount (the "Early Redemption Price") per Preferred
Share equal to the greater of (i) the Liquidation Amount; and (ii) the fair
market value of a Preferred Share on the Early Redemption Date. In the absence
of agreement, by the Corporation and all holders whose Preferred Shares are
subject to redemption, as to the fair market value of each Preferred Share, then
such fair market value shall be deemed to be the sum of (a) the Present Value of
dividends payable thereon with respect to periods commencing on the day
immediately after the Early Redemption Date through the Mandatory Redemption
Date and (b) the product of: (i) the Current Market Price on the Early
Redemption Date; and (ii) the Ratio. The Early Redemption Price shall be
satisfied in full by the Corporation causing to be delivered to each holder of
Preferred Shares that number of TSA Class A Common Shares equal to the quotient
of (i) the Early Redemption Price; divided by (ii) the Current Market Price on
the Early Redemption Date, provided that fractional TSA A Class A Common Shares
shall not be issued and in lieu thereof the Corporation will deliver a cheque
payable at par at any branch of the bankers of the Corporation in respect of the
Fractional Share Amount, less any Tax required to be deducted or withheld
therefrom.
5.2. In any case of a redemption of Preferred Shares under this Article 5, the
Corporation shall, at least ten (10) Business Days before the Early Redemption
Date (other than a Early Redemption Date established in connection with a TSA
Control Transaction), send or cause to be sent to each holder of Preferred
Shares a notice in writing of the redemption by the Corporation, of the
Preferred Shares held by such holder. In the case of an Early Redemption Date
established in connection with a TSA Control Transaction, the written notice of
redemption by the Corporation, on as many days prior written notice as may be
determined by the Board of Directors of the Corporation, acting in good faith
and in its sole discretion and with a view to permitting the holders of
Preferred Shares sufficient time to exchange their Preferred Shares prior to the
record date for determination of the registered holders of TSA Class A Common
Shares in order to participate in a TSA Control Transaction, to be reasonably
practicable in the circumstances. In any such case, such notice shall set out
the Early Redemption Date.
5.3. On or before the Early Redemption Date, a holder of Preferred Shares shall
deliver to the Corporation a certificate stating whether the holder is a
Canadian Resident or is not a Canadian Resident.
On or before the Early Redemption Date, a holder of Preferred Shares
who is not a Canadian Resident shall deliver to the Corporation or TSA Subco, as
the case may be, a certificate issued pursuant to Subsection 116(2) of the ITA,
with respect to the Preferred Shares being redeemed having as the "certificate
limit" as defined in Subsection 116(2) of the ITA, an amount no less than the
cost of the Preferred Shares (which may be equal to the fair market value of the
TSA Class A Common Shares and any cash receivable by such holder) to the
Corporation or TSA Subco, as the case may be.
In the case of a holder who is a partnership, the holder shall also
provide a certificate confirming the name and address of each member thereof and
the percentage of partnership interest held by each member.
In the event that a holder fails to deliver one of the requisite
certificates described or if the Corporation, or TSA Subco, as the case may be,
is required to deduct or withhold any amount under any other provision of
applicable Tax Law, the Corporation or TSA Subco, as the case may be, shall be
entitled to deduct and withhold from any consideration otherwise payable to any
such holder such amounts as the Corporation or TSA Subco, as the case may be, is
required or permitted to deduct and withhold with respect to such payment under
the ITA or any other provision of applicable Tax Law, in each case, as amended
or succeeded; provided that such withheld amount shall not be remitted prior to
two (2) Business Days prior to the date such amount is required by Law to be
remitted and where such certificate or a certificate issued pursuant to
Subsection 116(4) satisfactory to the Corporation or TSA Subco, as the case may
be, acting reasonably, is delivered prior to such required remittance date, such
withheld amount shall be released to the holder except to the extent that
amounts were withheld or deducted pursuant to another provision of applicable
Tax Law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes hereof as having been paid to such holder of the
Preferred Shares in respect of which such deduction and withholding was made,
provided that such withheld amounts are actually remitted to the appropriate
Taxing Authority and a receipt evidencing such remittance is delivered to such
holder. To the extent that the amount so required or permitted to be deducted or
withheld from any payment to a holder exceeds the cash portion of the
consideration otherwise payable to such holder, the Corporation or TSA Subco, as
the case may be, as agent of such holder, is hereby authorized to sell or
otherwise dispose of (or itself take title at the then-Current Market Price)
such portion of the consideration as is necessary to provide sufficient funds to
it to enable it to comply with such deduction or withholding requirement and the
Corporation or TSA Subco, as the case may be, shall notify such holder thereof
and remit to such holder any unapplied balance of the net proceeds of such sale.
If the proceeds of such sale are insufficient to fund the required withholding,
such holder shall forthwith pay to the Corporation or TSA Subco, as the case may
be, or remit to the applicable Taxing Authority the deficiency. Such holder
shall bear all reasonable costs and expenses associated with any sale by the
Corporation or TSA Subco, as the case may be, pursuant to the two immediately
preceding sentences.
5.4. On or after the Early Redemption Date and subject to the exercise by
TSA Subco or its permitted assignee of the Early Redemption Call Right:
(a) the Corporation shall cause to be delivered to the holders of the Preferred
Shares to be redeemed the Early Redemption Price for each such Preferred Share,
upon presentation and surrender at the registered office of the Corporation,
together with such other documents and instruments as may be required to effect
a transfer of Preferred Shares under applicable Law and the memorandum and
articles of association of the Corporation and such additional documents and
instruments as the Secretary of the Corporation may reasonably require.
(b) Payment of the total Early Redemption Price for such Preferred Shares shall
be made by delivery to each holder, at the address of the holder recorded in the
securities register of the Corporation or by holding for pick up by the holder
at the registered office of the Corporation of certificates representing fully
paid and non-assessable TSA Class A Common Shares and, if applicable, a cheque
of the Corporation payable at par at any branch of the bankers of the
Corporation in respect of the Fractional Share Amount (less any Tax required to
be deducted and withheld from the total Early Redemption Price by the
Corporation without interest).
(c) On and after the Early Redemption Date, the holders of the Preferred Shares
called for redemption shall cease to be holders of such Preferred Shares and
shall not be entitled to exercise any of the rights of holders in respect
thereof, other than the right to receive their proportionate part of the total
Early Redemption Price, unless payment of the total Early Redemption Price for
such Preferred Shares shall not be made upon presentation and surrender of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Early Redemption
Price has been paid in the manner hereinbefore provided.
(d) The Corporation shall have the right at any time after the sending of notice
of its intention to redeem the Preferred Shares as aforesaid to deposit or cause
to be deposited the total Early Redemption Price for the Preferred Shares so
called for redemption, or of such of the said Preferred Shares represented by
certificates that have not at the date of such deposit been surrendered by the
holders thereof in connection with such redemption, in a custodial account with
any chartered bank or trust company in Canada named in such notice, less any
amounts withheld on account of Tax required to be deducted and withheld
therefrom. Upon the later of such deposit being made and the Early Redemption
Date, the Preferred Shares in respect of which such deposit shall have been made
shall be redeemed and the rights of the holders thereof after such deposit or
Early Redemption Date, as the case may be, shall be limited to receiving their
proportionate part of the total Early Redemption Price for such Preferred Shares
so deposited, against presentation and surrender of the said certificates held
by them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of the total Early Redemption Price, the holders of the
Preferred Shares shall thereafter be considered and deemed for all purposes to
be holders of the TSA Class A Common Shares delivered to them. Any certificate
which represented a Preferred Share that has not been deposited, with all other
instruments required by this Section 5.4, on or prior to the first anniversary
of the Early Redemption Date, shall cease to represent a claim or interest of
any kind or nature as a holder of a Preferred Share.
5.5. If TSA Subco or a permitted assignee of TSA Subco exercises the Early
Redemption Call Right, the holders of Preferred Shares subject to the redemption
shall be obligated to transfer their Preferred Shares to TSA Subco or its
assignee, as the case may be, in accordance with the terms of the Early
Redemption Call Right and the Corporation shall not redeem the Preferred Shares.
ARTICLE 6
MANDATORY REDEMPTION OF PREFERRED SHARES BY THE CORPORATION
6.1. Subject to applicable Law (including solvency restrictions which may
require redemption of fewer than all of the Preferred Shares on a partial,
pro-rata basis), the Corporation shall, on the Mandatory Redemption Date, redeem
the whole of the then outstanding Preferred Shares for an amount per share equal
to the Liquidation Amount (the "Mandatory Redemption Price").
6.2. In any case of a redemption of Preferred Shares under this Article 6, the
Corporation shall, at least ten (10) Business Days before the Mandatory
Redemption Date, send or cause to be sent to each holder of Preferred Shares a
notice in writing of the redemption of the Corporation of the Preferred Shares
held by such holder. Such notice shall set out the Mandatory Redemption Price
and the Mandatory Redemption Date.
6.3. On or before the Mandatory Redemption Date, a holder of Preferred Shares
shall deliver to the Corporation a certificate stating whether the holder is a
Canadian Resident or is not a Canadian Resident.
On or before the Mandatory Redemption Date, a holder who is not a
Canadian Resident shall deliver to the Corporation a certificate issued pursuant
to Subsection 116(2) of the ITA, with respect to the Preferred Shares being
redeemed having as the "certificate limit" as defined in Subsection 116(2) of
the ITA, an amount no less than the Mandatory Redemption Price.
In the case of a holder who is a partnership, the holder shall also
provide a certificate confirming the name and address of each member thereof and
the percentage of partnership interest held by each member.
In the event that a holder fails to deliver one of the requisite
certificates described or if the Corporation is required to deduct or withhold
any amount under any other provision of applicable Tax Law, the Corporation
shall be entitled to deduct and withhold from any consideration otherwise
payable to any such holder such amounts as the Corporation is required or
permitted to deduct and withhold with respect to such payment under the ITA or
any other provision of applicable Tax Law, in each case, as amended or
succeeded; provided that such withheld amount shall not be remitted prior to two
(2) Business Days prior to the date such amount is required by Law to be
remitted and where such certificate or a certificate issued pursuant to
Subsection 116(4) satisfactory to the Corporation, acting reasonably, is
delivered prior to such required remittance date, such withheld amount shall be
released to the holder except to the extent that amounts were withheld or
deducted pursuant to another provision of applicable Tax Law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
hereof as having been paid to such holder of the Preferred Shares in respect of
which such deduction and withholding was made, provided that such withheld
amounts are actually remitted to the appropriate Taxing Authority and a receipt
evidencing such remittance is delivered to such holder.
6.4. On or after the Mandatory Redemption Date, the Corporation shall cause to
be delivered to the holders of the Preferred Shares to be redeemed the Mandatory
Redemption Price for each such Preferred Share, upon presentation and surrender
at the registered office of the Corporation of the certificates representing
such Preferred Shares, together with such other documents and instruments as may
be required to effect a transfer of Preferred Shares under applicable Law and
the memorandum and articles of association of the Corporation and such
additional documents and instruments as the Secretary of the Corporation may
reasonably require. Payment of the total Mandatory Redemption Price for such
Preferred Shares shall be made by delivery to each holder, at the address of the
holder recorded in the securities register of the Corporation or by holding for
pick up by the holder at the registered office of the Corporation, a cheque of
the Corporation payable at par at any branch of the bankers of the Corporation
in respect of the full amount of the Mandatory Redemption Price (less any Tax
required to be deducted and withheld from the total Mandatory Redemption Price
by the Corporation without interest). On and after the Mandatory Redemption
Date, the holders of the Preferred Shares called for redemption shall cease to
be holders of such Preferred Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate part of the total Mandatory Redemption Price, unless payment of
the total Mandatory Redemption Price for such Preferred Shares shall not be made
upon presentation and surrender of certificates in accordance with the foregoing
provisions, in which case the rights of the holders shall remain unaffected
until the total Mandatory Redemption Price has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time after
the sending of notice of its intention to redeem the Preferred Shares as
aforesaid to deposit or cause to be deposited the total Mandatory Redemption
Price for the Preferred Shares so called for redemption, or of such of the said
Preferred Shares represented by certificates that have not at the date of such
deposit been surrendered by the holders thereof in connection with such
redemption, in a custodial account with any chartered bank or trust company in
Canada named in such notice, less any amounts withheld on account of Tax
required to be deducted and withheld therefrom. Upon the later of such deposit
being made and the Mandatory Redemption Date, the Preferred Shares in respect
whereof such deposit shall have been made shall be redeemed and the rights of
the holders thereof after such deposit or Mandatory Redemption Date, as the case
may be, shall be limited to receiving their proportionate part of the total
Mandatory Redemption Price for such Preferred Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Any certificate which represented a
Preferred Share that has not been deposited, with all other instruments required
by this Section 6.4, on or prior to the first anniversary of the Mandatory
Redemption Date, shall cease to represent a claim or interest of any kind or
nature as a holder of a Preferred Share.
ARTICLE 7
VOTING RIGHTS
7.1. Except as required by applicable Law, the holders of the Preferred Shares
shall not be entitled as such to receive notice of or to attend any meeting of
the shareholders of the Corporation or to vote at any such meeting.
ARTICLE 8
LEGEND; CALL RIGHTS
8.1. The certificates evidencing the Preferred Shares shall contain or have
affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to:
(a) the Retraction Call Right and the Early Redemption Call Right (a copy of
which rights shall be attached to each certificate outstanding while such
agreement is in effect);
(b) the Right of First Refusal;
(c) the restrictions on transfer contained in these share provisions; and
(d) as required by applicable Laws, including Securities Laws.
8.2. Each holder of a Preferred Share, whether of record or beneficially, by
virtue of becoming and being such a holder shall be deemed to acknowledge each
of the Retraction Call Right and the Early Redemption Call Right, in each case,
in favour of TSA Subco and its permitted assigns and the overriding nature
thereof in connection with the retraction or early redemption of Preferred
Shares, as the case may be, and to be bound thereby in favour of TSA Subco and
its permitted assigns as provided in the Call and Right of First Refusal
Agreement.
ARTICLE 9
RESTRICTIONS ON TRANSFER
9.1. Any transfer of Preferred Shares shall require the approval of all of the
holders of Preferred Shares, expressed by written resolution, which approval
will be given (i) if the proposed transferee is TSA Subco or its assignee under
the Call and Right of First Refusal Agreement or the Preferred Shares are
redeemed by TSA Exchangeco; or (ii) provided the proposed transferee of the
Preferred Shares (if other than TSA Subco or its permitted assignee under the
Call and Right of First Refusal Agreement) has agreed in writing with the
transferor, TSA Subco and the Corporation, to be bound by the provisions of the
Call and Right of First Refusal Agreement.
ARTICLE 10
MISCELLANEOUS
10.1. Any notice, request or other communication to be given to the Corporation
by a holder of Preferred Shares shall be in writing and shall be valid and
effective if given by mail (postage prepaid) or by facsimile or by delivery to
the registered office of the Corporation and addressed to the attention of the
Secretary. Any such notice, request or other communication, if given by mail,
facsimile or delivery, shall only be deemed to have been given and received upon
actual receipt thereof by the Corporation.
10.2. Any presentation and surrender by a holder of Preferred Shares to the
Corporation of certificates representing Preferred Shares in connection with the
liquidation, dissolution or winding up of the Corporation or the retraction or
redemption of Preferred Shares shall be made by registered mail (postage
prepaid) or by delivery to the registered office of the Corporation addressed to
the attention of the Secretary of the Corporation. Any such presentation and
surrender of certificates shall only be deemed to have been made and to be
effective upon actual receipt thereof by the Corporation. Any such presentation
and surrender of certificates made by registered mail shall be at the sole risk
of the holder mailing the same.
10.3. Any notice, request or other communication to be given to a holder of
Preferred Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the fifth (5th) Business Day following the date of mailing
and, if given by delivery, shall be deemed to have been given and received on
the date of delivery. Accidental failure or omission to give any notice, request
or other communication to one or more holders of Preferred Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
the Corporation pursuant thereto.
10.4. If the Corporation determines that mail service is or is threatened to be
interrupted at the time when the Corporation is required or elects to give any
notice to the holders of Preferred Shares hereunder, such notice shall be valid
and effective if delivered personally to the holders in accordance with Sections
10.1 or 10.2 as the case may be.
If, by reason of any actual or threatened interruption of mail service
due to strike, lock-out or otherwise, any notice to be given to the Corporation
would be unlikely to reach its destination in a timely manner, such notice shall
be valid and effective only if delivered personally to the Corporation in
accordance with Sections 10.1 or 10.2, as the case may be.
10.5. For greater certainty, the Corporation shall not be required for any
purpose under these share provisions to recognize or take account of persons who
are not so recorded in the register of members maintained by it in respect of
the Preferred Shares.
10.6. Except as otherwise provided by applicable Law, all Preferred Shares
acquired by the Corporation upon the redemption or retraction thereof shall be
cancelled.
SCHEDULE A
NOTICE OF RETRACTION
To the Corporation and TSA Subco:
This notice is given pursuant to Article 4 of the provisions (the
"Preferred Share Provisions") attaching to the share(s) represented by this
certificate and all capitalized words and expressions used in this notice which
are defined in the Preferred Share Provisions have the meanings ascribed to such
words and expressions in such Preferred Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 4 of the Preferred Share
Provisions:
[ ] all share(s) represented by this certificate; or
[ ] _______________________ share(s) only.
The undersigned hereby notifies the Corporation that the Retraction Date shall
be _____________________________________.
NOTE: The Retraction Date must be a Business Day and must not be less than ten
(10) Business Days nor more than fifteen (15) Business Days after the date upon
which this notice is received by the Corporation. In the event that no such
Business Day is specified above, the Retraction Date shall be deemed to be the
fifteenth (15th) Business Day after the date on which this notice is received by
the Corporation.
The undersigned acknowledges the Retraction Call Right of TSA Subco to purchase
all but not less than all the Retracted Shares from the undersigned and that
this notice shall be deemed to be a revocable offer by the undersigned to sell
the Retracted Shares to TSA Subco in accordance with the Retraction Call Right
on the Retraction Date for the Retraction Price and on the other terms and
conditions set out in Section 4.3 of the Share Provisions. If TSA Subco
determines not to exercise the Retraction Call Right, the Corporation will
notify the undersigned of such fact as soon as possible. This notice of
retraction, and offer to sell the Retracted Shares to TSA Subco, may be revoked
and withdrawn by the undersigned by notice in writing given to the Corporation
at any time before the close of business on the Business Day immediately
preceding the Retraction Date.
The undersigned acknowledges that the Retraction Call Rights of TSA Subco may,
at the option of TSA Subco, be assigned in whole or in part to, and exercised
by, TSA or an Affiliate of TSA.
The undersigned hereby represents and warrants to the Corporation and TSA Subco
that the undersigned has good title to, and owns, the share(s) represented by
this certificate to be acquired by the Corporation or TSA Subco or its permitted
assignee, as the case may be, free and clear of all liens, claims and
encumbrances.
______________ _______________________ ______________________
(Date) (Signature of Shareholder) (Guarantee of
Signature)
[ ] Please check box if the securities and any cheque(s)
resulting from the retraction or purchase of the Retracted
Shares are to be held for pick-up by the shareholder at the
principal office of TSA in Omaha, Nebraska, failing which the
securities and any cheque(s) will be mailed to the last
address of the shareholder as it appears on the register.
The legal or beneficial owner of the Retracted Shares is for the purposes of the
Income Tax Act (Canada), as amended (please check one):
[ ] a resident of Canada
[ ] a non-resident of Canada
NOTE: A holder of Preferred Shares who is a non-resident of Canada for Canadian
income tax purposes is required to deliver a clearance certificate which
evidences that such shareholder has prepaid any Canadian income tax arising on a
capital gain realized on the retraction. In addition, similar certificates may
be required by provincial taxing authorities. A clearance certificate must be
obtained even in circumstances where the holder is not subject to Canadian
income tax on a retraction. In the event that a holder fails to deliver the
requisite certificates described above with this Notice of Retraction, the
purchaser of the Retracted Shares is entitled to deduct and withhold from any
consideration otherwise payable to any such holder such amounts (including a
portion of the TSA Class A Common Shares that would otherwise be delivered on a
Retraction) as the purchaser is required or permitted to deduct and withhold
with respect to such payment under Canadian or provincial income tax law. The
details of such withholding are set out more fully in the Preferred Share
Provisions.
NOTE: This section must be completed and this certificate, together with such
additional documents as the Corporation may require, must be deposited with the
Corporation at its registered office in Halifax, Nova Scotia. The securities and
any cheque(s) resulting from the retraction or purchase of the Retracted Shares
will be issued and registered in, and made payable to, respectively, the name of
the shareholder as it appears on the register of the Corporation and the
securities and cheque(s) resulting from such retraction or purchase will be
delivered to such shareholder as indicated above, unless the form appearing
immediately below is duly completed.
__________________________________ Date_____________________
Name of Person in Whose Name Securities or Cheque(s)
Are To Be Registered, Issued or Delivered (please print)
__________________________________ __________________________
Street Address or P.O. Box Signature of Shareholder
__________________________________ __________________________
City - Province/State Signature Guaranteed by
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining shares
of the Corporation will be issued and registered in the name of the shareholder
as it appears on the register of the Corporation, unless the share transfer
power on the share certificate is duly completed in respect of such shares.
Execution Copy
18
VOTING AND EXCHANGE TRUST AGREEMENT
AGREEMENT dated as of January 11, 2001, among Transaction
Systems Architects, Inc., a Delaware corporation ("TSA"), Transaction Systems
Architects Nova Scotia Company, a Nova Scotia unlimited company ("TSA Holdco"),
TSA Exchangeco Limited, a Nova Scotia limited company ("TSA Exchangeco") and
Wells Fargo Bank Minnesota, National Association, , an entity existing under the
laws of the United States (the "Trustee").
WHEREAS, pursuant to a Combination Agreement dated as of
October 24, 2000 (such agreement, as it may be amended or restated, is
hereinafter referred to as the "Combination Agreement"), among TSA, TSA Holdco,
TSA Exchangeco and MessagingDirect Ltd. ("MDL"), such parties agreed that on the
Effective Date (as defined in the Combination Agreement), they would execute and
deliver a Voting and Exchange Trust Agreement substantially in the form of
Exhibit 7.2(b)(ii) thereto;
WHEREAS, pursuant to the plan of arrangement (the "Plan of
Arrangement") effected by articles of arrangement (the "Articles of
Arrangement") filed pursuant to the Business Corporations Act (Alberta)
("ABCA"), as amended, among other things, each issued and outstanding Class A
common share of MDL (a "MDL Class A Share") was exchanged for either (i) issued
and outstanding exchangeable shares of TSA Exchangeco (the "Exchangeable
Shares"); or (ii) Class A voting common shares of TSA ("TSA Class A Common
Shares");
WHEREAS, the Plan of Arrangement sets forth the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
WHEREAS, TSA is to provide voting rights in TSA to each holder
(other than TSA and its Affiliates) from time to time of Exchangeable Shares,
such voting rights attaching to each Exchangeable Share to be equivalent to the
voting rights attaching to each TSA Class A Common Share;
WHEREAS, TSA is to grant to and in favor of the holders (other
than TSA and its Affiliates) from time to time of Exchangeable Shares the right,
in the circumstances set forth herein, to require TSA Holdco or TSA, as herein
provided, to purchase from each such holder all or any part of the Exchangeable
Shares held by the holder;
WHEREAS, the parties desire to make appropriate provision and
to establish a procedure whereby voting rights in TSA shall be exercisable by
holders (other than TSA and its subsidiaries and Affiliates) from time to time
of Exchangeable Shares by and through the Trustee, which will hold legal title
to one Special Voting Share of TSA, to which voting rights attach for the
benefit of the holders of Exchangeable Shares and whereby the rights to require
TSA Holdco or TSA to purchase Exchangeable Shares from the holders thereof
(other than TSA and its Affiliates) shall be exercisable by such holders from
time to time of Exchangeable Shares by and through the Trustee, which will hold
legal title to such rights for the benefit of such holders; and
WHEREAS, these recitals and any statements of fact in this
Agreement are made by the other parties hereto and not by the Trustee;
NOW, THEREFORE, in consideration of the respective covenants
and agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions
Except as otherwise defined herein, capitalized terms used
herein shall have the meaning ascribed to such terms in the Combination
Agreement. As used herein, the following terms shall have the following
meanings:
"Arrangement" has the meaning ascribed thereto in the recitals
hereto.
"Automatic Exchange" has the meaning ascribed thereto in
Section 5.12(c).
"Automatic Exchange Rights" means the benefit of the
obligation of TSA to effect the automatic exchange of TSA Class A Common Shares
for Exchangeable Shares pursuant to Section 5.12 hereof.
"Board of Directors" means the Board of Directors of TSA
Exchangeco.
"Canadian Dollar Equivalent" means in respect of an amount
expressed in a foreign currency (the "Foreign Currency Amount") at any date the
product obtained by multiplying (a) the Foreign Currency Amount by (b) the noon
spot exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the board of directors to be
appropriate for such purpose.
"Class A Shares" has the meaning ascribed thereto in the
recitals hereto.
"Current Market Price" means, in respect of a TSA Class A
Common Share on any date, the Canadian Dollar Equivalent of the average closing
price (computed and rounded to the third decimal point) of TSA Class A Common
Shares during a period of twenty (20) consecutive trading days ending not more
than three (3) trading days before such date on the NASDAQ, or, if the TSA Class
A Common Shares are not then listed on the NASDAQ, on such other stock exchange
or automated quotation system on which the TSA Class A Common Shares are listed
or quoted, as the case may be, as may be selected by the board of directors for
such purpose; provided, however, that if in the opinion of the board of
directors the public distribution or trading activity of TSA Class A Common
Shares during such period does not create a market which reflects the fair
market value of a TSA Class A Common Share, then the Current Market Price of a
TSA Class A Common Share shall be determined by the board of directors based
upon the advice of such qualified independent financial advisors as the board of
directors may deem to be appropriate, and provided further that any such
selection, opinion or determination by the board of directors shall be
conclusive and binding;
"Dividend Amount" means an amount equal to the full amount of
all declared and unpaid dividends on each Exchangeable Share with a dividend
record date prior to the effective date of: (i) the exchange of Exchangeable
Shares for TSA Class A Common Shares hereunder; (ii) the exercise of the
Exchange Right; or (iii) the exercise of the Automatic Exchange Rights;
"Equivalent Ratio Adjustment" has the meaning ascribed to that
term in the Exchangeable Share Provisions.
"Exchange Right" has the meaning ascribed thereto in Section
5.1 hereof.
"Exchangeable Share Provisions" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares.
"Exchangeable Shares" has the meaning ascribed thereto in the
recitals hereto.
"Fair Market Value" shall mean, as of the date of
determination thereof, the fair market value of such property or asset.
"Fractional Share Amount" means the amount of cash due and
unpaid in respect of a fractional share that would otherwise have been issuable
to the holder of an Exchangeable Share as a result of an Equivalent Ratio
Adjustment that has occurred prior to: (i) the exchange of Exchangeable Shares
for TSA Class A Common Shares hereunder; (ii) the exercise of the Exchange
Right; or (iii) the exercise of the Automatic Exchange Right;
"Holder Votes" has the meaning ascribed thereto in Section 4.2
hereof.
"Holders" means the registered holders from time to time of
Exchangeable Shares, other than TSA and its Affiliates.
"Indemnified Parties" has the meaning ascribed thereto in
Section 9.1 hereof.
"Liquidation Call Right" has the meaning ascribed thereto in
Section 1.1 of the Plan of Arrangement.
"List" has the meaning ascribed thereto in Section 4.6
hereof.
"Officer's Certificate" shall mean a certificate signed by the
Chief Executive Officer, the President, the Chief Financial Officer or any Vice
President of TSA.
"Plan of Arrangement" has the meaning ascribed thereto in the
Exchangeable Share Provisions.
"Redemption Call Right" has the meaning ascribed thereto in of
the Exchangeable Share Provisions.
"Remittance Date" has the meaning ascribed thereto in Section
5.13 hereof.
"Retracted Shares" has the meaning ascribed thereto in Section
5.7 hereof.
"Retraction Call Right" has the meaning ascribed thereto in
the Exchangeable Share Provisions.
"Special Voting Share" means the one share of Special
Preferred Voting Stock of TSA having the attributes set out in Schedule 1 hereto
issued by TSA to and deposited with the Trustee, which entitles the holder of
record thereof to a number of votes at meetings of holders of TSA Class A Common
Shares equal to the number of Exchangeable Shares outstanding from time to time,
other than Exchangeable Shares held by TSA and its Affiliates.
"Support Agreement" means that certain Support Agreement dated
as of the date hereof among TSA, TSA Holdco and TSA Exchangeco.
"Trust" means the trust created by this Agreement.
"Trustee" shall mean Wells Fargo Bank Minnesota, National
Association, as trustee under this Voting and Exchange Trust Agreement.
"Trust Estate" means the Special Voting Share, any other
securities, the Exchange Right, the Automatic Exchange Rights and any money or
other property which may be held by the Trustee from time to time pursuant to
this Agreement.
"TSA Class A Common Shares" has the meaning ascribed thereto
in the recitals hereto.
"TSA Consent" has the meaning ascribed thereto in Section 4.2
hereof.
"TSA Exchangeco Insolvency Event" means the institution by TSA
Exchangeco of any proceeding to be adjudicated a bankrupt or insolvent or to be
dissolved or wound up, or the consent of TSA Exchangeco to the institution of
bankruptcy, insolvency, dissolution or winding up proceedings against it, or the
filing of a petition, answer or consent seeking dissolution or winding up under
any bankruptcy, insolvency or analogous laws, including without limitation the
Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency
Act (Canada), and the failure by TSA Exchangeco to contest in good faith any
such proceedings commenced in respect of TSA Exchangeco within 30 days of
becoming aware thereof, or the consent by TSA Exchangeco to the filing of any
such petition or to the appointment of a receiver, or the making by TSA
Exchangeco of a general assignment for the benefit of creditors, or the
admission in writing by TSA Exchangeco of its inability to pay its debts
generally as they become due, or TSA Exchangeco not being permitted, pursuant to
solvency requirements of applicable law, to redeem any Retracted Shares pursuant
to Section 6 of the Exchangeable Share Provisions.
"TSA Liquidation Event" has the meaning ascribed thereto in
Section 5.12(b) hereof.
"TSA Liquidation Event Effective Date" has the meaning
ascribed thereto in Section 5.12(c) hereof.
"TSA Meeting" has the meaning ascribed thereto in Section 4.2
hereof.
"TSA Successor" has the meaning ascribed thereto in Section
11.1 hereof.
"Voting Rights" means the voting rights attached to the
Special Voting Share.
1.2 Interpretation Not Affected by Headings, Etc.
The division of this Agreement into articles, sections and
other portions and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation hereof. Unless
otherwise indicated, all references to an "Articles" or "section" followed by a
number and/or a letter refer to the specified Article or section of this
Agreement. The terms of "this Agreement", "hereof", "herein" and "hereunder" and
similar expressions refer to this Agreement (including the Schedules and
Exhibits hereto) and not to any particular Article, section or other portion
hereof, and do not include any agreement or instrument supplementary or
ancillary hereto.
1.3 Number, Gender, Etc.
Unless the context otherwise requires, words importing the
singular shall include the plural and vice versa and words importing any gender
shall include all genders.
1.4 Date for any Action
If any date on which any action is required to be taken under
this Agreement is not a Business Day, such action shall be required to be taken
on the next succeeding day which is a Business Day.
1.5 Currency
Unless otherwise specifically indicated, all sums of money
referred to in this Agreement are expressed in lawful money of the United States
of America.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 Establishment of Trust
The purpose of this Agreement is to create the Trust for the
benefit of the Holders, as herein provided. The Trustee will hold the Special
Voting Share in order to enable the Trustee to exercise the Voting Rights and
will hold the Exchange Right and the Automatic Exchange Rights in order to
enable the Trustee to exercise such rights, and any money or other property
comprising the Trust Estate, in each case as trustee for and on behalf of the
Holders as provided in this Agreement.
ARTICLE 3
SPECIAL VOTING SHARE
3.1 Issue and Ownership of the Special Voting Share
In consideration of the granting of the Liquidation Call
Right, Redemption Call Right and Retraction Call Right to TSA, TSA hereby issues
to and deposits with the Trustee the Special Voting Share to be hereafter held
of record by the Trustee as trustee for and on behalf of, and for the use and
benefit of, the Holders and in accordance with the provisions of this Agreement.
During the term of the Trust and subject to the terms and conditions of this
Agreement, the Trustee shall possess and be vested with full legal ownership of
the Special Voting Share and shall be entitled to exercise all of the rights and
powers of an owner with respect to the Special Voting Share, provided that the
Trustee shall:
(a) hold the Special Voting Share and the legal title thereto as trustee
solely for the use and benefit of the Holders in accordance
with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no
power or authority to sell, transfer, vote or otherwise deal
in or with the Special Voting Share and the Special Voting
Share shall not be used or disposed of by the Trustee for any
purpose other than the purposes for which the Trust is created
pursuant to this Agreement
3.2 Legended Share Certificates
TSA Exchangeco will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Holders of their
right to instruct the Trustee with respect to the exercise of the Voting Rights
with respect to the Exchangeable Shares held by a Holder.
3.3 Safe Keeping of Certificate
The certificate representing the Special Voting Share shall at
all times be held in safe keeping by the Trustee or its agent.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 Voting Rights
The Trustee, as the holder of record of the Special Voting
Share, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Special Voting Share, on any
matter, question, proposal or proposition whatsoever that may properly come
before the holders of TSA Class A Common Shares at a TSA Meeting or in
connection with a TSA Consent. The Voting Rights shall be and remain vested in
and exercised by the Trustee. The Trustee shall exercise the Voting Rights only
on the basis of instructions received pursuant to this Article 4 from Holders
entitled to instruct the Trustee as to the voting thereof at the time at which a
TSA Consent is sought or a TSA Meeting is held. To the extent that no
instructions are received from a Holder with respect to the Voting Rights to
which such Holder is entitled, the Trustee shall not exercise or permit the
exercise of such Holder's Voting Rights.
4.2 Number of Votes
With respect to all meetings of shareholders of TSA at which
holders of TSA Class A Common Shares are entitled to vote (a "TSA Meeting") and
with respect to all written consents sought by TSA from its shareholders
including the holders of shares of TSA Class A Common Shares (a "TSA Consent"),
each Holder shall be entitled to instruct the Trustee to cast and exercise, in
the manner instructed, one of the votes comprised in the Voting Rights for each
Exchangeable Share owned of record by such Holder on the record date established
by TSA or by applicable law for such TSA Meeting or TSA Consent, as the case may
be (the "Holder Votes") in respect of each matter, question, proposal or
proposition to be voted on at such TSA Meeting or to be consented to in
connection with such TSA Consent.
4.3 Mailings to Shareholders
With respect to each TSA Meeting and TSA Consent, the Trustee
will mail or cause to be mailed (or otherwise communicate in the same manner as
TSA utilizes in communications to holders of TSA Class A Common Shares) to each
of the Holders named in the List on the same day as the initial mailing or
notice (or other communication) with respect thereto is given by TSA to its
shareholders:
(a) a copy of such notice, together with any proxy or
information statement and related materials to be provided
to shareholders of TSA;
(b) a statement that such Holder is entitled to instruct the
Trustee as to the exercise of the Holder Votes with respect to
such TSA Meeting or TSA Consent, as the case may be, or,
pursuant to Section 4.7 hereof, to attend such TSA Meeting and
to exercise personally the Holder Votes thereat;
(c) a statement as to the manner in which such instructions may be
given to the Trustee, including an express indication that
instructions may be given to the Trustee to give:
(i) a proxy to such Holder or his designee to exercise personally the
Holder Votes; or
(ii) a proxy to a designated agent or other
representative of the management of TSA to exercise
such Holder Votes;
(d) a statement that if no such instructions are received from
the Holder, the Holder Votes to which such Holder is
entitled will not be exercised;
(e) a form of direction whereby the Holder may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of: (i) the time and date by which such
instructions must be received by the Trustee in order to be
binding upon it, which in the case of a TSA Meeting shall
not be earlier than the close of business on the second
Business Day prior to such meeting or not later than the
time period allowed in the notice calling the TSA Consent to
allow for a direct response by the Holder in regards to the
subject matter of the TSA Consent; and (ii) the method for
revoking or amending such instructions.
The materials referred to above are to be provided by TSA to
the Trustee. For the purpose of determining Holder Votes to which a Holder is
entitled in respect of any such TSA Meeting or TSA Consent, the number of
Exchangeable Shares owned of record by the Holder shall be determined at the
close of business on the record date established by TSA or by applicable Law for
purposes of determining shareholders entitled to vote at such TSA Meeting or to
give written consent in connection with such TSA Consent. TSA will notify the
Trustee in writing of any decision of the board of directors of TSA with respect
to the calling of any such TSA Meeting or the seeking of any such TSA Consent
and shall provide all necessary information and materials to the Trustee in each
case promptly and in any event in sufficient time to enable the Trustee to
perform its obligations contemplated by this Section 4.3.
4.4 Copies of Shareholder Information
TSA will deliver to the Trustee copies of all proxy materials,
(including notices of TSA Meetings; but excluding proxies to vote TSA Class A
Common Shares), information statements, reports (including without limitation
all interim and annual financial statements) and other written communications
that, in each case, are to be distributed from time to time to holders of TSA
Class A Common Shares in sufficient quantities and in sufficient time so as to
enable the Trustee to send those materials to each Holder at the same time as
such materials are first sent to holders of TSA Class A Common Shares. The
Trustee will mail or otherwise send to each Holder, at the expense of TSA,
copies of all such materials (and all materials specifically directed to the
Holders or to the Trustee for the benefit of the Holders by TSA) received by the
Trustee from TSA at the same time as such materials are first sent to holders of
TSA Class A Common Shares. The Trustee will also make copies of all such
materials available for inspection by any Holder at the Trustee's principal
office in the city of Minneapolis, Minnesota.
4.5 Other Materials
Immediately after receipt by TSA or any shareholder of TSA of
any material sent or given generally to the holders of TSA Class A Common Shares
by or on behalf of a third party, including without limitation dissident proxy
and information circulars (and related information and material) and tender and
exchange offer circulars (and related information and material), TSA shall use
its reasonable efforts to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward such material
(unless the same has been provided directly to Holders by such third party) to
each Holder as soon as possible thereafter. As soon as practicable after receipt
thereof, the Trustee will mail or otherwise send to each Holder, at the expense
of TSA, copies of all such materials received by the Trustee from TSA. The
Trustee will also make copies of all such materials available for inspection by
any Holder at the Trustee's principal office in the city of Minneapolis,
Minnesota.
4.6 List of Persons Entitled to Vote
TSA Exchangeco shall, (a) prior to each annual, general and
special TSA Meeting or the seeking of any TSA Consent and (b) forthwith upon
each request made at any time by the Trustee in writing, prepare or cause to be
prepared a list (a "List") of the names and addresses of the Holders arranged in
alphabetical order and showing the number of Exchangeable Shares held of record
by each such Holder, in each case at the close of business on the date specified
by the Trustee in such request or, in the case of a List prepared in connection
with a TSA Meeting or a TSA Consent, at the close of business on the record date
established by TSA or pursuant to applicable law for determining the holders of
TSA Class A Common Shares entitled to receive notice of and/or to vote at such
TSA Meeting or to give consent in connection with such TSA Consent. Each such
List shall be delivered to the Trustee promptly after receipt by TSA Exchangeco
of such request or after the record date for such meeting or seeking of consent,
as the case may be, is set and in any event within sufficient time as to enable
the Trustee to perform its obligations under this Agreement. TSA agrees to give
TSA Exchangeco written notice (with a copy to the Trustee) of the calling of any
TSA Meeting or the seeking of any TSA Consent, together with the record dates
therefor, sufficiently prior to the date of the calling of such meeting or
seeking of such consent so as to enable TSA Exchangeco to perform its
obligations under this Section 4.6.
4.7 Entitlement to Direct Votes
Any Holder named in a List prepared in connection with any TSA
Meeting or any TSA Consent will be entitled: (a) to instruct the Trustee in the
manner described in Section 4.2 hereof with respect to the exercise of the
Holder Votes to which such Holder is entitled; or (b) to attend such meeting and
personally to exercise thereat (or to exercise with respect to any written
consent), as the proxy of the Trustee, the Holder Votes to which such Holder is
entitled.
4.8 Voting By Trustee, and Attendance of Trustee Representative
at a Meeting
(a) In connection with each TSA Meeting and TSA Consent, the
Trustee shall exercise, either in person or by proxy, in
accordance with the instructions received from a Holder
pursuant to Section 4.2 hereof, the Holder Votes as to which
such Holder is entitled to direct the vote (or any lesser
number thereof as may be set forth in the instructions);
provided, however, that such written instructions are
received by the Trustee from the Holder prior to the time
and date fixed by it for receipt of such instructions in the
notice given by the Trustee to the Holder pursuant to
Section 4.3 hereof.
(b) The Trustee shall cause such representatives as are
empowered by it to sign and deliver, on behalf of the
Trustee, proxies for Voting Rights to attend each TSA
Meeting. Upon submission by a Holder (or its designee which
may include Persons listed on Schedule I to the Escrow
Agreement as owners of Exchangeable Shares comprising the
assets held pursuant to the Escrow Agreement) of
identification satisfactory to the Trustee's
representatives, and at the Holder's request, such
representatives shall sign and deliver to such Holder (or
its designee) a proxy to exercise personally the Holder
Votes as to which such Holder is otherwise entitled
hereunder to direct the vote, if such Holder either: (i) has
not previously given the Trustee instructions pursuant to
Section 4.2 hereof in respect of such meeting; or (ii)
submits to the Trustee's representatives written revocation
of any such previous instructions. At such meeting, the
Holder (or its designee) exercising such Holder Votes shall
have the same rights as the Trustee to speak at the meeting
in respect of any matter, question or proposition, to vote
by way of ballot at the meeting in respect of any matter,
question or proposition and to vote at such meeting by way
of a show of hands in respect of any matter, question or
proposition.
4.9 Distribution of Written Materials
Any written materials distributed by the Trustee to the
Holders pursuant to this Agreement shall be delivered or sent by mail (or
otherwise communicated in the same manner as TSA utilizes in communications to
holders of TSA Class A Common Shares) to each Holder at its address as shown on
the books of TSA Exchangeco. TSA Exchangeco shall provide or cause to be
provided to the Trustee for this purpose, on a timely basis and without charge
or other expense:
(a) a current List; and
(b) upon the request of the Trustee, mailing labels to enable
the Trustee to carry out its duties under this Agreement.
4.10 Termination of Voting Rights
The rights of a Holder with respect to the Holder Votes
exercisable in respect of the Exchangeable Shares held by such Holder, including
the right to instruct the Trustee as to the voting of or to vote personally such
Holder Votes, shall be deemed to be surrendered by the Holder to TSA or TSA
Holdco, as the case may be, and such Holder Votes and the Voting Rights
represented thereby shall cease immediately upon the delivery by such Holder to
the Trustee of the certificates representing such Exchangeable Shares in
connection with the exercise by the Holder of the Exchange Right or the
occurrence of the automatic exchange of Exchangeable Shares for TSA Class A
Common Shares, as specified in Article 5 hereof (unless, in either case, TSA or
TSA Holdco shall not have delivered the requisite TSA Class A Common Shares
issuable in exchange therefor and any applicable Dividend Amount and Fractional
Share Amounts to the Trustee for delivery to the Holders), or upon the
retraction or redemption of Exchangeable Shares pursuant to Article 6 or Article
7 of the Exchangeable Share Provisions, or upon the effective date of the
liquidation, dissolution or winding-up of TSA Exchangeco pursuant to Article 5
of the Exchangeable Share Provisions, or upon the purchase of Exchangeable
Shares from the Holder by TSA Holdco, TSA Exchangeco or TSA pursuant to the
exercise by such person of the Retraction Call Right, the Redemption Call Right
or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Right and Automatic
Exchange Right
(a) In consideration of the granting of the Liquidation Call
Right, Redemption Call Right and Retraction Call Right to TSA,
TSA hereby grants to the Trustee as trustee for and on behalf
of, and for the use and benefit of, the Holders:
(i) the right (the "Exchange Right"), upon the occurrence
and during the continuance of a TSA Exchangeco
Insolvency Event, to require TSA to purchase from
each or any Holder all or any part of the
Exchangeable Shares held by the Holder; and
(ii) the Automatic Exchange Rights,
all in accordance with the provisions of this Agreement and
the Exchangeable Share Provisions, as the case may be.
(b) During the term of the Trust and subject to the terms and
conditions of this Agreement, the Trustee shall possess and
be vested with full legal ownership of the Exchange Right
and the Automatic Exchange Rights and shall be entitled to
exercise all of the rights and powers of an owner with
respect to the Exchange Right and the Automatic Exchange
Rights, provided that the Trustee shall:
(i) hold the Exchange Right and the Automatic Exchange
Rights and the legal title thereto as trustee solely
for the use and benefit of the Holders in accordance
with the provisions of this Agreement; and
(ii) except as specifically authorized by this Agreement,
have no power or authority to exercise or otherwise
deal in or with the Exchange Right or the Automatic
Exchange Rights, and the Trustee shall not exercise
any such rights for any purpose other than the
purposes for which this Trust is created pursuant to
this Agreement.
(c) TSA shall be permitted to delegate or assign its rights and
obligations in respect of the Exchange Right and Automatic
Exchange Right to TSA Holdco, with the result that all
references to TSA in this Agreement with respect to such
rights and obligations in respect of which the delegation or
assignment is made shall be deemed to refer to TSA Holdco.
5.2 Legended Share Certificates
TSA Exchangeco will cause each certificate representing
Exchangeable Shares to bear an appropriate legend notifying the Holders of:
(a) their right to instruct the Trustee with respect to the
exercise of the Exchange Right in respect of the
Exchangeable Shares held by a Holder; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Rights
The Exchange Right shall be and remain vested in and exercised
by the Trustee. The Trustee shall exercise the Exchange Right only on the basis
of instructions received pursuant to this Article 5 from Holders entitled to
instruct the Trustee as to the exercise thereof. To the extent that no
instructions are received from a Holder with respect to the Exchange Right, the
Trustee shall not exercise or permit the exercise of the Exchange Right.
5.4 Purchase Price
Subject to an Equivalent Ratio Adjustment, the purchase price
payable by TSA Holdco or TSA for each Exchangeable Share to be purchased by TSA
Holdco or TSA under the Exchange Right shall be an amount per share equal to:
(a) the Current Market Price of a TSA Class A Common Shares on the
last Business Day prior to the day of closing of the purchase
and sale of such Exchangeable Share under the Exchange Right;
plus
(b) the Dividend Amount; plus
(c) the Fractional Share Amount.
In connection with each exercise of the Exchange Right, TSA Holdco or TSA will
provide to the Trustee an Officer's Certificate setting forth the calculation of
the purchase price for each Exchangeable Share. The purchase price for each such
Exchangeable Share so purchased shall be satisfied in full by TSA Holdco or TSA,
as applicable, issuing and delivering or causing to be delivered to the Trustee,
on behalf of the relevant Holder, one TSA Class A Common Shares plus a cheque
for the balance of the purchase price, if any, due under sub-paragraphs (b) and
(c) above, plus to the extent not paid by TSA Exchangeco, all dividends declared
on TSA Class A Common Shares that have not been declared on such Exchangeable
Shares or in respect of which economic equivalence therefor has not been
provided in accordance with Section 3.1 of the Exchangeable Share Provisions
(provided that if the record date for any such declared and unpaid dividends
occurs on or after the day of closing of such purchase and sale, the purchase
price shall not include such additional amounts equivalent to such declared and
unpaid dividends) without interest (but less any amounts withheld pursuant to
Section 5.13).
5.5 Exercise Instructions
Subject to the terms and conditions herein set forth, a Holder shall be
entitled, upon the occurrence and during the continuance of a TSA Exchangeco
Insolvency Event, to instruct the Trustee to exercise the Exchange Right with
respect to all or any part of the Exchangeable Shares registered in the name of
such Holder on the books of TSA Exchangeco. To cause the exercise of the
Exchange Right by the Trustee, the Holder shall deliver to the Trustee, in
person or by mail, at its principal transfer office in Minneapolis, Minnesota,
or at such other places as the Trustee may from time to time designate by
written notice to the Holders, the certificates representing the Exchangeable
Shares which such Holder desires TSA Holdco or TSA to purchase, duly endorsed in
blank, and accompanied by such other documents and instruments as may be
required to effect a transfer of Exchangeable Shares under applicable Law and
under the Memorandum and Articles of Association of TSA Exchangeco and such
additional documents and instruments as the Trustee may reasonably require
together with:
(a) a duly completed form of notice of exercise of the Exchange
Right, contained on the reverse of or attached to the
Exchangeable Share certificates, stating:
(i) the tax residency of the holder;
(ii) that the Holder thereby instructs the Trustee to
exercise the Exchange Right so as to require TSA or
TSA Holdco to purchase from the Holder the number of
Exchangeable Shares specified therein;
(iii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by TSA Holdco or
TSA free and clear of all liens, claims and
encumbrances;
(iv) the names in which the certificates representing TSA
Class A Common Shares issuable in connection with the
exercise of the Exchange Right are to be issued; and
(v) the names and addresses of the persons to whom such new certificates
should be delivered; and
(b) payment (or evidence satisfactory to the Trustee, TSA, TSA
Holdco and TSA Exchangeco of payment) of the Taxes (if any)
payable as contemplated by Section 5.8 of this Agreement.
If only a part of the Exchangeable Shares represented by any certificate or
certificates delivered to the Trustee are to be purchased by TSA Holdco or TSA
under the Exchange Right, a new certificate for the balance of such Exchangeable
Shares shall be issued by TSA Exchangeco to the Holder at the expense of TSA
Exchangeco.
5.6 Delivery of TSA Class A Common Shares; Effect of Exercise
Promptly after receipt of the certificates representing the Exchangeable Shares
which the Holder desires TSA Holdco or TSA to purchase under the Exchange Right
(together with such documents and instruments of transfer and a duly completed
form of notice of exercise of the Exchange Right (and payment of Taxes, if any,
payable as contemplated in Section 5.8 hereof or evidence thereof)), duly
endorsed in blank, the Trustee shall notify TSA Holdco, TSA Exchangeco and TSA
of its receipt of the same, which notice to TSA Holdco, TSA Exchangeco and TSA
shall constitute exercise of the Exchange Right by the Trustee on behalf of the
holder of such Exchangeable Shares, and TSA Holdco or TSA, as applicable, shall
immediately thereafter deliver or cause to be delivered to the Trustee, for
delivery to the Holder of such Exchangeable Shares (or to such other persons, if
any, properly designated by such Holder), the certificates for the number of TSA
Class A Common Shares issuable in connection with the exercise of the Exchange
Right, which shares shall be validly issued, fully paid, non-assessable, and
will be free and clear of Encumbrances attributable to, or arising due to, any
action or omission of TSA, and cheques for the balance, if any, of the total
purchase price therefor without interest, but less any amounts withheld pursuant
to Section 5.13 hereof; provided, however, that no such delivery shall be made
unless and until the Holder requesting the same shall have paid (or provided
evidence satisfactory to the Trustee, TSA Exchangeco, TSA and TSA Holdco of the
payment of) the Taxes (if any) payable as contemplated by Section 5.8 of this
Agreement. Immediately upon the giving of notice by the Trustee to TSA Nova
Holdco, TSA and TSA Exchangeco of the exercise of the Exchange Right, as
provided in this Section 5.6, the closing of the transaction of purchase and
sale contemplated by the Exchange Right shall be deemed to have occurred, and
the Holder of such Exchangeable Shares shall be deemed to have transferred to
TSA Holdco or TSA, as applicable, all of its right, title and interest in and to
such Exchangeable Shares and in the related interest in the Trust Estate and
shall cease to be a holder of such Exchangeable Shares and shall not be entitled
to exercise any of the rights of a holder in respect thereof, other than the
right to receive his proportionate part of the total purchase price therefor,
unless the requisite number of TSA Class A Common Shares (together with a cheque
for the balance, if any, of the total purchase price therefor without interest)
is not allotted and delivered by TSA Holdco or TSA to the Trustee, for delivery
to such Holder (or to such other persons, if any, properly designated by such
Holder), within five Business Days of the date of the giving of such notice by
the Trustee, in which case the rights of the Holder shall remain unaffected
until such TSA Class A Common Shares are so allotted and delivered by TSA Holdco
or TSA and any such cheque is so delivered and paid. Upon delivery by TSA Holdco
or TSA to the Trustee of such TSA Class A Common Shares, the Trustee shall
deliver such TSA Class A Common Shares to such Holder (or to such other persons,
if any, properly designated by such Holder). Concurrently with such Holder
ceasing to be a holder of Exchangeable Shares, the Holder shall be considered
and deemed for all purposes to be the holder of the TSA Class A Common Shares
delivered to it pursuant to the Exchange Right.
5.7 Exercise of Exchange Right Subsequent to Retraction
In the event that a Holder has exercised its right under
Article 6 of the Exchangeable Share Provisions to require TSA Exchangeco to
redeem any or all of the Exchangeable Shares held by the Holder (the "Retracted
Shares") and is notified by TSA Exchangeco pursuant to Section 6.7 of the
Exchangeable Share Provisions that TSA Exchangeco will not be permitted as a
result of solvency requirements of applicable Law to redeem all such Retracted
Shares, provided that TSA Holdco or TSA shall not have exercised the Retraction
Call Right with respect to the Retracted Shares and that the Holder has not
revoked the Retraction Request delivered by the Holder to TSA Exchangeco
pursuant to Section 6.1 of the Exchangeable Share Provisions, the Retraction
Request will constitute and will be deemed to constitute notice from the Holder
to the Trustee instructing the Trustee to exercise the Exchange Right with
respect to those Retracted Shares which TSA Exchangeco is unable to redeem. In
any such event, TSA Exchangeco hereby agrees with the Trustee and in favor of
the Holder immediately to notify the Trustee of such prohibition against TSA
Exchangeco redeeming all of the Retracted Shares and immediately to forward or
cause to be forwarded to the Trustee all relevant materials delivered by the
Holder to TSA Exchangeco or to the transfer agent of the Exchangeable Shares
(including without limitation a copy of the retraction request delivered
pursuant to Section 6.1 of the Exchangeable Share Provisions) in connection with
such proposed redemption of the Retracted Shares and the Trustee will thereupon
exercise the Exchange Right with respect to the Retracted Shares that TSA
Exchangeco is not permitted to redeem and will require TSA Holdco or TSA to
purchase such shares in accordance with the provisions of this Article 5.
5.8 Stamp or Other Transfer Taxes
Upon any sale of Exchangeable Shares to TSA Holdco or TSA
pursuant to the Exchange Right or the Automatic Exchange Rights, the share
certificate or certificates representing TSA Class A Common Shares to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Holder of the Exchangeable Shares so sold or
in such names as such Holder may otherwise direct in writing without charge to
the holder of the Exchangeable Shares so sold, provided, however, that such
Holder:
(a) shall pay (and neither TSA Holdco, TSA, TSA Exchangeco nor the
Trustee shall be required to pay) any documentary, stamp,
transfer or other similar Taxes that may be payable in respect
of any transfer involved in the issuance or delivery of such
shares to a person other than such Holder; or
(b) shall have established to the satisfaction of the Trustee,
TSA, TSA Holdco and TSA Exchangeco that such Taxes, if any,
have been paid.
5.9 Notice of TSA Exchangeco Insolvency Event
Immediately upon the occurrence of a TSA Exchangeco Insolvency
Event or any event which with the giving of notice or the passage of time or
both would be an TSA Exchangeco Insolvency Event, TSA Exchangeco and TSA shall
give written notice thereof to the Trustee. As soon as practicable after
receiving notice from TSA Exchangeco and TSA or from any other person of the
occurrence of an TSA Exchangeco Insolvency Event, the Trustee will mail to each
Holder, at the expense of TSA, a notice of such TSA Exchangeco Insolvency Event
in the form provided by TSA, which notice shall contain a brief statement of the
right of the Holders with respect to the Exchange Right.
5.10 Issuance and Listing of TSA Class A Common Shares
For so long as any Exchangeable Shares remain outstanding to
other than TSA and its Affiliates, TSA will cause the TSA Class A Common Shares
which are to be issued directly in consideration for MDL Class A Shares or to be
issued from time to time upon exchange of the Exchangeable Shares, to be quoted
on the NASDAQ or such other exchange or quotation system to the same extent as
TSA stock is quoted generally, subject only to official notice of issuance.
5.11 Reservation of TSA Class A Common Shares
TSA hereby represents, warrants and covenants for the benefit
of the holders of the Exchangeable Shares that it has irrevocably reserved for
issuance and will at all times keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of TSA
Class A Common Shares:
(a) as is equal to the sum of:
(i) the number of Exchangeable Shares issued and
outstanding to Holders from time to time; and
(ii) the number of Exchangeable Shares issuable upon the
exercise of all rights of Holders thereof to acquire
Exchangeable Shares outstanding from time to time;
and
(b) as are now and may hereafter be required to enable and
permit TSA Exchangeco and TSA Holdco and TSA to meet their
respective obligations hereunder, under the Support
Agreement, under the Exchangeable Share Provisions and under
any other security or commitment pursuant to which TSA, TSA
Holdco or TSA Exchangeco may now or hereafter be required to
issue or deliver TSA Class A Common Shares to Holders.
5.12 Automatic Exchange on Liquidation of TSA
(a) TSA will give the Trustee written notice of each of the
following events at the time set forth below:
(i) in the event of any determination by the board of
directors of TSA to institute voluntary
liquidation, dissolution or winding-up proceedings
with respect to TSA or to effect any other
distribution of assets of TSA among its
shareholders for the purpose of winding up its
affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) as soon as practicable following the earlier of:
(A) receipt by TSA of notice of ; and
(B) TSA otherwise becoming aware of,
any threatened or instituted claim, suit, petition or
other proceedings with respect to the involuntary
liquidation, dissolution or winding up of TSA or to
effect any other distribution of assets of TSA among
its shareholders for the purpose of winding up its
affairs, in each case where TSA has failed to contest
in good faith any such proceeding within 30 days of
becoming aware thereof.
(b) As soon as practicable following receipt by the Trustee from
TSA of notice of any event (a "TSA Liquidation Event")
contemplated by Subsection 5.12(a)(i) or 5.12(a)(ii) above,
the Trustee will give notice thereof to the Holders. Such
notice shall include a brief description of the automatic
exchange of Exchangeable Shares for TSA Class A Common
Shares provided for in Section 5.12 (c) below.
(c) In order that the Holders will be able to participate on a
pro rata basis with the holders of TSA Class A Common Shares
in the distribution of assets of TSA in connection with a
TSA Liquidation Event, on the fifth Business Day prior to
the effective date (the "TSA Liquidation Event Effective
Date") of a TSA Liquidation Event all of the
then-outstanding Exchangeable Shares held by Persons other
than TSA and its Affiliates shall be automatically exchanged
for TSA Class A Common Shares (the "Automatic Exchange"). To
effect such Automatic Exchange, TSA Holdco or TSA, as
applicable, shall purchase each Exchangeable Share held by
Persons other than TSA and its Affiliates outstanding on the
fifth Business Day prior to the TSA Liquidation Event
Effective Date, and each Holder shall sell the Exchangeable
Shares held by it at such time, for a purchase price per
share equal to (a) the Current Market Price of a TSA Class A
Common Shares on the fifth Business Day prior to the TSA
Liquidation Event Effective Date, which, subject to an
Equivalent Ratio Adjustment, shall be satisfied in full by
TSA issuing to the Holder one TSA Class A Common Share, plus
(b) the Dividend Amount; and plus (c) the Fractional Share
Amount; and plus (d) to the extent not paid by TSA
Exchangeco, all dividends declared on TSA Class A Common
Shares that have not been declared on such Exchangeable
Shares or in respect of which economic equivalence therefor
has not been provided in accordance with Section 3.1 of the
Exchangeable Share Provisions (provided that if the record
date for any such declared and unpaid dividends occurs on or
after the day of closing of such purchase and sale, the
purchase price shall not include such additional amounts
equivalent to such declared and unpaid dividends). In
connection with such Automatic Exchange, TSA Holdco or TSA
will provide to the Trustee an Officer's Certificate setting
forth the calculation of the purchase price for each
Exchangeable Share.
(d) On the fifth Business Day prior to the TSA Liquidation Event
Effective Date, the closing of the transaction of purchase
and sale contemplated by the Automatic Exchange shall be
deemed to have occurred, and each Holder of Exchangeable
Shares shall be deemed to have transferred to TSA Holdco or
TSA all of the Holder's right, title and interest in and to
such Exchangeable Shares and the related interest in the
Trust Estate and shall cease to be a holder of such
Exchangeable Shares and TSA Holdco or TSA shall deliver to
the Holder the TSA Class A Common Shares issuable upon such
Automatic Exchange and on the applicable payment date shall
deliver to the Trustee for delivery to the Holder a cheque
for the balance, if any, of the total purchase price for
such Exchangeable Shares without interest, but less any
amounts withheld pursuant to Section 5.13 hereof.
Concurrently with such Holder ceasing to be a holder of
Exchangeable Shares, the Holder shall be considered and
deemed for all purposes to be the holder of the TSA Class A
Common Shares issued to it pursuant to the Automatic
Exchange of Exchangeable Shares for TSA Class A Common
Shares and the certificates held by the Holder previously
representing the Exchangeable Shares exchanged by the Holder
with TSA Holdco or TSA pursuant to such Automatic Exchange
shall thereafter be deemed to represent the TSA Class A
Common Shares delivered to the Holder by TSA Holdco or TSA
pursuant to such Automatic Exchange. Upon the request of a
Holder and the surrender by the Holder of Exchangeable Share
certificates deemed to represent shares of TSA Class A
Common Shares, duly endorsed in blank and accompanied by
such instruments of transfer as TSA and TSA Holdco may
reasonably require, TSA Holdco or TSA shall deliver or cause
to be delivered to the Holder certificates representing the
TSA Class A Common Shares of which the Holder is the holder.
5.13 Withholding Rights
Prior to the exchange or disposition of any Exchangeable
Shares in accordance with this Article, each Holder shall deliver to TSA Holdco
or TSA, at or before such time:
(a) a certificate confirming that such Holder is a resident of
Canada for the purposes of the ITA; or
(b) in the case of a Holder who is a non-resident of Canada for
the purposes of the ITA, a certificate satisfactory to TSA
Holdco or TSA acting reasonably, issued pursuant to
subsection 116(2) of the ITA, with respect to the
Exchangeable Shares, and having as the "certificate limit",
as defined in subsection 116(2) of the ITA, an amount no
less than the cost to TSA Holdco or TSA, as the case may be,
of the Exchangeable Shares (which may be equal to the fair
market value of the TSA Class A Common Shares receivable by
such Holder).
In the case of a Holder who is a partnership, the Holder shall
also provide a certificate confirming the name and address of each member
thereof and the percentage of partnership interest held by each member (which
partners and percentages are clearly contemplated in the applicable
certificate).
In the event that a Holder fails to deliver the requisite
certificates described above at or before the exchange or disposition of such
shares, or in the event that TSA Holdco or TSA is required to deduct or withhold
any amount under any other provision of applicable Tax law, TSA Holdco or TSA
shall be entitled to deduct and withhold from any consideration otherwise
payable to any Holder such amounts as TSA Holdco or TSA is required or permitted
to deduct and withhold with respect to such payment under the ITA or any
provision of provincial or governmental tax law, in each case, as amended or
succeeded, provided that such withheld amount shall not be remitted prior to two
business days prior to the date such amount is required by law to be remitted
(the "Remittance Date") and where such certificate, or a certificate issued
pursuant to subsection 116(4) of the ITA satisfactory to TSA Holdco and TSA
acting reasonably, is delivered prior to such Remittance Date, such withheld
amount shall be released, to such Holder except to the extent that amounts were
withheld or deducted pursuant to another provision of applicable Tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes hereof as having been paid to the Holder in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the
amount so required or permitted to be deducted or withheld from any payment to a
Holder exceeds the cash portion of the consideration otherwise payable to the
Holder, TSA Holdco or TSA, as agent of such Holder, is hereby authorized to sell
or otherwise dispose of such portion of the consideration as is necessary to
provide sufficient funds to TSA Holdco or TSA to enable it to comply with such
deduction or withholding requirement and TSA Holdco or TSA shall notify the
Holder thereof and remit to such Holder any unapplied balance of the net
proceeds of such sale. If the proceeds of such sale are insufficient to fund the
required withholding, the Holder shall forthwith pay to TSA Holdco or TSA or
remit to the applicable taxing authority the deficiency. The Holder shall bear
all reasonable costs and expense associated with such sale by purchaser pursuant
to the two immediately preceding sentences.
ARTICLE 6
RESTRICTIONS ON ISSUE OF ADDITIONAL TSA SPECIAL VOTING SHARES
6.1 Issue of Additional TSA Special Voting Shares
During the term of this Agreement, TSA will not, without the
consent of the Holders, given in accordance with Section 9.2 of the Exchangeable
Share Provisions, issue any TSA Special Voting Shares in addition to the Special
Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 Powers and Duties of the Trustee
The rights, powers and authorities of the Trustee under this
Agreement, in its capacity as trustee of the Trust, shall include, without
limitation:
(a) receipt and deposit of the Special Voting Share from TSA as
trustee for and on behalf of the Holders in accordance with
the provisions of this Agreement;
(b) granting proxies and distributing materials to Holders as
provided in this Agreement;
(c) voting the Holder Votes in accordance with the provisions of
this Agreement;
(d) receiving the grant of the Exchange Right and the Automatic
Exchange Rights from TSA as trustee for and on behalf of the
Holders in accordance with the provisions of this Agreement;
(e) exercising the Exchange Right and enforcing the benefit of
the Automatic Exchange Rights, in each case in accordance
with the provisions of this Agreement, and in connection
therewith receiving from Holders Exchangeable Shares and
other requisite documents and distributing to such Holders
the TSA Class A Common Shares and cheques, if any, to which
such Holders are entitled upon the exercise of the Exchange
Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) holding title to the Trust Estate;
(g) investing any monies forming, from time to time, a part of
the Trust Estate as provided in this Agreement;
(h) taking action at the direction of a Holder or Holders to
enforce the obligations hereunder of each other party
hereto; and
(i) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers and authorities the
Trustee shall have (and is granted) such incidental and additional rights,
powers and authority not in conflict with any of the provisions of this
Agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding upon all
persons.
The Trustee in exercising its rights, powers, duties and
authorities hereunder shall act honestly and in good faith with a view to the
best interests of the Holders and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
7.2 No Conflict of Interest
The Trustee represents to each other party hereto that at the
date of execution and delivery of this Agreement there exists no material
conflict of interest in the role of the Trustee as a fiduciary hereunder and the
role of the Trustee in any other capacity. The Trustee shall, within 30 days
after it becomes aware that such a material conflict of interest exists, either
eliminate such material conflict of interest or resign in the manner and with
the effect specified in Article 10 hereof. If, notwithstanding the foregoing
provisions of this Section 7.2, the Trustee has such a material conflict of
interest, the validity and enforceability of this Agreement shall not be
affected in any manner whatsoever by reason only of the existence of such
material conflict of interest. If the Trustee contravenes the foregoing
provisions of this Section 7.2, any interested party may apply to the applicable
court for an order that the Trustee be replaced as trustee hereunder.
7.3 Dealings With Transfer Agents, Registrars, Etc.
TSA Exchangeco, TSA Holdco and TSA irrevocably authorize the
Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and
the TSA Class A Common Shares; and
(b) requisition, from time to time:
(i) from any such registrar or transfer agent any
information readily available from the records
maintained by it which the Trustee may reasonably
require for the discharge of its duties and
responsibilities under this Agreement; and
(ii) from the transfer agent of the TSA Class A Common
Shares, and any subsequent transfer agent of such
shares, the share certificates issuable upon the
exercise from time to time of the Exchange Right and
pursuant to the Automatic Exchange Rights in the
manner specified in Article 5 hereof.
TSA Exchangeco and TSA shall irrevocably authorize their
respective registrars and transfer agents to comply with all such requests. TSA
covenants that it will supply its transfer agent with duly executed share
certificates for the purpose of completing the exercise from time to time of the
Exchange Right and the Automatic Exchange Rights, in each case pursuant to
Article 5 hereof.
7.4 Books and Records
The Trustee shall keep available for inspection by TSA, TSA
Holdco and TSA Exchangeco, at the Trustee's principal office in Minneapolis,
Minnesota, correct and complete books and records of account relating to the
Trustee's actions under this Agreement, including without limitation, all
relevant data relating to mailings and instructions to and from Holders and all
transactions pursuant to the Voting Rights, the Exchange Right and the Automatic
Exchange Rights for the term of this Agreement. On or before December 1, 2001
and on or before December 1 in every year thereafter, so long as the Special
Voting Share is on deposit with the Trustee, the Trustee shall transmit to TSA
and TSA Exchangeco a brief report, dated as of the preceding September 30 with
respect to:
(a) the property and funds comprising the Trust Estate as of
that date;
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the
Trustee on behalf of Holders in consideration of the delivery
by TSA, or TSA Holdco of TSA Class A Common Shares in
connection with the Exchange Right, during the calendar year
ended on such date; and
(c) all other actions taken by the Trustee in the performance of
its duties under this Agreement which in the Trustee's sole
judgement it had not previously reported and which, in the
Trustee's sole judgement and opinion, materially affects the
Trust Estate.
7.5 Income Tax Return and Reports
The Trustee shall, to the extent necessary, prepare and file
on behalf of the Trust appropriate income tax returns and any other returns or
reports as may be required by applicable law or pursuant to the rules and
regulations of any securities exchange or other trading system through which the
Exchangeable Shares are traded and, in connection therewith, may obtain the
advice and assistance of such experts as the Trustee may consider necessary or
advisable. If requested by the Trustee, TSA shall retain such experts for
purposes of providing such advice and assistance.
7.6 Indemnification Prior to Certain Actions By Trustee
The Trustee shall exercise any or all of the rights, duties,
powers or authorities vested in it by this Agreement at the request, order or
direction of any Holder upon such Holder furnishing to the Trustee reasonable
funding, security and indemnity against the costs, expenses (including
reasonable counsel fees) and liabilities which may be incurred by the Trustee
therein or thereby, provided that no Holder shall be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with the exercise
by the Trustee of any of its rights, duties, powers and authorities with respect
to the Special Voting Share pursuant to Article 4 hereof, and with respect to
the Exchange Right pursuant to Article 5 hereof, and with respect to the
Automatic Exchange Rights pursuant to Article 5 hereof.
None of the provisions contained in this Agreement shall
require the Trustee to expend or risk its own funds or otherwise incur financial
liability in the exercise of any of its rights, powers, duties or authorities
unless funded, given funds, security and indemnified as aforesaid.
7.7 Actions by Holders
No Holder shall have the right to institute any action, suit
or proceeding or to exercise any other remedy authorized by this Agreement for
the purpose of enforcing any of its rights or for the execution of any trust or
power hereunder unless the Holder has requested the Trustee to take or institute
such action, suit or proceeding and furnished the Trustee with the funding,
security and indemnity referred to in Section 7.6 hereof and the Trustee shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Holder shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have taken; it being understood
and intended that no one or more Holders shall have any right in any manner
whatsoever to affect, disturb or prejudice the rights hereby created by any such
action, or to enforce any right hereunder or under the Voting Rights, the
Exchange Right or the Automatic Exchange Rights, except subject to the
conditions and in the manner herein provided, and that all powers and trusts
hereunder shall be exercised and all proceedings at law shall be instituted, had
and maintained by the Trustee, except only as herein provided, and in any event
for the equal benefit of all Holders.
7.8 Reliance Upon Declarations
The Trustee shall not be considered to be in contravention of
any of its rights, powers, duties and authorities hereunder if, when required,
it acts and relies in good faith upon statutory declarations, certificates,
opinions or reports furnished pursuant to the provisions hereof or required by
the Trustee to be furnished to it in the exercise of its rights, powers, duties
and authorities hereunder if such statutory declarations, certificates, opinions
or reports comply with the provisions of Section 7.9 hereof, if applicable, and
with any other applicable provisions of this Agreement.
7.9 Evidence and Authority to Trustee
TSA Exchangeco, TSA Holdco, and/or TSA shall furnish to the
Trustee evidence of compliance with the conditions provided for in this
Agreement relating to any action or step required or permitted to be taken by
TSA Exchangeco, TSA Holdco, and/or TSA or the Trustee under this Agreement or as
a result of any obligation imposed under this Agreement, including, without
limitation, in respect of the Voting Rights or the Exchange Right or the
Automatic Exchange Rights and the taking of any other action to be taken by the
Trustee at the request of or on the application of TSA Exchangeco, TSA Holdco,
and/or TSA forthwith if and when:
(a) such evidence is required by any other section of this
Agreement to be furnished to the Trustee in accordance with
the terms of this Section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives TSA Exchangeco, TSA
Holdco, and/or TSA written notice requiring it to furnish such
evidence in relation to any particular action or obligation
specified in such notice.
Such evidence shall consist of an Officer's Certificate of TSA
Exchangeco, TSA Holdco, and/or TSA or a statutory declaration or a certificate
made by persons entitled to sign an Officer's Certificate stating that any such
condition has been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the
Voting Rights or the Exchange Right or the Automatic Exchange Rights or, the
taking of any other action to be taken by the Trustee at the request or on the
application of TSA Exchangeco, TSA Holdco, and/or TSA, and except as otherwise
specifically provided herein, such evidence may consist of a report or opinion
of any solicitor, auditor, accountant, appraiser, valuer, engineer or other
expert or any other person whose qualifications give authority to a statement
made by him, provided that if such report or opinion is furnished by a director,
officer or employee of TSA Exchangeco, TSA Holdco, and/or TSA it shall be in the
form of an Officer's Certificate or a statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or
report furnished to the Trustee as evidence of compliance with a condition
provided for in this Agreement shall include a statement by the person giving
the evidence:
(a) declaring that he has read and understands the provisions of
this trust agreement relating to the condition in question:
(b) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration,
certificate, statement or opinion; and
(c) declaring that he has made such examination or investigation
as he believes is necessary to enable him to make the
statements or give the opinions contained or expressed
therein.
7.10 Experts, Advisers and Agents
The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from or prepared by any
solicitor, auditor, accountant, appraiser, valuer, engineer
or other expert, whether retained by the Trustee or by TSA
Exchangeco, TSA Holdco and/or TSA or otherwise, and may
employ such assistants as may be necessary to the proper
discharge of its powers and duties and determination of its
rights hereunder and may pay proper and reasonable
compensation for all such legal and other advice or
assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably
require for the proper discharge of its powers and duties
hereunder, and may pay reasonable remuneration for all
services performed for it (and shall be entitled to receive
reasonable remuneration for all services performed by it) in
the discharge of the trusts hereof and compensation for all
disbursements, costs and expenses made or incurred by it in
the discharge of its duties hereunder and in the management
of the Trust.
7.11 Trustee Not Required to Give Security
The Trustee shall not be required to give any bond or security
in respect of the execution of the trusts, rights, duties, powers and
authorities of this Agreement or otherwise in respect of the premises.
7.12 Authority to Carry on Business
The Trustee represents to TSA Exchangeco, TSA Holdco, and TSA
that at the date of execution and delivery by it of this Agreement it is
authorized to carry on the business of a National Association in the United
States, with authority to carry out its obligations hereunder but if,
notwithstanding the provisions of this Section 7.12, it ceases to be so
authorized to carry on such business, the validity and enforceability of this
Agreement and the Voting Rights, the Exchange Right and the Automatic Exchange
Rights shall not be affected in any manner whatsoever by reason only of such
event but the Trustee shall, within 90 days after ceasing to be authorized to
carry on such business in the United States, either become so authorized or
resign in the manner and with the effect specified in Article 10 hereof.
7.13 Acceptance of Trust
The Trustee hereby accepts the Trust created and provided for
by and in this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and to hold all rights, privileges and benefits
conferred hereby and by law in trust for the various persons who shall from time
to time be Holders, subject to all the terms and conditions herein set forth.
ARTICLE 8
COMPENSATION
8.1 Fees and Expenses of the Trustee
TSA shall pay to the Trustee its annual fees and other charges
for all of the services rendered by it under this Agreement and will reimburse
the Trustee for all reasonable expenses (including but not limited to taxes,
compensation paid to experts, agents and advisors and travel expenses) and
disbursements, (including the cost and expense of any suit or litigation of any
character and any proceedings before any governmental agency) reasonably
incurred by the Trustee in connection with its rights and duties under this
Agreement other than with respect to a dispute between one or more Holders and
TSA and/or its Affiliates, in which event the Trustees fees will be paid by the
non-prevailing party; provided that TSA and its Affiliates and the Holders shall
have no obligation to reimburse the Trustee for any expenses or disbursements
paid, incurred or suffered by the Trustee in any suit or litigation in which the
Trustee is determined to have acted in bad faith or with gross negligence,
recklessness or willful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Indemnification of the Trustee
TSA and TSA Exchangeco shall indemnify and hold harmless the
Trustee and each of its directors, officers, employees and agents appointed and
acting in accordance with this Agreement (collectively, the "Indemnified
Parties") against all Losses which, without fraud, negligence, recklessness,
willful misconduct or bad faith on the part of such Indemnified Party, may be
paid, incurred or suffered by the Indemnified Party by reason of or as a result
of the Trustee's acceptance or administration of the Trust, its compliance with
its duties set forth in this Agreement, or its compliance with, any written or
oral instructions delivered to the Trustee by TSA or its Affiliates pursuant
hereto. In no case shall TSA and its Affiliates be liable under this indemnity
for any claim against any of the Indemnified Parties unless TSA and TSA
Exchangeco shall be notified by the Trustee of the written assertion of a claim
or of any action commenced against the Indemnified Parties, promptly after any
of the Indemnified Parties shall have received any such written assertion of a
claim or shall have been served with a summons or other first legal process
giving information as to the nature and basis of the claim. Subject to (ii),
below, TSA and TSA Exchangeco shall be entitled to participate at their own
expense in the defense and, if TSA and TSA Exchangeco so elect at any time after
receipt of such notice, they may assume the defense of any suit brought to
enforce any such claim. The Trustee shall have the right to employ separate
counsel in any such suit and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of the Trustee unless: (i) the
employment of such counsel has been authorized by TSA and TSA Exchangeco, such
authorization not to be unreasonably withheld; or (ii) the named parties to any
such suit include both the Trustee and TSA or TSA Exchangeco or other TSA
Affiliates and the Trustee shall have been advised by counsel acceptable to TSA
and TSA Exchangeco that there may be one or more legal defenses available to the
Trustee that are different from or in addition to those available to TSA or its
Affiliates and that an actual or potential conflict of interest exists (in which
case TSA and TSA Exchangeco shall not have the right to assume the defense of
such suit on behalf of the Trustee but shall be liable to pay the reasonable
fees and expenses of counsel for the Trustee).
ARTICLE 10
CHANGE OF TRUSTEE
10.1 Resignation
The Trustee, or any trustee hereafter appointed, may at any
time resign by giving written notice of such resignation to TSA, TSA Holdco and
TSA Exchangeco specifying the date on which it desires to resign, provided that
such notice shall never be given less than 60 days before such desired
resignation date unless TSA, TSA Holdco and TSA Exchangeco otherwise agree and
provided further that such resignation shall not take effect until the date of
the appointment of a successor trustee and the acceptance of such appointment by
the successor trustee. Upon receiving such notice of resignation, TSA, TSA
Holdco and TSA Exchangeco shall promptly appoint a successor trustee by written
instrument in duplicate, one copy of which shall be delivered to the resigning
trustee and one copy to the successor trustee. Failing acceptance by a successor
trustee, a successor trustee may be appointed by an order of the applicable
courts of the Province of Alberta upon application of one or more of the parties
hereto.
10.2 Removal
The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on 30 days' prior notice by written
instrument executed by TSA, TSA Holdco and TSA Exchangeco, in duplicate, one
copy of which shall be delivered to the trustee so removed and one copy to the
successor trustee.
10.3 Successor Trustee
Any successor trustee appointed as provided under this
Agreement shall execute, acknowledge and deliver to TSA, TSA Holdco and TSA
Exchangeco and to its predecessor trustee an instrument accepting such
appointment. Thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as trustee in this Agreement. However, on the written request
of TSA, TSA Holdco and TSA Exchangeco or of the successor trustee, the trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of this Agreement, execute and deliver an instrument transferring to
such successor trustee all the rights and powers of the trustee so ceasing to
act. Upon the request of any such successor trustee, TSA, TSA Holdco, TSA
Exchangeco and such predecessor trustee shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers.
10.4 Notice of Successor Trustee
Upon acceptance of appointment by a successor trustee as
provided herein, TSA and TSA Exchangeco shall cause to be mailed notice of the
succession of such trustee hereunder to each Holder specified in a List. If TSA
or TSA Exchangeco shall fail to cause such notice to be mailed within 10 days
after acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be mailed at the expense of TSA Exchangeco.
ARTICLE 11
TSA SUCCESSORS
11.1 Certain Requirements in Respect of Combination, Etc.
Subject to and without limiting TSA's rights to redeem the
Exchangeable Shares TSA, directly or indirectly, shall not consummate any
transaction (whether by way of reconstruction, reorganization, consolidation,
merger, transfer, sale, lease or otherwise) whereby all or substantially all of
its undertaking, property and assets would become the property of any other
person or, in the case of a merger, of the continuing corporation resulting
therefrom unless, but may do so if: (i) such other person or continuing
corporation (herein called the "TSA Successor"), by operation of Law, becomes,
without more, bound by the terms and provisions of this Agreement or, if not so
bound, executes, prior to or contemporaneously with the consummation of such
transaction an agreement supplemental hereto and such other instruments (if any)
as are reasonably satisfactory to the Trustee and are reasonably necessary or
advisable to evidence the assumption by the TSA Successor of TSA's liability for
all monies payable and property deliverable by TSA hereunder and the covenant of
such TSA Successor to pay and deliver or cause to be delivered the same and its
agreement to observe and perform all the covenants and obligations of TSA under
this Agreement; and (ii) such transaction shall, to the satisfaction of the
Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee,
be upon such terms and conditions as substantially preserve and does not impair
in any material respect any of the rights, duties, powers and authorities of the
Trustee or of the Holders hereunder.
Nothing herein shall affect the rights of TSA Exchangeco to
redeem (or TSA Holdco or TSA to purchase pursuant to the Redemption Call Right)
Exchangeable Shares, as applicable.
11.2 Vesting of Powers in Successor
Whenever the conditions of Section 11. 1 hereof have been duly
observed and performed, the TSA Successor and the parties hereto, if required by
Section 11.1 hereof, shall execute and deliver the supplemental agreement
provided for in Section 12.5 hereof and thereupon TSA Successor shall possess
and from time to time may exercise each and every right and power of TSA under
this Agreement in the name of TSA or otherwise and any act or proceeding by any
provision of this Agreement required to be done or performed by the board of
directors of TSA or any officers of TSA may be done and performed with like
force and effect by the directors or officers of such TSA Successor.
11.3 Wholly-Owned Subsidiaries
Nothing herein shall be construed as preventing the
amalgamation, merger or other combination of any wholly-owned direct or indirect
subsidiary of TSA with or into TSA or with or into another wholly-owned direct
or indirect subsidiary of TSA or the winding-up, liquidation or dissolution of
any direct or indirect wholly-owned subsidiary of TSA provided that all of the
assets of such subsidiary are transferred to TSA or another direct or indirect
wholly-owned subsidiary of TSA, and any such transactions are expressly
permitted by this Section 11.3.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1 Amendments, Modifications, Etc.
Subject to Sections 12.2 and 12.4, this Agreement may not be
amended or modified except by an agreement in writing executed by TSA, TSA
Holdco and TSA Exchangeco and the Trustee and approved by the Holders in
accordance with Section 9.2 of the Exchangeable Share Provisions.
12.2 Administrative Amendments
Notwithstanding the provisions of Section 12.1 hereof, the
parties to this Agreement may in writing, at any time and from time to time,
without the approval of the Holders, amend or modify this Agreement for the
purposes of:
(a) adding to the covenants of any or all parties hereto for the
protection of TSA Exchangeco or the Holders;
(b) making such amendments or modifications not inconsistent
with this Agreement as may be necessary or desirable with
respect to matters or questions which, in the good faith
opinion of the board of directors of each of TSA and TSA
Exchangeco and in the good faith opinion of the Trustee,
having in mind the best interests of the Holders as a whole,
it may be expedient to make, provided that such boards of
directors and the Trustee shall be of the good faith opinion
that such amendments and modifications will not be
prejudicial to the interests of the Holders as a whole; or
(c) making such changes or corrections which, on the advice of
counsel to TSA Exchangeco, TSA and the Trustee, are required
for the purpose of curing or correcting any ambiguity or
defect or inconsistent provision or clerical omission or
mistake or manifest error, provided that the Trustee and the
board of directors of each of TSA Exchangeco and TSA shall
be of the good faith opinion that such changes or
corrections will not be prejudicial to the interests of the
Holders as a whole.
12.3 Meeting to Consider Amendments
TSA Exchangeco, at the request of TSA, shall call a meeting or
meetings of the Holders for the purpose of considering any proposed amendment or
modification requiring approval pursuant hereto. Holders may also approve any
proposed amendment or modification by written consent of Holders holding not
less than the minimum number of Exchangeable Shares that would be necessary to
authorize or take such action at a meeting of Holders called for such purpose.
Any such meeting or meetings shall be called and held, or written consent given
shall be given in accordance with the by-laws of TSA Exchangeco, the
Exchangeable Share Provisions and all applicable Laws.
12.4 Changes in Capital of TSA and TSA Exchangeco
At all times after the occurrence of any event effected
pursuant to Section 2.7 or Section 2.8 of the Support Agreement or otherwise, as
a result of which either TSA Class A Common Shares or the Exchangeable Shares or
both are in any way changed, this Agreement shall forthwith be amended and
modified as necessary in order that it shall apply with full force and effect,
mutatis mutandis, to all new securities into which the TSA Class A Common Shares
or the Exchangeable Shares or both are so changed and the parties hereto shall
execute and deliver a supplemental agreement giving effect to and evidencing
such necessary amendments and modifications.
12.5 Execution of Supplemental Agreements
No amendment to or modification or waiver of any of the
provisions of this Agreement otherwise permitted hereunder shall be effective
unless made in writing and signed by all of the parties hereto. From time to
time TSA, TSA Holdco, TSA Exchangeco and the Trustee may, subject to the
provisions of these presents, execute and deliver by their proper officers,
agreements or other instruments supplemental hereto, which thereafter shall form
part hereof, for any one or more of the following purposes:
(a) evidencing the succession of TSA Successors to TSA and the
covenants of and obligations assumed by each such TSA
Successor in accordance with the provisions of Article 11 and
the successor of any successor trustee in accordance with the
provisions of Article 10;
(b) making any additions to, deletions from or alterations of
the provisions of this Agreement or the Voting Rights, the
Exchange Right or the Automatic Exchange Rights which, in
the opinion of the Trustee, will not be prejudicial to the
interests of the Holders as a whole or are in the opinion of
the Trustee necessary or advisable in order to incorporate,
reflect or comply with any legislation the provisions of
which apply to TSA, TSA Holdco, TSA Exchangeco, the Trustee
or this Agreement; and
(c) for any other purposes not inconsistent with the provisions
of this trust agreement, including without limitation to
make or evidence any amendment or modification to this
agreement as contemplated hereby, provided that, in the
opinion of the Trustee and its counsel, the rights of the
Trustee and the Holders as a whole will not be prejudiced
thereby.
ARTICLE 13
TERMINATION
13.1 Term
The Trust created by this Agreement shall continue until the
earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder;
(b) each of TSA Exchangeco and TSA elects in writing to terminate
the Trust and such termination is approved by the Holders of
the Exchangeable Shares in accordance with Section 9.2 of the
Exchangeable Share Provisions; and
(c) 21 years from the date of this Agreement.
13.2 Survival of Agreement
This Agreement shall survive any termination of the Trust and
shall continue until there are no outstanding Holders of Exchangeable Shares;
provided, however, that the provisions of Articles 8 and 9 hereof shall survive
any such termination of this Agreement.
ARTICLE 14
GENERAL
14.1 Severability
If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, businesses,
legal and other purposes of the void or unenforceable provision.
14.2 Inurement
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, the holders of the Exchangeable Shares and their
respective successors and permitted assigns, as well as to their respective
heirs, executors, trustees, administrators and other personal representatives.
14.3 Notices to Parties
All notices and other communications between the parties hereunder shall be in
writing and shall be deemed given if delivered personally, by facsimile, sent by
nationally-recognized overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
(a) if to TSA, TSA Holdco or TSA Exchangeco:
Transaction Systems Architects, Inc.
224 South 108th Avenue
Suite 7
Omaha, Nebraska
68154
Attention: General Counsel and Secretary
Facsimile No.: (402) 390-8077
with a copy to:
Baker & McKenzie
BCE Place
181 Bay Street, Suite 2100
P.O. Box 874
Toronto, Ontario, Canada, M5J 2T3
Attention: Kathleen M. Orysiuk
Facsimile: (416) 863-6275
(b) if to the Trustee to:
Wells Fargo Bank Minnesota, National Association
Wells Fargo Bank Center
Sixth and Marquette
MAC N9303-120
Minneapolis, Minnesota
55479-0069 USA
Attention: Marco X. Morales
Facsimile No.: (612) 667-9825
Any notice or other communication given in accordance herewith shall be deemed
to have been given and received upon receipt thereof unless such day is not a
Business Day in which case it shall be deemed to have been given and received
upon the immediately following Business Day.
14.4 Notice of Holders
Any and all notices to be given and any documents to be sent
to any Holders may be given or sent to the address of such holder shown on the
register of holders of Exchangeable Shares in any manner permitted by the
by-laws of TSA Exchangeco from time to time in force in respect of notices to
shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such by-laws, the provisions of which by-laws
shall apply mutatis mutandis to notices or documents as aforesaid sent to such
Holders.
14.5 Risk of Payments by Post
Whenever payments are to be made or documents are to be sent
to any Holder by the Trustee or by TSA Exchangeco, or by such Holder to the
Trustee or to TSA or TSA Exchangeco, the making of such payment or sending of
such document sent through the post shall be at the risk of TSA Exchangeco, in
the case of payments made or documents sent by the Trustee or TSA Exchangeco,
and the Holder, in the case of payments made or documents sent by the Holder.
14.6 Counterparts
This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
14.7 Jurisdiction; Attornment
The internal laws of the Province of Alberta, Canada
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and enforcement
of the rights and duties of the parties hereto. Each of the parties hereto
agrees that any action or proceeding arising out of or relating to this
Agreement may be instituted in the courts of Alberta, waives any objection which
it may have now or hereafter to the venue of any such action or proceeding,
irrevocably submits to the jurisdiction of the said courts in any such action or
proceeding, agrees to be bound by any judgment of the said courts and not to
seek, and hereby waives, any review of the merits of any such judgment by the
courts of any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Voting and Exchange Trust Agreement as of the date first above written.
TRANSACTION SYSTEMS ARCHITECTS, INC.
By:
______________________________________
Name:
Title:
TRANSACTION SYSTEMS ARCHITECTS NOVA SCOTIA COMPANY
By:
______________________________________
Name:
Title:
TSA EXCHANGECO LIMITED
By:
______________________________________
Name:
Title:
WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
______________________________________
Name:
Title:
SCHEDULE 1
SPECIAL VOTING SHARE ATTRIBUTES
CERTIFICATE OF DESIGNATIONS
OF
SPECIAL PREFERRED VOTING STOCK
OF
TRANSACTION SYSTEMS ARCHITECTS, INC.
Pursuant to the provisions of Section 151(g) of the General Corporation
Law of the State of Delaware (the "DGCL"), and pursuant to its Amended and
Restated Certificate of Incorporation, the undersigned, Transaction Systems
Architects, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), in accordance with
the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Amended and Restated Certificate of
Incorporation of the Corporation, the Board of Directors on January 5, 2001,
adopted the following resolution creating a series of Preferred Stock, par value
$.01, designated as "Special Preferred Voting Stock":
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board by the Amended and Restated Certificate of Incorporation,
the Board hereby authorizes the creation of a series of preferred stock, par
value $.01 per share, of the Corporation, such series to be designated Special
Preferred Voting Stock (the "Special Preferred Voting Stock"), and hereby fixes
the designation and number of shares thereof and the other powers, preferences
and relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof as follows:
Section 1. Special Preferred Voting Stock Designated. A series of
Preferred Stock, consisting of one share of such stock, is hereby designated as
"Special Preferred Voting Stock." The outstanding share of Special Preferred
Voting Stock shall be entitled at any relevant date on all matters presented to
the holders of Class A Common Stock of the Corporation to the number of votes
equal to the number of Exchangeable Shares (as such term is defined in the
Voting and Exchange Trust Agreement dated as of January 11, 2001, among the
Corporation, Transaction Systems Architects Nova Scotia Company, TSA Exchangeco
Limited, and Wells Fargo Bank Minnesota, National Association, a trust company
existing under the laws of the State of Minnesota) outstanding from time to
time, other than Exchangeable Shares held by the Corporation and its affiliates.
The Special Preferred Voting Stock and Class A Common Stock shall vote together
as a single class. The Special Preferred Voting Stock shall have no other voting
rights except as required by law. No dividend shall be paid to the holder of
Special Preferred Voting Stock. The Special Preferred Voting Stock is not
convertible into any other class or series of the capital stock of the
Corporation or into cash, property or other rights. The holder of the Special
Preferred Voting Stock shall not be entitled to participate in any payment or
distribution upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation. Any share of Special Preferred Voting Stock
purchased or otherwise acquired by the Corporation shall be deemed retired and
shall be canceled and may not thereafter be reissued or otherwise disposed of by
the Corporation. So long as any Exchangeable Shares shall be outstanding, the
number of shares comprising the Special Preferred Voting Stock shall not be
increased or decreased and no other term of the Special Preferred Voting Stock
shall be amended, except upon the approval of the holder of the outstanding
share of Special Preferred Voting Stock. At such time as no Exchangeable Shares
shall be outstanding, the Special Preferred Voting Stock shall automatically be
cancelled.
IN WITNESS WHEREOF, the undersigned has executed this Certificate and
does affirm the foregoing as true this day of ___________, 2000.
TRANSACTION SYSTEMS ARCHITECTS, INC.
By:/s/ David Stokes
---------------------------------
David Stokes
General Counsel and Secretary
Execution Copy
11
SUPPORT AGREEMENT
SUPPORT AGREEMENT, dated as of January 11, 2001, among
Transaction Systems Architects, Inc., a Delaware corporation ("TSA"),
Transaction Systems Architects Nova Scotia Company, a Nova Scotia unlimited
company ("TSA Holdco"), and TSA Exchangeco Limited, a Nova Scotia limited
company ("TSA Exchangeco").
WHEREAS in connection with a combination agreement dated as of
October 24, 2000 among TSA, TSA Holdco, TSA Exchangeco and MessagingDirect
Ltd., an Alberta Corporation ("MDL"), (the "Combination Agreement"), TSA
Exchangeco is to issue exchangeable shares (the "Exchangeable Shares") to
certain holders of securities of MDL pursuant to the plan of arrangement to be
effected by Articles of Arrangement filed under the Business Corporations Act
(Alberta) contemplated by the Combination Agreement and attached as an exhibit
thereto (the "Plan of Arrangement");
WHEREAS, the Plan of Arrangement sets forth the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares;
WHEREAS, the parties to the Combination Agreement desire to
make appropriate provision and to establish a procedure whereby TSA, TSA
Holdco and TSA Exchangeco will take certain actions and make certain payments
and deliveries necessary to ensure that TSA Exchangeco will be able to make
certain payments and to deliver or cause to be delivered TSA Class A Common
Shares ("TSA Class A Common Shares") in satisfaction of the obligations of TSA
Exchangeco under the Exchangeable Share Provisions with respect to the payment
and satisfaction of dividends, Liquidation Amounts, Retraction Prices and
Redemption Prices, all in accordance with the Exchangeable Share Provisions;
and
WHEREAS, as part of the Plan of Arrangement and pursuant to
the Combination Agreement, the parties hereto are to execute and deliver a
Support Agreement substantially in the form of this Agreement on the Effective
Date (as defined in the Combination Agreement);
NOW THEREFORE in consideration of the respective covenants
and agreements provided in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms
Each term denoted herein by initial capital letters and not
otherwise defined herein shall have the meaning ascribed thereto in the
Exchangeable Share Provisions, unless the content requires otherwise.
1.2 Interpretation Not Affected by Headings, Etc.
The division of this Agreement into Articles, Sections and
other portions and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation hereof. Unless
otherwise indicated, all references to an "Article" or "Section" followed by a
number and/or a letter refer to the specified Article or Section of this
Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and
similar expressions refer to this Agreement (including the Schedules and
Exhibits hereto) and not to any particular Article, Section or other portion
hereof, but do not include any agreement or instrument supplementary or
ancillary hereto.
1.3 Number, Gender, Etc.
Words importing the singular number only shall include the
plural and vice versa. Words importing the use of any gender shall include all
genders.
1.4 Date For Any Action
If any date on which any action is required to be taken under
this Agreement is not a Business Day, such action shall be required to be
taken on the next succeeding Business Day.
ARTICLE II
COVENANTS OF TSA, TSA HOLDCO AND TSA EXCHANGECO
2.1 Covenants of TSA Regarding Exchangeable Shares
So long as any Exchangeable Shares not owned by TSA or its
Affiliates are outstanding, TSA will:
(a) not declare or pay any dividend on the TSA Class A Common Shares
unless: (i) TSA Exchangeco shall comply with the
provisions of Section 3.1 of the Exchangeable Share
Provisions; and (ii) TSA Exchangeco shall have
sufficient money or other assets or authorized but
unissued securities available to enable the due
declaration and the due and punctual payment, in
accordance with applicable Law, of any dividend to be
declared and paid by TSA Exchangeco all in accordance
with Section 3.1 of the Exchangeable Share
Provisions;
(b) advise TSA Exchangeco sufficiently in advance of the declaration by
TSA of any dividend on the TSA Class A Common
Shares and take all such other actions as are
necessary, in cooperation with TSA Exchangeco, to
ensure that: (i) the respective declaration date,
record date and payment date for a dividend on the
Exchangeable Shares shall be the same declaration
date, record date and payment date for the
corresponding dividend on the TSA Class A Common
Shares; or, (ii) the effective date for an
Equivalent Stock Subdivision or Equivalent Ratio
Adjustment, as the case may be, shall be the same
as the payment date for the corresponding stock
dividend on the TSA Class A Common Shares;
(c) take all such actions and do all such things as are necessary or
desirable to enable and permit TSA Exchangeco, in
accordance with applicable Law, to pay and
otherwise perform its obligations with respect to
the satisfaction of the Liquidation Amount, the
Retraction Price or the Redemption Price in respect
of each issued and outstanding Exchangeable Share
(other than Exchangeable Shares owned by TSA or its
Affiliates) upon the liquidation, dissolution or
winding up of TSA Exchangeco, or any other
distribution of the assets of TSA Exchangeco among
its Shareholders for the purpose of winding up its
affairs, the delivery of a Retraction Request by a
holder of Exchangeable Shares or a redemption of
Exchangeable Shares by TSA Exchangeco, as the case
may be, including, without limitation, all such
actions and all such things as are necessary or
desirable to enable and permit TSA Exchangeco to
cause to be delivered TSA Class A Common Shares to
the holders of Exchangeable Shares in accordance
with the provisions of Articles 5, 6 or 7, as the
case may be, of the Exchangeable Share Provisions;
(d) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit TSA
Exchangeco, TSA Holdco or TSA, in accordance with
applicable Law, to perform its obligations
contemplated in the Plan of Arrangement (including
the Exchangeable Share Provisions), including
without limitation, those obligations arising upon
the exercise by it of the Liquidation Call Right,
the Retraction Call Right or the Redemption Call
Right, and further including, without limitation,
all such actions and all such things as are
necessary or desirable to enable and permit TSA
Exchangeco, TSA Holdco or TSA to cause TSA Class A
Common Shares to be delivered to the holders of
Exchangeable Shares, in accordance with the
provisions of the Liquidation Call Right, the
Retraction Call Right or the Redemption Call Right,
as the case may be; and
(e) not exercise its vote as a shareholder, directly or indirectly, to
initiate the voluntary liquidation, dissolution or
winding up of TSA Exchangeco or any other
distribution of the assets of TSA Exchangeco among
its shareholders for the purpose of winding up its
affairs, nor take any action or omit to take,
directly or indirectly, any action that is designed
to result in the liquidation, dissolution or
winding up of TSA Exchangeco or any other
distribution of the assets of TSA Exchangeco among
its shareholders for the purpose of winding up its
affairs, subject to the provision in section 2.9
herein that a reorganization of TSA Exchangeco
shall not be prohibited in circumstances outlined
therein.
2.2 Segregation of Funds
TSA will cause TSA Exchangeco to deposit a sufficient amount
of funds in a separate account of TSA Exchangeco and segregate a sufficient
amount of such assets and other property as is necessary to enable TSA
Exchangeco to pay dividends when due and to pay or otherwise satisfy the
applicable dividends, Liquidation Amount, Retraction Price or Redemption
Price, in each case for the benefit of holders from time to time of the
Exchangeable Shares (other than TSA and its Affiliates), and TSA Exchangeco
will use such funds, assets and other property so segregated exclusively for
the payment of dividends and the payment or other satisfaction of the
Liquidation Amount, the Retraction Price or the Redemption Price, as
applicable, net of any corresponding withholding tax obligations and for the
remittance of such withholding tax obligations.
2.3 Reservation of TSA Class A Common Shares
TSA hereby represents, warrants and covenants that it has
irrevocably reserved for issuance and will at all times while any Exchangeable
Shares (other than Exchangeable Shares held by TSA or its Affiliates) are
outstanding, keep available, free from pre-emptive and other rights, out of
its authorized and unissued share capital such number of TSA Class A Common
Shares (or other shares or securities into which TSA Class A Common Shares may
be reclassified or changed as contemplated by Section 2.7 hereof): (a) as is
equal to the sum of: (i) the number of Exchangeable Shares issued and
outstanding from time to time (other than those Exchangeable Shares that have
been acquired by TSA or its Affiliates); and (ii) the number of Exchangeable
Shares issuable upon the exercise of all rights to acquire Exchangeable Shares
outstanding from time to time; and (b) as are now and may hereafter be
required to enable and permit TSA Exchangeco to meet its obligations
hereunder, under the Voting and Exchange Trust Agreement, under the
Exchangeable Share Provisions and under any other security or commitment
pursuant to the Plan of Arrangement with respect to which TSA may now or
hereafter be required to issue TSA Class A Common Shares and to enable and
permit TSA Exchangeco, TSA Holdco, or TSA to meet its obligations under the
Automatic Exchange Rights (as defined in the Voting and Exchange Trust
Agreement), Exchangeable Share Provisions, Liquidation Call Right, the
Retraction Call Right and the Redemption Call Right.
2.4 Notification of Certain Events
In order to assist TSA in complying with its obligations
hereunder and to permit TSA Exchangeco, TSA Holdco, or TSA to exercise the
Liquidation Call Right, the Retraction Call Right and the Redemption Call
Right, TSA Exchangeco will notify TSA, and TSA Holdco (and with respect to (a)
below, the transfer agent of the Exchangeable Shares) of each of the following
events at the time set forth below:
(a) in the event of any determination by the Board of Directors of TSA
Exchangeco to institute voluntary liquidation,
dissolution or winding up proceedings with respect
to TSA Exchangeco or to effect any other
distribution of the assets of TSA Exchangeco among
its shareholders for the purpose of winding up its
affairs, at least 60 days prior to the proposed
effective date of such liquidation, dissolution,
winding up or other distribution;
(b) immediately, upon the earlier of: (i) receipt by TSA Exchangeco of
notice of; and (ii) TSA Exchangeco otherwise
becoming aware of, any threatened or instituted
claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution
or winding up of TSA Exchangeco or to effect any
other distribution of the assets of TSA Exchangeco
among its shareholders for the purpose of winding
up its affairs;
(c) immediately, upon receipt by TSA Exchangeco of a Retraction Request;
(d) on the same date on which notice of redemption is
given to the holders of Exchangeable Shares, upon the
determination of a Redemption Date in accordance with
the Exchangeable Share Provisions; and
(e) as soon as practicable upon the issue by TSA
Exchangeco of any Exchangeable Shares or rights to
acquire Exchangeable Shares (other than the issue of
Exchangeable Shares and rights to acquire
Exchangeable Shares in exchange for MDL Class A
Shares pursuant to the Arrangement).
2.5 Delivery of TSA Class A Common Shares
In furtherance of TSA's obligations under Sections 2.1 (c)
and 2.1 (d) hereof, upon notice from TSA Exchangeco, TSA Holdco or TSA of any
event that requires any such party to cause TSA Class A Common Shares to be
delivered to any holder of Exchangeable Shares, TSA shall forthwith allot or
reserve, issue and deliver or cause to be delivered to the relevant holder of
Exchangeable Shares as directed by TSA Exchangeco, TSA Holdco or TSA of the
requisite number of TSA Class A Common Shares to be allotted to or reserved
for, and received by and issued to the former holder of the surrendered
Exchangeable Shares. All such TSA Class A Common Shares shall be validly
issued, fully paid, non-assessable, and will be free and clear of any lien,
claim or encumbrance attributable to, or arising due to, any action or
omission of the issuer.
2.6 Issuance, Listing and Registration of TSA Class A Common
Shares
So long as any Exchangeable Shares not owned by TSA or its
Affiliates are outstanding, TSA will cause the TSA Class A Common Shares to be
issued from time to time upon exchange of the Exchangeable Shares to be quoted
on the NASDAQ or such other exchange or quotation system to the same extent as
TSA stock is quoted generally, subject only to official notice of issuance.
TSA will prepare and file the Registration Statement (as defined in the
Combination Agreement) with the SEC.
2.7 Economic Equivalence
So long as any Exchangeable Shares not owned by TSA or its
Affiliates are outstanding:
(a) TSA will not without the prior approval of TSA
Exchangeco and the prior approval of the holders of
the Exchangeable Shares given in accordance with
Section 9.2 of the Exchangeable Share Provisions:
(i) issue or distribute TSA Class A Common
Shares (or securities exchangeable for or
convertible into or carrying rights to
acquire TSA Class A Common Shares) to the
holders of all or substantially all of the
then outstanding TSA Class A Common Shares
by way of stock dividend (including a
stock split payable as a stock dividend)
or other distribution, other than an issue
of TSA Class A Common Shares (or
securities exchangeable for or convertible
into or carrying rights to acquire TSA
Class A Common Shares) to holders of TSA
Class A Common Shares who exercise an
option to receive dividends in TSA Class A
Common Shares (or securities exchangeable
for or convertible into or carrying rights
to acquire TSA Class A Common Shares) in
lieu of receiving cash dividends;
(ii) issue or distribute rights, options or
warrants to the holders of all or
substantially all of the then outstanding
TSA Class A Common Shares entitling them
to subscribe for or to purchase TSA Class
A Common Shares (or securities
exchangeable for or convertible into or
carrying rights to acquire TSA Class A
Common Shares); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding
TSA Class A Common Shares:
(A) shares or securities of TSA of any
class other than TSA Class A Common
Shares (other than shares
convertible into or exchangeable for
or carrying rights to acquire TSA
Class A Common Shares);
(B) rights, options or warrants other than those referred to in Section
2.7(a)(ii) above;
(C) evidences of indebtedness of TSA; or
(D) assets of TSA;
unless TSA or TSA Exchangeco is permitted under
applicable Law to issue or distribute the same, or
the economic equivalent on a per share basis of, such
rights, options, securities, shares, evidences of
indebtedness or other assets to holders of the
Exchangeable Shares other than TSA and its Affiliates
or to effect an Equivalent Stock Subdivision or
Equivalent Ratio Adjustment and TSA or TSA Exchangeco
issues or distributes the same, or the economic
equivalent of, such rights, options, securities,
shares, evidences of indebtedness or other assets
simultaneously to holders of the Exchangeable Shares
or effects an Equivalent Stock Subdivision or
Equivalent Ratio Adjustment; provided that, for
greater certainty, the above restrictions shall not:
(i) apply to any securities issued or distributed by
TSA in order to give effect to and to consummate the
transactions contemplated by, and in accordance with,
the Plan of Arrangement or (ii) restrict TSA's
overriding Redemption Call Right in the event of a
TSA Spin-Out Decision Date.
(b) TSA will not without the prior approval of TSA
Exchangeco and the prior approval of the holders of
the Exchangeable Shares given in accordance with
Section 9.2 of the Exchangeable Share Provisions:
(i) subdivide, redivide or change the then
outstanding TSA Class A Common Shares into a
greater number of TSA Class A Common Shares;
or
(ii) reduce, combine, consolidate or change the
then outstanding TSA Class A Common Shares
into a lesser number of TSA Class A Common
Shares; or
(iii) reclassify or otherwise change the TSA Class
A Common Shares or effect an amalgamation,
merger, reorganization or other transaction
affecting the TSA Class A Common Shares;
unless (x) TSA Exchangeco is permitted under
applicable Law to make the same or an economically
equivalent change to, or in the rights of holders of,
the Exchangeable Shares and (y) the same or an
economically equivalent change is made to, or in the
rights of the holders of, the Exchangeable Shares.
(c) Should the board of directors of TSA Exchangeco determine, in good
faith and in its sole and absolute discretion, to
provide economic equivalence for the purposes of
any event referred to in section 2.7 (a) or (b)
above, the board of directors of TSA Exchangeco
shall determine, in its sole and absolute
discretion, (with the assistance of such reputable
and qualified independent financial advisors and/or
other experts as the board of directors of TSA
Exchangeco may require) such economic equivalence,
and each such determination shall be conclusive and
binding on TSA Exchangeco, all TSA Exchangeco
security holders and TSA. In making such
determination of economic equivalence, the
following factors shall, without excluding other
factors determined by the board of directors of TSA
Exchangeco to be relevant, be considered by the
board of directors of TSA Exchangeco :
(i) in the case of any stock dividend or other
distribution payable in TSA Class A Common
Shares, the number of such shares issued in
proportion to the number of TSA Class A
Common Shares previously outstanding;
(ii) in the case of the issuance or distribution of any rights, options or
warrants to subscribe for or purchase TSA
Class A Common Shares (or securities
exchangeable for or convertible into or
carrying rights to acquire TSA Class A
Common Shares), the relationship between
the exercise price of each such right,
option or warrant and the Current Market
Price;
(iii) in the case of the issuance or distribution of any other form of
property (including without limitation any
securities of TSA of any class other than
TSA Class A Common Shares, any rights,
options or warrants other than those
referred to in Subsection (b) above, any
evidences of indebtedness of TSA or any
assets of TSA), the relationship between
the fair market value (as determined by
the board of directors of TSA Exchangeco
in the manner above contemplated) of such
property to be issued or distributed with
respect to each outstanding TSA Class A
Common Share and the Current Market Price;
(iv) in the case of any subdivision, re-division or change of the then
outstanding TSA Class A Common Shares into
a greater number of TSA Class A Common
Shares or the reduction, combination or
consolidation or change of the then
outstanding TSA Class A Common Shares into
a lesser number of TSA Class A Common
Shares or any amalgamation, merger,
re-organization or other transaction
effecting the TSA Class A Common Shares,
the effect thereof on the then outstanding
shares of TSA Class A Common Shares; and
(v) the general taxation consequences of the relevant event to holders of
Exchangeable Shares to the extent that
such consequences may differ from the
taxation consequences to holders of TSA
Class A Common Shares as a result of
differences between Tax Laws of Canada,
the United Kingdom, and the United States
(except for any differing consequences
arising as a result of differing marginal
taxation rates and without regard to the
individual circumstances of holders of
Exchangeable Shares).
(d) TSA Exchangeco agrees that, to the extent required,
and subject to TSA's overriding Redemption Call
Right in the event of a TSA Spin-Out Decision Date,
upon due notice from TSA, TSA Exchangeco will use
its best efforts to take or cause to be taken such
steps as may be necessary for the purposes of
ensuring that appropriate dividends are paid or
other distributions are made by TSA Exchangeco, or
changes are made to the Exchangeable Shares or that
an Equivalent Ratio Adjustment is made, in order to
implement the required economic equivalence with
respect to TSA Class A Common Shares and
Exchangeable Shares as provided for in this Section
2.7.
2.8 Tender Offers, Etc.
In the event that a tender offer, share exchange offer, issuer
bid, take-over bid or similar transaction with respect to TSA Class A Common
Shares (an "Offer") is proposed by TSA or is proposed to TSA or its
shareholders and is recommended by the board of directors of TSA, or is
otherwise effected or to be effected with the consent or approval of the board
of directors of TSA and the Exchangeable Shares are not redeemed by TSA
Exchangeco or purchased by TSA Holdco (or TSA) pursuant to the Redemption Call
Right or Automatic Exchange Rights, TSA will use its reasonable efforts in
good faith to take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit holders of Exchangeable Shares
other than TSA and its Affiliates to participate in such Offer to the same
extent and on an economically equivalent basis as the holders of TSA Class A
Common Shares, without discrimination. Without limiting the generality of the
foregoing, TSA will use its reasonable efforts in good faith to ensure that
holders of Exchangeable Shares may participate in each such Offer without
being required to retract Exchangeable Shares as against TSA Exchangeco (or,
if so required, to ensure that any such retraction shall be effective only
upon, and shall be conditional upon, the closing of such Offer and only to the
extent necessary to tender or deposit to the Offer). Nothing herein shall
affect the rights of TSA Exchangeco to redeem (or TSA Holdco or TSA to
purchase pursuant to the Redemption Call Right or Automatic Exchange Rights)
Exchangeable Shares, as applicable, in the event of a TSA Control Transaction.
2.9 Ownership of Outstanding Shares of TSA Exchangeco
TSA covenants and agrees in favour of TSA Exchangeco that, as
long as any outstanding Exchangeable Shares are owned by any Person other than
TSA or its Affiliates, TSA will be and remain the direct or indirect
beneficial owner of all issued and outstanding voting shares in the capital of
TSA Exchangeco and of all of the issued and outstanding shares of TSA Holdco,
unless obtaining the prior approval of TSA Exchangeco and the prior approval
of the holders of the Exchangeable Shares given in accordance with Section 9.2
of the Exchangeable Share Provisions, and provided that this shall not
prohibit a reorganization of TSA Exchangeco or TSA Holdco which results in TSA
or its Affiliates assuming or succeeding to the rights and obligations of TSA
Exchangeco and TSA Holdco hereunder, but provided further that no such
reorganization shall result in the holders of Exchangeable Shares becoming
shareholders or otherwise beneficially interested in any body corporate or
other entity which does not afford its shareholders (or other equity holders)
limited liability.
2.10 TSA and Affiliates Not to Vote Exchangeable Shares
TSA covenants and agrees that it will appoint and cause to be
appointed proxy holders with respect to all Exchangeable Shares held by TSA
and its Affiliates, specifically including TSA Holdco, for the sole purpose of
attending each meeting of holders of Exchangeable Shares in order to be
counted as part of the quorum for each such meeting. TSA further covenants and
agrees that it will not, and will cause each of its Affiliates (including TSA
Holdco) not to, exercise any voting rights that may be exercisable by holders
of Exchangeable Shares from time to time pursuant to the Exchangeable Share
Provisions or pursuant to the provisions of the ABCA (or any successor or
other corporate statute by which TSA Exchangeco may in the future be governed)
with respect to any Exchangeable Shares held by it or by TSA Holdco, TSA or by
TSA's Affiliates in respect of any matter considered at any meeting of holders
of Exchangeable Shares.
2.11 Due Performance
On and after the Effective Date, TSA shall duly and timely
perform all of its obligations provided for in the Plan of Arrangement,
including any obligations that may arise upon the exercise of TSA's rights
under the Exchangeable Share Provisions.
ARTICLE III
GENERAL
3.1 Term
This Agreement shall come into force and be effective as of
the date hereof and shall terminate and be of no further force and effect at
such time as no Exchangeable Shares (or securities or rights convertible into
or exchangeable for or carrying rights to acquire Exchangeable Shares) are
held by any party other than TSA and any of its Affiliates.
3.2 Changes in Capital of TSA and TSA Exchangeco
Notwithstanding the provisions of Section 3.4 hereof, at all
times after the occurrence of any event effected pursuant to Section 2.7 or
2.8 hereof or otherwise, as a result of which either the TSA Class A Common
Shares or the Exchangeable Shares or both are in any way changed, this
Agreement shall forthwith be amended and modified as necessary in order that
it shall apply with full force and effect, mutatis mutandis, to all new
securities into which TSA Class A Common Shares or the Exchangeable Shares or
both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
3.3 Severability
If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the greatest extent possible, the economic,
businesses, legal and other purposes of the void or unenforceable provision.
3.4 Amendments, Modifications, Etc.
Subject to Section 3.2, 3.3 and 3.5, this Agreement may not
be amended or modified except by an agreement in writing executed by TSA
Exchangeco, TSA, and TSA Holdco and approved by the holders of the
Exchangeable Shares in accordance with Section 9.2 of the Exchangeable Share
Provisions.
3.5 Administrative Amendments
Notwithstanding the provisions of Section 3.4, the parties to
this Agreement may in writing, at any time and from time to time, without the
approval of the holders of the Exchangeable Shares, amend or modify this
Agreement as may be necessary or advisable for the purposes of:
(a) adding to the covenants of any or all parties to this
Agreement for the protection of TSA Exchangeco or the
holders of the Exchangeable Shares, provided that the
board of directors of each of TSA, TSA Exchangeco and
TSA Holdco shall be of the good faith opinion, after
consultation with counsel, that such additions will not
be prejudicial to the rights or interest of the holders
of Exchangeable Shares;
(b) making such provisions or modifications not inconsistent with this
Agreement as may be necessary or desirable with
respect to matters or questions which, in the good
faith opinion of the board of directors of each of
TSA Exchangeco, TSA Holdco and TSA, it may be
expedient to make, provided that each such board of
directors shall be of the good faith opinion, after
consultation with counsel, that such provisions or
modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares;
or
(c) making such changes or corrections to this Agreement, which, on the
advice of counsel, are reasonably required for the
purpose of curing or correcting any ambiguity or
defect or inconsistent provision or clerical omission
or mistake or manifest error, provided that in the
opinion of the board of directors of each of TSA
Exchangeco, TSA Holdco and TSA, after consultation
with counsel, such changes or corrections will not
be prejudicial to the interests of the holders of the
Exchangeable Shares.
3.6 Meeting to Consider Amendments
TSA Exchangeco, at the request of TSA, shall call a meeting
or meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval pursuant
to Section 3.4 hereof. Any such meeting or meetings shall be called and held
in accordance with the by-laws of TSA Exchangeco, the Exchangeable Share
Provisions and all applicable Laws.
3.7 Amendments Only in Writing
No amendment to or modification or waiver of any of the
provisions of this Agreement otherwise permitted hereunder shall be effective
unless made in writing and signed by all of the parties hereto.
3.8 Inurement
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, the holders from time to time of the Exchangeable
Shares and their respective successors and permitted assigns from time to
time, as well as to their respective heirs, executors, trustees,
administrators and other personal representatives.
3.9 Notices to Parties
All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally, by
facsimile, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to TSA, TSA Holdco or TSA Exchangeco:
Transaction Systems Architects, Inc.
224 South 108th Avenue
Suite 7
Omaha, Nebraska
68154
Attention: General Counsel and Secretary
Facsimile: (402) 390-8077
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a facsimile, when the party receiving such copy shall have confirmed
receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the tenth business day following such
mailing.
3.10 Counterparts
This Agreement may be executed in any number of counterparts,
each of which will be an original as regards any party whose signature appears
thereon and all of which together will constitute one and the same instrument.
This Agreement will become binding when one or more counterparts hereof,
individually or taken together, will bear the signatures of all the parties
reflected hereon as signatories.
3.11 Jurisdiction
This Agreement shall be construed and enforced in accordance
with the laws of the Province of Alberta and the laws of Canada applicable
therein.
3.12 Attornment
Each of the parties hereto agrees that any action or
proceeding arising out of or relating to this Agreement may be instituted in
the courts of Alberta, waives any objection which it may have now or hereafter
to the venue of any such action or proceeding, irrevocably submits to the
jurisdiction of the said courts in any such action or proceeding, agrees to be
bound by any judgment of the said courts and not to seek, and hereby waives,
any review of the merits of any such judgment by the courts of any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
TRANSACTION SYSTEMS ARCHITECTS, INC.
By:
___________________________________
Name:
Title:
TRANSACTION SYSTEMS ARCHITECTS NOVA SCOTIA COMPANY
By:
___________________________________
Name:
Title:
\ TSA EXCHANGECO LIMITED
By:
___________________________________
Name:
Title: