Exhibit
10.51
 
 EXECUTION
VERSION
 
 ARRANGEMENT
AGREEMENT
 
 among
 
 ACORN
ENERGY, INC.,
 
 COREWORX
INC.
 
 and
 
 DECISION
DYNAMICS TECHNOLOGY LTD.
 
 Dated
as of March 2, 2010
  -1-
  TABLE
OF CONTENTS
 
 ARTICLE
      I. DEFINITIONS
                                  
                                  
                                  5Section
      1.01
                                  Definitions.
                                  
                                  
                                  5ARTICLE
      II. ARRANGEMENT
                                  
                                  
                                  15Section
      2.01
                                  Implementation
      Steps by the Company.
                                  
                                  
                                  15Section
      2.02
                                  Interim
      Order
                                  
                                  
                                  15Section
      2.03
                                  Articles
      of Arrangement.
                                  
                                  
                                  16Section
      2.04
                                  Circular.
                                  
                                  
                                  16Section
      2.05
                                  Preparation
      of Filings.
                                  
                                  
                                  16Section
      2.06
                                  Company
      Action.
                                  
                                  
                                  17Section
      2.07
                                  Court
      Proceedings.
                                  
                                  
                                  17Section
      2.08
                                  Government
      Filings.
                                  
                                  
                                  18Section
      2.09
                                  Purchase
      Consideration.
                                  
                                  
                                  18Section
      2.10
                                  Company
      Stock Options, Shares for Service, Deferred Share Units and Company
      Warrants.
                                  
                                  
                                  19Section
      2.11
                                  Securities
      Act Exemption.
                                  
                                  
                                  19ARTICLE
      III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                                  
                                  
                                  20Section
      3.01
                                  Organization
      and Qualification; Subsidiaries.
                                  
                                  
                                  20Section
      3.02
                                  Certificate
      of Incorporation and By-Laws.
                                  
                                  
                                  21Section
      3.03
                                  Authority.
                                  
                                  
                                  21Section
      3.04
                                  No
      Conflict; Required Filings and Consents.
                                  
                                  
                                  21Section
      3.05
                                  Capitalization.
                                  
                                  
                                  22Section
      3.06
                                  Securities
      Law Matters; Financial Statements.
                                  
                                  
                                  23Section
      3.07
                                  Information
      to be Supplied
                                  
                                  
                                  24Section
      3.08
                                  Permits;
      Compliance.
                                  
                                  
                                  25Section
      3.09
                                  Absence
      of Certain Changes or Events.
                                  
                                  
                                  25Section
      3.10
                                  Absence
      of Litigation.
                                  
                                  
                                  26Section
      3.11
                                  Contracts.
                                  
                                  
                                  26Section
      3.12
                                  Employee
      Matters.
                                  
                                  
                                  27Section
      3.13
                                  Customers.
                                  
                                  
                                  29Section
      3.14
                                  Property
      and Leases.
                                  
                                  
                                  30Section
      3.15
                                  Intellectual
      Property.
                                  
                                  
                                  30Section
      3.16
                                  Taxes.
                                  
                                  
                                  32Section
      3.17
                                  Environmental
      Matters.
                                  
                                  
                                  35Section
      3.18
                                  Insurance.
                                  
                                  
                                  36Section
      3.19
                                  Brokers.
                                  
                                  
                                  36Section
      3.20
                                  Related
      Party Transactions; Collateral Benefit.
                                  
                                  
                                  36Section
      3.21
                                  Disclosure.
                                  
                                  
                                  37Section
      3.22
                                  Certain
      Payments and Foreign Corrupt Practices Act.
                                  
                                  
                                  37Section
      3.23
                                  Takeover
      Statutes.
                                  
                                  
                                  38Section
      3.24
                                  No
      Other Purchase Agreements.
                                  
                                  
                                  38Section
      3.25
                                  Personal
      Property.
                                  
                                  
                                  38Section
      3.26
                                  Warranty
      and Product Liability Matters.
                                  
                                  
                                  38Section
      3.27
                                  Privacy
      Laws.
                                  
                                  
                                  39Section
      3.28
                                  Not
      Engaged in Cultural Business.
                                  
                                  
                                  39Section
      3.29
                                  Solvency.
                                  
                                  
                                  39Section
      3.30
                                  Banking
      and Attorneys.
                                  
                                  
                                  39ARTICLE
      IV. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
      PURCHASER
                                  
                                  
                                  40Section
      4.01
                                  Corporate
      Organization.
                                  
                                  
                                  40Section
      4.02
                                  Authority.
                                  
                                  
                                  40Section
      4.03
                                  No
      Conflict; Required Filings and Consents.
                                  
                                  
                                  40
  -2-
 
 Section
      4.04
                        Capitalization.
                        
                        
                        41Section
      4.05
                        Litigation.
                        
                        
                        41Section
      4.06
                        No
      Vote Required.
                        
                        
                        41Section
      4.07
                        Operations
      of Purchaser.
                        
                        
                        41Section
      4.08
                        Brokers.
                        
                        
                        41Section
      4.09
                        Parent
      SEC Documents.
                        
                        
                        41Section
      4.10
                        Material
      Changes.
                        
                        
                        41Section
      4.11
                        Sarbanes-Oxley;
      Controls.
                        
                        
                        42Section
      4.12
                        NASDAQ
      Listing.
                        
                        
                        42Section
      4.13ARTICLE
      V. CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE DATE
                        
                        
                        43Section
      5.01
                        Conduct
      of Business by the Company.
                        
                        
                        43Section
      5.02
                        Pre-Acquisition
      Transactions.
                        
                        
                        45Section
      5.03
                        Covenants
      of the Company Regarding the Arrangement.
                        
                        
                        46Section
      5.04
                        Covenants
      of the Purchaser.
                        
                        
                        47ARTICLE
      VI. ADDITIONAL AGREEMENTS
                        
                        
                        48Section
      6.01
                        Access
      to Information; Confidentiality.
                        
                        
                        48Section
      6.02
                        Privacy
      Matters.
                        
                        
                        48Section
      6.03
                        No
      Solicitation of Transactions.
                        
                        
                        49Section
      6.04
                        Company
      Meeting.
                        
                        
                        51Section
      6.05
                        Notification
      of Certain Matters.
                        
                        
                        51Section
      6.06
                        Further
      Action; Reasonable Efforts.
                        
                        
                        52Section
      6.07
                        Purchaser.
                        
                        
                        52Section
      6.08
                        Public
      Announcements.
                        
                        
                        52Section
      6.09
                        Transfer
      Tax.
                        
                        
                        52Section
      6.10
                        Company
      Stock Options.
                        
                        
                        53Section
      6.11
                        Company
      Warrants.
                        
                        
                        53Section
      6.12
                        Cancellation
      of Other Securities.
                        
                        
                        53Section
      6.13
                        Support
      Agreements.
                        
                        
                        53Section
      6.14
                        Employment
      Arrangements.
                        
                        
                        53Section
      6.15
                        Maintain
      Insurance.
                        
                        
                        53Section
      6.16
                        Fulfillment
      of Conditions.
                        
                        
                        54Section
      6.17
                        Indemnification.
                        
                        
                        54ARTICLE
      VII. CONDITIONS
                        
                        
                        54Section
      7.01
                        Conditions
      Precedent to Each Party’s Obligations
                        
                        
                        54Section
      7.02
                        Conditions
      Precedent to Obligations of Parent and Purchaser.
                        
                        
                        55Section
      7.03
                        Conditions
      Precedent to Obligations of the Company.
                        
                        
                        56ARTICLE
      VIII. TERMINATION, AMENDMENT AND WAIVER
                        
                        
                        57Section
      8.01
                        Termination
      by Mutual Consent.
                        
                        
                        57Section
      8.02
                        Termination
      by Parent or the Company.
                        
                        
                        57Section
      8.03
                        Termination
      for Breach of Representations and Warranties.
                        
                        
                        58Section
      8.04
                        Termination
      by Parent.
                        
                        
                        58Section
      8.05
                        Effect
      of Termination and Abandonment.
                        
                        
                        59ARTICLE
      IX. GENERAL PROVISIONS
                        
                        
                        60Section
      9.01
                        Survival
      of Representations and Warranties.
                        
                        
                        60Section
      9.02
                        Amendments,
      Modification and Waiver.
                        
                        
                        60Section
      9.03
                        Notices.
                        
                        
                        60Section
      9.04
                        Severability.
                        
                        
                        62Section
      9.05
                        Entire
      Agreement; Assignment.
                        
                        
                        62Section
      9.06
                        Parties
      in Interest.
                        
                        
                        62Section
      9.07
                        Interpretation.
                        
                        
                        62Section
      9.08
                        Specific
      Performance.
                        
                        
                        62Section
      9.09
                        Governing
      Law.
                        
                        
                        63
  -3-
 
 Section
      9.10
                        Waiver
      of Jury Trial.
                        
                        
                        63Section
      9.11
                        Headings.
                        
                        
                        63Section
      9.12
                        Counterparts.
                        
                        
                        63Section
      9.13
                        Adjustment.
                        
                        
                        63Section
      9.14
                        Currency.
                        
                        
                        63
  -4-
  ARRANGEMENT
AGREEMENT
 
 THIS
ARRANGEMENT AGREEMENT (this “Agreement”) is made
as of March 2, 2010 by and among Acorn Energy, Inc., a Delaware corporation
(“Parent”),
Coreworx Inc., a corporation incorporated under the Business Corporations Act(Ontario) and a wholly-owned subsidiary of Parent (“Purchaser”) and
Decision Dynamics Technology Ltd. a corporation incorporated under the Canada Business Corporations
Act (the “Company”).
 
 WHEREAS,
the Boards of Directors of Parent, Purchaser and the Company have each approved
the terms and conditions of a business combination of the Company and the
Purchaser, upon the terms and subject to the conditions set forth
herein;
 
 WHEREAS,
the business combination of the Company and the Purchaser shall be effected by
the terms of this Agreement through a plan of arrangement, pursuant to section
192 of the CBCA (as defined below), of the Company;
 
 WHEREAS,
the Arrangement (as defined below) is intended, among other things, to provide
holders of the Aggregate Outstanding Company Stock with the opportunity to
dispose of their shares of Company Common Stock in exchange for shares of Parent
Common Stock on the terms and subject to the conditions set out
herein;
 
 WHEREAS,
the Board of Directors of the Company (the “Company Board”) has
unanimously (i) determined that the Arrangement is fair to the Company
Shareholders (as defined below) and in the best interests of the Company,
approved this Agreement and declared its advisability and approved the
Arrangement and the other transactions contemplated by this Agreement, and (ii)
resolved to recommend acceptance of the Arrangement and adoption of this
Agreement by the Company Shareholders and Company Optionholders (each as defined
below); and
 
 WHEREAS,
as a condition and as an inducement to the Parent’s willingness to enter into
this Agreement, the Parent, the Purchaser and (i) each Insider (as defined
below) who holds Company Securities (the “Company Insiders”)
and (ii) certain Major Shareholders (as defined below) who hold Company
Securities, have
entered into Support Agreements substantially in the form annexed hereto as
Annex III (collectively, the “Support Agreements”),
pursuant to which, among other things, such Company Insiders and Major
Shareholders have irrevocably agreed to exercise all voting rights attaching to
their Company Securities beneficially owned by them in favour of the Arrangement
and against any competing proposals.
 
 NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
Parent, the Purchaser and the Company hereby agree as follows:
 
 ARTICLE
I.
 DEFINITIONS
 
 Section
      1.01
              Definitions.
 
 (a) For
purposes of this Agreement:
 
 “Action” means any
investigation, litigation, suit, claim, action, or other legal, administrative
or arbitration proceeding of any nature whatsoever.
  -5-
 
 “Affiliate” of a
specified Person means any other Person who, directly or indirectly through one
or more intermediaries, Controls, is controlled by, or is under common Control
with, such specified Person.
 
 “Aggregate Outstanding
Company Stock” means a number of shares of Company Common Stock which,
subject to Sections 6.10 and 6.11, shall not exceed 59,005,466 shares of Company
Common Stock outstanding on the date hereof, plus such shares of Company Common
Stock as shall be issued upon the exercise of Company Stock Options, Deferred
Share Units or Company Warrants or issued as Shares for Service, in accordance
with the terms and conditions hereof.
 
 “Annual Financial
Statements” means the audited consolidated financial statements of the
Company as at and for each of the fiscal years ended December 31, 2008 and
December 31, 2007 together with the notes thereto and the auditors’ report
thereon.
 
 “Arrangement” means an
arrangement under Section 192 of the CBCA on the terms and subject to the
conditions set out in the Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with Section 9.02 hereof or Article 5 of
the Plan of Arrangement or made at the direction of the Court in the Interim
Order or the Final Order.
 
 “Arrangement
Resolution” means the special resolution of the Company Shareholders and
Company Optionholders, to be substantially in the form and content of Annex I
annexed hereto.
 
 “Articles of
Arrangement” means the articles of arrangement of the Company in respect
of the Arrangement that are required to be sent to the Director after the Final
Order is made.
 
 “Books and Records”
means all books of account, share registers and other financial and corporate
records, copies of tax records, sales and purchase records, customer and
supplier lists, formulae, business reports, registers and operating manuals,
plans and projections and all other documents, files, correspondence and other
information (whether in written, printed, electronic or computer printout form),
of the Company and each Company Subsidiary.
 
 “Business Day” means
any day on which banks are not required or authorized to close in the City of
Toronto or in the City of Calgary or the City of Edmonton.
 
 “Canadian Dollars” or
“Cdn.$” means lawful currency of Canada.
 
 “Canadian Securities
Laws” means all applicable securities laws in the provinces of Canada,
all as now enacted or as the same may from time to time be amended, re-enacted
or replaced, the respective regulations, rules, orders and forms under such laws
and the applicable published policy statements of and any exempting orders
issued by the Canadian Securities Regulators.
 
 “Canadian Securities
Regulators” means the securities commission or other securities
regulatory authority in each of the provinces of Canada.
 
 “CBCA” means the Canada Business Corporations
Act as in effect as of the date hereof and as may be amended from time to
time prior to the Effective Time.
 
 “Certificate” means a
certificate or certificates representing shares of Company Common
Stock.
 
 “Circular” means the
notice of the Company Meeting, accompanying management proxy circular and forms
of proxy, including all appendices thereto, to be sent to the Company
Shareholders and the Company Optionholders, as applicable, in connection with
the Company Meeting, as same may be amended from time to time.
 
 “Closing” means the
closing of the Transactions contemplated by this Agreement.
  -6-
  “Code” means the U.S.
Internal Revenue Code of 1986, as amended.
 
 “Company Common Stock”
means the common shares of the Company, without par value.
 
 “Company Disclosure
Schedule” means the disclosure schedule delivered by the Company to the
Parent and the Purchaser concurrently with the execution of this
Agreement.
 
 “Company Financial
Advisor” means Meyers Norris Penny LLP.
 
 “Company Insider”
means (a) a director, senior officer or Affiliate of the Company, or (b) any
Person who beneficially owns, directly or indirectly, Company Common Stock or
who exercises control or direction over Company Common Stock or a combination of
both carrying more than 10 per cent of the voting rights attached to all shares
of Company Common Stock outstanding at the date hereof.
 
 “Company Material Adverse
Effect” means any change, circumstance, occurrence, event, fact or effect
(a) that has given rise to, or would reasonably be expected to give rise to, a
material adverse change, or that has had, or would reasonably be expected to
have, a material adverse effect (taken alone or in the aggregate with any other
adverse change or effect) in, on or with respect to the business, results of
operations, condition (whether financial or otherwise), capital or future
prospects of the Company and the Company Subsidiaries taken individually or as a
whole; or (b) that is preventing or materially impeding, or is reasonably likely
to prevent or materially impede, the Company from performing its obligations
under this Agreement; provided, however, that the definition set forth in clause
(a) above shall not include any event, circumstance, change, occurrence, fact or
effect resulting solely from or relating solely to: (i) changes in the North
American or international financial markets in general, (ii) any change in the
market price or trading volume of the Company Common Stock, (iii) changes in
general economic conditions in any region in which the Company or the Company
Subsidiaries operate, (iv) changes in the industry in which the Company and the
Company Subsidiaries operate, (v) the public announcement of this Agreement or
the Transactions, (vi) any change in Laws of general applicability or any
interpretation thereof by any Governmental Authority, (vii) any natural disaster
or any acts of terrorism, sabotage, military action or war (whether or not
declared) or any escalation or worsening thereof, or (viii) changes in GAAP,
provided, that in the case of clauses (i), (iii), (iv) and (vi) that such change
does not effect the Company and the Company Subsidiaries in a manner that is
materially disproportionate to the effect on companies of a similar size
operating in the same industry as the Company.
 
 “Company Meeting”
means the special meeting of the Company Shareholders and Company Optionholders,
including any adjournment thereof, to be called and held in accordance with the
Interim Order, to consider the Arrangement, and for any other proper purpose as
may be set out in the notice for such meeting.
 
 “Company
Optionholders” means the holders of Company Stock Options.
 
 “Company Permit” means
all franchises, grants, authorizations, licenses, certifications, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of the Company and the Company
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted and proposed to be conducted after the
Effective Time.
 
 “Company Reports”
means all forms, news releases, reports, statements, schedules and other
documents required to be filed by the Company with the Canadian Securities
Regulators, whether filed prior to or subsequent to the date
hereof.
  -7-
 
 “Company Securities”
means collectively the Company Common Stock, the Company Warrants, the Company
Stock Options, the Deferred Share Units, the Shares for Service and any other
shares or securities of any nature issued by the Company from time to
time.
 
 “Company Shareholders”
means the holders of Company Common Stock.
 
 “Company Stock
Options” means, at any time or times, the options to purchase shares of
Company Common Stock, granted under the Company Stock Option Plan, whether or
not exercisable and whether or not vested, being outstanding and unexercised, at
such time or times.
 
 “Company Stock Option
Plan” means the stock option plan of the Company as amended to date and
as it may be further amended from time to time as expressly permitted by this
Agreement.
 
 “Company Subsidiaries”
means each of Decision Dynamics Technology Inc., and any other Subsidiary of the
Company from time to time.
 
 “Company Warrants”
means the share purchase warrants issued by the Company on June 29, 2007, to MMV
Financial Inc., that are exercisable for an aggregate of 1,265,000 shares of
Company Common Stock at an exercise price of $0.305 per share.
 
 “Company
Warrantholders” means the holders of Company Warrants.
 
 “Confidentiality
Agreement” means the confidentiality agreement dated as of September 30,
2009 between the Purchaser and the Company.
 
 “Contamination” means
the presence of, or Release on, under, from or to the environment of any
Hazardous Substance, except the routine storage and use of Hazardous Substances
from time to time in the ordinary course of business, in compliance with
Environmental Laws and with good commercial practice.
 
 “Control” (including
the terms “controlled
by” and “under
common control with”) means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
 
 “Court” means the
Court of Queen’s Bench of Alberta.
 
 “Deferred Share Units”
means those deferred share units issued pursuant to the Share Accumulation Plan
whereby deferred share units can be exchanged for either cash or Company Common
Stock.
 
 “Deferred Share
Unitholders” means the holders of Deferred Share Units.
 
 “Director” means the
Director appointed pursuant to section 260 of the CBCA.
 
 “Dissent Rights” means
the rights of holders of Company Common Stock to dissent in respect of the
Arrangement as described in Section 3.01 of the Plan of
Arrangement.
 
 “Dissenting
Shareholder” means a holder of Company Common Stock who duly exercises
Dissent Rights in respect of the shares of Company Common Stock held by such
holder.
 
 “Drop Dead Date” means
May 28, 2010 or such later date as may be mutually agreed by the parties to this
Agreement.
  -8-
 
 “Effective Date” means
the date shown on the certificate of arrangement to be issued by the Director
under the CBCA giving effect to the Arrangement.
 
 “Effective Time” means
12:01 a.m. (Calgary time) on the Effective Date.
 
 “Environmental Laws”
means any Law, permit, authorization and opinion relating to: (A) the
environment, human health or safety associated with the environment, or natural
resources; (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance; or (C) noise, odour, wetlands, pollution,
Contamination or any injury or threat of injury to persons or
property.
 
 “Escrow Agreement”
means the escrow agreement to be entered into among the Parties, the Major
Shareholders, Company Insiders and Computershare Investor Services Inc., as
escrow agent, pursuant to which the Major Shareholders and Company Insiders will
deposit the Parent Stock that they receive pursuant to the Arrangement with
one-third of such shares being released on Closing, one-third of such shares
being released on the date that is 90 days from Closing and the remainder of
such shares being released on the date that is 180 days from
Closing.
 
 “Exchange Act” means
the Securities Exchange Act of 1934, as amended.
 
 “Exercise Date” means
the date that is two Business Days prior to the Effective Date.
 
 “Expense Reimbursement
Costs” means and includes all documented, out-of-pocket expenses incurred
in connection with the acquisition contemplated by this Agreement, including
without limitation all lawyers, accountants, consultants, experts and investment
banking fees and expenses incurred by a party to this Agreement or any of its
Affiliates in connection with or relating to the preparation, authorization,
negotiation, execution and/or performance of this Agreement and the transactions
contemplated thereby, including the financing thereof.
 
 “Final Order” means
the final order of the Court approving the Arrangement as such order may be
amended by the Court at any time prior to the Effective Date or, if appealed,
then, unless such appeal is withdrawn or denied, as affirmed.
 
 “Financial Statements”
means, collectively, the Annual Financial Statements and the Third Quarter
Financial Statements.
 
 “Generally Accepted
Accounting Principles” or “GAAP” means those
accounting principles which are recognized as being generally accepted in Canada
by the Canadian Institute of Chartered Accountants from time to time, as set out
in the Handbook published by the Canadian Institute of Chartered Accountants, as
amended from time to time.
 
 “Governmental
Authority” means: (i) any domestic or foreign, national, federal,
provincial, state, county, local, municipal or regional government or body; (ii)
any multinational, multilateral or international body; (iii) any subdivision,
agency, commission, board, instrumentality or authority of any of the foregoing
governments or bodies; (iv) any quasi-governmental or private body exercising
any regulatory, expropriation or taxing authority under or for the account of
any of the foregoing governments or bodies; (v) any domestic, foreign,
international, multilateral or multinational judicial, quasi-judicial,
arbitration or administrative court, tribunal, commission, board or panel; or
(vi) any person employed by, acting for, or on behalf of, any of the foregoing
bodies; and without limiting the generality of the foregoing, shall include the
Canadian Securities Regulators and the U.S. Securities Regulators.
 
 “Hazardous Substances”
means: (A) any hazardous substance, pollutant or contaminant, as such terms are
defined under any Environmental Law; (B) any petroleum or petroleum product or
by-product, asbestos or asbestos-containing material, urea-formaldehyde,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; and (C) any other substance which is the subject of
regulatory action by any Governmental Authority pursuant to or could give rise
to Liability under any Environmental Law.
  -9-
  “Indebtedness” means,
as of a given time, (i) all indebtedness for borrowed money or for the deferred
purchase price of property or services in respect of which the Company or any of
the Company Subsidiaries is liable, contingently or otherwise, as obligor or
otherwise, and any commitment by which the Company or any of the Company
Subsidiaries assures a creditor against loss, including contingent reimbursement
obligations with respect to letters of credit; (ii) all indebtedness guaranteed
in any manner by the Company or any of the Company Subsidiaries, including a
guarantee in the form of an agreement to repurchase or reimburse; (iii) all
obligations under capitalized leases in respect of which the Company or any of
the Company Subsidiaries is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations the Company or any of
the Company Subsidiaries assures a creditor against loss; and (iv) all interest,
prepayment penalties, premiums, fees and expenses (if any) thereon.
 
 “Intellectual
Property” means (i) Canadian, United States and foreign patents, patent
applications and statutory invention registrations, (ii) trademarks, service
marks, trade dress, logos, trade names, corporate names, industrial designs and
other source identifiers, and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, and (iv) confidential and proprietary information, including trade
secrets and know-how.
 
 “Interim Order” means
the interim order of the Court, as the same may be amended, in respect of the
Arrangement, as contemplated by Section 2.02.
 
 “Laws” means all laws,
statutes, codes, ordinances, decrees, consent decrees, rules, regulations,
by-laws, statutory rules, policies, judicial or arbitral or administrative or
ministerial or departmental or judgments, Privacy Laws, orders, decisions,
rulings, letters of finding or awards, agency requirements, including general
principles of common and civil law, and terms and conditions of any grant of
approval, permission, authority or license of any Governmental Authority,
statutory body or self-regulatory authority, and the term “applicable” with
respect to such Laws and in the context that refers to one or more Persons,
means that such Laws apply to such Person or Persons or its or their business,
undertaking, property or securities and emanate from a Governmental Authority
having jurisdiction over the Person or Persons or its or their business,
undertaking or securities.
 
 “Liabilities” means
any direct or indirect liability, indebtedness, obligation, commitment, expense,
claim, guaranty or endorsement of or by any Person of any type, whether accrued,
absolute, contingent, matured, unmatured or other.
 
 “Liens” means all
mortgages, pledges, liens, security interests, conditional and installment sale
agreements, encumbrances, charges, claims or rights of third parties of any
kind, including, without limitation, any option, agreement, right of first
refusal or right of first offer or limitation on voting rights.
 
 “Major Shareholders”
means such major shareholders of the Company as may be identified by the
Purchaser including, but not limited to, Mosaic Venture Partners II Limited
Partnership and Edgestone Capital Venture Fund Nominee, Inc.
 
 “Misrepresentation”
shall have the meaning attributed to such term in the OSA.
 
 “NASDAQ” means the
NASDAQ Global Market.
 
 “Order” means any
legally enforceable judgment, order, decision, writ, injunction, stipulation,
ruling or decree of, or any settlement under jurisdiction of, any Governmental
Authority.
  -10-
 
 “OSA” means the Securities Act (Ontario), as
in effect as of the date hereof and as may be amended from time to time prior to
the Effective Date.
 
 “Parent Common Stock”
means the common stock of the Parent, par value U.S. $0.01 per
share.
 
 “Parent Material Adverse
Effect” means any change, circumstance, occurrence, event, fact or effect
(a) that has given rise to, or would reasonably be expected to give rise to, a
material adverse change, or that has had, or would reasonably be expected to
have, a material adverse effect (taken alone or in the aggregate with any other
adverse change or effect) in, on or with respect to the business, results of
operations, condition (whether financial or otherwise), capital or future
prospects of the Parent and its subsidiaries taken individually or as a whole;
or (b) that is preventing or materially impeding, or is reasonably likely to
prevent or materially impede, Parent from performing its obligations under this
Agreement; provided, however, that the definition set forth in clause (a) above
shall not include any event, circumstance, change, occurrence, fact or effect
resulting solely from or relating solely to: (i) changes in the North American
or international financial markets in general, (ii) any change in the market
price or trading volume of the Parent Common Stock, (iii) changes in general
economic conditions in any region in which the Parent or its subsidiaries
operate, (iv) changes in the industry in which the Parent and its subsidiaries
operate, (v) the public announcement of this Agreement or the Transactions, (vi)
any change in Laws of general applicability or any interpretation thereof by any
Governmental Authority, (vii) any natural disaster or any acts of terrorism,
sabotage, military action or war (whether or not declared) or any escalation or
worsening thereof,  or (viii) changes in generally accepted accounting
principles applicable in the United States provided, that in the case of clauses
(i), (iii), (iv) and (vi) that such change does not effect the Parent and its
subsidiaries in a manner that is materially disproportionate to the effect on
companies of a similar size operating in the same industry as the
Parent.
 
 “Parties” means
collectively, the Company, the Parent and the Purchaser.
 
 “Permitted Liens”
means, in respect of the Company and the Company Subsidiaries, (A) statutory
liens for current Taxes and assessments or other governmental charges not yet
due and payable, or the amount or validity of which is being contested in good
faith, by the Company or such Company Subsidiary, as the case may be and for
which a reserve has been established by the Company or such Company Subsidiary
on its Books and Records, and (B) mechanics’, materialmen’s, workmen’s,
repairmen’s, warehousemen’s and carriers’ liens and other similar statutory
liens arising in the ordinary course of business of the Company or such Company
Subsidiary consistent with past practice, (C) zoning, entitlement, building and
other land-use regulations imposed by governmental agencies having jurisdiction
over real property which are not violated by the current use and operation of
the real property, and (D) covenants, conditions, restrictions, easements and
other similar matters of record affecting title to the real property which do
not materially impair the occupancy or use of the real property for the purposes
for which it is currently used.
 
 “Person” shall be
broadly interpreted and includes any natural person, legal person, partnership,
limited partnership, joint venture, unincorporated association or other
organization, trust, trustee, executor, administrator or liquidator, regulatory
body or agency, government or governmental agency, authority or entity, however
designated or constituted and whether or not a legal entity.
 
 “Personal Information”
means information about an identifiable individual.
 
 “Plan of Arrangement”
means the plan of arrangement substantially in the form and content of Annex II
annexed hereto and any amendments or variations thereto made in accordance with
Section 9.02 hereof or Article 5 of the Plan of Arrangement or made at the
direction of the Court in the Final Order.
  -11-
  “Privacy Laws” means
all applicable laws, statutes, codes, ordinances, decrees, consent decrees,
rules, regulations, by-laws, statutory rules, letters of finding, policies,
judicial or arbitral or administrative or ministerial or departmental or
judgments, orders, decisions, rulings or awards, agency requirements relating to
the collection, use and disclosure of Personal Information, and terms and
conditions of any grant of approval, permission, authority or license of any
Governmental Authority, statutory body or self-regulatory
authority.
 
 “Purchase
Consideration” means the 1,000,000 shares of Parent Common Stock to be
issued to Company Shareholders (less the number of shares of Parent Common
Stock, if any, that would otherwise have been issuable in respect of Company
Common Stock held by Dissenting Shareholders), pursuant to the Plan of
Arrangement.
 
 “Purchaser Parties”
means, collectively, the Parent and the Purchaser.
 
 “Recommendation” means
the unanimous recommendation of the Company Board to the Company Shareholders
that the Company Shareholders and the Company Optionholders vote in favour of
the Arrangement Resolution, the acceptance of the Arrangement and, as
applicable, the adoption of this Agreement.
 
 “Record Date” means
the date determined by the Company Board as the record date for purposes of the
Company Meeting, in accordance with applicable Laws.
 
 “Regulatory Approval”
means those sanctions, rulings, consents, orders, exemptions, permits and other
approvals (including the lapse, without objection, of a prescribed time under a
statute or regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an objection being
made) of Governmental Authorities required to consummate the Plan of
Arrangement.
 
 “Release” means any
presence, emission, spill, seepage, leak, escape, leaching, discharge,
injection, pumping, pouring, emptying, dumping, disposal, migration or release
of a Hazardous Substance from any source into or upon the environment, including
the air, soil, improvements, surface water, groundwater, the sewer, septic
system, storm drain, publicly-owned treatment works, or waste treatment, storage
or disposal systems.
 
 “Remediation” means
any investigation, clean-up, removal action, remedial action, restoration,
repair, response action, corrective action, monitoring, sampling, and analysis,
installation, reclamation, closure or post-closure in connection with the
suspected, threatened or actual Release of Hazardous Substances.
 
 “SEC” means the United
States Securities and Exchange Commission.
 
 “Securities Act” means
the Securities Act of 1933, as amended.
 
 “Securities
Legislation” means the Securities Act, the Exchange Act, the state “blue
sky” securities laws of the states and territories of the United States, and the
Canadian Securities Laws, all as now enacted or as the same may from time to
time be amended, re-enacted or replaced, and the applicable rules, regulations,
rulings, orders and forms made or promulgated under such statutes and the
published policies of the regulatory authorities administering such statutes, as
well as the rules, regulations, bylaws and policies of the TSXV and the
NASDAQ.
 
 “Share Accumulation
Plan” means the share accumulation plan of the Company dated March 9,
2006.
 
 “Shares For Service”
means the 662,089 shares of Company Common Stock reserved for issuance to
certain employees of the Company as set forth in Section 3.05(f) of the Company
Disclosure Schedule.
  -12-
  “Software” means any
and all software that is owned by the Company and the Company Subsidiaries,
including without limitation any and all prior versions thereof, and work in
progress, customer/client software adapters, computer programs (in all formats),
algorithms, source code, object code, modules, components, strings and
interfaces directly or indirectly relating thereto, as identified in Section
3.15(b) of the Company Disclosure Schedule, and any and all documentation
directly or indirectly relating thereto, and all Intellectual Property rights
arising thereunder or included therein.
 
 “Subsidiary” or “Subsidiaries” of a
Person means any corporation, partnership, joint venture or other legal entity
of which such Person (a) owns, directly or indirectly, 50% or more of the
outstanding common stock, limited partnership or member interests or other
equity interests, or otherwise has a financial interest of 50% or more thereof,
or (b) is or Controls a general partner or other managing body of such legal
entity.
 
 “Supporting Persons”
means those Persons who have executed Support Agreements and are identified in
Section 3.05(g) of the Company Disclosure Schedule.
 
 “Tax Act” means the
Income Tax Act (Canada), as amended from time to time.
 
 “Tax” or “Taxes” means any and
all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind
(together with any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any Governmental Authority or
taxing authority, including, without limitation: taxes or other charges on or
with respect to income, franchise, windfall or other profits, net worth, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, Canada Pension Plan or Quebec Pension Plan, workers’ compensation or
unemployment insurance or compensation, taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers’ duties, tariffs and
similar charges; and including any Liability in respect of any item described
above as a transferee or successor, pursuant to U.S. Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law), or as an
indemnitor, guarantor, surety or in a similar capacity under any contract,
arrangement, agreement, understanding or commitment (whether oral or
written).
 
 “Tax Returns” means
all returns, reports, declarations, designations, schedules, notices, forms,
elections, information statements, remittances and similar statements (including
estimated Tax returns, claims for refunds, amended returns and reports and
information returns and reports and any attachments thereto) with respect to
Taxes filed or required to be filed with any taxing authority, domestic or
foreign.
 
 “Third Quarter Financial
Statements” means the unaudited consolidated financial statements of the
Company for the nine months ended September 30, 2009, together with the notes
thereto.
 
 “Transaction
Documents” means this Agreement, the Escrow Agreement, the Support
Agreements, the Employment Agreement and all other agreements and documents
contemplated hereunder, executed herewith or required to implement or give
effect to the Transactions, to which the Company is a party.
 
 “Transactions” means
the transactions contemplated by this Agreement, the Plan of Arrangement and by
any of the Transaction Documents, and including, for greater certainty, the
Arrangement.
 
 “TSXV” means the TSX
Venture Exchange.
 
 “United States” means
the United States of America, its territories and possessions, any state of the
United States, and the District of Columbia.
 
 “United States Dollars” or
“U.S.$” means lawful currency of the United States.
  -13-
 
 “U.S. Securities Laws”
means the Securities Act, the Exchange Act, the state “blue sky” securities laws
of the states and territories of the United States, and in each case the rules
and regulations promulgated thereunder.
 
 “U.S. Securities
Regulators” means the SEC or any state securities regulatory authority in
the United States.
 
 (b) The
following terms have the meanings set forth in the Sections set forth
below:
 
 Defined Term Location of
Definition
 
 Defined Term
                    Location of DefinitionAcknowledgement
                    Section
      6.14Acquisition
      Proposal
                    Section
      6.03(d)Agreement
                    PreambleAmended
      Offer
                    Section
      6.03(f)Approvals
                    Section
      3.08(c)Beneficiaries
                    Section
      6.17(c)Company
                    PreambleCompany
      Board
                    RecitalsCompany
      Insiders
                    RecitalsCompany
      Licensed Intellectual Property
                    Section
      3.15(a)Company
      Owned Intellectual Property
                    Section
      3.15(a)Customers
                    Section
      3.13Disclosed
      Personal Information
                    Section
      6.02(b)Employment
      Agreements
                    Section
      6.14Exchange
      Ratio
                    Section
      2.09(a)Environmental
      Permits
                    Section
      3.17(c)FCPA
                    Section
      3.22(c)ITCs
                    Section
      3.16(m)Leases
                    Section
      3.14(d)Material
      Contracts
                    Section
      3.11(a)Parent
                    PreamblePlans
                    Section
      3.12(m)Pre-Acquisition
      Transaction
                    Section
      5.02Proposed
      Agreement
                    Section
      6.03(f)Purchaser
                    PreambleRequired
      Approval
                    Section
      2.02(b)Related
      Party Agreement
                    Section
      3.11(a)Representatives
                    Section
      6.03(a)Restrictive
      Agreement
                    Section
      3.11(a)Support
      Agreements
                    RecitalsSuperior
      Proposal
                    Section
      6.03(e)tax
      asset
                    Section
      3.16(n)Termination
      Date
                    Section
      8.02(a)Transaction
      Resolution
                    Section
      5.02Transfer
      Taxes
                    Section
      6.09U.S.
      GAAP
                    Section
      4.09
  -14-
 
 ARTICLE
II.
 ARRANGEMENT
 
 Section
      2.01
              Implementation Steps
      by the Company.
 
 Subject
to the terms of this Agreement, the Company covenants in favour of the Parent
and the Purchaser that the Company shall:
 
 a)           As
soon as reasonably practical after execution and delivery of this Agreement and
the preparation of a substantially completed Circular in accordance with Section
2.04, but in any event no later than March 29, 2010 or such other date as agreed
to by the Purchaser, and in cooperation with the Purchaser’s and Parent’s
counsel, apply in a manner acceptable to the Parent and the Purchaser, acting
reasonably, under Section 192 of the CBCA for an order approving the Arrangement
and the Interim Order, and thereafter proceed with and diligently seek to obtain
the Interim Order and complete the Arrangement;
 
 b)           As
soon as reasonably practicable, convene and hold the Company Meeting for the
purpose of considering the Arrangement Resolution (and for any other proper
purpose as may be set out in the notice for such meeting with the prior approval
of the Purchaser acting reasonably), in accordance with the Interim
Order;
 
 c)           Include
the Recommendation in the Circular (which Recommendation, for greater certainty,
shall be subject to the provisions of Section 6.03);
 
 d)           Subject
to obtaining the approvals as are required by the Interim Order, proceed with
and diligently pursue the application to the Court for the Final Order;
and
 
 e)           Subject
to obtaining the Final Order and the satisfaction or waiver of the other
conditions herein contained in favour of each party, send to the Director, for
endorsement and filing by the Director, the Articles of Arrangement and such
other documents as may be required in connection therewith under the CBCA to
give effect to the Arrangement.
 
 Section
      2.02
              Interim
      Order
 
 The
Notice of motion for the application referred to in Section 2.01(a) shall
request that the Interim Order provide:
 
 a)           For
the class of Persons to whom notice is to be provided in respect of the
Arrangement and the Company Meeting and for the manner in which such notice is
to be provided;
 
 b)           That
the requisite approval (the “Required Approval”)
for the Arrangement Resolution shall be (i) 66-2/3% of the votes cast on the
Arrangement Resolution by the Company Shareholders, voting as a class, present
in person or by proxy at the Company Meeting; (ii) 66-2/3% of the votes cast on
the Arrangement Resolution by the Company Optionholders, voting as a separate
class, present in person or by proxy at the Company Meeting; such that each
Company Shareholder is entitled to one vote for each share of Company Common
Stock held, and each Company Optionholder is entitled to one vote for each share
of Company Common Stock that such holder would have received on a valid exercise
of such Company Stock Optionor such other
majority(ies) as may be approved by the Court;
 
 c)           That,
in all other respects, the terms, restrictions and conditions of the by-laws and
articles of the Company, including quorum requirements and all other matters,
shall apply in respect of the Company Meeting;
  -15-
 
 d)           That
the Company Meeting may be adjourned or postponed from time to time by the
Company without the need for additional approval of the Court;
 
 e)           For
the grant of the Dissent Rights; and
 
 f)          
 For the notice requirements respecting the presentation of the application
to the Court for a Final Order.
 
 Section
      2.03
              Articles of
      Arrangement.
 
 The
Articles of Arrangement shall, with such other matters as are necessary to
effect the Arrangement, and all as subject to the provisions of the Plan of
Arrangement, implement the Plan of Arrangement.
 
 Section
      2.04
              Circular.
 
 a)           As
promptly as practicable after the execution and delivery of this Agreement, the
Company and its legal counsel shall finalize the Circular, which shall include
information provided by the Purchaser Parties to the Company regarding the
disclosure required to be provided in respect of the Purchaser Parties in
accordance with applicable Securities Legislation and the CBCA, which the
Purchaser Parties agree to provide promptly upon request, together with any
other documents required by Securities Legislation and other applicable Laws or
the Interim Order in connection with the Arrangement, and as promptly as
practicable after the date of execution of this Agreement and in any event no
later than April 2, 2010, the Company shall cause the Circular and any other
documentation required in connection with the Company Meeting to be sent to each
Company Shareholder and Company Optionholder and to be filed as required by the
Interim Order, applicable Securities Legislation and the CBCA.  The
Circular together with any other documents required by Securities Legislation
and the CBCA shall be in form and substance satisfactory to the Parent and the
Purchaser, acting reasonably.
 
 b)           The
Company and the Purchaser Parties each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
executive officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Circular or any other statement,
filing, notice or application made by or on behalf of the Purchaser Parties, the
Company or any of their respective Subsidiaries to any third party and/or any
Governmental Authority in connection with the Arrangement and the
Transactions.
 
 Section
      2.05
              Preparation of
      Filings.
 
 a)           Each
of the Parties shall cooperate and use its reasonable commercial efforts
in:
 
 i.
              the
      preparation and filing of any application and any other documents
      reasonably deemed by the Parent, the Purchaser or the Company to be
      necessary to discharge their respective obligations under Securities
      Legislation and the CBCA in connection with the Arrangement and the
      Transactions;
 
 ii.
              the
      taking of all such action as may be required under any applicable
      Securities Legislation in connection with the Arrangement;
    and
 
 iii.
              the
      taking of all such action as may be required under the CBCA in connection
      with the Transactions.
  -16-
 
 b)           Each
of the Parties shall furnish to the other all such information concerning it and
its shareholders as may be required (and, in the case of its shareholders,
available to it) for the effecting of the actions described in Section 2.04 and
the foregoing provisions of this Section 2.05 and the obtaining of all
Regulatory Approvals required by Section 7.01(d), and each covenants that no
information furnished by it (to its knowledge in the case of information
concerning its shareholders) in connection with such actions will contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in the information so furnished or necessary in order to make any
information so furnished for use in any such document not misleading in the
light of the circumstances in which it is furnished.
 
 c)           Each
of the Parties shall promptly notify each other if, at any time before or after
the Effective Time, it becomes aware that the Circular, with respect to
information provided by it, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading in light of the
circumstances in which they are made, or that otherwise requires an amendment or
supplement to the Circular.  In any such event, the Company shall
(with the cooperation and assistance of the Parent and the Purchaser) prepare a
supplement or amendment to the Circular or such other document, as required and
as the case may be, and, if required, shall cause the same to be distributed to
the Company Shareholders and/or filed with the relevant securities regulatory
authorities.
 
 d)           The
Purchaser Parties shall indemnify and hold harmless the Company and its
directors and officers from and against all claims, damages, liabilities,
actions or demands to which they may become subject insofar as such claims,
damages, liabilities, actions or demands arise out of or are based upon the
information provided by the Purchaser Parties and included in the Circular or
any amendment thereto in order to comply with Securities Legislation and the
CBCA; provided however that, notwithstanding the foregoing, the Purchaser
Parties shall have no liability or obligation under this paragraph (d) in the
event that such information shall have been modified in any way, or reproduced
in any manner other than that provided by a Purchaser Party, without its prior
written consent.
 
 Section
      2.06
              Company
      Action.
 
 The
Company hereby approves of and consents to the Arrangement and represents that
the Company Board, at a meeting duly called and held, has unanimously (i)
determined that this Agreement and the Transactions are fair to the Company
Shareholders and in the best interests of the Company, (ii) approved and
declared advisable this Agreement and the Transactions, and (iii) resolved to
make the Recommendation, and agrees and undertakes to use its reasonable
commercial efforts to obtain the necessary vote in favour of the Arrangement by
the Company Shareholders and the Company Optionholders, subject in each case to
the provisions of Section 6.03.  The Company further represents that
the Company Board has received the opinion of the Company Financial Advisor to
the effect that, as of the date of this Agreement, the consideration to be
received by the holders of the Company Common Stock in the Arrangement is fair,
from a financial point of view, to such holders, and a copy of the written
opinion of the Company Financial Advisor, promptly upon receipt thereof, will be
delivered to the Purchaser Parties.  The Company hereby consents to
the inclusion in the Circular of the Recommendation and the Company shall not
withdraw, qualify, modify or amend the Recommendation in any manner adverse to
Parent or Purchaser except as and only to the extent permitted by Section
6.03.  The Company has been advised by each of its directors, by each
of the Company Insiders and by the Major Shareholders, that they intend to vote
all shares of Company Common Stock beneficially owned by them in favour of the
Arrangement.
  -17-
  Section
      2.07
              Court
      Proceedings.
 
 The
Company will provide the Purchaser Parties and their legal counsel with
reasonable opportunity to review and comment upon drafts of all material to be
filed with the Court in connection with the Arrangement, including by providing
on a timely basis a description of any information required to be supplied by
the Purchaser Parties for inclusion in such material, prior to the service and
filing of that material, and will accept the reasonable comments of the
Purchaser Parties and their legal counsel. In addition, the Company will not
object to legal counsel to the Purchaser Parties making such submissions on the
hearing of the motion for the Interim Order and the application for the Final
Order as such counsel considers appropriate, provided that the Company is
advised of the nature of any submissions on a timely basis prior to the hearing.
The Company will also provide legal counsel to the Purchaser Parties on a timely
basis with copies of any notice of appearance and evidence served on the Company
or their legal counsel in respect of the application for the Final Order or any
appeal therefrom. Except as required by applicable Laws, the Company will not
file any material with the Court in connection with the Arrangement or serve any
such material, and will not agree to modify or amend materials so filed or
served, except as contemplated hereby or with the Purchaser Parties’ prior
written consent, such consent not to be unreasonably withheld or delayed;
provided that nothing herein will require the Purchaser Parties to agree or
consent to any increased purchase price or other consideration or other
modification or amendment to such filed or served materials that expands or
increases the Purchaser Parties’ obligations set forth in any such filed or
served materials.
 
 Section
      2.08
              Government
      Filings.
 
 The
Company will not make any filing with any Governmental Entity or with the TSXV
with respect to the Arrangement or this Agreement without prior consultation
with the Purchaser; and the Parent will not make any filing with any
Governmental Entity or with any stock exchange with respect thereto without
prior consultation with the Company. However, the foregoing provisions of this
Section 2.08 will be subject to each Party’s overriding obligation to make any
disclosure or filing required under applicable Laws, and the Party making any
such disclosure or filing will use its commercially reasonable efforts to give
prior oral or written notice to the other Party and reasonable opportunity for
the other Party to review or comment on the disclosure or filing (other than
with respect to confidential information contained in such disclosure or
filing), and, if such prior notice is not possible, to give such notice
immediately following the making of any such disclosure or filing.
 
 Section
      2.09
              Purchase
      Consideration.
 
 Subject
to the provisions of Sections 6.10 and 6.11, the Purchase Consideration payable
to the Company Shareholders pursuant to the Arrangement shall be determined as
follows:
 
 a)           Holders
of Company Common Stock at the Effective Date who do not exercise Dissent Rights
under the Arrangement will be entitled to receive, in exchange for each share of
Company Common Stock so held, a fraction of a share of Parent Common Stock. The
fraction of a share of Parent Common Stock to be issued for each share of
Company Common Stock (the “Exchange Ratio”) will
be equal to 1,000,000 divided by the number of shares of Company Stock
outstanding as at the Effective Time including for greater certainty any shares
of Company Common Stock issued in exchange for the Company
Warrants.  The Exchange Ratio shall not exceed four decimal
places.
 
 b)           The
Parent shall not issue fractional shares of Parent Common Stock to the Company
Shareholders pursuant to the Arrangement.  Company Shareholders who
would otherwise have been entitled to receive decimal five (0.5) or more of a
share of Parent Common Stock pursuant to the Arrangement shall receive a number
of shares of Parent Common Stock rounded up to the next whole number of shares
of Parent Common Stock.  Company Shareholders who would otherwise have
been entitled to receive less than decimal five (0.5) of a share of Parent
Common Stock pursuant to the Arrangement shall receive a number of shares of
Parent Common Stock rounded down to the next whole number of shares of Parent
Common Stock.  For greater certainty, Company Shareholders shall not
be entitled to receive a cash payment in lieu of a fractional share of Parent
Common Stock.
  -18-
 
 Section
      2.10
              Company Stock Options,
      Shares for Service, Deferred Share Units and Company
      Warrants.
 
 a)           Before
the Closing, the Board of Directors of the Company (or, if appropriate, any
committee of the Board of Directors of the Company administering the Company
Stock Option Plan) shall adopt such resolutions or take such other actions as
may be required for the Company, as required, to effect the
following:
 
 i.
              accelerate
      the vesting term of all of the outstanding Company Stock Options and held
      by each of the Company Optionholders so that all outstanding Company Stock
      Options are fully vested and may be exercised at the discretion of the
      Company Optionholders prior to the Closing Date, provided that any Company
      Stock Options that are not exercised prior to the Closing Date will be
      terminated and of no further value to such Company Optionholders as at the
      Effective Time;
 
 ii.
              accelerate
      the vesting terms of all of the Shares For Service so that all Shares For
      Service are fully vested and issued immediately prior to the Effective
      Date.
 
 iii.
              make
      such other changes to the Company Stock Option Plan and Share Accumulation
      Plan as the Purchaser Parties and the Company may agree are appropriate to
      give effect to the Arrangement.
 
 b)           Before
the Closing, the Board of Directors of the Company shall adopt such resolutions
or take such other actions as may be required to effect that any Company
Warrants that are not exercised prior to the Closing Date will be exchanged for
shares of Company Stock and be terminated and of no further value to such
Company Warrantholders as at the Effective Time.
 
 c)           Before
the Closing, the Board of Directors of the Company shall take all such actions
to ensure that all outstanding Deferred Share Unitholders agree to exchange
their Deferred Share Units for Company Common Stock and not cash (other than in
respect of those holders of Deferred Share Units who had elected for the year
2010 to receive cash for their Deferred Share Units provided the aggregate cash
amount paid to such holders does not exceed $12,000).
 
 Section
      2.11
              Securities Act
      Exemption.
 
 a)           The
Parent Common Stock to be issued under the Arrangement is intended to be issued
in a transaction that satisfies the requirements of Section 3(a)(10) under the
Securities Act. Section 3(a)(10) of the Securities Act exempts from registration
any security issued in exchange for one or more bona fide outstanding securities
where, among other things, the terms and conditions of the transaction have been
approved by a court, after a hearing upon the fairness of the transaction at
which all persons to whom the securities will be issued have the right to appear
and receive timely notice thereof.  Accordingly, it is contemplated
that such shares will be freely tradable and evidenced by certificates issued
without a Securities Act restrictive legend, provided that any such shares
issued to persons who are Affiliates of the Parent at or within 90 days prior to
the Effective Time will be subject to resale restrictions under Rule 144
promulgated under the Securities Act and certificates evidencing the same may
include a legend to that effect in form and substance satisfactory to the
Parent.
  -19-
  b)           In the event that, due to an amendment
to the Securities Act, a change in the SEC’s interpretation of the Securities
Act or a decision of a court which provides that orders of Canadian courts such
as the Final Order do not qualify as an approval pursuant to Section 3(a)(10) of
the Securities Act, the exemption from registration pursuant to Section 3(a)(10)
of the Securities Act is not available for any reason to exempt the issuance of
the Parent Common Stock in accordance with the Arrangement from the registration
requirements of the Securities Act, then Parent shall take all necessary action
to file a registration statement on Form S-4 (or on such other form that may be
available to Parent) in order to register the Parent Common Stock issuable
pursuant to the Arrangement, and shall use its reasonable commercial efforts to
cause such registration statement to become effective at or prior to the
Effective Time.  The Company shall indemnify and hold harmless Parent
and its directors and officers from and against all claims, damages,
liabilities, actions or demands to which they may become subject insofar as such
claims, damages, liabilities, actions or demands arise out of or are based upon
the information provided by the Company and included in the Form S-4 (or on such
other form that may be available to Parent) or any amendment thereto in order to
comply with the Securities Act; provided however that, notwithstanding the
foregoing, the Company shall have no liability or obligation under this
paragraph (b) in the event that such information shall have been modified in any
way, or reproduced in any manner other than that provided by the Company,
without its prior written consent.
 
 ARTICLE
III.
 REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
 
 As an
inducement to the Parent and the Purchaser to enter into this Agreement and to
implement the Transactions, the Company hereby represents and warrants to the
Parent and the Purchaser as follows:
 
 Section
      3.01
              Organization and
      Qualification; Subsidiaries.
 
 a)           Each
of the Company and each Company Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, formation or organization and has the requisite power and
authority, corporate or otherwise, and all necessary approvals of Governmental
Authorities, to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company and each Company Subsidiary
is duly qualified or licensed as a foreign corporation or otherwise to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except, as regards
jurisdictions other than Canada and the provinces thereof, where the failure to
be so qualified, licensed or in good standing would not result in or would not
be reasonably likely to result in a Company Material Adverse
Effect.
 
 b)           The
Company has no Subsidiaries, other than Decision Dynamics Technology Inc., and
the Company does not directly or indirectly own any securities, equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any Person other than the
Company Subsidiaries.  The Company is the owner of record and
beneficially of all outstanding capital stock and other equity or similar
interests of each Company Subsidiary and no Person other than the Company owns
any interest convertible into or exchangeable or exercisable for any equity or
similar interest in any Company Subsidiary.  A list of the Company
Subsidiaries, their jurisdiction of incorporation and organization and the
outstanding capital stock and other securities and equity interests of the
Company Subsidiaries that are issued and outstanding is set forth in Section
3.01(b) of the Company Disclosure Schedule.
 
 c)           The
Company has no Liabilities in respect of or relating to any Subsidiaries
previously owned by it.
 
 d)           Section
3.01(d) of the Company Disclosure Schedule sets forth the address of all
premises in which the Company and each of the Company Subsidiaries maintain an
office or place of business.
  -20-
 
 Section
      3.02
              Certificate of
      Incorporation and By-Laws.
 
 The
Company has heretofore made available to the Purchaser a complete and correct
copy of the certificate of incorporation or other constating documents and the
bylaws or equivalent organizational documents, each as amended to date, of the
Company and each Company Subsidiary.  Such certificates of
incorporation, constating documents, by-laws or equivalent organizational
documents, as amended to date, are in full force and effect. Neither the Company
nor any Company Subsidiary is in violation of any of the provisions of its
certificate of incorporation, constating document, by-laws or equivalent
organizational documents.
 
 Section
      3.03
              Authority.
 
 The
Company has all necessary corporate power and authority to execute and deliver
each of the Transaction Documents to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
Transactions.  The execution and delivery of the Transaction Documents
by the Company and the consummation by the Company of the Transactions have been
duly and validly authorized by all necessary corporate action of the
Company.  No corporate proceedings on the part of the Company are
necessary to authorize the Transaction Documents or to consummate the
Transactions, other than the approval of the Company Shareholders and the
Company Optionholders and the filing of appropriate documents as required by the
CBCA.  Each of the Transaction Documents has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by each of the other parties hereto and subject to the
terms and conditions of this Agreement and the requisite approval of the
Arrangement Resolution by the Company Shareholders and the Company
Optionholders, each of the Transaction Documents constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles.
 
 Section
      3.04
              No Conflict; Required
      Filings and Consents.
 
 a)           The
execution and delivery of the Transaction Documents by the Company do not, and
the performance by the Company of its obligations thereunder, will not, (i)
result in a breach of or conflict with or violate the certificate of
incorporation or other constating documents or by-laws or any equivalent
organizational documents, each as amended to date, of the Company or any Company
Subsidiary, (ii) result in a breach of, constitute a default under, violate or
conflict with any material term or provision of any order of any court,
Governmental Authority or any Law applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected, (iii) result in any breach of or constitute a
default (or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien or other
encumbrance on any property or asset of the Company or any Company Subsidiary
pursuant to, or result in any payment under, any Material Contract (as defined
in Section 3.11) or Company Permit or, except as set forth in Section 3.04(a) of
the Company Disclosure Schedule, require the Company or any Company Subsidiary,
under the terms of any agreement, contract, arrangement or understanding to
which it is a party or by which it or any property or asset of the Company or
Company Subsidiary is bound, to obtain the consent or approval of, or provide
notice to, any other party to such agreement, contract, arrangement or
understanding; or (iv) give rise to any Liability not disclosed in Section
3.04(a) of the Company Disclosure Schedule.
 
 b)           The
execution and delivery of the Transaction Documents by the Company do not, and
the performance by the Company of its obligations thereunder, will not, require
any consent, approval, authorization or permit of, or filing with or
notification to any Governmental Authority, except (A) for applicable
requirements, if any, of Canadian Securities Laws, the Investment Canada Act and
filing of appropriate documents as required by the CBCA, and (B) as contemplated
by Section 2.01, Section 2.02 and the Plan of Arrangement.
  -21-
 
 Section
      3.05
              Capitalization.
 
 a)           The
authorized capital stock of the Company consists of an unlimited number of
shares of Company Common Stock. As of the date of this Agreement, 59,005,466
shares of Company Common Stock are issued and outstanding, all of which are duly
authorized, validly issued, fully paid and non-assessable.
 
 b)           The
Company Stock Option Plan and the Share Accumulation Plan are the only stock
option plans, stock purchase plans, stock incentive plans, stock appreciation
rights, phantom stock performance-based rights or similar rights or obligations
(contingent or otherwise) of the Company, the Company Warrants are the only
share purchase warrants issued by the Company and, save for the Company Stock
Options, the Company Warrants, the Deferred Share Units and the Shares for
Service, there are no options, warrants, debentures or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary.
 
 c)           Section
3.05(c) of the Company Disclosure Schedule sets forth the following information
with respect to each Company Stock Option and Deferred Share Unit outstanding as
of the date of this Agreement: (i) the name and address of the holder; (ii) the
number of shares of Company Common Stock subject to such Company Stock Option
and Deferred Share Unit; (iii) the exercise price of such Company Stock Option;
(iv) the date on which such Company Stock Option or Deferred Share Unit was
granted; and (v) the applicable vesting and expiry schedule.
 
 d)           Section
3.05(d) of the Company Disclosure Schedule sets forth the following information
with respect to the Company Warrants: (i) the name and address of each holder
thereof; (ii) the number of shares of Company Common Stock issuable to each such
holder upon exercise thereof; (iii) the exercise price thereof; (iv) the date of
issue thereof; and (v) the date of expiry thereof.
 
 e)           Section
3.05(e) of the Company Disclosure Schedule sets forth (i) the name of each
Company Insider of which the Company has knowledge, (ii) the number of shares of
Company Common Stock, Deferred Share Units, Shares for Service, the number of
Company Stock Options and the number of Company Warrants owned by each Company
Insider, and (iii) the aggregate percentage of the Outstanding Company Stock on
the date hereof owned by the Company Insiders as a group.
 
 f)    
       Section 3.05(f) of the Company
Disclosure Schedule sets forth the names of all Company employees who are
entitled to receive the Shares for Service.
 
 g)           Section
3.05(g) of the Company Disclosure Schedule sets forth the names of all Persons
who have signed Support Agreements.
 
 h)           There
are no outstanding contractual obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any capital stock of any Company Subsidiary or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Company Subsidiary or any other Person.
 
 i)       
    Neither the Company nor any Company Subsidiary has
entered into any agreement, contract, arrangement or commitment of any character
(including any employment, stock option or consulting agreement) that entitles a
holder of Company Stock Options to receive a guaranteed minimum amount for his
or her Company Stock Options upon the exercise thereof, the termination of his
or her employment or agreement pursuant to which he or she provides services, a
change of control of the Company or a Company Subsidiary or
otherwise.
  -22-
 
 j) 
          Each outstanding
share of capital stock of or other ownership interest in each Company Subsidiary
is duly authorized, validly issued, fully paid and non-assessable, and each such
share is owned by the Company free and clear of Liens, except for limitations on
transfer imposed by federal or state or Canadian provincial securities
Laws.
 
 k)           At
the Effective Time, there shall be outstanding not more than 59,005,466 shares
of Company Common Stock, plus Company Common Stock that is permitted to be
issued in accordance with the provisions of Sections 6.10 or Section 6.11,
issued as Shares for Service, issued pursuant to the exercise of Company Stock
Options or Company Warrants or issuable pursuant to the Share Accumulation
Plan.
 
 Section
      3.06
              Securities Law
      Matters; Financial
Statements.
 
 a)           The
Company is a “reporting issuer” or has equivalent status under Canadian
Securities Laws in the Provinces of British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec and North West Territories. The Company Common Stock
is listed on the TSXV. The Company has not been notified of any default or
alleged default by the Company of any material requirement of the TSXV or
applicable Canadian Securities Laws.  No Canadian Securities Regulator
has issued any order preventing or suspending trading of any securities of the
Company and to the knowledge of the Company, the Company is not in material
default of any requirement of applicable Canadian Securities Laws.
 
 b)           The
Company has filed all Company Reports required to be filed by it.
 
 c)           At
the time that they were filed or, if amended, as of the date of such amendment,
the Company Reports complied in all material respects, and each report
subsequently filed by the Company with the Canadian Securities Regulators will,
on the date filed, comply in all material respects, with all applicable
requirements of Canadian Securities Legislation as in effect on the date so
filed.  The Company Reports did not or will not, at the time they were
or will be filed, or, if amended, as of the date of such amendment, contain any
Misrepresentation.
 
 d)           No
material change has occurred in relation to the Company or a Company Subsidiary
which is not disclosed in the Company Reports and the Company has not filed any
confidential material change reports which continue to be
confidential.
 
 e)           Neither
the Company nor any of the Company Subsidiaries has filed with the SEC any
registration statement under the Securities Act or has any class of its
securities currently registered, or has prior to the date hereof been
registered, under Section 12 of the Exchange Act. The Company is not currently
required, and, with the exception of notices filed with the SEC on Form D
pursuant to Rule 503 of Regulation D under the Securities Act and similar
notices filed with certain state securities regulatory authorities as permitted
by section 18 of the Securities Act or in connection with offerings of
securities effected pursuant to exemptions from applicable state registration
requirements, has not prior to the date hereof been required, to file any form,
report or other document with the U.S. Securities Regulators. No Company
Subsidiary is required to file any form, report or other document with the
Canadian Securities Regulators or the U.S. Securities Regulators. Except as set
forth in Section 3.06(e) of the Company Disclosure Schedule, the Company has not
received any non-routine inquires or interrogatories, whether in writing or
otherwise, from any Canadian Securities Regulator, the TSXV or any other
Governmental Authority, or, to the knowledge of the Company, been the subject of
any investigation, audit, review or hearing by or in front of such Persons, in
each case with respect to any of the Company Reports or any of the information
contained therein.
  -23-
  f)           Each
of the consolidated financial statements contained in the Company Reports,
including, for greater certainty, the Financial Statements, and including, in
each case, any notes thereto, have been and, as regards such financial
statements prepared after the date hereof, will be, prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated and each
fairly presents or will fairly present, in all material respects, the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated Company Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments) and
reflects appropriate and adequate reserves for contingent Liabilities in
accordance with GAAP.
 
 g)           Except
as and to the extent set forth in the Company Reports, neither the Company nor
any Company Subsidiary has any Liability, except for (i) Liabilities incurred in
the ordinary course of business consistent with past practice since September
30, 2009, none of which will have a Company Material Adverse Effect, or (ii)
Liabilities for fees, costs and expenses incurred in connection with the
Transactions.
 
 h)           To
the knowledge of the Company, the Company currently has no liability to P2ES
Canada, Inc. (“P2ES”) pursuant to the terms of the asset purchase agreement
between the Company and P2ES dated August 28, 2008.
 
 i)           The
Company and the Company Subsidiaries have devised and maintain a system of
internal accounting controls and information systems sufficient to provide
reasonable assurances that (x) transactions are executed in accordance with
management's general or specific authorization, and (y) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with GAAP, and (B) to maintain accountability for assets, in all
material respects.
 
 j)           There
has been no material change in the internal control over financial reporting of
the Company or any Company Subsidiary that has affected, or is reasonably likely
to affect, the internal control of the Company or a Company Subsidiary over
financial reporting, in the three previous fiscal years of the
Company.
 
 k)           The
Company has provided to the Purchaser true and complete copies of all
“management letters” and other similar letters relating to the Company’s or any
of the Company Subsidiaries’ internal controls and accounting practices that
have been received by the Company from its auditors since January 1,
2007.
 
 Section
      3.07
              Information to be
      Supplied
 
 a)           The
Circular and the other documents required to be filed by the Company with the
Canadian Securities Regulators in connection with the Transactions will comply
as to form in all material respects with the requirements of the Canadian
Securities Laws and the CBCA, as the case may be.  Each of the
Circular and the other documents required to be filed by the Company with the
Canadian Securities Regulators in connection with the Transactions and any of
the information supplied or to be supplied by the Company or the Company
Subsidiaries or their representatives for inclusion or incorporation by
reference in the Circular will not, on the date of its filing or mailing, on the
date of the Company Meeting or at the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
 
 b)           Notwithstanding
the foregoing provisions of this Section 3.07, no representation or warranty is
made by the Company with respect to statements made in the Circular based on
information supplied by or on behalf of Purchaser Parties for inclusion therein,
unless such information shall have been modified in any way, or reproduced in
any manner other than that provided by a Purchaser Party, without its prior
written consent.
  -24-
 
 Section
      3.08
              Permits;
      Compliance.
 
 a)           The
operations of the Company and the Company Subsidiaries have been conducted in
compliance with all Laws in each jurisdiction in which it or they carry on
business or hold a Company Permit, except where the failure to so comply has not
resulted in a Company Material Adverse Effect.  The Company holds all
necessary Company Permits and all such Company Permits are in full force and
effect.
 
 b)           Neither
the Company nor any of the Company Subsidiaries is in default, in any material
respect, with respect to any Law or Company Permit or has received written
notice of any possible violation (or of any investigation, inspection, audit, or
other proceeding by any Governmental Authority involving allegations of any
violation) of any Law or Company Permit, and, to the knowledge of the Company,
no investigation, inspection, audit or other proceeding by any Governmental
Authority involving allegations of any violation of any Law or Company Permit is
threatened or contemplated.
 
 c)          
Each of the Company and the Company Subsidiaries has, and to the knowledge of
the Company all professional employees or agents of each of the Company and the
Company Subsidiaries have, all material licenses, franchises, permits,
authorizations, certifications, easements, variances, exceptions, consents and
orders, including approvals from all Governmental Authorities (“Approvals”) required
for the conduct of the business of each of the Company and the Company
Subsidiaries, the job duties of each professional employee or agent and the
occupancy and operation, for its present uses, of the real and personal property
which each of the Company and the Company Subsidiaries owns or leases and
neither the Company nor any of the Company Subsidiaries or, to the knowledge of
the Company, any of their respective professional employees or agents is in
material violation of any such Approval or any terms or conditions
thereof.
 
 d)           All
Approvals for the Company and each of the Company Subsidiaries are, in all
material respects, in full force and effect, and, to the knowledge of the
Company, all such Approvals for the professional employees and agents of the
Company and the Company Subsidiaries are in full force and effect, have been
issued to and fully paid for by the holder thereof and, to the knowledge of the
Company, no suspension or cancellation thereof has been threatened.
 
 e)           No
Approvals for the Company and each of the Company Subsidiaries, nor any Company
Permits, will terminate or cease to be valid and in effect by reason of the
Transactions.
 
 f)           
Neither the Company nor any of the Company Subsidiaries have engaged in any
activities which are prohibited, or are cause for criminal or civil penalties,
under applicable Laws.
 
 Section
      3.09
              Absence of Certain
      Changes or Events.
 
 Without
limiting the generality of any other provision hereof, and except as (a)
expressly contemplated by this Agreement or in Section 3.09 of the Company
Disclosure Schedule, or (b) described in the Company Reports filed prior to the
date of this Agreement, since September 30, 2009: (i) the Company and the
Company Subsidiaries have conducted their businesses only in the ordinary course
and in a manner consistent with past practice, (ii) there has not been any
Company Material Adverse Effect, (iii) none of the Company or any Company
Subsidiary has taken any action that, if taken after the date of this Agreement,
would constitute a breach of any of the covenants set forth in Section 5.01; and
(iv) none of the Company or any Company Subsidiary has issued or granted any
options, warrants, debentures or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any Company Subsidiary or obligating the Company or any
Company Subsidiary to issue or sell any shares of capital stock of, or other
equity interests in, the Company or any Company Subsidiary.
  -25-
 
 Section
      3.10
              Absence of
      Litigation.
 
 Except as
set forth in Section 3.10 of the Company Disclosure Schedule, there are no
Actions outstanding or, to the knowledge of the Company, threatened against the
Company or any Company Subsidiary at law or in equity or before or by any court
or other Governmental Authority.  To the knowledge of the Company,
there are no grounds upon which any Action may be commenced against the Company
or a Company Subsidiary.  Neither the Company nor any Company
Subsidiary nor any property or asset of the Company or any Company Subsidiary is
subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of the Company,
continuing investigation by, any Governmental Authority, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority.
 
 Section
      3.11
              Contracts.
 
 a)           Subsections
(i) through (xv) of Section 3.11(a) of the Company Disclosure Schedule contain a
complete list of the following written contracts and agreements to which the
Company or any Company Subsidiary is a party (such contracts and agreements,
together with the Plans, the Leases and the Company Permits, being “Material Contracts”):
(i) each contract, agreement or account involving aggregate annual payments to
the Company or any Company Subsidiary of more than $100,000, or aggregate annual
payments by the Company or any Company Subsidiary of more than $100,000, (ii)
all material contracts and agreements with any Governmental Authority, (iii) all
contracts and agreements that (A) limit or purport to limit the ability of the
Company or any Company Subsidiary or, to the Company’s knowledge, any key
executives of the Company or any Company Subsidiary, to compete in any line of
business or with any Person or in any geographic area or during any period of
time or otherwise restricts the development, manufacture, marketing,
distribution or sale of any products or services by the Company or any Company
Subsidiary, (B) require the Company or any Company Subsidiary to use any
supplier or third party for all or substantially all of the requirements or
needs of the Company or a Company Subsidiary and that provide for services of
more than $100,000, or aggregate annual payments by the Company or any Company
Subsidiary of more than $100,000, (C) limit or purport to limit in any material
respect the ability of the Company or any Company Subsidiary to solicit any
customers or clients of the other parties thereto, (D) contain
“non-solicitation” or “no-hire” provisions that restrict the Company or any
Company Subsidiary in any manner, or (E) require the Company or any Company
Subsidiary to market or co-market any services or products of a third party
(each of (A) through (E), a “Restrictive
Agreement”); (iv) all contracts, agreements and arrangements between the
Company or any of the Company Subsidiaries, on the one hand, and any Affiliate,
stockholder or officers, directors or principals of the Company or any Company
Subsidiary on the other hand (each such contract, a “Related Party
Agreement”); (v) all joint venture contracts, partnership arrangements or
other agreements outside the ordinary course of business involving a sharing of
profits, losses, costs or Liabilities by the Company or any Company Subsidiary
with any third party; (vi) all licenses issued by any other Governmental
Authority including, without limitation, the identity of the respective
licensees thereunder; (vii) each material employment, services or consulting
contract with any employee, service provider or consultant of the Company or any
of the Company Subsidiaries; (viii) any standstill or similar contract currently
restricting the ability of the Company or any Company Subsidiary to offer to
purchase or purchase the assets or equity securities of another Person; (ix)
each material contract providing that the Company, any Company Subsidiary or any
of their respective employees maintain the confidentiality of any information,
or providing for any Person to maintain the confidentiality of any information
material to the Company, any Company Subsidiary or their respective businesses;
(x) any contract providing for indemnification of any Person by the Company
and/or any Company Subsidiary, other than any agreement of indemnification
entered into in connection with the sale or license of software products in the
ordinary course of business; (xi) any contract under which the Company or any
Company Subsidiary has directly or indirectly guaranteed Indebtedness of any
Person; (xii) any contract under which the Company or any Company Subsidiary has
borrowed any money from, or issued any note, bond, debenture or other evidence
of Indebtedness to, any Person; (xiii) any contract granting a third party any
license to any Software or Intellectual Property involving aggregate annual
payments to the Company or any Company Subsidiary of more than $100,000, or
pursuant to which the Company or any Company Subsidiary has been granted by a
third party any license to any software (other than off the shelf, commercially
available software) or Intellectual Property, including without limitation
software used directly or indirectly or incorporated in any respect into the
Software, or any other license, option or other contract relating in whole or in
part to Intellectual Property or the intellectual property of any other Person;
(xiv) any contract under which the Company or any Company Subsidiary has granted
preferred pricing rights or co-development rights with respect to any product of
the Company or any Company Subsidiary; (xv) all other material contracts and
agreements, including any sole source contracts with suppliers and licensors,
whether or not made in the ordinary course of business, which are material to
the Company or any Company Subsidiary, or the conduct of their respective
businesses.
  -26-
 
 b)           Each
Material Contract is valid and binding on the Company or the Company Subsidiary
that is a party thereto or bound thereby, as the case may be, is, in all
material respects, in full force and effect against the Company or the relevant
Company Subsidiary, except to the extent it has expired in accordance with its
terms, and represents the entire agreement between or among the parties thereto
with respect to the subject matter thereof; and, upon consummation of the
Transactions, each Material Contract shall continue in full force and effect
without penalty.  None of the Company or any Company Subsidiary or, to
the knowledge of the Company, as of the date of this Agreement, any other party
thereto, is in breach of, or default under, in any material respect, any
Material Contract.
 
 c)           The
Company has made available to the Purchaser a true, complete and correct copy of
each written Material Contract, together with all material amendments, waivers
or other changes thereto. Other than as disclosed in Sections 3.11(a) and
3.12(a) of the Company Disclosure Schedule, neither the Company nor any of the
Company Subsidiaries is party to any oral agreements.  The Company and
the Company Subsidiaries have made available to Parent true and complete
descriptions of all such oral agreements.
 
 Section
      3.12
              Employee
      Matters.
 
 a)           Except
as set forth in Section 3.12(a) of the Company Disclosure Schedule, neither the
Company nor any of the Company Subsidiaries is a party to any agreement pursuant
to which either: (i) notice of termination, indemnity in lieu of notice of
termination, severance, termination payments, change of control payments or
other payments relating to the cessation of employment or services to any
director, officer, employee, consultant or service provider may be required to
be paid to terminate their employment or services; or (ii) any employee, service
provider or consultant who is bound by confidentiality, non-competition or
non-solicitation covenants with the Company or any of the Company Subsidiaries
is relieved thereof as a result of the completion of the
Transactions.  Section 3.12(a) of the Company Disclosure Schedule
contains a list of all employment, consulting and service agreements of the
Company and any of the Company Subsidiaries with their employees, independent
contractors, consultants and distributors, as the case may
be.  Section 3.12(a) of the Company Disclosure Schedule sets out the
following information for each director, officer, employee, consultant or
service provider who is entitled to receive any severance payment, termination
payment, change of control payment or other payment as a result of the
Transactions: the name of the individual, his or her title and the amount of the
payment he or she is entitled to receive.  The Company and the Company
Subsidiaries have made available to the Purchaser true and complete copies of
all such written agreements and true and complete descriptions of all such oral
agreements.
 
 b)           Section
3.12(b) of the Company Disclosure Schedule contains for all directors, officers
and employees of the Company and the Company Subsidiaries, the following correct
and complete lists: (i) a list of all salaries, wage rates, commissions and
consulting fees, bonus arrangements, deferred compensation, share or unit
appreciation program, options, retention bonus, incentive and benefits; (ii) a
list of all positions; (iii) a list indicating how many Persons work full-time
and part-time; (iv) a list of their length of service; (v) a list setting out
their respective vacation entitlement in days; and their entitlement to annual
sick days; and (vi) a list of how many Persons are currently on lay off or on a
leave of absence, together with the reasons for any such leave of absence and
their expected date of return to work, if known.
  -27-
 
 c)           There
is no collective agreement in force with respect to the employees of the Company
or the Company Subsidiaries, no collective agreement is currently being
negotiated by the Company or any of the Company Subsidiaries, no union or
employee bargaining agency or affiliated bargaining agent holds bargaining
rights with respect to any of the employees of the Company or of the Company
Subsidiaries by way of certification, interim certification, voluntary
recognition, or successors’ rights, and there are no current, or to Company’s
knowledge, threatened attempts to organize or establish any trade union or
association with respect to the Company and the Company Subsidiaries, nor have
there been any such attempts within the past five (5) years.
 
 d)           The
Company and the Company Subsidiaries are not engaged in any unfair labour
practices.  There are no unfair labour practice complaints, grievances
or arbitration proceedings outstanding nor to the Company’s knowledge,
threatened against the Company or the Company Subsidiaries and there is no
labour strike, slow down, work stoppage or lock-out in effect or to the
Company’s knowledge, threatened against the Company and the Company
Subsidiaries, nor has there been any such event within the past five (5)
years.
 
 e)           All
amounts due or owing or accrued but not yet owing for all salaries, wages
bonuses, commissions and consulting fees, vacation pay, incentive plans,
retention bonuses, options, pension, benefits or other employee benefits have
been paid or, if accrued, are reflected in the Books and Records.
 
 f)           No
terminated employee, independent contractor, consultant or distributor of the
Company or the Company Subsidiaries is owed any payments in respect of such
termination.  For the purpose of clarity, the Company is solely
responsible for, and will pay in full all amounts disclosed in Section 3.12(f)
of the Company Disclosure Schedule in accordance with the terms of the
respective severance agreements.
 
 g)           There
are no outstanding assessments, penalties, fines, liens, charges, surcharges, or
other amounts due or owing pursuant to any occupational health and safety
legislation and no audit of the Company or of any of the Company Subsidiaries is
currently being performed pursuant to any such applicable legislation. There are
no claims or, to the Company’s knowledge, anticipated claims which may adversely
affect the Company or any of the Company Subsidiaries’ accident cost experience
in respect of the business.
 
 h)           To
the knowledge of the Company, the Company and the Company Subsidiaries are not
subject to any outstanding claims for wrongful dismissal, constructive
dismissal, psychological harassment or any other claim, complaint or litigation
relating to employment, discrimination or termination of employment of any of
their employees or former employees or relating to any failure to hire a
candidate for employment.
 
 i)  
         There is no Order,
pursuant to any Law, requiring the taking of any action or the refraining from
taking any action in respect of any employee or former employee, independent
contractor, consultant or distributor of the Company or any of the Company
Subsidiaries.
 
 j)     
      There is no outstanding Indebtedness owed by
the Company or any of the Company Subsidiaries to any of their employees or
former employees, independent contractors, consultants or
distributors.
 
 k)           To
the Company’s knowledge, no managerial employee and no group of employees of the
Company or of any of the Company Subsidiaries have any plans to terminate his,
her or their employment or their service relationship with the Company or any of
the Company Subsidiaries.
  -28-
 
 l)    
       Those Persons who have been classified
as independent contractors, consultants or distributors have been properly
classified as such, and no audit is currently being performed by any
Governmental Authority in respect of the characterization of such individuals as
independent contractors, consultants or distributors of the Company or the
Company Subsidiaries, and to the knowledge of the Company, no such audit is
threatened.
 
 m)          Except
for the Company Stock Option Plan, the Share Accumulation Plan and the Shares
for Services and as set forth in Section 3.12(m) of the Company Disclosure
Schedule: (i) there are no pension, retirement, profit sharing, bonus, savings,
deferred compensation, stock option, purchase or appreciation, health, life
insurance, disability, sick pay, severance pay, group insurance or other
employee benefit plans, programs or arrangements maintained or contributed to by
the Company or any of the Company Subsidiaries (collectively, the “Plans”); (ii) there
are no outstanding material violations or defaults thereunder nor any actions,
claims or other proceedings outstanding or, to the knowledge of the Company,
threatened with respect to any Plan; (iii) no Plan is currently under a
governmental investigation or audit and, to the knowledge of the Company, no
such investigation or audit has been threatened; (iv) each Plan covers only
current or former employees of the Company and the Company Subsidiaries and
their dependants and beneficiaries; (v) no promise or commitment to increase
benefits under any Plan or to adopt any additional Plan has been made except as
required by Law; (vi) no event has occurred which could subject the Company or
any of the Company Subsidiaries to any material tax, penalty or fiduciary
Liability in connection with any Plan which has not been accrued on the Annual
Financial Statements; (vii) there have been no withdrawals of surplus or
contribution holidays, except as permitted by Law and the terms of the Plans;
and (viii) no other Plan provides post-employment and post-retirement benefits,
other than as required by Law.
 
 n)           The
Company is under no obligation and owes no money for any “time in lieu” to any
employee, former employee, independent contractor or consultant for any time
worked by such Person for the Company in excess of normal working
hours.
 
 o)           The
Company and each Company Subsidiary has complied and is in compliance in all
material respects with, and has been during the three previous years and is, in
all material respects, in good standing under all applicable Laws relating to
employment and labour matters, including any provision thereof relating to
wages, hours of work, vacation pay, overtime pay, conditions of employment,
workers’ compensation, health, safety, training, human rights, equal
opportunity, pay equity, or similar Laws and has properly completed and filed
all material reports required by such Laws.
 
 Section
      3.13
              Customers.
 
 Section
3.13 of the Company Disclosure Schedule lists the 20 largest customers of the
Company and the Company Subsidiaries by revenue during the 12 month period ended
December 31, 2009 (the “Customers”) and the
amount of net revenue (that is, net of setoffs, chargebacks, credits,
recoupments, refunds and other contractual allowances) received by the Company
and the Company Subsidiaries as a result of orders by each of the Customers
during such period.  Since January 1, 2010 through to the date hereof,
none of the Company, any Company Subsidiary or any executive officers or
directors of the Company or a Company Subsidiary has received any written
notice, or any other communication, from any Customer or from any other
employees of the Company and the Company Subsidiaries to the effect that any
such Customer intends to cease or materially reduce the amount of services
requested of, or size of orders placed with, the Company or any Company
Subsidiary or otherwise materially reduce the amount of business conducted with
the Company or any Company Subsidiary.
  -29-
  Section
      3.14
              Property and
      Leases.
 
 a)           The
Company and the Company Subsidiaries have good, valid and marketable title to
or, in the case of leased properties and assets, valid leasehold interest in,
all of the properties and assets owned or used by them to conduct their
respective businesses as currently conducted or as currently contemplated by the
Company and the Company Subsidiaries to be conducted, free and clear of all
Liens, subject only to Permitted Liens.
 
 b)           Neither
the Company or any Company Subsidiary owns any real property.
 
 c)           To
the knowledge of the Company, all Leases are in full force and effect and have
not been modified or amended, and there exists no material default under any
such lease by the Company or any Company Subsidiary, nor any event which, with
notice or lapse of time or both, would constitute a material default thereunder
by the Company or any Company Subsidiary.
 
 d)           Section
3.14(d) of the Company Disclosure Schedule discloses a full and complete list of
all leases of real property by or for the benefit of the Company and the Company
Subsidiaries and all amendments and modifications thereto (the “Leases”) and the
lessors thereof.  The Company has made available to the Purchaser,
prior to the date of this Agreement, complete and accurate copies of each of the
Leases, and none of the Leases has been modified in any material
respect.
 
 Section
      3.15
              Intellectual
      Property.
 
 a)           The
conduct of the business of the Company and the Company Subsidiaries as currently
conducted and the Software, does not, to the knowledge of the Company, infringe
upon or misappropriate Intellectual Property rights of any third party. No claim
has been asserted to the Company or any Company Subsidiary that the conduct of
the business of the Company or any Company Subsidiary as currently conducted or
the Software infringes upon or may infringe upon or misappropriates the
Intellectual Property rights of any third party.  With respect to each
item of Intellectual Property and each component of Software owned by the
Company or a Company Subsidiary (“Company Owned Intellectual
Property”), the Company or a Company Subsidiary is the owner of the
entire right, title and interest in and to such Company Owned Intellectual
Property and is entitled to use such Company Owned Intellectual Property,
including to modify or improve same or to create derivative works therefrom, in
the continued operation of its respective business.  With respect to
each item of software or Intellectual Property licensed to the Company or a
Company Subsidiary (“Company Licensed
Intellectual Property”), subject to the applicable terms of such
licenses, the Company or a Company Subsidiary has the right to use such software
or Company Licensed Intellectual Property in the continued operation of its
respective business in accordance with the manner in which the business of the
Company and the Company Subsidiaries is currently conducted.  The
Company Owned Intellectual Property has not, to the knowledge of the Company,
been adjudged or alleged to be invalid or unenforceable in whole or in
part.  Subject to bankruptcy, insolvency, reorganization, moratorium
and other applicable Law relating to or affecting creditors rights generally and
to general principles of equity relating to the availability of specific
performance and injunctive or other forms of equitable relief, each license of
software and the Company Licensed Intellectual Property is enforceable and is in
full force and effect, and will continue to be in full force and effect at the
Effective Time.  To the knowledge of the Company, no party to any
license of the Company Licensed Intellectual Property is in breach thereof or
default thereunder.
 
 b)           Section
3.15(b) of the Company Disclosure Schedule sets forth a true and complete list
of all (i) patents and patent applications, registered trademarks and trademark
applications, registered copyrights and copyright applications, industrial
designs and Software included in the Company Owned Intellectual Property, (ii)
licenses that are material to the Company’s business, and (iii) general
descriptions of trade secrets and other confidential intellectual property used
in the business of the Company and the Company Subsidiaries.  Section
3.15(b) of the Company Disclosure Schedule also sets forth a complete list of
all of the Software used in the business of the Company and the Company
Subsidiaries.
  -30-
  c)           The
Company and each Company Subsidiary has entered into confidentiality agreements
with respect to disclosures of its trade secrets and its other confidential
Intellectual Property, and (i) to the knowledge of the Company, there has been
no misappropriation of any Software or other Company Owned Intellectual Property
by any Person, (ii) to the knowledge of the Company, no employee, independent
contractor or agent of the Company or any Company Subsidiary has misappropriated
any Intellectual Property of any other Person in the course of such performance
as an employee, independent contractor or agent, and (iii) to the knowledge of
the Company, no employee, independent contractor or agent of the Company or any
Company Subsidiary is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property in the course of such
performance as an employee, independent contractor or agent.
 
 d)           Except
as set forth in Section 3.15(d) of the Company Disclosure Schedule, to the
knowledge of the Company, there is no alleged or actual infringement by any
Person of any Company Owned Intellectual Property or Company Licensed
Intellectual Property.  There is no action, suit, proceeding or claim
outstanding or, to the knowledge of the Company, threatened by others,
challenging the validity or scope of any Company Owned Intellectual
Property.  There is no action, suit, proceeding or claim outstanding
or, to the Knowledge of the Company, threatened by others, challenging the
validity or scope of any Company Licensed Intellectual Property.  To
the knowledge of the Company, there is no fact which could form a reasonable
basis for any such claim with respect to any Company Owned Intellectual Property
or Company Licensed Intellectual Property.
 
 e)           Neither
the Company nor any of the Company Subsidiaries has failed to maintain any
application or registration, or comply with any contract or Order which would
prevent it from owning, using or commercializing any Company Owned Intellectual
Property currently used or commercialized by any of them in the conduct of the
business of the Company and the Company Subsidiaries.
 
 f)           To
the knowledge of the Company, there are no third party patents or patent
applications that contain claims or trademarks or trademark applications that
infringe the issued or pending claims of any of the Company Owned Intellectual
Property or Company Licensed Intellectual Property.
 
 g)           Except
as disclosed in Section 3.15(g) of the Company Disclosure Schedule, neither the
Company nor any of its Company Subsidiaries pays or receives any royalty to or
from any Person with respect to the Company Owned Intellectual Property, nor has
the Company or any of the Company Subsidiaries licensed any Person to use any
Company Owned Intellectual Property.
 
 h)           The
Transactions will not cause a default under, or breach of, any rights of the
Company or of any of the Company Subsidiaries in and to the Company Owned
Intellectual Property or the Company Licensed Intellectual
Property.
 
 i)       
    Neither the Company nor any of the Company Subsidiaries
is subject to any judgment with respect to, nor has it entered into or is it a
party to any contract which restricts or impairs the use of, any Company Owned
Intellectual Property.
 
 j)      
     Neither the Company nor any of the Company
Subsidiaries has entered into any consent, indemnification, (except for
indemnification provisions contained in agreements with customers), forbearance
to sue or settlement agreement with respect to the Company Owned Intellectual
Property or Company Licensed Intellectual Property.
 
 k)           The
Company and each of the Company Subsidiaries has obtained intellectual property
assignments from employees and contractors as are necessary to establish and
preserve, for the benefit of the Company and each of the Company Subsidiaries,
all Company Owned Intellectual Property and Company Licensed Intellectual
Property.
  -31-
 
 l)   
        Except as set forth in Section
3.15(l) of the Company Disclosure Schedule, to the knowledge of the Company, no
open source or public library software, including, but not limited to, any
version of any software licensed pursuant to any GNU public license, was used in
the development or modification of any software owned by the Company or the
Company Subsidiaries that is incorporated into or utilized by any products of
the Company and the Company Subsidiaries where, as a result of the use of such
open source or public library software, the Company or any of the Company
Subsidiaries is obligated to make available to third parties other than its
customers the source code for the Software that is incorporated into such
products.
 
 m)          Neither
the Company nor any of the Company Subsidiaries have in the last three years (i)
transferred ownership of, (ii) except as set forth in Section 3.15(m) of the
Company Disclosure Schedule, granted any exclusive license of or right to use,
(iii) authorized the retention of any exclusive rights to use or contingent
right to use (including pursuant to a source code escrow), (iv) except as set
forth in Section 3.15(m)) of the Company Disclosure Schedule, authorized joint
ownership of or (v) except as set forth in Section 3.15(m) of the Company
Disclosure Schedule, granted any lien, security interest, claim, encumbrance or
any other restriction or limitation whatsoever in any or all Company Owned
Intellectual Property or Software.  Neither the Company nor any of the
Company Subsidiaries has granted any third party an exclusive license or right
to use any patents owned by the Company or any of the Company
Subsidiaries.
 
 Section
      3.16
              Taxes.
 
 a)           Section
3.16(a) of the Company Disclosure Schedule contains a list of all income Tax
Returns filed with respect to the Company and each of the Company Subsidiaries
since January 1, 2005, including all Tax Returns filed on a consolidated,
combined or unitary basis, along with a list of entities whose activities are
included in such filings.
 
 b)           The
Company and each of the Company Subsidiaries have timely filed (or have had
filed on their behalf) with all appropriate Governmental Authorities all Tax
Returns and reports required to be filed by each of them in accordance with all
applicable Laws, and each has, within the time and in the manner prescribed by
Law, paid, remitted and discharged all Taxes that have become due and payable,
and will timely pay all Taxes which will become due and payable on or prior to
the Effective Date other than such payments as are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves have been
taken on the Annual Financial Statements in accordance with GAAP, and all such
Tax Returns and reports are true, accurate and complete in all material
respects.
 
 c)           Neither
the Canada Revenue Agency, the Internal Revenue Service nor any other taxing
authority or agency has asserted in writing or, to the knowledge of the Company,
has threatened to assert against the Company or any Company Subsidiary any
deficiency or claim for any Taxes or interest thereon or penalties in connection
therewith.
 
 d)           Neither
the Company nor any Company Subsidiary has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax.
 
 e)           Neither
the Company nor any Company Subsidiary is party to any Tax-sharing agreement,
Tax-indemnification agreement or other agreement or arrangement relating to
Taxes with any Person, other than the Company or a Company Subsidiary; neither
the Company nor any of the Company Subsidiaries has been a member of an
affiliated, combined or unitary group filing a consolidated, combined, unitary
or other Tax Return for Canadian federal, provincial, local or non-Canadian Tax
purposes reflecting the income, assets or activities of affiliated companies, or
has any Liability for the Taxes of any other Person under any provision of
Canadian federal, provincial, local or non-Canadian Law, or as a transferee or
successor, or by contract, or otherwise.
  -32-
 
 f)   
        Neither the Company nor any
Company Subsidiary has any Liability for any amount of Taxes of any Person,
other than the Company or a Company Subsidiary, as a transferee or successor, or
by contract.
 
 g)           Neither
the Company nor any Company Subsidiary has any income reportable for a period
ending after the Effective Time that is attributable to any activity or a
transaction occurring in, or a change in accounting method made for, a period
ending on or prior to the Effective Time that resulted in a deferred reporting
of income from such transaction or from such change of accounting method or is
inconsistent with the past practice of the Company.
 
 h)           Each
of the Company and the Company Subsidiaries has withheld, collected and timely
paid all Taxes required to be withheld and paid in connection with any (i)
amounts paid or owing to any present or former employee, independent contractor,
creditor, stockholder or other third party, (ii) goods and services received
from or provided to any Person, and (iii) amounts paid or credited to any Person
not resident in the jurisdiction of the relevant payor, and the amount of Taxes
withheld but not remitted by the Company and the Company Subsidiaries will be
retained in respect of the appropriate amounts and will be remitted by the
Company and the Company Subsidiaries to the appropriate Tax authorities when
due.
 
 i)            Neither
the Company nor any of the Company Subsidiaries has any Liability for any
material amount of unpaid Taxes except as disclosed in the Financial Statements
or Books and Records.
 
 j)            The
Company and the Company Subsidiaries do not have any material Liability,
obligation or commitment for the payment of Taxes not yet due other than those
that have arisen since December 31, 2009 in the usual and ordinary course of
business and for which adequate provisions have been made in the Financial
Statements in accordance with GAAP.
 
 k)           All
Tax Returns of the Company and the Company Subsidiaries have been assessed
through December 31, 2008, there are no proposed or issued assessments or
reassessments respecting the Company or any of the Company Subsidiaries pursuant
to which there are amounts owing or discussions in respect thereof with any
taxing authority and there are no outstanding objections to any assessment or
reassessment of Taxes.  Other than as set forth in Section 3.16(l) of
the Company Disclosure Schedule, there are no contingent Tax Liabilities or any
grounds that could prompt an assessment or reassessment of the Company and any
of the Company Subsidiaries, including aggressive treatment of income, expenses,
deductions, credits or other amounts in the filing of earlier or current Tax
Returns.
 
 l)            The
Company and the Company Subsidiaries have collected from each past and present
customer (or other Person paying amounts to the Company and the Company
Subsidiaries) the amount of all Taxes (including goods and services Tax and
provincial, state and local sales Taxes) required to be collected, except where
the failure to so collect has not and is not reasonably likely to result in a
Company Material Adverse Effect, and have paid and remitted such Taxes when due,
in the form required under the appropriate legislation or made adequate
provision for the payment of such amounts to the proper Tax
authorities.  The amount of Tax collected but not remitted by the
Company and the Company Subsidiaries will be retained in the appropriate
accounts and remitted by the Company and the Company Subsidiaries to the
appropriate authorities when due.
 
 m)          For
2009, all research and development investment tax credits (“ITCs”) will be
claimed by the Company and the Company Subsidiaries in accordance with the Tax
Act and the relevant provincial legislation and the Company and the Company
Subsidiaries satisfied at all times the relevant criteria and conditions
entitling it to such ITCs.  All refunds of ITCs received or receivable
by the Company and the Company Subsidiaries for taxation year 2009 were claimed
in accordance with the Tax Act and the relevant provincial legislation and the
Company and the Company Subsidiaries satisfied at all times the relevant
criteria and conditions entitling it to claim a refund of such
ITCs.
  -33-
  n)           Neither
the Company nor any of the Company Subsidiaries is currently or was at any time
since January 1, 2006 the subject of any action or proceeding relating to Taxes
or a “tax asset”, or an audit or examination relating to Taxes or a tax asset
and, to the Company’s knowledge, no such action, proceeding, audit or
examination is pending or threatened.  For the purpose of this Section
3.16(p), the term “tax
asset” shall include but is not limited to any net operating loss,
non-capital loss, net capital loss, Tax pool, investment tax credit, foreign tax
credit, charitable deduction or any other credit or Tax attribute which could
reduce Taxes.  The Company has received a “notice of determination of
loss” pursuant to subsection 152(1.1) of the Tax Act, in respect of any
non-capital loss or net capital loss incurred by it.
 
 o)           Other
than as set forth in Section 3.16(q), neither the Company nor any of the Company
Subsidiaries (i) is a party to any agreement extending the time within which to
file any Tax Return, (ii) has granted to any Person any power of attorney that
is currently in force with respect to any Tax matter, (iii) has executed or
entered into any written agreement with, or obtained or applied for any written
consents or written clearances or any other Tax rulings from, nor has there been
any written agreement executed or entered into on behalf of any of them with,
any taxing authority relating to material Taxes, including any private letter
rulings or comparable rulings of any taxing authority and closing agreements
with any taxing authority, (iv) has any Liability for the Taxes of another
Person under U.S. Treasury Regulation Section 1.1502-6 (or any comparable
provision of state, local or foreign Law), (v) has, or has ever had, a permanent
establishment in any country other than the country of its organization or been
subject to Tax in a jurisdiction outside the country of its organization, (vi)
has, within the scope of Section 999 of the Code, participated in or cooperated
with any international boycott or has been requested to do so in connection with
any transaction or proposed transaction, (vii) has engaged in any “reportable
transaction” as defined in U.S. Treasury Regulation Section 1.6011-4(b), or
(viii) has constituted either a “distributing corporation” or a “controlled
corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355 of the
Code (A) in the two (2) years prior to the date of this Agreement or (B) in a
distribution which could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code) in
conjunction with the Transactions.
 
 p)           No
claim has been made in writing by any taxing authority in a jurisdiction where
the Company or any of the Company Subsidiaries does not file Tax Returns that it
is or may be subject to taxation by, or required to file any Tax Return in, that
jurisdiction.
 
 q)           The
Company and the Company Subsidiaries have maintained, in all material respects,
with respect to transfer pricing, proper intercompany agreements and concurrent
and supporting documentation as required under all applicable Tax Laws, such
that no transfer pricing amounts will be denied as deductions in any
jurisdiction either by reason of a lack of proper agreements or supporting
documentation or by reason of a non-compliance with applicable Tax
Laws.  The terms of the transfer pricing agreements involving the
Company or any of the Company Subsidiaries satisfy the requirements set by the
applicable Tax Law and by the respective taxing authority such that no transfer
pricing amount will be denied as deductions or will be considered to have
created income to the Company or any of the Company Subsidiaries of a type other
than that specified in the transfer pricing agreement.
 
 r)           Neither
the Company nor any of the Company Subsidiaries has (i) agreed to or is required
to make any adjustments pursuant to a change in Tax accounting method, (ii) any
knowledge that any taxing authority has proposed in writing any such adjustment,
or (iii) any application pending with any taxing authority requesting permission
for any changes in Tax accounting methods.
 
 s)           Each
U.S. Subsidiary of the Company has never had a “nonqualified deferred
compensation plan” (as defined in Section 409A(d)(1) of the
Code).
  -34-
 
 t)            There
is no contract of any U.S. Subsidiary of the Company covering any person that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by such Subsidiary (or Affiliates of such Subsidiary) by
reason of Section 280G of the Code.
 
 u)           For
purposes of this Section 3.16, any reference to the Company or any of the
Company Subsidiaries shall be deemed to include any Person that merged with or
was liquidated into the Company or such Company Subsidiary, as
applicable.
 
 Section
      3.17
              Environmental
      Matters.
 
 a)           Neither
the Company nor any of the Company Subsidiaries is in violation of or has
violated, during the three previous years, or has any Liability under, any
Environmental Law and there are no facts, circumstances or conditions existing,
initiated or occurring prior to the Effective Date which could result in
Liability under Environmental Laws.  Without limiting the generality
of the foregoing, to the knowledge of the Company: (i)  there has been
no Release of Hazardous Substances at, on, under or from any of the properties
currently owned, leased or operated by the Company or any Company Subsidiary
(including, without limitation, soils and surface and ground waters) during the
period of the Company’s or any Company Subsidiary’s ownership, tenancy or
operation of such property; (ii)  there has been no Release of
Hazardous Substances at, on, under or from any of the properties formerly owned,
leased or operated by the Company or any Company Subsidiary (including, without
limitation, soils and surface and ground waters) during the period of the
Company’s or any Company Subsidiary’s ownership, tenancy or operation of such
property; (iii) none of the real property currently owned, leased or operated by
the Company or the Company Subsidiaries contains underground improvements,
including but not limited to treatment or storage tanks, or underground piping
associated with such tanks, used currently or in the past for the management of
Hazardous Substances, and no portion of such real property is or has been used
as a dump or landfill or consists of or contains filled-in land or wetlands; and
(iv) neither PCB’s, “toxic mold,” nor asbestos-containing materials are present
on or in the real property currently or previously owned, operated or leased by
the Company or the Company Subsidiaries or the improvements
thereon.
 
 b)           Neither
the Company nor any Company Subsidiary has received any notice, demand, claim or
request for information or other written communication alleging that the Company
or any Company Subsidiary (i) is actually, potentially or allegedly liable under
any Environmental Law for Remediation of Hazardous Substances, or (ii) may be in
violation of or have any Liability under any Environmental Law.
 
 c)           The
Company and each Company Subsidiary has promptly applied for and maintains all
permits, licenses, consents, approvals and other authorizations required under
any Environmental Law (“Environmental
Permits”) and the Company and such Company Subsidiaries are in compliance
in all material respects with the Environmental Permits.
 
 d)           Neither
the Company nor any of the Company Subsidiaries has arranged, by contract,
agreement or otherwise, for the transportation, disposal or treatment of
Hazardous Substances at any location such that it is or could be liable for
Remediation of such location pursuant to Environmental Laws, and no such
location, nor any of the real property currently owned, operated, or leased by
the Company or any of  the Company Subsidiaries is listed on any
governmental list or database of properties that may require
Remediation.
 
 e)           No
authorization, notification, recording, filing, consent, waiting period,
Remediation or approval is required under any Environmental Law in order to
consummate the Transactions.
  -35-
 
 Section
      3.18
              Insurance.
 
 a)           Section
3.18(a) of the Company Disclosure Schedule sets out a list of all of the
insurance policies of the Company and the Company Subsidiaries relating to fire
and casualty, general liability, business interruption, directors’ and officers’
liability and workers’ compensation and other forms of insurance of any kind
relating to the business and operations of the Company or any Company
Subsidiary, and such list contains the name of the applicable insurance company,
the premiums payable, deductible (if any) and amount of coverage for each such
policy.  True and complete copies of all policies, or summaries
thereof of fire and casualty, general liability, business interruption,
directors’ and officers’ liability and workers’ compensation and other forms of
insurance of any kind relating to the business and operations of the Company or
any Company Subsidiary have been made available to the Purchaser, and such
policies are in full force and effect as of the date of this
Agreement.
 
 b)           The
insurance maintained by the Company and the Company Subsidiaries adequately
covers all material risks reasonably and prudently foreseeable in the operation
and conduct of the business of the Company and the Company Subsidiaries which
would be customary in the business carried on by the Company and the Company
Subsidiaries and the Company and the Company Subsidiaries are not in material
default under the terms of any such policy.
 
 c)           There
is no claim outstanding under any insurance policy of the Company or a Company
Subsidiary as to which coverage has been questioned, denied or disputed by the
underwriter of such policy, and there has been no notice of cancellation or
termination of, or premium increase with respect to, any such
policy.
 
 d)           The
Company and the Company Subsidiaries have paid all premiums due under their
insurance policies and none of the Company or any Company Subsidiary is in
default in any material respect under the terms of any of their insurance
policies.
 
 Section
      3.19
              Brokers.
 
 No
broker, finder or investment banker (other than the Company Financial Advisor)
is entitled to any brokerage, finder’s or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the
Company or any of the Company Subsidiaries.  The Company has
heretofore furnished to the Purchaser a complete and correct copy of all
agreements between the Company and the Company Financial Advisor pursuant to
which such firm would be entitled to any payment related to the Transactions;
provided that the provisions dealing with the basis upon which such payment
would be calculated (but not the amount of the payment) have been redacted
therefrom.
 
 Section
      3.20
              Related Party
      Transactions; Collateral
Benefit.
 
 No
executive officer, director or Affiliate of the Company or any Company
Subsidiary, nor any immediate family member or Affiliate of such executive
officer or director is entitled to any payment, benefit or advantage that would
constitute a “collateral benefit” within the meaning of Canadian Securities
Legislation, in connection with or as a result of the Transactions.
 
 Save for
or pursuant to (i) the employment, management or consulting arrangements listed
in Section 3.11 or Section 3.12 of the Company Disclosure Schedule and the
payments to be made thereunder, as disclosed therein, and (ii) compensation
payable to the directors of the Company in accordance with the “Compensation of
Directors” contained in the Company’s Management Information Circular
dated April 13, 2009, no executive officer, director or Affiliate of the
Company or any Company Subsidiary, nor any immediate family member or Affiliate
of such executive officer or director:
  -36-
 
 a)           is
a party to any agreement, contract, commitment, arrangement or transaction with
the Company or any Company Subsidiary;
 
 b)           is
entitled to any payment or transfer of any assets from the Company or any
Company Subsidiary;
 
 c)           has
any material interest in any material property used by the Company or any
Company Subsidiary; or
 
 d)           has
an interest in any customer or supplier of the Company or any Company Subsidiary
or provider of any services to the Company or any Company Subsidiary, other than
the ownership of less than 5% of the outstanding stock of any publicly-traded
company.
 
 Section
      3.21
              Disclosure.
 
 a)                     True
and complete copies of all documents listed in the Company Disclosure Schedule
have been made available or provided to the Purchaser.
 
 b)                     The
Company has made available to the Purchaser all Books and Records. All such
Books and Records are, in all material respects, complete and correct and have
been maintained, in all material respects, in accordance with good business
practices, including the maintenance of an adequate system of internal
accounting controls, and the information in the Books and Records is accurately
reflected in the Financial Statements.
 
 c)                     The
minute books of the Company and each Company Subsidiary contain, in all material
respects, accurate and complete records of all meetings held of, and corporate
action by, the stockholders and the board of directors (and committees thereof)
of the Company and each Company Subsidiary.
 
 d)                     None
of the representations or warranties made by the Company herein or in the
Company Disclosure Schedule, or in any certificate or document furnished by the
Company pursuant to this Agreement, when all such documents are read together in
their entirety, contains or will contain any untrue statement of a material
fact, or omits to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which it was made, not misleading.
 
 Section
      3.22
              Certain Payments and
      Foreign Corrupt Practices
Act.
 
 Without
limiting the generality of any other provision hereof, none of the Company, any
Company Subsidiary nor any of their respective officers, directors or employees
or, to the knowledge of the Company, any of the agents, shareholders,
distributors or representatives of the Company or a Company Subsidiary or any
other Persons acting on the express, implied or apparent authority of any of
them, has:
 
 a)           Paid,
given or received or has offered or promised to pay, give or receive, directly
or indirectly, any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, discount, inducement or other payment or thing of value, regardless of
form, whether in money, property or services, to any Person, whether in Canada,
the United States or elsewhere, and including any foreign official or political
party (or official thereof), in connection with or in furtherance of the
business of the Company or a Company Subsidiary, including, without limitation,
(i) for the purposes of influencing any act, decision or omission in order to
assist the Company or a Company Subsidiary in obtaining business for or with, or
directing business to, any Person, (ii) to obtain favourable treatment in
securing business for the Company or any Company Subsidiary, (iii) to pay for
favourable treatment for business secured by the Company or any Company
Subsidiary, (iv) to obtain special concessions or for special concessions
already obtained, for or in respect of the Company or any Company Subsidiary, or
(v) in violation of any Law, nor is the business of the Company and the Company
Subsidiaries in any manner dependent upon the making or receipt of any of the
foregoing;
  -37-
 
 b)           Established
or maintained any fund or asset with respect to the Company or any Company
Subsidiary that has not been recorded in the Books and Records of the Company
and the Company Subsidiaries; or
 
 c)           Directly
or indirectly, materially violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended (the “FCPA”), and none of
them has used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made,
offered or authorized any unlawful payment to foreign or domestic government
officials or employees, or made, offered or authorized any unlawful bribe,
rebate, payoff, influence payment, kickback or other similar unlawful
payment.  The Company and the Company Subsidiaries have established
reasonable internal controls and procedures that are intended to ensure
compliance with the FCPA.
 
 d)           The
business of the Company and each Company Subsidiary is not in any manner
dependent upon the making or receipt of the unlawful payments or other
inducements referred to in this Section 3.22.
 
 Section
      3.23
              Takeover
      Statutes.
 
 The
Company Board has taken all necessary action so that no restrictive provision of
any applicable anti-takeover provision in the Company’s certificate of
incorporation or bylaws or any shareholder rights or similar plan, is, or at the
Effective Time will be, applicable to the Company, the Purchaser, the Purchase
Consideration, the Arrangement or any of the other transactions contemplated by
this Agreement or the Support Agreements.
 
 Section
      3.24
              No Other Purchase
      Agreements.
 
 The
Company and the Company Subsidiaries are not a party to any other contract,
agreement or understanding of any nature for the purchase or other acquisition
of any of their undertaking, property or assets, other than in the ordinary
course of business.
 
 Section
      3.25
              Personal
      Property.
 
 Either
the Company or one of the Company Subsidiaries is the true and lawful owner or
lessee of and has good and valid title to, or a valid leasehold interest in, all
personal or moveable property (tangible or intangible) reflected on the balance
sheet contained in the Annual Financial Statements or thereafter acquired,
except inventory that has been sold or otherwise disposed of in the ordinary
course of business since the date of such balance sheet and not in violation of
this Agreement, in each case free and clear of all Liens, other than Permitted
Liens.
 
 Section
      3.26
              Warranty and Product
      Liability Matters.
 
 a)                     Section
3.26(a) of the Company Disclosure Schedule sets forth (i) a list of all product
liability claims made against the Company or any of the Company Subsidiaries
since January 1, 2007, and (ii) a summary of warranty claims made against the
Company or any of the Company Subsidiaries, together with the annual cost
associated with such warranty claims, for each of the three (3)
immediately-preceding fiscal years.
 
 b)                     Except
as set forth in Section 3.26(b) of the Company Disclosure Schedule, none of the
Company’s or the Company Subsidiaries’ products have design, manufacturing or
other defects, and such products comply with, and meet, in all material
respects, the current standards of, all Laws dealing with such
products.  No claims, including, but not limited to, product or
service warranty, Liability, strict liability or negligence claims, in respect
of the Company’s or any Company Subsidiary’s products or services are pending or
threatened.
  -38-
 
 c)                     The
Company and each Company Subsidiary has used reasonable commercial efforts to
limit Liability for warranty and product liability claims.
 
 Section
      3.27
              Privacy
      Laws.
 
 a)           The
Company and each of the Company Subsidiaries are conducting their business in
compliance, in all material respects, with all applicable Privacy
Laws.
 
 b)           The
Company has a written privacy policy which governs the collection, use or
disclosure of Personal Information, and the Company is in compliance, in all
material respects, with such policy.
 
 c)           There
has been no loss, theft or unauthorized collection, use or disclosure of
Personal Information that is in the custody or control of the Company or of any
of the Company Subsidiaries; and neither the Company or any Company Subsidiary
has received any written notice or other communication from any Person regarding
or in connection with any actual, alleged, possible or potential violation of,
or failure to comply with, any Privacy Laws or with respect to the loss, theft
or unauthorized collection, use or disclosure of Personal Information in the
custody or control of the Company or the Company Subsidiaries.
 
 Section
      3.28
              Not Engaged in
      Cultural Business.
 
 The
Company is not engaged in and does not carry on a “cultural business”, as such
term is defined in the Investment Canada
Act.
 
 Section
      3.29
              Solvency.
 
 At the
Effective Time, the Company will not be insolvent within the meaning of section
192(2) of the CBCA.
 
 Section
      3.30
              Banking and
      Attorneys.
 
 Section
3.30 of the Company Disclosure Schedule sets forth a true and complete list
showing:
 
 a)             The
name of each bank or similar institution in which each of the Company and the
Company Subsidiaries has an account or safe deposit box, the number or
designation of each such account and safe deposit box and the names of all
individuals authorized to draw thereon or to have access thereto;
and
 
 b)             The
name of each Person holding a general or special power of attorney from the
Company or any of the Company Subsidiaries and a summary of the terms
thereof.
  -39-
 
 ARTICLE
IV.
 REPRESENTATIONS
AND WARRANTIES OF THE PARENT AND THE PURCHASER
 
 As an
inducement to the Company to enter into this Agreement and to implement the
Transactions, the Purchaser Parties hereby, jointly and severally, represent and
warrant to the Company as follows:
 
 Section
      4.01
              Corporate
      Organization.
 
 Each of
the Purchaser Parties is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, except
where the failure to be so organized, existing or in good standing would not
reasonably be expected to have a Parent Material Adverse Effect.
 
 Section
      4.02
              Authority.
 
 a)           Each
of the Purchaser Parties has all necessary corporate power and authority to
execute and deliver the Transaction Documents, to perform its obligations
thereunder and to consummate the Transactions.
 
 b)           The
execution and delivery of the Transaction Documents by each of the Purchaser
Parties, and the consummation by each of them of the Transactions, have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Purchaser Parties are necessary to
authorize the Transaction Documents or to consummate the Transactions (other
than any necessary approvals or consents and the filing of appropriate documents
as required by the CBCA).
 
 c)           Each
of the Transaction Documents has been duly and validly executed and delivered by
each of the Purchaser Parties that is a party thereto and, assuming due
authorization, execution and delivery by each of the other parties thereto,
constitutes a legal, valid and binding obligation of each of the Purchaser
Parties that is a party thereto, enforceable against it in accordance with its
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting
the enforcement of creditors’ rights generally and by general equitable
principles.
 
 d)           The
Boards of Directors of each of the Purchaser Parties have duly approved the
Transaction Documents to which it is a party and the Transactions.
 
 Section
      4.03
              No Conflict; Required
      Filings and Consents.
 
 a)           The
execution and delivery of each of the Transaction Documents to which it is a
party by each of the Purchaser Parties do not, and the performance by each of
the Purchaser Parties of its obligations under such Transaction Documents, will
not, (i) conflict with or violate its certificate of incorporation or by-laws in
effect on the date of this Agreement, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 4.03(b) have
been obtained and all filings and obligations described in Section 4.03(b) have
been made, conflict with or violate any Law applicable to it or by which any
property or asset of either of them is bound or affected, or (iii) conflict with
or result in a breach of the terms of any material agreement to which it is a
party, except with respect to clauses (ii) and (iii), for any such conflicts or
violations which would not reasonably be expected to have a Parent Material
Adverse Effect.
 
 b)           The
execution and delivery of the Transaction Documents by each of the Purchaser
Parties that is a party thereto do not, and the performance by each of the
Purchaser Parties of its obligations thereunder, will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, except (i) for applicable requirements, if any, of the
Canadian Securities Laws, U.S. Securities Laws and state takeover laws, the
Investment Canada Act and filing of appropriate documents as required by the
CBCA, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
reasonably be expected to have a Parent Material Adverse
Effect.
  -40-
 
 Section
      4.04
              Capitalization.
 
 The
authorized capital stock of Parent consists of 20,000,000 shares of common
stock, par value U.S. $0.01 per share.  As of December 31, 2009,
13,248,813 shares of Parent Common Stock are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and
non-assessable.  All shares of Parent Common Stock deliverable
pursuant to this Agreement have been duly authorized and, when issued as
contemplated by this Agreement, will be validly issued, fully paid,
non-assessable and free of pre-emptive rights.
 
 Section
      4.05
              Litigation.
 
 There is
no Action pending or, to the knowledge of Parent, threatened against the
Purchaser Parties, or any property or asset of the Purchaser Parties, before any
Governmental Authority that seeks to materially delay or prevent the
consummation of the Transactions.
 
 Section
      4.06
              No Vote
      Required.
 
 No vote
of the stockholders of the Purchaser Parties is required by Law, their
respective certificates of incorporation or by-laws or otherwise in order for
each of the Purchaser Parties to consummate the Transactions.
 
 Section
      4.07
              Operations of
      Purchaser.
 
 Purchaser
is a direct, wholly-owned subsidiary of Parent. Purchaser carries on the
business of managing and controlling the content and related business processes
involved in the execution of capital projects.
 
 Section
      4.08
              Brokers.
 
 No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Purchaser Parties.
 
 Section
      4.09
              Parent SEC
      Documents.
  The Parent has filed all reports,
schedules, forms, statements and other documents required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
since January 1, 2008 (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Parent
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles (“U.S.
GAAP”) applied on a consistent basis during the periods involved, except
as may be otherwise specified in such financial statements or the notes thereto
and except that unaudited financial statements may not contain all footnotes
required by U.S. GAAP, and fairly present in all material respects the financial
position of the Parent as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments.
  -41-
 
 Section
      4.10
              Material
      Changes.
  Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Parent Material Adverse Effect, (ii) the Parent has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Parent’s financial
statements pursuant to U.S. GAAP or required to be disclosed in filings made
with the SEC, (iii) the Parent has not altered its method of accounting, (iv)
the Parent has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock and (v) the Parent has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Parent stock option or stock plans.
 
 Section
      4.11
              Sarbanes-Oxley;
      Controls.
 
 The Parent is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the date of this Agreement. The Parent maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with U.S. GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Parent has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Parent and designed such
disclosure controls and procedures to ensure that material information relating
to the Parent, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Parent’s most recently filed periodic report under the Exchange Act,
as the case may be, is being prepared. The Parent’s certifying officers have
evaluated the effectiveness of the Parent’s controls and procedures as of the
date prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”). The Parent presented in its
most recently filed periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Parent’s internal
controls (as such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to the knowledge of the Parent, in other factors that could
significantly affect the Parent’s internal controls.
 
 Section
      4.12
              NASDAQ
      Listing.
 
 The Parent Common Stock is listed for
trading on NASDAQ.  Parent is not aware of any pending default under,
or material non-compliance with, the standards for continued listing of the
Parent Common Stock on NASDAQ.  There is no SEC order pending or, to
Parent’s knowledge, threatened suspending or terminating registration of the
Parent Common Stock under the Exchange Act or suspending or terminating listing
on NASDAQ.
  -42-
 
 ARTICLE
V.
 CONDUCT
OF BUSINESS PRIOR TO THE EFFECTIVE DATE
 
 Section
      5.01
              Conduct of Business by
      the Company.
 
 a)           The
Company agrees that, between the date of this Agreement and the Effective Date,
except as required (i) by a Governmental Authority of competent jurisdiction, or
(ii) to complete the Transactions as contemplated by this Agreement, or as may
be required in order for the Company and the Purchaser Parties to comply with
applicable Laws, unless the Purchaser shall otherwise consent in writing, such
consent not to be unreasonably withheld or delayed: (i) the Company and the
Company Subsidiaries shall conduct their business only in the ordinary course of
business and in a manner consistent with past practice; and (ii) the Company
shall maintain its existence and good standing and use its reasonable commercial
efforts to preserve substantially intact the business organization of the
Company and the Company Subsidiaries, to keep available the services of the
current officers, employees and consultants of the Company and the Company
Subsidiaries and to preserve the current relationships of the Company and the
Company Subsidiaries with customers, suppliers and other persons with which the
Company or any Company Subsidiary has business relations.
 
 b)           By
way of amplification and not limitation, except as expressly contemplated by any
other provision of this Agreement or as required by a Governmental Authority of
competent jurisdiction or as may be required in order for the Company and the
Purchaser Parties to comply with applicable Laws, neither the Company nor any
Company Subsidiary shall, between the date of this Agreement and the earlier of
the Effective Date and the time that this Agreement is terminated in accordance
with its terms, directly or indirectly, do any of the following without the
prior written consent of the Purchaser:
 
 i.
              amend
      or otherwise change its certificate of incorporation or by-laws or
      equivalent organizational
documents;
 
 ii.
              issue,
      sell, pledge, assign, license or sub-license, dispose of, grant, encumber,
      or authorize the issuance, sale, pledge, disposition, grant or encumbrance
      of, (A) any shares of any class of capital stock of the Company or of any
      Company Subsidiary, or any options, warrants, convertible securities or
      other rights of any kind to acquire any shares of such capital stock, or
      any other ownership interest (including, without limitation, any phantom
      interest), of the Company or of any Company Subsidiary, except for the
      issuance of shares of Company Common Stock issuable upon the exercise of
      Company Stock Options, provided the Company complies with Section 6.10 or
      (B) any properties or assets of the Company or of any Company Subsidiary;
      or suffer, permit or allow the existence of any Lien on any of the
      foregoing;
 
 iii.
              except
      as specifically contemplated and permitted in Section 6.10, accelerate,
      amend or change the exercise period of any Company Stock Options or
      Company Warrants, re-price any Company Stock Options or Company Warrants,
      or authorize cash payments in exchange for any Company Stock Options or
      Company Warrants;
 
 iv.
              declare,
      set aside, make or pay any dividend or other distribution, payable in
      cash, stock, property or otherwise, with respect to any of its capital
      stock or other securities;
 
 v.
              reclassify,
      combine, split, subdivide or redeem, or purchase or otherwise acquire,
      directly or indirectly, any of its capital stock or other
      securities;
  -43-
  vi.
              (A)
      acquire (including, without limitation, by merger, consolidation, or
      acquisition of stock or assets or any other business combination) any
      interest of any nature in any Person whatsoever, including, without
      limitation, any corporation, partnership, other business organization or
      any division thereof, or any material amount of assets, except in the
      ordinary course of business and consistent with past practice; (B) issue
      any debt securities or assume, guarantee or endorse, or otherwise become
      responsible for, the obligations of any person, or make any loans or
      advances, or grant any security interest in any of its assets, except in
      the ordinary course of business and consistent with past practice; (C)
      authorize, or make any commitment with respect to, capital expenditures
      which are, in the aggregate, in excess of $100,000 from the date hereof
      until the earlier of (x) the Effective Time or (z) the termination of this
      Agreement pursuant to Article VIII; or (D) enter into or amend any
      contract, agreement, commitment or arrangement with respect to any matter
      set forth in this Section
5.01(b)(vi);
 
 vii.
              hire
      or terminate any employee or service provider except as expressly provided
      in Section 5.01(b)(vii) of the Company Disclosure
  Schedule;
 
 viii.
              other
      than as set forth in subsection 5.01(b)(iii), increase the compensation
      payable or to become payable or the benefits provided to its directors,
      officers, consultants, service providers or employees, except for general
      increases in the ordinary course and consistent with past practice and
      except as provided in written agreements between the Company or the
      Company Subsidiaries with such persons, or grant any severance or
      termination pay to or enter into any employment or severance agreement
      with, any director, officer, consultant, service provider or other
      employee of the Company or of any Company Subsidiary, or establish, adopt,
      enter into or, except as contemplated by this Agreement, amend any bonus,
      profit-sharing, thrift, compensation, stock option, restricted stock,
      pension, retirement, deferred compensation, employment, termination,
      severance or other plan, agreement, trust, fund, policy or arrangement for
      the benefit of any director, officer, consultant, service provider or
      employee;
 
 ix.
              change
      any of the accounting principles used by it, other than as required by
      GAAP;
 
 x.
              (A)
      make, change or rescind any Tax election, settle or compromise any
      Liability for Taxes, change or revoke any of its methods of Tax accounting
      or annual Tax accounting periods, file any amended Tax Return, surrender
      any claim for a refund of Taxes, enter into any closing agreement with a
      taxing authority relating to any Tax, or waive or extend the statute of
      limitations in respect of any Tax (other than pursuant to extensions of
      time to file Tax Returns in the ordinary course of business), or (B) take
      any action with respect to the computation of Taxes or the preparation of
      Tax Returns that is inconsistent with past
  practice;
 
 xi.
              pay,
      discharge or satisfy any claim, Liability or obligation (absolute,
      accrued, asserted or unasserted, contingent or otherwise), other than in
      the ordinary course of business and consistent with past practice, except
      for Liabilities for fees and other costs arising in connection with the
      completion of the Transactions; (xii) (A) amend, modify or consent to the
      termination of any Material Contract, or amend, waive, modify or consent
      to the termination of the Company’s or any Company Subsidiary’s rights
      thereunder or (B) enter into any contract or agreement that would be a
      Restrictive Agreement or a Related Party
  Agreement;
 
 xii.
              other
      than in the ordinary course of business (A) grant any exclusive license or
      sub-license in respect of any Company Owned Intellectual Property, (B)
      grant any license or sub-license in respect of any Company Owned
      Intellectual Property involving aggregate annual payments to the Company
      or any Company Subsidiary of more than Cdn.$100,000, (C) transfer any
      Company Owned Intellectual Property, (D) except in the ordinary course of
      business, develop any Intellectual Property jointly with any third party,
      or (E) except in the ordinary course of business, disclose any
      confidential Intellectual Property or other confidential information of
      the Company or any Company
Subsidiary;
  -44-
 
 xiii.
              commence
      or settle any Action; or
 
 xiv.
              except
      as permitted by Section 6.03, announce an intention, enter into any formal
      or informal agreement or otherwise make a commitment to do any of the
      foregoing or take any action that would materially delay the consummation
      of the Arrangement.
 
 For
greater certainty, and notwithstanding the foregoing, the Company may incur
Indebtedness in the ordinary course of business and consistent with past
practice, without the prior written consent of Parent.
 
 Section
      5.02
              Pre-Acquisition
      Transactions.
 
 a)           Prior
to the Effective Time, the Company agrees to (i) at the Purchaser’s expense,
cooperate with and provide reasonable assistance to the Purchaser Parties in
connection with the Purchaser Parties’ planning for and implementation of any
such reorganizations of the business, operations, assets or corporate structure
of the Company and the Company Subsidiary as the Purchaser Parties may request,
acting reasonably (each a “Pre-Acquisition
Transaction”), and (ii) at the Purchaser Parties’ expense, use
commercially reasonable efforts to implement in advance of the Effective Time
any Pre-Acquisition Transaction as reasonably requested by the Purchaser
Parties. At the Purchaser Parties’ option, such Pre-Acquisition Transactions may
include, without limitation, (i) formation of new Company Subsidiaries, (ii)
merger, amalgamation or consolidation of existing Company Subsidiaries, (iii)
transfer of securities in, or assets held by, existing Company Subsidiaries
either by sale, dividend or contribution, and (iv) filing of any elections
required or permitted under applicable Tax Laws relating to such transactions.
However, the Company will not be required to implement any such Pre-Acquisition
Transaction prior to the Effective Time unless it determines to its
satisfaction, acting reasonably, that (A) such implementation will not delay or
prevent consummation of the Arrangement (including by giving rise to litigation
by third parties); (B) such implementation will not have an adverse impact on
the Company Shareholders; and (C) the Arrangement will be consummated and the
Effective Time will occur immediately following the completion of such
Pre-Acquisition Transaction. The Purchaser Parties agree that any
Pre-Acquisition Transaction that is implemented at the Purchaser Parties’
request in advance of the Effective Time will not be considered in determining
whether a representation or warranty of the Company under this Agreement has
been breached.
 
 b)           To
the extent that a Pre-Acquisition Transaction requires approval of the Company
Shareholders under the CBCA, the Company shall at the Purchaser’s expense, (i)
seek approval of the Company Shareholders for such Pre-Acquisition Transaction
at the Company Meeting, (ii) include in the Circular a form of special
resolution of the Company Shareholders (the “Transaction
Resolution”) approving such Pre-Acquisition Transaction in form and
substance acceptable to the Purchaser Parties, acting reasonably, either
included within the Arrangement Resolution or separate from the Arrangement
Resolution if so requested by the Purchaser Parties, and (iii) include in the
Circular the unanimous recommendation of the Company Board that the Company
Shareholders vote in favour of the Transaction Resolution.  Subject to
the provisions of this Section 5.02, the provisions in this Agreement regarding
the Company’s obligations respecting the approval of the Arrangement Resolution
shall apply mutatis mutandisto the approval of the Transaction Resolution.
 
 c)           Subject
to the provisions of Sections 5.2(a) and 5.2(b), the Parties will work
cooperatively and use commercially reasonable efforts to prepare prior to the
Effective Time all documentation necessary and do such other acts and things as
are necessary to give effect to any Pre-Acquisition Transactions. Subject to the
provisions of Sections 5.2(a) and 5.2(b), the Parties shall give effect to any
Pre-Acquisition Transactions immediately before the Effective Time and shall
seek to have them become effective immediately before the Effective Time (but
after the Purchaser Parties shall have confirmed that all conditions in Sections
7.01 and 7.02 have been satisfied or waived by the Purchaser Parties and the
Company shall have confirmed that all conditions in Sections 7.01 and 7.03 have
been satisfied or waived by the Company).
  -45-
 
 Section
      5.03
              Covenants of the
      Company Regarding the
Arrangement.
 
 The
Company will perform, and will cause its Subsidiaries to perform, all
obligations required or desirable to be performed by the Company or any of its
Subsidiaries under this Agreement, cooperate with the Purchaser Parties in
connection therewith, and do all such other acts and things as may be necessary
or desirable in order to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated by this Agreement and, without
limiting the generality of the foregoing, the Company will and, where
appropriate, will cause its Subsidiaries to:
 
 a)           except
as specifically permitted by Section 6.03, use all commercially reasonable
efforts to obtain the Required Vote;
 
 b)           unless
this Agreement will have been terminated in accordance with Article VIII, submit
this Agreement to the Company Shareholders at the Company Meeting even if the
Company Board will have withdrawn, amended, modified or qualified its
recommendation of this Agreement or the Arrangement;
 
 c)           use
all commercially reasonable efforts to obtain all necessary waivers, consents
and approvals required to be obtained by the Company or the Company Subsidiary
in connection with the Arrangement from other parties to the Material Contracts
and, in connection with obtaining any approval or consent from any Person (other
than a Governmental Entity) with respect to any transaction contemplated by this
Agreement, (i) without the prior written consent of the Purchaser, which consent
will not be unreasonably withheld, not pay or commit to pay to such Person whose
approval or consent is being solicited any cash or other consideration, or make
any commitment or incur any liability or other obligation to such Person for
such approval or consent, and (ii) not request of the Purchaser or any of its
Affiliates to pay or commit to pay to any Person (other than a Governmental
Entity) whose approval or consent is being solicited any cash or other
consideration, or make any commitment or incur any liability or other obligation
to such Person for such approval or consent;
 
 d)           use
its commercially reasonable efforts to effect all necessary registrations,
filings and submissions of information required by Governmental Authorities from
the Company or the Company Subsidiaries relating to the
Arrangement;
 
 e)           apply
for and use all commercially reasonable efforts to obtain all Regulatory
Approvals relating to the Company or the Company Subsidiaries which are
typically applied for by a Person being acquired and, in doing so, keep the
Purchaser reasonably informed as to the status of the proceedings related to
obtaining the Regulatory Approvals, including providing the Purchaser with
copies of all related applications and notifications (other than confidential
information contained in such applications and notifications), in draft form, in
order for the Purchaser to provide its comments thereon; provided, however, that
nothing in this Agreement shall require the Company or its Affiliates to divest
or hold separate or otherwise take or commit to take any action with respect to
any asset, property or agreement of the Company or any of its Subsidiaries in
order to obtain any such Regulatory Approval;
 
 f)           use
its commercially reasonable efforts to cause holders of at least holders of 60%
of the Aggregate Outstanding Company Stock to execute the Escrow
Agreement;
 
 g)           use
its commercially reasonable efforts to defend all lawsuits or other legal,
regulatory or other proceedings against the Company or any of its Subsidiaries
challenging or affecting this Agreement or the consummation of the transactions
contemplated hereby; and
  -46-
 
 h)           use
its commercially reasonable efforts to take all such action as may be required
to be taken by the Company in order to make the exception provided by Section
3(a)(10) of the Securities Act available for the issuance of the Parent Common
Stock pursuant to the Arrangement.
 
 Section
      5.04
              Covenants of the
      Purchaser.
 
 The Parent will perform, and will cause
the Purchaser to perform, all obligations required or desirable to be performed
by it under this Agreement, co-operate with the Company in connection therewith,
and do all such other acts and things as may be necessary or desirable in order
to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated by this Agreement and, without limiting the generality
of the foregoing, the Parent will, and where appropriate will cause the
Purchaser to:
 
 a)           use
its commercially reasonable efforts to preserve intact the business,
organization, assets, properties, goodwill and employees of the Parent and its
Subsidiaries and other business relationships, continue to operate in the
ordinary course of business, maintain its books, records and accounts in
accordance with U.S. GAAP;
 
 b)           use
its commercially reasonable efforts to (i) effect all necessary registrations,
filings and submissions of information required by Governmental Authorities,
including, without limitation, pursuant to Investment Canada Act, Competition
Act, U.S. Securities Laws and the Hart-Scott-Rodino Act Antitrust Improvements
Act of 1976, as amended, from Parent, Purchaser or any of Parent’s Subsidiaries
relating to the Arrangement, (ii) take all such actions as may be required to be
taken by Parent in order to make the exemption provided by Section 3(a)(10) of
the Securities Act available for the issuance of Parent Common Stock pursuant to
the Arrangement, and (iii)  cause the Parent Common Stock to be issued
to the Company Shareholders pursuant to this Agreement and such Parent Common
Stock to be approved for listing on the NASDAQ, subject to official notice of
issuance, prior to or as of the Effective Time;
 
 c)           use
its commercially reasonable efforts to defend all lawsuits or other legal,
regulatory or other proceedings against the Purchaser Parties challenging or
affecting this Agreement or the consummation of the transactions contemplated
hereby;
 
 d)           subsequent
to the Closing, adhere to the existing Company policy (which is set out on
Schedule 5.04(d) of the Company Disclosure Schedule) with respect to severance
entitlements of employees of the Company;
 
 e)           not:
(i) amend its articles, charter or by-laws or other comparable organizational
documents; (ii) declare, set aside or pay any dividend or other distribution or
payment (whether in cash, shares or property) in respect of its shares; (iii)
adjust, split, combine or reclassify its shares; (iv) amend or modify the terms
of any of its shares; or (v) adopt a plan of liquidation or resolution providing
for its liquidation or dissolution; and
 
 f)           promptly
notify the Company in writing of (i) any circumstance or development that, to
the knowledge of the Parent, is or would reasonably be expected to have a Parent
Material Adverse Effect or any change in any material fact set forth in the
Parent SEC Documents, or (ii) any circumstance or development with respect to
any legal action affecting the Parent or any of its Subsidiaries or affecting
any of their respective properties or assets at law or in equity before or by
any Governmental Entity that, to the knowledge of the Parent, is or would
reasonably be expected to have a Parent Material Adverse Effect; provided that
the delivery of any such notification will not modify, amend or supersede any
representation or warranty of the Parent contained in this Agreement or in any
certificate or other instrument delivered in connection herewith and will not
affect any right of the Company hereunder;
  -47-
 
 ARTICLE
VI.
 ADDITIONAL
AGREEMENTS
 
 Section
      6.01
              Access to Information;
      Confidentiality.
 
 a)           Except
as otherwise prohibited by applicable Law, from the date of this Agreement until
the Effective Time, the Company shall, and shall cause the Company Subsidiaries
to, (i) provide to the Purchaser Parties and their officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives access, at reasonable times during normal business hours, upon
prior notice, to the officers, employees, agents, properties, offices and other
facilities of the Company and the Company Subsidiaries and to the Books and
Records, and (ii) furnish as promptly as practicable to the Purchaser Parties
such information in the Company’s possession concerning the business,
properties, contracts, assets, Liabilities, personnel and other aspects of the
Company and the Company Subsidiaries as the Purchaser Parties or its
representatives may reasonably request.
 
 b)           All
information obtained by the parties pursuant to this Section 6.01 shall be kept
confidential in accordance with the Confidentiality Agreement.
 
 c)           Any
investigation pursuant to this Section 6.01 shall not affect any representation
or warranty of any party hereto or any condition to the obligations of the
parties hereto.
 
 Section
      6.02
              Privacy
      Matters.
 
 a)           Notwithstanding
the other provisions of this Agreement and the Confidentiality Agreement, this
Section 6.02 shall apply with respect to Personal Information.
 
 b)           Each
Party acknowledges that it is responsible for compliance at all times with
Privacy Laws which govern the collection, use and disclosure of Personal
Information transferred to it by another Party in the course of the due
diligence process leading to this Agreement or pursuant to or in connection with
this Agreement ("Disclosed Personal
Information").
 
 c)           No
Party shall use Disclosed Personal Information for any purposes other than those
related to the performance of this Agreement and the completion of the
Arrangement.
 
 d)           Each
Party acknowledges and confirms that the disclosure of Personal Information is
necessary for the purposes of determining if the Parties shall proceed with the
Arrangement, and that the disclosure of Personal Information relates solely to
the carrying on of the business of the Company and the completion of the
Arrangement.
 
 e)           Each
of Party acknowledges and confirms that it has and shall continue to employ
appropriate technology and procedures in accordance with applicable Law to
prevent accidental loss or corruption of the Disclosed Personal Information,
unauthorized input or access to the Disclosed Personal Information, or
unauthorized or unlawful collection, storage, disclosure, recording, copying,
alteration, removal, deletion, use or other processing of such Disclosed
Personal Information.
 
 f)           Each
Party shall at all times keep strictly confidential all Disclosed Personal
Information provided to it, and shall instruct and require those employees or
advisors having access to such Disclosed Personal Information to protect the
confidentiality of such information in a manner consistent with the Parties'
obligations hereunder.  Each Party shall ensure that access to the
Disclosed Personal Information shall be restricted to its employees or advisors
who have a bona fide need to access such information in order to complete the
Arrangement.
  -48-
 
 g)           Each
Party shall promptly notify the other of all inquiries, complaints, requests for
access, and claims of which it is made aware in connection with the Disclosed
Personal Information.  The Parties shall fully co-operate with one
another, with the other Persons to whom the Personal Information relates, and
any Governmental Authority charged with enforcement of Privacy Laws, in
responding to such inquiries, complaints, requests for access, and
claims.
 
 h)           Upon
the expiry or termination of this Agreement, or otherwise upon the reasonable
request of the other Party, the Parties shall forthwith cease all use of the
Personal Information acquired by it in connection with this Agreement and will
return to the other or, at the other's request, destroy in a secure manner, the
Disclosed Personal Information (and any copies).
 
 Section
      6.03
              No Solicitation of
      Transactions.
 
 a)           The
Company shall, and shall cause the Company Subsidiaries, and its and their
respective officers, directors, employees, agents or advisors or other
representatives (including, without limitation, any financial advisor or
investment banker, legal counsel or accountant retained by it) (“Representatives”) to,
immediately cease and cause to be terminated any discussions or negotiations
with third parties with respect to an Acquisition Proposal (as defined
below).  The Company will not, directly or indirectly, and will
instruct its Representatives not to, directly or indirectly, solicit, initiate
or, except as and only to the extent permitted by Section 6.03(b), encourage
(including by way of furnishing non-public information), or take any other
action to facilitate, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or, except as and only to the extent permitted by Section 6.03(b), enter into or
maintain or continue discussions or negotiate with any Person in furtherance of
such inquiries or to obtain an Acquisition Proposal, or agree to or recommend or
endorse any Acquisition Proposal, or authorize or permit any Representative of
the Company or any of the Company Subsidiaries to take any such
action.  The Company shall not release any third party from, or waive
any provision of, any confidentiality or standstill agreement to which it is a
party, including any Support Agreement.
 
 b)           Notwithstanding
anything to the contrary in this Section 6.03, at any time prior to the
Arrangement having been approved by the Company Shareholders, the Company Board
may furnish information to, and enter into discussions with, a Person who has
made an unsolicited bona fide written proposal or offer regarding an Acquisition
Proposal (that did not result from a breach of this Section 6.03), and with
respect to which (i) the Company Board has determined, in its good faith
judgment (after consultation with its financial advisor), that such proposal or
offer constitutes or could reasonably be expected to result in a Superior
Proposal (as defined below), (ii) the Company Board has determined, in its good
faith judgment after consultation with outside legal counsel, that, in light of
such Superior Proposal, the failure to furnish such information or to enter into
such discussions would result in a breach of its fiduciary obligations under
applicable Law, (iii) the Company has satisfied its obligations under Section
6.03(c), (iv) the Company Board has provided written notice to the Purchaser
Parties of its intent to furnish information or enter into discussions with such
Person at least three Business Days prior to taking any such action, and (v) the
Company Board has obtained from such Person an executed confidentiality
agreement containing confidentiality provisions no less favourable to the
Company than those contained in the Confidentiality Agreement.
 
 c)           The
Company agrees that in addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.03, immediately upon receipt thereof,
the Company shall advise the Parent in writing of any request for information or
any Acquisition Proposal, or any inquiry, discussions or negotiations with
respect to any Acquisition Proposal and the terms and conditions of such request
for information, Acquisition Proposal, inquiry, discussions or negotiations and
the Company shall promptly provide to the Parent copies of any written materials
received by the Company in connection with any of the foregoing, and the
identity of the Person or group making any such request for information,
Acquisition Proposal or inquiry or with whom any discussions or negotiations may
be taking place.  The Company agrees that it shall keep the Purchaser
informed of the status, terms and material details (including amendments or
proposed amendments) of any such request for information, Acquisition Proposal
or inquiry and keep the Purchaser informed as to the details of any information
requested of or provided by the Company and as to the status and material terms
of all substantive discussions or negotiations with respect to any such request,
Acquisition Proposal or inquiry. The Company agrees that it shall simultaneously
provide to the Purchaser any non-public information concerning the Company that
may be provided to any other Person or group in connection with any Acquisition
Proposal which was not previously provided to the Purchaser.
  -49-
 
 d)           “Acquisition Proposal”
means any proposal or offer for a transaction, consolidation, business
combination, sale or other transfer or disposition of substantial assets, sale,
exchange, transfer of, or take-over bid for, shares of capital stock or other
similar transaction (other than the Transactions) involving the Company or any
Company Subsidiary.
 
 e)           “Superior Proposal”
means an unsolicited bona fide written offer made by a third party to consummate
an Acquisition Proposal on terms (including conditions to consummation of the
contemplated transaction) that the Company Board determines, in its good faith
judgment (after consultation with its financial advisor), to be more favourable
to the Company Shareholders, from a financial point of view, than the
Transactions contemplated in this Agreement (including any amendments to this
Agreement agreed to in writing by the Purchaser Parties in accordance with
Section 6.03(f)), is reasonably capable of being consummated, and in respect of
which, if the consideration is to be paid in cash or partly in cash, the third
party has made at that time, in the good faith judgment of the Company Board,
adequate arrangements to ensure that the required funds are available to effect
payment in full for all Company Securities that the third party has offered to
acquire.
 
 f)           Prior
to the Company entering into any agreement (a “Proposed Agreement”)
with any Person providing for or to facilitate any Superior Proposal that did
not result from the violation by the Company of Section 6.03(a), other than a
confidentiality agreement as contemplated by Section 6.03(b), it shall provide
the Purchaser with a copy of any Proposed Agreement not less than seven (7)
Business Days prior to its proposed execution by the Company.  During
such seven (7) Business Day period, the Company acknowledges and agrees that the
Purchaser Parties shall have the opportunity, but not the obligation, to offer
to amend the terms of this Agreement in order to provide for terms at least
equivalent to those included in the Proposed Agreement.  The Company
Board shall review any offer by the Purchaser Parties to amend the terms of this
Agreement (an “Amended
Offer”) to determine, acting in good faith and in accordance with its
fiduciary duties, whether the Amended Offer would be at least as favourable to
the Company Shareholders as the Superior Proposal provided for in the Proposed
Agreement.  If the Company Board so determines, the Company will enter
into an amended agreement with the Purchaser Parties reflecting the Amended
Offer.  If the Company Board continues to believe, acting in good
faith and in the proper discharge of its fiduciary duties, that the Acquisition
Proposal provided for in the Proposed Agreement continues to be a Superior
Proposal with respect to the Amended Offer, and therefore rejects the Amended
Offer, or if the Purchaser Parties do not amend the terms of this Agreement
within the specified period, the Company shall be, subject to complying with its
obligations under this Agreement, entitled to withdraw the Recommendation and
accept, approve, recommend and enter into the Proposed Agreement, provided that,
prior to, or concurrent with, entering into the Proposed Agreement, the Company:
(A) pays to the Purchaser Parties a break fee equal to $250,000; and (B)
reimburses all Expense Reimbursement Costs incurred by the Purchaser Parties, by
wire transfer of same-day funds, which payment shall result in the termination
of this Agreement, without further liability or obligation of the Company, save
in the event that the Company has not complied with its obligations pursuant to
this Article VI, in which case such payment shall not in any way relieve the
Company from any Liabilities to the Purchaser Parties for any damages suffered
by it as a result of the failure of the Company to comply with this Article
VI.
  -50-
 
 g)           The
Company shall as promptly as practicable reaffirm the Recommendation of the
Transaction by press release after: (i) any written bona fideAcquisition
Proposal (which is determined not to be a Superior Proposal) is publicly
announced or made; or (ii) the Purchaser Parties and the Company enter into an
amended agreement under Section 6.03(f); any such press release shall be
prepared in accordance with Section 6.07.
 
 Section
      6.04
              Company
      Meeting.
 
 Subject
to the terms of this Agreement, the Company shall cause the Company Meeting to
be duly called and held as soon as practicable after the date of this Agreement
for the purpose of voting on the Arrangement Resolution. The Company Meeting
shall be held no later than April 30, 2010, unless otherwise agreed by the
Company and the Purchaser Parties, each acting reasonably. The Company shall
provide notice to the Purchaser Parties of the Company Meeting and allow the
Purchaser Parties’ representatives to attend the Company Meeting.  The
Company shall conduct the Company Meeting in accordance with the rules of the
TSXV, the CBCA, the by-laws of the Company and as otherwise required by
applicable Laws.  The Company Board shall (i) include the
Recommendation in the Circular, and (ii) use its reasonable commercial efforts
to obtain the necessary vote by the Company Shareholders and the Company
Optionholders in favour of the Arrangement Resolution.  The Company
Board shall not withdraw, amend, modify or qualify in a manner adverse to the
Purchaser Parties the Recommendation (or announce its intention to do so),
except that, prior to the receipt of the Company Shareholders and the Company
Optionholders approval, the Company Board shall be permitted to withdraw the
Recommendation, following three Business Days’ prior notice to the Purchaser
Parties, but only if (A) the Company has complied in all respects with Section
6.03 and Section 6.04 of this Agreement, and (B) after complying with Section
6.03(f) of this Agreement, the Company has entered into the Proposed
Agreement.
 
 Section
      6.05
              Notification of
      Certain Matters.
 
 a)           The
Company shall give prompt notice to the Purchaser Parties, and the Purchaser
Parties shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate in
any material respect and (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that the delivery of
any such notification pursuant to this Section 6.04 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such
notice.
 
 b)           The
Company shall give prompt notice to the Purchaser Parties, and the Purchaser
Parties shall give prompt notice to the Company, of: (i) any notice or other
communication from any Governmental Authority in connection with the
Transactions, and (ii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened in writing against, relating to or
involving or otherwise affecting it or, in the case of the Company, any of the
Company Subsidiaries which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Article V and Article VI or
which relate to the consummation of the Transactions.
  -51-
 
 Section
      6.06
              Further Action;
      Reasonable Efforts.
 
 a)           Upon
the terms and subject to the conditions of this Agreement, (i) each of the
Parties hereto shall as promptly as practicable after the date of this Agreement
make all filings required to be made by it under applicable Laws; (ii) each of
the Parties hereto shall use its reasonable commercial efforts to take, or cause
to be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Laws or otherwise to consummate
expeditiously and make effective the Arrangement, including, without limitation,
using its reasonable commercial efforts to obtain all Regulatory Approvals and
consents, approvals of parties to contracts with the Company and the Company
Subsidiaries as are necessary for the consummation of the Arrangement and to
fulfill the conditions to the completion of the Arrangement, including, without
limitation, the Final Order; and (iii) the Company shall and where appropriate
shall cause the Company Subsidiaries to: (A) advise the Purchaser Parties as
reasonably requested, as to the aggregate tally of the proxies and votes
received in respect of the Company Meeting and all matters to be considered at
such meeting; and (B) provide the Purchaser Parties with a copy of any purported
exercise of the Dissent Rights and written communications with such Company
Shareholder purportedly exercising the Dissent Rights; and not settle or
compromise any claim brought by any present, former or purported holder of any
of its securities in connection with the Arrangement.  Notwithstanding
the foregoing, nothing herein shall require the Purchaser Parties, in connection
with the receipt of any regulatory approval, to agree to sell or divest any
material assets or business or agree to restrict in any material way any
business conducted by or proposed to be conducted by Parent, any Parent
Subsidiary, the Company or any Company Subsidiary, or to litigate or formally
contest any proceeding relating to any regulatory approval process in connection
with the Arrangement.
 
 b)           Each
of the parties hereto shall use its reasonable commercial efforts to cause its
respective officers, employees, agents, auditors and representatives to
cooperate with each other, prior to the Effective Date, to ensure the orderly
combination of the Company and the Company Subsidiaries with the Purchaser
Parties following the Effective Date and to minimize any disruption to the
respective businesses of the Purchaser Parties, the Company and the Company
Subsidiaries that might result from the Transactions.
 
 Section
      6.07
              Purchaser.
 
 Parent
shall cause and shall take all action necessary to cause Purchaser to perform
its obligations under this Agreement and to consummate the Transactions on the
terms and subject to the conditions set forth in this Agreement.
 
 Section
      6.08
              Public
      Announcements.
 
 The
initial press release relating to this Agreement shall be a joint press release
the text of which has been agreed to by each of the Purchaser Parties and the
Company, each acting reasonably. Thereafter, unless otherwise required by
applicable Law or the requirements of the NASDAQ or the TSXV, each of the
Purchaser Parties and the Company shall use its reasonable commercial efforts to
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the Arrangement; provided,
however, that this Section 6.08 shall terminate in the event the Company Board
withdraws the Recommendation.
 
 Section
      6.09
              Transfer
      Tax.
 
 The
Company and the Parent shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications or other documents regarding any
sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees and any similar Taxes which become
payable in connection with the Transactions (together with any related interest,
penalties or additions to Tax, “Transfer Taxes”). All
Transfer Taxes shall be paid by the Company and expressly shall not be a
Liability of any holder of the Company Common Stock.
  -52-
 
 Section
      6.10
              Company Stock
      Options.
 
 The
Company shall provide written notice to Parent of any exercise or purported
exercise of a Company Stock Option immediately upon receipt by the Company of a
notice of exercise or similar communication from a holder of Company Stock
Options, and the Company shall not issue any shares of Company Common Stock to
such holder of Company Stock Options for a period of not less than three
Business Days after sending such notice to the Purchaser
Parties.  Subject to the foregoing, the Company shall issue to each
holder of Company Stock Options who is entitled to exercise same, and who shall
do so prior to the Exercise Date in accordance with the terms and conditions
governing the exercise thereof, and only to such holders, the Company Common
Stock to which such holder is entitled pursuant to the exercise thereof;
provided, however, that notwithstanding the foregoing, (i) Company Stock Options
may be exercised only at the exercise price thereof in effect on the date
hereof, and (ii) the Company shall not under any circumstances issue more than
3,007,249 shares of Company Common Stock, in the aggregate, to holders of
Company Stock Options prior to the Effective Date.
 
 Section
      6.11
              Company
      Warrants.
 
 The
Company shall provide written notice to the Purchaser Parties of any exercise or
purported exercise of Company Warrants immediately upon receipt by the Company
of a notice of exercise or similar communication from a holder of Company
Warrants, and the Company shall not issue any shares of Company Common Stock to
such holder of Company Warrants for a period of not less than three Business
Days after sending such notice to the Purchaser Parties.
 
 Section
      6.12
              Cancellation of Other
      Securities.
 
 For
greater certainty, any and all Company Securities other than Company Common
Stock, shall be fully and finally cancelled and terminated immediately prior to
the Effective Time, and the holders thereof shall have no further rights or
entitlements thereunder.
 
 Section
      6.13
              Support
      Agreements.
 
 Contemporaneously
with the execution of this Agreement, the Company shall deliver the Support
Agreements duly executed by the Company Insiders and the Major Shareholders
referred to in the Recitals hereof.
 
 Section
      6.14
              Employment
      Arrangements.
 
 At or
before the Effective Date, the Purchaser and Justin Zinke shall have entered in
to an employment agreement with either the Purchaser or the Company (the “Employment
Agreement”), in a form satisfactory to the Purchaser and Justin Zinke,
each acting reasonably together with an acknowledgment and agreement from Justin
Zinke waiving any entitlement to any change of control payment from the Company
in connection with completion of the Transactions (the “Acknowledgment”).
 
 Section
      6.15
              Maintain
      Insurance.
 
 From the
date of this Agreement to the Effective Date, the Company shall, and shall cause
each Company Subsidiary to, maintain insurance on and in respect of the business
and assets of the Company and the Company Subsidiaries in like kind to, and in
an amount not less than the amount of, insurance in respect thereof in effect on
the date hereof.
  -53-
 
 Section
      6.16
              Fulfillment of
      Conditions.
 
 The
Company shall use its reasonable commercial efforts to fulfill or cause the
fulfillment of the conditions set forth in Section 7.01 and Section 7.02 to the
extent the fulfillment of the same is within the control of the
Company.
 
 Section
      6.17
              Indemnification.
 
 a)           Each
of the Purchaser Parties agrees that all rights to indemnification or
exculpation now existing in favour of present or former directors or officers of
the Company or any Company Subsidiary as provided in its articles of
incorporation or by-laws, as amended, or indemnification agreements, in effect
on the date of this Agreement shall survive the Transactions and shall continue
in full force and effect for a period of not less than six years from the
Effective Time and the Parent hereby causes the Purchaser to assume and the
Purchaser hereby assumes, effective upon consummation of the Arrangement, all
such liability with respect to any matters arising prior to the Effective
Time.  For greater certainty, Section 3.11(a)(x) of the Company
Disclosure Schedule sets out all such indemnification agreements in effect on
the date hereof.
 
 b)           The
Parent shall cause to be maintained in effect, for not less than six years from
the Effective Time, coverage equivalent to that in effect under the current
policies of the directors’ and officers’ liability insurance maintained by the
Company or any Company Subsidiary which is no less advantageous, and with no
gaps or lapses in coverages with respect to matters occurring prior to the
Effective Time.
 
 c)           The
provisions of this Section 6.17 are intended to be for the benefit of, and shall
be enforceable by, each present or former director or officer of the Company and
each of the company Subsidiaries and their respective estates, heirs, legal
representatives and assigns (collectively, the “Beneficiaries”) and
the Parent acknowledges that the Company accepts the Parent’s covenants under
this Section 6.17 as trustee for and on behalf of each of such
Beneficiaries.
 
 ARTICLE
VII.
 CONDITIONS
 
 Section
      7.01
              Conditions Precedent
      to Each Party’s Obligations
 
 The
respective obligations of each party hereto to complete the Transactions shall
be subject to the satisfaction, on or before the Effective Time, of each of the
following conditions precedent and which may be waived only by the unanimous
consent of all parties:
 
 a)           Interim Order. The
Interim Order shall have been obtained in form and substance satisfactory to
each of the Parties, acting reasonably.
 
 b)           Shareholder and Optionholder
Approval. The Arrangement shall have been duly approved by the Company
Shareholders and the Company Optionholders at the Company Meeting in accordance
with the requirements of the Interim Order.
 
 c)           Final Order. The
Final Order shall have been obtained in form and substance satisfactory to each
of the Parties, acting reasonably, and shall not have been set aside or modified
in a manner unacceptable to such parties on appeal or
otherwise.
  -54-
 
 d)           Approvals. All
Regulatory Approvals shall have been obtained on terms and conditions
satisfactory to the Parties.
 
 e)           No Adverse Order.
There shall not be in force any Order restraining, prohibiting, preventing or
enjoining the consummation of the Transactions and there shall be no proceeding,
whether of a judicial or administrative nature or otherwise brought by a
Governmental Authority that relates to or results from the Transactions that
would, if successful, result in an Order that would preclude completion of the
Transactions in accordance with the terms and conditions hereof, would otherwise
be inconsistent with any approvals which have been obtained or would result in a
Company Material Adverse Effect.
 
 f)           Material
Limitations.  There shall not
have been enacted, promulgated, enforced or issued by any Governmental
Authority, and in effect, any Law which restrains or enjoins the consummation of
the Arrangement or makes the Arrangement or other Transactions
illegal.
 
 Section
      7.02
              Conditions Precedent
      to Obligations of Parent and
Purchaser.
 
 The
obligation of the Purchaser Parties to complete the Transactions is also subject
to the fulfillment or satisfaction, on or before the Effective Time, of the
following conditions precedent (each of which is for the exclusive benefit of
the Purchaser Parties and may be waived by Parent and any one or more of which,
if not satisfied or waived, will relieve the Purchaser Parties of any and all
obligations under this Agreement):
 
 a)           Performance of
Obligations. The Company shall have in all material respects performed
and complied with all covenants, undertakings, obligations, agreements and
conditions to be performed or complied with by it at or before the Effective
Time pursuant to the terms of the Transaction Documents.
 
 b)           Representations and
Warranties. The representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of the
Effective Time, with the same effect as though such representations and
warranties were made on and as of the Effective Time (provided that any
representation and warranty that addresses matters only as of a certain date
shall be true and correct as of that certain date), except as otherwise
specifically permitted by this Agreement.
 
 c)           Company Material Adverse
Effect. Between the date hereof and the Effective Date, there shall not
have occurred a Company Material Adverse Effect.
 
 d)           Resolutions. The
Company Board shall have adopted all necessary resolutions, and all other
necessary corporate action shall have been taken by the Company and the Company
Subsidiaries, to permit the consummation of the Transactions and to terminate
all entitlements under the Company Options and the Company Warrants that have
not been validly exercised prior to the Effective Time.
 
 e)           Employment
Agreement.
Justin Zinke shall have entered into the Employment Agreement and shall have
delivered the Acknowledgment.
 
 f)           Escrow Agreement and Support
Agreements. The Major Shareholders and Company Insiders holding not less
than 51% of the issued and outstanding Company Common Stock, or any amount
otherwise agreed to by the Parties, shall have entered into Support Agreements
and the Escrow Agreement.
 
 g)           Title to Company
Securities. The Purchaser shall be satisfied, acting reasonably, that,
upon completion of the Transactions, it will have acquired good and marketable
title to all of the Company Securities.
  -55-
  h)           Capitalization of the
Company. There shall be issued and outstanding not more than 59,005,486
shares of Company Common Stock, plus any  shares of Company Common
Stock issued upon the exercise of Company Stock Options, Company Warrants in
accordance with Section 6.10 and 6.11 hereof and the issuance of any shares of
Company Common Stock in connection with the Shares for Service or pursuant to
the exchange of Deferred Share Units.
 
 i) 
          Assets and
Liabilities. At the Effective Date, there shall not be any material
adverse change in the assets and Liabilities of the Company from the Third
Quarter Financial Statements, other than costs incurred in connection with the
Transactions.
 
 j)   
        Consents. Each of the
consents referred to in Section 3.04 shall have been obtained on terms and
conditions satisfactory to the Purchaser Parties, acting
reasonably.
 
 k)           Deferred Share Units.
Each Deferred Share Unitholder shall have irrevocably agreed to exchange their
Deferred Share Units for Shares of Company Common Stock (other than those
holders of Deferred Share Units who had elected in the year 2010 to receive cash
for their Deferred Share Units provided that the aggregate cash amount paid to
such holders does not exceed $12,000.
 
 l)           Bank Security. The
Purchaser shall have received written confirmation from the Toronto Dominion
Bank that as of the Closing there are no loans outstanding to the Company and
shall have received written confirmation from the Toronto Dominion Bank that the
general security agreement executed by the Company in favour of the Toronto
Dominion Bank has been terminated.
 
 m)          Shares Outstanding.
The Purchaser shall have received from Computershare Trust Company a document
setting out the number of issued and outstanding shares of Company Common Stock
as at immediately prior to the Closing.
 
 n)           Dissent Rights.
Holders of shares of Company Common Stock representing in the aggregate 10% or
more of the issued and outstanding Company Common Stock immediately prior to the
Effective Date shall not have validly exercised Dissent Rights.
 
 o)           Legal Prohibition,
Unacceptable Terms.  There shall not exist any prohibition
under applicable Law against the completion of the Transactions, and none of the
consents, orders, authorizations, approvals or waivers contemplated herein shall
contain terms or conditions or require undertakings or security that would
result, either individually or in the aggregate, in a Company Material Adverse
Effect.
 
 p)           Withdrawal of
Recommendation. The Company Board shall not have either (i) withdrawn any
recommendation made by it that the Company Shareholders approve the Arrangement
Resolution or modified, changed or qualified any such recommendation in a manner
that has substantially the same effect or issued a recommendation that the
Company Shareholders not vote in favour of the Arrangement Resolution or (ii)
failed to reaffirm support of the Arrangement within five Business Days
following an announcement made by a third party in respect of any Acquisition
Proposal.
 
 q)           Acquisition Proposal.
The Company shall not have entered into any agreements in respect of an
Acquisition Proposal other than a confidentiality agreement permitted to be
entered into in accordance with Section 6.03(b).
 
 r)           Certificate of
Officer.  The Purchaser shall have received a certificate dated
the Effective Date and signed by the Chief Executive Officer of the Company,
certifying that the conditions specified in this Section 7.02 have been
satisfied.
 
 Section
      7.03
              Conditions Precedent
      to Obligations of the
Company.
 
 The
obligation of the Company to complete the Transactions is subject to the
fulfillment or satisfaction, on or before the Effective Time, of the following
conditions precedent (each of which is for the exclusive benefit of the Company
and may be waived by the Company and any one or more of which, if not satisfied
or waived, will relieve the Company of any and all obligations under this
Agreement):
  -56-
  a)           Performance of
Obligations.  The Purchaser Parties shall have in all material
respects performed and complied with all covenants, undertakings, obligations,
agreements and conditions to be performed or complied with by them at or before
the Effective Time pursuant to the terms of the Transaction
Documents.
 
 b)           Representations and
Warranties. The representations and warranties of the Purchaser Parties
contained in this Agreement shall be true and correct in all material respects
as of the Effective Time, with the same effect as though such representations
and warranties were made on and as of the Effective Time (provided that any
representation and warranty that addresses matters only as of a certain date
shall be true and correct as of that certain date), except as otherwise
specifically permitted by this Agreement.
 
 c)           Parent Material Adverse
Effect. Between the date hereof and the Effective Date, there shall not
have occurred a Parent Material Adverse Effect.
 
 d)           Legal Prohibition,
Unacceptable Terms. There shall not exist any prohibition under
applicable Law against the completion of the Transactions.
 
 e)           Certificate of
Officer. The Company shall have received a certificate dated the
Effective Date and signed by the Chief Executive Officer of Parent, certifying
that, the conditions specified in this Section 7.03 have been
satisfied.
 
 ARTICLE
VIII.
 TERMINATION,
AMENDMENT AND WAIVER
 
 Section
      8.01
              Termination by Mutual
      Consent.
 
 This
Agreement may be terminated and the Transactions may be abandoned at any time
prior to the Effective Date, whether before or after the approval by the Company
Shareholders referred to in Section 7.01(b), by mutual written consent of the
Company and the Parent.
 
 Section
      8.02
              Termination by Parent
      or the Company.
 
 This
Agreement may be terminated and the Transactions may be abandoned at any time
prior to the Effective Date by action of the Board of Directors of either the
Parent or the Company if:
 
 a)           The
Transactions shall not have been completed by the Drop Dead Date, whether such
date is before or after the date of approval by the Company Shareholders (the
“Termination
Date”);
 
 b)           The
approval of the Company Shareholders and the Company Optionholders required by
Section 7.01(b) shall not have been obtained at a meeting duly convened therefor
or at any adjournment or postponement thereof, or;
 
 c)           Any
Governmental Authority of competent jurisdiction shall have issued a
non-appealable final Order permanently restraining, enjoining or otherwise
prohibiting the consummation of the Transactions, provided, however, that the
right to terminate this Agreement pursuant to paragraph (a) or (b) above shall
not be available to any party that has breached or failed to fulfill any of its
obligations under this Agreement in any manner that shall have caused the
occurrence of the failure of the Transactions to occur before the Termination
Date or the failure to obtain the approval of the Company
Shareholders.
  -57-
 
 Section
      8.03
              Termination for Breach
      of Representations and
Warranties.
 
 This
Agreement may be terminated and the Transactions may be abandoned at any time
prior to the Effective Date:
 
 a)           By
the Company, subject to its having complied and being in compliance with all of
its obligations under this Agreement, in the event of a material breach by a
Purchaser Party of any representation, warranty, covenant or agreement made by
it contained in this Agreement or if any representation or warranty made by a
Purchaser Party shall have become untrue, in either case such that the
conditions set forth in Section 7.03(a) or (b) would not be satisfied as of the
time of such breach or as of the time such representation or warranty shall have
become untrue, and if such breach or inaccuracy shall not be cured within twenty
(20) Business Days after delivery of written notice thereof by the Company to
Parent; or
 
 b)           By
the Parent, subject to the Purchaser Parties having complied and being in
compliance with all of their obligations under this Agreement, in the event of a
material breach by the Company of any representation, warranty, covenant or
agreement made by it contained in this Agreement or if any representation or
warranty made by the Company shall have become untrue, in either case such that
the conditions set forth in Section 7.02(a) or (b) would not be satisfied as of
the time of such breach or as of the time such representation or warranty shall
have become untrue, and if such breach or inaccuracy shall not be cured within
twenty (20) Business Days after delivery of written notice thereof by the
Purchaser Party to the Company.
 
 c)           By
the Company, if any condition specified to be for the benefit of the Company
under Section 7.01 or 7.03, other than a condition set out in Section 7.03(a) or
(b), shall not have been satisfied on or prior to the date on which it is
required to be satisfied and the provisions of Section 8.03(a) do not otherwise
apply thereto.
 
 d)           By
the Parent, if any condition specified to be for the benefit of the Purchaser
Parties under Section 7.01 or 7.02, other than a condition set out in Section
7.02(a) or (b), shall not have been satisfied on or prior to the date on which
it is required to be satisfied and the provisions of Section 8.03(b) do not
otherwise apply thereto.
 
 Section
      8.04
              Termination by
      Parent.
 
 This
Agreement may be terminated and the Transactions may be abandoned at any time
prior to the Effective Time by written notice given to the Company by
Parent:
 
 a)           If
the Company or the Company Board shall have (i) withdrawn, modified or amended
in any respect adverse to Parent the Recommendation or failed to publicly
reaffirm the Recommendation (as required by Section 6.03(g)), (ii) approved,
publicly recommended or entered into an agreement with respect to, or
consummated, or adopted a resolution to approve, publicly recommend, enter into
an agreement with respect to, or consummate, any Acquisition Proposal from a
person other than the Parent, the Purchaser or any of their respective
Affiliates, or (iii) failed to include in the Circular the
Recommendation;
 
 b)           At
any time prior to the Effective Date, if there is a breach by a Company
Securityholder of any representation, warranty, covenant or agreement made by it
in a Support Agreement, which breach shall remain uncured prior to that date
which is ten (10) Business Days prior to the Company Meeting and which breach,
in Parent’s opinion, acting reasonably, could be expected to result in the
approval of the Company Shareholders and the Company Optionholders required by
Section 7.01(b) not being received;
  -58-
 
 c)           If
the Company Board shall have approved, publicly recommended or entered into an
agreement with respect to, or consummated, or adopted a resolution to approve,
publicly recommend, enter into an agreement with respect to, or consummate, a
Superior Proposal; or
 
 d)           If
holders of shares of Company Common Stock representing in the aggregate 10% or
more of the issued and outstanding Company Common Stock immediately prior to the
Effective Date have validly exercised Dissent Rights.
 
 Section
      8.05
              Effect of Termination
      and Abandonment.
 
 a)           In
the event of the termination of this Agreement by the Purchaser or the Company,
as provided in this Article VIII, this Agreement (other than as set forth below)
shall forthwith become void and there shall be no liability hereunder on the
part of the Company, the Parent or the Purchaser or their respective officers or
directors to perform any of their obligations hereunder (except that Section
6.01(b), this Section 8.05, Section 9.03, Section 9.09 and Section 9.10 shall
survive such termination); provided, however, that nothing contained in this
Section 8.05 shall relieve any party from any Liability for any willful or
intentional breach of this Agreement.
 
 b)           In
the event that this Agreement is terminated by the Parent pursuant to Section
8.02(b), Section 8.04(b) or Section 8.04(d), and the Parent is not otherwise
entitled to receive from the Company the termination fees and Expense
Reimbursement Costs contemplated in sub-sections (c) and (d) below, the Company
shall pay to Parent the Expense Reimbursement Costs incurred by the Purchaser
Parties, up to a maximum amount of $200,000
 
 c)           In
the event that this Agreement is terminated:
 
 i.
              by
      Parent pursuant to Section 8.03(b), Section 8.03(d), Section 8.04(a) or
      Section 8.04(c); or
 
 ii.
              by
      either Parent or the Company pursuant to Section 8.02(a), but, in such
      case, only if prior to such termination a third party has announced an
      Acquisition Proposal and, within 3 months following termination of this
      Agreement, the Company accepts, approves, recommends or enters into such
      Acquisition Proposal,
 
 the
Company shall: (A) pay to the Purchaser Parties a termination fee equal to
$250,000; and (B) reimburse the Purchaser Parties for all out-of-pocket costs
and expenses incurred by Parent and Purchaser in connection with the
Transactions.
 
 d)           In
the event that this Agreement is terminated by Parent pursuant to Section
8.02(b) or Section 8.04(b) and there has been, at any time after the date hereof
and prior to the holding of the Company Meeting, an Acquisition Proposal or any
public announcement by any third party of an Acquisition Proposal or an intent
to make an Acquisition Proposal, the Company shall: (A) pay to the Purchaser
Parties a termination fee equal to $250,000; and (B) reimburse the Purchaser
Parties for all Expense Reimbursement Costs incurred by the Purchaser Parties in
connection with the Transactions.
 
 e)           In
the event that this Agreement is terminated by the Company pursuant to Section
8.03(a) or Section 8.03(c), the Parent shall: (A) pay to the Company a
termination fee equal to $250,000; and (B) reimburse the Company for Expense
Reimbursement Costs incurred by the Company in connection with the
Transactions.
 
 f)           Other
than as set out in section 6.03(f), any applicable termination fees and
reimbursement payments must be paid within two Business Days of the termination
date of this Agreement (or in the case of Section 8.05(c)(ii), within two
Business Days of the date the Company accepts, approves, recommends or enters
into the Acquisition Proposal).
  -59-
 
 ARTICLE
IX.
 GENERAL
PROVISIONS
 
 Section
      9.01
              Survival of
      Representations and
Warranties.
 
 Subject
to Section 8.05(a), the representations and warranties of each of the Company,
the Parent and the Purchaser contained herein shall not survive the completion
of the Transactions and shall expire and be terminated on the earlier of the
termination of this Agreement in accordance with its terms and the Effective
Time.
 
 Section
      9.02
              Amendments,
      Modification and Waiver.
 
 a)           Except
as may otherwise be provided herein, any provision of this Agreement may be
amended, modified or waived by the Parties hereto, by action taken by or
authorized by their respective Boards of Directors, prior to the Effective Date
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by the Company and the Purchaser Parties or, in the case of a
waiver, by the party against whom the waiver is to be effective; provided
further, however, that, after the approval of this Agreement by the Company
Shareholders, no such amendment shall be made except as allowed under applicable
Law.
 
 b)           No
failure or delay by any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
 
 Section
      9.03
              Notices.
 
 All
notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by telecopy, by electronic means, by overnight
delivery service or by registered or certified mail (postage prepaid, return
receipt requested) to the respective Parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.03):
 
 if to the
Parent:
 
 Acorn
Energy, Inc.
 4 W.
Rockland Road
 P.O. Box
9
 Montchanin,
Delaware
 19710
 Facsimile
No: (302) 656-1703
 Email:
jmoore@acornenergy.com
 Attention:
Chairman and Chief Executive Officer
  -60-
 
 If to the
Purchaser:
 
 Coreworx
Inc.
 22
Frederick Street
 Suite
800
 Kitchener,
Ontario
 N2H
6M6
 Facsimile
No. (519) 772-3182
 Attention:
Chief Executive Officer
 
 with
copies to:
 
 Wildeboer
Dellelce LLP
 365 Bay
Street
 Suite
800
 Toronto,
Ontario
 M5H
2V1
 Facsimile
No.:  (416) 361-1790
 Email:
rwortzman@wildlaw.ca
 Attention:
Robert Wortzman
 
 - and
-
 
 Eilenberg
& Krause LLP
 11 East
44th Street
 Suite
1900
 New York,
New York
 10017
 Facsimile
No. (212) 986-2399
 Email:
sk@ezlaw.com
 Attention:
Sheldon Krause
 
 if to the
Company:
 
 Decision
Dynamics Technology Ltd.
 300, 717
– 7th Avenue SW
 Calgary,
Alberta
 T2P
0Z3
 Facsimile
No.: (403) 451-0708
 Email:
justin.zinke@ddytech.com
 Attention:
Chief Executive Officer
 
 with
copies to:
 
 Fraser
Milner Casgrain LLP
 10180 -
101 Street
 Edmonton,
Alberta
 T5J
3V5
 Facsimile
No.: (780) 423-7276
 Email:
shane.stevenson@fmc-law.com
 Attention:
Shane Stevenson
  -61-
 
 or to
such other person or address as any party shall specify by notice in writing to
each of the other Parties. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery
unless if mailed, in which case on the third business day after the mailing
thereof except for a notice of a change of address, which shall be effective
only upon receipt thereof.
 
 Section
      9.04
              Severability.
 
 If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of Law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the Transactions is not affected
in any manner materially adverse to any party.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the Transactions be
consummated as originally contemplated to the fullest extent
possible.
 
 Section
      9.05
              Entire Agreement;
      Assignment.
 
 This
Agreement, together with the Annexes, Exhibits and Schedules hereto and the
Confidentiality Agreement, constitute the entire agreement among the Parties
with respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.  This Agreement shall not be
assigned (whether pursuant to a merger, by operation of law or otherwise)
without the prior written consent of each Party hereto.
 
 Section
      9.06
              Parties in
      Interest.
 
 This
Agreement shall be binding upon and inure solely to the benefit of each Party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
 
 Section
      9.07
              Interpretation.
 
 References
herein to the “knowledge of the Company” shall mean the actual knowledge of any
one of the Chief Executive Officer, the Chief Financial Officer or the directors
of the Company and the Company Subsidiaries.  References herein to the
“knowledge of the Parent” shall mean the actual knowledge of the “officers” of
Parent (as such term is defined in Rule 3b-2 promulgated under the Exchange
Act).  Whenever the words “include”, “includes” or “including” are
used in this Agreement they shall be deemed to be followed by the words “without
limitation”.  The phrase “made available” when used in this Agreement
shall mean that the information referred to has been made available if requested
by the party to whom such information is to be made available. References to
“hereof” shall mean this Agreement and references to the “date hereof” shall
mean the date of this Agreement.  The Parties acknowledge that the
parties and their counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any other agreement or document given pursuant to this
Agreement.
 
 Section
      9.08
              Specific
      Performance.
 
 The
Parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement were not performed in accordance with the terms
hereof and that the Parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in
equity.
  -62-
 
 Section
      9.09
              Governing
      Law.
 
 This
Agreement shall be governed by and construed in accordance with the laws of the
Province of Ontario regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof, except to the extent
mandatorily governed by the law of another jurisdiction. Each of the Parties
hereto (i) irrevocably consents to the exclusive jurisdiction and venue of the
Courts of the Province of Ontario in connection with any matter based upon or
arising out of this Agreement or the matters contemplated herein, and (ii)
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.
 
 Section
      9.10
              Waiver of Jury
      Trial.
 
 Each of
the Parties hereto hereby waives to the fullest extent permitted by applicable
Law any right it may have to a trial by jury with respect to any litigation
directly or indirectly arising out of, under or in connection with the
Transaction Documents or the Transactions.  Each of the Parties hereto
(a) certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other Party would not, in the
event of litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other Parties hereto have been induced to enter into this the
Transaction Documents and the Transactions, as applicable, by, among other
things, the mutual waivers and certifications in this Section 9.10.
 
 Section
      9.11
              Headings.
 
 The
descriptive headings contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
 
 Section
      9.12
              Counterparts.
 
 This
Agreement may be executed and delivered (including by facsimile transmission) in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same
agreement.
 
 Section
    9.13
              Adjustment.
 
 In the
event of any subdivision, consolidation, reclassification or other change to the
Parent Common Stock prior to the Effective Date, all appropriate adjustments
shall be made, mutatis mutandis, in respect of the Purchase
Consideration.
 
 Section
      9.14
              Currency.
 
 For
greater certainty, all dollar amounts expressed in this Agreement (unless
otherwise expressly provided for herein) or in the Company Disclosure Schedule
(unless otherwise expressly provided for therein) are in Canadian
dollars.
 
 - SIGNATURE PAGE FOLLOWS
-
  -63-
  IN
WITNESS WHEREOF, the Parent, the Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
 
 DECISION
      DYNAMICS TECHNOLOGY LTD.
                
                ACORN
      ENERGY, INC.By:
                
                
                By:Name:
                
                
                Name:Title:
                
                
                Title:
 
 COREWORX
      INC.By:Name:Title:
  -64-
  ANNEX
I.
 ARRANGEMENT
RESOLUTION
 SPECIAL
RESOLUTION OF THE COMPANY SHAREHOLDERS AND OPTIONHOLDERS
 
 BE IT
RESOLVED THAT:
 
 The
arrangement (the “Arrangement”) under Section
192 of the Canada Business Corporations Act (the “CBCA”) involving Decision
Dynamics Technology Ltd.. (the “Company”), as more
particularly described and set forth in the management proxy circular, including
all appendices thereto, (the “Circular”) of the Company
accompanying the notice of this meeting (as the Arrangement may be modified or
amended) is hereby authorized, approved and adopted;
 
 The Plan
of Arrangement (the “Plan of
Arrangement”) involving the Company, the full text of which is set out as
Annex II to the Arrangement Agreement made as of March 2, 2010 among Acorn
Energy, Inc., Coreworx Inc. and the Company (the “Arrangement Agreement”), (as
the Plan of Arrangement may be or may have been amended) is hereby approved and
adopted;
 
 Notwithstanding
that this resolution has been passed (and the Arrangement adopted) by the
Company Shareholders and the Company Optionholders (all as defined in the
Circular) or that the Arrangement has been approved by the Court of Queen’s
Bench of Alberta, the directors of the Company are hereby authorized and
empowered (i) to amend the Arrangement Agreement, or the Plan of Arrangement to
the extent permitted by the Arrangement Agreement, and (ii) subject to the terms
of the Arrangement Agreement, not to proceed with the Arrangement;
 
 Any
officer or director of the Company is hereby authorized and directed for and on
behalf of the Company to execute, under the seal of the Company or otherwise,
and to deliver articles of arrangement and such other documents as are necessary
or desirable to the Director under the CBCA in accordance with the Arrangement
Agreement for filing; and
 
 Any
officer or director of the Company is hereby authorized and directed for and on
behalf of the Company to execute or cause to be executed, under the seal of the
Company or otherwise, and to deliver or cause to be delivered, all such other
documents and instruments and to perform or cause to be performed all such other
acts and things as in such person’s opinion may be necessary or desirable to
give full effect to the foregoing special resolution and the matters authorized
hereby, such determination to he conclusively evidenced by the execution and
delivery of such document, agreement or instrument or the doing or any such act
or thing.
  -65-
  ANNEX
II.
 PLAN
OF ARRANGEMENT
 
 PLAN
OF ARRANGEMENT
 UNDER
SECTION 192
 OF
THE CANADA BUSINESS CORPORATIONS ACT
 
 ARTICLE
I.
 INTERPRETATION
 
 Section
      1.01
              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.  All other terms that are capitalized herein, and not
otherwise defined in this Agreement, shall have the meaning attributed to them
in the Arrangement Agreement.
 
 “Arrangement” means an
arrangement under section 192 of the CBCA on the terms and subject to the
conditions set out in this Plan of Arrangement, subject to any amendments or
variations thereto made in accordance with Section 9.02 of the Arrangement
Agreement or this Plan of Arrangement or made at the direction of the Court in
the Final Order.
 
 “Arrangement Agreement” means
the arrangement agreement made as of the 2nd day of
March, 2010, among the Purchaser Parties and the Company, as amended,
supplemented and/or restated in accordance therewith prior to the Effective
Date, providing for, among other things, the Arrangement.
 
 “Arrangement Resolution” means
the special resolution of the Company Shareholders and the Company Optionholders
approving the Plan of Arrangement as required by the Interim Order and
applicable law, to be substantially in the form attached to the
Circular.
 
 “Articles of Arrangement” means
the articles of arrangement of the Company in respect of the Arrangement that
are required by the CBCA to be sent to the Director after the Final Order is
made.
 
 “Business Day” means any day on
which banks are not required or authorized to close in the City of Toronto or
the City of Calgary or the City of Edmonton.
 
 “CBCA” means the Canada Business Corporations
Act as in effect as of the date hereof and as may be amended from time to
time prior to the Effective Time.
 
 “Certificate” means the
certificate of arrangement giving effect to the Arrangement, issued pursuant to
Section 192(7) of the CBCA after the Articles of Arrangement have been
filed.
 
 “Circular” means the notice of
the Company Meeting, accompanying management proxy circular and forms of proxy,
including all appendices thereto, to be sent to the Company Shareholders or the
Company Optionholders, as applicable, in connection with the Company Meeting, as
same may be amended from time to time.
 
 “Company” means Decision
Dynamics Technology Ltd., a corporation existing under the
CBCA.
  -66-
 
 “Company Common Stock” means
the Company’s common shares without par value.
 
 “Company Meeting” means the
special meeting of the Company Shareholders and the Company Optionholders,
including any adjournment thereof, to be called and held in accordance with the
Interim Order, to consider the Arrangement, and for any other proper purpose as
may be set out in the notice for such meeting.
 
 “Company Optionholders” means
the holders of Company Stock Options.
 
 “Company Securities” means
Company Common Stock, Company Warrants, Company Stock Options and any other
shares or securities of any nature issued by the Company from time to time, the
holders of which are entitled to exercise voting rights at the Company Meeting
or in connection with the Arrangement or any part thereof.
 
 “Company Securityholders” or
“holders” means the
holders of Company Securities from time to time.
 
 “Company Shareholders” means
the holders of Company Common Stock.
 
 “Company Stock Options” means,
at any time or times, the options to purchase shares of Company Common Stock,
granted under the Company Stock Option Plan, whether or not exercisable and
whether or not vested, being outstanding and unexercised, at such time or
times.
 
 “Company Stock Option Plan”
means, collectively, the stock option plan of the Company as amended to date and
as it may be further amended from time to time as expressly permitted by this
Agreement.
 
 “Company Warrants” means the
share purchase warrants issued by the Company on June 29, 2007, to MMV Financial
Inc., that are exercisable for an aggregate of 1,265,000 shares of Company
Common Stock at an exercise price of Cdn.$0.305 per share.
 
 “Company Warrantholders” means
the holders of Company Warrants.
 
 “Consideration Value” means
1,000,000 shares of Parent Common Stock.
 
 “Court” means the Court of
Queen’s Bench of Alberta.
 
 “Depositary” means such trust
company or other Person as may be appointed by Parent, from time to time, to act
as depositary for the purpose of the Arrangement.
 
 “Director” means the Director
appointed pursuant to Section 260 of the CBCA.
 
 “Dissent Rights” has the
meaning ascribed thereto in Section 3.1.
 
 “Drop Dead Date” means May 28,
2010, or such later date as may be mutually agreed by the parties to the
Arrangement Agreement.
 
 “Effective Date” means the date
shown on the Certificate, provided that such date occurs on or prior to the Drop
Dead Date.
 
 “Effective Time” means 12:01
a.m. (Calgary time) on the Effective Date.
 
 “Exercise Date” means the date
that is two Business Days prior to the Effective Date.
  -67-
 
 “Exchange Ratio” means
1,000,000 divided by that number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (including the number of shares of
Company Common Stock issued in exchange for the Company Warrants pursuant to
Section 2.03(a) of this Plan of Arrangement).
 
 “Final Order” means the final
order of the Court approving the Arrangement as such order may be amended by the
Court at any time prior to the Effective Date or, if appealed, then, unless such
appeal is withdrawn or denied, as affirmed.
 
 “Governmental Authority” means:
(i) any domestic or foreign, national, federal, provincial, state, county,
local, municipal or regional government or body; (ii) any multinational,
multilateral or international body; (iii) any subdivision, agency, commission,
board, instrumentality or authority of any of the foregoing governments or
bodies; (iv) any quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of the
foregoing governments or bodies; (v) any domestic, foreign, international,
multilateral or multinational judicial, quasi-judicial, arbitration or
administrative court, tribunal, commission, board or panel; or (vi) any person
employed by, acting for, or on behalf of, any of the foregoing
bodies.
 
 “Interim Order” means the
interim order of the Court, as the same may be amended, in respect of the
Arrangement, as contemplated by Section 2.02 of the Arrangement
Agreement.
 
 “Letter of Transmittal” means
the letter of transmittal for use by the Company Shareholders, in the form
accompanying the Circular.
 
 “Liens” means all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges, claims or rights of third parties of any kind, including,
without limitation, any option, agreement, right of first refusal or right of
first offer or limitation on voting rights.
 
 “Meeting Date” means the date
of the Company Meeting.
 
 “NASDAQ” means the NASDAQ
Global Market.
 
 “Noon Spot Rate” means, on any
day, the Noon Spot Rate on such day of the Bank of Canada for one U.S. dollar
expressed in Canadian dollars.
 
 “Parent” means Acorn Energy,
Inc., a corporation existing under the laws of the State of
Delaware.
 
 “Parent Common Stock” means the
common stock of Parent, par value U.S. $0.01 per share, that is listed on the
NASDAQ.
 
 “Person” shall be broadly
interpreted and includes any natural person, legal person, partnership, limited
partnership, joint venture, unincorporated association or other organization,
trust, trustee, executor, administrator or liquidator, regulatory body or
agency, government or governmental agency, authority or entity, however
designated or constituted and whether or not a legal entity.
 
 “Purchaser” means Coreworx
Inc., a corporation existing under the Business Corporation Act
(Ontario).
 
 “Purchaser Parties” means,
collectively, Parent and Purchaser.
 
 “Share Accumulation Plan” means
the share accumulation plan of the Company dated March 9, 2006.
  -68-
 
 “Warrant ExchangeShares” means that number of
shares of Company Common Stock equal to the fair value of the Company Warrants
as determined by a third party valuator.
 
 Section
      1.02
              Sections
      and Headings
 
 The
division of this Plan of Arrangement into sections and the insertion of headings
are for reference purposes only and shall not affect the interpretation of this
Plan of Arrangement. Unless otherwise indicated, any reference in this Plan of
Arrangement to a section or an exhibit refers to the specified section of or
exhibit to this Plan of Arrangement.
 
 Section
      1.03
              Number,
      Gender and Persons
 
 In this
Plan of Arrangement, unless the context otherwise requires, words importing the
singular number include the plural and vice versa and words importing any gender
include all genders.
 
 Section
      1.04
              Currency
 
 Except as
expressly indicated otherwise, all sums of money referred to in this Plan of
Arrangement are expressed and shall be payable in Canadian dollars.
 
 Section
      1.05
              Time
 
 Time
shall be of the essence in each and every matter or thing herein provided.
Unless otherwise indicated, all times expressed herein are local time in
Calgary, Alberta.
 
 Section
      1.06
              Date
      for any Action
 
 If the
date on which any action is required to be taken hereunder is not a Business Day
in the place where the action is required to be taken, such action shall be
required to be taken on the next succeeding day which is a Business Day in such
place.
 
 ARTICLE
II.
 ARRANGEMENT
 
 Section
      2.01
              Binding
      Effect
 
 This Plan
of Arrangement will become effective at, and be binding at and after, the
Effective Time on (i) the Company, (ii) Parent, (iii) the Purchaser, and (iv)
all Company Securityholders.
 
 Section
      2.02
              Arrangement
      Agreement
 
 This Plan
of Arrangement is made pursuant to, and is subject to the provisions of, the
Arrangement Agreement.
 
 Section
      2.03
              Arrangement
 
 The
Articles of Arrangement shall be filed and the Certificate shall be issued with
respect to the Arrangement in its entirety.  The Certificate shall be
conclusive evidence that the Arrangement has become effective in accordance with
its terms in the sequence provided herein.  At the Effective Time, the
following shall occur and shall be deemed to occur in the following order
without any further act or formality:
  -69-
 
 Company
Warrants
 
 (a)           The
Company Warrants shall be exchanged for the Warrant Exchange
Shares.
 
 Company Common
Stock
 
 (b)           Each
outstanding share of Company Common Stock (that is not held by a holder who has
exercised its Dissent Rights and is ultimately entitled to be paid the fair
value of its shares of Company Common Stock (other than shares of Company Common
Stock held by the Parent or any Subsidiary of the Parent which Company Common
Stock shall not be transferred under the Arrangement and shall be cancelled at
the Effective Time and cease to exist)), will be transferred by the holder
thereof to, and acquired by, Purchaser without any act or formality on the part
of the holders of such Company Common Stock or the Purchaser, free and clear of
all Liens in exchange, with respect to each share of Company Common Stock held
by such holder, in exchange for that fraction of a share of Parent Common Stock
equal to the Exchange Ratio in accordance with Article 4, and the name of each
such holder of Company Common Stock will be removed from the register of holders
of Company Common Stock and added to the register of holders of Parent Common
Stock, as applicable.
 
 (c)           With
respect to each share of Company Common Stock transferred and acquired in
accordance with section 2.03(b): (i) the holder thereof shall be deemed to have
executed and delivered all consents, releases, assignments and waivers,
statutory or otherwise required to transfer such share of Company Common Stock
in accordance with section 2.03(b) and such holder shall cease to be the holder
of such transferred Company Common Stock; and (ii) The Purchaser shall be deemed
to be the beneficial owner of all of the shares of Company Common Stock
transferred and acquired in accordance with section 2.03(b), free and clear of
all Liens, and the Purchaser’s name shall be entered on the register of holders
of Company Common Stock as the legal holder thereof.
 
 Company
Options
 
 (d)           Each
Company Option, if any, that has not been exercised prior to the Effective Time
shall be cancelled and terminated and shall cease to represent any right or
claim whatsoever.
 
 Other
Securities
 
 (e)           Any
and all other securities of the Company that may be exercised for, or converted
into, shares of capital stock of the Company or shares of Parent Common Stock
including any entitlements under the Share Accumulation Plan or Shares for
Services (other than Company Stock Options and Company Warrants) shall be fully
and finally cancelled and terminated on the Effective Date, and the holders
thereof shall have no further rights or entitlements
thereunder.
  -70-
 
 ARTICLE
III.
 RIGHTS
OF DISSENT
 
 Section
      3.01
              Rights
      of Dissent
 
 Holders
of the Company Common Stock may exercise rights of dissent with respect to such
shares pursuant to and in the manner set forth in section 190 of the CBCA and
this Section 3.1 (the “Dissent Rights”) in
connection with the Arrangement; provided that, notwithstanding subsection
190(5) of the CBCA, the written objection to the Arrangement Resolution referred
to in subsection 190(5) of the CBCA must be received by the Company not later
than 5:00 p.m. (Edmonton time) on the Business Day preceding the Company Meeting
or received by the Chairman of the Company Meeting before commencement of the
Company Meeting.  Any holders of Company Common Stock who does not so
provide written objection to the Arrangement Resolution before the commencement
of the Company Meeting shall not have a right to dissent with respect to the
Arrangement.
 
 Holders
of the Company Common Stock who duly exercise such rights of dissent and
who:
 
 (a)           are
ultimately determined to be entitled to be paid fair value for their Company
Common Stock shall be deemed to have transferred such Company Common Stock to
the Purchaser in accordance with Section 2.2(b) hereof and shall be entitled to
be paid the fair  value therefor as provided in section 190 of the
CBCA; or
 
 (b)           are
ultimately determined not to be entitled, for any reason, to be paid fair value
for their Company Common Stock shall be deemed to have participated in the
Arrangement on the same basis as a non-dissenting holder of the Company Common
Stock and shall receive from the Purchaser the Purchase Consideration on the
basis determined in accordance with, Section 2.2(a) hereof;
 
 but in no
case shall Parent, the Purchaser, the Company or any other Person be required to
recognize such holders as holders of Company Common Stock after the Effective
Time, and the names of such holders of Company Common Stock shall be deleted
from the registers of holders of Company Common Stock at the Effective
Time.
 
 For greater certainty, in addition to
any other restrictions in section 190 of the CBCA, no Company Shareholders who
has voted in favor of the Arrangement shall be entitled to dissent with respect
to the Arrangement.
 
 ARTICLE
IV.
 CERTIFICATES
 
 Section
      4.01
              Company
      Common Stock
 
 At or
promptly after the Effective Date, Parent will deposit with the Depositary a
certificate representing the Parent Common Stock payable and issuable in
accordance with the provisions of Article 2 hereof. On and after the Effective
Time, certificates formerly representing Company Common Stock prior to the
Effective Time (other than shares of Company Common Stock held by Parent or the
Purchaser or any Affiliate thereof) shall cease to represent such shares and
shall represent only the right to receive the consideration therefor specified
in Section 2.2 in accordance with the terms of the Arrangement, subject to
compliance with the requirements set forth in this Article 4.
  -71-
 
 As soon
as practicable after the Effective Date, upon a Company Shareholder depositing
with the Depositary certificates representing shares of Company Common Stock
accompanied by a duly-completed Letter of Transmittal and such other documents
and instruments as the Depositary may reasonably require, Purchaser shall cause
the Depositary to deliver, to the Company Shareholder or otherwise in accordance
with the Letter of Transmittal, the share certificates evidencing the shares of
Parent Common Stock to which such Company Shareholder is entitled in accordance
with the terms of the Arrangement.
 
 Section
      4.02
              Other
      Securities
 
 At the
Effective Time, each and every certificate, document, agreement or other
instrument, if any, formerly representing any and all other securities of the
Company that may be exercised for, or converted into, shares of capital stock of
the Company or shares of Parent Common Stock, shall be and shall be deemed to be
cancelled, void and of no further force and effect without any further
authorization, act or formality.
 
 Section
      4.03
              Lost
      Certificates
 
 If any
certificate which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock that were exchanged pursuant to
Article 2 hereof, 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, subject to the terms hereof, issue in
exchange for such lost, stolen or destroyed certificate, a certificate
representing the shares of Parent Common Stock payable in respect
thereof.  When authorizing such issuance in exchange for any lost,
stolen or destroyed certificate, the Person to whom a certificate representing
shares of Parent Common Stock to be issued shall, as a condition precedent to
the issuance thereof, give a bond satisfactory to the Depositary and Parent in
such sum as Parent may reasonably direct or otherwise indemnify the Depositary,
the Company and Purchaser Parties in a manner satisfactory to them against any
claim that may be made against any of them with respect to the certificate
alleged to have been lost, stolen or destroyed.
 
 Section
      4.04
              Unclaimed
      Certificates
 
 Notwithstanding
any of the other provisions hereof, any certificate which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (other
than shares of Company Common Stock held by Parent or the Purchaser or any
Affiliate thereof) that has not been surrendered with all other documents and
instruments required by this Article 4 on or prior to the sixth anniversary of
the Effective Date, shall cease to represent a claim or interest of any kind or
nature against the Company or any Purchaser Party and the right of such Company
Shareholder to receive shares of Parent Common Stock, shall, on the sixth
anniversary of the Effective Date, be deemed to have been surrendered and
forfeited to Purchaser, together with all entitlements to dividends,
distributions and any interest thereon held for such former Company Shareholder,
for no consideration.
 
 Section
      4.05
              Withholding
      Rights
 
 Purchaser
and the Depositary shall be entitled to deduct and withhold from any
consideration payable to any Company Shareholder, such amounts as Purchaser or
the Depositary is required to deduct and withhold with respect to such payment
under applicable Tax Laws. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes hereof as having been paid to
the Company Shareholder in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority.
  -72-
  ARTICLE
V.
 AMENDMENTS
 
 Section
      5.01
              Amendments
      to Plan of Arrangement
 
 The
Company reserves the right to amend, modify and/or supplement this Plan of
Arrangement at any time and from time to time prior to the Effective Date,
provided that each such amendment, modification and/or supplement must be (i)
set out in writing, (ii) approved by Parent, (iii) filed with the Court and, if
made following the Company Meeting, approved by the Court and (iv) communicated
to the Company Shareholders and the Company Optionholders.
 
 Any
amendment, modification or supplement to this Plan of Arrangement may be
proposed by the Company at any time prior to the Company Meeting (provided that
Parent shall have consented thereto) with or without any other prior notice or
communication, and if so proposed and accepted by the Company Shareholders and
the Company Optionholders voting at the Company 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 that is
approved by the Court following the Company Meeting shall be effective only if
(i) it is consented to by each of the Company and Parent and (ii) if required by
the Court, it is communicated to or consented to by the Company Shareholders and
the Company Optionholders.
 
 ARTICLE
VI.
 FURTHER
ASSURANCES
 
 Section
      6.01
              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, each of the parties to the Arrangement Agreement shall 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 further to document or evidence
any of the transactions or events set out herein.
  -73-