AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 2001
REGISTRATION NO. 333-58116
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 2
TO
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
GROUPE CGI INC./
CGI GROUP INC.
(Exact name of registrant as specified in its charter)
CGI GROUP INC.
(Translation of registrant's name into English)
QUEBEC, CANADA 7374 NONE
(State or other jurisdiction (Primary Standard (I.R.S. Employer Identification No.)
of Industrial
incorporation or organization) Classification Code Number)
------------------------------
CGI GROUP INC. CGI INFORMATION SYSTEMS &
1130 SHERBROOKE STREET WEST MANAGEMENT CONSULTANTS, INC.
5TH FLOOR 600 FEDERAL STREET
MONTREAL, QUEBEC, CANADA H3A 2M8 ANDOVER, MA 01810
(514) 841-3200 ATTN: PIERRE TURCOTTE
(Address and telephone number of Registrant's (978) 682-5500
principal executive offices) (Name, address and telephone number
of agent for service)
------------------------
COPIES TO:
PAULE DORE PETER GOLDEN, ESQ. CHRISTIANE JODOIN, ESQ. ROBERT GRAMMIG, ESQ. DILIP PATEL, ESQ.
Executive Vice President, Fried, Frank, McCarthy Tetrault Holland & Knight LLP Vice President-
Chief Corporate Officer Harris, The Windsor, 400 North Ashley Drive General Counsel
and Secretary Shriver & Jacobson 5th Floor Tampa, FL 33602 and Secretary
CGI Group Inc. One New York Plaza 1170 Peel Street (813) 227-8500 IMRglobal Corp.
1130 Sherbrooke Street West New York, NY 10004 Montreal, Quebec 100 South Missouri Avenue
Montreal, Quebec (212) 859-8000 Canada H3B 4S8 Clearwater, Florida 33756
Canada H3A 2M8 (514) 397-4100 (727) 467-8000
(514) 841-3200
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS PROMPTLY AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
------------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PRELIMINARY--SUBJECT TO COMPLETION--DATED JUNE 8, 2001
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE.
[LOGO]
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
JUNE 8, 2001
---------------------
Fellow Shareholders:
You are cordially invited to attend a special meeting of shareholders of
IMRglobal Corp. on July 13, 2001, at 10:00 a.m., local time, at The Hilton
Millennium Hotel, 55 Church Street, New York, New York 10007.
At the special meeting we will ask you to vote on the proposed merger
between IMRglobal and a wholly owned subsidiary of CGI Group Inc. CGI, a company
incorporated under the laws of Quebec, is a large Canadian independent
information technology (IT) services firm with approximately 10,000 employees in
March 2001. If the merger is completed, IMRglobal will become a wholly owned
subsidiary of CGI, and each of your shares of IMRglobal common stock will be
converted into the right to receive 1.5974 Class A Subordinate Shares of CGI.
The CGI Class A Subordinate Shares are quoted on the New York Stock Exchange
under the symbol "GIB." The CGI Class A Subordinate Shares also trade on the
Toronto Stock Exchange under the symbol "GIB.A." On June 4, 2001, the closing
price of a CGI Class A Subordinate Share on the New York Stock Exchange was
$(US)5.97. Based on that closing price, the 1.5974 Class A Subordinate Shares of
CGI to be exchanged for each share of IMRglobal common stock in the merger would
have a market value of $(US)9.5365.
We estimate that in the merger CGI will issue approximately 70.6 million CGI
Class A Subordinate Shares to IMRglobal shareholders and up to approximately
9.5 million CGI Class A Subordinate Shares in connection with subsequent
exercises of options to purchase shares of IMRglobal common stock which will
become options to acquire CGI Class A Subordinate Shares. As a result, IMRglobal
shareholders will own approximately 19.1% of all of the CGI shares outstanding
immediately after the merger, and, assuming the exercise of all outstanding
options, warrants and preemptive rights to purchase CGI shares immediately after
the merger, IMRglobal shareholders and option holders will own approximately
20.4% of all of the CGI shares then outstanding.
Based on the closing price of a CGI Class A Subordinate Share on the New
York Stock Exchange on June 4, 2001, the aggregate value of the shares of CGI to
be issued to IMRglobal shareholders in the merger would be approximately
$(US)421.6 million, and $(US)478.2 million if all of the options to acquire
shares of IMRglobal common stock were exercised.
Based on IMRglobal's unaudited balance sheet at March 31, 2001 and a
preliminary valuation of intangible assets, CGI will acquire approximately
$(US)155.7 million of assets, $(US)81.0 million of liabilities and
$(US)346.9 million of goodwill.
Only shareholders who hold shares of IMRglobal common stock of record at the
close of business on May 9, 2001 will be entitled to vote at the special
meeting.
Directors and executive officers of IMRglobal currently beneficially own
approximately 30.8% of the total outstanding common stock of IMRglobal and,
following the completion of the merger, will beneficially own approximately 6.8%
of the Class A Subordinate Shares of CGI, in each case assuming the exercise of
all options to acquire shares of IMRglobal common stock.
AFTER CAREFUL CONSIDERATION, IMRGLOBAL'S BOARD OF DIRECTORS HAS DETERMINED
THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND IN THE BEST INTERESTS
OF IMRGLOBAL AND ITS SHAREHOLDERS AND RECOMMENDS THAT ALL SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE MERGER AGREEMENT AT THE SPECIAL MEETING. THE FINANCIAL
ADVISOR TO IMRGLOBAL, UPDATA CAPITAL INC., HAS DELIVERED ITS WRITTEN OPINION TO
THE EFFECT THAT, AS OF THE DATE OF THE MERGER AGREEMENT, THE EXCHANGE RATIO WAS
FAIR FROM A FINANCIAL POINT OF VIEW TO THE SHAREHOLDERS OF IMRGLOBAL. THE MERGER
AGREEMENT IS INCLUDED IN THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX A, AND THE
OPINION OF UPDATA CAPITAL IS INCLUDED IN THIS PROXY STATEMENT/ PROSPECTUS AS
APPENDIX B AND EACH APPENDIX SHOULD BE READ CAREFULLY IN ITS ENTIRETY BY ALL
SHAREHOLDERS.
The accompanying notice of meeting and proxy statement/prospectus explain
the proposed merger and provide specific information concerning the special
meeting. Please read these materials carefully. YOU SHOULD ALSO CAREFULLY
CONSIDER THE RISK FACTORS IN THE MERGER DESCRIBED BEGINNING ON PAGE 25.
Your vote is very important. Failure to vote your shares will have the same
effect as a vote against the adoption of the merger agreement. To be certain
that your shares are voted at the special meeting, please sign, date and return
the enclosed proxy card as soon as possible, whether or not you plan to attend
in person. If you hold your shares in "street name" you should instruct your
broker how to vote in accordance with the voting instructions form provided by
your broker.
Cordially,
[LOGO]
Satish K. Sanan
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE CGI CLASS A SUBORDINATE SHARES TO BE
ISSUED IN CONNECTION WITH THE MERGER, OR DETERMINED IF THIS PROXY STATEMENT/
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THIS PROXY STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION
WHERE AN OFFER OR SOLICITATION WOULD BE ILLEGAL.
--------------------------
This proxy statement/prospectus is dated June 8, 2001 and was first mailed
to IMRglobal shareholders on June 12, 2001.
IMRGLOBAL CORP.
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 13, 2001
---------------------
To the Shareholders of IMRglobal Corp.
Notice is hereby given that a special meeting of shareholders of IMRglobal
Corp. will be held on July 13, 2001, at 10:00 a.m., local time, at The Hilton
Millennium Hotel, 55 Church Street, New York, New York 10007.
You are cordially invited to attend the special meeting. The purpose of the
special meeting is to consider and vote on a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of February 21, 2001, among CGI
Group Inc., IMRglobal Corp. and CGI Florida Corporation, a wholly owned
subsidiary of CGI. Pursuant to the merger agreement, IMRglobal will become a
wholly owned subsidiary of CGI through the merger of CGI Florida Corporation, or
another wholly owned subsidiary of CGI, with and into IMRglobal. Each share of
IMRglobal common stock outstanding immediately prior to the merger will be
converted into the right to receive 1.5974 CGI Class A Subordinate Shares.
This proposal is more fully described later in the proxy
statement/prospectus attached to this notice.
Only shareholders of record at the close of business on May 9, 2001 are
entitled to notice of and to vote at the special meeting and any adjournments of
the special meeting. You may vote in person or by proxy. Mailing your completed
proxy in advance of the meeting will not prevent you from voting in person at
the special meeting.
We cannot complete the merger unless the Agreement and Plan of Merger is
approved by receiving the affirmative vote from the holders of a majority of the
outstanding shares of IMRglobal common stock on the record date.
By order of the Board of Directors,
[LOGO]
Dilip Patel
VICE PRESIDENT-GENERAL COUNSEL AND
SECRETARY
IMPORTANT NOTICE
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE
URGED TO READ THE ATTACHED PROXY STATEMENT/PROSPECTUS CAREFULLY AND THEN TO
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE OR TO SUBMIT YOUR VOTE THROUGH THE INTERNET OR BY TELEPHONE BY
FOLLOWING THE INSTRUCTIONS ON THE ACCOMPANYING PROXY CARD. IF YOU LATER DESIRE
TO REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER SET FORTH IN
THE PROXY STATEMENT/PROSPECTUS. PLEASE DO NOT SEND US ANY STOCK CERTIFICATES AT
THIS TIME. ONCE THE MERGER IS APPROVED, YOU WILL RECEIVE INSTRUCTIONS ABOUT
EXCHANGING YOUR SHARE CERTIFICATES.
IF YOU HOLD YOUR SHARES IN "STREET NAME," PLEASE INSTRUCT YOUR BROKER HOW TO
VOTE IN ACCORDANCE WITH THE INSTRUCTIONS PROVIDED BY YOUR BROKER.
Clearwater, Florida
June 8, 2001
TABLE OF CONTENTS
PAGE
--------
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 5
RISK FACTORS................................................ 25
FORWARD-LOOKING STATEMENTS.................................. 34
THE IMRGLOBAL SPECIAL MEETING............................... 36
General................................................... 36
Record Date; Quorum....................................... 36
Required Vote............................................. 36
Voting and Revocation of Proxies.......................... 37
Solicitation of Proxies................................... 37
Appraisal Rights.......................................... 37
THE MERGER.................................................. 38
Background of the Merger.................................. 38
Reasons for the Merger.................................... 42
Potential Risks and Negative Factors...................... 44
Recommendation of the IMRglobal Board of Directors;
Considerations of the IMR global Board of Directors..... 45
Opinion of IMRglobal's Financial Advisor.................. 47
Plans for IMRglobal After the Merger...................... 53
Conflicts of Interest between Directors and Officers of
IMRglobal and IMRglobal Shareholders in the Merger...... 53
Accounting Treatment...................................... 56
Regulatory Approvals Required for the Merger.............. 57
Other Effects of the Merger............................... 58
Directors and Management of CGI and IMRglobal Following
the Merger.............................................. 60
Equity Ownership Following the Merger..................... 60
Financial Information..................................... 61
Dividends................................................. 61
Federal Securities Laws Consequences...................... 61
Appraisal Rights.......................................... 61
CGI Shareholder Preemptive Rights and Related Matters..... 62
MATERIAL UNITED STATES TAX CONSEQUENCES..................... 63
General................................................... 63
Tax Opinions.............................................. 64
United States Federal Income Tax Consequences to U.S.
Holders of IMRglobal Common Stock....................... 64
United States Federal Income Tax Consequences of Owning
CGI Class A Subordinate Shares.......................... 65
MATERIAL CANADIAN TAX CONSEQUENCES.......................... 66
Dividends on CGI Class A Subordinate Shares............... 67
Disposition of CGI Class A Subordinate Shares............. 67
THE MERGER AGREEMENT........................................ 68
The Merger................................................ 68
Effective Time and Timing of Closing...................... 68
Consideration to be Received in the Merger................ 68
Exchange of Certificates Representing IMRglobal Common
Stock................................................... 68
Representations and Warranties............................ 69
Conduct of Business Pending the Merger; Other Actions..... 70
Offers for Alternative Transactions....................... 71
i
PAGE
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Agreement Regarding Recommendation to Shareholders........ 72
Stock Options and Other Employee Benefits................. 72
Indemnification and Insurance............................. 74
Conditions................................................ 74
Termination and Effects of Termination.................... 76
Expenses.................................................. 78
Amendment; Waiver......................................... 78
THE VOTING AGREEMENT........................................ 78
SHARE OWNERSHIP OF IMRGLOBAL................................ 79
EXCHANGE RATES.............................................. 80
MARKET PRICE AND DIVIDEND DATA.............................. 80
Market Prices............................................. 80
Dividend Data............................................. 82
DESCRIPTION OF CGI.......................................... 83
DESCRIPTION OF IMRGLOBAL.................................... 86
COMPETITION BETWEEN CGI AND IMRGLOBAL....................... 89
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................... 90
COMPILATION REPORT.......................................... 91
COMMENT FOR UNITED STATES READERS ON DIFFERENCES BETWEEN
CANADIAN AND UNITED STATES REPORTING STANDARDS............ 91
DESCRIPTION OF CGI SHARES................................... 106
General................................................... 106
Dividends................................................. 108
Voting Rights............................................. 108
Conversion Rights......................................... 108
Liquidation Rights........................................ 109
Preemptive Rights and New Issues of Shares................ 109
Changes in Capital........................................ 109
General Meetings and Notices.............................. 110
Liability of Directors and Officers....................... 110
Registrar................................................. 110
COMPARISON OF RIGHTS OF IMRGLOBAL SHAREHOLDERS AND CGI
SHAREHOLDERS.............................................. 111
Voting Rights............................................. 111
Action by Written Consent................................. 112
Shareholder Proposals and Shareholder Nominations of
Directors............................................... 112
Sources and Payment of Dividends.......................... 113
Rights of Purchase and Redemption......................... 114
Authority to Issue Shares................................. 114
Meetings of Shareholders.................................. 114
Special Meetings of Shareholders.......................... 115
Appraisal Rights.......................................... 116
Preemptive Rights......................................... 116
Conversion Rights......................................... 119
Amendment of Governing Instruments........................ 120
Preferred Stock........................................... 121
Stock Class Rights........................................ 121
Shareholders' Votes on Certain Transactions............... 122
Rights of Inspection...................................... 123
ii
PAGE
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Standard of Conduct for Directors......................... 124
Classification of the Board of Directors.................. 125
Removal of Directors...................................... 125
Vacancies on the Board of Directors....................... 126
Liability of Directors and Officers....................... 127
Indemnification of Directors and Officers................. 128
Conflict of Interest of Directors and Officers............ 129
Shareholders' Suits....................................... 130
Provisions Relating to Share Acquisitions and Certain
Business Combinations................................... 130
Directors' Fiduciary Duties in Takeovers.................. 132
Disclosure of Interests................................... 132
Limitation on Enforceability of Civil Liabilities Under
U.S. Federal Securities Laws............................ 133
Proxy Statements and Reports.............................. 134
Reporting Requirements.................................... 135
DIRECTORS AND MANAGEMENT OF CGI FOLLOWING THE MERGER........ 136
Directors and Executive Officers.......................... 136
CGI Directors............................................. 136
Responsibility and Terms of Members of the Board of
Directors............................................... 138
Meetings of the Board of Directors of CGI; Committees of
the Board............................................... 138
Governance Policies....................................... 139
CGI Executive Officers.................................... 144
Share Ownership of CGI.................................... 145
Remuneration of Executive Officers........................ 147
Share Options............................................. 149
Remuneration of Directors................................. 150
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS............... 151
RELATED PARTIES AND CERTAIN TRANSACTIONS.................... 151
Information Regarding BCE Inc............................. 151
Decisions Requiring Prior Approval by BCE Inc............. 152
Put Rights of Messrs. Godin, Imbeau and Brassard.......... 153
Call Right of BCE Inc..................................... 153
Price on the Put and Call Rights.......................... 153
Board of Directors Designees.............................. 153
BCE Inc. Rights of First Refusal.......................... 153
Change of Control Offers.................................. 154
Termination............................................... 154
FEES AND EXPENSES........................................... 154
VALIDITY OF SECURITIES...................................... 155
EXPERTS..................................................... 155
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF
IMRGLOBAL SHAREHOLDERS.................................... 155
INDEX TO CGI CONSOLIDATED FINANCIAL STATEMENTS.............. F-1
CGI CONSOLIDATED FINANCIAL STATEMENTS....................... F-3
Appendix A Agreement and Plan of Merger by and among CGI
Group Inc., IMRglobal Corp. and CGI Florida
Corporation..................................... A-i
Appendix B Opinion of Updata Capital, Inc.................. B-1
iii
THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT CGI AND IMRGLOBAL FROM DOCUMENTS FILED WITH THE SEC THAT ARE NOT INCLUDED
IN OR DELIVERED WITH THIS DOCUMENT. CGI WILL PROVIDE YOU WITH COPIES OF THIS
INFORMATION RELATING TO CGI, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
CGI GROUP INC.
1130 SHERBROOKE STREET WEST
MONTREAL, QUEBEC, CANADA H3A 2M8
ATTENTION: RONALD WHITE
DIRECTOR, INVESTOR RELATIONS
TELEPHONE NUMBER: (514) 841-3230
IMRGLOBAL WILL PROVIDE YOU WITH COPIES OF THIS INFORMATION RELATING TO
IMRGLOBAL, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST TO:
IMRGLOBAL CORP.
100 SOUTH MISSOURI AVENUE
CLEARWATER, FLORIDA 33756
ATTENTION: INVESTOR RELATIONS
TELEPHONE NUMBER: (727) 467-8163
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
IMRGLOBAL SPECIAL MEETING, YOU SHOULD MAKE YOUR REQUEST NO LATER THAN JUNE 29,
2001. YOU MAY ALSO CALL THE INVESTOR RELATIONS DEPARTMENT OF IMRGLOBAL IF YOU
HAVE ANY QUESTIONS ABOUT THE MERGER.
iv
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly some
commonly asked questions regarding the merger. These questions and answers may
not address all questions that may be important to you as an IMRglobal
shareholder. Please refer to the more detailed information contained elsewhere
in this proxy statement/prospectus, the appendices to this proxy
statement/prospectus and the documents referred to or incorporated by reference
in this proxy statement/prospectus.
Q. WHAT IS THE PROPOSED TRANSACTION?
A. CGI will acquire IMRglobal by merging a wholly owned subsidiary of CGI into
IMRglobal. As a result of the merger, IMRglobal will become a wholly owned
subsidiary of CGI and holders of shares of IMRglobal common stock will
receive Class A Subordinate Shares of CGI.
Q. WHY ARE CGI AND IMRGLOBAL PROPOSING TO MERGE?
A. The boards of directors of CGI and IMRglobal believe that the combination of
their two companies will create a company well positioned to establish a
world class standard of excellence in global information technology (IT)
services. The boards of directors of CGI and IMRglobal believe that the
combined company will be capable of generating substantially more long-term
shareholder value than could be achieved by either of our companies
individually. Specifically, we believe the combined company will be
positioned to offer its clients a greater depth and breadth of services
around the world.
Q. WHAT ARE THE POSSIBLE DISADVANTAGES ASSOCIATED WITH THE MERGER?
A. In determining whether to vote to approve and adopt the merger and the merger
agreement, you should consider carefully the risk factors described in
detail on pages 25 through 34, including the following:
- key employees may terminate their employment in connection with or after
the merger;
- we may lose existing clients as a result of the merger;
- cost savings and other benefits expected from the merger may not be
realized;
- CGI may not be able to successfully integrate IMRglobal and other
businesses it has acquired or may acquire in the future;
- the market value of CGI shares received in connection with the merger may
fluctuate considerably;
- sales of IMRglobal common stock and CGI shares by IMRglobal shareholders
not permitted to hold shares of a non-U.S. company may adversely affect
the market price of CGI Class A Subordinate Shares;
- a majority of the voting power of CGI's stock is, and will after
completion of the merger be, in the hands of a number of related persons
who will exercise substantial influence over the policies of CGI and can
prevent CGI from engaging in a number of specified transactions, including
a sale of CGI.
Q. WHY IS THE IMRGLOBAL BOARD OF DIRECTORS RECOMMENDING APPROVAL OF THE MERGER
AGREEMENT?
A. In addition to the reasons for the merger described above, the IMRglobal
board of directors believes that the merger is fair to and in the best
interests of IMRglobal and its shareholders. The IMRglobal board of
directors received an opinion from its financial advisor, Updata
Capital Inc., that, as of the date of the merger agreement, the exchange
ratio pursuant to the merger agreement is fair from a financial point of
view to IMRglobal shareholders. To review the IMRglobal board of directors'
reasons for recommending approval of the merger agreement, see pages 45
through 47.
1
Some members of the IMRglobal board of directors have additional interests
in the merger that may create possible conflicts of interest as discussed on
pages 53 through 56.
Q. WHAT WILL IMRGLOBAL SHAREHOLDERS RECEIVE IN THE MERGER?
A. You will receive 1.5974 CGI Class A Subordinate Shares for each share of
IMRglobal common stock you own. This exchange ratio will not change, even if
the market price of CGI or IMRglobal shares increases or decreases between
now and the date the merger is completed. You will receive only whole CGI
shares. Any fractional shares you would otherwise receive will be paid in
cash.
Q. WHAT IS A CGI CLASS A SUBORDINATE SHARE?
A. CGI currently has outstanding two classes of shares, Class A Subordinate
Shares and Class B Shares (multiple voting), both of which are the
equivalent of the common stock issued by a company organized under state law
in the United States. The Class A Subordinate Shares are entitled to one
vote per share and the Class B Shares (multiple voting) are entitled to ten
votes per share. The Class A Subordinate Shares and Class B Shares (multiple
voting) participate equally with respect to dividends and distributions of
proceeds upon liquidation of CGI. The Class B Shares (multiple voting) may
be converted into Class A Subordinate Shares on a one-for-one basis at any
time at the option of the holder of the Class B Shares (multiple voting).
BCE Inc., directly or indirectly, currently owns CGI shares representing
approximately 30.4% of the voting power of all voting shares of CGI. Also,
Messrs. Godin, Imbeau and Brassard and their holding companies own shares of
CGI which currently represent approximately 46.2% of the voting power of all
CGI voting shares. These persons, by virtue of their ownership of Class A
Subordinate Shares and Class B Shares (multiple voting) of CGI will,
immediately following the merger, in the aggregate own shares of CGI
representing a maximum of approximately 71.1% of the voting power of all
voting shares of CGI (if BCE Inc. does not exercise certain preemptive
rights described on page 62), or, a maximum of approximately 72.5% of the
voting power of all voting shares of CGI (if BCE Inc. does exercise these
preemptive rights). Only the Class A Subordinate Shares are listed for
trading on the Toronto and New York Stock Exchanges. For more details on
Class A Subordinate Shares and Class B Shares (multiple voting), see
pages 106 through 110.
Q. WHAT ARE THE U.S. TAX CONSEQUENCES TO IMRGLOBAL SHAREHOLDERS OF THE MERGER?
A. The exchange by U.S. holders of IMRglobal common stock for CGI Class A
Subordinate Shares will generally be tax-free for United States federal
income tax purposes, except for any gains with respect to cash received upon
the sale of shares representing the fractional share interests in CGI shares
that IMRglobal shareholders are otherwise entitled to receive. Special rules
apply, however, to any U.S. holder that is a five-percent transferee holder
with respect to CGI immediately after the merger. You should consult your
tax advisor on how specific tax consequences of the merger apply to you.
Q. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A. We expect to complete the merger in the summer of 2001. Because the merger is
subject to shareholder and governmental approvals, we cannot predict the
exact timing of its completion.
Q. WHAT IF THE MERGER IS NOT COMPLETED?
A. It is possible that the merger will not be completed, if, for example,
IMRglobal's shareholders do not approve and adopt the merger agreement.
Should the merger not be completed, neither IMRglobal nor any other person
is under any obligation to make or consider any alternative proposal
regarding the acquisition of IMRglobal. It is therefore possible that
IMRglobal would continue as an independent company. In addition, IMRglobal
may be required to pay a termination fee if the merger is not completed
under some circumstances relating to other acquisition proposals for
IMRglobal. If the merger is not completed, the market price of
2
IMRglobal shares may be affected. The reason why the merger is not completed
may have an influence on the stock price.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. After we complete the merger, we will send you instructions explaining
how to exchange your IMRglobal share certificates for certificates
representing CGI Class A Subordinate Shares.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement/ prospectus, please vote your shares of IMRglobal common
stock as soon as possible.
Q. HOW DO I VOTE?
A. You may choose one of the following ways to cast your vote:
- by completing the accompanying proxy card and returning it in the enclosed
postage-paid envelope;
- through the Internet or by telephone as described on the accompanying
proxy card; or
- by appearing and voting in person at the special meeting.
If your shares are held in "street name," i.e., in the name of a bank,
broker or other financial institution you should follow the procedure
described by your bank, broker or other financial institution on the voting
instructions form provided by them.
Q. IF MY SHARES ARE HELD FOR ME BY MY BROKER, WILL MY BROKER VOTE THOSE SHARES
FOR ME?
A. Your broker will vote your shares only if you provide instructions to your
broker on how to vote. You should instruct your broker on how to vote your
shares, using the instructions provided by your broker.
Q. MAY I CHANGE MY VOTE?
A. Yes. You may withdraw your proxy or change your vote:
- by sending written revocation of your proxy to IMRglobal;
- by submitting a new properly completed and signed proxy to IMRglobal by
mail;
- by voting again through the Internet or by telephone as described on the
accompanying proxy card prior to the IMRglobal special meeting; or
- by voting in person at the IMRglobal special meeting.
If your shares are held in "street name," you must follow the procedure
described by your bank, broker or other financial institution on the voting
instructions form provided by them.
Q. DO I NEED TO ATTEND THE SPECIAL MEETING IN PERSON?
A. No. It is not necessary for you to attend the special meeting in order to
vote your shares, although you are welcome to attend.
Q. WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A. Holders of record of IMRglobal common stock as of the close of business on
May 9, 2001 are entitled to vote at the special meeting. Each IMRglobal
shareholder has one vote for each share of IMRglobal common stock owned.
Options to purchase shares of IMRglobal common stock do not bear rights to
vote.
3
Q. WHAT VOTE IS REQUIRED FOR THE IMRGLOBAL SHAREHOLDERS TO APPROVE THE MERGER
AGREEMENT?
A. In order for the merger agreement to be approved, holders of a majority of
the outstanding IMRglobal common stock must vote FOR approval of the merger
agreement. The Chairman and Chief Executive Officer of IMRglobal and his
family limited partnership, an entity he controls, together are holders of
approximately 27.3% of the outstanding shares of IMRglobal common stock, and
have agreed to vote to approve the merger agreement.
Q. WHAT OTHER MATTERS WILL BE VOTED ON AT THE IMRGLOBAL SPECIAL MEETING?
A. IMRglobal does not expect to ask shareholders to vote on any other matter at
the special meeting. Under Florida law, IMRglobal cannot ask shareholders to
vote on any other matters at the special meeting, without providing notice
of those matters.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT IMRGLOBAL AND CGI?
A. IMRglobal files periodic reports and other information with the SEC. CGI
files Forms 40-F and 6-K with, and has an obligation to furnish other
documents to, the SEC. You may read and copy this information at the SEC's
public reference facilities. Please call the SEC at 1-800-SEC-0330 for
information about these facilities. Information about CGI is also available
at the offices of the New York Stock Exchange. Information about IMRglobal
is also available at the offices of the NASD and the Internet site
maintained by the SEC at http://www.sec.gov. For a more detailed description
of the information available, please see page 22.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have questions about the merger after reading this proxy
statement/prospectus or if you need assistance voting your shares you should
contact IMRglobal's Investor Relations Department at (727) 467-8163.
4
SUMMARY
THIS SUMMARY, TOGETHER WITH THE PRECEDING QUESTIONS AND ANSWERS SECTION,
HIGHLIGHTS THE MATERIAL INFORMATION FROM THIS PROXY STATEMENT/PROSPECTUS. IT
DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD
READ CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS AND THE ADDITIONAL
DOCUMENTS REFERRED TO IN, OR INCORPORATED BY REFERENCE TO, THIS PROXY
STATEMENT/PROSPECTUS TO FULLY UNDERSTAND THE MERGER. IN PARTICULAR, YOU SHOULD
READ THE DOCUMENTS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS, INCLUDING THE
AGREEMENT AND PLAN OF MERGER ATTACHED AS APPENDIX A.
THE COMPANIES (SEE PAGE 84)
CGI GROUP INC.
1130 Sherbrooke Street West
Montreal, Quebec
Canada H3A 2M8
(514) 841-3200
CGI, a company incorporated under the laws of Quebec, is a large Canadian
independent information technology (IT) services firm with a headcount of close
to 10,000 employees in March 2001. CGI helps its 2,500 clients in the private
and public sectors meet their strategic goals by providing them with an
end-to-end offering of high-level business and IT solutions. CGI specializes in
the following areas of IT services: strategic IT and management consulting
(including business process engineering); systems development and integration;
and outsourcing and management of IT and business functions. CGI has offices in
Canada, the United States and the United Kingdom, and project offices in more
than 20 other countries. More information about CGI can be found on page 83
under the heading "Description of CGI."
IMRGLOBAL CORP.
100 South Missouri Avenue
Clearwater, FL 33756
(727) 467-8000
IMRglobal is a global provider of end-to-end information technology services
to Fortune 500 and Global 2000 companies in six vertical industries. Those
industries include financial services, healthcare, government, utilities, retail
and manufacturing/distribution. IMRglobal's services include strategic IT and
management consulting (including business process engineering), systems
development and integration, software application outsourcing and professional
services. IMRglobal maintains its corporate headquarters in the United States
and country headquarters in France, United Kingdom, India, Japan, Canada and
Australia. More information about IMRglobal can be found on page 86 under the
heading "Description of IMRglobal."
COMPETITION BETWEEN CGI AND IMRGLOBAL
Despite operating in the same industry, CGI and IMRglobal have not
traditionally directly competed against one another in the past. CGI generates
46% of its revenue from the Telecommunications sector, a sector in which
IMRglobal has not competed in the past, and the two companies' primary
operations are substantially in different geographic locations, with 72% of
CGI's revenue being derived in Canada, as opposed to only 5% for IMRglobal. CGI
generates approximately 26% of its total revenue from the Financial Services
sector, while IMRglobal generates approximately 50% of its total revenue from
this sector. However, within the sector CGI and IMRglobal have a focus which is
only partly overlapping, with CGI focusing on both the Credit Unions and the
Property and Casualty Insurance segments, and IMRglobal focusing, within its
North American operations, on the
5
Life Insurance and Property and Casualty Insurance segments. In addition, CGI's
business is focused on large full IT outsourcing deals of greater than
$20 million, while IMRglobal has focused primarily on application management
outsourcing deals of less than $20 million.
Because of the above, and the other factors described on page 89 under the
heading "Competition Between CGI and IMRglobal", to date, CGI and IMRglobal have
only competed directly for customer projects in the Property and Casualty
Insurance industry segment of the Financial Services sector in North America.
THE MERGER (SEE PAGE 38)
In the merger, a wholly owned subsidiary of CGI will merge with and into
IMRglobal and, as a result, IMRglobal will become a wholly owned subsidiary of
CGI. Upon completion of the merger CGI will issue approximately 70.6 million
Class A Subordinate Shares. In addition, in connection with the merger, CGI may
issue up to approximately 9.5 million CGI Class A Subordinate Shares in
connection with subsequent exercises of options to purchase shares of IMRglobal
common stock that will become options to acquire CGI Class A Subordinate Shares.
Based on the closing price of a CGI Class A Subordinate Share on the New
York Stock Exchange on June 4, 2001 of $(US)5.97, the 1.5974 Class A Subordinate
Shares of CGI to be exchanged for each share of IMRglobal common stock in the
merger would have a market value of $(US)9.5365, and the aggregate value of the
shares of CGI to be issued to IMRglobal shareholders in the merger would be
approximately $(US)421.6 million, and $(US)478.2 million if all of the options
to acquire shares of IMRglobal common stock were exercised. As a result,
IMRglobal shareholders would own approximately 19.1% of all of the CGI shares
outstanding immediately after the merger, and, assuming the exercise of all
outstanding options, warrants and preemptive rights to purchase CGI shares
immediately after the merger, IMRglobal shareholders and option holders would
own approximately 20.4% of all of the CGI shares then outstanding.
Directors and executive officers of IMRglobal currently beneficially own
approximately 30.8% of the total outstanding common stock of IMRglobal and,
following the completion of the merger, will beneficially own approximately 6.8%
of the Class A Subordinate Shares of CGI, in each case assuming the exercise of
all options to acquire shares of IMRglobal common stock.
The number of Class A Subordinate Shares of CGI to be exchanged for each
share of IMRglobal common stock in the merger was determined by arms length
negotiation between CGI and IMRglobal and, at the time the exchange ratio was
determined, was intended to provide $(US)9.50 in value for each share of
IMRglobal common stock based on the average closing price of CGI Class A
Subordinate Shares on the New York Stock Exchange for the 25 trading days ended
February 16, 2001. The actual value of the CGI Class A Subordinate Shares
exchanged for each share of IMRglobal common stock in the merger will depend on
the market price of CGI Class A Subordinate Shares at the time the merger is
completed, which may be substantially different than $(US)9.50.
Based on IMRglobal's unaudited balance sheet at March 31, 2001 and a
preliminary valuation of intangible assets, CGI will acquire approximately
$(US)155.7 million of assets, $(US)81.0 million of liabilities and
$(US)346.9 million of goodwill.
RECOMMENDATION OF IMRGLOBAL'S BOARD OF DIRECTORS (SEE PAGE 45)
The IMRglobal board of directors has determined that the merger agreement
and the merger are in the best interests of IMRglobal and its shareholders and
has unanimously approved and declared advisable the merger and the merger
agreement. The board of directors of IMRglobal recommends that IMRglobal
shareholders vote "FOR" approval of the merger agreement at the special meeting.
6
RECORD DATE FOR VOTING; VOTE REQUIRED OF IMRGLOBAL SHAREHOLDERS (SEE PAGE 36)
You can vote at the special meeting of IMRglobal shareholders if you owned
IMRglobal common stock at the close of business on May 9, 2001.
Approval of the merger agreement requires the affirmative vote of holders of
a majority of the outstanding shares of IMRglobal common stock.
As of the record date, May 9, 2001, IMRglobal had 44,089,019 shares of
common stock outstanding. Each share of IMRglobal common stock outstanding on
the record date entitles its holder to one vote. As of the record date, the
directors, executive officers of IMRglobal and their affiliates held common
stock representing approximately 29.4% of all the outstanding IMRglobal common
stock. This includes approximately 27.3% of the outstanding shares of IMRglobal
common stock owned by the Chairman and Chief Executive Officer of IMRglobal and
his family limited partnership, an entity he controls, which are required to be
voted for approval of the merger agreement pursuant to an agreement with CGI.
OPINION OF IMRGLOBAL'S FINANCIAL ADVISOR (SEE PAGE 47)
Updata Capital, as financial advisor to IMRglobal, has delivered a written
opinion to the board of directors of IMRglobal to the effect that, as of the
date of the merger agreement, the exchange ratio was fair from a financial point
of view to the IMRglobal shareholders. We have attached this opinion as
Appendix B to this proxy statement/prospectus. You are urged to read this
opinion carefully. Updata Capital has not been paid separately for this opinion,
however, IMRglobal has agreed to pay Updata Capital, upon consummation of the
merger, a total fee of 0.6% of the aggregate consideration paid in the
transaction for its services.
DIRECTORS AND MANAGEMENT OF CGI AND IMRGLOBAL FOLLOWING THE MERGER (SEE PAGE 60)
When we complete the merger, the current board of directors of CGI, which
consists of 13 directors, will continue to serve as the board of directors of
CGI. In addition, CGI has agreed that the CGI board of directors will appoint
Satish K. Sanan, IMRglobal's Chairman and Chief Executive Officer, to the CGI
board of directors when a vacancy on the board occurs, subject to Mr. Sanan's
continued employment with CGI at that time. If no vacancy on the board has
occurred Mr. Sanan will be nominated for election as a CGI director at CGI's
next annual meeting of shareholders if he continues as an employee of CGI at
that time.
Serge Godin, the Chairman, President and Chief Executive Officer of CGI,
will continue to be Chairman, President and Chief Executive Officer of CGI after
the merger. Upon completion of the merger, substantially all of the senior
management of IMRglobal is expected to continue in management roles at IMRglobal
or CGI.
EMPLOYMENT AGREEMENTS (SEE PAGE 53)
In connection with the merger agreement, Satish K. Sanan, Chairman and Chief
Executive Officer of IMRglobal, has entered into a new employment agreement with
IMRglobal and CGI which will become effective when the merger is completed. This
employment agreement provides for a two-year term of employment beginning upon
completion of the merger. Two other IMRglobal executive officers entered into
amendments to their employment agreements. The merger will not change current
employment agreements of other senior executives and key employees of IMRglobal.
7
CONFLICTS OF INTERESTS BETWEEN DIRECTORS AND OFFICERS OF IMRGLOBAL AND IMRGLOBAL
SHAREHOLDERS IN THE MERGER (SEE PAGE 53)
Certain officers and directors of IMRglobal are participating in
arrangements that provide them with interests in the merger that are different
from, or in addition to, those of other IMRglobal shareholders, including the
following:
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
COVERAGE. CGI has agreed that the indemnification provisions of the
articles of incorporation and bylaws of IMRglobal immediately prior to the
effective time of the merger will not be amended, repealed or otherwise
modified for a period of six years from the effective time of the merger in
any manner that would adversely affect the rights of individuals who, at the
effective time of the merger, were directors, officers, employees or agents
of IMRglobal, and has agreed, for a period of six years after the effective
time of the merger, to procure directors' and officers' liability insurance
with coverage and in amounts no less favorable than IMRglobal's current
coverage; provided that CGI is not required to procure any coverage in
excess of the amount that can be obtained at a premium of 250% of the
current annual premium paid by IMRglobal;
VESTING OF STOCK OPTIONS HELD BY CERTAIN DIRECTORS. The vesting of
11,250 stock options to acquire shares of IMRglobal's common stock that are
held by each of two directors of IMRglobal, Charles C. Luthin and Jeffery S.
Slowgrove, otherwise vesting on May 26, 2002 at an exercise price of
$(US)15.50 per share, will be accelerated as a result of the merger. Upon
completion of the merger, all outstanding options under the directors stock
option plan of IMRglobal will become options to purchase CGI Class A
Subordinate Shares and will remain exercisable until December 31, 2001;
GRANT OF STOCK OPTIONS TO SENIOR MANAGEMENT. CGI has agreed that after
completion of the Merger, CGI will grant members of senior management of
IMRglobal options to purchase an aggregate of 1,000,000 CGI Class A
Subordinate Shares pursuant to CGI's stock option plan. The options will be
granted as determined by CGI and are intended to incentivize and encourage
these persons to remain with the combined company, and to facilitate the
integration of IMRglobal with CGI by aligning the interests of these persons
with the interests of CGI following the merger. The per share exercise price
of these options will be the fair market value of the underlying stock on
the date option is granted, calculated as provided for under CGI's stock
option plan;
VESTING OF STOCK OPTIONS HELD BY DIRECTORS AND OFFICERS UPON
TERMINATION. Under the terms of IMRglobal's stock option plans, if the
employment of any director or employee is terminated without cause within
12 months of the completion of the merger, the stock options held by such
directors and employees will automatically vest and become exercisable;
EMPLOYMENT AGREEMENT WITH IMRGLOBAL'S CHIEF EXECUTIVE OFFICER. In
connection with the merger, IMRglobal's Chief Executive Officer, Satish K.
Sanan, has entered into a new employment agreement and certain related
agreements with IMRglobal and CGI that will become effective at the time the
merger is completed and provide for, among other things, (1) a two year
term, with automatic one year renewals; (2) the forgiveness of the
$(US)5.0 million loan (and any accrued interest) to Mr. Sanan from IMRglobal
or a bonus payment to Mr. Sanan in an amount equal to the loan which will be
used to repay the loan; (3) an annual base salary of $(US)500,000; (4) an
annual financial bonus of up $(US)500,000; (5) the grant of employee stock
options to purchase CGI Class A Subordinate Shares; (6) the immediate
vesting of all stock options granted to Mr. Sanan prior to the completion of
the merger in the event he is terminated without cause (options for
IMRglobal shares otherwise vesting as to 34,000 shares on May 10, 2002 at
$(US)17.625 per share, 50,000 shares on March 16, 2002 at $(US)13.1875 per
share and 50,000 shares on March 16, 2003 at $(US)13.1875 per share);
(7) the provision of insurance benefits, car
8
allowances, and the payment each year of up to $(US)106,020 in premiums on
life insurance policies for the benefit of Mr. Sanan; (8) if he is an
employee of CGI at such time, the board of directors of CGI will either
appoint Mr. Sanan to the board of directors to fill any vacancy which occurs
or, if no such vacancy occurs, nominate Mr. Sanan for election as a CGI
director at CGI's next annual meeting of shareholders expected to be held in
January 2002; and (9) the payment to Mr. Sanan of his base salary, insurance
benefits and car allowances for the remainder of the then current term of
his employment agreement if he is terminated without cause.
EMPLOYMENT AGREEMENT WITH CERTAIN EXECUTIVE OFFICERS OF IMRGLOBAL. In
connection with the merger and to induce continued employment, CGI and
IMRglobal entered into amendments to the existing employment agreements
between IMRglobal and each of Vincent Addonisio, IMRglobal's Executive Vice
President and Chief Administrative Officer, and Philip Shipperlee,
IMRglobal's President of European Operations. These amendments provide for
the forgiveness of loans provided by IMRglobal to each individual to
purchase shares of IMRglobal common stock. (Each loan is $(US)234,500 plus
accrued interest of approximately $(US)50,000 on each loan.) In the event
that either individual terminates his employment within six months of the
merger, CGI has the right to claim the forgiven amount from such individual.
AGGREGATE DEBT FORGIVENESS OF DIRECTORS AND EXECUTIVE OFFICERS OF
IMRGLOBAL. In connection with the merger, including the debt forgiveness
described above, IMRglobal insiders will receive debt forgiveness of
approximately $(US)5.6 million, as follows:
THOUSANDS OF
US DOLLARS
------------
Satish K. Sanan............................................. $5,000
Vincent Addonisio........................................... 285
Philip Shipperlee........................................... 285
------
$5,570
======
Accordingly, the directors and officers of IMRglobal receiving these
benefits may have been more likely to vote to adopt the merger agreement and to
approve the merger than if they did not have these interests. IMRglobal
shareholders should consider whether these interests may have influenced these
directors and officers to support or recommend the merger. You can read more
about these interests under the heading "The Merger--Conflicts of Interest
between Directors and Officers of IMRglobal and IMRglobal Shareholders in the
Merger."
PREEMPTIVE RIGHTS (SEE PAGE 62)
Under the articles of incorporation of CGI, holders of Class B Shares
(multiple voting) have preemptive rights to acquire additional Class B Shares
(multiple voting) to maintain their current percentage voting power associated
with Class B Shares in connection with certain issuances of Class A Subordinate
Shares. The current holders of Class B Shares (multiple voting) are
Messrs. Godin, Imbeau and Brassard, directly or indirectly through holding
companies they control, as well as BCE Inc., directly or indirectly through an
entity it controls. Furthermore, pursuant to an agreement, BCE Inc. has rights
to acquire additional Class A Subordinate Shares to maintain its equity
participation in connection with certain issuances of Class A Subordinate
Shares. The preemptive rights to purchase additional Class B Shares (multiple
voting) available to Messrs. Godin, Imbeau and Brassard and their holding
companies in connection with the merger will be exercised, in full or in part,
by Messrs. Godin and Imbeau and their respective holding companies at a cash
price equal to the weighted average trading price on the TSE for the Class A
Subordinate Shares for the twenty-one day period starting ten days before and
ending ten days after the date of closing of the merger up to a maximum
aggregate purchase price of $(Cdn)60 million.
9
BCE Inc. has informed CGI that it will not exercise its preemptive rights to
acquire additional Class A Subordinate Shares. However, it has indicated to CGI
that it will decide prior to completion of the merger whether or not it will
exercise its preemptive rights to acquire additional Class B Shares (multiple
voting). If BCE Inc. does not exercise its preemptive rights, up to a maximum of
an aggregate of approximately 6.0 million Class B Shares (multiple voting) will
be issued to Messrs. Godin and Imbeau and their holding companies. If BCE Inc.
exercises its preemptive rights, up to a maximum of an aggregate of
approximately 9.6 million Class B Shares (multiple voting) will be issued in
connection with the exercise of these preemptive rights, including shares which
are subscribed to by Messrs. Godin and Imbeau and their holding companies. The
proceeds to be received by CGI in connection with the exercise of the preemptive
rights will be used to repay long-term debt.
If BCE Inc. does not exercise its preemptive rights to acquire additional
Class B Shares (multiple voting), Messrs. Godin, Imbeau and Brassard and
BCE Inc. will collectively beneficially own 113,658,948 Class A Subordinate
Shares and a maximum of 40,874,693 Class B Shares (multiple voting)
representing, in the aggregate, a maximum of approximately 71.1% of the voting
power of shares of CGI to be outstanding immediately following completion of the
merger. If BCE Inc. does exercise those preemptive rights then Messrs. Godin,
Imbeau and Brassard and BCE Inc. will collectively beneficially own 113,658,948
Class A Subordinate Shares and a maximum of 44,488,326 Class B Shares (multiple
voting) representing, in the aggregate, a maximum of approximately 72.5% of the
voting power of shares of CGI to be outstanding immediately following completion
of the merger.
RISK FACTORS (SEE PAGE 25)
In determining whether to vote to approve and adopt the merger agreement,
you should consider carefully the risk factors described in this proxy
statement/prospectus, including the risks that:
- key employees, including those having relationships with clients, may
terminate their employment in connection with or after the merger;
- we may lose existing clients as a result of the merger;
- cost savings and other benefits expected from the merger may not be
realized;
- CGI may not be able to successfully integrate IMRglobal and other
businesses it has acquired or may acquire in the future;
- the value of CGI Class A Subordinate Shares received in connection with
the merger may fluctuate considerably;
- sales of IMRglobal common stock and CGI shares by IMRglobal shareholders
not permitted to hold shares of a non-U.S. company may adversely affect
the market price of CGI Class A Subordinate Shares;
- a majority of the voting power of CGI's stock is, and will after
completion of the merger be, in the hands of a number of related persons
who will exercise substantial influence over the policies of CGI and can
prevent CGI from engaging in a number of specified transactions, including
a sale of CGI;
- our success or failure will partially depend on competition in the IT
services market, as well as fluctuations in client expenditures on IT
services, taking into consideration general economic conditions as well as
industry specific conditions affecting our clients;
- our operating results may fluctuate from quarter to quarter which could
result in a decline in CGI's stock price;
- increased competition for qualified consultants may create difficulties in
attracting and retaining them, which could result in our inability to
service existing clients;
10
- future acquisitions may dilute shareholders' holdings in CGI if securities
are issued in connection with the acquisition;
- we may not be able to meet client expectations while performing our
services and providing solutions for our clients, which may damage our
reputation, and create difficulties attracting new business; and
- international operations create various internal and external risks,
including foreign currency exchange rate fluctuations, which may
negatively affect our performance.
These risks and other risks we describe under "Risk Factors" may have an
adverse effect on our business, financial condition and results of operations.
COMPARISON OF RIGHTS OF HOLDERS OF CGI SHARES WITH HOLDERS OF IMRGLOBAL
COMMON STOCK (SEE PAGE 111)
As a result of the merger, holders of IMRglobal common stock will receive
CGI Class A Subordinate Shares. There are numerous differences between the
rights of a shareholder in IMRglobal, a Florida corporation, and the rights of a
shareholder of CGI, a Quebec company. For example:
- Each holder of IMRglobal common stock is entitled to one vote per share
and will be entitled to one vote per share as a holder of CGI Class A
Subordinate Shares after the completion of the merger. In the merger,
holders of IMRglobal shares will receive CGI Class A Subordinate Shares
which have one vote per share. However, holders of CGI's outstanding
Class B Shares (multiple voting) are entitled to ten votes per share. CGI
Class B Shares (multiple voting) currently outstanding carry approximately
57.7% of the voting power in CGI. The holders of CGI's outstanding
Class B Shares (multiple voting) also own CGI Class A Subordinate Shares.
The combined ownership of Class A Subordinate Shares and Class B Shares
(multiple voting) by holders of Class B Shares (multiple voting) currently
represents approximately 76.6% of the total voting power of all voting
securities of CGI;
- CGI's articles of incorporation provide for preemptive rights, in some
cases, in favor of holders of Class B Shares (multiple voting) upon
issuance of Class A Subordinate Shares of CGI or securities convertible
into Class A Subordinate Shares so that these holders may maintain their
voting power at current levels. An options agreement among Bell Canada,
CGI, BCE Inc. and various other shareholders of CGI provides for
additional preemptive rights in favor of BCE Inc. upon issuance of
Class A Subordinate Shares of CGI or securities convertible into Class A
Subordinate Shares;
- Holders of shares of IMRglobal common stock have no preemptive rights and
will have no preemptive rights after the completion of the merger;
- Class A Subordinate Shares of CGI are convertible, at the option of the
holder, into Class B Shares (multiple voting) in the event of certain
takeover bids on Class B Shares (multiple voting) on a one-for-one basis;
- Class B Shares (multiple voting) are convertible at any time, at the
option of the holder, on a one-for-one basis into Class A Subordinate
Shares;
- If BCE Inc. and any of its wholly-owned subsidiaries hold in the aggregate
at least 30% of the outstanding equity shares of CGI, Class B Shares
(multiple voting) will be automatically converted on a one-for-one basis
into Class A Subordinate Shares, thereby eliminating the multiple votes to
which Class B Shares (multiple voting) are entitled, and Class A
Subordinate Shares will be automatically re-designated as "common shares",
in each case, as of the earlier of: (a) January 5, 2004 and (b) upon
material breach (which breach is not cured) by CGI or any of
11
Messrs. Godin, Imbeau or Brassard or their respective holding companies of
their agreements with BCE Inc.;
- IMRglobal's board of directors may issue shares of preferred stock with
specified rights and privileges, but there are no shares of preferred
stock of IMRglobal currently outstanding;
- CGI's articles of incorporation authorize it to issue an unlimited number
of shares of any authorized class of shares;
- The Companies Act (Quebec) does not specifically provide for shareholder
proposals to be presented at a meeting of shareholders, however, 10% or
more of the holders of shares of the company can require the company to
call a meeting;
- The Companies Act (Quebec) does not generally provide for appraisal
rights, however a dissenting shareholder may apply to courts to protect
its rights;
- CGI's articles of incorporation do not provide for a classified board of
directors;
- As a foreign private issuer, CGI is not governed by the proxy rules under
the Exchange Act; and
- Pursuant to the options agreement among CGI, BCE Inc., Bell Canada and
various other shareholders of CGI, a number of matters, including dividend
policy, major transactions and non-arm's length transactions are subject
to the prior approval of BCE Inc.
You should also be aware that it may be difficult to effect service of
process to begin a lawsuit in a U.S. court against directors and officers of CGI
who are not residents of the U.S.
CONDITIONS TO THE MERGER (SEE PAGE 74)
We will not complete the merger unless a number of conditions are satisfied.
These include:
- approval by IMRglobal shareholders;
- clearance under applicable antitrust laws of the U.S. and other
jurisdictions and approval by other regulatory authorities, in each case
without conditions that would have a material adverse effect on CGI or on
IMRglobal or result in a violation of the civil or criminal law of that
jurisdiction;
- listing of CGI Class A Subordinate Shares to be issued pursuant to the
merger on the Toronto and New York Stock Exchanges, as described on page
58 under "The Merger--Other Effects of the Merger--Listing of Shares"; and
- receipt of opinions of tax counsel to the effect that the merger generally
will be tax-free to U.S. holders of IMRglobal common stock for U.S.
federal income tax purposes, except with respect to cash received from the
proceeds of the sale of shares representing the fractional interests in
CGI shares that IMRglobal shareholders are otherwise entitled to receive.
Special rules apply, however, to any U.S. holder that is a five-percent
transferee holder of CGI immediately after the merger.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 76)
We may terminate the merger agreement by mutual consent with the approval of
both of our boards of directors. In addition, either of us may terminate the
merger agreement if:
- we do not complete the merger by October 21, 2001, unless the failure is
caused by a material breach of the merger agreement by the company seeking
to terminate; or
- the shareholders of IMRglobal do not approve the merger agreement at the
special shareholders meeting; or
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- a governmental law or order permanently enjoins or otherwise prohibits the
merger, unless the company seeking to terminate failed to use reasonable
best efforts to prevent the law or order from being enacted or issued or
the law or order is due to a material breach by the company seeking to
terminate its obligations under the merger agreement.
Additionally, CGI may terminate the merger agreement if:
- the IMRglobal board of directors withdraws or adversely modifies or fails
to reconfirm its favorable recommendation of the merger to its
shareholders; or
- the IMRglobal board of directors recommends an alternative transaction
proposed by a third party before the receipt of IMRglobal shareholder
approval of the merger agreement; or
- IMRglobal breaches (and does not cure the breach) any of its
representations, warranties or obligations under the merger agreement and,
as a result of this breach, a condition to the merger would not be
satisfied.
IMRglobal may terminate the merger agreement if:
- prior to the receipt of IMRglobal shareholder approval of the merger
agreement, the IMRglobal board of directors resolves to accept an
alternative transaction proposal by a third party and IMRglobal pays CGI
the termination payment described below; or
- CGI breaches (and does not cure the breach) any of its representations,
warranties or obligations under the merger agreement and, as a result of
this breach, a condition to the merger would not be satisfied.
TERMINATION PAYMENTS (SEE PAGE 77)
IMRglobal will be required to pay CGI a termination payment of
$(US)13 million if:
(1) the IMRglobal board of directors recommends an alternative transaction
by a third party to its shareholders or withdraws or adversely modifies
or fails to reconfirm its favorable recommendation of the merger to its
shareholders;
(2) (a) a third party makes a proposal for an alternative transaction to
IMRglobal, (b) IMRglobal terminates the merger agreement because the
merger has not been completed by October 21, 2001, and (c) within nine
months after the termination of the merger agreement IMRglobal enters
into or completes an alternative transaction with a third party;
(3) IMRglobal's representations and warranties are inaccurate or IMRglobal
violates its obligations under the merger agreement and, in either case,
the result is that a condition to the merger cannot be satisfied, and
either (a) prior to such breach or violation a third party makes a bona
fide proposal for an alternative transaction to IMRglobal or (b) within
nine months after termination of the merger agreement IMRglobal enters
into or completes an alternative transaction; or
(4) (a) a third party makes a proposal for an alternative transaction to
IMRglobal, (b) the shareholders of IMRglobal do not vote to approve the
merger agreement and (c) within nine months after termination of the
merger agreement IMRglobal enters into or completes an alternative
transaction.
AGREEMENT REGARDING RECOMMENDATION TO SHAREHOLDERS (SEE PAGE 72)
The IMRglobal board of directors has agreed, subject to its fiduciary duties
in the event of a proposal for an alternative transaction, to recommend that
IMRglobal shareholders vote to approve the merger.
13
ACCOUNTING TREATMENT (SEE PAGE 56)
CGI will account for the merger using the purchase method under both
generally accepted accounting principles in Canada (Canadian GAAP) and generally
accepted accounting principles in the U.S. (U.S. GAAP).
APPRAISAL RIGHTS (SEE PAGE 61)
Under Florida law, holders of IMRglobal common stock do not have the right
to demand an appraisal of the value of their shares in connection with the
merger because IMRglobal common stock is listed on the Nasdaq National Market.
LISTING OF CGI CLASS A SUBORDINATE SHARES (SEE PAGE 58)
The CGI Class A Subordinate Shares you will receive upon completion of the
merger will be listed for trading on both the Toronto Stock Exchange and the New
York Stock Exchange.
U.S. FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 64)
The exchange by U.S. holders of IMRglobal common stock for CGI Class A
Subordinate Shares will generally be tax free for United States federal income
tax purposes, except with respect to cash received from the proceeds of the sale
of shares representing fractional interests in CGI shares. Special rules apply,
however, to any U.S. holder that is a five-percent transferee holder of CGI
immediately after the merger. You should consult your tax advisor on how
specific tax consequences of the merger apply to you.
REGULATORY APPROVALS (SEE PAGE 57)
We have both agreed to use reasonable best efforts to complete the merger,
including to gain clearance from antitrust and competition authorities and to
obtain other required regulatory approvals. For this purpose, CGI and IMRglobal
have also agreed to take actions and to accept restrictions or conditions, to
the extent consistent with its obligation to use reasonable best efforts, to
avoid or eliminate impediments under any antitrust or competition laws unless
those actions, restrictions or conditions would have a material adverse effect
on CGI or on IMRglobal. Although we do not expect the regulatory authorities to
raise any significant objections to the merger, we cannot assure you that we
will obtain all required regulatory approvals or that these approvals will not
require actions or contain restrictions or conditions that would be detrimental
to CGI or IMRglobal.
COMPARATIVE MARKET PRICE DATA
We present below the per share closing prices for CGI Class A Subordinate
Shares as reported on the NYSE Composite Tape and the closing price for shares
of IMRglobal common stock as quoted on the Nasdaq National Market. We also
present the closing prices for CGI Class A Subordinate Shares as reported on the
Toronto Stock Exchange. These prices are presented on the following dates:
- February 20, 2001, the last full trading day before the first public
announcement of the signing of the merger agreement; and
- June 4, 2001 the latest practicable date before the printing of this proxy
statement/prospectus.
14
The table also presents implied equivalent per share values for shares of
IMRglobal common stock by multiplying the price per CGI Class A Subordinate
Share on the two dates by the exchange ratio of 1.5974.
IMRGLOBAL SHARE
CGI CGI CLASS A PRICE EQUIVALENT
CLASS A IMRGLOBAL SUBORDINATE SHARE (CGI NYSE PRICE
SUBORDINATE SHARE SHARE $(US) $(CDN) PER IMRGLOBAL SHARE)
$(US) NYSE PRICE NASDAQ PRICE TSE PRICE $(US)
----------------- --------------- ----------------- --------------------
February 20, 2001......... 5.60 6.53 8.75 8.95
June 4, 2001.............. 5.97 9.28 9.20 9.54
Additional historical market price information for CGI Class A Subordinate
Shares and IMRglobal common stock is included under "Market Price and Dividend
Data" on pages 80 through 82.
IMRGLOBAL SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR CGI
CLASS A SUBORDINATE SHARES AND SHARES OF IMRGLOBAL COMMON STOCK BEFORE MAKING A
DECISION WITH RESPECT TO THE MERGER.
CURRENCIES AND EXCHANGE RATES
References in this document to "dollars," "$" or "$(US)" are to the currency
of the United States and references to Canadian dollars or $(Cdn) are to the
currency of Canada. Solely for your convenience, this proxy statement/prospectus
contains translations of Canadian dollar amounts into U.S. dollars at specified
rates. You should not take these translations as assurances that Canadian dollar
amounts currently represent U.S. dollar amounts or could be converted into U.S.
dollars at the rate indicated or at any other rate, at any time.
In this proxy statement/prospectus, unless otherwise stated, Canadian
dollars have been translated, solely for convenience, into U.S. dollars at a
rate of $(US)0.6636 per $(Cdn)1.00, the noon buying rate in New York City on
September 30, 2000 for cable transfers for Canadian dollars as certified for
customs purposes by the Federal Reserve Bank of New York, for all data presented
in Canadian dollars as of September 30, 2000. In addition, unless otherwise
stated, Canadian dollars have been translated, solely for convenience, into U.S.
dollars at a rate of $(US)0.6336 per $(Cdn)1.00, the noon buying rate in New
York City on March 31, 2001 for cable transfers for Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York, for all
data presented in Canadian dollars as of March 31, 2001. On June 4, 2001, the
latest practicable date for which exchange rate information was available before
the printing of this proxy statement/prospectus, the noon buying rate in New
York City for cable transfers in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York was $(US)0.6516 per $(Cdn)1.00.
These translations should not be construed as a representation that the U.S.
dollar amounts actually represent, or could be converted into, Canadian dollars
at the rates indicated.
The period end, average and range of high and low U.S. dollar/Canadian
dollar exchange rates for the five years ended September 30, 2000, and the six
months ended March 31, 2001, are presented in the section entitled "Exchange
Rates" beginning on page 80.
COMPARATIVE PER SHARE DATA
We present below audited historical year-end, unaudited historical quarterly
and unaudited pro forma per share data that reflect the completion of the merger
based upon the historical financial statements of CGI and IMRglobal. The pro
forma data are not indicative of the results of future
15
operations or the actual results that would have occurred had the merger been
completed at the beginning of the periods presented. You should read the data
presented below together with:
- the audited and unaudited historical consolidated financial statements,
including applicable notes, of CGI as at and for the year ended
September 30, 2000 and as at and for the six months ended March 31, 2001
included elsewhere in this proxy statement/prospectus;
- the audited and unaudited historical consolidated financial statements,
including applicable notes, of IMRglobal as at and for the year ended
December 31, 2000 incorporated by reference into this proxy
statement/prospectus and as at and for the six months ended March 31,
2001; and
- the unaudited pro forma condensed consolidated financial information
appearing in this proxy statement/prospectus beginning on page 90.
IMRglobal's earnings and book value per share have been restated to Canadian
GAAP based on the following:
- IMRglobal's historical audited financial position and results of operation
were converted into Canadian dollars. This was done using a rate of
$(Cdn)1.5070 to $(US)1.00 and of $(Cdn)1.5784 to $(US)1.00 for the
respective purposes of the September 30, 2000 and March 31, 2001 unaudited
pro forma condensed consolidated financial information; and
- unaudited adjustments to restate the above amounts to conform with CGI's
disclosed accounting policies applied under Canadian GAAP.
The above adjustments are described in the notes to the unaudited pro forma
condensed consolidated information.
The first, third, sixth and eighth columns of numeric data in the tables
below present historical per share amounts for CGI and IMRglobal for the year
ended and at September 30, 2000 and at and for the six months ended March 31,
2001 in the case of CGI, and for the year ended and at December 31, 2000 and at
and for the three months ended March 31, 2001, in the case of IMRglobal. The
ninth column of numeric data presents unaudited pro forma per share amounts and
the eleventh column of numeric data presents pro forma equivalent data for the
year ended September 30, 2000, respectively, based on the estimated number of
CGI shares to be issued in the merger. The thirteenth column of numeric data
presents unaudited pro forma per share amounts and the fifteenth column of
numeric data presents pro forma equivalent data, as at and for the six months
ended March 31, 2001, respectively, based on the estimated number of CGI shares
to be issued in the merger. Solely for your convenience, in the second, fourth,
tenth, twelfth, fourteenth and sixteenth columns of numeric data below we
present in U.S. dollars the CGI historical per share amount, pro forma and pro
forma equivalent amounts presented in Canadian dollars in the first, third,
ninth, eleventh, thirteenth and fifteenth columns. Solely for your convenience,
in the fifth and seventh columns below, we present in Canadian dollars the
IMRglobal historical amounts presented in U.S. dollars in the sixth and eighth
columns. Solely for your convenience, the Canadian dollars have been converted
into U.S. dollars at a rate of $(US)0.6636 per $(Cdn)1.00, and U.S. dollars have
been converted into Canadian dollars at a rate of $(Cdn)1.5070 per $(US)1.00,
the noon buying rate in New York City on September 30, 2000 for all data
presented as at and for the year ended September 30, 2000, and the Canadian
dollars have been converted into U.S. dollars at a rate of $(US)0.6336 per
$(Cdn)1.00 and U.S. dollars have been converted into Canadian dollars at a rate
of $(Cdn)1.5784 per $(US)1.00, the noon buying rate in New York City on
March 31, 2001 for all data presented as at and for the six months ended
March 31, 2001. Solely for your convenience, U.S. dollars have been converted
into Canadian dollars at a rate of $(Cdn)0.6669 per $(US)1.00, the noon buying
rate in New York City on December 31, 2000 for all data presented as at and for
the year ended December 31, 2000.
16
HISTORICAL PER HISTORICAL PER
HISTORICAL PER HISTORICAL PER IMRGLOBAL SHARE IMRGLOBAL SHARE
CGI SHARE (1) CGI SHARE (1) -------------------- --------------------
------------------- ------------------- AS AT AND FOR THE AS AT AND FOR THE
AS AT AND FOR THE AS AT AND FOR THE YEAR ENDED THREE MONTHS
YEAR ENDED SEP- SIX MONTHS ENDED DECEMBER 31, ENDED MARCH 31,
TEMBER 30, 2000 MARCH 31, 2001 2000 2001
------------------- ------------------- -------------------- --------------------
$(CDN) $(US) $(CDN) $(US) $(CDN) $(US) $(CDN) $(US)
(UNAUDITED) (UNAUDITED)
AMOUNT UNDER CANADIAN
GAAP
Earnings:
Basic................. 0.21 0.14 0.09 0.06 0.05 0.03 0.01 0.00
Diluted (1)........... 0.20 0.13 0.09 0.06 0.05 0.03 0.01 0.00
Book value (2).......... 2.46 1.63 2.81 1.78 9.81 6.54 9.47 6.00
U.S. GAAP
Earnings:
Basic................. 0.20 0.13 0.07 0.05 0.00 0.00 0.03 0.02
Diluted............... 0.20 0.13 0.07 0.05 0.00 0.00 0.03 0.02
Book value (2).......... 2.49 1.65 2.83 1.79 8.46 5.64 8.16 5.17
PRO FORMA PRO FORMA
EQUIVALENT PER EQUIVALENT PER
IMRGLOBAL SHARE IMRGLOBAL SHARE
(CGI PRO FORMA (CGI PRO FORMA
MULTIPLIED BY MULTIPLIED BY
PRO FORMA PER EXCHANGE RATIO) PRO FORMA PER EXCHANGE RATIO)
CGI SHARE (1) (1) CGI SHARE (1) (1)
------------------- ------------------- -------------------- -------------------
FOR THE YEAR FOR THE YEAR AS AT AND FOR THE AS AT AND FOR THE
ENDED SEPTEM- ENDED SEPTEM- SIX MONTHS ENDED SIX MONTHS ENDED
BER 30, 2000 BER 30, 2000 MARCH 31, 2001 MARCH 31, 2001
------------------- ------------------- -------------------- -------------------
$(CDN) $(US) $(CDN) $(US) $(CDN) $(US) $(CDN) $(US)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
AMOUNT UNDER CANADIAN
GAAP
Earnings:
Basic................. 0.13 0.09 0.21 0.14 0.02 0.01 0.03 0.02
Diluted (1)........... 0.13 0.09 0.21 0.14 0.02 0.01 0.03 0.02
Book value (2).......... 3.95 2.50 6.30 3.99
U.S. GAAP
Earnings:
Basic................. 0.11 0.08 0.18 0.12 0.00 0.00 0.01 0.00
Diluted............... 0.11 0.07 0.18 0.12 0.00 0.00 0.01 0.00
Book value (2).......... 3.96 2.51 6.33 4.01
- ----------------------------------------
(1) The treasury stock method is used for determining the dilutive effect of
options.
(2) Based on the total outstanding Class A Subordinate Shares and Class B Shares
(multiple voting) at balance sheet dates.
Neither CGI nor IMRglobal declared or paid any dividends during the periods
referred to above.
17
SELECTED HISTORICAL FINANCIAL DATA
We present below selected historical financial data of CGI and IMRglobal for
each of the years included in the five year period ended September 30, 2000 in
the case of CGI, and December 31, 2000 in the case of IMRglobal. We also present
below unaudited selected historical data for the six months ended March 31, 2001
in the case of CGI and for the three months ended March 31, 2001 in the case of
IMRglobal. We derived the selected historical financial data of each of CGI and
IMRglobal (apart from the selected historical financial data for CGI and
IMRglobal for 1996 and 1997 and the selected historical balance sheet data for
1998) from, and you should read the data in conjunction with, the annual audited
consolidated financial statements, including the notes to those financial
statements of CGI included elsewhere in this proxy statement/prospectus, and of
IMRglobal, incorporated by reference into this proxy statement/prospectus. CGI
and IMRglobal selected historical financial data for 1996 and 1997 and the
selected historical balance sheet data for 1998 have been derived from their
respective annual audited consolidated financial statements for those years,
which, in accordance with SEC rules, have not been incorporated by reference
into this proxy statement/prospectus. We derived the unaudited selected
historical data of CGI for the six months ended March 31, 2001 from CGI's
Form 6-K incorporated by reference into this proxy statement/prospectus. We
derived the unaudited selected historical data of IMRglobal for the three months
ended March 31, 2001 from IMRglobal's Form 10-Q incorporated by reference into
this proxy statement/prospectus.
CGI reports its financial results in accordance with Canadian GAAP and
IMRglobal reports its financial results in accordance with U.S. GAAP. The
significant differences between U.S. GAAP and Canadian GAAP that are relevant to
CGI's consolidated financial statements are presented in Note 15 thereto, which
presents a reconciliation to U.S. GAAP of CGI's consolidated net earnings and
shareholders' equity for the years ended September 30, 1998, 1999 and 2000.
CGI's financial statements and Annual Report on Form 40-F include non-U.S. GAAP
measures such as EBITDA, earnings before amortization of goodwill, earnings per
share before amortization of goodwill and operating cash flows. These
supplementary measures are permitted to be used in Canadian GAAP and in Canadian
securities filings. CGI's financial statements including the notes thereto are
included elsewhere in this proxy statement/prospectus.
18
SELECTED HISTORICAL FINANCIAL DATA FOR CGI
AS AT AND FOR
THE SIX MONTHS AS AT AND FOR THE
ENDED YEARS ENDED SEPTEMBER 30,
MARCH 31, --------------------------------------------------------
2001 2000 1999 1998 1997 1996
--------------- ---------- ---------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF EARNINGS DATA
CANADIAN GAAP
Revenue..................................... $ 708,161 $1,436,008 $1,409,458 $740,693 $231,916 $122,015
Earnings before amortization of goodwill
(1)....................................... 38,340 73,542 99,906 43,166 9,210 3,163
Earnings per share before amortization of
goodwill (1)(2)
Basic..................................... 0.14 0.27 0.37 0.18 0.06 0.02
Diluted (3)............................... 0.14 0.27 0.37 0.18 0.06 0.02
Net earnings................................ 25,628 55,666 83,816 34,828 7,765 2,718
Earnings per share (2)
Basic..................................... 0.09 0.21 0.31 0.15 0.05 0.02
Diluted (3)............................... 0.09 0.20 0.31 0.15 0.05 0.02
Net margin.................................. 3.6% 3.9% 5.9% 4.7% 3.3% 2.2%
U.S. GAAP
Revenue..................................... $ 708,161 $1,436,008 $1,409,458 $740,963 $231,916 $122,015
Net earnings................................ 20,424 53,864 86,050 32,794 6,125 1,803
Earnings per share (2)
Basic..................................... 0.07 0.20 0.32 0.14 0.04 0.01
Diluted................................... 0.07 0.20 0.32 0.14 0.04 0.01
Net margin.................................. 2.9% 3.8% 6.1% 4.4% 2.6% 1.5%
BALANCE SHEET DATA
CANADIAN GAAP
Total assets................................ $1,107,251 $ 920,873 $ 866,489 $744,930 $154,143 $ 72,159
Shareholders' equity........................ 815,987 677,301 563,055 474,247 72,271 40,789
Working capital............................. 131,254 164,624 97,556 63,956 16,935 18,823
Long-term debt (4).......................... 30,000 30,000 46,200 1,073 34,822 10,023
U.S. GAAP
Total assets................................ $1,111,907 $ 930,423 $ 875,551 $741,526 $149,459 $ 68,474
Shareholders' equity........................ 819,997 685,688 562,019 470,843 67,993 38,151
Working capital............................. 131,254 165,800 97,556 63,956 16,935 18,823
Long-term debt (4).......................... 30,000 30,000 46,200 1,073 34,822 10,023
- ------------------------------
(1) In Canada, the Accounting Standards Board has approved an addendum to
"Business Combinations", Section No. 1580 that permits goodwill amortization
expense to be presented net-of-tax on a separate line in the Consolidated
Statement of Earnings. This presentation is not currently permitted under
U.S. GAAP.
(2) Adjusted for 2-for-1 stock splits effective August 12 and December 15, 1997,
as well as May 21, 1998 and January 7, 2000.
(3) Effective October 1, 2000, CGI employed the treasury stock method for
determining the dilutive effect of options issued in calculating diluted
earnings per share. Information for all periods presented in the above table
have been prepared using the treasury stock method.
(4) Excludes current portion of long-term debt and obligations under capital
leases.
19
SELECTED HISTORICAL FINANCIAL DATA OF IMRGLOBAL
(U.S. GAAP)
AS AT AND FOR
THE THREE MONTHS AS AT AND FOR THE YEARS ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------------------------
2001 2000 1999 1998 1997 1996
---------------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
Revenue....................... $ 61,604 $256,172 $222,028 $170,318 $89,645 $30,988
Gross Profit.................. 24,489 101,345 92,857 80,243 39,934 13,346
Income (loss) from
operations.................. 2,707 8,754 (10,110) 28,823 16,908 5,016
Cumulative effect of change in
accounting method, net of
income taxes................ -- (2,707) -- -- -- --
Net income (loss)............. 675 185 (11,839) 19,880 12,469 2,890
Diluted earnings (loss) per
share....................... 0.02 0.00 (0.34) 0.57 0.40 0.13
Cash dividends................ -- -- -- 163 -- 1,623
Cash dividends per share...... -- -- -- -- -- 0.07
Weighted average common stock
and common stock equivalents
outstanding, assuming
dilution.................... 44,435 43,261 34,786 35,064 31,238 23,026
BALANCE SHEET DATA
Cash, cash equivalents and
marketable securities....... $ 10,963 $ 19,689 $ 37,432 $110,416 $91,452 $30,307
Working Capital............... 49,306 43,552 47,091 122,783 96,977 31,371
Total assets.................. 308,674 318,835 303,798 223,699 138,656 50,563
Long-term debt, net of current
portion..................... 31,050 30,894 985 671 918 39
Shareholders' equity.......... 227,701 231,780 234,923 174,814 114,358 41,045
Common stock outstanding at
period end, net of treasury
stock....................... 44,041 41,069 37,028 30,392 26,370 22,430
SELECTED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
CGI and IMRglobal are providing the following selected unaudited pro forma
condensed consolidated financial data to give you a better picture of what the
results of operations and financial position of the combined businesses of CGI
and IMRglobal might have looked like had the merger occurred on an earlier date.
The unaudited pro forma condensed consolidated financial information does not
take into account any synergies or cost savings, which may or are expected to
occur as a result of the merger. We are providing this information for
illustrative purposes only. This information does not purport to represent what
the results of operations or financial position of CGI would have been if the
merger had actually occurred on the earlier dates assumed. This information is
also not necessarily indicative of what CGI's future operating results or
consolidated financial position will be.
See "Unaudited Pro Forma Condensed Consolidated Financial Information"
beginning on page 90 for a more detailed explanation of this analysis.
20
BASIS OF PREPARATION
The unaudited pro forma condensed consolidated financial information was
prepared in accordance with Canadian GAAP, which differs in certain material
respects from U.S. GAAP. The significant differences between U.S. GAAP and
Canadian GAAP that are relevant to CGI's unaudited pro forma consolidated
financial information are presented in Note 4 of CGI's unaudited pro forma
condensed consolidated financial information included elsewhere in this proxy
statement/prospectus. The unaudited pro forma condensed consolidated financial
information for the year ended September 30, 2000 and as at and for the six
months ended March 31, 2001 has been derived from: (1) the audited historical
consolidated financial statements of CGI for the year ended September 30, 2000
and the unaudited consolidated financial statements as at and for the six months
ended March 31, 2001, respectively, (2) the audited historical consolidated
financial statements of IMRglobal for the year ended December 31, 2000 and the
unaudited financial statements of IMRglobal as at and for the six months ended
March 31, 2001, respectively, (3) the unaudited adjustments to conform
IMRglobal's historical financial information with CGI's disclosed accounting
policies under Canadian GAAP, and (4) the unaudited pro forma assumptions and
adjustments described in the notes to the unaudited pro forma condensed
consolidated financial information.
Solely for your convenience, unaudited pro forma condensed consolidated
financial information has been converted into U.S. dollars using a rate of
$(US)0.6636 to $(Cdn)1.00 and a rate of $(US)0.6336 to $(Cdn)1.00, the noon
buying rate in New York City, for the purposes of the September 30, 2000 and
March 31, 2001 unaudited pro forma condensed consolidated information, on those
respective dates.
CGI intends to account for the merger using the purchase method under both
Canadian and U.S. GAAP. The unaudited pro forma condensed consolidated financial
information has been prepared on this basis.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS SELECTED DATA
AND UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SELECTED DATA
The unaudited pro forma condensed consolidated statements of earnings
selected data we provide below assume that the merger took place on October 1,
1999 for the year ended September 30, 2000 and for the six months ended
March 31, 2001 and have been prepared in accordance with the methodology
described above under "--Basis of Preparation."
The unaudited pro forma condensed consolidated balance sheet selected data
we provide below assumes that the merger took place on March 31, 2001, and has
been prepared in accordance with the methodology described above under "--Basis
of Preparation."
21
SELECTED UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL DATA
FOR AS AT AND FOR THE FOR THE AS AT AND FOR THE
THE YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, 2000 MARCH 31, 2001 SEPTEMBER 30, 2000 MARCH 31, 2001
------------------ ----------------- ------------------ -----------------
$(CDN) $(CDN) $(US) $(US)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF EARNINGS DATA
CANADIAN GAAP
Revenue..................... $1,822,059 $ 889,492 $1,209,064 $ 563,541
Earnings before amortization
of goodwill (1)........... 90,607 33,298 60,124 21,097
Earnings per share before
amortization of goodwill
Basic..................... 0.26 0.09 0.17 0.06
Diluted (2)............... 0.26 0.09 0.17 0.06
Net earnings................ 45,749 6,166 30,357 3,907
Earnings per share
Basic..................... 0.13 0.02 0.09 0.01
Diluted (2)............... 0.13 0.02 0.09 0.01
Net margin.................. 2.5% 0.7% 2.5% 0.7%
U.S. GAAP
Revenue..................... $1,822,059 $ 889,492 $1,209,064 $ 563,541
Net earnings................ 39,277 922 26,063 583
Earnings per share
Basic..................... 0.11 0.00 0.08 0.00
Diluted................... 0.11 0.00 0.07 0.00
Net margin.................. 2.2% 0.1% 2.2% 0.1%
BALANCE SHEET DATA
CANADIAN GAAP
Total assets................ $1,941,514 $1,230,052
Shareholders' equity........ 1,445,813 915,999
Working capital............. 209,031 132,432
Long-term debt (3).......... 75,805 48,026
U.S. GAAP
Total assets................ $1,945,456 $1,232,549
Shareholders' equity........ 1,449,823 918,539
Working capital............. 209,650 132,824
Long-term debt (3).......... 75,805 48,026
- ------------------------
(1) In Canada, the Accounting Standards Board has approved an addendum to
"Business Combinations," Section No. 1580 that permits goodwill amortization
expense to be presented net-of-tax on a separate line in the Consolidated
Statement of Earnings. This presentation is not currently permitted under
U.S. GAAP.
(2) The treasury stock method is used for determining the dilutive effect of
options issued.
(3) Excludes current portion of long-term debt and obligations under capital
leases.
WHERE YOU CAN FIND MORE INFORMATION
CGI files annual and special reports and other information and IMRglobal
files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information on file at the SEC's public reference room located at 450 Fifth
22
Street, NW, Washington, D.C. 20549 or at one of the SEC's other public reference
rooms in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. The SEC
filings are also available to the public from commercial document retrieval
services. The IMRglobal filings, as well as the registration statement of which
this proxy statement/prospectus forms a part, are available at the Internet
world wide web site maintained by the SEC at WWW.SEC.GOV.
CGI has filed a registration statement on Form F-4 to register with the SEC
the CGI Class A Subordinate Shares which IMRglobal shareholders will receive in
connection with the merger. This proxy statement/prospectus is a part of the
registration statement on Form F-4 and constitutes a prospectus of CGI, as well
as being a proxy statement of IMRglobal for its special meeting.
The SEC permits CGI and IMRglobal to "incorporate by reference" information
into this proxy statement/prospectus. This means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this proxy statement/prospectus, except for any information
superseded by information contained directly in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that have been previously filed with the SEC. These documents
contain important information about CGI and IMRglobal and their financial
conditions.
CGI SEC FILINGS (FILE NO 1-14858) PERIOD OR FILING DATE
Report on Form 6-K June 4, 2001
Report on Form 6-K June 4, 2001
Report on Form 6-K May 16, 2001
Report on Form 6-K May 16, 2001
Report on Form 6-K May 16, 2001
Report on Form 6-K May 16, 2001
Quarterly Report on Form 6-K Six months ended March 31, 2001
Report on Form 6-K May 14, 2001
Report on Form 6-K April 30, 2001
Report on Form 6-K April 10, 2001
Quarterly Report on Form 6-K Three months ended March 31, 2001
Report on Form 6-K February 28, 2001
Report on Form 6-K February 28, 2001
Report on Form 6-K February 14, 2001
Report on Form 6-K February 14, 2001
Report on Form 6-K January 31, 2001
Report on Form 6-K January 31, 2001
Report on Form 6-K January 31, 2001
Report on Form 6-K January 17, 2001
Report on Form 6-K January 12, 2001
Report on Form 6-K January 2, 2001
Quarterly Report on Form 6-K Three months ended December 31, 2000
Annual Report on Form 40-F Year ended September 30, 2000
IMRGLOBAL SEC FILINGS (FILE NO. 0-28840) PERIOD OR FILING DATE
Quarterly Report on Form 10-Q Three months ended March 31, 2001
Annual Report on Form 10-K Year ended December 31, 2000
23
The financial statements which form part of CGI's Annual Report on
Form 40-F for the year ended September 30, 2000 are not incorporated by
reference in this proxy statement/prospectus. Consolidated financial statements
of CGI appear in this joint proxy statement/prospectus at page F-1.
CGI and IMRglobal also incorporate by reference into this proxy
statement/prospectus additional documents that they may file with the SEC from
the date of this proxy statement/prospectus to the date of the IMRglobal special
meeting. These include reports such as Annual Reports on Form 10-K and
Form 40-F, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, any
Reports on Form 6-K designated as being incorporated by reference into this
proxy statement/prospectus, as well as proxy statements filed by IMRglobal.
The CGI Class A Subordinate Shares are traded on the New York Stock Exchange
and the Toronto Stock Exchange. You may inspect any reports and other
information filed with the SEC by CGI at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. You may inspect any periodic reports, proxy
statements and other information filed with the SEC by IMRglobal at the offices
of the NASD at 1735 K Street NW, Washington, DC 20006-1500.
If you are a CGI or IMRglobal shareholder, you may not have been sent some
of the documents incorporated by reference, but you can obtain any of them
through CGI or IMRglobal as described below, the SEC or the SEC's Internet world
wide web site as described above. Documents incorporated by reference are
available without charge, excluding all exhibits unless an exhibit has been
specifically incorporated by reference into this proxy statement/prospectus.
Shareholders may obtain documents incorporated by reference into this proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
CGI Group Inc. IMRglobal Corp.
1130 Sherbrooke Street West 100 South Missouri Avenue
Montreal, Quebec Clearwater, Florida 33756
Canada H3A 2M8 Tel: (727) 467-8163
Tel: (514) 841-3230 Attention: Investor Relations
Attention: Ronald White
Director, Investor Relations
If you would like to request documents from CGI or IMRglobal, please do so
by June 29, 2001 to receive them before the IMRglobal special meeting.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. NO ONE HAS
BEEN AUTHORIZED TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN, OR INCORPORATED BY REFERENCE INTO, THIS PROXY
STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED JUNE 8, 2001. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN, OR INCORPORATED BY
REFERENCE INTO, THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THAT DATE. NEITHER OUR MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO
IMRGLOBAL SHAREHOLDERS NOR THE ISSUANCE BY CGI OF CLASS A SUBORDINATE SHARES IN
CONNECTION WITH THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
INFORMATION CONTAINED IN THIS PROXY STATEMENT/ PROSPECTUS REGARDING CGI HAS BEEN
PROVIDED BY CGI, AND INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
REGARDING IMRGLOBAL HAS BEEN PROVIDED BY IMRGLOBAL.
24
RISK FACTORS
You should consider the following matters in deciding whether to vote in
favor of the merger. You should also consider the other information included in
this document. These matters have been grouped under two separate headings:
"Risks Relating to the Merger," which discuss the risks of combining our
companies, risks under the merger agreement and potential conflicts of interest,
and "Industry and Business Risks," which discuss the risks of the industry and
our business. See "Forward-Looking Statements" on page 34.
RISKS RELATING TO THE MERGER
THE PERFORMANCE OF THE COMBINED COMPANY WILL BE AFFECTED BY ITS ABILITY TO
RETAIN KEY PERSONNEL.
Because our respective employees and their skills and relationships with
clients are among our most important assets, the performance of the combined
company will be affected by its ability to retain these employees after the
completion of the merger.
We cannot assure you that employees of IMRglobal or CGI, including senior
executives and key employees, will not terminate their employment in connection
with or after completion of the merger. If the combined company is unable to
retain IMRglobal's and CGI's senior executives and key employees, or attract
qualified personnel to replace any employees who leave, the business of the
combined company may be materially and adversely impacted.
WE MAY LOSE EXISTING CLIENTS AS A RESULT OF THE MERGER.
The performance of the combined company will be affected by its ability to
retain the existing clients of CGI and IMRglobal and attract new clients. In
particular, in order to retain existing clients the combined company likely
must: (1) maintain the existing levels of service; (2) eliminate any confusion
in the marketplace concerning continuity of service and (3) assure clients that
existing technology will continue to be supported. Additionally, because of the
combined company's larger number of clients there is a greater likelihood that
we will experience conflicts of interest between clients or potential clients
that will limit our ability to expand our business. If the combined company
fails to maintain existing clients or attract new clients, its revenues and
profitability may be adversely impacted.
WE MAY NOT REALIZE THE COST SAVINGS AND OTHER BENEFITS WE EXPECT FROM THE
MERGER.
The combined company's ability to successfully realize cost savings and
benefits resulting from the merger, and the timing of this realization may be
affected by a variety of factors, including:
- its broad geographic areas of operations and the resulting potential
complexity of implementing cost savings and realizing synergies;
- the failure to fully develop or carry out its cost savings implementation
plans; and
- unexpected events, including major changes in the IT services industry.
Whether the anticipated benefits of the merger are ultimately achieved will
depend upon a number of factors, including our ability to integrate the
operations of our companies and achieve operating efficiencies, economies of
scale and the ability of the combined company to capitalize on its combined
asset base and strategic position.
If the cost savings or benefits we expect are not realized or are delayed,
the market price of the CGI Class A Subordinate Shares could be adversely
affected.
25
U.S. SHAREHOLDERS OF CGI MAY HAVE DIFFICULTY ENFORCING CIVIL LIABILITIES
AGAINST CGI AND ITS AFFILIATES.
CGI is a Canadian corporation with its principal place of business in
Montreal, Quebec, Canada. Currently, all of CGI's directors and executive
officers, and its accountants, are residents of Canada and/or are organized
under the laws of Canada or a province thereof and all or a substantial portion
of the assets of such persons and of CGI are located outside the U.S.
Consequently, it may be difficult for U.S. investors to effect service within
the U.S. upon CGI, its directors or officers, or to realize in the U.S. upon
judgments of courts of the U.S. predicated upon civil liabilities under the
Securities Act. In addition, investors should not assume that courts in Canada
(1) would enforce judgments of U.S. courts obtained in actions against CGI or
such persons predicated upon the civil liability provisions of the U.S. federal
securities laws or the securities or blue sky laws of any state within the U.S.
or (2) would enforce, in original actions, liabilities against CGI or such
persons predicated upon the U.S. federal securities laws or any state securities
or blue sky laws.
CERTAIN DIRECTORS AND EXECUTIVE OFFICERS OF IMRGLOBAL MAY BE DEEMED TO HAVE
CONFLICTS OF INTERESTS THAT MAY INFLUENCE THEM TO SUPPORT OR APPROVE THE MERGER.
Certain officers and directors of IMRglobal are participating in
arrangements that provide them with interests in the merger that are different
from, or in addition to, those of other IMRglobal shareholders, including the
following:
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
COVERAGE. CGI has agreed that the indemnification provisions of the
articles of incorporation and bylaws of IMRglobal immediately prior to the
effective time of the merger will not be amended, repealed or otherwise
modified for a period of six years from the effective time of the merger in
any manner that would adversely affect the rights of individuals who, at the
effective time of the merger, were directors, officers, employees or agents
of IMRglobal, and has agreed, for a period of six years after the effective
time of the merger, to procure directors' and officers' liability insurance
with coverage and in amounts no less favorable than IMRglobal's current
coverage; provided that CGI is not required to procure any coverage in
excess of the amount that can be obtained at a premium of 250% of the
current annual premium paid by IMRglobal;
VESTING OF STOCK OPTIONS HELD BY CERTAIN DIRECTORS. The vesting of
11,250 stock options to acquire shares of IMRglobal's common stock that are
held by each of two directors of IMRglobal, Charles C. Luthin and Jeffery S.
Slowgrove, otherwise vesting on May 26, 2002 at an exercise price of
$(US)15.50 per share, will be accelerated as a result of the merger. Upon
completion of the merger, all outstanding options under the directors stock
option plan of IMRglobal will become options to purchase CGI Class A
Subordinate Shares and will remain exercisable until December 31, 2001;
GRANT OF STOCK OPTIONS TO SENIOR MANAGEMENT. CGI has agreed that after
completion of the Merger, CGI will grant members of senior management of
IMRglobal options to purchase an aggregate of 1,000,000 CGI Class A
Subordinate Shares (the options will be granted as determined by CGI and are
intended to incentivize and encourage these persons to remain with the
combined company, and to facilitate the integration of IMRglobal with CGI by
aligning the interests of these persons with the interests of CGI following
the merger);
VESTING OF STOCK OPTIONS HELD BY DIRECTORS AND OFFICERS UPON
TERMINATION. Under the terms of IMRglobal's stock option plans, if the
employment of any director or employee is terminated without cause within
12 months of the completion of the merger, the stock options held by such
directors and employees will automatically vest and become exercisable;
26
EMPLOYMENT AGREEMENT WITH IMRGLOBAL'S CHIEF EXECUTIVE OFFICER. In
connection with the merger, IMRglobal's Chief Executive Officer, Satish K.
Sanan, has entered into a new employment agreement and certain related
agreements with IMRglobal and CGI that will become effective at the time the
merger is completed and provide for, among other things, (1) a two year
term, with automatic one year renewals; (2) the forgiveness of the
$(US)5.0 million loan (and any accrued interest) to Mr. Sanan from IMRglobal
or a bonus payment to Mr. Sanan in an amount equal to the loan which will be
used to repay the loan; (3) an annual base salary of $(US)500,000; (4) an
annual financial bonus of up $(US)500,000; (5) the grant of employee stock
options to purchase CGI Class A Subordinate Shares; (6) the immediate
vesting of all stock options granted to Mr. Sanan prior to the completion of
the merger in the event he is terminated without cause (options for
IMRglobal shares otherwise vesting as to 34,000 shares on May 10, 2002 at
$17.625 per share, 50,000 shares on March 16, 2002 at $13.1875 per share and
50,000 shares on March 16, 2003 at $13.1875 per share); (7) the provision of
insurance benefits, car allowances, and the payment each year of up to
$(US)106,020 in premiums on life insurance policies for the benefit of
Mr. Sanan; (8) if he is an employee of CGI at such time, the board of
directors of CGI will either appoint Mr. Sanan to the board of directors to
fill any vacancy which occurs or, if no such vacancy occurs, nominate
Mr. Sanan for election as a CGI director at CGI's next annual meeting of
shareholders expected to be held in January 2002; and (9) the payment to
Mr. Sanan of his base salary, insurance benefits and car allowances for the
remainder of the then current term of his employment agreement if he is
terminated without cause.
EMPLOYMENT AGREEMENT WITH CERTAIN EXECUTIVE OFFICERS OF IMRGLOBAL. In
connection with the merger and to induce continued employment, CGI and
IMRglobal entered into amendments to the existing employment agreements
between IMRglobal and each of Vincent Addonisio, IMRglobal's Executive Vice
President and Chief Administrative Officer, and Philip Shipperlee,
IMRglobal's President of European Operations. These amendments provide for
the forgiveness of loans provided by IMRglobal to each individual to
purchase shares of IMRglobal common stock. (Each loan is $(US)234,500 plus
accrued interest of approximately $(US)50,000 on each loan.) In the event
that either individual terminates his employment within six months of the
merger, CGI has the right to claim the forgiven amount from such individual.
AGGREGATE DEBT FORGIVENESS OF DIRECTORS AND EXECUTIVE OFFICERS OF
IMRGLOBAL. In connection with the merger including the debt forgiveness
described above, IMRglobal insiders will receive debt forgiveness of
approximately $(US)5.6 million, in the aggregate.
Accordingly, the directors and officers of IMRglobal receiving these
benefits may have been more likely to vote to adopt the merger agreement and to
approve the merger than if they did not have these interests. IMRglobal
shareholders should consider whether these interests may have influenced these
directors and officers to support or recommend the merger. You can read more
about these interests under the heading "The Merger--Conflicts of Interest
between Directors and Officers of IMRglobal and IMRglobal Shareholders in the
Merger."
THE MARKET PRICE OF THE CGI CLASS A SUBORDINATE SHARES MAY BE SUBJECT TO
DOWNWARD PRESSURE FOR A PERIOD OF TIME AS A RESULT OF SALES OF IMRGLOBAL COMMON
STOCK AND CGI SHARES BY IMRGLOBAL SHAREHOLDERS.
In connection with the merger, shareholders of IMRglobal may sell a
significant number of shares of IMRglobal common stock or the CGI Class A
Subordinate Shares they will receive upon completion of the merger. These sales
could adversely affect the market price for the CGI Class A Subordinate Shares
for a period of time before and after completion of the merger. Shareholders of
IMRglobal who may sell shares in connection with the merger include:
- some U.S. mutual funds, state pension funds and other investors who are
not permitted to hold equity securities of non-U.S. companies; and
27
- employees of IMRglobal who hold IMRglobal common stock and currently
vested options.
THE VALUE OF CGI CLASS A SUBORDINATE SHARES YOU WILL RECEIVE IN THE MERGER
DEPENDS ON THE MARKET PRICE OF THE CGI CLASS A SUBORDINATE SHARES AT THE
COMPLETION OF THE MERGER. THERE IS A FIXED EXCHANGE RATIO.
The number of CGI Class A Subordinate Shares that you will receive in the
merger for each share of IMRglobal common stock is fixed at 1.5974. Because the
market price of CGI Class A Subordinate Shares will fluctuate, the value at the
time of the completion of the merger of the consideration you will receive will
depend on the market price at that time. The market prices of CGI Class A
Subordinate Shares and IMRglobal common stock, and the value of CGI Class A
Subordinate Shares relative to IMRglobal common stock, may be substantially
different on the date the merger agreement was signed, the date of this proxy
statement/prospectus, the date of the special meeting of the IMRglobal
shareholders, and the date the merger is completed. These market prices may vary
depending upon changes in the business, operations or prospects of CGI and
IMRglobal, market assessments of the likelihood that the merger will be
consummated and the timing thereof, general market, economic and industry
conditions, and other factors both within and beyond the control of CGI and
IMRglobal. There can be no assurance of the value at the time of the merger of
CGI Class A Subordinate Shares you will receive for your IMRglobal shares in the
merger. In addition, the value of CGI Class A Subordinate Shares will fluctuate
following completion of the merger. For historical and current market prices of
the CGI Class A Subordinate Shares, see "Market Price and Dividend Data."
IMRGLOBAL MAY BE REQUIRED TO PAY CGI A TERMINATION FEE IF THE MERGER
AGREEMENT IS TERMINATED UNDER CERTAIN CIRCUMSTANCES RELATING TO THIRD PARTY
PROPOSALS TO ACQUIRE IMRGLOBAL.
The termination fee provisions in the merger agreement may discourage
alternative proposals from being made to IMRglobal by third parties. Those
termination fee provisions, which are described in detail on page 76 under the
heading "The Merger Agreement--Termination and Effects of Termination", require
IMRglobal to pay CGI a termination fee of $(US)13 million if the merger
agreement with CGI is terminated in any one of three circumstances and, within
nine months of termination, IMRglobal enters into a merger agreement or
completes a merger in respect of an alternative transaction.
FOLLOWING THE MERGER WE MAY BE INFLUENCED BY CERTAIN SHAREHOLDERS.
BCE Inc., directly or indirectly, currently owns shares of CGI representing
approximately 30.4% of the voting power of all voting shares of CGI. Also,
Messrs. Godin, Imbeau and Brassard and their holding companies own shares of CGI
which currently represent approximately 46.2% of the voting power of all CGI
voting shares. As a result, they will have the ability to influence the outcome
of elections of directors and other matters presented for approval to CGI's
shareholders. In addition, CGI has contractual arrangements with BCE Inc. and
certain other shareholders of CGI, pursuant to which certain matters, including
dividend policy, major transactions (including changes of control), changes in
certain executive officers of CGI, and non-arm's length transactions are subject
to the prior approval of BCE Inc. This concentration of ownership and
contractual arrangement could have the effect of preventing a change of control
of CGI or otherwise limiting the price investors may be willing to pay in the
future for Class A Subordinate Shares.
INDUSTRY AND BUSINESS RISKS
WE OPERATE, AND THE COMBINED COMPANY WILL OPERATE, IN A HIGHLY COMPETITIVE
INDUSTRY.
We each operate in a highly competitive industry. Certain of the companies
which compete with CGI and IMRglobal have longer operating histories, larger
client bases, longer relationships with their clients, greater brand or name
recognition, and greater financial and other resources than the company
28
resulting from the merger will have. As a result, our competitors may be in a
stronger position to respond more quickly to new or emerging technologies and
changes in client requirements and to devote greater resources than we can to
the development, promotion and sale of their services. Competitors could lower
their prices, potentially forcing us to lower our prices and suffer reduced
operating margins. We cannot assure you that the combined company will not
encounter increased competition in the future that would adversely affect its
operations.
THE COMBINED COMPANY'S PERFORMANCE WILL BE AFFECTED BY CHANGES IN THE
AMOUNTS SPENT ON IT SERVICES AND CAPITAL EXPENDITURES BY CLIENTS OF CGI AND
IMRGLOBAL AND BY POTENTIAL NEW CLIENTS.
Currently, the performance of each of CGI and IMRglobal is affected by the
general demand for IT services by clients and potential clients. This will
continue to be true after the merger. Therefore, any significant decrease in
demand for the services of the combined company resulting from reductions in the
IT budgets of clients will adversely affect the combined company. The demand for
IT services is, in part, affected by general economic conditions as well as
specific industry conditions affecting our clients. An economic slowdown or
recession may cause our clients to reduce or defer their expenditures on IT
services.
CGI'S STRATEGIC ALLIANCE WITH BCE INC. MAY CREATE BUSINESS RISKS AS WELL AS
OPPORTUNITIES.
BCE Inc. is a telecommunications company operating in Canada and other
countries. BCE Inc., directly or indirectly, currently owns shares of CGI
representing approximately 30.4% of the voting power of all voting shares of
CGI. As more fully described in the section beginning on page 151 entitled
"Related Parties and Certain Transactions", CGI delivers a wide range of IT
services to BCE Inc. and its related companies, ranging from full or partial
outsourcing of IS/IT services, to consulting and systems integration services,
and has other business relationships with BCE Inc. The terms of the contracts
which form part of this strategic relationship between CGI and BCE and its
related companies were negotiated at arm's length. For the years ended
September 30, 1998, 1999 and 2000, revenues attributable to these contracts
accounted for 18.9%, 37.4% and 39.9% of CGI's total gross revenue, respectively.
This strategic alliance is material to CGI, and a loss of, or a substantial
decrease in, this business could have a material adverse effect on CGI. Also,
competitors of BCE and its affiliates, including Bell Canada, may be reluctant
to engage in business with CGI, or certain significant projects with such
competitors may be subject to approval by BCE Inc., as provided by the terms of
an options agreement among CGI, BCE, Bell Canada and various other shareholders
of CGI.
THE COMBINED COMPANY'S REVENUES AND OPERATING RESULTS MAY FLUCTUATE FROM
QUARTER TO QUARTER, AND FLUCTUATIONS IN OPERATING RESULTS COULD CAUSE CGI'S
STOCK PRICE TO DECLINE.
Our individual operating results have fluctuated in the past and the
combined company's revenue and operating results may fluctuate in the future as
a result of a variety of factors, many of which will be outside of the combined
company's control. In future quarters, our operating results may be below the
expectations of public market analysts or investors, and the price of our
Class A Subordinate Shares may decline. Factors that could cause quarterly
fluctuations include many of the risk factors discussed elsewhere in this proxy
statement/prospectus, and also include:
- the beginning and ending of significant contracts during a quarter;
- the number, size, timing and scope of client assignments;
- the loss of key consultants, which could cause clients to end their
relationships with us;
- the accuracy of our project estimates;
- unanticipated project terminations, delays or deferrals;
- the loss of one or more significant clients;
29
- fluctuations in the information technologies services market;
- regulatory and judicial actions;
- fluctuations in the value of foreign currencies versus the U.S. dollar or
Canadian dollar; and
- general economic conditions.
Because a significant portion of our expenses are relatively fixed, a
variation in the number of client assignments or the timing of the initiation or
the completion of client assignments may cause significant variations in
operating results from quarter to quarter and could result in losses. To the
extent the addition of consultant employees is not followed by corresponding
increases in revenues, we would incur additional expenses that would not be
matched by corresponding revenues. Therefore, our profitability would decline
and we could potentially experience losses. In addition, our stock price would
likely decline.
THE PRICE OF CGI CLASS A SUBORDINATE SHARES MAY BE VOLATILE.
The trading price of CGI Class A Subordinate Shares fluctuates
significantly, and may be further affected by market factors, such as:
- the depth and liquidity of the market for our Class A Subordinate Shares;
- investor perception of us and the industries in which we operate;
- changes in earnings estimates or buy/sell recommendations by analysts; and
- general financial and other market conditions.
In addition, public stock markets have experienced, and are currently
experiencing, significant price and trading volume volatility, particularly in
the technology sector of the market. This volatility has significantly affected
the market prices of securities of many companies for reasons frequently
unrelated to or disproportionately impacted by the operating performance of
these companies. These broad market fluctuations may adversely affect the market
price of our Class A Subordinate Shares. As a result, we may be unable to raise
capital or use our stock to acquire businesses on attractive terms and investors
may be unable to resell their Class A Subordinate Shares at or above their
purchase price.
WE MAY LOSE LARGE CLIENTS OR SIGNIFICANT CLIENT ENGAGEMENTS.
If we lose a major client or large client engagement, our revenues will be
adversely affected. We perform varying amounts of work for specific clients from
year to year. A major client in one year may not use our services in another
year. In addition, we may derive revenue from a major client that constitutes a
large portion of total revenue for particular quarters. If we lose any major
clients or any of our clients cancel or significantly reduce the scope of a
large client engagement, our business, financial condition and results of
operations could be materially and adversely affected. Consequently, you should
not predict or anticipate our future revenue based upon the number of clients we
currently have or the number and size of our existing client engagements.
WE MAY BE UNABLE TO COLLECT OUR ACCOUNTS RECEIVABLE.
A high percentage of our current assets at any given time are accounts
receivable. If we are unable to collect these amounts due to disputes with
customers or default by the parties owing us these amounts, our operating cash
flows and earnings may be reduced.
30
WE MUST CONTINUE TO ATTRACT AND RETAIN QUALITY CONSULTANTS, AND OUR
INABILITY TO DO SO COULD IMPAIR OUR ABILITY TO SERVICE EXISTING ENGAGEMENTS OR
UNDERTAKE NEW ENGAGEMENTS, RESULTING IN A DECLINE IN OUR REVENUES AND INCOME.
We must attract a significant number of new consultants to implement our
growth plans. The number of potential consultants that meet our hiring criteria
is relatively small, and we face significant competition for these consultants
from our direct competitors and others in the IT industry. Competition for these
consultants may result in significant increases in our costs to retain the
consultants, which could reduce our margins and our profitability. In addition,
we will need to attract consultants in international locations, principally
Europe and India, to support our international growth plans. Our inability to
recruit new consultants and retain existing consultants could impair our ability
to service existing engagements or undertake new engagements. If we are unable
to attract and retain consultants, our revenues and our profitability could
decline.
IF WE DO NOT CONTINUALLY ENHANCE OUR SERVICES TO MEET THE CHANGING NEEDS OF
OUR CUSTOMERS, WE MAY LOSE FUTURE BUSINESS TO OUR COMPETITORS.
We believe that our future success will depend upon our ability to enhance
our existing services and to introduce new services to meet the requirements of
our customers in a rapidly developing and evolving market. Our present or future
services may not satisfy the needs of the IT services market. If we are unable
to anticipate or respond adequately to customer needs, we may lose business and
our financial performance will suffer.
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION ACTIVITY.
The IT services industry is undergoing significant consolidation and change.
We have engaged in a number of significant acquisitions as part of our growth
and business development strategy. There can be no assurance that we will be
able to identify appropriate acquisition candidates in the future, that any
identified candidates will be acquired or that acquired businesses will be
integrated effectively or prove profitable.
Also, industry consolidation or the formation of joint ventures or alliances
could reduce our client base, reduce the number of potential clients that we can
target or decrease the demand for its services. A merger or acquisition of one
of our clients may result in the elimination, postponement or reduction of
outsourced IT services utilized by that newly combined company.
ANY DELAY OR INABILITY TO INTEGRATE ACQUIRED BUSINESSES COULD IMPAIR OUR
OPERATING RESULTS.
CGI has grown, and plans to continue to grow, in part by acquiring other
businesses in its industry. Since July 1, 2000, CGI has acquired six companies
(excluding IMRglobal). Our future success is dependent on our ability to
integrate our past and future acquisitions into one enterprise with a common
business and operating plan. We must also monitor the performance of our
acquired businesses. Our acquisitions involve a number of risks, including:
- diversion of management's attention from other business concerns;
- failure to effectively assimilate the acquired businesses and their
technology, personnel and customers;
- failure of the acquired businesses to achieve the results we expect,
including increasing revenues, realizing cost savings and implementing
best practices;
- the loss of key customers or employees from either our current business or
the acquired businesses;
- our inability to integrate the accounting, purchasing or marketing methods
of the acquired businesses on a timely basis;
31
- risks associated with unanticipated events or liabilities, and
- customer dissatisfaction or performance problems at the acquired
businesses.
We may not be successful in our efforts to integrate acquired businesses or
to monitor their performance. If we are unable to do so, or if we experience
delays or unusual expenses in doing so, our operating costs may be higher than
anticipated and earnings may be lower than anticipated which could have a
material adverse effect on our businesses, financial condition and results of
operations.
OUR ACQUISITION ACTIVITIES COULD DILUTE YOUR HOLDINGS IN OUR COMPANY.
Holdings of existing shareholders will be diluted if equity securities are
issued in connection with any acquisition. If we incur debt in order to effect
any acquisition, we will incur debt service costs, and we expect that we would
enter into agreements that will restrict our operations in some respects. If we
incur indebtedness, our shareholders will also rank junior to the holders of the
indebtedness in connection with any liquidation of our company.
For the years ended September 30, 1998, 1999 and 2000, and for the six-month
period ended March 31, 2001, CGI issued the following Class A Subordinate Shares
(or securities convertible into Class A Subordinate Shares) in connection with
acquisitions:
1998........................................................ 39.8 million
1999........................................................ None
2000........................................................ 5.6 million
Six-month period ended March 31, 2001....................... 14.3 million
Whether CGI issues shares in connection with any possible future
acquisitions will depend upon many factors including the availability of
attractive acquisition opportunities, the terms of such acquisition, the market
value of CGI equity at the time, and other facts and circumstances existing at
the time of those transactions. Consequently, CGI cannot currently determine the
amount of any possible future issuances in acquisitions. As of the date of this
proxy statement/prospectus, CGI has not entered into any agreements in
connection with a possible material future acquisition of a company, nor does it
have any current plan in respect of any possible specific material future
acquisition. CGI undertakes no obligation to update this disclosure, other than
as required by law.
IF WE FAIL TO MEET CLIENT EXPECTATIONS IN THE PERFORMANCE OF OUR SERVICES
AND THE PROVISION OF SOLUTIONS, WE COULD DAMAGE OUR REPUTATION AND HAVE
DIFFICULTY ATTRACTING NEW BUSINESS.
Our services and solutions often involve complex information systems and
software, which are critical to our clients' operations. Our failure to meet
client expectations in the provision of appropriate solutions, and the
performance of our services, including the quality, cost and timeliness of our
services, may damage our reputation in the IT services industry and adversely
affect our ability to attract and retain clients. If a client is not satisfied
with our solutions or services, we will generally spend additional human and
other resources at our own expense to ensure client satisfaction. Such
expenditures will typically result in a lower margin on such engagements and
could materially adversely effect our business, financial condition and results
of operations.
In the course of providing our solutions and services, we will often
recommend the use of other software and hardware products. These products may
not perform as expected or may contain defects. If this occurs, our reputation
could be damaged and we could be subject to liability. We attempt contractually
to limit our exposure to potential liability claims. Such limitations may not
always be effective. A successful liability claim brought against us may
adversely affect our reputation in the IT services industry and could have a
material adverse effect on our business, financial condition and
32
results of operations. Although we maintain liability insurance, such insurance
may not always provide adequate coverage for successful claims against us.
WITH THE INCREASED INTERNATIONAL BUSINESS VOLUME, WE WILL BE EXPOSED TO
GREATER FOREIGN CURRENCY EXCHANGE RISKS, WHICH COULD ADVERSELY IMPACT OUR
OPERATING RESULTS.
Some of our international engagements are denominated in the local currency
of our clients. Expenses that we incur in delivering these services, consisting
primarily of consultant compensation, are often denominated in Canadian dollars.
To the extent that the value of a currency in which our billings are denominated
decreases in relation to the Canadian dollar or another currency in which our
expenses are denominated, our revenues, operating results and financial
condition could be harmed. We may hedge our foreign currency exposure from time
to time, but hedging may not be effective.
OUR INTERNATIONAL OPERATIONS ALSO CREATE SPECIALIZED RISKS THAT CAN
NEGATIVELY AFFECT US.
These risks include:
- difficulties in creating international market demand for our services;
- difficulties and costs of tailoring our services to each individual
country's IT needs;
- unfavorable pricing and price competition;
- longer payment cycles in some countries and difficulties in collecting
international accounts receivables;
- difficulties in enforcing contractual obligations and intellectual
property rights;
- adverse tax consequences;
- increased costs associated with maintaining international marketing
efforts and offices;
- adverse changes in regulatory requirements;
- economic instability;
- potential foreign tax consequences, including taxes payable on the
repatriation of earnings from our India operations;
- compliance with employment laws in foreign countries, which may be more
stringent than employment laws in the U.S.; and
- unexpected changes in the local and regional political climate in India
and the possible reactions to those changes by the international
community, including economic sanctions.
Any one or all of these factors may cause increased operating costs, lower
than anticipated financial performance and may materially adversely affect our
business, financial condition and results of operations.
IF WE FAIL TO DEVELOP LONG-TERM RELATIONSHIPS WITH CUSTOMERS, OUR SUCCESS
COULD BE JEOPARDIZED.
A substantial majority of our business is derived from repeat customers. Our
future success depends to a significant extent on our ability to develop
long-term relationships with our customers. We may be unable to develop new
customer relationships and our relationships with new or existing customers may
be unsuccessful. Our inability to build long-term customer relations could
result in declines in our revenues and profitability.
33
OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD HARM OUR
COMPETITIVE POSITION AND OUR FINANCIAL PERFORMANCE OR EXPOSE US TO LITIGATION
RISKS.
We rely upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect our
proprietary rights and the proprietary rights of third parties from whom we
license intellectual property. There can be no assurance that the steps we have
taken to limit distribution of confidential and proprietary information will be
adequate to deter misappropriation of confidential or proprietary information or
that we will be able to detect unauthorized use and take appropriate steps to
enforce our intellectual property rights.
We may be subject to the risk of claims alleging infringement of third-party
intellectual property rights. Any claims could require us to spend significant
sums in litigation, pay damages, develop non-infringing intellectual property or
acquire licenses to the intellectual property that is the subject of asserted
infringement.
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus, and the documents we are incorporating by
reference, contain forward-looking statements about CGI, IMRglobal and the
combined company, which we intend to be covered by the safe harbor for
"forward-looking statements" provided by the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are statements that are not
historical facts and include financial projections and estimates and their
underlying assumptions; statements regarding plans, objectives and expectations
with respect to future operations, products and services; and statements
regarding future performance. This includes information relating to:
- cost savings, benefits, revenues and earnings estimated to result from the
merger; and
- estimated costs of combining our companies.
It also includes statements using words like "expects," "anticipates,"
"believes," "intends," "estimates" and similar expressions.
The forward-looking statements in this proxy statement/prospectus are
subject to various risks and uncertainties, most of which are difficult to
predict and generally beyond the control of CGI and IMRglobal. Accordingly,
actual results may differ materially from those expressed in, or implied by, the
forward-looking statements. The risks and uncertainties to which forward-looking
statements are subject include: those we discuss above under "Risk Factors,"
those we discuss or identify in our public filings with the SEC, and risks and
uncertainties with respect to our expectations regarding:
- the timing and completion of the merger;
- the value of the merger consideration;
- growth and expansion opportunities;
- market positions;
- the conduct of worldwide operations;
- earnings improvements;
- cost savings;
- revenue growth;
- other benefits anticipated from the merger;
- gains and losses of clients and client business and projects;
- changes in the IT budgets and capital expenditures of clients;
34
- changes in management or ownership of clients; and
- retention of, and ability to attract, qualified employees;
and the effects of:
- foreign exchange rate fluctuations;
- regional, national and international economic conditions, including
changes in interest rates and the performance of the financial markets;
- changes in industry rates of compensation;
- changes in regional, national and international laws;
- regulations and taxes;
- changes in competition and pricing environments;
- regional, national and international market and industry conditions; and
- regional, national and international political conditions.
The actual results, performance or achievement by CGI, IMRglobal or the
combined company could differ significantly from those expressed in, or implied
by, our forward-looking statements. Accordingly, we cannot assure you that any
of the events anticipated by the forward-looking statements will occur, or if
they do, what effect they will have on the results of operations and financial
conditions of CGI, IMRglobal or the combined company following the merger. In
addition, CGI's Annual Report on Form 40-F and Reports on Form 6-K contain a
discussion of various risk factors relating to its business and results of
operations and IMRglobal's filings with the SEC contain similar information with
respect to its business and results and they are incorporated herein by
reference.
Neither CGI nor IMRglobal assumes any obligation, and each disclaims any
intention to, update or revise any forward-looking statements, whether as a
result of new information, future events, changes in assumptions or otherwise.
35
THE IMRGLOBAL SPECIAL MEETING
GENERAL
The special meeting of shareholders of IMRglobal will be held on July 13,
2001, at 10:00 a.m., local time, at The Millennium Hilton, 55 Church Street, New
York, New York 10007. At the special meeting the IMRglobal shareholders will
consider and vote upon the Agreement and Plan of Merger, dated as of
February 21, 2001, by and among CGI, IMRglobal and CGI Florida Corporation, a
wholly owned subsidiary of CGI, and the merger. Pursuant to the merger
agreement, CGI Florida Corporation or another wholly owned subsidiary of CGI
will merge with and into IMRglobal. Following the merger, IMRglobal will be a
wholly owned subsidiary of CGI. We have attached a copy of the merger agreement
to this proxy statement/prospectus as Appendix A.
RECORD DATE; QUORUM
IMRglobal's board of directors has fixed the close of business on May 9,
2001 as the record date for the determination of the shareholders entitled to
notice of, and to vote at, the special meeting. At the record date there were
44,089,019 outstanding shares of IMRglobal common stock held by 206 IMRglobal
shareholders of record.
The holders of not less than 33 1/3% of the outstanding shares of IMRglobal
common stock at the record date, represented by person or by proxy, will
constitute a quorum for purposes of the special meeting. A quorum is necessary
to hold the special meeting. Any shares of IMRglobal common stock held in
treasury by IMRglobal or by any of its subsidiaries are not considered to be
outstanding for purposes of a quorum. Brokers and nominees are not allowed to
vote on the approval of the merger on behalf of shareholders, and shares that
are not voted because brokers did not receive instructions are referred to as
"broker non-votes." Abstentions and "broker non-votes" count as present for
establishing a quorum. Once a share is represented at the special meeting, it
will be counted for the purpose of determining a quorum at the special meeting
and any adjournment of the special meeting, unless the holder is present solely
to object to the special meeting. However, if a new record date is set for the
adjourned special meeting, then a new quorum will have to be established.
REQUIRED VOTE
Each share of IMRglobal common stock outstanding as of the close of business
on May 9, 2001 entitles the holder to one vote at the special meeting.
Completion of the merger requires the approval of the merger agreement by the
affirmative vote of the holders of a majority of the voting power of the
outstanding shares of IMRglobal common stock. Because the vote is based on the
number of shares outstanding rather than on the number of votes cast, failure to
vote your shares is effectively a vote against approval of the merger. In
addition, abstentions and "broker non-votes" will have the same effect as votes
against approval of the merger. You may vote your shares in one of the following
ways:
(1) by completing the accompanying proxy card and returning it in the
enclosed postage-paid envelope;
(2) through the Internet or by telephone by following the instructions on
the accompanying proxy card; or
(3) by appearing and voting in person at the special meeting.
If your shares are held in "street name," i.e., in the name of a bank,
broker or other financial institution, you should follow the procedure described
by your bank, broker or other financial institution on the voting instructions
form provided by them.
At the record date, directors and executive officers of IMRglobal and their
associates and affiliates owned approximately 29.4% of the outstanding shares of
IMRglobal common stock. Included in these
36
shares are those owned by IMRglobal's Chairman and Chief Executive Officer and
his family limited partnership, an entity controlled by Mr. Sanan, representing
approximately 27.3% of the outstanding shares of IMRglobal common stock, which
are required to be voted in favor of approval of the merger agreement under an
agreement with CGI.
VOTING AND REVOCATION OF PROXIES
If you vote your shares of IMRglobal common stock by signing a proxy, your
shares will be voted at the special meeting as you indicate on your proxy card.
If no instructions are indicated on your signed proxy card, your shares of
IMRglobal common stock will be voted "FOR" the approval of the merger. If you
vote your shares of IMRglobal common stock through the Internet or by telephone,
your shares will be voted at the special meeting as instructed.
You may revoke your proxy at any time before the proxy is voted at the
special meeting. A proxy may be revoked prior to the vote at the special meeting
in any of the following ways:
(1) by submitting a written revocation to the Secretary of IMRglobal Corp.
at 100 South Missouri Avenue, Clearwater, Florida 33756;
(2) by submitting a new proxy dated after the date of the proxy that is
being revoked; or
(3) by voting in person at the special meeting.
However, simply attending the special meeting will not revoke a proxy. If
you do not hold your shares of IMRglobal common stock in your own name, you may
revoke a previously given proxy by following the revocation instructions
provided by the bank, broker or other party who is the registered owner of the
shares.
The IMRglobal board of directors is not aware of any other business to be
brought before the special meeting. If, however, other matters are properly
brought before the special meeting or any adjournment or postponement of the
special meeting, the persons appointed as proxies will have discretionary
authority to vote the shares represented by duly executed proxies in accordance
with their discretion and judgment. Under Florida law, IMRglobal cannot ask
shareholders to vote on any other matter at the special meeting, without
providing notice of those matters.
Do not include stock certificates when returning the enclosed proxy card. If
the merger is completed, you will be sent instructions at that time for
exchanging your shares of IMRglobal common stock for CGI Class A Subordinate
Shares.
SOLICITATION OF PROXIES
IMRglobal will bear the costs of soliciting proxies to vote on the merger
agreement at the special meeting. CGI and IMRglobal will share equally the
amount of the filing fees and other expenses incurred in connection with the
cost of filing, printing and distributing this proxy statement/prospectus.
Officers, directors and employees of IMRglobal may also solicit proxies from
shareholders by telephone, mail, the Internet or in person. Executive officers
and directors of CGI may also solicit proxies from shareholders of IMRglobal by
telephone or in person. However, none of the persons listed above will be paid
for soliciting proxies. IMRglobal will make arrangements with brokerage houses
and other custodians, nominees and fiduciaries to send the proxy materials to
beneficial owners, and IMRglobal will reimburse those brokerage houses and
custodians for their reasonable expenses in doing so.
APPRAISAL RIGHTS
Holders of IMRglobal common stock are not entitled to appraisal rights under
Florida law in connection with the merger because IMRglobal common stock is
listed on Nasdaq National Market.
37
THE MERGER
BACKGROUND OF THE MERGER
IMRglobal has continually reviewed its position in the IT services industry
in which it competes and potential strategic business alternatives. Beginning in
late 1999, the IMRglobal board of directors held several meetings to discuss the
exploration of a possible sale of IMRglobal for cash or a strategic business
combination with another entity in exchange for stock consideration. During
these meetings, IMRglobal identified some of the desired attributes of a
business combination partner, such as:
- a significantly larger company with a strong balance sheet;
- a capable provider of infrastructure and operations services, a service
line that IMRglobal's large customers needed, but that IMRglobal was
unable to provide on its own;
- a company that is organized and integrated in areas where IMRglobal is
strong such as financial services, and, that had capabilities for
expansion in the utilities and telecommunications industries;
- a company that could take advantage of IMRglobal's offshore delivery
capabilities; and
- a combination partner that would benefit from IMRglobal's existing
employee base.
Although IMRglobal was also focused at this time on plans to improve its
operating performance in the upcoming fiscal year, it was still committed to the
exploration of its strategic alternatives.
In December 1999, IMRglobal retained Updata Capital, Inc. as its financial
advisor to assist IMRglobal's management and board of directors in examining
strategies to maximize shareholder value, including a possible sale of IMRglobal
or other business combination transactions. The engagement of Updata Capital was
based on the firm's specialized experience in the IT services industry and its
experience in transactions of the type contemplated by IMRglobal. Updata Capital
contacted approximately 62 potential strategic and financial partners and 34 of
these potential partners signed confidentiality agreements enabling them to
receive confidential information prepared by IMRglobal for this purpose. In
addition to CGI, seven of these companies expressed significant interest in a
possible transaction with IMRglobal.
At various times from March 2000 until mid December 2000, IMRglobal engaged
in discussions regarding potential transactions with each of these interested
companies. During this period, IMRglobal stock fluctuated between $(US)19.19 and
$(US)2.38 per share, which, as noted below, in one instance resulted in an
indication of interest being reduced in amount. In all cases, several telephone
conferences were held and in all cases, a face-to-face meeting was held. During
this period, Satish K. Sanan, IMRglobal's Chief Executive Officer and Vincent
Addonisio, IMRglobal's Executive Vice President and Chief Administrative Officer
were the two IMRglobal officers who had primary contact with these companies. In
addition to CGI, these companies included a large European-based
telecommunications company, a large Asian-based electronics and technology
company, and five U.S.-based companies, including one international
telecommunications company, one international software company, one
international business supplier and two international IT service providers. The
securities of all of these companies are publicly traded and all were potential
strategic buyers. None of these discussions, except those with CGI, resulted in
a formal offer to purchase IMRglobal and the discussions in most cases did not
extend beyond preliminary exchanges of information and informal discussions of
valuation. Additionally, in December 2000, Messrs. Sanan and Addonisio began to
explore the possibility of a leverage buyout transaction.
During this time period, aside from CGI, Computer Sciences Corporation
expressed the greatest interest in IMRglobal and in November 2000 made a verbal
preliminary indication of interest at a reasonable premium to market, which was
calculated by Updata Capital to be approximately $(US)9.75 per share. This
verbal preliminary indication of interest changed in response to a decrease in
IMRglobal's stock price. On December 14, 2000 the Computer Sciences Corporation
preliminary offer stood at $(US)4.00 per share. Computer Sciences Corporation
indicated that the offer would be paid in its stock, although later in the
negotiation process, Computer Sciences Corporation indicated that it
38
might be willing to include a cash component in its offer, if any offer was
made. Computer Sciences Corporation raised its preliminary acquisition proposal
to $(US)5-6 per share during the period between December 18-21, 2000. On
December 22, 2000 Computer Sciences Corporation raised the premium to market it
was willing to pay. Based upon the increased premium, Updata Capital estimated
that the value of Computer Sciences Corporations preliminary indication of
interest was $(US)7-8 per share, payable either exclusively or primarily in the
stock of Computer Sciences Corporation. Although IMRglobal's management informed
the IMRglobal board of directors of all such discussions, IMRglobal's management
did not continue to pursue discussions with Computer Sciences Corporation
because of its belief that the price offered did not reflect an adequate value
to the IMRglobal shareholders.
During the summer of 2000, representatives of Updata Capital and Renaud
Caron, CGI's Senior Vice President, Business Engineering and Mergers and
Acquisitions had exploratory discussions regarding the possibility of a
combination of the two companies. The two companies signed a confidentiality
agreement on November 9, 2000 providing for the confidential treatment of any
non-public information exchanged and of the fact that the companies were
considering a possible transaction.
On November 21, 2000, Francois Chasse, CGI's Executive Vice President,
Mergers and Acquisitions and General Manager-USA and Mr. Caron met in
Clearwater, Florida with Messrs. Sanan and Addonisio and a representative of
Updata Capital, in order to discuss a possible business combination between
IMRglobal and CGI. At this meeting, the parties generally discussed the
background and business strategy of each of the respective companies, the terms
of a potential transaction and the advantages of a combined company.
On December 5, 2000, Mr. Sanan met in person with Serge Godin, CGI's
Chairman, Chief Executive Officer and President, in Montreal at CGI's
headquarters to tour CGI's facilities and to engage in additional discussions
regarding a potential transaction with CGI.
On December 15, 2000, Messrs. Godin and Chasse met with Mr. Sanan and
Mr. Addonisio in Clearwater to further discuss the business of the two
companies, the terms of the potential transaction and the business advantages
that could be obtained by combining the two companies. A representative of
Updata Capital was also present.
On December 20, 2000, Messrs. Godin, Sanan and Addonisio participated in a
conference call to exchange and discuss financial information of both companies
and to exchange views regarding valuations.
On December 27, 2000, Mr. Addonisio and Michael Dean, IMRglobal's Chief
Financial Officer, visited and met with Mr. Godin, Andre Imbeau, CGI's Executive
Vice President and Chief Financial Officer, David Anderson, CGI's Vice President
of Finance and Treasury, and Benoit Garant, CGI's Director of Finance and
Treasury, at CGI's headquarters in Montreal to further discuss and evaluate a
potential transaction. Based on the IMRglobal financial information available to
CGI at the time, CGI verbally made its initial offer to IMRglobal, including an
initial indication of CGI's intent to offer IMRglobal shareholders CGI Class A
Subordinate Shares valued in the range of $(US)6.00 to $(US)7.00 per share of
IMRglobal common stock based on CGI's then current share price, which was
rejected by Messrs. Addonisio and Dean. During the course of the all-day series
of meetings, numerous discussions were held to evaluate, discuss and negotiate
the potential transaction, including the exchange ratio. Further explanation of
the IMRglobal financial information was provided by IMRglobal.
By the end of this meeting, CGI had increased its offer to IMRglobal
shareholders to CGI Class A Subordinate Shares valued at approximately $(US)9.00
per share of IMRglobal common stock based on CGI's then current share price.
Messrs. Sanan and Addonisio indicated that this offer would also not be
acceptable to the IMRglobal board of directors because it did not adequately
reflect the intrinsic value of IMRglobal.
39
On December 29, 2000, Messrs. Sanan and Addonisio had a telephone conference
with Mr. Godin, in which Mr. Godin indicated CGI's intent to improve its offer
to IMRglobal shareholders payable in CGI Class A Subordinate Shares to a value
of $(US)9.50 per share of IMRglobal common stock based on CGI's then current
share price.
On January 2, 2001, the IMRglobal board of directors held a special meeting
to discuss the following strategic options:
- a leveraged buyout of IMRglobal by a management-led group;
- a sale of the company for cash;
- a strategic business combination with another entity with stock
consideration; and
- the continuation of IMRglobal as an independent company.
IMRglobal's management then made a presentation to the board of directors
regarding each option. This included the details of the initial meetings with
all interested companies. The board of directors discussed each option at
length, including the potential merger with CGI for stock consideration then
valued at $(US)9.50 per share of IMRglobal common stock, and the fact that, as
of yet, none of the other interested companies had submitted offers more
favorable than CGI's offer. The IMRglobal board of directors discussed the
significant consolidation experienced by the IT industry in recent years and the
decline in IMRglobal's stock price since the board first considered exploring
strategic options and alternatives in late 1999. At the conclusion of the
meeting, after a review of the current and historical market prices of IMRglobal
common stock and CGI Class A Subordinate Shares relative to each other and
relative to those of other industry participants, the IMRglobal board of
directors authorized IMRglobal's senior executives to continue to explore all
available strategic options and alternatives in order to maximize shareholder
value, including the advancement of negotiations with CGI and further
discussions with any existing or newly interested companies.
IMRglobal continued its discussions with the other interested companies and
held meetings and telephone conferences with five firms that had been found by
Hyde Park Capital Advisors, LLC, a Tampa-based investment banking firm,
regarding a leveraged buyout transaction. Each of these five firms was a
financial buyer specializing in making significant investments in leveraged
buyout transactions. One of these firms, Investcorp International, Inc.,
presented a written expression of interest to IMRglobal at $(US)8-9 per share in
cash. The other firm made an oral expression of interest. Both proposals would
have required an unspecified but substantial financial and professional
commitment from the senior officers of IMRglobal, in order to demonstrate to the
investors management's commitment to the project. These officers were unable or
unwilling to commit to any such proposal because they were unable or unwilling
to make a substantial equity investment in a privately held company with no firm
prospects for liquidity. Accordingly, it was not feasible to proceed with these
discussions.
On January 5, 2001, the CGI board of directors considered and approved a
recommendation to pursue a combination with IMRglobal, and to continue
discussions with IMRglobal looking towards such a combination. On January 5,
2001, CGI engaged Salomon Smith Barney to serve as CGI's representative and
financial advisor in connection with a possible business combination involving
IMRglobal.
During January and February of 2001, both CGI and IMRglobal completed an
extensive due diligence review of the operations of the other company.
A CGI team traveled to Florida to evaluate and perform due diligence on
IMRglobal from January 15, 2001 through January 25, 2001. These meetings were
held at the Tampa offices of Holland & Knight LLP, legal counsel to IMRglobal.
On January 30, 2001 Messrs. Sanan and Addonisio met with Messrs. Godin,
Chasse and Imbeau in Tampa to discuss the terms of the potential transaction. On
January 31, 2001, Messrs. Imbeau and Chasse met with Messrs. Sanan, Addonisio
and Dean regarding the operational details of a business combination. Also on
January 31, 2001, IMRglobal publicly announced that its board of directors had
40
authorized management to explore strategic alternatives and that it was engaged
in several discussions regarding possible strategic alternatives. After this
announcement, IMRglobal was contacted by representatives of two additional
companies who expressed an interest in acquiring IMRglobal. "One of these was a
US-based company with securities traded on the New York Stock Exchange and the
other was a European-based company. The European-based company was not willing
to make a proposal to acquire the entire business of IMRglobal and after an
investigation by IMRglobal's advisors did not appear to have adequate resources
to purchase a substantial portion of IMRglobal's operations. After the US-based
company was informed that another potential buyer had offered $(US)9.50 per
share, IMRglobal's representatives were told that this potential acquiror was
not interested in proceeding at a price greater than $(US)9.00 per share and no
further discussions took place."
An IMRglobal team, along with representatives of Updata Capital and
representatives of IMRglobal's outside U.S. and Canadian legal counsel traveled
to Montreal to evaluate and perform due diligence on CGI, from February 5, 2001
through February 7, 2001.
On February 9, 2001, Fried, Frank, Harris, Shriver & Jacobson, and McCarthy
Tetrault, legal counsel to CGI, circulated the first draft of the merger
agreement and related agreements to IMRglobal, CGI and Holland & Knight LLP. CGI
also advised IMRglobal that its willingness to enter into a merger agreement was
conditioned upon Mr. Sanan's committing to support the transaction, and a draft
voting agreement was provided to Mr. Sanan and IMRglobal.
On February 12, 2001, CGI proposed an exchange ratio for each share of
IMRglobal common stock computed as the number of CGI Class A Subordinate Shares
needed to equal $(US)9.50 based on the average closing price of CGI Class A
Subordinate Shares on the New York Stock Exchange for the 25 trading days ending
February 16, 2001.
On February 12, 2001, the IMRglobal board of directors held a special
meeting to again consider all of its strategic alternatives and to receive an
update on the CGI negotiations. IMRglobal's management made a presentation to
the board of directors regarding the status of each alternative and discussions
with several interested parties. The details of proposals received from all
interested companies as well as the leveraged buyout proposals received were
presented to the IMRglobal board of directors. CGI's offer also was presented to
the IMRglobal board of directors at this meeting. The IMRglobal board of
directors reached the conclusion that: (a) a leveraged buyout of IMRglobal by a
management-led group was not a viable alternative because senior management was
unable or unwilling to commit substantial resources to invest in a
privately-held corporation; (b) a sale of IMRglobal for cash to an outside buyer
was not a viable alternative because no potential purchaser had made a cash
offer that was superior to the CGI offer; and (c) although the continued
operation of IMRglobal as an independent company was possible, that for the
reasons set forth under the heading "--Reasons for the Merger," the IMRglobal
board of directors determined that it was in the best interests of the IMRglobal
shareholders to combine operations with a larger organization. The IMRglobal
board of directors determined that no other proposal was as favorable to the
shareholders of IMRglobal as the CGI proposal. Updata Capital gave a
presentation based on the CGI offer and indicated its initial belief that it
could give a fairness opinion based on the proposed consideration to be received
by IMRglobal shareholders from CGI. At the conclusion of the meeting, and after
considering all the proposals presented, the IMRglobal board of directors
approved in principle the merger with CGI subject to the Updata Capital fairness
opinion and the negotiation of acceptable final transaction documents and
authorized IMRglobal's senior executives to proceed with the negotiation of a
definitive merger agreement with CGI.
Representatives of CGI and IMRglobal, together with their respective legal
advisors, then continued to negotiate the merger agreement and the related
documents.
On both February 14 and 19, 2001, the IMRglobal board of directors held
special meetings to receive updates from Messrs. Sanan and Addonisio on the
status of the negotiations with CGI. Messrs. Imbeau and Chasse also traveled to
Clearwater on February 19, 2001, to meet with Messrs. Sanan and Addonisio to
further discuss the specifics of the proposed transaction. The fixed
41
exchange ratio of 1.5974 CGI Class A Subordinate Shares for each share of
IMRglobal common stock was confirmed. On February 20, 2001, the IMRglobal board
of directors held another special meeting with Messrs. Sanan and Addonisio and
its legal and financial advisors in attendance, and reviewed the following:
- the status of the negotiations for the proposed transaction with CGI;
- the principal terms of the merger agreement and the related documents;
- the strategic fit of the transaction with CGI in light of the desirable
attributes for a business combination partner that IMRglobal had
identified in late 1999;
- the potential risks of the transaction with CGI; and
- the results of the due diligence evaluation of CGI.
Updata Capital reviewed its various financial analysis with respect to the
fairness of the exchange ratio and presented its oral and written opinion to the
IMRglobal board of directors that the exchange ratio was fair to IMRglobal
shareholders from a financial point of view. Updata Capital's analysis and
opinion are described in "--Opinion of IMRglobal's Financial Advisor".
IMRglobal's legal advisors discussed the board's responsibilities and
fiduciary duties in considering a strategic business combination and further
discussed the terms of the merger agreement and the related documents. Following
discussion, the IMRglobal board:
- determined that the proposed merger was advisable, fair to and in the best
interests of IMRglobal and its shareholders;
- unanimously approved the merger agreement, the voting agreement and
related documents; and
- resolved to recommend the approval and adoption of the merger agreement
and approval of the merger by IMRglobal shareholders.
On the evening of February 20, 2001, the CGI board of directors held a
special meeting with members of CGI's senior management and its legal and
financial advisors, and reviewed the results of the due diligence evaluation of
IMRglobal and the terms of the proposed transaction. The CGI board of directors
approved the merger agreement and related documents.
The approval of the merger, including the exchange ratio in the merger, by
the boards of directors of CGI and IMRglobal was based upon the factors
described immediately below in the section entitled "--Recommendation of
IMRglobal Board of Directors; Considerations of the IMRglobal Board of
Directors."
In the morning of February 21, 2001, IMRglobal and CGI entered into the
merger agreement and related agreements. CGI also entered into a voting
agreement with Mr. Sanan and his family limited partnership, an entity he
controls. On February 21, 2001, CGI and IMRglobal issued press releases
announcing the transaction.
REASONS FOR THE MERGER
CGI and IMRglobal believe that the merger will establish a combined company
well positioned to establish a world class standard of excellence in IT
services. We believe that the combined company will be capable of generating
substantially more long-term shareholder value than could be achieved by either
of our companies individually. We describe below the key benefits we expect to
derive from the merger.
ABILITY TO OFFER A WIDE RANGE OF SOLUTIONS AND SERVICES
We believe that, through subsidiaries in North America, Europe, Asia Pacific
and Latin America, the combined company will be uniquely positioned to offer
clients the industry's widest range of solutions and services on a local and
global basis. These products and services and the combined company's highly
complementary businesses are:
- outsourcing and management of IT functions;
42
- systems development and integration;
- business and technology consulting;
- e-business services and solutions;
- IT strategy formulation;
- application maintenance and support; and
- professional services.
We believe that the combined company will be positioned to benefit
substantially from:
- the increased ability to offer a broader range of services, including
management of IT functions, business technology consulting, e-business,
application development/component based solutions, application
modernization and application maintenance--customers will be offered
end-to-end IT solutions;
- the ability to provide additional services to the existing customers of
each of CGI and IMRglobal; and
- a broader and more experienced management team drawn from both companies.
COST SAVINGS OPPORTUNITIES
We believe that the combined company will have opportunities to realize cost
savings as a result of the merger. The combined company expects to realize
savings:
- by lowering cost of supporting CGI owned solutions by utilizing
IMRglobal's offshore maintenance support;
- by combining our personnel training and recruitment efforts;
- through financial planning, budgeting, reporting and control, tax
planning, property procurement, IT investment and the elimination of
various duplicative holding company costs of CGI and IMRglobal, including
legal, investor relations, human resources, treasury and public company
expenses; and
- by eliminating duplication in infrastructure, such as real estate,
networking, and telecommunication.
These potential cost savings are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of CGI and
IMRglobal. We cannot provide assurance that the combined company will achieve
these cost savings.
In addition to the reasons set forth above, CGI also believes that CGI and
its current shareholders will benefit from the merger in a number of ways. These
benefits for the merger include:
- the addition of IMRglobal almost doubles CGI's revenues generated in the
United States which is the largest IT services market in the world, and is
a vital market for any North American IT services provider;
- the addition of IMRglobal is expected to provide the critical mass to
position CGI as a full IT outsourcing services player in the large United
States outsourcing market. Critical mass is significant as clients look to
outsource their operations to IT partners that can demonstrate that they
have the size, the breadth of services, the depth of expertise, the large
teams of IT professionals and the financial stability to meet their
requirements over contract terms that often extend to ten years;
- the combination with IMRglobal will significantly increase CGI's systems
integration and high-end consulting capabilities in the U.S. and U.K. and
provides a presence in France, India, Japan and Australia, expanding CGI's
ability to service multinational companies;
- IMRglobal is expected to strengthen CGI's expertise and presence in CGI's
vertical markets in the United States. Specifically, CGI expects to
- gain additional brand recognition and opportunities with insurance
clients,
43
- add significant life insurance and health insurance IT service
capabilities,
- leverage long standing relationships in brand name accounts such as
John Hancock and American Express,
- strengthen its presence in the manufacturing sector,
- gain presence and capabilities in the retail sector,
- gain access to the large United States healthcare market through
IMRglobal's senior level management consulting capability which CGI
believes has a first class reputation, and
- be in a position to aggressively target the government sector
leveraging CGI's expertise in electronic service delivery;
- the merger provides CGI with cross-selling opportunities, especially in
the United States and Europe. CGI will be in a position to offer its
end-to-end IT services offering, full IT outsourcing capabilities
including its infrastructure related services, and global industry
specific solutions to IMRglobal's clients. IMRglobal's component based
development, eCRM solutions, and other industry specific solutions can be
offered to existing CGI clients;
- IMRglobal is expected to add strong management and IT professionals in the
United States and international markets;
- IMRglobal is expected to add a dynamic sales channel for CGI's end-to-end
services and full IT outsourcing capabilities;
- IMRglobal will provide CGI with what CGI believes to be a unique delivery
model which brings high quality, cost effective client support through IT
services operations in India; and
- the merger is expected to be neutral to slightly accretive to CGI's cash
earnings per share.
POTENTIAL RISKS AND NEGATIVE FACTORS
The merger is subject to potential risks and negative factors such as:
- the risk that the operations of CGI and IMRglobal might not be
successfully integrated;
- the risk that, despite the efforts of CGI and IMRglobal after the merger,
key personnel might leave IMRglobal;
- the risk that, despite the efforts of CGI and IMRglobal after the merger,
we may lose customers;
- the risk that the potential benefits of the merger might not be fully
realized;
- the risk that the market price for CGI Class A Subordinate Shares might
decline; and
- the fact that the termination fee provisions of the merger agreement could
discourage alternative proposals being made to IMRglobal. (In this regard,
the IMRglobal board of directors took into account that these provisions
are customary for transactions of this type, provide for amounts within
the range that is customary for transactions of this size, and were
necessary to induce CGI to enter into the merger agreement.)
While the IMRglobal board of directors considered each of the foregoing
potential risks and negative factors, as discussed below under "Recommendation
of the IMRglobal Directors; Considerations of the IMRglobal Board of Directors,"
the IMRglobal board of directors concluded that the benefits of the merger
outweigh such potential risks and negative factors.
44
RECOMMENDATION OF THE IMRGLOBAL BOARD OF DIRECTORS; CONSIDERATIONS OF THE
IMRGLOBAL BOARD OF DIRECTORS
At a special meeting on February 20, 2001, the IMRglobal board of directors
unanimously determined that the merger is advisable, and that the merger
agreement and the merger are in the best interests of IMRglobal and its
shareholders. Accordingly, the IMRglobal board of directors recommends that the
shareholders of IMRglobal vote "FOR" approval of the merger agreement and the
merger at the special meeting.
In the course of reaching its decision to adopt the merger agreement and the
related agreements, the IMRglobal board of directors consulted with management,
as well as with outside legal counsel and its financial advisor, and in addition
to those set forth above under "--Reasons for the Merger," considered the
following material factors as reasons that the merger will be beneficial to
IMRglobal and its shareholders:
- the business, operations, properties and assets, financial condition,
competitive position, business strategy, and prospects of IMRglobal and
CGI (as well as the risks involved in achieving these prospects), the
nature of the IT services industry in which IMRglobal competes, and
current industry, economic and market conditions, both on a historical and
on a prospective basis;
- the fact that CGI (1) is a significantly larger company in the industry
with a strong balance sheet; (2) is a capable provider of infrastructure
and operations services, a service line needed by IMRglobal's large
customers; (3) is organized and integrated in areas where IMRglobal is
strong such as financial services, and has capabilities for expansion in
the utilities and telecommunications industries; (4) is a company that
could take advantage of IMRglobal's offshore delivery capabilities; and
(5) would provide IMRglobal with a combination partner that would benefit
from IMRglobal's existing employee base;
- the potential shareholder value that could be expected to be generated
from the various strategic alternatives available to IMRglobal, including
(1) a leveraged buyout of IMRglobal by a management-led group; (2) a sale
of the company for cash; (3) a strategic business combination with another
entity for stock consideration; and (4) continuation as an independent
company;
- the view of management and the board of directors that a combination
between CGI and IMRglobal would represent an excellent "fit" from a
strategic standpoint, with minimal conflicts between their respective
clients, and would produce a strong and diversified combined company;
- the view that because the CGI transaction is structured as a stock merger
rather than a cash sale, the merger provides IMRglobal's shareholders with
the opportunity to participate in a larger, more competitive company; and
- the expectation that the CGI merger will qualify as a tax-free transaction
for U.S. federal income tax purposes (except with respect to cash received
for fractional shares).
In the course of deliberations, the IMRglobal board of directors reviewed
with IMRglobal management a number of other factors relevant to the merger. In
particular, the IMRglobal board of directors considered other factors supportive
of its decision to adopt the merger agreement, including:
- the presentations of IMRglobal's financial advisor concerning financial
aspects of the proposed merger and of the various strategic alternatives
available to IMRglobal, and the oral and written opinion received from
Updata Capital, that as of the date of the opinion, and based on the
considerations in those opinions, the exchange ratio pursuant to the
merger agreement was fair from a financial point of view to IMRglobal
shareholders;
- the view of IMRglobal management and the IMRglobal board of directors
that: (1) the IT services industry has experienced significant
consolidation in recent years, (2) the industry participants that achieve
the greatest geographic and functional scale and diversity are likely to
45
be at a competitive advantage relative to smaller competitors and to be
better positioned to take advantage of long-term growth opportunities and
trends, and (3) IMRglobal's business and financial performance would
benefit from being part of a larger, more diverse company;
- the current and historical market prices of IMRglobal common stock and CGI
Class A Subordinate Shares relative to each other and relative to those of
other industry participants;
- the fact that several members of IMRglobal's current senior management
team are expected to play a significant role in the management of
IMRglobal during the transition following the merger as well as on an
ongoing basis;
- the terms of the merger agreement, including: the nature and relatively
limited number of conditions to the completion of the merger, which the
IMRglobal board of directors believes increases the likelihood that the
merger will be completed if approved by shareholders; the provisions that
allow IMRglobal, under some circumstances, to furnish information to and
conduct negotiations with third parties and that allow the IMRglobal board
of directors, upon receipt of a superior proposal, to change its
recommendation to shareholders; and the termination fee provisions
requiring IMRglobal to compensate CGI in some circumstances in the event
the merger agreement is terminated; and
- the views of IMRglobal's largest shareholder, Satish K. Sanan, as to the
desirability of the transaction, his willingness to support the merger by
entering into a voting agreement with CGI and that the terms of the voting
agreement (including its termination upon termination of the merger
agreement) will not prevent IMRglobal from responding to, and accepting,
acquisition proposals from third parties.
The IMRglobal board of directors also considered the following potentially
negative factors associated with the CGI merger:
- the risk that the operations of CGI and IMRglobal might not be
successfully integrated;
- the risk that, despite the efforts of CGI and IMRglobal after the merger,
key personnel might leave IMRglobal;
- the risk that, despite the efforts of CGI and IMRglobal after the merger,
we may lose customers;
- the risk that the potential benefits of the merger might not be fully
realized;
- the risk that the market price for CGI Class A Subordinate Shares might
decline; and
- the fact that the termination fee provisions of the merger agreement could
discourage alternative proposals being made to IMRglobal (in this regard,
the IMRglobal board of directors took into account that these provisions
are customary for transactions of this type, provide for amounts within
the range that is customary for transactions of this size, and were
necessary to induce CGI to enter into the merger agreement).
In addition, in considering the proposed merger with CGI, the directors of
IMRglobal were aware of the interests of various officers and directors in the
merger described under "--Conflicts of Interest between Directors and Officers
of IMRglobal and IMRglobal Shareholders in the Merger" and determined that these
interests did not detract from the fairness of the merger to the IMRglobal
shareholders. To the extent certain benefits received by these officers and
directors encourage these persons to continue in the employ of the combined
company following the merger, it was believed that these benefits might also
result in future benefits for the shareholders of CGI, following the merger,
including shareholders of IMRglobal.
The foregoing discussion addresses the material information and factors
considered by the IMRglobal board of directors in its consideration of the
merger, including factors that support the merger as well as those that may
weigh against it. The IMRglobal board of directors conducted
46
numerous discussions of the factors described above, including asking questions
of IMRglobal's management and legal and financial advisors. In view of the
variety of factors and the amount of information considered, the IMRglobal board
of directors did not find it practicable to, and did not, make specific
assessments of, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, the IMRglobal
board of directors did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination. The determination to
approve the merger was made after consideration of all of the factors as a
whole. In addition, individual members of the IMRglobal board of directors may
have given different weights to different factors.
OPINION OF IMRGLOBAL'S FINANCIAL ADVISOR
Updata Capital focuses on providing merger and acquisition and strategic
advisory services to information technology companies. In this capacity, Updata
Capital is continually engaged in valuing technology businesses. IMRglobal
engaged Updata Capital to act as its financial advisor in connection with a
potential merger or business combination. On February 20, 2001, Updata Capital
delivered to IMRglobal's board of directors its oral and written opinions that,
as of that date, and subject to the assumptions, limitations and qualifications
set forth in such opinion, the exchange ratio was fair from a financial point of
view to IMRglobal and the holders of IMRglobal common stock.
THE FULL TEXT OF THE OPINION DELIVERED BY UPDATA CAPITAL TO THE IMRGLOBAL
BOARD OF DIRECTORS, DATED FEBRUARY 20, 2001, WHICH SETS FORTH THE ASSUMPTIONS
MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE
SCOPE OF REVIEW UNDERTAKEN BY UPDATA CAPITAL IN RENDERING ITS OPINION, IS
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. UPDATA CAPITAL HAS CONSENTED IN WRITING TO THE INCLUSION OF
THE OPINION IN THIS PROXY STATEMENT/PROSPECTUS. THE OPINION SPEAKS ONLY AS OF
THE DAY PRIOR TO THE PUBLIC ANNOUNCEMENT OF THE PROPOSED TRANSACTION. UPDATA
CAPITAL DELIVERED THE OPINION SOLELY FOR THE INFORMATION OF THE BOARD OF
DIRECTORS OF IMRGLOBAL IN CONNECTION WITH ITS CONSIDERATION OF THE TRANSACTION
AND IT DOES NOT CONSTITUTE A RECOMMENDATION TO ANY IMRGLOBAL SHAREHOLDER AS TO
WHETHER TO VOTE ITS, HIS OR HER SHARES OF IMRGLOBAL COMMON STOCK IN FAVOR OF THE
TRANSACTION. UPDATA CAPITAL STATES IN ITS OPINION THAT IT DOES NOT BELIEVE THAT
ANY OTHER PERSON OTHER THAN THE BOARD OF DIRECTORS OF IMRGLOBAL HAS THE LEGAL
RIGHT UNDER STATE LAW TO RELY ON ITS OPINION, AND THAT, IN THE ABSENCE OF ANY
GOVERNING PRECEDENTS, IT WOULD RESIST ANY ASSERTION OTHERWISE. IF NECESSARY THE
MATTER WOULD BE DETERMINED BY A COURT OF COMPETENT JURISDICTION. WHETHER OR NOT
ANY OTHER PERSON OTHER THAN THE BOARD OF DIRECTORS OF IMRGLOBAL HAS THE LEGAL
RIGHT UNDER STATE LAW TO RELY ON UPDATA CAPITAL'S OPINION WOULD HAVE NO EFFECT
ON THE RIGHTS AND RESPONSIBILITIES OF UPDATA CAPITAL OR THE BOARD OF DIRECTORS
UNDER THE FEDERAL SECURITIES LAWS. THE SUMMARY OF THE UPDATA CAPITAL OPINION SET
FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX B. IMRGLOBAL
SHAREHOLDERS ARE URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In rendering its opinion, Updata Capital, among other things:
- reviewed a draft of the merger agreement dated February 9, 2001 and
related documents, and based its opinion on the understanding that the
terms and conditions of the final merger agreement would not materially
change;
- reviewed IMRglobal's and CGI's respective historical and projected
financial statements that were provided to Updata Capital by IMRglobal and
CGI, respectively;
- reviewed certain internal financial and operating information, including
certain projections relating to IMRglobal and CGI prepared by their
respective managements (including projections under various financing and
operating assumptions);
47
- participated in discussions with IMRglobal management and CGI management
concerning the operations, business strategy, financial performance and
prospects for IMRglobal and CGI;
- reviewed the recent reported closing prices and trading activity for
IMRglobal's common stock and CGI's Class A Subordinate Shares;
- compared certain aspects of the financial and market performances of
IMRglobal and CGI with public companies it deemed comparable in whole or
in part;
- analyzed available information, both public and private, concerning other
mergers and acquisitions it believed to be comparable in whole or in part
to the proposed transaction;
- reviewed certain publicly available financial statements and other
information of CGI;
- reviewed IMRglobal's Annual Reports on Form 10-K for the fiscal years
ended December 31, 1999 and December 31, 1998, including the audited
financial statements included therein, and Quarterly Reports on Form 10-Q
for the fiscal quarters ending March 31, 2000, June 30, 2000 and
September 30, 2000;
- reviewed the IMRglobal's unaudited financial statements for the fiscal
year ended December 31, 2000;
- assessed, based on discussions with IMRglobal's senior management and
CGI's senior management, the strategic rationale for the proposed
transaction;
- assisted in negotiations and discussions related to the proposed
transaction among IMRglobal, CGI and their respective legal and financial
advisors; and
- conducted other financial studies, analyses and investigations as it
deemed appropriate for purposes of rendering its opinion.
Updata Capital did not assume responsibility for independent verification
of, and did not independently verify, any of the information concerning
IMRglobal or CGI considered in connection with its review of the proposed
transactions, including without limitation, any financial information, forecasts
or projections considered in connection with the rendering of its opinion.
Accordingly, for purposes of its opinion, Updata Capital assumed and relied upon
the accuracy and completeness of all such information. In connection with its
opinion, Updata Capital did not prepare or obtain any independent valuation or
appraisal of any of the assets or liabilities of IMRglobal or CGI, and it did
not conduct a physical inspection of the properties and facilities of IMRglobal
or CGI. With respect to the financial forecasts and projections used in its
analysis, Updata Capital assumed that they reflected the best currently
available estimates and judgments of the expected future financial performance
of IMRglobal and CGI, and Updata Capital expressed no view as to the
reasonableness of such forecasts and projections or the assumptions on which
such forecasts or projections were based. For the purposes of its opinion,
Updata Capital also assumed that neither IMRglobal nor CGI was a party to any
pending transactions, including without limitation external recapitalizations or
material merger or acquisition discussions, other than the proposed merger and
transactions in the ordinary course of conducting their respective businesses.
Updata Capital did not opine on, nor did its opinion consider:
- the tax consequences of the merger, including tax consequences to any
holder of IMRglobal common stock;
- the relative merits of the merger as compared to any alternative business
strategies that might exist for IMRglobal;
- the effect of any other transaction in which IMRglobal might engage;
- the form or terms of the merger agreement; or
48
- the prices at which IMRglobal or CGI stock may trade following the date of
its opinion or following the consummation of the merger.
In performing its analyses, Updata Capital used published Wall Street
estimates of calendar years 2000 and 2001 financial performances of IMRglobal
and CGI and made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of IMRglobal, CGI or Updata Capital. The analyses performed
by Updata Capital and summarized below are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of IMRglobal, CGI or their respective advisors, neither IMRglobal, CGI,
Updata Capital nor any other person assumes responsibility if future results or
actual values are materially different from the results of analyses based on
forecasts or assumptions. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be acquired or bought or sold.
Updata Capital's opinion is necessarily based upon market, economic,
financial and other conditions as they existed and can be evaluated as of the
date of the opinion and any subsequent change in such conditions would require a
reevaluation of such opinion. Although subsequent developments may affect its
opinion, Updata Capital has assumed no obligation to update, revise or reaffirm
it.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to summary description. The summary of Updata Capital's
analyses set forth below summarizes the material analyses presented to the
IMRglobal's board of directors but is not a complete description of the
presentation by Updata Capital to the IMRglobal board of directors or the
analysis performed by Updata Capital in connection with preparing its opinion.
In arriving at its opinion, Updata Capital did not attribute any particular
weight to any analyses or factors considered by it, but rather made subjective,
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Updata Capital believes that its analyses and the summary
set forth below must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, or of the following summary, without
considering all factors and analyses, could create an incomplete view of the
processes underlying the analyses set forth in the Updata Capital presentation
to the IMRglobal board of directors and Updata Capital's opinion.
The terms of the proposed merger, including the type and amount of merger
consideration, were determined through negotiations between IMRglobal and CGI
and were approved by IMRglobal's board of directors. Although Updata Capital
provided advice to IMRglobal during the course of these negotiations, the
decision to enter into the merger was solely that of the IMRglobal board of
directors. As described above, the opinion of Updata Capital as to the fairness
of the merger consideration from a financial point of view was only one of a
number of factors taken into consideration by the IMRglobal board of directors
in making its determination to approve the proposed merger.
The following is a brief summary of the material financial analyses
performed by Updata Capital in connection with providing its opinion to the
IMRglobal board of directors on February 20, 2001.
ANALYSIS OF PUBLICLY TRADED COMPANIES CONSIDERED COMPARABLE TO
IMRGLOBAL. This analysis reviews a business' operating performance and outlook
relative to a group of peer companies to determine an implied value. Updata
Capital chose firms that are comparable to IMRglobal in terms of information
technology service focus, business models and size. Using published Wall Street
estimates, Updata Capital used revenue, EBIT, and P/E multiples when making its
comparisons, because valuations based on these multiples are generally accepted
in the analysis of IT services companies. Revenue and EBIT multiples were based
on Enterprise Value, and P/E multiples were based on Market Value of Equity for
a group of publicly traded companies that Updata Capital considered comparable
to IMRglobal. Net
49
Enterprise Value represents a company's current stock price multiplied by its
fully diluted common shares, plus debt and preferred stock, minus cash and cash
equivalents on the most recent publicly available balance sheet. EBIT means a
company's earnings before interest and taxes. Updata Capital used closing per
share prices as of February 16, 2001 in its calculations.
The companies that Updata Capital considered comparable to IMRglobal were:
- Answerthink, Inc.
- Atlantic Data Services, Inc.
- Cognizant Technology Solutions Corp.
- COGNICASE Inc.
- First Consulting Group, Inc.
- Intelligroup, Inc.
- Nextera Enterprises, Inc.
- Proxicom, Inc.
- Sapient Corporation
- Silverline Technologies Limited
- Syntel, Inc.
- Technology Solutions Company
Updata Capital determined mean and median revenue, EBIT and P/E multiples
for these companies. Applying such multiples for the comparable companies to
actual and projected calendar year 2000 and 2001 results of operations of
IMRglobal resulted in a range of implied value per share of IMRglobal of
$(US)1.88 to $(US)10.73. See the following table for details.
CY 2000 CY 2001 CY 2000 CY 2001 CY 2000 CY 2001
-------- -------- -------- -------- -------- --------
REVENUE MULTIPLES EBIT MULTIPLES P/E MULTIPLES
Comparable Public Companies
Mean................................... 1.4x 1.2 15.4 15.7x 27.8x 25.6x
Median................................. 1.0x 1.0x 15.5x 14.7x 23.8x 29.0x
IMR Results ($(US) millions)............. $ 256.2 $ 300.0 $ 9.6 $ 26.6 $ 0.08 $ 0.37
Value of IMR Per Share
Mean................................... $ 7.70 $ 7.67 $ 3.02 $ 9.02 $ 2.19 $ 9.46
Median................................. $ 5.45 $ 6.72 $ 3.06 $ 8.44 $ 1.88 $10.73
ANALYSIS OF SELECTED TRANSACTIONS. This analysis provides a valuation range
based on financial information of selected public companies which have been
recently acquired and are in similar industries as the business being evaluated.
Using published Wall Street estimates, Updata Capital compared the proposed
merger with fifteen selected mergers and acquisitions transactions involving IT
services companies. In evaluating the transactions and the changing market
conditions, Updata Capital based its transactions analysis on four transactions
announced during the second half of 2000 and early 2001 which most closely
reflected the current market conditions for IT services companies. These
transactions resemble the IMRglobal transaction in terms of information
technology service focus, business models, publicly traded companies and
similarity of market conditions at the time of
50
announcement. The acquirors and targets in the transactions that Updata Capital
deemed comparable to the proposed merger were:
Most Recent Transactions
- Schlumberger Limited/Sema plc--Pending
- ICICI Infotech Inc./Command Systems, Inc.--Pending
- Silverline Technologies Limited/SeraNova, Inc.--October 2000
- Computer Sciences Corporation/Mynd Corporation--July 2000
Other Transactions Considered
- CMG plc/Admiral plc--April 2000
- PSINet Inc./Metamor Worldwide, Inc.--March 2000
- Whittman Hart, Inc./USWeb/CKS--December 1999
- Razorfish, Inc./International Integration Incorporated--August 1999
- AnswerThink Consulting Group, Inc./THINK New Ideas, Inc.--June 1999
- Compuware Corp./Data Processing Resources Corp.--June 1999
- Computer Associates International, Inc./Computer Management
Sciences, Inc.--October 1998
- Affiliated Computer Services, Inc./BRC Holdings, Inc.--October 1998
- First Consulting Group, Inc./Integrated Systems Consulting
Group--September 1999
- Complete Business Solutions, Inc./Claremont Technology
Group, Inc.--April 1998
- Computer Horizons Corp./Spargo Consulting--May 1998
For each transaction, Updata Capital calculated multiples based on the Net
Enterprise Value one day prior to announcement over last 12 months (LTM)
revenues and EBIT, where data was available and meaningful. All multiples for
the selected transactions were based on public information available at the time
of public announcement. Applying the medians of the foregoing sets of multiples
to IMRglobal's calendar year 2000 revenues and EBIT resulted in a range of
implied per share value of IMRglobal of $(US)4.80 to $(US)8.41. See the
following table for details.
MULTIPLE OF LTM
REVENUE MULTIPLE OF LTM EBIT
--------------- --------------------
Transactions During Second Half of 2000
Average.................................. 1.5x 23.7x
Median................................... 1.4x 23.7x
IMR: 2000 Results ($(US) millions)......... $256.2 $ 9.6
Valuation of IMR Per Share
Mean..................................... $ 8.41 $ 4.80
Median................................... $ 7.75 $ 4.80
Updata Capital also observed that no company or transaction used in the
above analyses is identical to IMRglobal or the proposed merger, and the reasons
for and circumstances surrounding each of the analyzed transactions are
inherently different. Accordingly, an analysis of the results of the foregoing
is not mathematical; rather it involves complex, qualitative considerations and
judgments, reflected in Updata Capital's opinion, concerning differences in the
financial and operating characteristics of the compared companies, the
characteristics of the selected transactions and other factors that could affect
the public trading values of the comparable companies, IMRglobal and CGI.
51
PREMIUM ANALYSIS PAID IN SELECTED TRANSACTIONS. Updata Capital reviewed
premiums paid in the above listed fifteen mergers and acquisitions of publicly
traded IT services companies at one day and thirty days prior to the
announcement of the transactions. As with the analysis of selected transactions,
Updata Capital based its premium analysis on the four most recent transactions
because the transactions resemble the IMRglobal transaction in terms of
information technology service focus, business models, publicly traded companies
and similarity of market conditions at the time of announcement. The mean
premiums paid over the seller's or target's stock price one day and thirty days
prior to the announcement were 49.3% and 78.3% respectively. Based upon
IMRglobal's closing stock price of $(US)6.56 on February 16, 2001 and $(US)4.75
on January 17, 2001, the range of implied per share value for IMRglobal was
between $(US)8.47 and $(US)9.80. In addition, the $(US)9.50 per share implied
merger consideration offered to IMRglobal shareholders represented premiums of
approximately:
- 45% over the closing price of $(US)6.56 on February 16, 2001 (the date two
trading days prior to the announcement of the CGI offer; and
- 100% over the closing price of $(US)4.75 on January 17, 2001 (the date
35 days prior to the announcement of the CGI offer).
See the following table for details.
SELLER'S PREMIUM
-----------------------------------
ONE DAY PRIOR TO 30 DAYS PRIOR TO
DATE ANNC'D DATE ANNC'D
---------------- ----------------
Premiums During Second Half of 2000
Average....................................... 49.3% 78.3%
Median........................................ 45.1% 85.5%
IMR Stock Price................................. 2/16/01 1/17/01
$(US)6.56 $(US)4.75
Valuation of IMR Per Share
Mean.......................................... $(US)9.80 $(US)8.47
Median........................................ $(US)9.52 $(US)8.81
DISCOUNTED CASH FLOW ANALYSIS. Updata Capital calculated a range of
theoretical values for IMRglobal based upon projected discounted cash flows from
2001-2005 and a terminal value based upon a multiple of 2005 EBIT. Results were
based on financial estimates, prepared by IMRglobal's management through 2005,
Updata Capital's analysis of after-tax, unlevered free cash flows, and discount
rates between 15% and 30%. Changes in these estimated ranges, or in management's
estimates of business performance, would change the implied theoretical values.
The discounted cash flow analysis produced a range of theoretical values,
depending on the assumptions utilized, from $(US)7.77 to $(US)15.54 per share.
See the following table for details.
MARKET VALUE OF EQUITY/SHARE
------------------------------------------------------
MULTIPLE OF 2005 EBIT
------------------------------------------------------
DISCOUNT RATE 14.0X 16.0X 18.0X
- --------------------- ---------- ---------- ----------
15.0% $(US)12.50 $(US)14.02 $(US)15.54
20.0% $(US)10.59 $(US)11.87 $(US)13.16
25.0% $(US) 9.04 $(US)10.13 $(US)11.22
30.0% $(US) 7.77 $(US) 8.70 $(US) 9.63
Updata Capital, as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, strategic transactions, corporate restructurings, and
other investment banking activity. Updata Capital may in the future
52
provide investment banking or other financial advisory services to IMRglobal or
CGI or their affiliates and may receive fees for the rendering of such services.
Pursuant to an engagement letter dated December 13, 1999, IMRglobal has
agreed to pay Updata Capital, upon consummation of a merger, a fee of 0.6% of
the aggregate consideration paid in the transaction, but no fee if a merger is
not consummated. The letter also provides that IMRglobal will reimburse Updata
Capital for its reasonable out-of-pocket expenses (regardless of whether or not
the merger is consummated) and will indemnify Updata Capital and certain related
persons against certain liabilities arising out of its engagement. In addition,
Updata Capital's engagement letter stipulates that Updata Capital will revise
the fairness opinion if there is a material change to the transaction terms.
PLANS FOR IMRGLOBAL AFTER THE MERGER
SUBSIDIARY OF CGI
Following the merger, IMRglobal will be a wholly owned subsidiary of CGI.
EMPLOYMENT AGREEMENTS
In connection with the execution of the merger agreement, CGI and IMRglobal
have entered into a new employment agreement with Satish K. Sanan, Chairman and
Chief Executive Officer of IMRglobal. In addition, in connection with the merger
agreement, the existing employment agreements of Vincent Addonisio, IMRglobal's
Executive Vice President and Chief Administrative Officer, and Philip
Shipperlee, IMRglobal's President, European Operations were amended. The
employment agreements of Messrs. Sanan, Addonisio and Shipperlee are described
in "--Conflicts of Interests between Directors and Officers of IMRglobal and
IMRglobal Shareholders in the Merger."
CONFLICTS OF INTERESTS BETWEEN DIRECTORS AND OFFICERS OF IMRGLOBAL AND IMRGLOBAL
SHAREHOLDERS IN THE MERGER
In considering the recommendation of the IMRglobal board of directors in
favor of the merger, you should be aware that some of the directors and
executive officers of IMRglobal could have interests in the merger that may be
different from, or in addition to, the interests of IMRglobal shareholders
generally. These interests, to the extent material, are described below. The
IMRglobal board of directors was aware of the existence of these interests, in
approving the merger agreement and the merger and determined that these
interests did not detract from the fairness of the merger to the IMRglobal
shareholders. To the extent certain benefits received by these officers and
directors encourage these persons to continue in the employ of the combined
company following the merger, it was believed that these benefits might also
result in future benefits for the shareholders of CGI, following the merger,
including shareholders of IMRglobal.
EMPLOYMENT AGREEMENTS
In connection with entering into the merger agreement, IMRglobal's Chairman
and Chief Executive Officer, Satish K. Sanan, entered into a new employment
agreement which will become effective at the time the merger is completed, and
certain related agreements, with IMRglobal and CGI.
The new agreements with Mr. Sanan provide for:
- Mr. Sanan's employment by IMRglobal;
- a two-year term, with automatic one year renewals unless notice of
termination is given at least 120 days prior to the expiration of the term
by either Mr. Sanan or IMRglobal;
- responsibilities for Mr. Sanan as are reasonably agreed upon by Mr. Sanan
and CGI;
- an annual base salary of $(US)500,000;
53
- an annual financial performance bonus of up to 100% of base salary keyed
to performance criteria related to CGI and IMRglobal;
- the granting to Mr. Sanan of employee stock options by CGI in a manner
consistent with grants to executive vice presidents of CGI located in the
United States. The number of options to be granted to Mr. Sanan has not
yet been determined. However, it is expected that these options would be
valid for a term of 10 years. In the past, executive vice presidents of
CGI located in the United States have been granted options at a level,
based on achievement of performance objectives, valued between 40% to 80%
of base salary. The number of options issued has generally been equal to
the value divided by the grant price (generally, fair market value at the
time of grant);
- the immediate vesting of all stock options granted to Mr. Sanan prior to
the completion of the merger in the event he is terminated without "cause"
(as defined in his new employment agreement). These options otherwise vest
as to 34,000 shares on May 10, 2002 at $(US)17.625 per share, 50,000
shares on March 16, 2002 at $(US)13.1875 per share and 50,000 shares on
March 16, 2003 at $(US)13.1875 per share;
- the payment to Mr. Sanan of his base salary, insurance benefits and car
allowances for the remainder of the then current term of his employment
agreement in the event that his employment is terminated without cause;
- the provision to Mr. Sanan of insurance benefits, car allowances, and the
payment by IMRglobal each year of up to $(US)106,020 in premiums on life
insurance policies for the benefit of Mr. Sanan; and
- if he is an employee of CGI at such time, the appointment of Mr. Sanan to
the board of directors of CGI if a board vacancy occurs or, if not, the
nomination for election of Mr. Sanan as a CGI director at CGI's next
annual meeting of shareholders, if he continues as an employee of CGI at
that time, subject to any necessary shareholder approval.
In consideration for the foregoing new employment and related agreements and
as an inducement to CGI entering into the merger agreement, Mr. Sanan has agreed
to the following:
- while the merger agreement is in effect and following completion of the
merger, Mr. Sanan will not be entitled to the severance benefits
provided for under his existing employment agreement which might
otherwise be payable upon a termination of his employment without cause
by IMRglobal or following specified "constructive" terminations of his
employment. These severance benefits waived by Mr. Sanan include a
payment equal to three times his gross employment income attributable
to IMRglobal for the previous calendar year (which could have totaled
as much as $(US)96.0 million in severance payments based on
Mr. Sanan's 2000 earnings), the vesting of all of his employee stock
options, and the continuation of certain insurance benefits;
- upon completion of the merger, revised terms to his continuing
employment, including a new bonus arrangement so that Mr. Sanan will no
longer be entitled to the financial performance bonus in his existing
employment agreement equal to 2% of IMRglobal's consolidated pre-tax
cash earnings, up to a maximum of $(US)1.0 million and will instead be
entitled to an annual financial performance bonus of up to
$(US)500,000;
- immediately prior to completion of the merger, the $(US)5.0 million
loan (and any accrued interest) to Mr. Sanan pursuant to a line of
credit provided to him by IMRglobal under his existing employment
agreement will be eliminated either by the forgiveness of the loan or
the payment of a bonus to Mr. Sanan in an amount equal to the loan
which will be used to repay the loan;
54
- an overpayment to Mr. Sanan in respect of his year 2000 bonus in the
amount of $(US)286,832 will be credited against his year 2001 bonus, if
earned, and Mr. Sanan will be required to repay this overpayment to the
extent that it exceeds the aggregate amount of his 2001 bonus; and
- at the time the merger is completed, his existing employment agreement
will be replaced by the new employment agreement.
CGI indicated to Mr. Sanan that it would not be willing to enter into the
merger agreement unless Mr. Sanan agreed to the foregoing conditions. Mr. Sanan
determined that if CGI entered into the merger agreement, the terms of his new
employment agreement would be adequate for him to forego the severance payments
provided in his prior employment agreement with IMRglobal.
At the time the merger agreement was signed, CGI and IMRglobal also entered
into amendments to the existing employment agreements between IMRglobal and each
of Vincent Addonisio, IMRglobal's Executive Vice President and Chief
Administrative Officer, and Philip Shipperlee, IMRglobal's President of European
Operations. These amendments provide:
- that the amounts these individuals have borrowed from IMRglobal pursuant
to loans provided to them under their existing employment agreements and
used by each of them to purchase shares of IMRglobal common stock that
secure such loans (each loan is approximately $(US)234,500 plus accrued
interest of approximately $(US)50,000 on each loan) will be forgiven and
IMRglobal's security interest in its common stock released at the time the
merger is completed (each loan was used by each of Mr. Addonisio and
Mr. Shipperlee to purchase IMRglobal common stock with a current market
value of approximately $(US)75,000 for each);
- the employee will be obligated to repay the loan amounts plus accrued
interest if he voluntarily terminates his employment (other than by reason
of death or disability) within six months after the consummation of the
merger; and
- if the employee's employment with IMRglobal is terminated for any reason
after the consummation of the merger, any unvested stock options granted
to him by IMRglobal prior to the merger will become immediately and fully
exercisable and all of his outstanding stock options will remain
exercisable for 36 months after the termination of employment.
These amendments to the employment agreements of Messrs. Addonisio and
Shipperlee will terminate if the merger agreement is terminated. CGI determined
that continued employment by Messrs. Addonisio and Shipperlee up to and after
completion of the merger would be beneficial and necessary to a successful
integration of IMRglobal into CGI. CGI further determined that the potential
forgiveness of the loans would provide an adequate incentive for
Messrs. Addonisio and Shipperlee to continue their employment up to and after
completion of the merger. The amendments to the employment agreements of
Messrs. Addonisio and Shipperlee were offered only after the principal terms of
the proposed merger had been negotiated, and were accepted by Messrs. Addonisio
and Shipperlee without negotiation.
EFFECT OF THE MERGER ON THE IMRGLOBAL EQUITY PLANS
At the effective time of the merger, all options to acquire shares of
IMRglobal common stock including options held by IMRglobal's directors and
executive officers, by their terms will become options to acquire CGI Class A
Subordinate Shares in a number and at an exercise price which will reflect the
exchange ratio of IMRglobal common stock for CGI Class A Subordinate Shares in
the merger. In addition, CGI will, no later than three business days after the
effective time of the merger, register the CGI Class A Subordinate Shares
issuable upon exercise of these options under the Securities Act of 1933. Under
the terms of IMRglobal's stock option plans, if the employment of an IMRglobal
employee is terminated without cause within twelve months of the completion of
the merger, the stock options held by the employee will automatically vest and
become exercisable. The
55
merger will result in the acceleration of the vesting of 11,250 options for each
of IMRglobal directors Charles C. Luthin and Jeffery S. Slowgrove that would
otherwise vest on May 26, 2002 at an exercise price of $(US)15.50 per share.
When these options are converted into options to purchase CGI Class A
Subordinate Shares at the effective time of the merger, they will all become
fully vested. Upon completion of the merger, all outstanding options under the
directors stock option plan of IMRglobal will remain exercisable until
December 31, 2001.
NEW STOCK OPTION GRANTS
In the merger agreement, CGI has agreed to grant to members of senior
management of IMRglobal options to purchase an aggregate of 1,000,000 CGI
Class A Subordinate Shares. The grant will be made following completion of the
merger to members of IMRglobal management as determined by CGI after
consultation with IMRglobal's Chairman and Chief Executive Officer, Satish K.
Sanan. The per share exercise price of the options will be the fair market value
of the CGI Class A Subordinate Shares on the date the option is granted as
provided for under CGI's plans. The option grants are intended to be part of the
incentive compensation for IMRglobal's management following completion of the
merger, to encourage these persons to remain with the combined company, and to
facilitate the integration of IMRglobal with CGI by aligning the interests of
these persons with the interests of CGI following the merger.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
CGI has agreed that the indemnification provisions of the articles of
incorporation and bylaws of IMRglobal immediately prior to the effective time of
the merger will not be amended, repealed or otherwise modified for a period of
six years from the effective time of the merger in any manner that would
adversely affect the rights thereunder of individuals who at the effective time
of the merger, were directors, officers, employees or agents of IMRglobal.
CGI has agreed to indemnify and hold harmless, each present and former
director and officer of IMRglobal or any of its subsidiaries against any costs
or expenses, including attorneys' fees, damages and liabilities in connection
with any actual or threatened claim or investigation in connection with any
action or omission occurring or alleged to occur prior to the effective time of
the merger in their capacities as officer or director.
The merger agreement requires that, for a period of six years after the
effective time of the merger, CGI will procure directors' and officers'
liability insurance with coverage and in amounts no less favorable than
IMRglobal's current coverage; provided that CGI is not required to procure any
coverage in excess of the amount that can be obtained at a premium of 250% of
the current annual premium paid by IMRglobal.
Due to the foregoing interests of IMRglobal directors and officers, such
directors and officers of IMRglobal may have been more likely to vote to adopt
the merger agreement and to approve the merger than if they did not have these
interests. IMRglobal shareholders should consider whether these interests may
have influenced these directors and officers to support or recommend the merger.
ACCOUNTING TREATMENT
CGI will account for the merger using the purchase method under both
Canadian and U.S. GAAP. See the "Unaudited Pro Forma Condensed Consolidated
Financial Information" beginning on page 90.
The purchase price will be allocated to the net assets acquired of IMRglobal
based on their estimated fair value. CGI's management believes that any excess
of the purchase consideration over the fair value of the net assets acquired of
IMRglobal will be allocated to goodwill.
The purchase price for Canadian and U.S. GAAP will differ. In accordance
with Canadian GAAP, the determination of the purchase price is based on the CGI
Class A Subordinate Share average
56
market closing price on the TSE for the twenty-one day period starting ten days
before and ending ten days after the closing date of the merger as compared to
the twenty-one day period starting ten days before and ending ten days after the
announcement date for U.S. GAAP purposes.
A preliminary allocation of the purchase price to the estimated fair value
of net assets acquired has been performed for purposes of the unaudited pro
forma condensed consolidated financial information based on initial appraisal
estimates and other valuation studies which are in process and which CGI
management believes are reasonable. Accordingly, the purchase adjustments made
in connection with the development of the unaudited pro forma condensed
consolidated financial information appearing elsewhere in this document are
preliminary and were made solely for purposes of developing the unaudited pro
forma condensed consolidated financial information. CGI will make appropriate
purchase adjustments upon finalization of these estimates and other valuation
studies. For financial reporting purposes, CGI will include the results of
operations of IMRglobal in the CGI consolidated statement of earnings starting
from the completion date of the merger.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
U.S. ANTITRUST
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
we cannot complete the merger until we have given notification and furnished
information relating to the operations of CGI and IMRglobal and the markets in
which they operate to the U.S. Federal Trade Commission and the Antitrust
Division of the U.S. Department of Justice and the applicable waiting period
expires or the transaction is granted early termination. On March 16, 2001, CGI
and IMRglobal each filed a premerger notification and report form under the HSR
Act with the FTC and the Department of Justice. All applicable waiting periods
under the HSR Act have now expired or have been terminated.
At any time before or after the consummation of the merger, and
notwithstanding the expiration of the waiting period under the HSR Act, the
Department of Justice or the FTC could take any action under the antitrust laws
that it deems necessary or desirable in the public interest, including seeking
to enjoin the completion of the merger or seeking the divestiture of substantial
assets of IMRglobal or CGI.
CGI and IMRglobal believe that neither the FTC nor the Department of Justice
should challenge the merger. There can be no assurance, however, that a
challenge to the merger on antitrust grounds will not be made, or, if a
challenge is made, what the result will be. In addition, private parties and
state attorneys general may also bring actions under the antitrust laws
challenging the merger.
EXON-FLORIO AMENDMENT
The Exon-Florio Amendment consisting of the Omnibus Trade and
Competitiveness Act of 1988, which was added to Title VII of the Defense
Production Act of 1950, empowers the President of the United States to prohibit
or suspend an acquisition of, or investment in, a United States company by a
"foreign person" if the President, after investigation, finds credible evidence
that the foreign person might take action that threatens to impair the national
security of the United States and that other provisions of existing law do not
provide adequate and appropriate authority to protect the national security. By
a 1988 executive order, the President delegated to the Committee on Foreign
Investment in the United States, or CFIUS, the authority to receive notices of
proposed transactions, determine when an investigation is warranted, conduct
investigations and submit recommendations to the President to suspend or
prohibit the completion of transactions or to require divestitures of completed
transactions. Parties to a transaction are not required to file a notice with
CFIUS. However, CFIUS has the authority to review transactions even if no notice
has been filed by the parties to transaction.
57
CGI and IMRglobal do not intend to file a notice with CFIUS with respect to
the merger. They do not believe the merger threatens to impair the national
security of the United States. Consequently they believe no review of the merger
or other action is appropriate. However, there can be no assurance that an
investigation or challenge of the merger based on the Exon-Florio Amendment will
not be made or, if made, what the result will be.
OTHER LAWS
CGI and IMRglobal conduct operations in a number of jurisdictions throughout
the world where other regulatory filings or approvals may be required or
advisable in connection with the completion of the merger. CGI and IMRglobal are
currently in the process of reviewing whether filings or approvals material to
CGI and IMRglobal and its subsidiaries may be required or desirable in other
jurisdictions. It is possible that one or more of these filings may not be made,
or one or more of these approvals, which are not as a matter of practice
required to be obtained prior to effectiveness of a merger transaction, may not
be obtained, prior to the merger.
GENERAL
It is possible that one or more of the regulatory approvals required to
complete the merger will not be obtained on a timely basis or at all. In
addition, it is possible that any of the governmental entities with which
filings are made may seek regulatory concessions as conditions for granting
approval of the merger. Under the merger agreement, CGI and IMRglobal have each
agreed to use its reasonable best efforts to complete the merger, including to
gain clearance from antitrust and competition authorities and obtain other
required approvals. For this purpose, CGI and IMRglobal have agreed to offer to
take and to accept, to the extent consistent with its obligation to use
reasonable best efforts, any actions, conditions, terms or restrictions
necessary to obtain any regulatory approval, unless those conditions, terms and
restrictions in the aggregate would have a material adverse effect on CGI or
IMRglobal. Although we do not expect regulatory authorities to raise any
significant objections to the merger, we can not be certain that we will obtain
all required regulatory approvals or that these approvals will not contain
terms, conditions or restrictions that would be detrimental to CGI after the
merger.
OTHER EFFECTS OF THE MERGER
LISTING OF SHARES
It is a condition to the merger that the CGI Class A Subordinate Shares
issuable in connection with the merger be authorized for listing on the New York
Stock Exchange and the Toronto Stock Exchange, subject to official notice of
issuance.
CONTENT AND TIMING OF REPORTS AND NOTICES OF THE COMPANIES; DEFINITION OF
FOREIGN PRIVATE ISSUER
The content and timing of reports and notices that CGI files with the SEC
differ in several respects from the reports and notices that IMRglobal currently
files. CGI is a foreign private issuer for the purposes of the reporting rules
under the Exchange Act.
As a U.S. reporting company, IMRglobal currently must file with the SEC,
among other reports and notices:
(1) an Annual Report on Form 10-K within 90 days after the end of each
fiscal year;
(2) a Quarterly Report on Form 10-Q within 45 days after the end of each
fiscal quarter; and
(3) Current Reports on Form 8-K upon the occurrence of various corporate
events.
58
As a foreign private issuer eligible to use the SEC's multijurisdictional
disclosure system, pursuant to the requirements of the Exchange Act, CGI is
required to:
(1) file with the SEC an annual report on Form 40-F within six months after
the end of each fiscal year; and
(2) furnish reports on Form 6-K upon the occurrence of significant corporate
events if the events are disclosed in Canada.
Subsequent to the merger, CGI will continue to make filings with the SEC on
the same basis. As a foreign private issuer, CGI is not required under the
Exchange Act to file quarterly reports on Form 10-Q after the end of each
financial quarter.
In addition, the content and timing of reports and notices that holders of
CGI Class A Subordinate Shares will receive will differ from the reports and
notices that are currently received by IMRglobal shareholders. As a U.S.
reporting company, IMRglobal must mail to its shareholders in advance of each
annual meeting of shareholders:
(1) an annual report containing audited financial statements; and
(2) a proxy statement that complies with the requirements of the Exchange
Act.
As a foreign private issuer, CGI is exempt from the rules under the Exchange
Act prescribing the furnishing and content of annual reports and proxy
statements to its shareholders. CGI expects to retain its status as a foreign
private issuer after the completion of the merger. Under SEC rules, CGI will
retain its status as a foreign private issuer so long as either:
- 50% or more of CGI's shares, including CGI Class A Subordinate Shares, are
beneficially owned by shareholders who are not residents of the U.S.; or
- all three of the following conditions continue to be satisfied: at least
50% of CGI's directors and its executive officers are neither citizens nor
residents of the U.S.; at least 50% of CGI's assets are located outside
the U.S.; and CGI's business is administered principally outside the U.S.
After completion of the merger, it is not expected that U.S. shareholders
will hold more than 50% of CGI's shares, including the CGI Class A Subordinate
Shares. However, even if U.S. shareholders were to hold more than 50% of CGI's
shares after completion of the merger, CGI expects that after the merger at
least 50% of its directors and executive officers will be persons who are not
U.S. citizens or residents and, on a consolidated basis, at least 50% of its
assets will be located outside of the U.S. Furthermore, CGI will continue to
administer its business from its current headquarters in Montreal, Quebec.
Accordingly, CGI expects to retain its status as a foreign private issuer after
completion of the merger. If CGI at any time loses its status as a foreign
private issuer, it will be required to file Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. In addition, CGI
will become subject to the rules under the Exchange Act regarding the furnishing
and content of annual reports and proxy statements to its shareholders.
As a foreign private issuer, CGI is exempt from the rules under the Exchange
Act regarding the furnishing of annual reports. However, under the rules of the
NYSE, CGI is required to distribute to the holders of its Class A Subordinate
Shares an annual report containing audited financial statements a reasonable
period of time before CGI's annual general meeting of shareholders and, in any
event, no later than 225 days after the close of its fiscal year. Under
applicable Canadian securities laws and the TSE rules, an annual report
containing audited financial statements must be filed and distributed to
shareholders within 140 days from the end of CGI's financial year. CGI currently
furnishes holders of its Class A Subordinate Shares with its annual report which
contains audited financial statements prepared in conformity with Canadian GAAP,
including U.S. GAAP reconciliations, and a discussion of CGI's financial results
that is comparable to the management's discussion and analysis that is contained
in IMRglobal's Annual Reports on Form 10-K. See "Description of CGI Shares."
59
DELISTING OF IMRGLOBAL COMMON STOCK
Following completion of the merger, the IMRglobal common stock will be
delisted from the Nasdaq National Market System and deregistered under the
Exchange Act.
REQUIRED DISPOSITIONS
Some U.S. mutual funds and state pension funds currently holding IMRglobal
common stock who are precluded from holding non-U.S. equities will be required
to sell their IMRglobal shares (or the CGI Class A Subordinate Shares they
receive in exchange) prior to or after completion of the merger. These sales
could adversely affect the market price for the CGI Class A Subordinate Shares.
DIRECTORS AND MANAGEMENT OF CGI AND IMRGLOBAL FOLLOWING THE MERGER
Following completion of the merger, CGI's directors and executive officers
will remain unchanged. Information regarding these directors and officers is
contained under the caption "Directors and Management of CGI Following the
Merger." CGI has agreed that the board of directors of CGI will appoint Satish
K. Sanan, IMRglobal's Chairman and Chief Executive Officer, if he is an employee
of CGI at that time, to the board of directors of CGI should a vacancy occur. If
no vacancy on the board has occurred and if Mr. Sanan continues as an employee
of CGI, CGI has agreed to nominate him for election to CGI's board of directors
at CGI's next annual meeting of shareholders, which is expected to be held in
January, 2002, subject to CGI shareholder approval. Upon completion of the
merger, the directors of CGI Florida Corporation, all of whom are executive
officers of CGI, will become the directors of IMRglobal.
In addition, it is expected that substantially all of the executive officers
and key employees of IMRglobal will continue in the management of IMRglobal and
provide services to the combined company.
EQUITY OWNERSHIP FOLLOWING THE MERGER
Based on the closing price of a CGI Class A Subordinate Share on the New
York Stock Exchange on June 4, 2001 of $(US)5.97, the 1.5974 Class A Subordinate
Shares of CGI to be exchanged for each share of IMRglobal common stock in the
merger would have a market value of $(US)9.5365, and the aggregate value of the
shares of CGI to be issued to IMRglobal shareholders in the merger would be
approximately $(US)421.6 million, and $(US)478.2 million if all of the options
to acquire shares of IMRglobal common stock were exercised. As a result,
IMRglobal shareholders would own approximately 19.1% of all of the CGI shares
outstanding immediately after the merger, and, assuming the exercise of all
outstanding options, warrants and preemptive rights to purchase CGI shares
immediately after the merger, IMRglobal shareholders and option holders would
own approximately 20.4% of all of the CGI shares then outstanding.
Directors and executive officers of IMRglobal currently beneficially own
approximately 30.8% of the total outstanding common stock of IMRglobal and,
following the completion of the merger, will beneficially own approximately 6.8%
of the Class A Subordinate Shares of CGI, in each case assuming the exercise of
all options to acquire shares of IMRglobal common stock.
The number of Class A Subordinate Shares of CGI to be exchanged for each
share of IMRglobal common stock in the merger was determined by arms length
negotiation between CGI and IMRglobal and, at the time the exchange ratio was
determined, was intended to provide $(US)9.50 in value for each share of
IMRglobal common stock based on the average closing price of CGI Class A
Subordinate Shares on the New York Stock Exchange for the 25 trading days ended
February 16, 2001. The actual value of the CGI Class A Subordinate Shares
exchanged for each share of IMRglobal common stock in the merger will depend on
the market price of CGI Class A Subordinate Shares at the time the merger is
completed, which may be substantially different than $(US)9.50.
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Based on IMRglobal's unaudited balance sheet at March 31, 2001 and a
preliminary valuation of intangible assets, CGI will acquire approximately
$(US)155.7 million of assets, $(US)81.0 million of liabilities and
$(US)346.9 million of goodwill.
FINANCIAL INFORMATION
CGI prepares its financial statements in accordance with Canadian GAAP and
presents them in Canadian dollars. The CGI financial statements include a
reconciliation of the Canadian GAAP financial information to U.S. GAAP and a
description of the effects of the differences between Canadian GAAP and U.S.
GAAP in accordance with SEC rules.
If CGI loses its status as a foreign private issuer, under SEC rules it will
be required to prepare financial statements in accordance with U.S. GAAP and
present them in U.S. dollars, in addition to its financial statements prepared
in accordance with Canadian GAAP and presented in Canadian dollars. See "--Other
Effects of the Merger" above. The notes to CGI's consolidated financial
statements on Form 40-F for the year ended September 30, 2000 describe the
significant differences between Canadian GAAP and U.S. GAAP as they relate to
CGI. The notes to the Unaudited Pro Forma Condensed Consolidated Financial
Information, prepared in accordance with Canadian GAAP, present material
adjustments which would be required if U.S. GAAP had been applied to that
information.
DIVIDENDS
CGI historically has not paid dividends on Class A Subordinate Shares and
does not expect to pay dividends on Class A Subordinate Shares in the
foreseeable future. The amount of any future dividends of CGI will be dependent
upon its earnings and financial condition, and other factors affecting its
businesses. Holders of CGI shares would receive dividends, if any, in Canadian
dollars.
FEDERAL SECURITIES LAWS CONSEQUENCES
All CGI Class A Subordinate Shares received in the merger by IMRglobal
shareholders will be freely transferable, except that CGI Class A Subordinate
Shares received by persons who are deemed to be "affiliates" of IMRglobal under
the Securities Act of 1933, as amended, at the time of the IMRglobal special
meeting may be resold by them only in transactions permitted by Rule 145 under
the Securities Act or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of IMRglobal for these purposes generally
include individuals or entities that control, are controlled by or are under
common control with IMRglobal and include directors and executive officers of
IMRglobal. The merger agreement requires IMRglobal to use its reasonable best
efforts to cause each of its affiliates to execute a written agreement to the
effect that he or she will not offer, sell or otherwise dispose of any CGI
Class A Subordinate Shares issued to them in the merger in violation of the
Securities Act or the related SEC rules.
By virtue of available statutory prospectus exemptions under the securities
laws of certain provinces of Canada, Class A Subordinate Shares to be issued to
IMRglobal shareholders in connection with the merger will be freely resalable in
Canada by a former holder of IMRglobal common stock.
APPRAISAL RIGHTS
Under the Florida Business Corporation Act, if the merger is completed,
shareholders of IMRglobal will not have any dissenters' rights to have their
shares appraised by a court and to be paid such appraised "fair value" in cash,
regardless of how these shareholders vote on the merger. The dissenters rights
are not available because IMRglobal common stock is listed on the Nasdaq Stock
Market's National Market.
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CGI SHAREHOLDER PREEMPTIVE RIGHTS AND RELATED MATTERS
Under the articles of incorporation of CGI, holders of Class B Shares
(multiple voting) have preemptive rights in connection with certain issuances of
Class A Subordinate Shares or securities convertible into Class A Subordinate
Shares. Pursuant to these preemptive rights, each holder of Class B Shares
(multiple voting) has a right to purchase that number of Class B Shares
(multiple voting) which allows him to maintain his then current percentage
voting power associated with the Class B Shares (multiple voting) in CGI. The
current holders of Class B Shares (multiple voting) are (a) Messrs. Godin,
Imbeau and Brassard, directly or indirectly through holding companies they
control, and (b) BCE Inc., directly or indirectly through an entity it controls.
In addition, under the options agreement among BCE Inc., Bell Canada, CGI and
Messrs. Godin, Imbeau and Brassard and their respective holding companies,
BCE Inc. has additional preemptive rights in connection with certain issuances
of Class A Subordinate Shares or securities convertible into Class A Subordinate
Shares giving BCE Inc. the right to purchase Class A Subordinate Shares to
maintain its equity participation in CGI. If any of the holders of Class B
Shares (multiple voting) other than BCE Inc. decides not to exercise its
preemptive rights, these rights can be exercised by BCE Inc. The preemptive
rights to purchase additional Class B Shares (multiple voting) of CGI available
to Messrs. Godin, Imbeau and Brassard and their holding companies in connection
with the merger will be exercised, in full or in part, by Messrs. Godin and
Imbeau and their holding companies (including, with the consent of BCE Inc.,
Mr. Brassard's preemptive rights) at a cash price equal to the weighted average
trading price on the TSE for the Class A Subordinate Shares for the twenty-one
day period starting ten days before and ending ten days after the date of the
closing of the merger up to a maximum aggregate purchase price of
$(Cdn)60 million. BCE Inc. has informed CGI that it will not exercise its
preemptive rights to acquire additional Class A Subordinate Shares and has
indicated to CGI that it will decide prior to completion of the merger whether
or not it will exercise its preemptive rights to purchase Class B Shares
(multiple voting) at the same per share price described above for the other
preemptive rights. If BCE Inc. does not exercise its preemptive rights, up to a
maximum of an aggregate of approximately 6.0 million Class B Shares (multiple
voting) will be issued to Messrs. Godin and Imbeau and their holding companies
in connection with the exercise of these preemptive rights, and if BCE Inc.
exercises its preemptive rights, up to a maximum of an aggregate of
approximately 9.5 million Class B Shares (multiple voting) will be issued in
connection with the exercise of these preemptive rights, including shares which
are subscribed to by Messrs. Godin and Imbeau and their holding companies. The
sale of these additional CGI shares pursuant to the exercise of preemptive
rights will occur at the time that the merger is completed. The proceeds to be
received by CGI in connection with the exercise of the preemptive rights will be
used to repay long-term debt.
If BCE Inc. does not exercise its preemptive rights to acquire additional
Class B Shares (multiple voting), Messrs. Godin, Imbeau and Brassard and
BCE Inc. will collectively beneficially own 113,648,948 Class A Subordinate
Shares and a maximum of 40,874,693 Class B Shares (multiple voting)
representing, in the aggregate, a maximum of approximately 71.1% of the voting
power of shares of CGI to be outstanding immediately following completion of the
merger. If BCE Inc. does exercise those preemptive rights then Messrs. Godin,
Imbeau and Brassard and BCE Inc. will collectively beneficially own 113,648,948
Class A Subordinate Shares and a maximum of 44,488,326 Class B Shares (multiple
voting) representing, in the aggregate, a maximum of approximately 72.5% of the
voting power of shares of CGI to be outstanding immediately following completion
of the merger.
In connection with the execution of the merger agreement, CGI obtained the
consent of BCE Inc. which has a right to approve major transactions under its
contractual arrangements with CGI. See "Related Parties and Certain
Transactions" on page 151.
Under the rules and interpretations of the NYSE, the TSE and Quebec law, CGI
shareholder approval of the merger or the merger agreement is not required.
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MATERIAL UNITED STATES TAX CONSEQUENCES
GENERAL
The following is a discussion of the material U.S. federal income tax
consequences of the merger to U.S. Holders of IMRglobal common stock and the
material U.S. federal income tax considerations applicable to the ownership of
CGI Class A Subordinate Shares by U.S. Holders and is the opinion of Fried,
Frank, Harris, Shriver & Jacobson, U.S. counsel to CGI, and Holland & Knight
LLP, U.S. counsel to IMRglobal. As used in this discussion, a "U.S. Holder"
means (1) prior to completion of the merger, a beneficial owner of a share of
IMRglobal common stock, and (2) after completion of the merger, a beneficial
owner of a CGI Class A Subordinate Share, in either case, characterized as, for
U.S. federal income tax purposes:
- a citizen or individual resident of the U.S.;
- a corporation or other entity that has elected to be treated as a
corporation organized in or under the laws of the U.S. or any state
thereof, including the District of Columbia;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if, in general, the trust is subject to the supervision of a court
within the U.S. and the control of one or more U.S. persons as described
in Section 7701(a)(30) of the U.S. Internal Revenue Code of 1986, as
amended (the "U.S. tax code").
If a partnership is a beneficial owner of a share of IMRglobal common stock,
or a beneficial owner of a CGI Class A Subordinate Share, the treatment of a
partner in the partnership will generally depend upon the status of the partner
and upon the activities of the partnership. A U.S. holder that is a partnership,
and partners in such a partnership, should consult their tax advisors about the
U.S. federal income tax consequences of the merger and the material U.S. federal
income tax considerations applicable to the ownership of CGI Class A Subordinate
Shares.
This discussion does not address all aspects of U.S. federal income taxation
that may be relevant to shareholders to which special provisions of U.S. federal
income tax law may apply based on their particular circumstances or status. For
example, the discussion does not address all aspects of U.S. federal income
taxation that may be relevant to:
- shareholders liable for alternative minimum tax;
- shareholders that actually or constructively own or will own 5% or more by
vote or value of the outstanding shares of IMRglobal or CGI;
- shareholders that hold their shares as part of a straddle, hedge,
synthetic security, conversion transaction or other integrated investment
composed of CGI shares and one or more other investments;
- shareholders whose "functional currency" is not the U.S. dollar;
- financial institutions;
- insurance companies;
- tax-exempt organizations;
- traders in securities that elect mark-to-market accounting treatment;
- broker-dealers;
- persons who acquired their shares of stock by exercising employee stock
options or as some other form of compensation;
- qualified retirement plans;
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- regulated investment companies; or
- real estate investment trusts.
Further, the discussion below is limited to shareholders who hold shares of
IMRglobal common stock and, after the merger, CGI Class A Subordinate Shares, as
capital assets and does not address U.S. state or local taxation or taxation by
countries other than the U.S.
The discussion below is based on existing U.S. federal income tax law,
including legislation, administrative rulings and court decisions, as well as on
the relevant Canada-U.S. tax treaty, all as in effect on the date of this proxy
statement/prospectus, all of which are subject to change, or changes in
interpretation, possibly with retroactive effect. The foregoing discussion also
assumes that the merger will be completed in accordance with the terms and
conditions of the merger agreement without waiver or modification of any such
terms or conditions.
Finally, CGI believes that it is not a "passive foreign investment company"
within the meaning of Section 1297(a) of the U.S. tax code or a "foreign
personal holding company" within the meaning of Section 552(a) of the U.S. tax
code and the discussion below so assumes.
Each IMRglobal shareholder is advised to consult his or her own tax advisor
as to the U.S. federal income tax consequences of the merger, and the ownership
and disposition of the CGI Class A Subordinate Shares to him or her, in each
case in light of the facts and circumstances that may be unique to him or her,
and as to, U.S. estate, gift, state, local, or non-U.S. tax consequences of the
merger.
TAX OPINIONS
The merger agreement provides that CGI and IMRglobal must each receive at
closing an additional opinion from its counsel substantially to the effect that
the merger will be treated as a reorganization within the meaning of
Section 368(a) of the U.S. tax code and a U.S. Holder of IMRglobal common stock
who receives CGI Class A Subordinate Shares in exchange for shares of IMRglobal
common stock will not recognize gain or loss on the exchange, except with
respect to cash received upon the sale of CGI fractional share interests. Each
tax opinion from counsel will be based on representations of CGI and IMRglobal
as to factual matters and various assumptions as noted in these opinions.
The merger agreement permits each of CGI and IMRglobal to waive (but neither
intends to waive) the receipt of its counsel's opinion as a condition to its
obligation to consummate the merger. The tax opinions will not be binding on the
IRS or a court and will not preclude the IRS or a court from adopting a contrary
position. In the event either CGI or IMRglobal were to waive receipt of its
counsel's tax opinion, CGI and IMRglobal have agreed to resolicit proxies from
shareholders of IMRglobal. Accordingly, the discussion below assumes the merger
agreement is consummated without waiver of the tax opinion condition. If the tax
opinion is waived, or the IRS successfully challenges the conclusions of the tax
opinion, the U.S. federal tax consequences to U.S. Holders may be other than
those described in this section. Neither CGI nor IMRglobal will seek a ruling
from the IRS as to the U.S. federal income tax treatment of the merger.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS OF IMRGLOBAL
COMMON STOCK
For U.S. federal income tax purposes, the merger will be treated as a
reorganization within the meaning of Section 368(a) of the U.S. tax code.
Accordingly, U.S. Holders of IMRglobal common stock will not recognize gain or
loss as a result of the receipt solely of CGI Class A Subordinate Shares in
exchange for shares of IMRglobal common stock, except to the extent of any cash
received upon the sale of fractional CGI Class A Subordinate Shares as explained
below.
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The aggregate tax basis of the CGI Class A Subordinate Shares received in
the merger will equal the aggregate tax basis of the shares of IMRglobal common
stock exchanged, decreased by the basis of any IMRglobal common stock allocated
to a fractional interest in a CGI Class A Subordinate Shares that is sold for
cash. The holding period of the CGI Class A Subordinate Shares will include the
holding period of the shares of IMRglobal common stock for which they are
exchanged.
Fractional interests in CGI Class A Subordinate Shares will not be issued to
IMRglobal shareholders in the merger. In lieu of the issuance of fractional
interests in CGI Class A Subordinate Shares, any fractional interests IMRglobal
shareholders otherwise would have been entitled to receive will be sold and the
proceeds of that sale will be paid to those shareholders. A U.S. Holder who
receives cash in respect of a fractional share will recognize gain or loss equal
to the cash amount received for the fractional share reduced by the U.S.
Holder's tax basis in IMRglobal common stock exchanged which is allocable to the
fractional share interest. Any gain or loss will generally be capital gain or
loss, and will be long-term capital gain or loss with respect to shares of
IMRglobal common stock held for more than 12 months at the effective time of the
merger.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING CGI CLASS A SUBORDINATE
SHARES
TAXATION OF DIVIDENDS
Although CGI does not currently pay dividends on Class A Subordinate Shares,
if and when it does so, for U.S. federal income tax purposes, a U.S. Holder will
generally include in gross income the amount of any dividend paid by CGI
(unreduced by any applicable Canadian withholding tax), to the extent paid out
of CGI's current and/or accumulated earnings and profits, as determined for U.S.
federal income tax purposes, as ordinary income when the dividend is actually
received by the U.S. Holder. As described below, dividends paid or deemed paid
by CGI with respect to Class A Subordinate Shares held by U.S. persons may be
subject to income tax withholding in Canada. The dividend will generally not be
eligible for the dividends-received deduction generally allowed to U.S.
corporations in respect of dividends received from other U.S. corporations.
Distributions in excess of CGI's current and/or accumulated earnings and
profits, as determined for U.S. federal income tax purposes, will be treated as
a non-taxable return of capital to the extent of the U.S. Holder's tax basis in
the CGI Class A Subordinate Shares and thereafter as capital gain.
The amount of the dividend includible in the income of a U.S. Holder will be
the U.S. dollar value of the dividend, determined at the spot rate on the date
the dividend is includible in the income of the U.S. Holder, regardless of
whether the payment is in fact converted into U.S. dollars. A U.S. Holder will
have a basis in any Canadian dollar distributed by CGI equal to the U.S. dollar
value of the Canadian dollar on the date it is actually or constructively
received by the U.S. Holder. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date the dividend payment is
includible in income to the date that payment is converted into U.S. dollars
will be treated as ordinary income or loss. This gain or loss will generally be
income from sources within the U.S. for foreign tax credit limitation purposes.
A U.S. Holder may, subject to limitations, be eligible to claim as a credit
or deduction for purposes of computing its U.S. federal income tax liability the
Canadian withholding tax properly withheld from dividend distributions. However,
under rules enacted by the U.S. Congress in 1997 and other guidance recently
released by the U.S. Treasury department, foreign tax credits will not be
allowed for withholding taxes imposed on some short-term or hedged positions in
securities or on arrangements in which a U.S. Holder's expected economic profit,
after non-U.S. taxes, is insubstantial. The calculation and availability of
foreign tax credits, and in the case of a U.S. Holder that does not elect or is
not permitted to claim a foreign tax credit, of deductions, involves the
application of complex rules that depend on a U.S. Holder's particular
circumstances. U.S. Holders should consult their own advisers regarding the
availability of foreign tax credits and deductions for such Canadian withholding
tax.
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TAXATION OF CAPITAL GAINS
Upon a sale or other disposition of CGI Class A Subordinate Shares, a U.S.
Holder will recognize gain or loss for U.S. federal income tax purposes in an
amount equal to the difference between the U.S. dollar value of the amount
realized and the U.S. Holder's tax basis, determined in U.S. dollars, in the CGI
Class A Subordinate Shares. Gain or loss recognized will be long-term capital
gain or loss with respect to CGI Class A Subordinate Shares held for more than
12 months at the time of the sale or other disposition and any gain recognized
generally will be income from sources within the U.S. for foreign tax credit
limitation purposes.
A U.S. Holder that is liable for both U.S. federal income tax and Canadian
tax on a sale or other disposition of CGI Class A Subordinate Shares should
consult with his or her tax advisor to determine the U.S. Holder's entitlement
to credit the Canadian tax against the U.S. Holder's U.S. federal income tax
liability. See "Material Canadian Tax Consequences--Disposition of CGI Class A
Subordinate Shares."
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to dividends in
respect of the CGI Class A Subordinate Shares and the proceeds received on the
sale or disposition of the CGI Class A Subordinate Shares paid within the U.S.,
and in certain cases outside of the U.S., to a U.S. Holder unless the U.S.
Holder is an exempt recipient, such as a corporation, and a 31% backup
withholding may apply to these amounts if the U.S. Holder fails to provide an
accurate taxpayer identification number or has been notified by the IRS that he
or she is subject to backup withholding as a result of a failure to report
interest and dividends required to be shown on the U.S. Holder's U.S. federal
income tax returns.
Amounts withheld under the backup withholding rules may be credited against
a U.S. Holder's U.S. federal income tax liability, and a U.S. Holder may obtain
a refund of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS.
IMRGLOBAL SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM, INCLUDING THE APPLICATION AND
EFFECT OF ANY STATE, LOCAL OR NON U.S. INCOME AND OTHER TAX LAWS, OF THE MERGER.
MATERIAL CANADIAN TAX CONSEQUENCES
The following is a summary of the material Canadian federal income tax
considerations generally applicable to a person who acquires CGI Class A
Subordinate Shares in the merger and who, for the purposes of the INCOME TAX ACT
(Canada) (the "ITA") and the CANADA--UNITED STATES INCOME TAX CONVENTION (the
"Convention"), as applicable, and at all relevant times, (i) is resident in the
United States and not resident in Canada, (ii) does not use or hold the Class A
Subordinate Shares in carrying on a business in Canada, (iii) holds CGI Class A
Subordinate Shares as capital property, and (iv) deals at arm's length with and
is not and will not be affiliated with CGI (a "U.S. Resident Holder"). CGI
Class A Subordinate Shares will generally constitute capital property to a U.S.
Resident Holder unless the holder holds such shares in the course of carrying on
a business or has acquired such shares in a transaction or transactions
considered to be an adventure in the nature of trade.
This summary does not apply to holders of CGI Class A Subordinate Shares
that are "financial institutions" for purpose of the "mark-to-market" rules in
the ITA. Moreover, special rules, which are not described below, may apply to
non-resident insurers for whom CGI Class A Subordinate Shares are "designated
insurance property" under the ITA.
This summary is based upon the current provisions of the ITA, the
regulations thereunder and the current published administrative practices and
policies of the Canada Customs and Revenue Agency
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("CCRA") all in effect as of the date hereof. This summary also takes into
account specific proposals to amend the ITA, and regulations, publicly announced
by or on behalf of the Minister of Finance (Canada) prior to the date hereof, or
ITA proposals, and assumes that all ITA proposals will be enacted substantially
as proposed. However, no assurance can be given that the ITA proposals will be
enacted as proposed, or at all.
This summary is not exhaustive of all possible Canadian federal income tax
considerations and, except for the ITA proposals, does not take into account or
anticipate any changes in law, whether by legislative, governmental or judicial
decision or action, or any changes in the administrative practices of the CCRA.
This summary does not take into account tax legislation of any province,
territory or foreign jurisdiction. Provisions of provincial income tax
legislation vary from province to province in Canada and may differ from federal
income tax legislation.
This summary is of a general nature only and is not intended to be, nor
should it be construed to be, legal or tax advice to any particular holder of
CGI Class A Subordinate Shares. Accordingly, U.S. Resident Holders should
consult their own tax advisors for advice with respect to the income tax
consequences to them of acquiring and holding CGI Class A Subordinate Shares
having regard to their own particular circumstances.
DIVIDENDS ON CGI CLASS A SUBORDINATE SHARES
Although CGI does not currently pay dividends on Class A Subordinate Shares,
if it were to do so in the future, under the ITA and the Convention, dividends
paid or credited, or deemed to be paid or credited, on the CGI Class A
Subordinate Shares to a U.S. Resident Holder will be subject to Canadian
withholding tax at the rate of 15% of the gross amount of such dividends or
deemed dividends. If a U.S. Resident Holder is a corporation and owns 10% or
more of CGI's voting stock, the withholding tax rate is reduced from 15% to 5%.
DISPOSITION OF CGI CLASS A SUBORDINATE SHARES
A U.S. Resident Holder will not be subject to tax under the ITA in respect
of any capital gain on a disposition of CGI Class A Subordinate Shares unless at
the time of such disposition, such shares constitute "taxable Canadian property"
of the U.S. Resident Holder for purposes of the ITA and such U.S. Resident
Holder is not entitled to relief under the Convention. The CGI Class A
Subordinate Shares will not constitute taxable Canadian property of a U.S.
Resident Holder at the time of a disposition of such shares unless such U.S.
Resident Holder uses or holds or is deemed to use or hold such shares in or in
the course of carrying on business in Canada or, at any time within the five
year period immediately preceding the disposition, the U.S. Resident Holder,
persons with whom the U.S. Resident Holder did not deal at arm's length, or the
U.S. Resident Holder together with such persons, owned or had an interest in or
right to acquire not less than 25% of the issued shares of any class of the
share capital of CGI.
If the Class A Subordinate Shares are taxable Canadian property to a U.S.
Resident Holder, any capital gain realised on a disposition or deemed
disposition of such Class A Subordinate Shares will generally be exempt from tax
under the ITA by virtue of the Convention provided that the value of the
Class A Subordinate Shares is not derived principally from real property
situated in Canada. CGI is of the view that the value of Class A Subordinate
Shares of its share capital is not currently derived principally from real
property situated in Canada.
Provided that the CGI Class A Subordinate Shares remain listed on a
prescribed stock exchange, (including the New York Stock Exchange and The
Toronto Stock Exchange) a U.S. Resident Holder who disposes of CGI Class A
Subordinate Shares will not be required to comply with Canadian notification
procedures generally applicable to dispositions of taxable Canadian property.
Canada does not currently impose any estate taxes or succession duties.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement.
This summary is qualified in its entirety by reference to the complete text of
the merger agreement, a copy of which is attached to this proxy
statement/prospectus as Appendix A and is incorporated by reference into this
document. IMRglobal shareholders are urged to read the merger agreement in its
entirety because it is the legal document that governs the merger.
THE MERGER
CGI Florida Corporation or another wholly owned subsidiary of CGI will merge
with and into IMRglobal, with IMRglobal surviving as a wholly owned subsidiary
of CGI.
EFFECTIVE TIME AND TIMING OF CLOSING
The merger will become effective and be completed when IMRglobal and CGI
Florida Corporation (or another wholly owned subsidiary of CGI) file articles of
merger with the Secretary of State of the State of Florida or at a later time,
if agreed to by CGI and IMRglobal and so specified in the articles of merger. We
expect the merger to become effective on the same day as the closing of the
merger, which will take place either as soon as practicable after the conditions
described in the merger agreement have been satisfied or waived or on another
date agreed upon by CGI and IMRglobal. We currently expect that the merger will
be completed shortly after the approval of the merger agreement by IMRglobal
shareholders.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time the merger becomes effective:
- each outstanding share of IMRglobal common stock will be canceled and
converted into a right to receive 1.5974 CGI Class A Subordinate Shares;
and
- each outstanding IMRglobal stock option will become an option to purchase
CGI Class A Subordinate Shares as described on page 72 under "--Stock
Options and Other Employee Benefits."
In the event that before the completion of the merger a stock split, reverse
stock split, stock dividend, recapitalization or redenomination of share capital
or other similar transaction causes a change to the number of outstanding shares
of IMRglobal common stock or CGI Class A Subordinate Shares, then the number of
CGI Class A Subordinate Shares into which a share of IMRglobal common stock will
be converted in the merger will be appropriately adjusted.
EXCHANGE OF CERTIFICATES REPRESENTING IMRGLOBAL COMMON STOCK
CGI will appoint an exchange agent who will, in exchange for certificates
representing shares of IMRglobal common stock, issue certificates representing
the CGI Class A Subordinate Shares into which IMRglobal shares will be converted
in the merger. Promptly after the merger is completed, IMRglobal or the exchange
agent will mail to each registered holder of shares of IMRglobal common stock a
letter of transmittal. The holder must properly complete the letter of
transmittal and deliver to the exchange agent with the holder's common stock
certificates.
The holder will then be entitled to receive in exchange for the holder's
IMRglobal common stock:
- the number of CGI Class A Subordinate Shares, into which the holder's
shares were converted in the merger, excluding fractional share interests;
and
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- a check in the amount, after giving effect to any required tax
withholdings, of cash in U.S. dollars, in lieu of any fractional interest
in CGI Class A Subordinate Shares on the terms described below.
The exchange agent will not deliver fractional CGI Class A Subordinate
Shares in connection with the merger. Instead, each holder of shares of
IMRglobal common stock exchanged in the merger who would otherwise have received
a fraction of a CGI Class A Subordinate Share will receive cash in an amount
equal to the holder's proportionate interest in the net proceeds from the sale
on the New York Stock Exchange by the exchange agent of CGI shares representing
all of the fractional shares which IMRglobal shareholders are otherwise entitled
to receive. IMRglobal will pay all commissions, transfer taxes and out-of-pocket
costs, including the expenses and compensation of the exchange agent, incurred
in connection with the sale of the CGI shares representing all fractional
shares.
Shares of IMRglobal common stock that are surrendered to the exchange agent
will be canceled. No interest will be paid or accrued on any amount payable to
holders of IMRglobal common stock. In addition, no holder of IMRglobal common
stock will receive any dividends or other distributions with respect to CGI
Class A Subordinate Shares to which the holder is entitled under the merger
agreement until that holder's IMRglobal common stock certificate is surrendered
to the exchange agent with a properly completed letter of transmittal.
In order for a person who is not a registered holder of the IMRglobal common
stock to have a certificate exchanged, the person must:
- ensure that the certificate surrendered is properly endorsed or otherwise
in proper form for transfer; and
- pay the exchange agent any transfer or other taxes required or establish
to the satisfaction of the exchange agent that such taxes have been paid
or are not payable.
An IMRglobal shareholder who holds IMRglobal common stock in "street name"
through a bank, broker or other financial institution should receive information
about the procedures for exchanging that holder's shares for CGI Class A
Subordinate Shares from that institution and should direct inquiries to the
institution.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains a number of customary representations and
warranties made by CGI and IMRglobal regarding:
- due organization, good standing and qualification;
- capital structure;
- corporate authority to enter into the merger agreement and lack of
conflicts with corporate governance documents, contracts or laws;
- governmental filings;
- SEC reports and financial statements;
- absence of material changes;
- litigation and liabilities;
- brokers' and finders' fees;
- employee benefit plans;
- labor and employment matters;
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- licenses;
- intellectual property;
- continuity of business;
- compliance with laws;
- environmental matters; and
- tax matters.
IMRglobal has also represented:
- that it has taken or will take all actions appropriate and necessary to
ensure that provisions of the Florida Business Corporation Act limiting
business combinations with affiliates and regulating so called control
shares will not affect the merger, the voting agreement, or any other
transaction contemplated by the merger agreement and the voting agreement;
and
- as to absence of sensitive payments, non-competition provisions in certain
contracts, and transactions with affiliates.
The merger agreement also contains customary representations and warranties
of CGI regarding CGI Florida Corporation, including that it has not engaged in
prior business activities or incurred liabilities other than in connection with
the merger agreement.
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER ACTIONS
IMRglobal has agreed that during the period from the signing of the merger
agreement until the completion of the merger, unless otherwise provided in the
merger agreement or approved by CGI, it will carry on its business in the
ordinary and usual course in all material respects. Moreover, to the extent
consistent with this obligation, IMRglobal is required to use reasonable best
efforts to preserve its business organization intact and maintain its existing
relations and goodwill with customers, clients, suppliers, creditors,
regulators, lessors, employees and business associates.
CGI and IMRglobal have each also agreed that before the completion of the
merger they will, unless otherwise provided in the merger agreement or approved
by the other party in writing:
- not amend their corporate governance documents;
- not split, combine, subdivide or reclassify their outstanding shares;
- not adopt a plan of complete or partial liquidation;
- not declare or pay dividends or make distributions on their outstanding
shares or securities convertible into those shares;
- not repurchase any of their outstanding shares or securities convertible
into those shares except as required by the terms of securities now
outstanding;
- not take any action, or fail to take any action which to the knowledge of
their senior executives would prevent, materially delay or materially
impede the completion of the merger;
- not take any action that will cause the merger to fail to qualify as a tax
free reorganization under the U.S. tax code;
- timely satisfy all applicable tax reporting and filing requirements
contained in the U.S. tax code relating to the merger; and
70
- not take any action to cause their shares to be delisted, in the case of
CGI, on the Toronto Stock Exchange and on the New York Stock Exchange and
in the case of IMRglobal, on the Nasdaq National Market.
In addition, IMRglobal has agreed that, unless otherwise provided in the
merger agreement or approved by CGI in writing, it will not take any of the
following actions:
- issue any new shares of common stock or securities convertible into those
shares, except upon the exercise of outstanding stock options or in
accordance with IMRglobal's employee stock purchase plan;
- incur or materially modify (1) the terms of any material indebtedness or
(2) any other liability outside the ordinary and usual course of business;
- enter into any merger or share exchange;
- dispose of any business or material asset outside the ordinary and usual
course of business;
- make acquisitions of businesses or assets outside of the ordinary and
usual course of business;
- amend or make any new awards of stock-based compensation or other benefits
under, any compensation or benefit plan, except increases in salary or
non-stock-based bonus compensation in the ordinary and usual course of
business consistent with past practice;
- enter into any contract or commitment to make expenditures other than
(1) any contract for the provision of services to any new or existing
client of IMRglobal which is expected to generate less than
$(US)2.0 million in revenues over its term, or (2) any other related
contracts or commitments that are reasonably expected to involve payments
of less than $(US)300,000;
- enter into or amend the terms of, or terminate any material joint venture,
partnership or similar arrangement; and
- change its tax accounting policies, elections or settle any material
audits, examinations or litigation regarding taxes.
OFFERS FOR ALTERNATIVE TRANSACTIONS
IMRglobal has agreed not to, and is required to use its best efforts to
cause its employees, agents and representatives not to:
- initiate, solicit or encourage any party to make, or facilitate the making
of, a merger, reorganization, share exchange, consolidation, or similar
transaction with it or the purchase of 10% or more of its assets or
shares; or
- engage in any discussions or negotiations with or provide any confidential
information or data to any person relating to an offer for an alternative
transaction or engage in any negotiations with any person concerning any
alternative transaction offer, or otherwise facilitate any effort to make
or implement an alternative transaction offer.
However, if IMRglobal receives an alternative transaction offer, it may,
after giving CGI at least three business days notice, engage in discussions or
negotiations with, and furnish confidential information to, the person that made
the offer, if that offer:
- did not result from the breach of IMRglobal's obligations described above
not to solicit or engage in discussions regarding an alternative
transaction offer;
- IMRglobal's board of directors determines in its good faith judgment after
receiving the advice of its financial adviser that the offer is reasonably
likely to result in a superior offer; and
71
- IMRglobal's board of directors determines in its good faith judgment after
receiving the advice of its outside counsel that the board of directors
would violate its fiduciary duties if it did not engage in discussions or
negotiations or furnish information with respect to that offer.
A "superior offer" is a bona-fide written alternative transaction offer
that:
- has a value of at least 105% of the value of the consideration offered
pursuant to the merger agreement with CGI; and
- IMRglobal's board of directors determines in its good faith judgment,
after consultation with its financial advisors, to be an offer more
favorable from a financial point of view to its shareholders than the
merger under the merger agreement between CGI and IMRglobal, and taking
into account all legal, financial, regulatory and other aspects of the
offer, the offer is for a transaction that is reasonably likely to be
completed.
IMRglobal has also agreed:
- to terminate any discussions or negotiations regarding alternative
transactions that were being conducted before the merger agreement was
signed;
- to inform its subsidiaries and their representatives of the relevant
obligations undertaken in the merger agreement;
- to notify CGI promptly if any inquiries, proposals or requests for
information regarding an alternative transaction are received or any
discussions or negotiations are sought and identify the person making the
inquiry, proposal or request and the material terms of any alternative
transaction offer that company receives; and
- to request the prompt return of all confidential information relating to
IMRglobal provided to third parties prior to the date of the merger
agreement in connection with IMRglobal's consideration of an alternative
transaction.
AGREEMENT REGARDING RECOMMENDATION TO SHAREHOLDERS
The IMRglobal board of directors is required to recommend that IMRglobal
shareholders vote to approve the merger agreement. However, the IMRglobal board
of directors will not be required to recommend approval of the merger agreement
if it has received an acquisition proposal from a third party which is a
superior proposal and the board concludes, after receiving the advice of its
outside counsel, that there is a reasonable possibility that the board would be
in violation of its fiduciary duties under applicable law if it did not change
its recommendation.
IMRglobal's board of directors also is required to deliver written notice to
CGI at least five business days before that board of directors modifies its
favorable recommendation of the merger, advising that it intends to do so unless
CGI modifies the terms and conditions of the merger agreement.
However, IMRglobal is required to submit the merger for a vote of its
shareholders even if its board of directors determines not to recommend approval
of the merger unless the merger agreement has been terminated.
STOCK OPTIONS AND OTHER EMPLOYEE BENEFITS
STOCK OPTIONS
In the merger, all IMRglobal stock options will by their terms become
options to acquire CGI Class A Subordinate Shares.
72
Each IMRglobal stock option will remain subject to the terms of the
IMRglobal stock option plan under which it was issued, except that after the
merger IMRglobal stock options will be exercisable for 1.5974 Class A
Subordinate Shares for each share of IMRglobal common stock subject to that
option before the merger.
The exercise price per CGI Class A Subordinate Share for each of these
options will be the exercise price per share of IMRglobal common stock
applicable to that option before completion of the merger divided by 1.5974.
Additionally, under the terms of IMRglobal's stock option plans, options
granted to employees, including executive officers of IMRglobal, will vest and
become fully exercisable if the employment of the employee is terminated without
cause within twelve months after the merger. Pursuant to the amendments to the
employment agreements of Messrs. Addonisio and Shipperlee, all stock options
held by either of them and granted prior to the completion of the merger will
vest and become fully exercisable for a period of 36 months following the date
of termination of either of them for any reason. Furthermore, the new employment
agreement entered into between IMRglobal and Mr. Sanan provides for the
immediate vesting of all stock options granted to Mr. Sanan prior to the
completion of the merger in the event he is terminated without "cause" (as
defined in his new employment agreement). These options otherwise vest as to
34,000 shares on May 10, 2002 at $(US)17.625 per share, 50,000 shares on
March 16, 2002 at $(US)13.1875 per share and 50,000 shares on March 16, 2003 at
$(US)13.1875 per share.
The merger will result in the acceleration of the vesting of options for the
following directors pursuant to the existing terms of their options: Charles C.
Luthin (options to purchase 11,250 IMRglobal shares at $15.50 per share) and
Jeffery S. Slowgrove (options to purchase 11,250 IMRglobal shares at $15.50 per
share). When these options are converted into CGI options at the effective time
of the merger, they will be fully vested and exercisable until December 31,
2001.
OTHER EMPLOYEE BENEFITS
For at least the twelve month period after completion of the merger, CGI
intends to provide to IMRglobal employees:
- employee benefits, except salary, incentive compensation and stock-based
benefits, which in the aggregate are substantially comparable to the
benefits provided by IMRglobal before the merger; and
- salary, incentive compensation stock-based benefits pursuant to criteria
and procedures substantially similar to the criteria and procedures
applied to similarly situated employees of CGI.
However, IMRglobal employees who are subject to collective bargaining or
other labor agreements will receive benefits under the terms of those
agreements. IMRglobal employees who have entered into an employment agreement
with IMRglobal will receive all salary, incentive compensation and other
employee benefits under the terms of that employment agreement.
CGI will also recognize:
- an IMRglobal employee's prior service with IMRglobal and its predecessor
entities for purposes of eligibility and vesting, but not benefit
accruals, under any employee benefit plans that are maintained for the
benefit of IMRglobal employees after the merger to the same extent as that
service is recognized by IMRglobal before the merger.
In the merger agreement, CGI has agreed to grant options to purchase an
aggregate of 1,000,000 CGI Class A Subordinate Shares to members of IMRglobal's
senior management as part of their incentive compensation following completion
of the merger.
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INDEMNIFICATION AND INSURANCE
After the merger, CGI will indemnify the individuals who are or were
directors or officers of IMRglobal or any of its subsidiaries as of or before
the completion of the merger for any losses they incur because they acted as
directors and officers of IMRglobal or its subsidiaries before the merger, as
follows:
- CGI will maintain, for a period of six years after the merger, all rights
to indemnification and all limitations on liability existing under the
IMRglobal articles of incorporation and bylaws in favor of those directors
and officers;
- CGI will maintain all rights to indemnification and all limitations on
liability existing under any agreement between any of those directors or
officers;
- CGI will, for a period of six years after the merger, indemnify those
directors and officers (including with respect to acts in connection with
their adoption and approval of the merger agreement) to the fullest extent
permitted by law; and
- CGI will, for a period of six years after the merger, provide liability
insurance for those directors and officers for acts or omissions occurring
before the merger on terms at least as favorable as those of any policy
presently in effect. CGI will not, however, be required to provide any
more coverage than can be obtained for the remainder of the period for an
annual premium that is more than 250% of the annual premium currently paid
by IMRglobal for its existing coverage.
CONDITIONS
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO COMPLETE THE MERGER
IMRglobal's and CGI's respective obligations to complete the merger are
subject to the satisfaction or waiver of the following conditions:
- SHAREHOLDER APPROVAL. The holders of a majority of the voting power of
IMRglobal common stock shall have approved the merger agreement; and
- REGULATORY APPROVALS. Without being subject to conditions or restrictions
that would have a material adverse effect on CGI or on IMRglobal:
(1) all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act having expired or been terminated (this condition
has now been satisfied); and
(2) all other consents, approvals and declarations and authorizations of
other governmental entities, having been obtained which, if not
obtained before completion of the merger, would have a material
adverse effect on CGI or IMRglobal or would result in a violation of
the civil or criminal law of that jurisdiction.
We describe in detail the regulatory approvals required for the merger and
the actions the merger agreement requires that CGI and IMRglobal take in order
to obtain regulatory approvals under "The Merger--Regulatory Approvals Required
for the Merger."
- NO LAWS OR ORDERS. No law, judgment or order having been enacted or
entered by a governmental entity that restrains, enjoins or otherwise
prohibits the completion of the merger or that materially frustrates the
express intent and purposes of the merger agreement and no governmental
entity having instituted a proceeding that would have a material adverse
effect on CGI and IMRglobal on a combined basis.
- STOCK EXCHANGE LISTING. The CGI Class A Subordinate Shares to be issued in
connection with the merger having been authorized for listing on the New
York Stock Exchange and the Toronto Stock Exchange, subject to official
notice of issuance.
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- THIRD PARTY CONSENTS. Any consents of third parties required in connection
with the merger shall have been obtained, except, generally, where the
failure to obtain the consents would not have a material adverse effect on
CGI or IMRglobal following the merger.
As used in the merger agreement, a "material adverse effect" means, with
respect to any entity, a material adverse effect on the business, properties,
results of operations or financial condition of the entity and its subsidiaries,
taken as a whole, except that events, consequences or conditions caused by
changes in the economy in general or in the industries in which such entity
operates which do not disproportionately affect that entity will not be
considered to have a material adverse effect.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF CGI
The obligations of CGI to effect the merger are also subject to the
satisfaction, or waiver by CGI, of the following conditions:
- REPRESENTATIONS AND WARRANTIES. IMRglobal's representations and warranties
in the merger agreement having been true in all material respects when the
merger agreement was entered into and as of the date the merger is
completed, except to the extent that a representation or warranty
expressly speaks as of a specific date, in which case it need be true only
as of that date, and except to the extent that together all inaccuracies
in the representations and warranties would not reasonably be expected to
have a material adverse effect on IMRglobal. IMRglobal's representation
regarding its capitalization must by itself be true in all material
respects.
- COMPLIANCE WITH COVENANTS. IMRglobal having performed all material
obligations required to be performed by it under the merger agreement at
or before the date of the closing of the merger.
- TAX OPINION. CGI having received an opinion from Fried, Frank, Harris,
Shriver & Jacobson substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in the opinion:
(1) the merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368 of the U.S. tax
code;
(2) CGI will be treated as a corporation under Section 367(a) of the U.S.
tax code with respect to each transfer of property pursuant to the
merger;
(3) no gain or loss will be recognized by the shareholders of IMRglobal
who exchange IMRglobal common stock solely for CGI Class A
Subordinate Shares in the merger, except with respect to cash
received instead of fractional interests in those shares; and
(4) each of CGI, IMRglobal and CGI Florida Corporation will be a party to
the reorganization within the meaning of Section 368 of the U.S. tax
code.
CGI does not intend to waive this tax opinion condition. The opinion shall
not address any tax consequences to a five percent transferee shareholder.
- CEO AGREEMENTS. The agreements relating to the employment of the Chairman
and Chief Executive Officer of IMRglobal entered into in connection with
the merger agreement shall be effective and no breach of these agreements
shall have occurred.
- AFFILIATE LETTERS. Each affiliate of IMRglobal shall have entered into an
agreement requiring any disposition of CGI Class A Subordinate Shares
received in the merger to be made in compliance with the Securities Act of
1933.
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ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF IMRGLOBAL
The obligation of IMRglobal to effect the merger is also subject to the
satisfaction or, except as noted below, waiver by IMRglobal of the following
conditions:
- REPRESENTATIONS AND WARRANTIES. CGI's representations and warranties in
the merger agreement having been true in all material respects when the
merger agreement was entered into and as of the closing date, except to
the extent that a representation or warranty expressly speaks as of a
specific date, in which case it need be true only as of that date and
except to the extent that together all inaccuracies in the representations
and warranties would not reasonably be expected to have a material adverse
effect on CGI. CGI's representation regarding its capitalization must by
itself be true in all material respects.
- COMPLIANCE WITH COVENANTS. CGI having performed all material obligations
required to be performed by it under the merger agreement at or before the
date of the closing of the merger.
- TAX OPINION. IMRglobal having received an opinion from Holland & Knight,
substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in the opinion:
(1) the merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368 of the U.S. tax
code;
(2) CGI will be treated as a corporation under Section 367(a) of the U.S.
tax code with respect to each transfer of property pursuant to the
merger;
(3) no gain or loss will be recognized by the shareholders of IMRglobal
who exchange IMRglobal common stock solely for CGI Class A
Subordinate Shares in the merger, except with respect to cash
received instead of fractional interests in those shares; and
(4) each of CGI, IMRglobal and CGI Florida Corporation will be a party to
the reorganization within the meaning of Section 368 of the U.S. tax
code.
IMRglobal does not intend to waive this tax opinion condition. The opinion
shall not address any tax consequences to a five percent transferee shareholder.
Both CGI and IMRglobal do not intend to waive the conditions to their
respective obligations to complete the merger relating to receipt of a tax
opinion. In addition, both CGI and IMRglobal do not intend to waive the
conditions discussed on page 74 under the headings "--Conditions--No Laws or
Orders" and "--Conditions--Stock Exchange Listing."
CGI and IMRglobal have not yet made any determination as to whether they
would waive any other conditions to their respective obligations to complete the
merger. Any decision will be made based upon the facts and circumstances
existing at that time. Whether any amendment of this proxy statement/prospectus
or resolicitation of proxies would be made if a condition were to be waived will
depend upon the materiality of the waiver. If we do not resolicit proxies in the
event a material condition is waived, then certain of the benefits of the merger
may not be realized, such as the continuation of business relationships or the
absence of a material adverse change. In the SEC's view, generally a
resolicitation of proxies and an amendment to this proxy statement/prospectus
would be required if material conditions for the benefit of IMRglobal
shareholders are waived.
TERMINATION AND EFFECTS OF TERMINATION
RIGHT TO TERMINATE
The merger agreement may be terminated at any time before the closing in any
of the following ways:
(1) by mutual written consent;
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(2) by either company, if:
(a) the merger is not completed by October 21, 2001, provided that
neither company may terminate the merger agreement if the failure to
complete the merger by that date is caused by the failure of the
company seeking to terminate to fulfill its obligations under the
merger agreement;
(b) a governmental authority enacts any law or issues a final
non-appealable permanent injunction that prohibits the completion of
the merger, except that the right to terminate the merger agreement
for this reason is not available to any company that has not used its
reasonable best efforts to prevent this injunction from being issued
or this injunction is due to a material breach by that company of its
obligations under the merger agreement; or
(c) IMRglobal's shareholders do not approve the merger agreement at the
IMRglobal shareholders meeting;
(3) by CGI, if:
(a) the IMRglobal board withdraws or adversely modifies its favorable
recommendation of the merger agreement to IMRglobal's shareholders;
(b) IMRglobal or its board recommends an alternative transaction offer to
its shareholders; or
(c) any representation or warranty of IMRglobal contained in the merger
agreement is inaccurate, or IMRglobal breaches any of its obligations
contained in the merger agreement, which, unless cured within 20
business days following written notice of this inaccuracy or breach
from CGI, would result in conditions to the merger not being
satisfied before or as of October 21, 2001; and
(4) by IMRglobal, if:
(a) any representation or warranty of CGI contained in the merger
agreement is inaccurate, or CGI breaches any of its obligations
contained in the merger agreement, which, unless cured within 20
business days following written notice of this inaccuracy or breach
from IMRglobal, would result in conditions to the merger not being
satisfied before or as of October 21, 2001; or
(b) prior to approval of the merger agreement by IMRglobal shareholders,
the IMRglobal board of directors accepts an acquisition proposal
which is a superior proposal, after having given CGI five business
days' prior written notice and having paid CGI the termination fee
described below.
TERMINATION FEES PAYABLE TO CGI
IMRglobal has agreed to pay CGI a termination fee of $(US)13 million if:
(1) IMRglobal's board of directors withdraws or adversely modifies its
favorable recommendation of the merger to its shareholders at a time when
an alternative transaction offer for IMRglobal is pending;
(2) IMRglobal or its board of directors recommends an alternative
transaction offer to its shareholders; or
(3) an alternative transaction offer for IMRglobal is made or is publicly
announced and the merger agreement is subsequently terminated:
(a) by CGI or IMRglobal, because the necessary approval of IMRglobal's
shareholders is not obtained at the IMRglobal shareholders meeting;
77
(b) by IMRglobal, because the merger is not consummated by October 21,
2001, except if the necessary approval of CGI shareholders has not
then been obtained, for any reason other than as a result of a breach
by IMRglobal; or
(c) by CGI, because any representation or warranty of IMRglobal contained
in the merger agreement is inaccurate or IMRglobal breaches any of
its obligations contained in the merger agreement, which, unless
cured within 20 business days following written notice of this breach
from CGI, would not be satisfied prior to or as of the termination
date; and
in the case of each of (a), (b) or (c), if within nine months after the merger
agreement is terminated, IMRglobal enters into an agreement in respect of any
alternative transaction, or an alternative transaction is completed.
EXPENSES
Whether or not the merger is completed, all costs and expenses incurred in
connection with the merger, the merger agreement and the transaction
contemplated by the merger agreement will be paid by the party incurring the
expense, except that CGI and IMRglobal will share equally the costs and expenses
of filing, printing and distributing the Form F-4 registration statement and
this proxy statement/prospectus and CGI will pay all fees required in connection
with any filing required under the HSR Act.
AMENDMENT; WAIVER
CGI and IMRglobal may amend the merger agreement by written agreement prior
to completion of the merger, but, after IMRglobal's shareholders have approved
the merger agreement, no amendment may be made which by law requires further
shareholder approval without the shareholder approval being obtained.
Any provision of the merger agreement may be waived before the merger is
completed, but only if the waiver is in writing and signed by the party against
whom the waiver is to be effective.
THE VOTING AGREEMENT
Satish K. Sanan, the Chairman and Chief Executive Officer of IMRglobal, and
a family limited partnership he controls, collectively the owners of 12,086,597
shares of IMRglobal common stock, representing approximately 27.3% of
IMRglobal's outstanding common stock, have entered into a voting agreement with
CGI and CGI Florida Corporation. (In addition, any of the IMRglobal additional
shares obtained by Mr. Sanan upon the exercise of any of the options to acquire
625,000 shares of IMRglobal common stock also will be subject to the voting
agreement.) This agreement requires them to vote their shares in favor of
approval of the merger agreement at the IMRglobal shareholders meeting, to vote
against other acquisition proposals and certain other matters relating to
IMRglobal, and not to transfer their shares of IMRglobal common stock, subject
to certain exceptions. The voting agreement will terminate upon termination of
the merger agreement.
Under the voting agreement, CGI has agreed to register under the U.S.
securities laws the CGI Class A Subordinate Shares that Mr. Sanan and his family
limited partnership will receive upon completion of the merger if these shares
cannot be sold in compliance with the U.S. securities laws without such
registration. Mr. Sanan would have the right to request two registrations of his
shares and he would be obligated to pay the expenses of such registrations. He
would also have certain rights to include these shares in other registration
statements filed by CGI in connection with the sale of Class A Subordinate
Shares in the United States.
Mr. Sanan also has agreed that, if and when he decides to sell CGI Class A
Subordinate Shares that he will receive upon completion of the merger, to use
commercially reasonable efforts to sell these shares in an orderly manner which
is not disruptive to the market for the shares. Furthermore, he has agreed, so
long as he continues to be an employee of CGI or IMRglobal, to retain at least
20% of his CGI Class A Subordinate Shares for two years after completion of the
merger.
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SHARE OWNERSHIP OF IMRGLOBAL
The following table sets forth, as of June 4, 2001 the beneficial ownership
of IMRglobal's outstanding common stock of (a) each person known by IMRglobal to
own beneficially more than 5% of IMRglobal's outstanding common stock, (b) each
director, (c) each executive officer, and (d) all executive officers and
directors as a group:
COMMON STOCK BENEFICIALLY OWNED (1)
--------------------------------------
NUMBER OF SHARES
NAME OF BENEFICIAL OWNERS OF COMMON STOCK PERCENTAGE OF CLASS
- ------------------------- ---------------- -------------------
Massachusetts Financial Services Company
(2)....................................... 4,549,661 10.3%
State of Wisconsin Investment Board (2)..... 3,350,800 7.6%
Satish K. Sanan (3)......................... 12,577,597 28.1%
Jeffery S. Slowgrove (4).................... 770,950 1.7%
Vincent Addonisio (5)....................... 256,750 *
Philip Shipperlee (6)....................... 150,871 *
Charles C. Luthin (7)....................... 67,925 *
Michael Dean (8)............................ 61,050 *
All executive officers and directors as a
group (6 persons) (9)..................... 13,885,143 30.8%
- ------------------------
* Less than 1% of the outstanding common stock
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. For purposes of calculating the percentage beneficially owned,
the number of shares deemed outstanding includes (i) 44,208,781 shares
outstanding as of June 4, 2001 and (ii) shares issuable by IMRglobal
pursuant to options held by the respective person or group which may be
exercised within 60 days following the date of this proxy
statement/prospectus which are the "presently exercisable options." These
options are deemed to be outstanding and to be beneficially owned by the
person or group holding such options for the purpose of computing the
percentage ownership of that person or group but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person or group.
(2) For purposes of this proxy statement/prospectus, IMRglobal has relied upon
information reported by the respective shareholder to the SEC pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended,
as of February 12, 2001, for Massachusetts, Financial Services Company; and
as of February 9, 2001, for the State of Wisconsin Investment Board.
(3) Includes 491,000 shares issuable upon the exercise of presently exercisable
options (225,000 at an exercise price of $(US)6.22 per share; 150,000 at an
exercise price of $(US)37.17 per share; 66,000 at an exercise price of
$(US)17.62 per share and 50,000 at an exercise price of $(US)13.19 per
share). Also includes 6,441,360 shares held in the A&S Family Limited
Partnership, the sole general partner of which is a corporation controlled
by Mr. Sanan.
(4) Includes 22,500 shares issuable upon the exercise of presently exercisable
options (at an exercise price of $(US)15.50 per share). Also includes
172,250 shares held in trusts which are controlled by Mr. Slowgrove.
(5) Includes 212,500 shares issuable upon the exercise of presently exercisable
options (22,500 at an exercise price of $(US)22.94 per share; 90,000 at an
exercise price of $(US)24.13 per share; and 100,000 at an exercise price of
$(US)8.06 per share). Also includes 29,250 shares held in a family limited
partnership controlled by Mr. Addonisio.
79
(6) Includes 52,500 shares issuable upon the exercise of presently exercisable
options (22,500 at an exercise price of $(US)6.22 per share; and 30,000 at
an exercise price of $(US)15.08 per share).
(7) Includes 67,500 shares issuable upon the exercise of presently exercisable
options (22,500 at an exercise price of $(US)6.22 per share; 22,500 at an
exercise price of $(US)22.94 per share; and 22,500 at an exercise price of
$(US)15.50 per share).
(8) Includes 50,000 shares issuable upon the exercise of presently exercisable
options (at an exercise price of $(US)0.04 per share).
(9) Includes an aggregate of 896,000 shares issuable upon the exercise of
presently exercisable options.
EXCHANGE RATES
This table sets forth, for each period indicated, the high and low exchange
rates for one Canadian dollar expressed in U.S. dollars, the average exchange
rate during that period, and the exchange rate at the end of that period.
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ----------------------------------------------------------------
MARCH 31, 2001 2000 1999 1998 1997 1996
---------------- -------- -------- -------- -------- --------
High.......................... 0.6697 0.6969 0.6828 0.7292 0.7513 0.7527
Low........................... 0.6336 0.6629 0.6423 0.6341 0.7145 0.7235
Average....................... 0.6548 0.6792 0.6663 0.6845 0.7286 0.7327
Period end.................... 0.6336 0.6636 0.6805 0.6552 0.7234 0.7342
As of June 4, 2001, the latest practicable date for which exchange rate
information was available prior to the printing of this document, the exchange
rate for one Canadian dollar expressed in U.S. dollars was $(US)0.6516.
This table sets forth, for each period indicated, the high and low exchange
rates for one U.S. dollar expressed in Canadian dollars, the average exchange
rate during that period, and the exchange rate at the end of that period.
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ----------------------------------------------------------------
MARCH 31, 2001 2000 1999 1998 1997 1996
---------------- -------- -------- -------- -------- --------
High.......................... 1.5784 1.5085 1.5569 1.5770 1.3996 1.3822
Low........................... 1.4933 1.4350 1.4646 1.3714 1.3310 1.3286
Average....................... 1.5270 1.4723 1.5008 1.4609 1.3725 1.3648
Period end.................... 1.5784 1.5070 1.4695 1.5262 1.3824 1.3620
As of June 4, 2001, the latest practicable date for which exchange rate
information was available prior to the printing of this document, the exchange
rate for one U.S. dollar was $(Cdn)1.5347.
All of the exchange rate information set forth above is based on the noon
buying rates in New York City for cable transfer in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York on the
relevant dates.
MARKET PRICE AND DIVIDEND DATA
MARKET PRICES
CGI
The primary trading market for the CGI Class A Subordinate Shares is the
Toronto Stock Exchange, where they are traded under the ticker symbol "GIB.A."
The CGI Class A Subordinate Shares also are traded on the New York Stock
Exchange, where the ticker symbol is "GIB."
80
The table below sets forth, for the calendar quarters indicated, the high
and low closing sales prices for the Class A Subordinate Shares as reported on
the TSE and the range of high and low closing sales prices of CGI Class A
Subordinate Shares as reported on the NYSE Composite Tape.
CGI CLASS A SUBORDINATE CGI CLASS A SUBORDINATE
SHARE ($(US) PER CLASS A SHARE ($(CDN) PER CLASS A
SUBORDINATE SUBORDINATE SHARE) (1) PER
SHARE) (1) PER NYSE TSE
------------------------- ---------------------------
HIGH LOW HIGH LOW
----------- ----------- ------------ ------------
YEAR ENDED SEPTEMBER 30, 1999
First Quarter................................... 9.91 5.41 14.88 8.38
Second Quarter.................................. 12.62 10.03 18.68 15.10
Third Quarter................................... 12.16 10.25 17.63 15.18
Fourth Quarter.................................. 10.94 9.81 16.10 12.63
YEAR ENDED SEPTEMBER 30, 2000
First Quarter................................... 24.50 9.81 31.75 14.45
Second Quarter.................................. 22.90 13.00 33.45 18.80
Third Quarter................................... 13.37 6.62 19.35 9.70
Fourth Quarter.................................. 9.31 6.00 13.70 8.90
YEAR TO END SEPTEMBER 30, 2001
First Quarter................................... 7.81 3.50 11.90 5.65
Second Quarter.................................. 6.45 3.52 9.75 5.50
Third Quarter (through June 4, 2001)............ 6.27 3.24 9.69 5.16
- ------------------------
(1) Adjusted for 2-for-1 stock split effective January 7, 2000.
IMRGLOBAL SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
CGI CLASS A SUBORDINATE SHARES.
On February 20, 2001, the last trading day prior to the formal public
announcement of the signing of the merger agreement, the closing sales price of
the CGI Class A Subordinate Shares on the NYSE was $US5.60 per share (and
$(Cdn)8.75 per share on the TSE). On June 4, 2001, the last trading day for
which information was available prior to the printing of this proxy
statement/prospectus, the closing sales price of the Class A Subordinate Shares
on the NYSE was $(US)5.97 per share (and $(Cdn)9.20 per share on the TSE).
As of May 31, 2001 the last date prior to the printing of this proxy
statement/prospectus for which it was practicable for us to obtain information,
there were approximately 1,645 record holders of CGI Class A Subordinate Shares.
81
IMRGLOBAL
The IMRglobal common stock is traded on the Nasdaq National Market System
under the ticker symbol "IMRS." The table below sets forth, for the calendar
quarters indicated, the high and low bid prices of shares of IMRglobal common
stock as quoted on the Nasdaq National Market.
IMRGLOBAL COMMON
STOCK
($(US) PER SHARE)
-------------------
HIGH LOW
-------- --------
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... 32.63 12.94
Second Quarter.............................................. 23.25 13.75
Third Quarter............................................... 20.13 8.00
Fourth Quarter.............................................. 14.50 7.00
YEAR ENDED DECEMBER 31, 2000
First Quarter............................................... 13.38 8.50
Second Quarter.............................................. 19.19 11.13
Third Quarter............................................... 14.19 10.19
Fourth Quarter.............................................. 11.88 2.38
YEAR TO END DECEMBER 31, 2001
First Quarter............................................... 7.03 4.25
Second Quarter (through June 4, 2001)....................... 9.69 4.91
The last sale price of a share of IMRglobal common stock on the Nasdaq
National Market on February 20, 2001, the day prior to the formal public
announcement of the signing of the merger agreement, was $(US)6.5312 per share.
On June 4, 2001, the last trading day for which information was available prior
to the printing of this proxy statement/prospectus the last sale price was
$(US)9.28 per share.
As of June 4, 2001, the last date prior to the printing of this proxy
statement/prospectus for which it was practicable for us to obtain this
information, there were approximately 200 record holders of IMRglobal common
stock.
IMRGLOBAL SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE IMRGLOBAL COMMON STOCK.
DIVIDEND DATA
Neither CGI nor IMRglobal has declared or paid dividends on Class A
Subordinate Shares, in the case of CGI, or on common stock, in the case of
IMRglobal, during the last three full calendar years or during 2001.
82
DESCRIPTION OF CGI
CGI is a large independent Canadian IT services company with a headcount of
close to 10,000 employees in March 2001. CGI helps its 2,500 clients in the
private and public sectors meet their strategic goals by providing them with an
end-to-end offering of high-level business and IT solutions. CGI specializes in
the following areas of IT services: strategic IT and management consulting
(including business process engineering); systems development and integration;
and outsourcing and management of IT and business functions. CGI serves some
2,500 medium-sized and large public and private organizations in Canada, the
United States, Europe, as well as in 20 other countries around the world. CGI
has offices in Canada, the United States and the United Kingdom, and project
offices in more than 20 other countries.
CGI's ISO 9001 certified management frameworks ensure that its clients'
objectives are clearly defined, that projects are properly scoped and that the
necessary resources are applied to meet objectives. These processes ensure that
clients' requirements drive CGI's solutions.
CGI is fully independent of any hardware or software vendor, which, CGI
believes, sets it apart from most other major IT firms in North America and
enables CGI to provide objective professional services of the highest quality.
CGI provides the full range of IT services, including outsourcing, systems
development and integration, and consulting. CGI's primary focus is large scale
systems development and integration and outsourcing contracts. Outsourcing
revenue represented approximately 62%, systems development and integration
represented approximately 23% and consulting represented approximately 15% of
fiscal 2000 revenues. CGI generated 75% of total revenue from higher value added
services such as IT planning, business process engineering, systems
architecture, systems development and maintenance. The remaining 25% is
comprised of facilities management services including state-of-the-art data
centers, help desks, call centers and desktop services.
OUTSOURCING
Outsourcing is one of the fastest-growing segments of the IT industry. CGI
has been active in outsourcing since 1986, which makes it a pioneer in this
sector. Through a series of acquisitions completed since 1996, including the
acquisition on July 1, 1998 of Bell Sygma Telecom Solutions and Bell Sygma
International, divisions of Bell Sygma Inc., CGI has become a large independent
provider of outsourcing services in North America, with a headcount of close to
10,000 employees in March 2001.
Outsourcing contracts are signed for periods ranging from five to ten years
and are renewable at the client's option. They are paid for according to a
formula of monthly payments. As part of such contracts, CGI takes over partial
or complete responsibility for the development and maintenance of part or all of
a client's information systems, including the management of data centers and
telecommunications networks. Clients, meanwhile, generally maintain control over
their strategic IT functions.
The services provided in the field of outsourcing cover the following areas:
- management of the IT functions of the client;
- project management, systems architecture development and maintenance, and
Internet-based solutions development and integration;
- technology management, including call centers, data center management,
desktop services, as well as Web hosting and Internet server hosting.
These services include hosting and operating clients' computer systems
(mainframe and distributed environments), as well as managing and
supporting their operating systems and software;
- management of technological transitions;
- management of telecommunications applications and systems;
83
- management of local and wide area networks (LAN/WAN);
- management of document technology services;
- financial transaction switching services;
- operation of business functions such as payroll services (business process
outsourcing).
CGI today operates three technology management centers in Canada, in
Montreal (Quebec), Mississauga (Ontario) and Regina (Saskatchewan) as well as
service centers in Montreal (Quebec), Quebec City (Quebec) and Mississauga
(Ontario). In the United States, CGI operates nine credit union processing
facilities. In the U.K., CGI operates one data center facility. These operations
employ more than 1,300 professionals.
SYSTEMS DEVELOPMENT AND INTEGRATION
As part of systems development and integration projects, CGI takes
responsibility for all activities relating to the development and implementation
of information systems. CGI develops IT systems which respond to clients'
strategic needs by integrating different technologies. Comprehensive integrated
solutions consist of a complex set of hardware, software, information systems
and telecommunications components. CGI brings a complete solution including
systems engineering, software development or customization, integration of
various software and hardware, and user training. Systems integration contracts
are projects with a clearly defined beginning and end, typically ranging from
six months to three years.
To ensure that such fixed-price systems integration contracts are profitable
and to reduce risk, CGI has implemented a rigorous management framework covering
all phases of a project--from the initial proposal to final delivery--which is
systematically applied to all of its new contracts.
CONSULTING SERVICES
These services comprise IT and management consulting services, including IT
strategic planning, business process engineering and systems architecture. CGI
believes that, in addition to their technical expertise, CGI professionals
understand the business issues in a particular industry or sector.
CGI's strength in the area of e-business services stems from what it
believes are key competitive advantages. Its strategic e-business offering
remains focused on enhancing--not replacing--client business models. Also, CGI
is one of the few North American IT firms to provide its clients with an
all-encompassing offering that includes the planning, design, implementation and
management of e-business solutions. CGI offers e-business solutions and services
for a range of applications including e-commerce, supply chain management,
customer relationship management, knowledge management, business intelligence,
and collaborative technology.
CGI approaches its clients' e-business needs from a business perspective and
based on its understanding of their industry. CGI tailors integrated solutions
that take into consideration its clients' business, software and infrastructure
requirements. Because CGI's e-solutions are founded on organizations' business
needs, we believe that they reflect the way clients think and how they view
e-business.
84
REVENUE BY GEOGRAPHIC REGION
CGI's gross revenues for the years ended September 30, 1998, 1999 and 2000
were attributable to operations in Canada, United States and other international
regions (mainly Europe and Latin America):
YEARS ENDED SEPTEMBER 30,
----------------------------------
1998 1999 2000
-------- ---------- ----------
(TABULAR AMOUNTS IN THOUSANDS OF
CANADIAN DOLLARS)
Canada..................................... $614,911 $1,143,874 $1,043,978
US......................................... 94,535 136,479 215,401
International.............................. 31,517 129,105 176,629
-------- ---------- ----------
$740,963 $1,409,458 $1,436,008
======== ========== ==========
REVENUE BY SERVICE OFFERING
CGI's gross revenues for the years ended September 30, 1998, 1999 and 2000
were attributable to its service offerings:
YEARS ENDED SEPTEMBER 30,
----------------------------------
1998 1999 2000
-------- ---------- ----------
(TABULAR AMOUNTS IN THOUSANDS OF
CANADIAN DOLLARS)
Management of IT and business functions
(outsourcing)............................ $517,078 $1,009,844 $ 891,726
Systems integration........................ 134,991 239,768 326,569
Consulting................................. 89,554 159,846 217,713
-------- ---------- ----------
$740,963 $1,409,458 $1,436,008
======== ========== ==========
MARKETING
CGI offers its services directly through its professional staff and senior
management. CGI does not market its services through third party channels.
CGI's sales force is organized primarily on a geographic basis with focus on
five specific target industries: Telecommunications, Financial Services,
Government, Public Services and Utilities, and Manufacturing, Retail and
Distribution. CGI focuses its sales and marketing efforts on large and medium
size corporations in the target industries.
QUALITATIVE AND QUANTITATIVE DISCLOSURE OF MARKET RISK
INTEREST RATES. CGI has variable-rate long-term debt, subject to
market-risk from changes in interest rates. Sensitivity analysis is one
technique it uses to measure the impact of changes in interest rates on the
value of market-risk sensitive financial instruments. A hypothetical 10%
movement in interest rates would not have material impact on CGI's future
earnings or cash flows.
FOREIGN CURRENCY. CGI conducts business in Canada, United States, Europe
and Latin America. CGI generates approximately 73% of its revenue from Canada
and reports its financial statements in Canadian dollars. The primary purpose of
its foreign currency hedging activities is to protect against currency exchange
risk relating to its client contracts. It has not entered into foreign currency
forward contracts for speculative or trading purposes. As a result, a
hypothetical 10% movement of the value of the Canadian Dollars against all
currencies in either direction would not have a material impact.
85
DESCRIPTION OF IMRGLOBAL
IMRglobal is a global provider of end-to-end IT services to Fortune 500 and
Global 2000 sized companies in key vertical industries. These industries include
financial services, healthcare, government, utilities, retail and
manufacturing/distribution. IMRglobal's revenue was $(US)256 million for its
fiscal year ended December 31, 2000. IMRglobal has approximately 3,000 employees
and has its principal offices in the United States, Canada, U.K., France, India,
Japan and Australia.
IMRglobal believes one of its competitive advantages is to offer services on
a fixed-price, fixed-time basis. By offering fixed pricing, IMRglobal's clients
reduce their exposure to increased costs by using the "on-site, off-site"
delivery model. The off-site portion of IMRglobal's model utilizes India
delivery centers, which have achieved ISO 9001/9002/9003 certification. These
centers allow IMRglobal to maintain consistent quality and reduce project
delivery time in facilities that cost substantially less than comparable
facilities in North America and Europe.
IMRglobal provides a broad range of IT services, including: (a) strategic IT
and management consulting (including business process engineering); (b) systems
development and integration; (c) software application outsourcing and
(d) professional services. IMRglobal delivers each of these services
independently or as a comprehensive package.
STRATEGIC IT AND MANAGEMENT CONSULTING
IMRglobal provides industry business experience such as helping its
healthcare clients by simplifying complex business issues in the healthcare
industry, evaluating their financial and operational performance and supplying
advice in the ever-changing healthcare industry. IMRglobal's healthcare
consultants have a national reputation as experts in healthcare payment
methodologies and help its clients to improve the quality of their services,
increase productivity and reduce costs. IMRglobal has been significantly
increasing its industry business expertise in each of its targeted markets by
hiring people with extensive experience in particular industries and by
acquiring companies that focus exclusively on a particular vertical industry.
By combining industry business expertise with its technological experience,
IMRglobal is able to assist its clients in formulating effective IT strategies
that best match the client's business objectives.
SYSTEMS DEVELOPMENT AND INTEGRATION
Using an approach similar to the popular Lego-Registered Trademark--building
block approach, IMRglobal utilizes reusable, industry-specific software
components to quickly build vertical industry specific applications for its
clients. These pre-built, pre-tested software components, along with components
customized for company specific purposes, are assembled in significantly less
time than building an application from scratch and provide clients a solution
that fits their business better than a packaged solution. This approach can be
used to deliver projects on an accelerated basis for selected platforms,
avoiding the functional shortcomings of traditional standardized, pre-packaged
software solutions or the time and cost of developing completely new custom
solutions.
In addition to the component based development described above, Systems
development and integration services also include services to build new systems
on technologies as specified by clients. Further, IMRglobal helps clients design
and implement solutions involving the Internet and electronic commerce.
SOFTWARE APPLICATION OUTSOURCING
IMRglobal has four distinct processes for its software application
outsourcing services:
(1) Corrective maintenance requires software failures to be diagnosed and
fixed as they occur. These failures can directly affect business
operations and require the highest level of support. Quick fixes and poor
documentation often result in increased code complexity and increased
future maintenance costs.
86
(2) Adaptive maintenance requires software modification to support changing
business requirements or changing technical environments. This includes
user enhancements, operating system upgrades and other outside
improvements. Enhancement backlogs are generally the biggest source of
concern for IT management.
(3) Perfective maintenance involves modifications to application systems to
improve performance, without changing the basic system.
(4) Preventive maintenance identifies and eliminates the maintenance
problems that create the need for corrective maintenance.
PROFESSIONAL SERVICES
IMRglobal also provides professional services on a time and materials basis.
In addition to staffing its client's short-term needs, IMRglobal's objective is
to leverage professional staffing engagements to learn more about the client's
business and IT system needs and position itself to provide additional services.
REVENUE BY GEOGRAPHIC REGION
IMRglobal's gross revenues for the years ended December 31, 1998, 1999 and
2000 were attributable to operations in the United States, Canada and other
international regions (mainly Europe and Asia Pacific):
YEARS ENDED DECEMBER
---------------------------------------
1998 1999 2000
----------- ----------- -----------
(TABULAR AMOUNTS IN THOUSANDS OF U.S.
DOLLARS)
US............................................ $113,792 $131,708 $165,348
Canada........................................ 3,926 17,727 12,600
International................................. 52,600 72,593 78,224
-------- -------- --------
$170,318 $222,028 $256,172
======== ======== ========
REVENUE BY SERVICE OFFERING
IMRglobal's gross revenues for the years ended December 31, 1998, 1999 and
2000 were attributable to its service offerings:
YEARS ENDED DECEMBER
---------------------------------------
1998 1999 2000
----------- ----------- -----------
(TABULAR AMOUNTS IN THOUSANDS OF U.S.
DOLLARS)
Management of IT and business functions
(outsourcing)............................... $ 41,208 $ 55,233 $ 58,495
Systems integration........................... 101,515 127,542 127,460
Consulting.................................... 27,595 39,253 70,217
-------- -------- --------
$170,318 $222,028 $256,172
======== ======== ========
MARKETING
IMRglobal markets and sells its services directly through its professional
staff and senior management operating at its United States and international
regional offices and sales branch offices. IMRglobal focuses its marketing
efforts on large corporations within its targeted industries that have
significant IT budgets and recurring staffing or software development needs.
Marketing personnel identify prospects and enter the information into a database
that is consistently maintained. Direct sales representatives utilize those
records to initiate the sales cycle from prospect qualification to closing. As
87
a result, IMRglobal can pre-qualify sales opportunities and minimize the time
that direct sales representatives spend on prospect qualification.
IMRglobal's marketing programs include direct mail campaigns, advertising,
seminars, conferences and other activities. The executive, sales, financial and
technical support teams define the scope, deliverables, assumptions and
execution strategies for a proposed project. They also develop project
estimates, prepare pricing margin, and cash flow analyses, and finalize sales
proposals. Management reviews and approves all proposals and the sales staff
presents the proposal to the prospective client. Sales personnel are actively
involved throughout the execution phase of every project, because IMRglobal
believes successful project implementations will lead to more sales
opportunities at that client.
QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISKS
IMRglobal is exposed to market risk from changes in interest rates and
foreign currency exchange rates. It occasionally enters into hedging
transactions to manage the foreign currency risk. It does not hold or issue
derivative financial instruments for trading purposes.
INTEREST RATES
IMRglobal has variable-rate long-term debt obligations, subject to market
risk from changes in interest rates. Sensitivity analysis is one technique it
uses to measure the impact of changes in interest rates on the value of
market-risk sensitive financial instruments. A hypothetical 10% movement in
interest rates would not have a material impact on IMRglobal's future earnings
or cash flows.
FOREIGN CURRENCY
IMRglobal conducts business in the United States and around the world.
IMRglobal's most significant foreign currency transaction exposures relate to
Canada, the United Kingdom, France (Euro currency), Australia and Japan. The
primary purpose of its foreign currency hedging activities is to protect against
foreign currency exchange risk from intercompany financing and trading
transactions. IMRglobal enters into foreign currency forward contracts with
durations of generally less than 12 months to hedge such transactions. It has
not entered into foreign currency forward contracts for speculative or trading
purposes. All IMRglobal's foreign currency forward contracts are
marked-to-market, with gains and losses recognized in earnings, on a current
basis. In addition, since it enters into forward contracts only as a hedge, any
change in currency rates would not result in any material gain or loss, as any
gain or loss on the underlying foreign denominated balance would be offset by
the loss or gain on the forward contract.
During the ordinary course of business, IMRglobal enters into certain
contracts denominated in foreign currency. Potential foreign currency exposures
arising from these contracts are analyzed during the contract bidding process.
IMRglobal generally manages these transactions by ensuring that most costs to
service contracts are incurred in the same currency in which revenue is
received. By matching revenues and costs to the same currency, IMRglobal has
been able to substantially mitigate foreign currency risk to earnings.
Approximately 35% of IMRglobal's revenue is generated outside of the United
States. Using sensitivity analysis, a hypothetical ten-percent increase in the
value of the U.S. dollar against all currencies would decrease annual revenue by
3.5%, while a hypothetical ten-percent decrease in the value of the U.S. dollar
against all currencies would increase revenue by 3.5%. In the opinion of
management, expenses incurred in local currency would offset a substantial
portion of this fluctuation. As a result, a hypothetical 10% movement of the
value of the U.S. Dollar against all currencies in either direction would impact
IMRglobal's earnings before interest and taxes by approximately $(US)600,000 on
an annual basis. This amount would be offset, in part, from the impacts of local
income taxes.
88
COMPETITION BETWEEN CGI AND IMRGLOBAL
Despite operating in the same industry, CGI and IMRglobal have not
traditionally directly competed against one another in the past. This is due to
the following:
- CGI generates 46% of its revenue from the Telecommunications sector, a
sector in which IMRglobal has not competed in the past.
- The two companies' primary operations are in different geographic
locations. Over 72% of CGI's revenues are derived in Canada compared to
less than 5% for IMRglobal. Additionally, IMRglobal did not enter the
Canadian market until late in 1998 while CGI has operated in the Canadian
market since 1976.
In the U.S., CGI's expansion has occurred primarily over the past three
years due to a series of US-based acquisitions. These acquisitions were
primarily focused on the Property and Casualty Insurance and the Credit
Union industry segments.
Outside of North America, IMRglobal and CGI's only other common geographic
market is the U.K. However, both companies' U.K. operations have been
relatively small (under $20 million revenue annually) and have only been
initiated within the past four years. Accordingly, CGI has not competed
directly with IMRglobal in the U.K. through the present time.
- CGI generates approximately 26% of its total revenue from the Financial
Services sector, while IMRglobal generates approximately 50% of its total
revenue from this sector. However, within the sector CGI and IMRglobal
have a focus which is only partly overlapping, with CGI focusing on both
the Credit Unions and the Property and Casualty Insurance segments, and
IMRglobal focusing, within its North American operations, on the Life
Insurance and Property and Casualty segments.
- CGI's business is focused on large full IT outsourcing deals of greater
than $20 million, and includes the outsourcing of data centers and
hardware functions. IMRglobal has focused primarily on application
management outsourcing deals of less than $20 million and has not offered
the outsourcing of data centers and hardware functions.
Because of the above, to date, CGI and IMRglobal have only competed directly
for customer projects in the Property and Casualty Insurance industry segment of
the Financial Services sector in North America.
89
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION
The following unaudited pro forma condensed consolidated financial
information gives pro forma effect to the proposed merger of CGI and IMRglobal,
after giving effect to the pro forma adjustments described in the accompanying
notes. The unaudited pro forma financial statements give effect to a definitive
merger agreement providing for the acquisition by CGI of all outstanding shares
of common stock of IMRglobal on the basis of 1.5974 Class A Subordinate Shares
of CGI for each IMRglobal share of common stock. The unaudited pro forma
condensed consolidated financial statements also give effect to the exercise of
the preemptive rights of certain holders of CGI Class B Shares (multiple
voting). In connection with the exercise of these preemptive rights, CGI
Class B Shares (multiple voting) will be issued, the proceeds of which will be
used to repay long-term debt. This financial information was prepared from, and
should be read in conjunction with, the historical consolidated financial
statements, including applicable notes thereto, of CGI included elsewhere in
this proxy statement/prospectus and incorporated by reference herein, and of
IMRglobal, incorporated by reference into this proxy statement/prospectus. For
information on how to obtain any of these documents, see "Summary--Where You Can
Find More Information."
The unaudited pro forma condensed consolidated statements of earnings for
the year ended September 30, 2000 and for the six months ended March 31, 2001
give effect to the transaction as if it had occurred on October 1, 1999.
The unaudited pro forma condensed consolidated balance sheet as at
March 31, 2001 gives effect to the transaction as if it had occurred on that
date.
The unaudited pro forma condensed consolidated financial information was
prepared for illustrative purposes only. This information does not purport to
represent what the actual results of operations or financial position of CGI
would have been if the merger had actually occurred on the dates assumed and
does not necessarily indicate what CGI's future operating results or
consolidated financial position will be.
The unaudited pro forma condensed consolidated financial information was
prepared in accordance with Canadian generally accepted accounting principles
(GAAP), which differs in certain material respects from U.S. GAAP. Note 15 to
the CGI consolidated financial statements for the year ended September 30, 2000
and the six months ended March 31, 2001 included elsewhere in this proxy
statement/prospectus describes the principal differences between Canadian GAAP
and U.S. GAAP as they relate to CGI. The notes to the unaudited pro forma
condensed consolidated financial information present material adjustments to pro
forma consolidated net earnings and pro forma consolidated shareholders' equity
which would be required if U.S. GAAP had been applied.
The proposed merger will be accounted for using the purchase method of
accounting under both Canadian and U.S. GAAP.
The historical financial statements of IMRglobal were prepared in accordance
with U.S. GAAP. For purposes of presenting the unaudited pro forma condensed
consolidated financial information, the historical audited financial information
relating to IMRglobal was adjusted to include unaudited adjustments to conform
IMRglobal's historical financial information with CGI's disclosed accounting
policies under Canadian GAAP as described in the notes to the unaudited pro
forma condensed consolidated financial information.
The pro forma adjustments presented in the unaudited pro forma condensed
consolidated financial information give effect to estimates made by CGI
management and assumptions that it believes to be reasonable. The unaudited pro
forma condensed consolidated financial information does not take into account
any synergies or cost savings which may or are expected to occur as a result of
the merger. See "The Merger--Reasons for the Merger" on page 42.
90
COMPILATION REPORT
To the Directors of CGI Group Inc.
We have reviewed, as to compilation only, the accompanying unaudited pro
forma condensed consolidated balance sheet as at March 31, 2001, and the
unaudited pro forma condensed consolidated statements of earnings, for the year
ended September 30, 2000 and for the six months ended March 31, 2001 which have
been prepared in accordance with accounting principles generally accepted in
Canada. The statements have been prepared for inclusion in the proxy
statement/prospectus. In our opinion, the unaudited pro forma condensed
consolidated balance sheet and unaudited pro forma condensed consolidated
statements of earnings have been properly compiled to give effect to the
transaction and the assumptions described in the notes thereto.
(signed) Samson Belair/Deloitte & Touche
Chartered Accountants
Montreal, Quebec
June 7, 2001
COMMENT FOR UNITED STATES READERS ON DIFFERENCES BETWEEN
CANADIAN AND UNITED STATES REPORTING STANDARDS
The above opinion, provided solely pursuant to Canadian requirements, is
expressed in accordance with standards of reporting generally accepted in
Canada. Such standards contemplate the expression of an opinion with respect to
the compilation of pro forma financial statements. U.S. standards do not provide
for the expression of an opinion on the compilation of pro forma statements. To
report in conformity with United States standards on the reasonableness of the
pro forma adjustments and their application to the unaudited pro forma condensed
consolidated balance sheet and unaudited pro forma condensed consolidated
statements of earnings would require an examination or review which would be
substantially greater in scope than the review as to compilation only that we
have conducted. Consequently, under U.S. standards, we would be unable to
express any opinion with respect to the compilation of the accompanying
unaudited pro forma condensed consolidated balance sheet and unaudited pro forma
condensed consolidated statements of earnings.
(signed) Samson Belair/Deloitte & Touche
Chartered Accountants
Montreal, Quebec
June 7, 2001
91
CGI GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
CGI PRO
FORMA CGI PRO
CGI FOR THE FOR THE FORMA
YEAR IMRGLOBAL FOR YEAR FOR THE YEAR
ENDED THE YEAR ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, PRO FORMA SEPTEMBER 30, SEPTEMBER 30,
2000 2000 (NOTE 3) ADJUSTMENTS NOTES 2000 2000
------------- -------------- ----------- ----------- ------------- -------------
$(CDN) $(CDN) $(CDN) $(CDN) $(US)
(TABULAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE........................... 1,436,008 386,051 -- 1,822,059 1,209,064
Operating expenses................ 1,264,311 346,583 1,683 2 (iii) 1,612,577 1,070,058
----------- ------- ----------- ----------- -----------
Operating earnings before:........ 171,697 39,468 (1,683) 209,482 139,006
Depreciation and amortization..... 48,378 11,007 -- 59,385 39,406
----------- ------- ----------- ----------- -----------
Earnings before the following
items........................... 123,319 28,461 (1,683) 150,097 99,600
Interest income (expense) and
other........................... 208 (3,599) -- (3,391) (2,250)
----------- ------- ----------- ----------- -----------
Earnings before income taxes and
amortization of goodwill........ 123,527 24,862 (1,683) 146,706 97,350
Income taxes...................... 49,985 6,754 (640) 56,099 37,226
----------- ------- ----------- ----------- -----------
Earnings before amortization of
goodwill........................ 73,542 18,108 (1,043) 90,607 60,124
Amortization of goodwill, net of
taxes........................... 17,876 16,034 10,948 2 (iii) 44,858 29,767
----------- ------- ----------- ----------- -----------
NET EARNINGS...................... 55,666 2,074 (11,991) 45,749 30,357
=========== ======= =========== =========== ===========
Basic earnings per share before
amortization of goodwill........ 0.27 0.26 0.17
=========== =========== ===========
Diluted earnings per share before
amortization of goodwill........ 0.27 0.26 0.17
=========== =========== ===========
Basic earnings per share.......... 0.21 0.13 0.09
=========== =========== ===========
Diluted earnings per share........ 0.20 0.13 0.09
=========== =========== ===========
Basic weighted average number of 2 (iii), 2
shares.......................... 270,442,354 76,255,848 (iv) 346,698,202 346,698,202
=========== =========== =========== ===========
Diluted weighted average numbers
of shares....................... 272,760,212 351,004,892 351,004,892
=========== =========== ===========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
92
CGI GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED MARCH 31, 2001
IMRGLOBAL FOR CGI PRO FORMA CGI PRO FORMA
THE SIX FOR THE SIX FOR THE SIX
CGI FOR THE SIX MONTHS ENDED MONTHS ENDED MONTHS ENDED
MONTHS ENDED MARCH 31, PRO FORMA MARCH 31, MARCH 31,
MARCH 31, 2001 2001 (NOTE 3) ADJUSTMENTS NOTES 2001 2001
--------------- ------------- ----------- --------------- ------------- ---------------
$(CDN) $(CDN) $(CDN) $(CDN) $(US)
(TABULAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUE............... 708,161 181,331 -- 889,492 563,541
Operating expenses.... 612,289 181,552 882 2(iii) 794,723 503,499
----------- -------- ---------- ----------- -----------
Operating earnings
(loss) before:...... 95,872 (221) (882) 94,769 60,042
Depreciation and
amortization........ 26,588 4,612 -- 31,200 19,767
----------- -------- ---------- ----------- -----------
Earnings (loss) before
the following
items............... 69,284 (4,833) (882) 63,569 40,275
Interest income
(expense) and
other............... (705) (3,132) -- (3,837) (2,431)
----------- -------- ---------- ----------- -----------
Earnings (loss) before
income taxes and
amortization of
goodwill............ 68,579 (7,965) (882) 59,732 37,844
Provision for
(recovery of) income
taxes............... 30,239 (3,470) (335) 26,434 16,747
----------- -------- ---------- ----------- -----------
Earnings (loss) before
amortization of
goodwill............ 38,340 (4,495) (547) 33,298 21,097
Amortization of
goodwill............ 12,712 8,946 5,474 2(iii) 27,132 17,190
----------- -------- ---------- ----------- -----------
NET EARNINGS (LOSS)... 25,628 (13,441) (6,021) 6,166 3,907
=========== ======== ========== =========== ===========
Basic and diluted
earnings per share
before amortization
of goodwill......... 0.14 0.09 0.06
=========== =========== ===========
Basic and diluted
earnings per
share............... 0.09 0.02 0.01
=========== =========== ===========
Basic weighted average
number of shares.... 281,893,441 76,255,848 2(iii), 2(iv) 358,149,289 358,149,289
=========== ========== =========== ===========
Diluted weighted
average number of
shares.............. 282,739,145 360,542,450 360,542,450
=========== =========== ===========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
93
CGI GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2001
CGI AS AT IMRGLOBAL AS AT CGI PRO FORMA CGI PRO FORMA
MARCH 31, MARCH 31, PRO FORMA AS AT AS AT
2001 2001 (NOTE 3) ADJUSTMENTS NOTES MARCH 31, 2001 MARCH 31, 2001
------------ --------------- ----------- --------------- -------------- --------------
$(CDN) $(CDN) $(CDN) $(CDN) $(US)
(TABULAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
Current assets
Cash and cash equivalents... 28,190 17,304 45,710 2(iii) 91,204 57,783
Accounts receivable......... 232,396 74,808 -- 307,204 194,630
Income taxes................ 21,299 -- -- 21,299 13,494
Work in progress............ 48,702 27,761 -- 76,463 48,443
Prepaid expenses and other
current assets............ 32,997 5,449 -- 38,446 24,358
Future income taxes......... 6,951 22,601 28,957 2(iii) 58,509 37,068
--------- ------- ------- --------- ---------
370,535 147,923 74,667 593,125 375,776
Fixed assets.................. 80,693 64,255 -- 144,948 91,832
Contract costs and other...... 100,360 35,372 (8,140) 2(iii) 127,592 80,836
Future income taxes........... 34,569 -- 3,367 2(iii) 37,936 24,034
Goodwill...................... 521,094 297,863 218,956 2(iii) 1,037,913 657,574
--------- ------- ------- --------- ---------
1,107,251 545,413 288,850 1,941,514 1,230,052
========= ======= ======= ========= =========
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities............... 168,027 59,741 74,000 2(iii) 301,768 191,186
Deferred revenue............ 59,019 8,200 -- 67,219 42,587
Future income taxes......... 5,436 1,710 -- 7,146 4,527
Current portion of long-term
debt...................... 6,799 1,162 -- 7,961 5,044
--------- ------- ------- --------- ---------
239,281 70,813 74,000 384,094 243,344
Future income taxes........... 13,903 409 1,915 2(iv) 16,227 10,280
Long-term debt................ 38,080 49,009 -- 87,089 55,176
Other long-term liabilities... -- 8,291 -- 8,291 5,253
--------- ------- ------- --------- ---------
291,264 128,522 75,915 495,701 314,053
SHAREHOLDERS' EQUITY.......... 815,987 -- 629,826 2(iii), 2(iv) 1,445,813 915,999
--------- ------- --------- ---------
1,107,251 128,522 705,741 1,941,514 1,230,052
========= ======= ======= ========= =========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
94
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated balance sheet and condensed
consolidated statements of earnings have been prepared to give effect to the
proposed merger between IMRglobal and CGI, through a wholly owned subsidiary of
CGI.
CGI will account for the merger as a purchase under both Canadian and U.S.
GAAP. The unaudited pro forma condensed consolidated financial statements have
been prepared on this basis.
The unaudited pro forma condensed consolidated statement of earnings for the
year ended September 30, 2000 has been prepared by management of CGI from the
audited consolidated financial statements of CGI for the year ended
September 30, 2000 included elsewhere in this proxy statement/ prospectus and
the audited consolidated financial statements of IMRglobal for the year ended
December 31, 2000 included in the IMRglobal Annual Report on Form 10-K
incorporated by reference into this proxy statement/prospectus.
The unaudited pro forma condensed consolidated balance sheet and statement
of earnings as at and for the six months ended March 31, 2001 have been prepared
by management of CGI from the unaudited consolidated financial statements for
the six months ended March 31, 2001 of CGI and IMRglobal, respectively.
These unaudited pro forma condensed consolidated financial statements and
notes thereto do not purport to represent what CGI's results of operations or
financial condition would actually have been, had this transaction in fact
occurred on such dates or to project CGI's results of operations or financial
condition for any future date or period. These unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
historical consolidated financial statements and notes thereto of CGI, which
appear elsewhere in this proxy statement/prospectus and with the IMRglobal
historical consolidated financial statements and notes thereto, included in
IMRglobal's Annual Report on Form 10-K incorporated by reference in this proxy
statement/prospectus.
2. SIGNIFICANT ASSUMPTIONS AND ADJUSTMENTS
In the preparation of the unaudited pro forma condensed consolidated
financial information, the following significant assumptions and adjustments
have been made:
(i) The unaudited pro forma condensed consolidated balance sheet at
March 31, 2001 gives effect to the transaction discussed in Note 1 above
as if it had occurred on March 31, 2001. The unaudited pro forma
condensed consolidated statements of earnings for the year ended
September 30, 2000 and for the six months ended March 31, 2001 give
effect to the transaction as if it had occurred on October 1, 1999.
(ii) IMRglobal presents its financial statements in U.S. dollars. Solely for
convenience, the financial statement information of IMRglobal, as
adjusted and restated to conform with CGI accounting policies applied
under Canadian GAAP (see Note 3), has been translated into Canadian
dollars. This was done using a rate of $(Cdn)1.5070 to $(US)1.00 and of
$(Cdn)1.5784 to $(US)1.00, for the respective purposes of the
September 30, 2000 and March 31, 2001 unaudited pro forma condensed
consolidated financial information, the noon buying rates in New York
City on those respective dates.
These translations should not be construed as a representation that the
U.S. dollar amounts actually represent, or could be converted into,
Canadian dollars at the rates indicated.
95
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
(iii) The unaudited pro forma condensed consolidated financial information
records the merger using the purchase method with the excess of the
fair value of the consideration over the estimated fair value of net
assets acquired being allocated to goodwill.
The unaudited pro forma condensed consolidated financial information
assumes that CGI will issue 1.5974 CGI Class A Subordinate Shares, in
exchange for each share of IMRglobal common stock. Based upon the
43,963,742 IMRglobal shares represented in the merger agreement by
IMRglobal to be outstanding as of February 14, 2001, 70,227,681 CGI
Class A Subordinate Shares are assumed to be issued. For purposes of
the unaudited pro forma condensed consolidated financial statements,
the total purchase price assumed is based upon the CGI Class A
Subordinate Share weighted average trading price on the TSE for the
twenty-one-day period starting ten days before and ending ten days
after the announcement date of February 21, 2001 of $(Cdn)7.58. For
Canadian GAAP purposes, the final purchase price will be determined
using the CGI Class A Subordinate Share average closing price on the
TSE for the twenty-one-day period starting ten days before and ending
ten days after the date of completion of the merger. (For U.S. GAAP,
the $(Cdn)7.58 price would be used.)
As a result of the proposed merger, outstanding IMRglobal stock options
will become options to acquire CGI Class A Subordinate Shares based on
the 1.5974 exchange ratio. Based upon the 6,513,093 IMRglobal options
represented in the merger agreement by IMRglobal to be outstanding as
of February 14, 2001, the fair value of the IMRglobal stock options
outstanding on that date was estimated by management, using the
Black-Scholes option pricing model, at $(Cdn)55,888,000 and has been
included in the purchase consideration. The intrinsic value of the
unvested stock options, established at $(Cdn)5,039,000 (including
income taxes of $(Cdn)1,915,000), will be accounted for as unearned
compensation costs, in a separate component of shareholders' equity,
and will be amortized over approximately 3 years, being the estimated
remaining future vesting (service) period. The resulting compensation
cost of $(Cdn)1,683,000 for the year ended September 30, 2000
($(Cdn)882,000 for the six months ended March 31, 2001) was included as
an adjustment to the pro forma condensed consolidated statement of
earnings.
The total purchase consideration for purposes of the unaudited pro
forma condensed consolidated financial information includes estimated
professional fees and integration and other costs related to the
acquisition of $(Cdn)74,000,000 (before income taxes of
$(Cdn)28,860,000).
As part of the proposed merger, loans to certain directors and officers
of IMRglobal totaling $(Cdn)8,881,000 (before income taxes of
$(Cdn)3,464,000) for purposes of the unaudited pro forma condensed
consolidated financial information are to be forgiven and to be applied
against the fair value of net assets acquired.
A preliminary allocation of the purchase price to the estimated fair
value of net assets acquired has been performed for purposes of the
unaudited pro forma condensed consolidated financial information based
on initial appraisal estimates and other valuation studies which are in
process and which CGI believes are reasonable. The final allocation is
subject to completion of these studies, which is expected to be within
the next twelve months and, may result in the purchase price being
allocated to other identifiable intangible assets besides goodwill that
may have substantially shorter useful lives. A summary of the
96
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
preliminary allocation of the total purchase consideration, in accordance
with Canadian GAAP, is shown below:
MARCH 31, 2001
$(CDN)
--------------
(IN THOUSANDS)
Share consideration......................................... 532,526
Fair value of IMRglobal stock options....................... 55,888
Acquisition costs (net of income taxes of
$(Cdn)28,860,000)......................................... 45,140
--------
Total purchase consideration................................ 633,554
Less: Estimated fair value of net assets acquired........... (416,891)
Plus: Expected forgiveness of loans to directors and
officers (net of income taxes of $(Cdn)3,464,000)......... 5,417
Less: Unearned compensation costs (net of income taxes of
$(Cdn)1,915,000).......................................... (3,124)
--------
Goodwill.................................................... 218,956
========
Goodwill arising on the transaction will be amortized over a period of
20 years using the straight-line method based on the estimated useful
lives of net assets acquired. Accordingly, amortization expense relating
to goodwill of $(Cdn)10,948,000 and $(Cdn)5,474,000 is reflected in the
unaudited pro forma condensed consolidated statements of earnings for the
year ended September 30, 2000 and the six months ended March 31, 2001,
respectively.
(iv) Under the articles of incorporation of CGI, holders of CGI Class B
Shares (multiple voting) have preemptive rights in connection with
certain issuances of CGI Class A Subordinate Shares or of securities
convertible into CGI Class A Subordinate Shares. Pursuant to these
preemptive rights, holders of CGI Class B Shares (multiple voting) have
a right-to-subscribe to that number of CGI Class B Shares (multiple
voting) which allow them to maintain their then current percentage
voting power associated with the CGI Class B Shares (multiple voting)
in CGI. Under the options agreement among Bell Canada, CGI, BCE Inc.
and various other shareholders of CGI, BCE Inc. has additional
preemptive rights in connection with certain issuances of CGI Class A
Subordinate Shares or securities convertible into such shares to
purchase that number of CGI Class A Subordinate Shares to maintain its
equity participation in CGI; these rights will not be exercised by
BCE Inc.
Certain holders of CGI Class B Shares (multiple voting) have committed
to exercise their preemptive rights in connection with the merger
pursuant to which 6,028,167 CGI Class B Shares (multiple voting) will
be issued at the CGI Class A Subordinate Share weighted average trading
price described in (iii) above, up to a maximum aggregate amount of
$(Cdn)60,000,000. For purposes of the unaudited pro forma condensed
consolidated financial statements the average closing price on the TSE
for the twenty-one day period starting ten days before and ending ten
days after February 21, 2001 of $(Cdn)7.58 was used in the
determination of the estimated proceeds of $(Cdn)45,710,000 for the
issuance of 6,028,167 CGI Class B Shares (multiple voting). As a
result, the unaudited pro forma condensed consolidated balance sheet at
March 31, 2001 reflects an adjustment to cash and cash equivalents of
$(Cdn)45,710,000 and to shareholders' equity in the same amount. Upon
97
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
receipt of these proceeds, CGI management plans to use the funds to repay
post-merger consolidated long-term debt, principally belonging to
IMRglobal, (including the current portion of the long-term debt of
$(Cdn)319,000 at March 31, 2001). However, interest expense in the pro
forma condensed consolidated statements of earnings for the year ended
September 30, 2000 and for the six months ended March 31, 2001 was not
adjusted to give effect to savings resulting from the reduction of
outstanding long-term debt. The respective interest expense savings are
estimated at $(Cdn)2,880,000 and $(Cdn)1,440,000 for the year ended
September 30, 2000 and the six months ended March 31, 2001,
respectively based on the March 31, 2001 weighted average interest rate
of 6.3% on the IMRglobal revolving facilities. The final purchase price
for CGI Class B Shares (multiple voting) issued upon the exercise of
preemptive rights shall be equal to the issuance price of the CGI
Class A Subordinate Shares which shall be based on the twenty-one day
weighted average trading price on the TSE of CGI Class A Subordinate
Shares for the period starting the tenth day before the day the merger
is completed. Accordingly, the estimated proceeds described above may
differ significantly and have an impact on the post merger consolidated
long-term debt repayment.
BCE Inc., a holder of CGI Class A Subordinate Shares and Class B Shares
(multiple voting), has determined not to exercise its preemptive rights
to acquire additional CGI Class A Subordinate Shares. However, in the
event that BCE Inc. decides to exercise its preemptive rights to
acquire additional CGI Class B Shares (multiple voting), an additional
3,613,633 CGI Class B Shares (multiple voting) would be issued at the
same price per share described above. Accordingly, cash and cash
equivalents and shareholders' equity would be increased by estimated
proceeds of $(Cdn)27,391,338; this adjustment was not reflected in the
unaudited pro forma condensed consolidated balance sheet at March 31,
2001. These proceeds would be used by CGI to further repay post merger
consolidated long-term debt, principally belonging to CGI. However,
interest expense in the unaudited pro forma condensed consolidated
statements of earnings for the year ended September 30, 2000 and for
the six months ended March 31, 2001 was not adjusted to give effect to
the savings resulting from the reduction of outstanding long-term debt.
The respective interest expense savings, based on CGI's average
interest rate of 6.4% on its revolving credit facility, are estimated
at $(Cdn)1,753,000 and of $(Cdn)876,500 for the year ended
September 30, 2000 and the six months ended March 31, 2001,
respectively. Lastly, this additional subscription referred to in this
paragraph would have no significant impact on pro forma basic and
diluted earnings per share for both periods presented.
3. U.S. TO CANADIAN GAAP ADJUSTMENTS TO HISTORICAL IMRGLOBAL FINANCIAL
STATEMENTS
IMRglobal presents its financial statements in U.S. dollars. Solely for
convenience, for purposes of the financial information of IMRglobal, as adjusted
and restated to conform with CGI accounting policies applied under Canadian GAAP
and used in the preparation of the unaudited pro forma condensed consolidated
financial information for the year ended September 30, 2000 and as at and for
the six months ended March 31, 2001, have been translated into Canadian dollars.
This was done using a rate of $(Cdn)1.5070 to $(US)1.00 and of $(Cdn)1.5784 to
$(US)1.00, the noon buying rates in New York City on those respective dates.
98
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
The following table presents the reconciliation from the IMRglobal statement
of earnings for the year ended December 31, 2000, prepared under U.S. GAAP and
as conformed to CGI's presentation and accounting policies under Canadian GAAP.
STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2000
IMRGLOBAL IN IMRGLOBAL IN
ACCORDANCE ADJUSTMENTS ACCORDANCE
WITH U.S. RECLASSIFICATIONS TO CANADIAN WITH CANADIAN
GAAP (A) GAAP NOTES GAAP
------------ ----------------- ----------- -------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS)
REVENUES.......................... 386,051 -- -- 386,051
Operating expenses................ 357,114 (8,926) (1,605) (b),(c) 346,583
------- ------- ------ -------
Operating earnings before:........ 28,937 8,926 1,605 39,468
Depreciation and amortization..... 15,745 (5,041) 303 (b) 11,007
------- ------- ------ -------
Earnings before the following
items........................... 13,192 13,967 1,302 28,461
Interest income (expense)......... (3,599) -- -- (3,599)
------- ------- ------ -------
Earnings before income taxes,
amortization of goodwill and
cumulative effect of change in
accounting method............... 9,593 13,967 1,302 24,862
Income taxes...................... 5,235 998 521 (b),(c) 6,754
------- ------- ------ -------
Earnings before amortization of
goodwill and cumulative effect
of change in accounting
method.......................... 4,358 12,969 781 18,108
Amortization of goodwill, net of
taxes........................... -- 12,969 3,065 (d) 16,034
------- ------- ------ -------
Net earnings before cumulative
effect of change in accounting
method.......................... 4,358 -- (2,284) 2,074
Cumulative effect of change in
accounting method............... (4,079) -- 4,079 (e) --
------- ------- ------ -------
NET EARNINGS...................... 279 -- 1,795 2,074
======= ======= ====== =======
99
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
The following tables present the reconciliation from the IMRglobal statement
of earnings and balance sheet as at and for the six months ended March 31, 2001,
prepared under U.S. GAAP and as conformed to CGI'S presentation and accounting
policies under Canadian GAAP.
STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED MARCH 31, 2001
IMRGLOBAL IN IMRGLOBAL IN
ACCORDANCE ADJUSTMENTS ACCORDANCE
WITH U.S. RECLASSIFICATIONS TO CANADIAN WITH CANADIAN
GAAP (A) GAAP NOTES GAAP
------------ ----------------- ----------- -------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS)
REVENUES.......................... 181,331 181,331
Operating expenses................ 186,054 (4,012) (490) (b),(c) 181,552
------- ------- ------ -------
Operating loss.................... (4,723) 4,012 490 (221)
Depreciation and amortization..... 8,313 (3,850) 149 (b) 4,612
------- ------- ------ -------
Loss before the following items... (13,036) 7,862 341 (4,833)
Interest income (expense)......... (3,132) -- -- (3,132)
------- ------- ------ -------
Loss before income taxes,
amortization of goodwill and
cumulative effect of change in
accounting method............... (16,168) 7,862 341 (7,965)
(Recovery of) provision for income
taxes........................... (4,123) 517 136 (b),(c) (3,470)
------- ------- ------ -------
Loss before amortization of
goodwill and cumulative effect
of change in accounting
method.......................... (12,045) 7,345 205 (4,495)
Amortization of goodwill, net of
taxes........................... -- 7,345 1,601 (d) 8,946
------- ------- ------ -------
Net loss before cumulative effect
of change in accounting
method.......................... (12,045) -- (1,396) (13,441)
Cumulative effect of change in
accounting method............... -- -- -- (e) --
------- ------- ------ -------
NET LOSS.......................... (12,045) -- (1,396) (13,441)
======= ======= ====== =======
100
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
BALANCE SHEET AS AT MARCH 31, 2001
IMRGLOBAL IN IMRGLOBAL IN
ACCORDANCE ADJUSTMENTS ACCORDANCE
WITH U.S. TO CANADIAN WITH CANADIAN
GAAP GAAP NOTES GAAP
------------ ----------- -------- -------------
(UNAUDITED) (UNAUDITED)
(TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS)
ASSETS
Current assets
Cash and cash equivalents..................... 17,304 -- 17,304
Accounts receivable........................... 74,808 -- 74,808
Work in progress.............................. 27,761 -- 27,761
Prepaid expenses and other current assets..... 5,449 -- 5,449
Future income taxes........................... 22,601 -- 22,601
------- ------ -------
147,923 -- 147,923
Fixed assets.................................... 64,255 64,255
Contract costs and other........................ 33,584 1,788 (b) 35,372
Goodwill........................................ 241,449 56,414 (d) 297,863
------- ------ -------
487,211 58,202 545,413
======= ====== =======
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities...... 59,026 715 (b) 59,741
Deferred revenue.............................. 8,200 -- 8,200
Future income taxes........................... 1,710 -- 1,710
Current portion of long-term debt............. 1,162 -- 1,162
------- ------ -------
70,098 715 70,813
Future income taxes............................. 409 -- 409
Long-term debt.................................. 49,009 -- 49,009
Other long-term liabilities..................... 8,291 -- 8,291
------- ------ -------
127,807 715 128,522
Shareholders' equity............................ 359,404 57,487 (b),(d) 416,891
------- ------ -------
487,211 58,202 545,413
======= ====== =======
Accounting principles generally accepted in Canada differ in certain
material respects from those generally accepted in the U.S. The differences
which are material to restating the consolidated financial statements of
IMRglobal as at and for the year ended December 31, 2000 and for the six months
ended March 31, 2001 to comply with CGI's accounting policies under Canadian
GAAP are described below.
(A) RECLASSIFICATIONS
Reclassifications were made to the IMRglobal financial statements prepared
under U.S. GAAP to conform to CGI's presentation under Canadian GAAP. These
reclassifications had no impact on IMRglobal's net income or shareholders'
equity.
101
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
In particular, under Canadian GAAP, goodwill amortization expense may be
presented net-of-tax on a separate line in the Consolidated Statement of
Earnings. This presentation is not currently permitted under U.S. GAAP.
Also, under U.S. GAAP, depreciation and amortization amounts are included in
operating expenses.
(B) CAPITALIZED SOFTWARE COSTS
Under Canadian GAAP, certain overhead costs would have been capitalized as
capitalized software costs. Under U.S. GAAP, these costs were expensed as
incurred. The adjustment to operating expenses includes the capitalization of
overhead costs for Canadian GAAP purposes. Amortization relating to these
additional capitalized costs and income taxes under Canadian GAAP are also
reflected in the adjustments.
(C) RESTRUCTURING CHARGES
Under U.S. GAAP, employee termination benefit charges must meet specific
conditions regarding the timing of the recognition of the related accrual for
restructuring charges. The adjustment to operating expenses includes the
reversal of employee termination costs which would have qualified for
recognition in the 1999 fiscal year-end under Canadian GAAP.
(D) GOODWILL
(i) Certain business combinations entered into by IMRglobal were accounted
for using the pooling of interests method. Under Canadian GAAP, these
acquisitions would have been accounted for using the purchase method.
The adjustment includes the recognition of the resulting goodwill, net
of accumulated amortization as well as the corresponding amortization.
(ii) Under U.S. GAAP, as a result of the acquisition of a subsidiary
company, amounts allocated to software and development costs incurred
by the subsidiary prior to the acquisition would be considered as
purchased in process research and development (R&D). Also under U.S.
GAAP, purchased in process R&D that represents products in the
development stage and not considered to have reached technological
feasibility at the time of the acquisition is expensed. Under Canadian
GAAP, these costs would have been excluded from the fair value of net
assets acquired and would have therefore resulted in additional
goodwill. The adjustment includes the capitalization of these costs as
goodwill resulting from the acquisition of the subsidiary, net of
accumulated amortization.
(E) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD
Under U.S. GAAP, the cumulative effect of a change in accounting method is
charged to earnings whereas under Canadian GAAP, the effect is applied to
opening retained earnings. This item was excluded from the unaudited pro forma
condensed consolidated financial information for the six months ended March 31,
2001, as this change in accounting method was recorded with a January 1, 2000
effective date.
4. RECONCILIATION OF UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION FROM CANADIAN GAAP TO U.S. GAAP
The tables below set out the principal adjustments to pro forma consolidated
net earnings and shareholders' equity reflected in the unaudited pro forma
condensed consolidated financial information
102
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
which would be required if U.S. GAAP had been applied. These tables should be
read in conjunction with Note 15 of CGI's financial statements included
elsewhere in this proxy statement/prospectus and with Note 3 above.
Solely for convenience, the following tables have been translated into
Canadian dollars using a rate of $(Cdn)1.5070 to $(US)1.00 and of $(Cdn)1.5784
to $(US)1.00, for the respective purposes of the September 30, 2000 and
March 31, 2001 unaudited pro forma reconciliation from Canadian to U.S. GAAP of
pro forma consolidated net earnings and shareholders' equity, the noon buying
rates in New York City on those respective dates.
RECONCILIATION OF PRO FORMA CONSOLIDATED NET EARNINGS
YEAR ENDED
SEPTEMBER 30, 2000
-----------------------
$(CDN) $(US)
-------- --------
(TABULAR AMOUNTS IN
THOUSANDS, EXCEPT PER
SHARE DATA)
Pro forma net earnings under Canadian GAAP............. 45,749 30,357
Adjustments for:
Foreign currency (ii)................................ 462 307
Goodwill amortization (iii).......................... (309) (204)
Integration costs (iv)............................... (1,764) (1,171)
Capitalized software costs (v)....................... (329) (218)
Cumulative effect of change in accounting method
(vi)............................................... (4,079) (2,707)
Other................................................ (453) (301)
------ ------
Pro forma net earnings under U.S. GAAP................. 39,277 26,063
====== ======
Pro forma basic earnings per share..................... 0.11 0.08
====== ======
Pro forma diluted earnings per share................... 0.11 0.07
====== ======
SIX MONTHS ENDED
MARCH 31, 2001
-----------------------
$(CDN) $(US)
-------- --------
(TABULAR AMOUNTS IN
THOUSANDS, EXCEPT PER
SHARE DATA)
Pro forma net earnings under Canadian GAAP............. 6,166 3,907
Adjustments for:
Foreign currency (ii)................................ 62 39
Goodwill amortization................................ 88 55
Integration costs (iv)............................... (5,190) (3,288)
Capitalized software costs (v)....................... (86) (55)
Other................................................ (118) (75)
------- ------
Pro forma net earnings under U.S. GAAP................. 922 583
======= ======
Pro forma basic and diluted earnings per share......... 0.00 0.00
======= ======
103
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
RECONCILIATION OF PRO FORMA CONSOLIDATED SHAREHOLDERS' EQUITY
AS AT
MARCH 31, 2001
--------------------
$(CDN) $(US)
--------- --------
(TABULAR AMOUNTS IN
THOUSANDS)
Pro forma shareholders' equity under Canadian GAAP...... 1,445,813 915,999
Adjustments for:
Adjustment for change in accounting policy (i)........ 9,134 5,787
Foreign currency translation (ii)..................... 2,548 1,614
Goodwill (iii)........................................ 355 225
Integration costs (iv)................................ (6,954) (4,406)
Capitalized software costs (v)........................ (1,073) (680)
--------- -------
Pro forma shareholders' equity under U.S. GAAP.......... 1,449,823 918,539
========= =======
- ------------------------
(i) Income taxes and adjustment for change in accounting policy
On October 1, 1999, CGI adopted the recommendations of CICA Handbook
Section 3465 "Income taxes." The recommendations of Section 3465 are similar
to the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 109 "Accounting for Income Taxes" issued by the Financial Accounting
Standards Board ("FASB"). Upon the implementation of Section 3465, CGI
recorded an adjustment to reflect the difference between the assigned value
and the tax basis of an asset acquired in a purchase business combination,
which resulted in a future income tax liability; CGI offset this amount
through a reduction of retained earnings as part of the cumulative
adjustment. Under U.S. GAAP, this amount would have been reflected as
additional goodwill.
Prior to the issuance of Section 3465, under Canadian GAAP, accounting for
income taxes was similar to the provisions of the U.S. Accounting Principles
Board No. 11. Under U.S. GAAP, CGI would have followed the provisions of
SFAS No. 109.
(ii) Translation of foreign currencies
Under Canadian GAAP, the financial statements of CGI's foreign subsidiaries,
which are considered integrated operations, have been translated using the
temporal method. Under this method, monetary assets and liabilities are
translated at the exchange rates in effect at the balance sheet dates and
non-monetary assets and liabilities are translated at historical exchange
rates. Revenues and expenses are translated at average rates for the period.
Translation exchange gains or losses of such subsidiaries are reflected in
net earnings.
Under U.S. GAAP, SFAS No. 52, "Foreign Currency Translation," requires
companies to translate functional-currency financial statements into
reporting currency using the current exchange rate method whereby the rates
in effect on the balance sheet dates for assets and liabilities and the
weighted average rate for statement of earnings elements are used. Any
translation adjustments, resulting from the process of translating the
financial statements of foreign subsidiaries into Canadian dollars, are
excluded from the determination of net earnings and are reported as a
separate component in shareholders' equity.
104
CGI GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
SEPTEMBER 30, 2000 AND MARCH 31, 2001
(iii) Goodwill
As described in (i) above, goodwill recorded by CGI would be greater for
U.S. GAAP purposes than for Canadian GAAP purposes. The adjustment reflects
the additional goodwill amortization expense for U.S. GAAP purposes.
In addition, as described in Note 3(d) certain business combinations entered
into by IMRglobal were accounted for using the pooling of interests method
for U.S. GAAP purposes. Also, purchased in-process R&D expensed under U.S.
GAAP would have resulted in additional goodwill for Canadian GAAP purposes.
The adjustment includes the reversal of the Canadian GAAP adjustment
discussed in Note 3(d).
Finally, the adjustment includes the adjustment resulting from the
difference in the estimated fair value of net assets acquired between
Canadian GAAP and U.S. GAAP.
(iv) Integration costs
Under Canadian GAAP, certain costs relating to the purchaser may be
recognized in the purchase price allocation when accounting for business
combinations, subject to certain conditions. Under U.S. GAAP, only costs
relating directly to the acquired business may be considered in the purchase
price allocation. The adjustment represents the charge to net earnings, net
of income taxes, under U.S. GAAP.
(v) Capitalized software costs
As described in Note 3(b) under Canadian GAAP, certain overhead costs would
have been capitalized as capitalized software costs. Under U.S. GAAP, these
costs are expensed as incurred. The adjustment represents the reversal of
the Canadian GAAP adjustment discussed in Note 3(b).
(vi) Cumulative effect of change in accounting method
As described in Note 3(e), under U.S. GAAP, the cumulative effect relating
to a change in accounting method is charged to net earnings whereas under
Canadian GAAP, the effect is applied to opening retained earnings.
(vii) Proportionate consolidation
The proportionate consolidation method is used to account for interests in
joint ventures. Under U.S. GAAP, entities in which CGI owns a majority of
the share capital would be fully consolidated and those which are less than
majority-owned but over which CGI exercises significant influence, would be
accounted for using the equity method. This would result in
reclassifications in the consolidated balance sheet and statement of
earnings for the year ended September 30, 2000 and as at and for the six
months ended March 31, 2001. However, the differences in the case of
majority-owned joint ventures were not considered material and have
consequently not been presented. In accordance with practices prescribed by
the Securities and Exchange Commission, CGI has elected, for the purpose of
this reconciliation, to account for interests in joint ventures using the
proportionate consolidation method.
(viii) Earnings before amortization of goodwill
In Canada, the Accounting Standards Board has approved an addendum to
"Business Combinations", Section No. 1580 that permits goodwill amortization
expense to be presented net-of-tax on a separate line in the Consolidated
Statement of Earnings. This presentation is not currently permitted under
U.S. GAAP.
(ix) Depreciation and amortization
Under U.S. GAAP, depreciation and amortization amounts would be included in
operating expenses.
105
DESCRIPTION OF CGI SHARES
GENERAL
The authorized capital stock of CGI consists of an unlimited number of
shares, without par value, as follows:
- Class A Subordinate Shares
- carry one vote per share,
- participate equally with Class B Shares (multiple voting) with respect
to the payment of dividends and distribution of proceeds upon
liquidation,
- are convertible, at the option of the holder, into Class B Shares
(multiple voting) in the event of certain takeover bids on Class B
Shares (multiple voting), and
- if BCE Inc. and any of its wholly owned subsidiaries hold in the
aggregate at least 30% of the outstanding equity shares of CGI, will be
automatically redesignated as "common shares" as of the earliest of:
- January 5, 2004,
- 90 calendar days after written notice by BCE Inc. that CGI or any
of Messrs. Godin, Imbeau or Brassard or their respective holding
companies is in breach in any material respect of their agreements
with BCE Inc.; which breach was not cured or remedied, and
- the date of an order issued by an arbitrator in connection with the
resolution of the dispute in connection with this material breach,
if CGI, or any of Messrs. Godin, Imbeau or Brassard or their
respective holding companies choose to submit the matter to
arbitration in accordance with their agreements with BCE Inc.;
- Class B Shares (multiple voting)
- carry ten votes per share,
- participate equally with Class A Subordinate Shares with respect to the
payment of dividends and distribution of proceeds upon liquidation,
- are convertible at any time at the option of the holder into Class A
Subordinate Shares, and
- if BCE Inc. and any of its wholly owned subsidiaries hold in the
aggregate at least 30% of the outstanding equity shares of CGI, are
automatically convertible on a one-for-one basis into Class A
Subordinate Shares, thereby eliminating the multiple votes to which the
Class B Shares (multiple voting) are entitled, as of the earliest of:
- January 5, 2004,
- 90 calendar days after written notice by BCE Inc. that CGI or any
of Messrs. Godin, Imbeau or Brassard or their respective holding
companies is in breach in any material respect of their agreements
with BCE Inc., which breach was not cured or remedied, and
- the date of an order issued by an arbitrator in connection with the
resolution of the dispute in connection with this material breach,
if CGI, or any of Messrs. Godin, Imbeau or Brassard or their
respective holding companies choose to submit the matter to
arbitration in accordance with their agreements with BCE Inc.;
106
- First Preferred Shares, issuable in series, carrying one vote per share,
ranking senior to Second Preferred Shares, Class A Subordinate Shares and
Class B Shares (multiple voting) with respect to the payment of dividends;
- Second Preferred Shares, issuable in series, non-voting, ranking senior to
Class A Subordinate Shares and Class B Shares (multiple voting) with
respect to the payment of dividends.
No First Preferred Shares or Second Preferred Shares are currently outstanding
or issuable upon the exercise of any options, warrants or similar rights or upon
the conversion of any convertible securities.
As of the close of business on March 20, 2001, there were 255,215,941
Class A Subordinate Shares and 34,846,526 Class B Shares (multiple voting)
issued and outstanding. In addition, as of March 20, 2001, there were
outstanding options to acquire 8,431,025 Class A Subordinate Shares under CGI's
share option plan for certain of its employees and of its subsidiaries.
Under the articles of incorporation of CGI, holders of Class B Shares
(multiple voting) have preemptive rights in connection with certain issuances of
Class A Subordinate Shares or securities convertible into Class A Subordinate
Shares. Pursuant to these preemptive rights, each holder of Class B Shares
(multiple voting) has a right to subscribe to that number of Class B Shares
(multiple voting) which allows him to maintain his then current percentage
voting power associated with the Class B Shares (multiple voting) in CGI. The
current holders of Class B Shares (multiple voting) are (a) Messrs. Godin,
Imbeau and Brassard, directly or indirectly through entities they control, and
(b) BCE Inc., directly or indirectly through an entity it controls. In addition,
under the options agreement among BCE Inc., Bell Canada, CGI and Messrs. Godin,
Imbeau and Brassard and their respective holding companies, BCE Inc. has
additional preemptive rights in connection with certain issuances of Class A
Subordinate Shares or securities convertible into Class A Subordinate Shares
giving BCE Inc. the right to purchase Class A Subordinate Shares to maintain its
equity participation in CGI. If any of the holders of Class B Shares (multiple
voting) other than BCE Inc. decides not to exercise its preemptive rights, these
rights can be exercised by BCE Inc. The preemptive rights to purchase additional
Class B Shares (multiple voting) of CGI available to Messrs. Godin, Imbeau and
Brassard and their holding companies in connection with the merger will be
exercised, in full or in part, by Messrs. Godin and Imbeau and their holding
companies (including, with the consent of BCE Inc., Mr. Brassard's preemptive
rights) at a cash price equal to the weighted average trading price on the TSE
for the Class A Subordinate Shares for the twenty-one day period starting ten
days before and ending ten days after the date of the closing of the merger up
to a maximum aggregate purchase price of $(Cdn)60 million. BCE Inc. has informed
CGI that it will not exercise its preemptive rights to acquire additional
Class A Subordinate Shares and has indicated to CGI that it will decide prior to
completion of the merger whether or not it will exercise its preemptive rights
to purchase Class B Shares (multiple voting) at the same price per share
described above for the other preemptive rights. If BCE Inc. does not exercise
its preemptive rights, up to a maximum of an aggregate of approximately
6.0 million Class B Shares (multiple voting) will be issued to Messrs. Godin and
Imbeau and their holding companies in connection with the exercise of these
preemptive rights, and if BCE Inc. exercises its preemptive rights, up to a
maximum of an aggregate of approximately 9.6 million Class B Shares (multiple
voting) will be issued in connection with the exercise of these preemptive
rights, including shares which are subscribed to by Messrs. Godin and Imbeau and
their holding companies. The sale of these additional CGI shares pursuant to the
exercise of preemptive rights will occur at the time that the merger is
completed. The proceeds to be received by CGI in connection with the exercise of
the preemptive rights will be used to repay long-term debt. In connection with
the execution of the merger agreement, CGI obtained the consent of BCE Inc.
which has a right to approve major transactions under its contractual
arrangements with CGI. See "Related Parties and Certain Transactions" on
page 151.
107
The following information is a summary of the material terms of the Class A
Subordinate Shares as specified in CGI's articles of incorporation as currently
in effect. You are encouraged to read CGI's articles of incorporation which are
an exhibit to the registration statement of which this proxy
statement/prospectus forms a part. See also "Comparison of Rights of IMRglobal
Shareholders and CGI Shareholders."
All of the issued CGI shares are fully paid. CGI Class A Subordinate Shares
are represented in certificated form. After the merger, all CGI Class A
Subordinate Shares to be issued in the merger may be represented by certificates
in registered form issued (subject to the terms of issue of the shares) by CGI's
transfer agent and registrar, Computershare Trust Company of Canada, 1800 McGill
College, 7th Floor, Montreal, Quebec, Canada H3A 3K9.
Under Canadian law, persons who are neither residents nor nationals of
Canada may freely hold, vote and transfer shares in the same manner and under
the same terms as Canadian residents or nationals.
DIVIDENDS
CGI's board of directors may declare dividends on its shares. No dividend
may be paid other than in compliance with the Companies Act (Quebec). For a
further discussion, see "Comparison of Rights of IMRglobal Shareholders and CGI
Shareholders--Sources and Payment of Dividends." Dividends on CGI shares, if
any, will be announced and paid in Canadian dollars. Under the terms of the
options agreement among Bell Canada, CGI, BCE Inc. and various other
shareholders of CGI, changes in CGI's dividend policy require prior approval of
BCE Inc. CGI has not declared or paid any dividends to its shareholders and does
not expect to declare or pay any dividends in the foreseeable future.
VOTING RIGHTS
Every holder of CGI Class A Subordinate Shares present in person or present
by a duly authorized representative at a meeting of shareholders has one vote
per share. Every holder of CGI Class B Shares (multiple voting) present in
person or present by a duly authorized representative at a meeting of
shareholders has ten votes per share.
Ordinary resolutions must be approved by at least a majority of the votes
cast in person or by proxy. Special resolutions require the affirmative vote of
at least 66 2/3% of the votes cast in person or by proxy to be approved. We
describe the difference between ordinary and special resolutions under
"Comparison of Rights of IMRglobal Shareholders and CGI Shareholders--Special
Meetings of Shareholders."
Registered holders of CGI shares may appoint a proxy to attend and vote on
their behalf at any shareholders meeting.
CONVERSION RIGHTS
The articles of incorporation of CGI provide that if a take over bid,
exchange bid or an issuer bid, other than an "exempt bid" (defined in the
articles as an offer made to the holders of Class B Shares (multiple voting)
which is at the same time made, on the same terms and conditions, to the holders
of Class A Subordinate Shares or an offer which is exempt from the obligations
set forth in Title IV, entitled "Take-Over Bids and Issuer Bids", of the
Securities Act (Quebec), as amended from time to time), each Class A Subordinate
Share shall become convertible into one Class B Share (multiple voting), at the
holder's option, and in order to entitle the holder to accept the offer from the
date it is made. However, this right of conversion shall be deemed not to come
into effect if the offer is not completed by its offeror or if the senior
executives and full-time employees of CGI or its subsidiaries and any corporate
entity under the control of one or more of these senior executives, as holders
of
108
shares in the share capital of CGI carrying more than 50% of the voting rights
attached to the outstanding Class B Shares (multiple voting) do not accept the
offer.
CGI's articles of incorporation contain a complete description of the types
of bids giving rise to the rights of conversion and the procedures to be
followed to perform the conversion. The articles stipulate that upon such bid,
CGI or the transfer agent will communicate in writing to the holders of Class A
Subordinate Shares full details as to the bid and the manner of exercising the
right of conversion.
The articles of incorporation of CGI also provide that Class B Shares
(multiple voting) are convertible, at any time, at the option of the holder into
Class A Subordinate Shares. Furthermore, the articles of incorporation provide
that if BCE Inc. and any of its wholly owned subsidiaries hold in the aggregate
at least 30% of the outstanding equity shares of CGI, the Class B Shares
(multiple voting) shall be automatically converted on a one-for-one basis into
Class A Subordinate Shares, thereby eliminating the multiple votes attached to
the Class B Shares (multiple voting), as of the earlier of:
- January 5, 2004,
- 90 calendar days after written notice by BCE Inc. that CGI or any of
Messrs. Godin, Imbeau or Brassard or their respective holding companies is
in breach in any material respect of their agreements with BCE, which
breach was not cured or remedied, and
- the date of an order issued by an arbitrator in connection with the
resolution of the dispute in connection with this material breach, if CGI,
or any of Messrs. Godin, Imbeau or Brassard or their respective holding
companies choose to submit the matter to arbitration in accordance with
their agreements with BCE.
LIQUIDATION RIGHTS
In the event of the liquidation of CGI, after payment of all liabilities and
applicable deductions under Canada laws, including payments to creditors, the
remaining assets will be divided equally among the holders of the CGI Class A
Subordinate Shares and Class B Shares (multiple voting) based on the number of
shares owned.
PREEMPTIVE RIGHTS AND NEW ISSUES OF SHARES
CGI's articles of incorporation provide the holders of Class B Shares
(multiple voting) preemptive rights in connection with certain issuances of
Class A Subordinate Shares or securities convertible into Class A Subordinate
Shares. In addition, pursuant to the options agreement among Bell Canada, CGI,
BCE Inc. and various other shareholders of CGI, BCE Inc. has rights to purchase
additional Class A Subordinate Shares in connection with issuances of Class A
Subordinate Shares or securities convertible into Class A Subordinate Shares.
These preemptive rights are described under "Comparison of Rights of IMRglobal
Shareholders and CGI Shareholders--Preemptive Rights."
In addition, under the options agreement among Bell Canada, CGI, BCE Inc.
and various other shareholders of CGI, CGI has agreed not to issue participating
or voting shares of its capital stock without the prior approval of BCE Inc.
CHANGES IN CAPITAL
CGI shareholders may pass a special resolution to do certain corporate
actions, including any of the following:
- change its share capital by the creation or the elimination of classes of
shares;
- convert any classes of shares of its capital stock into new classes; and
109
- modify the rights, privileges, conditions or description of any classes of
shares.
CGI, without shareholder approval but subject to board of directors
approval, may do certain corporate actions, including any of the following:
- purchase its own shares;
- issue shares in series; and
- consolidate or divide its shares into a lesser or greater number of
shares.
BCE Inc. has certain approval rights over changes in the share capital of
CGI, including any amendments to the articles of incorporation and purchases by
CGI of its own shares.
GENERAL MEETINGS AND NOTICES
Under the Companies Act (Quebec), CGI is required to hold an annual general
meeting of shareholders within four months of the end of its financial year and,
subject to the foregoing, the meeting may be held at a time and place determined
by the directors. CGI is required to give notice of meetings of its shareholders
to record holders of CGI's shares. However, a shareholder who is not registered
on CGI's register of shareholders on the date of closing of the registers will
not be entitled to receive notices from CGI. Pursuant to TSE rules, the date of
closing of the registers must be at least 35 days and no more than 60 days prior
to the meeting date. CGI must give notice to each registered holder of shares at
its last known address.
LIABILITY OF DIRECTORS AND OFFICERS
A director of CGI may be personally liable for his conduct as a director
under certain circumstances. Under the Companies Act (Quebec), a director is
entitled also to certain presumptions which might make it more difficult to
assess liability against the director. See "Comparison of Rights of IMRglobal
Shareholders and CGI Shareholders--Liability of Directors and Officers" for a
discussion of the inability of a Canadian company to exempt directors and
officers from certain liabilities.
REGISTRAR
The transfer agent and registrar for CGI Class A Subordinate Shares is
Computershare Trust Company of Canada, 1800 McGill College, 7th Floor, Montreal,
Quebec, Canada H3A 3K9.
110
COMPARISON OF RIGHTS OF IMRGLOBAL SHAREHOLDERS AND CGI SHAREHOLDERS
As a result of the merger, holders of IMRglobal common stock will receive
CGI Class A Subordinate Shares. CGI is a company incorporated under the laws of
Quebec, Canada. The following is a summary comparison of material differences
between the rights of a IMRglobal shareholder and a CGI shareholder arising from
the differences between the corporate laws of Florida and those of Quebec,
Canada, the governing instruments of the two companies, and the securities laws
and regulations governing the two companies. This summary is not a complete
description of the laws of Florida or of Quebec, Canada, the other rules or laws
referred to in this summary, the IMRglobal articles of incorporation, the
IMRglobal bylaws or the CGI articles of incorporation and bylaws. For
information on how to obtain the governing instruments of IMRglobal and CGI, see
"Summary--Where You Can Find More Information." You are encouraged to obtain and
read these documents.
As CGI is a reporting issuer in the provinces of Quebec, Ontario and British
Columbia, Canada, it is also subject to the applicable Canadian securities
legislation, as amended from time to time, and the rules, regulations, blanket
orders and orders having application to CGI and forms made or promulgated under
the foregoing legislation, and the policies, bulletins and notices of regulatory
authorities administering such legislation. Class A Subordinate Shares are
listed on the Toronto and New York Stock Exchanges and, consequently, CGI is
subject to certain listing requirements of those exchanges. IMRglobal is listed
on the Nasdaq National Market System and is subject to the listing requirements
for such Nasdaq companies.
Unless the context otherwise requires, references to "shareholder" or
"shareholders" means the person(s) whose name(s) appear on a company's transfer
books and who are the record owners of the shares concerned.
PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
SHAREHOLDERS
VOTING RIGHTS
- - Under Florida law, each shareholder is - Under the Companies Act (Quebec), each
entitled to one vote for each share of shareholder is entitled to one vote for
capital stock held by the shareholder, by each share of the share capital held by
person or proxy, on each matter submitted the shareholder, by person or by proxy, on
to a vote at a shareholders meeting unless each matter submitted to a vote at a
the articles of incorporation provide shareholders meeting, unless the articles
otherwise. IMRglobal's articles of of incorporation provide otherwise. CGI's
incorporation do not alter the voting articles of incorporation do not alter the
rights of holders of IMRglobal common voting rights of holders of CGI Class A
stock. Subordinate Shares. However, CGI's
- - The IMRglobal bylaws provide that the articles of incorporation provide that the
presence of the holders of not less than holders of Class B Shares (multiple
33 1/3% of the outstanding voting power of voting) shall be entitled to 10 votes for
any voting group entitled to vote on a each Class B Share (multiple voting) held.
matter constitutes a quorum for the - CGI's bylaws provide that the presence of
transaction of business at a shareholders at least two persons representing,
meeting. personally or by proxy, 35% of the
- - Under Florida law, articles of outstanding shares of the share capital of
incorporation may provide that in CGI conferring the right to vote at the
elections of directors, shareholders are meeting constitutes a quorum for the
entitled to cumulate votes. The IMRglobal transaction of business at a shareholders
articles of incorporation do not provide meeting.
for cumulative voting for the elec-
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
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tion of directors; therefore, under - Cumulative voting is not provided for in
Florida law, directors are elected by a the Companies Act (Quebec); however, it is
plurality of the votes cast by the shares not prohibited. CGI's articles of
entitled to vote in the election at a incorporation do not provide for
meeting at which a quorum is present. cumulative voting for the election of
directors; therefore, directors are
elected by a majority of the votes cast by
the shares entitled to vote in the
election at a meeting at which a quorum is
present.
ACTION BY WRITTEN CONSENT
- - Under Florida law, unless otherwise - Under the Companies Act (Quebec), share-
provided in the articles of incorporation, holders are permitted to pass resolutions
shareholders may take any action required by written consent if the resolution is
or permitted to be taken at a shareholders signed by all the shareholders entitled to
meeting without a meeting if the action is vote on that resolution at a shareholders
consented to in writing by shareholders meeting. CGI's articles of incorporation
entitled to cast the same number of votes do not provide otherwise.
that would be required to take that action
at a meeting at which all shareholders
were present and voting in person. The
articles of incorporation of IMRglobal, do
not provide otherwise.
SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS OF DIRECTORS
- - IMRglobal's articles of incorporation - CGI's articles of incorporation do not
establish an advance notice procedure for provide for an advance notice procedure
the nomination of candidates for election for the nomination of candidates for
as directors, as well as for other election as directors or for other
shareholder proposals and directors shareholder proposals. The Companies Act
nominations must be given timely in (Quebec) does not permit shareholders to
writing to the Secretary of IMRglobal submit proposals for action at meetings of
before the meeting at which such matters shareholders unless included in the notice
are to be acted upon or directors are to of meeting. However, holders of 10% or
be elected. Such notice, to be timely, more of voting shares may ask CGI to call
must be received at the principal a special meeting of shareholders.
executive offices of IMRglobal with
respect to shareholder proposals and
elections to be held at the annual
meeting, not less than 60 days before the
date of the meeting at which the
director(s) are to be elected; however, if
less than 70 days notice or prior public
disclosure of the date of the scheduled
meeting is given or made, notice by the
shareholder, to be timely, must be
delivered or received not later than the
close of business on the tenth day
following the earlier of the
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
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day on which notice of the date of the
meeting is mailed to shareholders or
public disclosure of the date of such
meeting is made.
- - Notice to IMRglobal from a shareholder who
intends to present a proposal or to
nominate a person for election as a
director at a shareholders' meeting must
contain certain information about the
shareholder giving such notice and, in the
case of director nominations, all
information that would be required to be
included in a proxy statement soliciting
proxies for the election of the proposed
nominee (including such person's written
consent to serve as a director if so
elected). If the presiding officer at the
meeting determines that a shareholder's
proposal or nomination is not made in
accordance with the procedures set forth
in the articles of incorporation, such
proposal or nomination, at the direction
of such presiding officer, may be
disregarded. The notice requirement for
shareholder proposals contained in the
articles of incorporation does not
restrict a shareholder's right to include
proposals in IMRglobal's annual proxy
materials pursuant to rules promulgated
under the Securities Exchange Act of 1934,
as amended.
- - In addition, SEC rules allow precatory
resolutions to be included in management's
proxy statement for annual meetings of
shareholders if, among other conditions
required to be met, advance notice is
given to the corporation.
SOURCES AND PAYMENT OF DIVIDENDS
- - Under Florida law, subject to any - Under the Companies Act (Quebec), subject
restriction in the corporation's articles to any restriction in the company's
of incorporation, the board of directors articles of incorporation, the board of
may declare and pay dividends or other directors may declare and pay dividends or
distributions to shareholders unless, other distributions to shareholders unless
after giving effect to the distribution there is a reasonable ground to believe
(1) the corporation would not be able to that, as a consequence
pay its debts as they become due in (1) the company could not discharge its
the usual course of business, or liabilities when due, or
(2) the corporation's total assets would (2) the book value of the company's
be less than the sum of its total assets would be less than the sum of
liabilities plus the amount required its liabilities and its issued and
to satisfy out- paid-up share capital account.
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standing liquidation rights superior CGI's articles of incorporation contain no
to the liquidation rights of those provisions restricting dividends on CGI's
receiving the distribution. Class A Subordinate Shares. However,
IMRglobal's articles of incorporation pursuant to the options agreement among
contain no provisions restricting Bell Canada, CGI, BCE Inc. and various
dividends on IMRglobal common stock. other shareholders of CGI, any change in
CGI's dividend policy is subject to the
prior approval of BCE Inc.
RIGHTS OF PURCHASE AND REDEMPTION
- - Under Florida law, any corporation may - Under the Companies Act (Quebec), a com-
purchase, redeem or otherwise acquire its pany may, subject to any restriction in
own shares, except that it may not the company's articles of incorporation,
purchase or redeem these shares if the purchase, redeem or otherwise acquire its
distribution is prohibited by its articles own shares unless there is reasonable
of incorporation or would be prohibited ground to believe that, as a consequence,
under the restrictions on distributions (1) it could not discharge its
described under "Sources and Payment of liabilities when due, or
Dividends." IMRglobal's articles of (2) the book value of its assets would be
incorporation do not impose any additional less than the aggregate of its
restrictions on distributions. liabilities and the sums necessary
for the payment, in case of
redemption or winding-up, of the
shares payable by preference or
concurrently.
- CGI's articles of incorporation do not
impose any additional restrictions on
distributions. However, pursuant to the
options agreement among Bell Canada, CGI,
BCE Inc. and various other shareholders of
CGI, any redemption or purchase of shares
is subject to the prior approval of BCE
Inc.
AUTHORITY TO ISSUE SHARES
- - Florida law provides a corporation the - The Companies Act (Quebec) does not
authority to issue the number of shares of require that any maximum number of shares
its capital stock as are authorized in its which a corporation has authority to issue
articles of incorporation. be specified in its articles. CGI's
articles of incorporation currently
authorize it to issue an unlimited number
of shares of each class.
MEETINGS OF SHAREHOLDERS
- - IMRglobal's bylaws provide that all - Under CGI's articles of incorporation, all
meetings of shareholders are to be held at general meetings of shareholders will be
any place held at
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designated by the IMRglobal board of the time and place determined by the
directors or, if no designation is made, directors, subject to the provisions of
at the principal office of IMRglobal. The applicable law.
bylaws also provide that the annual - Under the Companies Act (Quebec), if there
meeting of shareholders shall be held is a quorum, a resolution is approved by
annually within six months after the end the shareholders if the votes cast
of IMRglobal's fiscal year. favoring the action exceed the votes cast
- - Under Florida law, if there is a quorum, a against the action, unless the articles of
resolution is approved by the shareholders incorporation or the Companies Act
if the votes cast favoring the action (Quebec) require a greater number of
exceed the votes cast against the action, affirmative votes. The Companies Act
unless the articles of incorporation or (Quebec) requires special majority
Florida law require a greater number of approval for certain actions, including,
affirmative votes. IMRglobal's articles of amendments to articles of incorporation,
incorporation do not provide for a greater mergers and dissolution. CGI's articles of
number of affirmative votes. However, incorporation provide, in certain cir-
Florida law requires absolute majority cumstances, for a class vote. Furthermore,
approval for amendments to the articles of pursuant to the options agreement between
incorporation creating dissenters rights, Bell Canada, CGI, BCE Inc. and various
mergers, share exchanges, sale of all or other shareholders of CGI, certain matters
substantially all of the company's assets including dividend policy, major
and dissolution. transactions and non- arm's length
transactions, are subject to the prior
approval of BCE Inc.
SPECIAL MEETINGS OF SHAREHOLDERS
- - Florida law provides that special meetings - The Companies Act (Quebec) provides that
of shareholders may be called only by special meetings of shareholders may be
(1) the board of directors; called only by
(2) any person or persons authorized by (1) the board of directors; or
the corporation's articles of (2) requisition in writing signed by the
incorporation or bylaws; or holders of 10% or more of the shares
(3) if 10% or more of all the votes bearing right to vote, setting out
entitled to be cast on an issue the objects of the proposed meeting.
proposed to be considered at the The bylaws of CGI provide that in addition
special meeting demand in writing to the provisions of the Companies Act
that a special meeting be held (Quebec), special meetings may be called
(provided, that the articles of by the Chairman of the Board of Directors
incorporation can make the threshold or the President and Chief Executive
percentage as high as 50% and IMR- Officer or, in their absence, by any
global's articles increased this member of the Executive Committee of CGI.
threshold to 50% of all votes - Quebec securities law requires that an
entitled to be cast on the issue). issuer give shareholders notice of each
- - Florida law requires that a corporation annual and special shareholders' meeting
give shareholders notice of each annual at least 21 days and no more than 50 days
and special shareholders' meeting at least before the meeting date. However,
10 days and no more than 60 days before according to TSE rules, notice must be
the meeting date. given by an issuer at least 33 days before
the meeting date. Notice of a special
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Notice of a special meeting must identify meeting must identify the business to be
the business to be transacted. transacted.
- - Florida law provides that the business
permitted to be conducted at any special
meeting is limited to the purpose or
purposes specified in the notice of the
special meeting.
APPRAISAL RIGHTS
- - Under Florida law, shareholders of a - While the Companies Act (Quebec) does not
corporation have the right to dissent provide for appraisal rights, a dissenting
from, and obtain payment of the fair value shareholder may apply to a court and the
of their shares in connection with, court may intervene in certain corporate
certain corporate actions, including an actions that it considers appropriate as
amendment to the articles of incorporation described under "Shareholders Votes on
which materially and adversely affects the Certain Transactions" below.
rights or preferences of shares held by
the dissenting shareholders, a disposition
of all or substantially all of the
corporation's property and assets not in
the usual course of business, a plan of
merger in which the shareholders may vote,
a plan of exchange involving the
acquisition of the corporation's shares if
the shareholders are entitled to vote on
the plan, and certain control share
acquisitions. However, appraisal rights
are not available to holders of shares
(1) listed on a national securities
exchange;
(2) designated as a national market
system security on an interdealer
quotation system operated by the
National Association of Securities
Dealers, Inc.; or
(3) held of record by more than 2,000
shareholders.
PREEMPTIVE RIGHTS
- - Under Florida law, a shareholder is not - Under the Companies Act (Quebec), a share-
entitled to preemptive rights to subscribe holder is not entitled to preemptive
for additional issuances of stock or any rights to subscribe for additional
security convertible into stock unless issuances of stock or any security
they are specifically granted in the convertible into stock unless they are
articles of incorporation. specifically granted in the articles of
IMRglobal's articles of incorporation do incorporation or contractually.
not provide for preemptive rights.
- CGI's articles of incorporation provide
for preemptive rights in favor of holders
of Class B Shares (multiple voting).
Therefore, CGI
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may not issue Class A Subordinate Shares
or securities convertible into Class A
Subordinate Shares, without offering to
each holder of Class B Shares (multiple
voting), pro rata to the number of Class B
Shares (multiple voting) it holds, the
right to subscribe concurrently with the
issue of Class A Subordinate Shares or of
securities convertible into Class A
Subordinate Shares, as the case may be, an
aggregate number of Class B Shares
(multiple voting) or securities
convertible into Class B Shares (multiple
voting), as the case may be, sufficient to
fully maintain its proportion of voting
rights associated with the Class B Shares
(multiple voting). The consideration to be
paid for the issuance of each Class B
Share (multiple voting) or security
convertible into Class B Shares (multiple
voting), as the case may be, shall be
equal to the issue price of each Class A
Subordinate Share or security convertible
into Class A Subordinate Shares then
issued.
The preemptive rights do not apply in the
case of the issuance of Class A
Subordinate Shares or securities
convertible into Class A Subordinate
Shares:
(1) in payment of stock dividend;
(2) pursuant to the stock option plans or
share purchase plans of CGI;
(3) in connection with the conversion of
Class B Shares (multiple voting) into
Class A Subordinate Shares pursuant
to the articles of incorporation of
CGI; or
(4) further to the exercise of the
conversion, exchange or acquisition
rights attached to securities
convertible into Class A Subordinate
Shares.
Any holder of Class B Shares (multiple
voting) may assign its preemptive rights
to other holders of Class B Shares
(multiple voting).
Under the options agreement among Bell
Canada, CGI, BCE Inc. and various other
shareholders of CGI, Messrs. Godin, Imbeau
and Brassard and their respective holding
companies have undertaken to assign to BCE
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
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Inc. the right, at BCE's sole option, to
acquire any portion of the Class B Shares
(multiple voting) to which Messrs. Godin,
Imbeau and Brassard and their respective
holding companies would be entitled to
subscribe pursuant to the preemptive
rights provided for in the articles of
incorporation of CGI and which Messrs.
Godin, Imbeau and Brassard and their
respective holding companies decide not to
acquire.
Under the options agreement, CGI may not
issue Class A Subordinate Shares or any
securities convertible into Class A
Subordinate Shares without offering to BCE
Inc. the right to subscribe to additional
Class A Subordinate Shares to permit BCE
to fully maintain its pro rata equity
participation in the capital of CGI, at
equivalent prices.
BCE's preemptive rights do not apply in
the case of issuances of Class A
Subordinate Shares:
(1) in payment of stock dividends;
(2) upon exercise of options granted
pursuant to the CGI share option
plan;
(3) in connection with the conversion of
Class B Shares (multiple voting) into
Class A Subordinate Shares pursuant
to the articles of incorporation of
CGI; or
(4) in connection with the exercise of
the conversion, exchange or
acquisition rights attached to
securities convertible into Class A
Subordinate Shares.
Notwithstanding the foregoing, CGI must,
at the request of BCE Inc., issue Class A
Subordinate Shares to BCE, on or before
February 28 of each year, up to the
aggregate number of shares which allows
BCE to maintain the same proportionate
holding of Class A Subordinate Shares as
it had prior to each issuance of shares
upon the exercise of options granted
pursuant to the CGI share option plan.
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CONVERSION RIGHTS
- - IMRglobal's articles of incorporation - CGI articles of incorporation provide
provide that shares of preferred stock of conversion rights for certain classes of
IMRglobal convertible into shares of shares:
common stock may be issued with all of the (1) Class A Subordinate Shares are
rights, privileges, and designations as convertible, at the option of the
may be set by IMRglobal's board of holder, into Class B Shares (multiple
directors. There are currently no out- voting) in the event of certain
standing shares of preferred stock of IMR- takeover bids on Class B Shares
global. (multiple voting),
(2) Class B Shares (multiple voting) are
convertible at any time at the option
of the holder into Class A
Subordinate Shares; and
(3) If BCE Inc. and any of its wholly
owned subsidiaries hold in the
aggregate at least 30% of the
outstanding equity shares of CGI,
Class B Shares (multiple voting) are
automatically convertible on a
one-for-one basis into Class A
Subordinate Shares, thereby
eliminating the multiple votes to
which the Class B Shares (multiple
voting) are entitled, as of the
earliest of:
- January 5, 2004,
- 90 calendar days after written
notice by BCE Inc. that CGI or
any of Messrs. Godin, Imbeau or
Brassard or their respective
holding companies is in breach
in any material respect of their
agreements with BCE, which
breach was not cured or
remedied, and
- the date of an order issued by
an arbitrator in connection with
the resolution of the dispute in
connection with this material
breach, if CGI, or any of
Messrs. Godin, Imbeau or
Brassard or their respective
holding companies choose to
submit the matter to arbitration
in accordance with their
agreements with BCE.
- Under the options agreement, Messrs.
Godin, Imbeau and Brassard and their
holding companies have agreed, until the
termination of the options agreement, not
to convert the Class A Subordinate Shares
they own into Class B Shares (multiple
voting), except as provided in the options
agreement.
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AMENDMENT OF GOVERNING INSTRUMENTS
- - Florida law provides that, unless a - The Companies Act (Quebec) provides that,
corporation's articles of incorporation subject to certain exceptions which
provide otherwise, a board of directors include creation of series and stock
may amend certain provisions of the splits, any amendments to the articles of
corporation's articles of incorporation incorporation generally requires:
without shareholder approval. The (1) that the directors pass a bylaw;
amendments so permitted are technical and, (2) that the bylaw be confirmed by at
generally, do not affect shareholder least 66 2/3% of the votes cast by
interests. All other amendments to the the shareholders at a special general
articles of association require meeting called for that purpose; and
(1) the recommendation of the board of (3) if the amendment is a conversion of
directors (unless there is a conflict shares, that the bylaw be confirmed
of interest or other special by all the holders of the class of
circumstance); shares affected by the conversion or
(2) the affirmative vote of a majority of that an arrangement be approved by at
the outstanding stock entitled to least 75% of the votes cast by the
vote; and shareholders of the class affected at
(3) the affirmative vote of a majority of a special meeting called for that
the outstanding stock of each class purpose.
adversely affected by the amendment. - Any transaction affecting the rights of
- - Under IMRglobal's articles of shareholders or any class of them may be
incorporation, approval of the holders of dealt with by way of arrangement. An
shares representing at least 66 2/3% of arrangement requires the confirmation by
the voting power of the capital stock of at least 75% of the votes cast by the
IMRglobal entitled to vote is required to shareholders of the class affected at a
amend or repeal any of the provisions of special meeting called upon for that
the IMRglobal articles of incorporation purpose.
relating to: - The articles of incorporation of CGI
(1) the number of directors; provide that any amendment to the articles
(2) the classification of the IMRglobal affecting the rights, privileges,
board of directors; restrictions or conditions attaching to
(3) filling vacancies on the board of the Class A Subordinate Shares or the
directors; Class B Shares (multiple voting) requires,
(4) the removal of directors; in addition to the requirements of the
(5) limitations on the liability of Companies Act (Quebec), that the bylaw
directors; amending the articles of incorporation be
(6) annual and special meetings of share- confirmed by:
holders; (1) at least 66 2/3% of the votes cast at
(7) the amendment to the IMRglobal a shareholders meeting by holders of
bylaws; Class A Subordinate Shares and Class
(8) the amendment of the provisions of B Shares (multiple voting) voting
IMRglobal's articles of incorporation together; and
described herein; (2) in the event the rights, privileges,
(9) the capital stock; or restrictions or conditions attached
to the Class A Subordinate Shares, as
a class, or the
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(10) the right of the IMRglobal board of Class B Shares (multiple voting), as
directors to consider clients, a class, are affected in a manner
creditors, employees and other different from that of the other
constituencies in determining whether class of shares, at least 66 2/3% of
to take any corporate action. the votes cast at a shareholders
- - Under Florida law, the board of directors meeting by holders of the class of
has the power to adopt, amend or repeal shares so affected in a different
the bylaws of a company unless manner, voting separately, as a
(1) the articles of incorporation class.
reserves the power to amend the
bylaws generally or a particular
bylaw provision exclusively to the
shareholders, or
(2) the shareholders provide in a bylaw
provision expressly that the board of
directors may not amend the bylaws or
a particular bylaw provision.
The shareholders may amend or repeal
bylaws even though the board of directors
also have the power. The IMRglobal
articles of incorporation authorize the
IMRglobal board of directors to adopt,
amend or repeal the IMRglobal bylaws by a
vote of a majority of the directors.
PREFERRED STOCK
- - The IMRglobal articles of incorporation - Subject to the options agreement among
authorize the IMRglobal board of directors Bell Canada, CGI, BCE Inc. and various
(1) to provide for the issuance of one or other shareholders of CGI, CGI's articles
more series of preferred stock; of incorporation permit CGI to issue new
(2) to issue up to 10,000,000 shares of series of first or second preferred shares
preferred stock; with any rights granted to holders of such
(3) to fix the designations and number of shares as specified in the articles of
the shares constituting each series incorporation including rights of priority
of preferred stock; and over the CGI Class A Subordinate Shares
(4) to fix for each series, its relative and Class B Shares (multiple voting). CGI
rights. currently has only outstanding Class A
Subordinate Shares and Class B Shares
(multiple voting).
STOCK CLASS RIGHTS
- - Under Florida law, any change to the - As described under "Amendment of Gov-
rights of holders of IMRglobal's common erning Instruments," "Shareholders' Votes
stock or preferred stock would require an on Certain Transactions," and "Provisions
amendment to the IMRglobal articles of Relating to Share Acquisitions and Certain
incorporation, except for certain stock Business Combinations," certain amendments
splits. Holders of shares of a class or to CGI's articles of incorporation as well
series are entitled to vote as a class as certain
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upon a proposed amendment to the articles transactions which, in each case, affect
of incorporation if the amendment will the rights of Class A Subordinate Shares
(1) increase or decrease the authorized or Class B Shares (multiple voting)
shares of the class or series; generally require approval by holders of
(2) change the shares of the class or such class voting together as a single
series into shares of another class class.
or series;
(3) create a new class of shares having
rights or preferences regarding
distributions that are superior or
equal to the shares of the class; or
(4) alter or change the powers,
preferences or special rights of the
shares of the class or series so as
to affect them adversely.
SHAREHOLDERS' VOTES ON CERTAIN TRANSACTIONS
- - Generally, under Florida law, unless the - Under Quebec law, unless the articles of
articles of incorporation provide for the incorporation provide for the vote of a
vote of a larger portion of the stock, larger portion of the shares, certain
completion of a merger or consolidation or transactions, including completion of a
sale of substantially all of a merger or dissolution generally require:
corporation's assets or dissolution (1) approval of the board of directors;
requires (2) approval of the holders of shares
(1) the approval of the board of representing at least 66 2/3% of the
directors; and voting power of the share capital of
(2) approvals by the vote of the holders CGI entitled to vote; and
of a majority of the outstanding (3) in case of a merger which affects the
stock. rights, privileges, conditions or
IMRglobal's articles of incorporation do restrictions of shares of a class and
not provide for the vote of a larger changes them in relation to another
portion of the stock for a merger or class, approval of the holders of the
consolidation. class of shares so affected
- The rules of the Nasdaq National Market, representing at least 66 2/3% of the
on which IMRglobal's common stock is voting power of such class of shares.
listed, are similar to those of the NYSE - Under the rules of the Toronto Stock
with respect to acquisitions, except Exchange, acquisitions do not generally
that approval of shareholders is require shareholder approval if the
required in connection with an aggregate number of securities issued in
acquisition transaction involving an connection with the acquisition does not
officer, director or substantial exceed 25% of the number of securities
shareholder only if 5% or more of the of the issue outstanding (on a
outstanding stock or voting power is non-diluted basis) prior to giving
being issued. effect to such transaction.
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Notwithstanding the foregoing, the
Toronto Stock Exchange may require
shareholder approval if, in its opinion,
the proposed transaction:
(1) may materially affect control of the
company;
(2) has not been negotiated at arm's
length; or
(3) is of such nature as to make
shareholder approval desirable,
having regard to the interests of the
company's shareholders and the
investing public.
- Under the rules of the NYSE,
acquisitions involving
(1) any director, officer or substantial
security holders and the issuance of
additional shares of common stock of
a listed company totaling one percent
or more of the outstanding shares of
that company's common stock or one
percent or more of the voting power
of the company; or
(2) the issuance of additional shares of
common stock of a listed company
totaling 20% or more of the
outstanding shares of common stock or
20% or more of the voting power of
the company
require the approval of the holders of a
majority of the shares voting on the
acquisition. Other transactions do not
require shareholder approval under the
NYSE rules.
RIGHTS OF INSPECTION
- - Florida law allows any shareholder to - Under the Companies Act (Quebec), any
inspect the shareholders list for a shareholder can have access and inspect
meeting during regular business hours ten during reasonable business hours of every
days prior to the meeting, during the day, except Sundays and holidays, at the
meeting and during any adjournment of the company's head office or chief place of
meeting. In addition, any shareholder can business, the constituting documents,
inspect and copy, during regular business bylaws, minutes of shareholders' meetings,
hours at the corporation's principal resolutions of shareholders, shareholder
office, the corporation's governing docu- records, register of transfers and
ments, such as articles of incorporation, director registers. Any shareholder can
bylaws, resolutions of the board of also obtain a copy of the articles of
directors establishing securities and incorporation and bylaws of the company.
minutes of share-
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
SHAREHOLDERS
holders meetings, if the shareholder gives
written notice of his or her demand at
least five business days in advance. Any
shareholder can also inspect and copy,
during regular business hours at a
reasonable location specified by the
corporation, other minutes of the board of
directors or its committees, accounting
records, shareholder records and any other
books and records of the corporation, if
(1) the shareholder gives written notice
of his or her demand at least five
business days in advance, (2) the demand
is made in good faith and for a proper
purpose, (3) the purpose is described and
the records to be inspected or copied are
specified and (4) the records specified
are directly connected with the share-
holder's purpose.
STANDARD OF CONDUCT FOR DIRECTORS
- - Florida law requires that a director - Under Quebec law, a director is considered
discharge his duties: to be the mandatary of the Company. He
(1) in good faith; must, in the performance of his duties,
(2) with the care of an ordinarily conform to the obligations imposed on him
prudent person in a like position by law, the constituting act or the bylaws
would exercise under similar of the company and he must act within the
circumstances; and limits of the powers conferred upon him.
(3) in a manner he reasonably believes to Furthermore, Quebec law requires that a
be in the best interests of the director act with prudence and diligence
corporation. and with honesty and loyalty in the best
In discharging his duties, a director may interest of the company.
consider such factors as he considers - CGI's board currently consists of 13
relevant, including the long-term members, 10 of whom are non-executive
prospects and interests of the corporation officers of CGI.
and its shareholders, and the social,
economic, legal or other effects of any
action on the employees, suppliers, cus-
tomers of the corporation, the community
and society in which the corporation
operates, and the economy of Florida and
the United States.
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
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- - The IMRglobal board of directors currently
consists of five members, three of whom
are executive officers of IMRglobal.
CLASSIFICATION OF THE BOARD OF DIRECTORS
- - Florida law permits the articles of - The Companies Act (Quebec) does not pro-
incorporation or a shareholder-adopted vide for classified board of directors;
bylaw to provide that directors be divided however, it is not prohibited. CGI's
into one, two or three classes, with the articles of incorporation do not provide
term of office of one class of directors for a classified board of directors.
to expire each year.
IMRglobal's articles of incorporation
provide that, except with regard to
directors elected or appointed in respect
of any class of preferred stock, the
IMRglobal board of directors will be
divided into three classes of directors
with
(1) the number of directors divided as
evenly as possible among the three
classes; and
(2) each class elected to serve for a
term of three years.
The provision of IMRglobal's articles of
incorporation relating to the
classification of the IMRglobal board of
directors may only be amended or repealed
with the approval of the IMRglobal board
of directors and by the affirmative vote
of the holders of shares representing at
least 66 2/3% of the combined voting power
of the outstanding shares of capital stock
of IMRglobal entitled to vote.
REMOVAL OF DIRECTORS
- - Florida law provides that, absent a - Under the Companies Act (Quebec), unless
provision in the articles of incorporation otherwise provided for in the articles of
permitting removal of directors only for incorporation, the shareholders may, by
cause, the directors may be removed with ordinary resolution, remove a director at
or without cause if the number of votes a special meeting called for that purpose.
cast to remove the director exceeds the The articles of incorporation and bylaws
number of votes cast not to remove him or of CGI do not provide otherwise.
her. If a corporation has cumulative
voting, Florida law provides that a direc-
tor is not removed from the board of
directors
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
SHAREHOLDERS
if the votes cast against removal of the
director would be sufficient to elect the
director at an election of the entire
board of directors under cumulative
voting. The IMRglobal articles of
incorporation do not provide for cumu-
lative voting.
- - Under IMRglobal's articles of
incorporation, directors of IMRglobal may
be removed only for cause by the
affirmative vote of holders of 66 2/3% of
the shares entitled to vote for the
election of directors. For this purpose,
"for cause" means: (i) misconduct as a
director of IMRglobal or any subsidiary of
IMRglobal which involves dishonesty with
respect to a material corporate activity
or material corporate assets; or (ii)
conviction of an offense punishable by one
or more years of imprisonment (other than
minor regulatory infractions and traffic
violations which do not materially and
adversely affect IMRglobal). At least 30
days prior to the shareholders meeting at
which a director's removal is to be
considered, written notice must be sent to
the affected director.
VACANCIES ON THE BOARD OF DIRECTORS
- - Under Florida law, unless otherwise - Under the Companies Act (Quebec), a
provided in the articles of incorporation, vacancy created by the removal of a
(1) vacancies on a board of directors; director may be filled at the shareholders
and meeting at which the removal took place
(2) newly created directorships resulting or, if not so filled, by the directors for
from an increase in the number of the remainder of the term. Any other
directors vacancy may be filled, for the remainder
may be filled by a majority of the of the term, by the directors. The
directors in office. In the case of a articles of incorporation and bylaws of
classified board, directors elected to CGI do not provide otherwise.
fill vacancies or newly created
directorships will hold office until the
next election of the class for which the
directors have been chosen.
- - IMRglobal's articles of incorporation
provide that, subject to the rights of any
holders of preferred stock,
(1) any vacancies on IMRglobal's board of
directors; or
(2) newly created directorships may be
filled
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PROVISIONS CURRENTLY APPLICABLE TO IMRGLOBAL PROVISIONS APPLICABLE TO CGI SHAREHOLDERS
SHAREHOLDERS
by the affirmative vote of a majority
of the remaining directors in office,
even if less than a quorum, or, if
not filed by the directors, by the
shareholders. IMRglobal's articles of
incorporation also provide that any
directors chosen to fill a vacancy
will serve until the next election of
the class to which the director was
appointed.
LIABILITY OF DIRECTORS AND OFFICERS
- - Florida law provides that a director is - Under Quebec law, a director can be held
not personally liable for monetary damages personally liable in certain
to the corporation or any other person for circumstances, which include:
any statement, vote, decision, or failure (1) if he does not act, in the
to act, regarding corporate management or performance of his duties, in
policy unless conformity with the obligations
(1) the director breached or failed to imposed on him by law, the consti-
perform his duties as a director and tuting act, the bylaws of the company
(2) the director's breach or failure to or, does not act within the limits of
perform his duties constitute the powers conferred upon him;
- - a violation of criminal law, unless the (2) if he does not act with prudence and
director had reasonable cause to believe diligence and honesty and loyalty in
his conduct was lawful the best interest of the company;
- - a transaction from which the director (3) if he commingles the property of the
derived an improper personal benefit; company with his own property or if
- - conscious disregard for the best interest he uses for his own profit or that of
of the corporation or willful misconduct, a third party any property of the
in the case of actions on behalf of the company or any information he obtains
corporation or its shareholders; by reason of his duties, unless he is
- - in the case of an action by someone other authorized to do so by the members of
than the corporation or its shareholders, the company;
an act committed with recklessness, bad (4) to its employees, for all debts not
faith or with malicious purpose or in a exceeding six months' wages due for
manner exhibiting wanton and willful services rendered to the company;
disregard of human rights, safety or (5) if a financial assistance is granted
property; or by the company to a shareholder in
- - intentional or negligent payment of contravention with the provisions of
unlawful dividends or stock purchases or the Companies Act (Quebec);
redemptions. (6) if the payment of a dividend is
IMRglobal's articles of incorporation authorized in contravention with the
provide that a director of IMRglobal will provisions of the Companies Act
not be personally liable to IMRglobal or (Quebec);
its shareholders for monetary damages for (7) if the acquisition of the company's
breach of fiduciary duty as a director shares or payment thereof is made in
except as provided by Florida law. contravention with the provisions of
the Companies Act (Quebec);
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(8) if a reduction of share capital is
authorized in contravention with the
provisions of the Companies Act
(Quebec);
(9) for the debts of the company existing
at the time of dissolution of the
company, to every creditor of the
company who has not given his consent
to the fact that the debts and
obligations of the company have not
been duly provided for or pro-
tected;
(10) in the event a company omits to make
withholdings at source; and
(11) in the event a company omits to pay
the goods and services tax in Canada.
Under the Companies Act (Quebec), a direc-
tor is presumed to have acted with
appropriate skill and with prudence and
diligence if he relies on the opinion or
report of an expert to take a decision.
Also, a director present at a meeting of
the board of directors or executive
committee is deemed to have approved any
resolution or participated in any measure
taken at that meeting, unless:
(1) he demands at the meeting that his
dissent be registered in the minutes
of proceedings, or
(2) he notifies the secretary of the
meeting in writing of his dissent
before the adjournment or rising of
the meeting.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
- - Florida law provides that a corporation - Under the Companies Act (Quebec), a com-
may indemnify any officer or director who pany shall assume the defense of its
is made a party to any third party suit or directors and officers in any action
proceeding on account of being a director, prosecuted by a third person for an act
officer or employee of the corporation done in the exercise of his duties and
against expenses, including attorney's shall pay damages, if any, resulting from
fees, judgments, fines and amounts paid in that act, unless the director or officer
settlement reasonably incurred by him in has committed a grievous offense or a
connection with the action, through, among personal offense separable from the
other things, a majority vote of a quorum exercise of his duties. However, in a
consisting of directors who were not penal or criminal proceeding, the company
parties to the suit or proceeding, if the shall assume only the payment of the
officer or director expenses of its director or officer if he
had reasonable grounds to believe
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SHAREHOLDERS
(1) acted in good faith and in a manner that his conduct was in conformity with
he reasonably believed to be in, or the law, or the payment of the expenses of
not opposed to, the best interests of a director or officer, if he has been
the corporation; and freed or acquitted.
(2) in a criminal proceeding, had no CGI's bylaws provide that the board of
reasonable cause to believe his directors may purchase, for the benefit of
conduct was unlawful. the directors, officers or their
- IMRglobal's bylaws provide that predecessors or any other person who has
(1) IMRglobal shall indemnify its current assumed or who is about to assume a
and former directors and officers as responsibility on behalf of CGI or any
permitted by Florida law; and corporation controlled by it, insurance
(2) IMRglobal may advance payment of any covering the liability they incur for hav-
expenses incurred in connection with ing acted in their capacity as directors
any proceeding. or officers of the company, with the
- IMRglobal maintains directors' and exception of the liability resulting from
officers' liability insurance. their own negligence or a personal fault
separable from the performance of their
duties.
- CGI maintains directors' and officers'
liability insurance.
CONFLICT OF INTEREST OF DIRECTORS AND OFFICERS
- - Florida law provides that no contract or - The Quebec Civil Code provides that a
transaction between the corporation and director shall avoid placing himself in
one or more of the directors, or between any situation where his personal interest
the corporation and any other corporation, would be in conflict with his obligations
partnership, association, or other as a director. A director shall declare to
organization in which one or more of the the company any interest he has in an
directors are directors or officers, or enterprise or association that may place
have a financial interest, shall be void him in a situation of conflict of interest
or voidable solely for this reason, or and of any right he may set up against it,
solely because the director is present at indicating their nature and value. The
or participates in the meeting of the declaration of interest is recorded in the
board of directors which authorizes the minutes of the proceedings of the board of
contract or transaction or solely because directors.
his or her or their votes are counted for
such purpose, if:
(1) the fact of such relationship or
interest is disclosed or known to the
board of directors or committee of
directors which authorizes, approves,
or ratifies the contract or
transaction by a vote or consent
sufficient for the purpose without
counting the votes or consents of
these interested directors;
(2) the fact of such relationship or
interest is disclosed or known to the
shareholders entitled to vote and
they authorize,
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SHAREHOLDERS
approve, or ratify such contract or
transaction by vote or written
consent; or
(3) the contract or transaction is fair
and reasonable as to the corporation
at the time it is authorized by the
board, a committee of directors, or
the shareholders.
SHAREHOLDERS' SUITS
- - Under Florida law, a shareholder may - Under Quebec law, a shareholder may
initiate a derivative action to enforce a initiate a derivative action to enforce a
right of a corporation if the corporation right of a company if the company fails to
fails to enforce the right itself. An enforce the right itself. However, the
individual may also commence a class shareholder must generally demonstrate
action suit on behalf of himself and other certain facts, including that:
similarly situated shareholders where the (1) he is a shareholder of the company;
requirements for maintaining a class and
action under Florida law have been met. (2) the decision of the company not to
The complaint must enforce its right was not taken in
(1) state that the plaintiff was a the best interest of the company and
shareholder at the time of the was taken to advantage the directors
transaction of which the plaintiff of the company or persons that they
complains or that the plaintiff's want to protect.
shares thereafter devolved on the - The Quebec Civil Code also provides that
plaintiff by operation of law; and in case of fraud with regard to the
(2) allege with particularity the demand company, the court may, on the application
made by the plaintiff to obtain the of an interested party, hold the founders,
action the plaintiff desires from the directors, other senior officers or
directors and that the demand was members of the company who have
refused or ignored. participated in the alleged act or derived
The corporation may request the court to personal profit therefrom liable, to the
dismiss the proceeding if the independent extent it indicates, for any damage
directors or a committee of independent suffered by the company.
directors determines in good faith after
reasonable investigation that the
maintenance of the derivative sent is not
in the best interests of the corporation.
PROVISIONS RELATING TO SHARE ACQUISITIONS AND CERTAIN BUSINESS COMBINATIONS
- - Florida law contains a provision which - Under the Ontario Securities Commission
restricts many business combination and the Quebec Securities Commission
transactions with an interested regulations, certain transactions
shareholder for five years after the including related party transactions,
interested shareholder has acquired 10% of require an issuer, subject to these
the voting power of a corporation. Under regulations in certain cases, to obtain
Florida law, if a business combi- formal valuation and minority
shareholders' approval,
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SHAREHOLDERS
nation, including a merger, a disposition before proceeding with the proposed
of substantially all assets, an issuance transaction. Under these regulations, a
of securities and other similar related party includes a person or a
transactions, occurs with a person who, company, whether alone or jointly or in
together with its affiliates, owns 10% or concert with others, that holds securities
more of the outstanding capital stock of of the issuer or of the interested party
the subject corporation, a related person, sufficient to affect materially the
then the combination must be approved by control of the issuer or of the interested
two-thirds of the outstanding capital party.
stock entitled to vote for directors. A formal valuation will generally mean for
However, the combination may occur without a transaction, a valuation prepared in
such a vote if, among other exceptions, accordance with the applicable regulation
(i) a majority of disinterested directors and that contains a qualified and
approves the transaction, (ii) the independent appraiser's opinion as to a
corporation has not had more than 300 value or range of values representing the
shareholders of record during the 3 years fair market value of the subject matter of
prior to the announcement of the proposed the valuation. The minority shareholder
transaction, or (iii) the related person approval will entail, with respect to an
is the beneficial owner of at least 90% of issuer, approval of the proposed
the outstanding voting shares of the transaction by a majority of the votes
corporation, exclusive of shares acquired cast by holders of each class of the
directly from the corporation in a affected securities at a meeting of
transaction not approved by a majority of shareholders of that class called to
disinterested directors. The merger is not consider the transaction. However, in
subject to this provision as a result of certain circumstances, a related party
IMRglobal's approval of the voting transaction may proceed without the
agreement. requirement of a formal valuation or the
- - Florida law also contains a control share approval of minority shareholders in
provision. This provision generally accordance with exemptions available under
provides that shares acquired in a the regulations including discretionary
"control share acquisition" will not exemptions. The merger is not subject to
possess any voting rights unless such the provisions of these regulations.
voting rights are approved by a majority Under the rules of the TSE, a company pro-
of the corporation's disinterested posing to enter into a property
shareholders. A "control share transaction with a person who, in the
acquisition" is an acquisition, directly opinion of the TSE, is not at arm's length
or indirectly, by any person of owner- to the company, may be required to
ship of, or the power to direct the provide, independently prepared
exercise of voting power with respect to, documentation such as an engineer's
issued and outstanding "control shares" of report. The TSE may also require
a publicly held Florida corporation. shareholder approval if, in its opinion,
"Control shares" are shares, that, except the proposed transaction has not been
for the control share provision, would negotiated at arm's length such as in a
have voting power that, when added to all related party transaction.
other shares owned by a person or in
respect to which such person may exer-
cise or direct the exercise of voting
power, would entitle such person,
immediately after acquisition of such
shares, directly or indirectly, along or
as a part of a group, to exercise or
direct the exercise of voting power in the
election of directors within any of the
following ranges: (a) at least 20 percent
but less than 33 percent of all voting
power, (b) at
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SHAREHOLDERS
least 33 percent but less than a majority
of all voting power, or (c) a majority or
more of all voting power. The shares of
IMRglobal common stock subject to the
voting agreement are not affected by this
provision because IMRglobal's board of
directors approved of the agreement.
The merger of CGI and IMRglobal is not
governed by the limitations set forth
above. The IMRglobal board of directors
has unanimously approved and adopted the
merger and the merger agreement.
DIRECTORS' FIDUCIARY DUTIES IN TAKEOVERS
- - Under Florida law, directors generally - Under Quebec law, directors of a company
have a duty to act without self-interest, have a fiduciary duty to take only those
on a well-informed basis and in a manner actions which are in the interests of the
they reasonably believe to be in the best company.
interests of the shareholders.
- - IMRglobal's articles of incorporation
permit the IMRglobal board of directors to
take into account, in determining whether
to take any action, the interests of its
employees, customers, suppliers, creditors
and the communities in which IMRglobal
does business.
DISCLOSURE OF INTERESTS
- - Acquirors of IMRglobal common stock are - Under U.S. law, acquirors of the Class A
subject to disclosure requirements under Subordinate Shares are subject to the same
Section 13(d)(1) of the Exchange Act and reporting requirements on Schedule 13D or
Rule 13d-1 thereunder, which provide that Schedule 13G as are applicable to
any person who becomes the beneficial acquirors of IMRglobal shares. In
owner of more than 5% of the outstanding addition, under Canadian securities law, a
IMRglobal common stock must, within 10 person who becomes an insider of CGI must
days after such acquisition disclose to the appropriate securities
(1) file a Schedule 13D or Schedule 13G commissions his control over the
with the SEC disclosing specified securities of CGI. An insider is:
information; and (1) CGI, its subsidiaries, its directors,
(2) send a copy of the Schedule 13D or its executive officers and the
Schedule 13G to IMRglobal and to each directors and executive officers of
securities exchange on which its subsidiaries;
IMRglobal common stock is traded. (2) any person who exercises control over
more than 10% of a class of shares of
CGI to which are attached voting
rights
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SHAREHOLDERS
- - IMRglobal is required by the rules of the or an unlimited right to a share of
SEC to disclose in the proxy statement the profits and its assets in case of
relating to its annual meeting of winding- up;
shareholders the identity and number of (3) the directors and executive officers
shares of IMRglobal common stock of a person referred to in item (2)
beneficially owned by: above.
(1) each of its directors; An insider of CGI must file a report in
(2) its chief executive officer; accordance with the conditions and in the
(3) each of its four most highly form prescribed, disclosing any change in
compensated executive officers other his control over the securities of CGI.
than its chief executive officer; CGI is required, among other things, by
(4) all of its directors and executive the securities regulations in Canada to
officers as a group; and disclose in the proxy statement relating
(5) any beneficial owner of 5% or more of to its annual meeting of shareholders, to
the IMRglobal common stock of whom it the knowledge of its directors and
is aware. executive officers, the name and number of
securities beneficially owned or over
which control or direction is exercised
by:
(1) each of its directors;
(2) all of its directors and executive
officers as a group; and
(3) any person exercising control or
direction over voting securities
carrying more than 10% of the voting
rights attached to any class of
securities of CGI.
LIMITATION ON ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. FEDERAL SECURITIES LAWS
ABILITY TO BRING SUITS, ENFORCE JUDGMENTS AND
ENFORCE U.S. LAW
- - IMRglobal is a U.S. company incorporated - CGI is a Quebec company located in Mon-
under the laws of Florida and has treal, Quebec, Canada. Following the
substantial assets located in the U.S. As merger, many of the directors and officers
a result, investors generally can initiate of CGI will be residents of Canada and not
lawsuits in the U.S. against IMRglobal and the U.S. In addition, although CGI will
its directors and officers and can enforce have substantial assets in the U.S.,
lawsuits based on U.S. federal securities following the merger, the majority of
laws in U.S. courts. CGI's assets and a large portion of the
assets of CGI's directors and officers
will be located outside of the U.S.
As a result, U.S. investors may find it
difficult in a lawsuit based on the civil
liability provisions of the U.S. federal
securities laws
(1) to effect service within the U.S.
upon CGI and the directors and
officers of CGI located outside the
U.S.;
(2) to enforce in U.S. courts or outside
the
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U.S., judgments obtained against
those persons in U.S. courts;
(3) to enforce in U.S. courts judgments
obtained against those persons in
courts in jurisdictions outside the
U.S.; and
(4) to enforce against those persons in
Canada, whether in original actions
or in actions for the enforcement of
judgments of U.S. courts, civil
liabilities based solely upon the
U.S. federal securities laws.
SHORT SWING PROFITS
- - Directors and officers of IMRglobal are - Directors and officers of CGI are not
governed by rules under the Exchange Act subject to the Exchange Act's "short
that may require directors and officers to swing" profit rules because CGI is a
forfeit to IMRglobal any "short swing" foreign private issuer under the Exchange
profits realized from purchases and sales, Act which is not subject to these rules.
as determined under the Exchange Act and However, directors of CGI are subject to
the rules thereunder, of IMRglobal equity applicable Canadian legislation
securities. prohibiting insider trading.
- Also, CGI has adopted an insider trading
rule of conduct pursuant to which insiders
are not entitled to trade in CGI shares
when in possession of privileged
information regarding CGI and during
certain periods of time.
PROXY STATEMENTS AND REPORTS
NOTICES AND REPORTS TO SHAREHOLDERS
- - Under the Exchange Act proxy rules, IMR- - As a foreign private issuer, CGI will not
global must comply with notice and be governed by the proxy rules under the
disclosure requirements relating to the Exchange Act.
solicitation of proxies for shareholder However, CGI is governed by applicable
meetings. securities laws in Canada and the rules of
the Toronto Stock Exchange regulating
notices of shareholder meetings, which
provide that notice of a shareholders
meeting must be accompanied by
(1) a shareholder circular; and
(2) a form of proxy.
In addition, CGI sends CGI shareholders a
copy of its annual report.
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REPORTING REQUIREMENTS
- - As a U.S. public company, IMRglobal must - As a foreign private issuer with
file with the SEC, among other reports and securities listed on the New York Stock
notices: Exchange and registered under Section 12
(1) an Annual Report on Form 10-K within of the Exchange Act, CGI will be required
90 days after the end of each fiscal to publicly file with the SEC Annual
year; Reports on Form 40-F within six months
(2) a Quarterly Report on Form 10-Q after the end of each fiscal year and
within 45 days after the end of each reports on Form 6-K.
fiscal quarter; and - CGI is also required to notify the
(3) Current Reports on Form 8-K upon the applicable Canadian securities regulators
occurrence of important corporate of material changes, including
events. (1) any non-arm's length transaction;
(2) a transaction reasonably expected to
have a significant effect on the
market price or the value of the
securities of CGI;
(3) significant changes in management;
(4) a change of ownership of shares of
CGI which involves more than 20% of
the outstanding voting shares of CGI
or which is sufficient to affect the
control of CGI;
(5) a reorganization, amalgamation or
merger;
(6) a substantial change in the type of
business or affairs conducted by CGI;
and
(7) major acquisitions or dispositions.
135
DIRECTORS AND MANAGEMENT OF CGI FOLLOWING THE MERGER
DIRECTORS AND EXECUTIVE OFFICERS
At the time the merger is completed, the board of directors of CGI will
consist of its current 13 directors. CGI has agreed that the CGI board of
directors will appoint Satish K. Sanan, IMRglobal's Chairman and Chief Executive
Officer, if he is an employee of CGI at that time, to the board of directors of
CGI should a vacancy occur. In any event, if Mr. Sanan continues as an employee
of CGI, CGI has agreed to nominate him for election to CGI's board of directors
at CGI's next annual meeting of shareholders, which is expected to be held in
January, 2002, subject to CGI shareholder approval.
CGI DIRECTORS
We have set forth below the name, age, current position and business
experience of the 13 persons who will serve on the CGI board of directors after
the completion of the merger.
YVAN ALLAIRE--59
Mr. Allaire is Executive Vice-President Bombardier Inc. and Chairman,
Bombardier Capital. At Bombardier, Mr. Allaire is responsible for the following
corporate functions: acquisitions, treasury, financial engineering, strategic
initiatives, legal services, communications and public relations. His first year
as a director of CGI was 1999.
WILLIAM D. ANDERSON--51
Mr. Anderson is President of BCE Ventures, Chairman of the Board of
BCI Inc., and a director of BCE Emergis Inc. and other BCE group companies. Born
June 13, 1949 in Ontario, Mr. Anderson graduated with Honours in Business from
the University of Western Ontario and became a chartered accountant in 1974.
Mr. Anderson joined BCE Inc. in 1992 and returned to BCE as Senior
Vice-President, Finance in 1997 and was subsequently appointed Chief Financial
Officer of BCE. His first year as a director of CGI was 1999.
CLAUDE BOIVIN--66
Mr. Boivin is a director of companies, whose first year as a CGI director
was 1993. Mr. Boivin is a former President and Chief Operating Officer of
Hydro-Quebec, a provincially-owned public electric utility. Mr. Boivin was born
on April 20, 1934 and holds a B.A. Sc. (electrical engineering) from Ecole
Polytechnique, Universite de Montreal.
JEAN BRASSARD--56
Jean Brassard is a director of companies and until 2000, he was Chief
Operating Officer of CGI. He joined CGI in 1978, which was also his first year
as a director of the Company. Mr. Brassard holds a Master's degree in Management
from Laval University. Prior to joining CGI, Mr. Brassard held various positions
with the Quebec civil service.
CLAUDE CHAMBERLAND--61
Mr. Chamberland is President, Alcan International Ltd. He was born in 1939
and obtained his engineering degree in metallurgy from Universite Laval in 1963.
Over his 37-year career with Alcan Aluminium, his responsibilities have
encompassed diverse areas, ranging from technical mandates to most management
levels, including executive vice-president functions. His first year as director
of CGI was 1998.
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PAULE DORE--49
Paule Dore joined CGI in 1990 and is currently Executive Vice-President and
Chief Corporate Officer. She is responsible for Human Resources, Communications,
Quality, Marketing, Knowledge Management and Corporate Secretariat. For the past
twenty years, Paule Dore has held management and leadership positions. She has
held several prominent positions in the community including President of the
Board of Trade of Metropolitan Montreal in 1996-1997. Her first year as a CGI
board member was 1996.
SERGE GODIN--51
Serge Godin is Chairman, President and CEO of CGI. He was born in Shipshaw,
Quebec (Canada) in 1949. In 1976, at the age of 26, with post-secondary
education in computer technology as well as management studies from Laval
University, Serge Godin founded a two-person computer consulting and management
company in Quebec City: CGI. Under Serge Godin's leadership, CGI has grown to
become a large Canadian independent IT consulting company with a headcount of
close to 10,000 employees in March 2001.
ANDRE IMBEAU--51
In October 1976, Andre Imbeau became co-founder of CGI Group with Serge
Godin. During the company's early years, Mr. Imbeau acted as consultant to many
CGI clients in addition to fulfilling his administrative and financial
responsibilities. In 1983, he became head of finance and administration and he
now holds the title of Executive Vice-President and Chief Financial Officer of
CGI. His first year as a director of the company was 1976.
DAVID L. JOHNSTON, CC--59
Born in Sudbury, Ontario in 1941, David Johnston completed his university
studies with distinction in three countries: the United States (Harvard A.B.
1963), England (Cambridge LL.B. 1965) and Canada (Queen's LL.B. 1966). Among
other academic functions, David Johnston was Dean of the Faculty of Law at the
University of Western Ontario in 1974, and Principal and Vice-Chancellor of
McGill University in 1979. In July 1994, Mr. Johnston returned to McGill's
Faculty of Law as a full-time professor. He presently chairs the Federal
Government's Advisory Board on the Information Highway. Mr. Johnston's first
year as a CGI director was 1994.
C. WESLEY M. SCOTT--54
From February 2000 until his retirement on March 1, 2001, Mr. Scott was
Chief Corporate Officer of BCE Inc. His retirement marked the end of over
30 years' involvement within the BCE group. He served four years with Nortel
Networks from July 1995 to January 1999 as Executive Vice-President Corporate
and from April 1997 also held the position of Chief Financial Officer of that
company. Mr. Scott has also served as President and Chief Executive Officer of
Stentor, the marketing and engineering arm of the major Canadian Telephone
Companies, and as President of Bell Ontario. Mr. Scott is a graduate of the
University of Toronto (Trinity College) with a Bachelor of Commerce degree and
received his M.B.A. from the Harvard Business School in 1970. Mr. Scott
currently serves on a number of corporate boards, including BCE Emergis, Bell
Canada International, Sears Canada, C-MAC Industries and Book4Golf.com, together
with other private companies. In the not-for-profit sector he is a Trustee of
the Hospital for Sick Children and a director of the Hospital for Sick Children
Foundation, and a Trustee of Trinity College. Mr. Scott was appointed as a CGI
board member on May 8, 2001.
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EILEEN MERCIER--53
Mrs. Mercier is president of her own management consulting firm, Finvoy
Management Inc. Until March 1995, Mrs Mercier was Senior Vice-President and
Chief Financial Officer of Abitibi-Price. Mrs. Mercier holds a Master of Arts
and a Master of Business Administration degrees and her career encompasses
25 years of broad, senior financial, strategic planning and general management
experience in the forest products, financial services, integrated oil and
communication industries. Her first year as CGI director was 1996.
JEAN C. MONTY--53
Jean C. Monty was appointed Chairman and Chief Executive Officer of
BCE Inc. on April 26, 2000. Prior to joining BCE Inc. in 1997, Mr. Monty was
Vice-Chairman and Chief Executive Officer of Nortel (Nortel Networks
Corporation). Mr. Monty began his career at Bell Canada in 1974 and has held
numerous positions in the BCE group. Mr. Monty has been named a member of the
Order of Canada for his contributions to business, policy and community affairs.
In recognition of his achievements, Mr. Monty has been named Canada's
Outstanding CEO of the Year for 1997. His first year as a CGI director was 1998.
CHARLES SIROIS--46
Charles Sirois was born in 1954. He is the founder and principal shareholder
of Telesystem Ltd. and is also the Chairman and Chief Executive Officer of this
private holding company. The Company includes a network of operating companies
in wireless and broadband communication infrastructures and enterprises,
principally involved in the development of mobile Internet services and
Web-centric business solutions. Prior to February 15, 2000, he was Chairman and
Chief Executive Officer of Teleglobe Inc. Mr. Sirois's first year as a director
of CGI was 1998.
For the past five years, all of the directors have been engaged in their
present occupation or in other management capacities with the companies with
which they currently hold positions, except for: Mr. William D. Anderson who,
prior to December 1, 2000, was Chief Financial Officer of BCE Inc., Mr. Jean
Brassard who, prior to October 1, 2000, was President and Chief Operating
Officer of CGI Group Inc. Mr. Charles Sirois who, prior to February 15, 2000,
was Chairman and Chief Executive Officer of Teleglobe Inc., and Mr. C. Wesley M.
Scott who, prior to March 1, 2001, was Chief Corporate Officer of BCE Inc.
RESPONSIBILITY AND TERMS OF MEMBERS OF THE BOARD OF DIRECTORS
The board of directors is responsible for approving CGI policy and strategy
and is responsible to shareholders for CGI's financial and operational
performance.
Each director holds office until the next annual meeting of shareholders or
until that director's successor is elected, unless the office is earlier
vacated.
The board meets at least six times a year, and more frequently when business
needs require. After completion of the merger, the board is expected to continue
to consist of 13 directors, of whom three shall be executive officers of CGI.
MEETINGS OF THE BOARD OF DIRECTORS OF CGI; COMMITTEES OF THE BOARD
The committees of the CGI board of directors after the merger will initially
be the same as the current standing committees of the CGI board of directors,
which are the audit committee and the human resources and corporate governance
committee.
The audit committee, comprised of only outside directors, is responsible to
review with the auditors the scope of the audit, CGI's internal control
procedures, programs and policies and the
138
adequacy and effectiveness of CGI's internal controls over the accounting and
financial reporting systems within CGI, and related party transactions, the
review and recommendation to the CGI board of directors of CGI's interim and
audited financial statements and all public disclosure documents containing
audited or unaudited financial information.
The audit committee meets at least five times a year and currently consists
of the following non-executive directors: Messrs. Claude Boivin (Chairman), Yvan
Allaire and Ms. Eileen Mercier.
The human resources and corporate governance committee has responsibility
for the administration of the corporation policy covering CGI's senior officers.
This committee makes recommendations on the compensation of senior officers to
the full board of directors for approval.
The human resources and corporate governance committee is composed of
Messrs. David L. Johnston, Chairman, Jean C. Monty and Claude Chamberland.
Mr. Godin currently participates in meetings as an ex-officio member. The
committee met four times during fiscal 2000.
GOVERNANCE POLICIES
CGI supports and conducts its business generally in accordance with the TSE
guidelines for effective corporate governance. These guidelines address such
matters as the constitution and independence of boards of directors, the
functions to be performed by boards and their committees, and the relationship
between the board of directors, management and shareholders. A brief description
of CGI's corporate governance practices, in tabular form, follows:
GUIDELINES COMMENTS
1. The board of directors should explicitly
assume responsibility for the stewardship
of CGI, including:
(a) adoption of a strategic planning (a) The board of directors is involved in the
process; preparation of the 3-year strategic plan
of CGI and such plan is reviewed annually
by the board of directors.
(b) identification of the principal (b) The audit committee identifies the major
risks of CGI's business, and financial and operating risks undertaken
implementation of appropriate by CGI and reviews the various policies
systems to manage these risks; and practices of CGI to manage such risk.
The audit committee regularly reports on
such matters to the board of directors.
(c) succession planning, including (c) The human resources committee reviews,
appointing, training and monitoring reports and, where appropriate, provides
senior management; recommendations to the board of directors
on succession planning matters.
(d) CGI's communication policy; and (d) The board of directors has adopted
"Guidelines on Timely Disclosure" which
address matters such as the essential
principles of the disclosure rules of the
regulatory authorities and disclosure
guidelines.
139
GUIDELINES COMMENTS
Under the Guidelines, the board of
directors has the responsibility to
oversee the content of CGI's major
communications to its shareholders and
the investing public. However, the board
believes that it is management's role to
communicate on behalf of CGI with its
shareholders and the investment
community. CGI maintains an effective
investor relations process to respond to
shareholder questions and concerns.
The board of directors reviews and, where
required, approves statutory disclosure
documents prior to their distribution to
shareholders.
(e) integrity of the CGI's internal (e) The board of directors' duties include
control and management information the assessment of the integrity of CGI's
systems. internal control and information system.
The audit committee also has the
responsibility to review the internal
control and management information
systems of CGI. The committee reports to
the board of directors with respect to
such controls and systems.
2. The board of directors should be The board of directors is composed of 13
constituted with a majority of directors, six of whom are unrelated
individuals who qualify as unrelated directors.
directors.
The board of directors has determined
that its six unrelated directors do not
have interests in or relationships with
CGI's significant shareholder, Mr. Serge
Godin, Chairman of the Board, President
and Chief Executive Officer of CGI, that
could be considered to materially
interfere with the directors' ability to
act in the best interests of CGI. CGI
believes that such representation fairly
reflects the investment of minority
shareholders in CGI.
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GUIDELINES COMMENTS
3. The analysis of the application of the RELATED:
principles supporting the conclusion in William D. Anderson, President, BCE
paragraph 2 above. Ventures Inc.
Jean Brassard, Vice-Chairman, CGI and Director
of Companies
Paule Dore, Executive Vice-President and Chief
Corporate Officer, and Secretary, CGI
Serge Godin, Chairman, President and Chief
Executive Officer, CGI
Andre Imbeau, Executive Vice-President and
Chief Financial Officer, and Treasurer, CGI
Jean C. Monty, Chairman and Chief Executive
Officer, BCE Inc.
UNRELATED:
Yvan Allaire
Claude Boivin
Claude Chamberland
David L. Johnston
Eileen A. Mercier
C. Wesley M. Scott
Charles Sirois
4. The board of directors should appoint a The human resources and corporate governance
committee of directors: committee is comprised of three outside
(a) composed exclusively of outside directors and two of whom are unrelated. The
directors, i.e. non-management Chairman of the Board and President and Chief
directors, a majority of whom are Executive Officer currently participates in the
unrelated directors; and human resources and corporate governance
committee meetings as an ex-officio member.
(b) with the responsibility for The Chairman of the Board submits to the human
proposing to the full board of directors resources and corporate governance committee
new nominees to the board of candidates to fill vacancies on the board of
directors and for assessing directors; if the candidacies are endorsed by
directors on an ongoing basis. the human resources committee, they are then
submitted to the approval of the board of
directors.
5. The board of directors should implement a The human resources and corporate governance
process to be carried out by the committee is responsible for making an annual
nominating committee or other appropriate assessment of the overall performance of the
committee for assessing the effectiveness contribution of the board of directors and of
of the board of directors as a whole, the its committees. The annual assessment is
committees of the board of directors and communicated by the chairman of the committee
the contribution of individual directors. to the board of directors.
141
GUIDELINES COMMENTS
6. Existence of an orientation and education Each new director has access to a formal
program for new recruits to the board of orientation and education program of CGI and
directors. receives a record of historical public
information on CGI together with prior minutes
of applicable committees of the board of
directors.
In addition, presentations on various topics
are given, by management, on a regular basis to
the board of directors and directors are given
updates on business and governance initiatives
and in response to questions raised by the
members of the board of directors.
7. Size of the board of directors and the The board of directors is of the view that its
impact of the number upon effectiveness. size and composition are well suited to the
circumstances of CGI and allow for the
efficient functioning of the board of directors
as a decision-making body.
8. Adequacy and form of the compensation of The human resources and corporate governance
directors that realistically reflects the committee reviews periodically directors'
responsibilities and risk involved in compensation. In determining directors'
being an effective director. remuneration, the committee considers time
commitment, comparative fees, risks and
responsibilities.
9. Committees of the board of directors Each committee operates according to the board
should generally be composed of: of directors' approved written mandate
(a) outside directors; and outlining its duties and responsibilities and
(b) a majority of whom are unrelated are composed exclusively of outside directors,
directors. a majority of whom are unrelated to CGI.
10. The board of directors' responsibility All corporate governance matters are dealt with
for (or a committee of the board of by the human resources and corporate governance
directors' general responsibility for) committee. The scope of the mandate of such
developing CGI's approach to governance committee was confirmed in a "Role Statement"
issues. adopted by the board of directors.
11. The board of directors has developed: The board of directors has delegated to senior
(a) position descriptions for the board management the responsibility for day to day
of directors and for the CEO, involving management of the business of CGI. In addition
the definition of the limits to to those matters, which must by law be approved
management's responsibilities; and by the board of directors, the board of
(b) the corporate objectives for which directors retains responsibility for
the CEO is responsible for meeting. significant changes in CGI's affairs.
12. The structure and procedures ensuring The board of directors acts independently of
that the board of directors can function management.
independently of management.
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GUIDELINES COMMENTS
The board of directors has concluded, for
various reasons, that the fact that Mr. Serge
Godin occupies the office of Chairman of the
Board, President and Chief Executive Officer of
CGI does not impair the ability of the board of
directors to act independently of management.
Mr. David L. Johnston acts as lead director of
CGI and a meeting of the outside directors is
held annually and chaired by the lead director.
(a) The audit committee of the board of The audit committee is comprised of only
directors should be composed only of outside directors.
outside directors.
The audit committee is mandated by the board of
directors to review with the auditors the scope
(b) The roles and responsibilities of of the audit review; review with the auditors
the audit committee should be and management the effectiveness of CGI's
specifically defined so as to accounting policies and practices, CGI's
provide appropriate guidance to internal control procedures, programs and
audit committee members as to their policies and the adequacy and effectiveness of
duties. CGI's internal controls over the accounting and
(c) The audit committee should have financial reporting systems within CGI; review
direct communication channels with the related party transactions; and review and
internal and external auditors to recommend the approval to the board of
discuss and review specific issues directors of CGI's interim and audited
as appropriate. financial statements and all public disclosure
(d) The audit committee duties should documents containing audited or unaudited
include oversight responsibility for financial information.
management reporting on internal The audit committee reviews with CGI's auditors
control, and should ensure that
management has designed and and management the effectiveness of CGI's
implemented an effective system of accounting policies and practices, CGI's
internal control. internal control procedures, programs and
policies and the adequacy and effectiveness of
CGI's internal controls over the accounting and
financial reporting systems within CGI; reviews
related party transactions; and reviews CGI's
audited financial statements with the auditors
prior to their submission to the board of
directors for approval.
The audit committee reviews CGI's internal
control procedures, programs and policies and
the adequacy and effectiveness of CGI's
internal controls over the accounting and
financial reporting systems within CGI.
143
GUIDELINES COMMENTS
13. Existence of a system which enables an Individual directors may engage outside
individual director to engage an outside advisors with the authorization of the chairman
advisor at the expense of CGI in of the board.
appropriate circumstances.
CGI EXECUTIVE OFFICERS
We have set forth below the name, age, and current position of the executive
officers of CGI.
NAME CURRENT POSITION IN CGI AGE
- ---- ----------------------- --------
Serge Godin.................... Chairman of the Board, President and Chief
Executive Officer 51
Francois Chasse................ Executive Vice-President, Mergers &
Acquisitions, and General Manager, U.S. 50
Paule Dore..................... Executive Vice-President, Chief Corporate
Officer and Secretary 49
Andre Imbeau................... Executive Vice-President, Chief Financial
Officer and Treasurer 51
Andre Nadeau................... Executive Vice-President and Chief Strategy
Officer 50
Luc Pinard..................... Executive Vice-President and General
Manager, International 48
Michael E. Roach............... Executive Vice-President and General
Manager, Canada 49
Daniel Rocheleau............... Executive Vice-President and Chief Business
Engineering Officer 49
All of the above-mentioned persons have held the position set out opposite
their names, or other executive or management functions in the CGI or its
subsidiaries during the last five years, except
(i) Andre Nadeau, who was professional consultant until October 1997; and
(ii) Michael E. Roach, who was President and Chief Executive Officer of Bell
Sygma Inc. until June 30, 1998.
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SHARE OWNERSHIP OF CGI
The following table sets forth, as of May 31, 2001, the beneficial ownership
of CGI's outstanding Class A Subordinate Shares and Class B Shares (multiple
voting) of (a) each person known by CGI to own beneficially more than 5% of
CGI's outstanding Class A Subordinate Shares or Class B Subordinate Shares,
(b) each director, (c) each executive officer, and (d) all executive officers
and directors as a group:
PERCENTAGE OF
COMBINED VOTING
POWER OF CLASS A
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF SUBORDINATE SHARES
CLASS A CLASS A CLASS B SHARES CLASS B SHARES AND CLASS B
SUBORDINATE SUBORDINATE (MULTIPLE (MULTIPLE VOTING) SHARES
NAME SHARES(1) SHARES OWNED VOTING)(1) OWNED (MULTIPLE VOTING)
- ---- ----------- ------------- -------------- ----------------- ------------------
BCE Inc.(2)............... 113,000,794 44.3% 7,027,606 20.2% 30.4%
Yvan Allaire(3)........... 8,214 * -- -- *
William D. Anderson....... 1,000 * -- -- *
Claude Boivin(4).......... 113,549 * -- -- *
Jean Brassard(5).......... 400,904 * 1,334,496 3.8% 2.3%
Claude Chamberland(6)..... 14,542 * -- -- *
Francois Chasse(7)........ 138,397 * -- -- *
Paule Dore(8)............. 585,736 * -- -- *
Serge Godin(9)............ 826,327 * 23,007,352 66.0% 38.2%
Andre Imbeau(10).......... 445,923 * 3,477,072 10.0% 5.8%
David L. Johnston(11)..... 80,123 * -- -- *
Eileen A. Mercier(12)..... 18,864 * -- -- *
Jean C. Monty(13)......... 20,000 * -- -- *
Andre Nadeau(14).......... 224,032 * -- -- *
Luc Pinard(15)............ 982,081 * -- -- *
Michael E. Roach(16)...... 505,625 * -- -- *
Daniel Rocheleau(17)...... 348,120 * -- -- *
C. Wesley M. Scott(18).... 3,000 * -- -- *
Charles Sirois(19)........ 10,737 * -- -- *
Directors and Executive
Officers as a Group
(18 persons)............ 4,727,174 1.8% 27,818,920 79.8% 46.7%
- ------------------------
* Less than 1% of the outstanding shares.
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. For purposes of calculating the percentage beneficially owned,
the number of shares deemed outstanding includes: (i) 255,224,941 Class A
Subordinate Shares and 34,846,526 Class B Shares (multiple voting)
outstanding as of May 31, 2001; and (ii) Class A Subordinate Shares issuable
by CGI pursuant to options held by the respective person or group which may
be exercised within 60 days following the date of this proxy
statement/prospectus which are the presently exercisable options. These
presently exercisable options are deemed to be outstanding and to be
beneficially owned by the person or group holding these options for the
purpose of computing the percentage ownership of that person or group but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or group.
(2) Includes 89,000,794 Class A Subordinate Shares and 72,874 Class B Shares
(multiple voting) held by 3588513 Canada Inc., a wholly owned subsidiary of
BCE Inc.
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(3) Includes 8,042 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(4) Includes 6,953 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan and
94,080 Class A Subordinate Shares are held by Gestion Marclo Inc., an entity
controlled by Mr. Boivin.
(5) Includes 350,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan and
1,285,392 Class B Shares (multiple voting) held by 9065-4476 Quebec Inc., an
entity controlled by Mr. Brassard.
(6) Includes 3,146 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(7) Includes 21,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(8) Includes 115,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(9) Includes 265,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under CGI share option plan. All
Class B Shares (multiple voting) are held by 9058-0705 Quebec Inc., an
entity controlled by Mr. Godin.
(10) Includes 400,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan. All
Class B Shares (multiple voting) are held by 9061-9354 Quebec Inc., an
entity controlled by Mr. Imbeau.
(11) Includes 7,003 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(12) Includes 3,586 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(13) All Class A Subordinate Shares are held by Libermont Inc., an entity
controlled by Mr. Monty. Excludes the shares owned by BCE Inc., which are
reported separately in this table. Mr. Monty is Chairman and Chief Executive
Officer of BCE Inc.
(14) Includes 154,667 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(15) Includes 15,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(16) Includes 496,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(17) Includes 15,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(18) Includes 2,000 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
(19) Includes 8,095 Class A Subordinate Shares issuable upon the exercise of
presently exercisable options issued under the CGI share option plan.
Following completion of the merger and after the issuance of approximately
70.6 million Class A Subordinate Shares to holders of IMRglobal common stock and
the issuance of up to a maximum of approximately 6.0 million Class B Shares
(multiple voting) pursuant to the exercise of preemptive rights
146
by Messrs. Godin and Imbeau and their holding companies (and if BCE Inc. does
not exercise its preemptive rights), the directors and executive officers of CGI
as a group and BCE Inc. will beneficially own, directly and indirectly, CGI
shares representing up to a maximum of approximately 71.1% of the voting power
of all CGI voting shares (and up to a maximum of approximately 72.5% if
BCE Inc. exercises its preemptive rights).
REMUNERATION OF EXECUTIVE OFFICERS
The summary compensation table shows detailed information on total
compensation for the Chairman, President and Chief Executive Officer and the
four other most highly paid executive officers of CGI for services rendered
during the fiscal years ended on September 30, 2000, 1999 and 1998. This
information is as follows:
- salary earned;
- bonus earned under CGI's annual bonus plan;
- any other compensation, including perquisites and other personal benefits;
- options granted under the CGI share option plan;
- bonus earned under the CGI incentive plan; and
- any other compensation not otherwise declared elsewhere.
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SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND PRINCIPAL ----------------------------------- ---------------------------
POSITION AS AT CLASS A LONG-TERM
SEPTEMBER 30, 2000 SUBORDINATE INCENTIVE
------------------ OTHER ANNUAL SHARES PLANS ANY OTHER
SALARY BONUS COMPENSATION UNDER OPTIONS PAYOUTS COMPENSATION
($(CDN)) ($(CDN)) ($(CDN)) GRANTED (#) ($(CDN)) ($(CDN))
-------- -------- ------------- -------------- ---------- -------------
Serge Godin................ 2000 485,162 -- 229,177(a) 155,000 -- 16,908(c)
Chairman, President and 1999 459,657 345,000 229,249 65,000(b) -- 16,099(c)
Chief Executive Officer 1998 399,204 300,000 224,969 100,000(b) -- 14,000(c)
Jean Brassard(h)........... 2000 424,692 -- (d) -- -- 14,821(c)
President and Chief...... 1999 404,232 303,750 (d) 50,000(b) -- 14,174(c)
Operating Officer........ 1998 348,863 262,500 (d) 85,000(b) -- 6,125(c)
Andre Imbeau............... 2000 361,739 -- (d) 115,000 -- 12,624(c)
Executive Vice- 1999 344,347 258,750 (d) 50,000(b) -- 12,074(c)
President and Chief 1998 298,951 225,000 (d) 85,000(b) -- 10,500(c)
Financial Officer
Francois Chasse............ 2000 343,077 -- 46,273(f) 53,000(e) -- 11,967(c)
Executive Vice- 1999 322,464 125,000 (d) -- -- 11,105(c)
President, Mergers & 1998 297,101 85,644 (d) -- -- 10,063(c)
Acquisitions, and
General Manager, US
Michael Roach(i)........... 2000 333,365 -- 34,349(f) 78,000(e) -- 11,547(c)
Executive Vice- 1999 290,693 125,000 (d) -- -- 7,671(c)
President and General 1998 72,675 -- (d) 120,000(g) -- --
Manager, Canada
- ------------------------------
(a) This amount includes $(Cdn)190,200 representing the amount of interest and
capital paid by CGI on behalf of Mr. Godin on loans taken out by him for
purchase of CGI stock.
(b) Number of Class A Subordinate Shares before 2-for-1 stock split effective
January 7, 2000.
(c) This amount represents CGI's contribution in the name of the executive
toward the stock purchase plan available to all CGI's employees. Employees
may contribute up to 3.5% of their base salary, an amount fully matched by
CGI. Contributions are used to purchase CGI Class A Subordinate Shares.
(d) As the value of perquisites and other personal benefits does not exceed the
lower of $(Cdn)50,000 or 10% of the aggregate salary and bonus for the
fiscal year being considered, its disclosure is not required under current
disclosure rules.
(e) 18,000 of those Class A Subordinate Shares are before 2-for-1 stock split
effective January 7, 2000.
(f) These amounts include $(Cdn)31,650 and $(Cdn)18,556 representing the value
of automobile benefit provided to Mr. Chasse and Mr. Roach respectively.
(g) Number of Class A Subordinate Shares before 2-for-1 stock splits effective
May 21, 1998 and January 7, 2000.
(h) Mr. Brassard has resigned effective as of October 1, 2000, as President and
Chief Operating Officer of CGI, but remains as Vice-Chairman and a director
of CGI.
(i) Mr. Roach has been employed by CGI since the last quarter of 1998.
148
SHARE OPTIONS
OPTIONS GRANTED DURING THE LAST FISCAL YEAR
The table below shows, for the named executive officers of CGI, the options
granted during fiscal 2000.
OPTIONS GRANTED DURING THE MOST RECENTLY
COMPLETED FISCAL YEAR
MARKET VALUE OF
CLASS A CLASS A
SUBORDINATE SUBORDINATE
SHARES % OF TOTAL OPTIONS SHARES UNDER
UNDER OPTIONS GRANTED OPTIONS AT THE
GRANTED TO EMPLOYEES DURING EXERCISE PRICE DATE OF GRANT
NAME (#) THE FISCAL YEAR ($(CDN)) ($(CDN)) EXPIRATION DATE
- ---- ------------- ------------------- -------------- --------------- ----------------
Serge Godin............. 155,000 5.07% 9.90 9.90 October 24, 2010
Andre Imbeau............ 115,000 3.76% 9.90 9.90 October 24, 2010
Francois Chasse......... 25,000 1.64% 9.90 9.90 October 24, 2010
10,000 0.33% 14.41 14.41 May 10, 2010
36,000 1.18% 16.20 16.20 November 9, 2009
Michael Roach........... 25,000 1.64% 8.91 8.91 November 7, 2010
25,000 1.64% 9.90 9.90 October 24, 2010
10,000 0.33% 14.41 14.41 May 10, 2010
36,000 1.18% 16.20 16.20 November 9, 2009
OPTIONS EXERCISED DURING THE LAST FISCAL YEAR
The following table shows, for the named executive officers of CGI, the
number of shares covered by the options granted, if any, exercised during the
fiscal year ended on September 30, 2000, and the aggregate value realized at the
time of exercise.
The table also shows the total number of shares covered by unexercised
options, if any, held as at September 30, 2000, and the value of unexercised
in-the-money options at year-end.
149
OPTIONS EXERCISED DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
AND VALUE OF OPTIONS AT YEAR-END
CLASS A VALUE OF UNEXERCISED IN-THE-
SUBORDINATE UNEXERCISED OPTIONS MONEY OPTIONS AT YEAR-
SHARES AGGREGATE AT YEAR-END END (A)
ACQUIRED ON VALUE (#) ($(CDN))
EXERCISE REALIZED ----------------------------- -----------------------------
NAME (#) ($(CDN)) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
- ---- ----------- --------- ----------- --------------- ----------- ---------------
Serge Godin................... -- -- 265,000 155,000 -- --
Jean Brassard................. -- -- 220,000 -- 1,306,800 --
180,000
Andre Imbeau.................. -- -- 220,000 115,000 1,306,800 --
180,000
Francois Chasse............... -- -- 10,000 25,000 -- --
21,000 30,000
Michael Roach................. -- -- 10,000 50,000 2,858,400 --
6,000 30,000
480,000
- ------------------------
(a) Based on the closing price on the TSE of Class A Subordinate Shares as of
September 29, 2000, namely $(Cdn)11.70.
REMUNERATION OF DIRECTORS
Members of the CGI board of directors who are employees of CGI are not
compensated for their services as directors or members of committees of the CGI
board of directors.
Members of the board of directors who are not employees of CGI are paid an
annual retainer fee of $(Cdn)10,000. An additional compensation of $(Cdn)1,000
per year is paid to members of a committee and $(Cdn)3,000 per year to a
chairman of a committee. Attendance fees are $(Cdn)1,000 per board or committee
meeting.
Members who join the board of directors for the first time are entitled to
receive a grant of options to purchase Class A Subordinate Shares on the date of
their nomination.
Members of the board of directors may choose to convert part or all of their
retainer into deferred stock units (DSUs). The number of DSUs granted to a
member is equal to the chosen annual retainer amount divided by the average
closing price of Class A Subordinate Shares over the five business days
preceding the calculation date. Once granted, the value of DSUs is determined
based on the quoted market price of CGI Class A Subordinate Shares. The value of
DSUs is payable only upon the member's departure from the Board. The amount paid
corresponds to the number of DSUs accumulated to the credit of the member
multiplied by the average closing price of Class A Subordinate Shares during the
30 working days preceding the member's departure. The amount is paid in cash,
after statutory deductions. For each DSU purchased with the retainer, the member
of the board of directors is granted two stock options under the CGI share
option plan. Each option must be exercised within a period of ten years. The
exercise price is equal to the average closing price of Class A Subordinate
Shares over the five consecutive business days preceding the date of grant. The
members of the board of directors have 30 days following their election or
reelection as directors to notify the CGI's Secretary of the portion of the
retainer they wish to receive in DSUs for the next fiscal year.
For the fiscal year ended September 30, 2000, total cash remuneration of
$(Cdn)187,000 was paid to the directors.
150
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
As of June 4, 2001, no directors, senior officers, former directors or
former senior officers of CGI were indebted to CGI.
RELATED PARTIES AND CERTAIN TRANSACTIONS
INFORMATION REGARDING BCE INC.
The following information about BCE Inc., CGI's largest shareholder, is
derived from publicly available information and has not been independently
verified by either CGI or IMRglobal.
BCE Inc. is a telecommunications company operating in Canada and other
countries in communications services, systems integration and e-commerce, media,
technology and solutions, and international communications services.
BCE Inc.'s shares are listed on the TSE and the NYSE. Based on the closing
price of its shares on the Toronto Stock Exchange on March 16, 2001, the market
value of its equity was approximately $(Cdn)30.3 billion.
BCE Inc.'s Chairman and Chief Executive Officer is Jean C. Monty. Mr. Monty
serves as a director of CGI. In addition, William D. Anderson, President of BCE
Ventures Inc., a wholly owned subsidiary of BCE Inc., also serves as a director
of CGI.
BCE Inc. has centered its business activities around four operating
businesses: Bell Canada (Canadian connectivity); Teleglobe (global
connectivity); Bell Globemedia (content), and BCE Emergis (commerce). All other
investments are combined in BCE Ventures whose main investments include Bell
Canada International Inc. (BCI), CGI Group Inc. (CGI), Telesat Canada, BCE
Capital Inc. (BCE Capital), Bimcor Inc. (Bimcor), Excel Communications Inc.
(Excel) and Look Communications Inc. (Look).
Bell Canada: BCE Inc. owns 80% of Bell Canada Holdings Inc., which owns 100%
of Bell Canada. (The remaining 20% of BCH is owned by SBC Communications Inc.)
BCE Inc. also owns approximately 53% of Aliant Inc. (39% held by Bell Canada and
approximately 14% by BCE Inc.). Bell Canada and Aliant provide Canadian local,
national and intercontinental telecom services, digital networks, interconnected
wired and wireless services, Internet services and directory services. Bell
ExpressVu (owned by Bell Canada) is a major Canadian direct-to-home satellite
service provider.
Teleglobe: BCE Inc. effectively owns 95.4% of Teleglobe Communication
Corporation. SBC Communications holds the remaining 4.6% of Teleglobe. Teleglobe
provides, on a global basis, a broad portfolio of data and Internet services,
hosting services and content distribution.
BCE Emergis: BCE Emergis is a major Canadian provider of e-commerce
solutions and is among the top electronic commerce providers in North America.
BCE Ventures: BCE Ventures reports ownership of the following: BCI (73.6%),
CGI (43.4%), Telesat (100.0%), Excel Communications (95.4%), Look Communications
(25.3%), TeleReal (100.0%), Bimcor (100.0%) and BCE Capital (100.0%).
CGI delivers a wide range of IT services to BCE Inc. companies, ranging from
full or partial outsourcing of IS/IT services, to consulting and systems
integration services. At Bell Canada, the wireline company of BCE Inc., CGI
supplies server and desktop support services, user help desk, as well as broad
applications maintenance and development services. At Bell Mobility, the
wireless company, CGI supplies the whole range of IT services, ranging from data
center and telecommunications operations, server and desktop support, user help
desk, as well as all applications maintenance and development services.
CGI also provides various IT services for other BCE Inc. companies such as
infrastructure and store support at Bell Distribution Inc., infrastructure
support at Bell Actimedia Inc., support,
151
application maintenance and development at Telebec, and consulting/systems
integration services as appropriate to many others.
Pursuant to an outsourcing agreement between Bell Canada and CGI, CGI is the
preferred supplier for Bell Canada's information systems and IT needs for an
initial period of ten years ending May 25, 2008.
The terms of the contracts which form part of this strategic relationship
between CGI and BCE Inc. and its related companies were negotiated at arm's
length. For the years ended September 30, 1998, 1999 and 2000, revenues
attributable to these contracts accounted for 18.9%, 37.4% and 39.9% of CGI's
total gross revenue, respectively. This strategic alliance is material to CGI.
DECISIONS REQUIRING PRIOR APPROVAL BY BCE INC.
In connection with the execution of an options agreement among Serge Godin,
Andre Imbeau, Jean Brassard, their respective holding companies, Bell Canada,
BCE Inc. and CGI reflecting certain shareholder arrangements, Mr. Jean Monty,
chief executive officer of BCE Inc., was appointed to the board of directors of
CGI. This options agreement contemplates that until the earlier of January 5,
2006 and the date on which BCE acquires more than 50% of the voting power of
CGI, certain matters, shall be subject to the prior approval of the chief
executive officer or the chief operating officer of BCE Inc. Specifically, BCE
Inc. must approve:
- any change in the dividend policy;
- any arrangement, amalgamation or merger of CGI with any person other than
wholly owned subsidiaries of CGI or other public corporations with market
capitalizations less than 10% of that of CGI;
- any transaction with a value in excess of $(Cdn)10 million between CGI and
its subsidiaries on the one hand, and any person or persons acting in
concert with more than 10% or more of the voting power of CGI, other than
BCE Inc. and its affiliates;
- the appointment, from time to time, of a Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer of CGI other than Serge
Godin, Jean Brassard or Andre Imbeau;
- amendments to articles of incorporation or by-laws of CGI;
- redemptions, purchases or offers to purchase or redeem equity shares of
CGI;
- acquisitions or agreements to acquire any person or business primarily
engaged in an activity other than IT services;
- making by CGI or its subsidiaries of any acquisition or disposition of
assets or securities in excess of 10% of the market capitalization of CGI;
- launching of new lines of business for CGI or material changes in CGI's
corporate strategy; and
- any material alliance or joint venture that BCE Inc. reasonably concludes
would be:
- outside the normal course of CGI's business;
- in any significant manner, inconsistent with CGI's strategic business
plan; or
- in any significant manner, inconsistent with the commercial interests
of the BCE group.
Messrs. Godin, Imbeau and Brassard, in their capacity as directors of CGI,
subject to their fiduciary duties, and Messrs. Godin, Imbeau and Brassard, in
their capacity as shareholders and directors of CGI, have agreed to vote in
accordance with BCE Inc.'s position on these matters when brought before the
directors or shareholders of CGI.
152
PUT RIGHTS OF MESSRS. GODIN, IMBEAU AND BRASSARD
Messrs. Godin, Imbeau and Brassard and their respective holding companies
have the right to sell to BCE Inc., in the aggregate,
- up to 10,432,095 Class B Shares (multiple voting) (representing 30% of the
Class B Shares (multiple voting) held by them as at July 1, 1998) at any
time on and after January 5, 2002 and prior to January 5, 2003; and
- up to all Class B Shares (multiple voting) held by them as at July 1, 1998
and not previously put to BCE Inc., at any time on and after January 5,
2003 and prior to January 5, 2004.
These put rights accelerate in the event of long-term disability or death of any
of Messrs. Godin, Imbeau or Brassard or upon failure of BCE Inc. to comply with
its material obligations under the options agreement.
CALL RIGHT OF BCE INC.
For a period of two years after January 5, 2004, BCE Inc. will have the
right to purchase all but not less than all the Class A Subordinate Shares and
Class B Shares (multiple voting) then held by Messrs. Godin, Imbeau and Brassard
and their respective holding companies. This call right accelerates in the event
of a failure by any of Messrs. Godin, Imbeau or Brassard or any of their
respective holding companies to comply with their material obligations under the
options agreement.
PRICE ON THE PUT AND CALL RIGHTS
The price per share on any exercise of the put rights of Messrs. Godin,
Imbeau and Brassard and their respective holding companies and the call right of
BCE Inc. will be 115% of the then per share market price of the Class A
Subordinate Shares and will be payable in common shares of BCE Inc. at the then
market price per common share of BCE Inc. at the time of the exercise.
BOARD OF DIRECTORS DESIGNEES
So long as BCE Inc. holds at least 20% of the outstanding shares in the
share capital of CGI, Messrs. Godin, Imbeau and Brassard and their holding
companies must vote to elect to the board of directors of CGI the number of
board designees nominated by BCE Inc. as shall represent 25% of the total number
of directors on the CGI board. In addition, BCE Inc. has agreed to vote all of
its CGI shares to elect Messrs. Godin, Imbeau and Brassard to the board of
directors of CGI. Furthermore, until the date on which BCE Inc. acquires control
of CGI, BCE Inc. undertakes to vote in favor of the election of each of Messrs.
Godin, Imbeau and Brassard as a director of CGI to the extent that each of them
is at that time a senior executive of CGI.
BCE INC. RIGHTS OF FIRST REFUSAL
BCE Inc. has a right of refusal on all sales of CGI shares held by
Messrs. Godin, Imbeau and Brassard and their respective holding companies, other
than Class A Subordinate Shares acquired by Messrs. Godin, Imbeau and Brassard
after July 1, 1998 pursuant to CGI's employee share purchase plan or pursuant to
the exercise of options under CGI's share option plan and other than 2,000,000
Class B Shares (multiple voting) in the aggregate held by Messrs. Godin, Imbeau
and Brassard and their respective holding companies and the Class B Shares
(multiple voting) acquired by Messrs. Godin and Imbeau and their respective
holding companies pursuant to the exercise of their preemptive rights in
connection with the merger.
The 2,000,000 Class B Shares (multiple voting) may be converted into
Class A Subordinate Shares and sold on the market after having been offered
among Messrs. Godin, Imbeau and Brassard and their respective holding companies
and then to BCE Inc. at the market price of Class A Subordinate Shares. The
Class B Shares (multiple voting) acquired by Messrs. Godin and Imbeau and their
respective holding companies pursuant to the exercise of their preemptive rights
in connection with the
153
merger may be converted into Class A Subordinate Shares and sold on the market
after having been offered among Messrs. Godin and Imbeau and their respective
holding companies and then to BCE Inc. at the market price of Class A
Subordinate Shares.
CHANGE OF CONTROL OFFERS
If, before BCE Inc. acquires control of CGI, an offer is made to buy shares
of CGI such that control of CGI would change, which offer Messrs. Godin, Imbeau
and Brassard and their holding companies wish to accept, and BCE Inc. elects not
to exercise its rights of first refusal on these shares, Messrs. Godin, Imbeau
and Brassard and their holding companies may sell their shares in such change of
control sale, provided that, as soon as practicable after the sale, Bell Canada
has the right to terminate its outsourcing agreement with CGI and buy from CGI,
at the fair market value as defined in the outsourcing agreement, all or part of
the assets used in providing services under the outsourcing agreement between
CGI and Bell Canada and to engage all or part of the employees rendering
services to Bell Canada under this outsourcing agreement and to terminate the
agreement. The termination of the outsourcing agreement with Bell Canada, which
produced for the three months ended December 31, 2000 approximately 22% of CGI's
revenues, would likely have a material adverse effect on CGI.
TERMINATION
The options agreement shall terminate on the earliest of
- January 5, 2006, subject to outstanding notices with respect to the right
of refusal of BCE Inc. under the agreement;
- the date on which BCE Inc. acquires all CGI shares held by Messrs. Godin,
Imbeau and Brassard and their holding companies, and covered by the put
options; and
- the date on which a person, other than BCE Inc. or any of its affiliates,
acquires all of the shares of CGI held by Messrs. Godin, Imbeau and
Brassard and their holding companies.
All of the rights under the options agreement described in this section
"Related Parties and Certain Transactions" terminate upon termination of the
options agreement except the non-competition provisions thereunder restricting
Messrs. Godin, Imbeau and Brassard and their respective holding companies from
competing in the fields of IT services or telecommunications in some
geographical areas in Canada for a period of three years.
FEES AND EXPENSES
Pursuant to the merger agreement, CGI and IMRglobal have agreed to each pay
half of certain expenses. See "The Merger Agreement--Expenses."
CGI and its subsidiary, CGI Florida Corporation, estimate that they will
incur fees and expenses in connection with the merger of approximately $(US)7.0
million.
IMRglobal estimates that it will incur fees and expenses in connection with
the merger of approximately $(US)4.0 million.
These fees and expenses related to the merger will be financed from
generally available funds of CGI and IMRglobal.
Neither CGI nor IMRglobal will pay any fees or commissions to any broker or
dealer or any person for soliciting IMRglobal Shareholders with respect to the
merger. Upon request, IMRglobal will reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding materials to their customers.
154
VALIDITY OF SECURITIES
McCarthy Tetrault will pass upon the validity under Canadian law of the CGI
Class A Subordinate Shares to be issued pursuant to the merger.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have audited
the consolidated financial statements of IMRglobal included in IMRglobal's
Annual Report on Form 10-K for the year ended December 31, 2000, as set forth in
their report, which is incorporated by reference in this proxy
statement/prospectus and elsewhere in the registration statement on Form F-4.
Such consolidated financial statements are incorporated by reference in reliance
upon Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
The audited consolidated financial statements of CGI as of September 30,
2000 and 1999, and for each of the three years in the period ended
September 30, 2000 included elsewhere in this proxy statement/prospectus, have
been audited by Samson Belair/Deloitte & Touche, independent auditors, as
indicated in their report with respect hereto, and are included in reliance upon
the authority of said firm as experts in giving said reports.
The opinions of Updata Capital, Inc., described herein and attached as
Appendix B to this proxy statement/prospectus, are described and included based
on the authority of such firm as experts in the valuation of businesses and
securities.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF IMRGLOBAL SHAREHOLDERS
If the merger is completed as expected, IMRglobal will not hold an annual
meeting of IMRglobal shareholders in 2001. If the merger is not approved by
IMRglobal shareholders or is delayed or not completed for any other reason,
IMRglobal expects it will hold its 2001 Annual Meeting of Shareholders in
June 2001. Any eligible shareholder of IMRglobal wishing to have a proposal
considered for inclusion in the Company's 2001 proxy solicitation materials
under Rule 14a-8 of the Securities Exchange Act of 1934, must set forth the
proposal in writing and file it with the Secretary of IMRglobal Corp., 100 South
Missouri Avenue, Clearwater, Florida 33756, at a reasonable time in advance of
the date of mailing of IMRglobal's proxy statement. IMRglobal will consider any
proposal filed on or before December 30, 2000 to be in compliance with this
requirement. An eligible shareholder is one who is the record or beneficial
owner of the lesser of 1% or $(US)2,000 in market value of securities entitled
to be voted at that annual meeting and has held such securities for at least one
year and who shall continue to own those securities through the date on which
the annual meeting is held.
In addition, under IMRglobal's bylaws, a shareholder who wishes to propose
business for consideration at the 2001 Annual Meeting of Shareholders or to
nominate persons for election to IMRglobal's board of directors must deliver to
IMRglobal the information specified in IMRglobal's bylaws not later than
60 days in advance of the date of the 2001 Annual Meeting of Shareholders as
originally scheduled; but, if less than 70 days notice of the date of the
meeting is given, then notice from the shareholder must be received no later
than the tenth day following the earlier of the date IMRglobal first mails
notice of the date of its 2001 Annual Meeting of Shareholders or the date on
which public disclosure is made. Under Rule 14a-4 of the Exchange Act, IMRglobal
may exercise discretionary voting authority under proxies it solicits for the
2001 Annual Meeting of Shareholders to vote on any proposal made by a
shareholder that the shareholder does not seek to include in IMRglobal's proxy
statement pursuant to Rule 14a-8, unless IMRglobal is notified about the
proposal before the above notice deadline and the proposing shareholder states
an intention to, and submits proof that it did, distribute proxies to a
percentage of the shareholders sufficient to carry the proposal.
155
INDEX TO CGI CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
Auditors' report............................................ F-2
Consolidated statements of earnings......................... F-3
Consolidated statements of retained earnings................ F-4
Consolidated balance sheets................................. F-5
Consolidated statements of cash flows....................... F-6
Notes to the Consolidated Financial Statements.............. F-7
F-1
AUDITORS' REPORT
To the Directors of
CGI Group Inc.
We have audited the consolidated balance sheets of CGI Group Inc. as at
September 30, 2000 and 1999 and the consolidated statements of earnings,
retained earnings and cash flows for each of the years in the three-year period
ended September 30, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at
September 30, 2000 and 1999 and the results of its operations and its cash flows
for each of the years in the three-year period ended September 30, 2000 in
accordance with Canadian generally accepted accounting principles.
(signed) Samson Belair/Deloitte & Touche
Chartered Accountants
Montreal, Quebec
November 7, 2000 (except for Notes 7 a), 15 a) to f)
and 17 which are dated June 7, 2001)
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA -- U.S. REPORTING DIFFERENCE
In the United States of America, reporting standards for auditors require
the addition of an explanatory paragraph (following the opinion paragraph)
outlining changes in accounting principles that have been implemented in the
financial statements. As discussed in Note 2 to the financial statements, the
Company changed its method of accounting for income taxes from the deferral
method to the liability method and has changed its method of calculation and
presentation for earnings per share from the inputed earnings approach to the
treasury stock method.
(signed) Samson Belair/Deloitte & Touche
Chartered Accountants
Montreal, Quebec
June 7, 2001
F-2
CGI GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
-------------------- -----------------------------------
2001 2000 2000 1999 1998
--------- -------- ----------- ---------- --------
$ $ $ $ $
(UNAUDITED)
REVENUE....................................... 708,161 785,206 1,436,008 1,409,458 740,963
--------- -------- ----------- ---------- --------
Operating expenses
Costs of services, selling and
administrative expenses................... 606,770 661,783 1,254,351 1,185,563 633,616
Research and development.................... 5,519 5,410 9,960 9,618 5,980
--------- -------- ----------- ---------- --------
612,289 667,193 1,264,311 1,195,181 639,596
--------- -------- ----------- ---------- --------
Operating earnings before:.................. 95,872 118,013 171,697 214,277 101,367
--------- -------- ----------- ---------- --------
Depreciation and amortization of fixed
assets.................................... 14,774 13,794 26,387 27,415 16,851
Amortization of contract costs.............. 11,814 11,496 21,991 19,002 11,321
Amortization of software and development
costs..................................... -- -- -- 1,874 2,105
--------- -------- ----------- ---------- --------
26,588 25,290 48,378 48,291 30,277
--------- -------- ----------- ---------- --------
Earnings before the following items........... 69,284 92,723 123,319 165,986 71,090
--------- -------- ----------- ---------- --------
Interest
Long-term debt.............................. (1,834) (1,879) (3,624) (1,389) (816)
Other....................................... (155) (182) (130) (120) (107)
Income...................................... 1,277 2,503 3,898 5,310 1,987
--------- -------- ----------- ---------- --------
(712) 442 144 3,801 1,064
--------- -------- ----------- ---------- --------
Earnings before income taxes, entity subject
to significant influence, non-controlling
interest and amortization of goodwill....... 68,572 93,165 123,463 169,787 72,154
Income taxes (Note 8)......................... 30,239 38,079 49,985 69,943 29,285
--------- -------- ----------- ---------- --------
Earnings before entity subject to significant
influence, non-controlling interest and
amortization of goodwill.................... 38,333 55,086 73,478 99,844 42,869
Entity subject to significant influence....... 7 51 64 62 44
Non-controlling interest...................... -- -- -- -- 253
--------- -------- ----------- ---------- --------
Earnings before amortization of goodwill...... 38,340 55,137 73,542 99,906 43,166
Amortization of goodwill, net of income
taxes....................................... 12,712 8,766 17,876 16,090 8,338
--------- -------- ----------- ---------- --------
NET EARNINGS.................................. 25,628 46,371 55,666 83,816 34,828
========= ======== =========== ========== ========
BASIC AND DILUTED EARNINGS PER SHARE BEFORE
AMORTIZATION OF GOODWILL.................... 0.14 0.20 0.27 0.37 0.18
========= ======== =========== ========== ========
BASIC EARNINGS PER SHARE (NOTE 7)............. 0.09 0.17 0.21 0.31 0.15
========= ======== =========== ========== ========
DILUTED EARNINGS PER SHARE (NOTE 7)........... 0.09 0.17 0.20 0.31 0.15
========= ======== =========== ========== ========
See Notes to the Consolidated Financial Statements
F-3
CGI GROUP INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(IN THOUSANDS OF CANADIAN DOLLARS)
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
------------------- ------------------------------
2001 2000 2000 1999 1998
-------- -------- -------- -------- --------
$ $ $ $ $
(UNAUDITED)
RETAINED EARNINGS, BEGINNING OF YEAR, AS
PREVIOUSLY REPORTED...................... 183,156 139,080 139,080 55,264 20,436
Adjustment for change in accounting
policy (Note 2).......................... -- (11,590) (11,590) -- --
-------- -------- -------- -------- -------
Retained earnings, beginning of year, as
restated................................. 183,156 127,490 127,490 55,264 20,436
-------- -------- -------- -------- -------
Net earnings............................... 25,628 46,371 55,666 83,816 34,828
-------- -------- -------- -------- -------
RETAINED EARNINGS, END OF YEAR............. 208,784 173,861 183,156 139,080 55,264
======== ======== ======== ======== =======
See Notes to the Consolidated Financial Statements
F-4
CGI GROUP INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
AS AT
MARCH 31, AS AT SEPTEMBER 30,
----------- -------------------
2001 2000 1999
----------- -------- --------
$ $ $
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents................................. 28,190 49,341 42,229
Accounts receivable (Note 3).............................. 232,396 211,188 208,392
Income taxes.............................................. 21,299 10,483 --
Work in progress.......................................... 48,702 49,117 79,899
Prepaid expenses and other current assets................. 32,997 19,442 13,631
Future income taxes (Note 8).............................. 6,951 7,052 --
---------- -------- --------
370,535 346,623 344,151
Investment in an entity subject to significant influence.... -- 1,261 683
Fixed assets (Note 4)....................................... 80,693 58,900 63,094
Contract costs (Note 5)..................................... 100,360 93,716 99,774
Future income taxes (Note 8)................................ 34,569 24,470 --
Goodwill.................................................... 521,094 395,903 358,787
---------- -------- --------
1,107,251 920,873 866,489
========== ======== ========
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities.................. 168,027 142,754 204,397
Income taxes.............................................. -- -- 10,177
Deferred revenue.......................................... 59,019 25,512 21,351
Future income taxes (Note 8).............................. 5,436 7,963 5,531
Current portion of long-term debt (Note 6)................ 6,799 5,770 5,139
---------- -------- --------
239,281 181,999 246,595
Future income taxes (Note 8)................................ 13,903 23,929 2,214
Long-term debt (Note 6)..................................... 38,080 37,644 54,625
---------- -------- --------
291,264 243,572 303,434
---------- -------- --------
SHAREHOLDERS' EQUITY
Capital stock (Note 7).................................... 600,145 491,807 423,764
Contributed surplus....................................... 211 211 211
Retained earnings......................................... 208,784 183,156 139,080
Foreign currency translation adjustment (Note 2).......... 6,847 2,127 --
---------- -------- --------
815,987 677,301 563,055
---------- -------- --------
1,107,251 920,873 866,489
========== ======== ========
See Notes to the Consolidated Financial Statements
F-5
CGI GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF CANADIAN DOLLARS)
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
------------------- -------------------------------
2001 2000 2000 1999 1998
-------- -------- -------- --------- --------
$ $ $ $ $
(UNAUDITED)
OPERATING ACTIVITIES
Net earnings........................................... 25,628 46,371 55,666 83,816 34,828
Adjustments for:
Depreciation and amortization of fixed assets........ 14,774 13,794 26,387 27,415 16,851
Loss (gain) on disposal of fixed assets.............. -- 131 1,454 (135) --
Amortization of contract costs....................... 11,814 11,496 21,991 19,002 11,321
Amortization of software and development costs....... -- -- -- 1,874 2,105
Amortization of goodwill............................. 13,444 9,433 19,153 16,584 8,434
Future income taxes.................................. (1,872) 1,532 2,214 12,364 2,526
Foreign exchange loss (gain)......................... 2,098 (99) (497) 988 (1,547)
Entity subject to significant influence.............. (7) (51) (64) (62) (44)
Other................................................ -- -- -- 190 (468)
-------- -------- -------- --------- --------
Operating cash flow...................................... 65,879 82,607 126,304 162,036 74,006
-------- -------- -------- --------- --------
Changes in non-cash operating working capital items:
Accounts receivable.................................. 1,696 (2,188) 17,206 (10,229) (35,774)
Work in progress..................................... (4,861) (11,584) 31,725 (56,552) 2,957
Prepaid expenses and other current assets............ (12,014) (14,812) (5,486) (1,389) (1,216)
Accounts payable and accrued liabilities............. (11,261) (37,254) (92,027) (10,998) 89,722
Income taxes......................................... (10,797) 2,111 (13,647) (16,218) 24,052
Deferred revenue..................................... 27,863 (7,363) 3,475 9,860 (3,300)
-------- -------- -------- --------- --------
(9,374) (71,090) (58,754) (85,526) 76,441
-------- -------- -------- --------- --------
Cash provided by operating activities.................... 56,505 11,517 67,550 76,510 150,447
-------- -------- -------- --------- --------
FINANCING ACTIVITIES
Addition of long-term debt............................. 20,000 -- -- 46,200 --
Reduction of long-term debt............................ (31,694) (3,385) (22,107) (9,670) (25,321)
Issuance of shares..................................... 485 10,148 10,931 4,992 47,720
-------- -------- -------- --------- --------
Cash (used for) provided by financing activities......... (11,209) 6,763 (11,176) 41,522 22,399
-------- -------- -------- --------- --------
INVESTING ACTIVITIES
Business acquisitions (net of cash) (Note 9)........... (47,123) (2,892) (18,395) (119,106) 1,720
Investment in an entity subject to significant
influence............................................ -- (514) (514) -- (577)
Purchase of fixed assets............................... (10,577) (9,091) (18,090) (20,678) (19,002)
Proceeds from sale of fixed assets..................... -- 297 845 2,201 1,334
Contract costs......................................... (10,375) (10,446) (14,177) (58,884) (21,288)
-------- -------- -------- --------- --------
Cash used for investing activities....................... (68,075) (22,646) (50,331) (196,467) (37,813)
-------- -------- -------- --------- --------
Foreign exchange gain (loss) on cash held in foreign
currencies............................................. 1,628 (467) 1,069 (754) 1,207
-------- -------- -------- --------- --------
Net (decrease) increase in cash and cash equivalents..... (21,151) (4,833) 7,112 (79,189) 136,240
-------- -------- -------- --------- --------
Cash and cash equivalents at beginning of year........... 49,341 42,229 42,229 121,418 (14,822)
-------- -------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................. 28,190 37,396 49,341 42,229 121,418
======== ======== ======== ========= ========
Supplementary cash flow information (Note 10)
See Notes to the Consolidated Financial Statements
F-6
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
1. DESCRIPTION OF BUSINESS
CGI Group Inc. (the "Company"), directly or through its subsidiaries,
provides a full range of information technology ("IT") services including
management of IT and business functions, systems integration and consulting. The
Company's primary focus is large-scale systems integration and outsourcing
contracts for both private and public sector organizations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL STATEMENTS--MARCH 31, 2001 AND 2000
In the opinion of management, the unaudited interim consolidated financial
statements contain all adjustments of a normal recurring nature necessary to
present fairly the financial position, results of operations and cash flows for
the periods presented. Operating results for the six months ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ending September 30, 2001.
PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles ("GAAP") which differ in
certain material respects with United States GAAP. Significant differences
relevant to the Company are presented in Note 15.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
Canadian GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period.
Because of the use of estimates inherent in the financial reporting process,
actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The financial statements of entities controlled by the Company are
consolidated; entities jointly controlled by the Company, referred to as joint
ventures, are accounted for using the proportionate consolidation method; the
associated company, which the Company has the ability to significantly
influence, is accounted for using the equity method.
REVENUE RECOGNITION AND WORK IN PROGRESS
The Company provides professional services under level-of-effort, cost-based
and fixed-price contracts. Work in progress is valued at estimated net
realizable value. Under level-of-effort contracts, revenue is recorded as
services are provided. For cost-based contracts, revenue is recorded as
reimbursable costs are incurred. Revenue from fixed-price contracts is recorded
using the percentage-of-completion method, whereby revenue and profit are based
on a ratio of costs incurred to total estimated costs of the project. Deferred
revenue principally represents billings to customers in excess of work in
progress. Losses, if any, on long-term contracts are recognized during the
period they are determined. Revenue from the sale of software licences is
recognized when the product is delivered
F-7
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
to the customer and when no significant vendor obligations remain and the
collection of the receivable is reasonably assured. Where license agreements
include multiple elements, revenues from the sale of licenses are recognized on
the same basis provided the services do not include significant customization or
modification of the base product and the payment terms for licenses are not
subject to acceptance criteria. If an acceptance period is stipulated, revenues
are recognized upon the earlier of customer acceptance or expiration of the
acceptance period. Revenue from software maintenance and support agreements is
recognized on a straight-line basis over the term of the related agreements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of unrestricted cash and
short-term investments having an initial maturity of three months or less.
DEPRECIATION AND AMORTIZATION
Fixed assets are recorded at cost and are depreciated and amortized over
their estimated useful lives, using principally the straight-line method. The
annual depreciation and amortization periods by fixed asset category are as
follows:
Leasehold improvements................. Term of lease plus first renewal option
Furniture and fixtures................. 3 to 10 years
Computer equipment..................... 3 to 5 years
Software............................... 1 to 5 years
CONTRACT COSTS
These costs include expenses incurred in the course of IT management
contracts obtained by the Company for periods varying from two to ten years.
These expenses are recorded at cost and amortized using the straight-line method
over the term of the respective contracts.
Contract costs comprise principally the following:
a) Value assigned to a specific long-term outsourcing contract entered into
by an acquired company.
b) Software specifically designed or acquired, namely software used by the
Company to provide long-term outsourcing contracts to clients or group of
clients.
SOFTWARE AND DEVELOPMENT COSTS
Costs incurred for the design and development of software and products are
capitalized only after technological feasibility is established. Purchased
computer software is recorded at cost.
Capitalized software and development costs are amortized on a straight-line
basis from the time the software and products are in use, over their estimated
useful lives, ranging between three and five years.
F-8
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill represents the excess of the purchase price over the fair values of
the net assets of entities acquired at the respective dates of acquisition.
Goodwill is amortized on a straight-line basis over its expected useful life of
20 years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the carrying value of its long-lived assets, including
goodwill, on an ongoing basis. In order to determine whether an impairment
exists, management considers the undiscounted cash flows estimated to be
generated by those assets as well as other indicators. An impairment loss is
measured as the amount by which the carrying amount of assets exceeds their fair
value. Any permanent impairment in the carrying value of assets is charged
against earnings in the period an impairment is determined.
STOCK OPTION PLAN
The Company has a stock option plan, which is described in Note 7. No
compensation expense is recognized for this plan when stock options are granted
to employees and directors. Any consideration paid by employees and directors on
exercise of stock options is credited to share capital.
RESEARCH AND DEVELOPMENT
Research and development expenses are charged to earnings in the year they
are incurred, net of related investment tax credits.
INCOME TAXES
On October 1, 1999, the Company adopted the recommendations of the Canadian
Institute of Chartered Accountants ("CICA") Handbook section 3465, Income taxes,
which replaces the deferral method with the liability method of tax allocation.
The Company applied the recommendations retroactively without restating prior
years.
Future income taxes relate to the expected future tax consequences of
differences between the carrying amount of balance sheet items and their
corresponding tax values. Future tax assets are recognized only to the extent
that, in the opinion of management, it is more likely than not that the future
income tax assets will be realized. Future income tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment or substantive enactment.
F-9
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The change had the following cumulative effect on the October 1, 1999
accounts:
INCREASE DECREASE
$ $
-------- --------
Retained earnings.......................................... 11,590
Goodwill................................................... 16,869
Current future income tax assets........................... 9,060
Long-term future income tax assets......................... 4,722
Current future income tax liabilities...................... 15
Long-term future income tax liabilities.................... 8,488
TRANSLATION OF FOREIGN CURRENCIES
On January 1, 2000, the Company reclassified its U.S. subsidiary companies
from integrated foreign operations to self-sustaining foreign operations as a
result of changes in the economic facts and circumstances.
Accordingly, self-sustaining subsidiaries are accounted for using the
current-rate method. Assets and liabilities denominated in a foreign currency
are translated into Canadian dollars at exchange rates in effect at the balance
sheet date. Revenues and expenses are translated at average exchange rates
prevailing during the year. Resulting unrealized gains or losses are accumulated
and reported as translation adjustment in shareholders' equity. This change has
been applied prospectively.
TRANSLATION OF FOREIGN CURRENCIES (CONTINUED)
The accounts of foreign subsidiaries, which are financially or operationally
dependent on the parent company, are accounted for using the temporal method.
Under this method, monetary assets and liabilities are translated at the
exchange rates in effect at the balance sheet dates and non-monetary assets and
liabilities are translated at historical exchange rates. Revenues and expenses
are translated at average rates for the period. Translation exchange gains or
losses of such subsidiaries are reflected in net earnings.
Revenues and expenses denominated in foreign currencies are recorded at the
rate of exchange prevailing at the transaction date. Monetary assets and
liabilities denominated in foreign currencies are translated at exchange rates
prevailing at the balance sheet dates. Other unrealized translation gains and
losses are reflected in net earnings.
EARNINGS PER SHARE
The Company adopted the recommendations of CICA Handbook Section 3500,
EARNINGS PER SHARE ("EPS"), effective October 1, 2000. The revised section
requires the use of the treasury stock method to compute the dilutive effect of
potential common shares. Prior to October 1, 2000, the Company used the inputed
earnings approach to calculate diluted earnings per share. Basic and diluted
earnings per share figures for each of the years in the three-year period ended
September 30, 2000 and the two six-month periods ended March 31, 2001 and 2000
were computed using the treasury stock method.
F-10
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FUTURE ACCOUNTING CHANGES
On October 1, 2000, the Company adopted the recommendations of the CICA
Handbook Section 3461, EMPLOYEE FUTURE BENEFITS. This standard requires
companies to accrue the costs of post-retirement benefits other than pensions
over the expected working lives of employees in a manner similar to pension
costs. Under current practice, such costs are charged to income as incurred. The
standard also requires a change in the discount rate used to value liabilities
and service costs from an estimated long-term interest rate to a market-based
interest rate. The adoption of the recommendations of Section 3461 did not have
a material effect on the consolidated financial statements of the Company.
3. ACCOUNTS RECEIVABLE
SEPTEMBER 30,
-------------------------
2000 1999
-------- --------
$ $
Trade................................................ 202,108 204,405
Other(1)............................................. 9,080 3,987
------- -------
211,188 208,392
======= =======
- ------------------------
(1) The Ministere des Finances (Quebec) granted the Company refundable tax
credits on salaries, calculated at the rate of 25% on salaries paid in
Quebec, for a maximum of $10,000 a year per eligible employee. The period
covered by the agreement varies from five to ten years and takes effect
starting May 11, 2000, the date the agreement was signed, and is conditional
upon the Company's relocation to the Cite du commerce electronique.
Accordingly, other accounts receivable, as at September 30, 2000, include an
amount of approximately $7,800,000 in refundable tax credits on salaries
receivable.
F-11
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
4. FIXED ASSETS
SEPTEMBER 30, 2000
----------------------------------
ACCUMULATED
DEPRECIATION
AND NET BOOK
COST AMORTIZATION VALUE
-------- ------------ --------
$ $ $
Leasehold improvements........................ 25,887 5,917 19,970
Furniture and fixtures........................ 24,260 11,569 12,691
Computer equipment............................ 72,886 52,002 20,884
Software...................................... 15,516 10,161 5,355
------- ------ ------
138,549 79,649 58,900
======= ====== ======
SEPTEMBER 30, 1999
----------------------------------
ACCUMULATED
DEPRECIATION
AND NET BOOK
COST AMORTIZATION VALUE
-------- ------------ --------
$ $ $
Leasehold improvements......................... 17,914 1,229 16,685
Furniture and fixtures......................... 16,189 3,715 12,474
Computer equipment............................. 45,568 16,856 28,712
Software....................................... 11,770 6,547 5,223
------ ------ ------
91,441 28,347 63,094
====== ====== ======
Fixed assets include assets acquired under capital leases totalling
$10,549,000 ($12,463,000 in 1999), net of accumulated depreciation and
amortization of $7,981,000 ($6,911,000 in 1999).
F-12
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
5. CONTRACT COSTS
SEPTEMBER 30, 2000
----------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
-------- ------------ --------
$ $ $
Software acquired and developed............... 41,022 9,241 31,781
Software licenses and other expenses.......... 95,225 33,290 61,935
------- ------ ------
136,247 42,531 93,716
======= ====== ======
SEPTEMBER 30, 1999
----------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
-------- ------------ --------
$ $ $
Software acquired and developed............... 34,564 4,740 29,824
Software licenses and other expenses.......... 98,896 28,946 69,950
------- ------ ------
133,460 33,686 99,774
======= ====== ======
6. LONG-TERM DEBT
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
$ $
Unsecured revolving credit facility, bearing interest at
bankers' acceptance rate plus 0.375% with no principal
payments before 2004(1)................................... 30,000 46,200
Obligations under capital leases, bearing interest at
various interest rates varying from 5.7% to 14.7% and
repayable in blended monthly installments maturing at
various dates until 2005.................................. 12,777 13,398
Other unsecured loans, without interest, repayable ending in
September 2001............................................ 637 166
------ ------
43,414 59,764
Current portion............................................. 5,770 5,139
------ ------
37,644 54,625
====== ======
- ------------------------
(1) An amount of $195,000,000 is available under the terms of this unsecured
revolving credit facility. In addition to this revolving credit facility,
the Company also has available lines of credit totalling $25,500,000,
bearing interest at the prime rate of a Canadian Chartered bank, under which
approximately $1,650,000 has been used to cover letters of credit issued for
contracts with major outsourcing and systems integration customers. The
effective interest rate at September 30, 2000 on this facility was 7.50%.
F-13
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
6. LONG-TERM DEBT (CONTINUED)
At September 30, 2000, principal repayments on long-term debt over the next
five years are as follows:
$
2001....................................................... 637
2002....................................................... --
2003....................................................... --
2004....................................................... 30,000
2005....................................................... --
At September 30, 2000, minimum capital lease payments are as follows:
PAYMENT INTEREST PRINCIPAL
-------- -------- ---------
$ $ $
2001............................................... 5,969 836 5,133
2002............................................... 3,523 512 3,011
2003............................................... 2,609 290 2,319
2004............................................... 2,343 51 2,292
2005............................................... 22 -- 22
------ ----- ------
Total minimum capital lease payments............... 14,466 1,689 12,777
====== ===== ======
F-14
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
7. CAPITAL STOCK
Authorized, an unlimited number without par value
First preferred shares, carrying one vote per share, ranking prior to
second preferred shares, Class A Subordinate Shares and Class B Shares
with respect to the payment of dividends
Second preferred shares, non-voting, ranking prior to Class A
Subordinate Shares and Class B Shares with respect to the payment of
dividends
Class A Subordinate Shares, carrying one vote per share, participating
equally with Class B Shares with respect to the payment of dividends and
convertible into Class B Shares under certain conditions in the event of
certain takeover bids on Class B Shares
Class B Shares, carrying ten votes per share, participating equally with
Class A Subordinate Shares with respect to the payment of dividends,
convertible at any time at the option of the holder into Class A
Subordinate Shares
AS AT AS AT SEPTEMBER 30,
MARCH 31, -------------------
2001 2000 1999
--------- -------- --------
$ $ $
(UNAUDITED)
Issued and paid
Class A Subordinate Shares................................ 598,983 490,645 423,616
Class B Shares............................................ 1,162 1,162 148
------- ------- -------
600,145 491,807 423,764
======= ======= =======
On June 18, 1998, the Company modified its authorized capital stock by
creating Series 6 first preferred shares. Series 6 first preferred shares are
convertible into Class A Subordinate Shares on the basis of one Class A
Subordinate Share for each first preferred share, Series 6.
On June 29, 1998, the Company modified its authorized capital stock by
converting the first preferred shares, Series 1 into Class A Subordinate Shares
on a one-for-one basis and canceling the unissued first preferred shares,
Series 1, 2, 3, 4 and 5 from the Company's authorized share capital.
F-15
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
7. CAPITAL STOCK (CONTINUED)
For the six months ended March 31, 2001 and the years ended September 30,
2000, 1999 and 1998 and after giving retroactive effect to the subdivision of
the Company's shares that occurred on December 15, 1997, May 21, 1998 and
January 7, 2000, the Class A Subordinate Shares, Class B Shares and first
preferred shares changed as follows:
CLASS A SUBORDINATE CLASS B FIRST PREFERRED
SHARES SHARES SHARES
---------------------- --------------------- -----------------------
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT
----------- -------- ---------- -------- ------------ --------
$ $ $
Balance at September 30, 1997...... 87,962,160 33,037 43,718,624 187 36,800,000 18,400
Issued for cash.................... -- -- -- -- 17,512,864 43,672
Issued as consideration for
business acquisitions............ 3,015,712 1,800 -- -- 76,521,600 317,628
Options exercised.................. 1,340,388 4,048 -- -- -- --
Conversion......................... 139,779,436 379,739 (8,944,972) (39) (130,834,464) (379,700)
----------- ------- ---------- ----- ------------ --------
Balance at September 30, 1998...... 232,097,696 418,624 34,773,652 148 -- --
Options exercised.................. 1,790,278 4,992 -- -- -- --
----------- ------- ---------- ----- ------------ --------
Balance at September 30, 1999...... 233,887,974 423,616 34,773,652 148 -- --
Issued for cash.................... 287,914 4,003 -- -- -- --
Issued as consideration for
business acquisitions............ 5,626,369 57,112 -- -- -- --
Options exercised.................. 953,410 5,914 72,874 1,014 -- --
----------- ------- ---------- ----- ------------ --------
BALANCE AT SEPTEMBER 30, 2000...... 240,755,667 490,645 34,846,526 1,162 -- --
Issued as consideration for
business acquisitions
(unaudited)...................... 14,299,441 107,853 -- -- -- --
Options exercised (unaudited)...... 164,833 485 -- -- -- --
----------- ------- ---------- ----- ------------ --------
BALANCE AT MARCH 31, 2001
(UNAUDITED)...................... 255,219,941 598,983 34,846,526 1,162 -- --
=========== ======= ========== ===== ============ ========
STOCK OPTION PLAN
Under a Stock option plan for certain employees and directors of the Company
and its subsidiaries, the Board of Directors may grant, at its discretion,
options to purchase company stock to certain employees and directors of the
Company and its subsidiaries. The exercise price is established by the Board of
Directors but may not be lower than the average closing price for Class A
Subordinate Shares over the five business days preceding the date of the grant.
Options are exercisable from the date of grant. Each option must be exercised
within a ten-year period, except in the event of retirement, termination of
employment or death. At September 30, 2000, options for 23,307,734 Class A
Subordinate Shares have been reserved for issuance under the stock option plan.
F-16
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
7. CAPITAL STOCK (CONTINUED)
The following table presents information concerning all stock options
granted to certain employees and directors by the Company:
SIX MONTHS YEARS ENDED SEPTEMBER 30,
ENDED ------------------------------------------------------------------------
MARCH 31, 2001 2000 1999 1998
--------------------- ---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
NUMBER OF PRICE PER NUMBER OF PRICE PER NUMBER OF PRICE PER NUMBER OF PRICE PER
OPTIONS SHARE OPTIONS SHARE OPTIONS SHARE OPTIONS SHARE
--------- --------- ---------- --------- ---------- --------- ---------- ---------
$ $ $ $
(UNAUDITED)
Outstanding, beginning
of period........... 6,413,181 11.46 4,996,414 8.23 5,497,696 4.85 3,834,640 2.77
Granted during the
period.............. 2,565,800 9.66 2,565,594 15.93 1,415,980 14.65 3,027,444 6.71
Exercised, forfeited
and expired during
the period.......... (638,556) 11.54 (1,148,827) 7.44 (1,917,262) 3.26 (1,364,388) 3.02
--------- ----- ---------- ----- ---------- ----- ---------- ----
Outstanding, end of
period.............. 8,340,425 10.90 6,413,181 11.46 4,996,414 8.23 5,497,696 4.85
========= ===== ========== ===== ========== ===== ========== ====
The following table summarizes information about outstanding stock options
granted to certain employees and directors of the Company at September 30, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------- ----------------------------
WEIGHTED AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER CONTRACTUAL LIFE AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------- ----------- ---------------- -------------- ----------- --------------
$ $ $
0.98 181,000 2 0.98 181,000 0.98
1.88 175,000 2 1.88 175,000 1.88
3.15 to 4.44 565,496 2 4.07 565,496 4.07
5.39 to 5.75 1,215,500 3 5.71 1,038,000 5.71
9.03 to 13.33 1,084,490 5 12.02 917,654 11.90
14.00 to 16.63 3,146,127 10 15.73 632,724 15.33
24.51 to 26.03 45,568 10 25.99 1,068 24.51
--------- -- ----- --------- -----
6,413,181 7 11.46 3,510,942 8.37
========= == ===== ========= =====
F-17
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
7. CAPITAL STOCK (CONTINUED)
A) EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
SIX MONTHS ENDED YEARS ENDED
MARCH 31, SEPTEMBER 30,
------------------------- ---------------------------------------
2001 2000 2000 1999 1998
----------- ----------- ----------- ----------- -----------
$ $ $ $ $
(UNAUDITED)
NUMERATOR:
Net earnings.................. 25,628 46,371 55,666 83,816 34,828
=========== =========== =========== =========== ===========
DENOMINATOR:
Denominator for basic earnings
per share -- weighted
average shares.............. 281,893,441 269,709,197 270,442,354 267,969,082 234,614,324
Dilutive effect of employee
stock options............... 845,704 3,393,168 2,317,858 1,127,202 3,191,550
----------- ----------- ----------- ----------- -----------
Denominator for diluted
earnings per share --
adjusted weighted average
shares and assumed
conversions................. 282,739,145 273,102,365 272,760,212 269,096,284 237,805,874
=========== =========== =========== =========== ===========
Basic earnings per share...... 0.09 0.17 0.21 0.31 0.15
=========== =========== =========== =========== ===========
Diluted earnings per share.... 0.09 0.17 0.20 0.31 0.15
=========== =========== =========== =========== ===========
8. INCOME TAXES
As described in Note 2, the Company adopted the recommendations of CICA
Handbook Section 3465, Income Taxes, effective October 1, 1999 and prior year
figures have not been restated. The terminology used to describe comparative
figures is consistent with the terminology used to describe current year figures
calculated using the liability method of tax allocation.
The income tax provision for the years ended September 30, is as follows:
LIABILITY
METHOD DEFERRAL METHOD
--------- -------------------
2000 1999 1998
--------- -------- --------
$ $ $
Current............................................. 46,494 57,085 26,663
Future(1)........................................... 3,491 12,858 2,622
------ ------ ------
49,985 69,943 29,285
====== ====== ======
- ------------------------
(1) Includes $1,277,000 ($494,000 in 1999 and $96,000 in 1998) of future income
taxes related to goodwill amortization.
F-18
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
8. INCOME TAXES (CONTINUED)
The Company's effective income tax rate differs from the combined Canadian
statutory tax rate for the following reasons:
LIABILITY DEFERRAL
METHOD METHOD
--------- -------------------
2000 1999 1998
--------- -------- --------
% % %
Combined federal and provincial statutory tax rates..... 40.6 41.9 41.9
Non-deductible items.................................... 4.7 5.1 6.8
Utilization of non-recognized tax benefits of a
subsidiary............................................ -- (1.1) (2.6)
Other................................................... 1.5 (0.6) (0.3)
---- ---- ----
Effective income tax rate before goodwill
amortization.......................................... 46.8 45.3 45.8
Goodwill amortization................................... (6.3) (4.1) (5.2)
---- ---- ----
Effective income tax rate............................... 40.5 41.2 40.6
==== ==== ====
At September 30, 2000, future income taxes are as follows:
$
Future income tax assets:
Provision for integration costs........................... 10,415
Tax benefits on losses.................................... 23,654
Unclaimed research and experimental development
expenses................................................ 2,041
Other..................................................... 1,201
-------
37,311
-------
Future income tax liabilities:
Fixed assets.............................................. 1,958
Contract costs............................................ 21,550
Work in progress.......................................... 7,190
Goodwill.................................................. 1,049
Other..................................................... 145
-------
31,892
-------
Valuation allowance......................................... 5,789
-------
Future income taxes, net.................................... (370)
=======
Future income taxes are classified as follows:
$
Current future income tax assets. 7,052
Long-term future income tax assets.......................... 24,470
Current future income tax liabilities....................... (7,963)
Long-term future income tax liabilities..................... (23,929)
-------
Future income tax liabilities, net.......................... (370)
=======
F-19
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
8. INCOME TAXES (CONTINUED)
Comparative figures for future income tax assets and liabilities are not
presented as they would not provide any additional useful information.
Certain of the Company's subsidiaries have losses carried forward
aggregating approximately $64,500,000, of which approximately $50,400,000
originates from the Company's U.S. subsidiaries, available to reduce future
taxable income and expiring at various dates to 2020. In addition, losses
approximating $3,700,000 can be used to offset future years' taxable income
indefinitely. The benefit of these losses has been reflected in the consolidated
financial statements to the extent that it was considered to be more likely than
not that the related future income tax assets would be realized.
9. BUSINESS ACQUISITIONS
During the year ended September 30, 2000, the Company made the following
acquisitions:
The Company acquired all the outstanding shares of MCM Technology Inc.
("MCM") and of APG Solutions & Technologies inc. ("APG") on October 26,
1999, and on September 1, 2000, respectively and began recording the
results of operations from these entities as of their respective
effective acquisition dates. MCM is an information technology consulting
firm serving clients mainly in the health care and telecommunications
industries. APG is an information technology consulting firm
specializing in the implementation of enterprise resource planning
packages ("ERP"), system evolution, electronic commerce and knowledge
management.
These acquisitions were accounted for using the purchase method, as follows:
MCM APG TOTAL
-------- -------- --------
$ $ $
Non-cash working capital items..................... (1,208) (8,079) (9,287)
Fixed assets....................................... 872 2,089 2,961
Contract costs..................................... -- 1,501 1,501
Future income taxes................................ 363 9,570 9,933
Goodwill........................................... 8,925 64,349 73,274
Assumption of long-term debt....................... (635) (2,240) (2,875)
------ ------- -------
8,317 67,190 75,507
Cash position at acquisition....................... 1,008 (7,162) (6,154)
------ ------- -------
9,325 60,028 69,353
====== ======= =======
Consideration
Cash............................................. 2,900 9,341 12,241
Issuance of 5,626,369 Class A Subordinate
Shares......................................... 6,425 50,687 57,112
------ ------- -------
9,325 60,028 69,353
====== ======= =======
F-20
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
9. BUSINESS ACQUISITIONS (CONTINUED)
On October 29, 1999, the Company entered into a partnership agreement with
third parties that involved the creation of PT Information Systems ("PT-SI").
The Company accounts for its 26.4% interest in PT-SI using the proportionate
consolidation method. Furthermore, during the six months ended March 31, 2001,
the Company acquired 49% of the outstanding shares of AGTI Consulting Services
Inc. ("AGTI") and increased its interest in Conseillers en informatique
d'affaires ("CIA") from 35% to 49% on November 27, 2000 and January 12, 2001,
respectively. The Company accounts for its AGTI and CIA interests using the
proportionate consolidation method. The Company's proportionate share of PT-SI,
AGTI and CIA operations included in the consolidated financial statements is as
follows:
AS OF AND FOR AS OF AND FOR
THE SIX MONTHS THE YEAR ENDED
ENDED MARCH 31, 2001 SEPTEMBER 30, 2000
--------------------- -------------------
$ $
(UNAUDITED)
BALANCE SHEET
Current assets.......................... 15,681 1,347
Non-current assets...................... 18,393 192
Current liabilities..................... 3,497 1,335
Non-current liabilities................. 29 --
STATEMENT OF EARNINGS
Revenues................................ 12,259 10,814
Expenses(1)............................. 12,286 10,312
------ ------
Net (loss) earnings..................... (27) 502
====== ======
STATEMENT OF CASH FLOWS
Funds provided by (used for):
Operations............................ 287 502
Financing activities.................. -- 234
Investing activities.................. (203) --
- ------------------------
(1) Excludes strictly the Company's share of management fees charged by the
Company to PT-SI.
F-21
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
9. BUSINESS ACQUISITIONS (CONTINUED)
During the year ended September 30, 1999, the Company made the following
acquisitions:
On January 1, 1999, the Company acquired all the outstanding shares of
9061-9313 Quebec Inc., a corporation incorporated by Mouvement
Desjardins and into which the assets of Technologie Desjardins
Laurentienne ("TDL") were transferred. On July 1, 1999, the Company
acquired substantially all of the assets related to the businesses of
DRT Systems International and DRT Systems International L.P. (jointly,
"DRT"). These acquisitions were accounted for using the purchase method,
as follows:
TDL DRT TOTAL
-------- -------- --------
$ $ $
Non-cash working capital items..................... 1,072 23,952 25,024
Fixed assets....................................... 2,516 3,207 5,723
Contract costs..................................... 1,053 -- 1,053
Goodwill........................................... 18,541 68,765 87,306
------ ------ -------
23,182 95,924 119,106
------ ------ -------
Cash consideration................................. 23,182 95,924 119,106
====== ====== =======
F-22
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
9. BUSINESS ACQUISITIONS (CONTINUED)
During the year ended September 30, 1998, the Company made the following
acquisitions:
On October 22, 1997, the Company acquired all the outstanding shares of
ISI Systems Inc., 3420035 Canada Inc. and Teleglobe Limited, which
represented the Insurance Systems group of Teleglobe Inc. ("Insurance
Systems"). On May 26, 1998, the Company increased its 50% interest in
Solfitech Inc. ("Solfitech"), a subsidiary, from 50% to 100%, following
the exercise by Societe financiere d'Innovation Inc. ("Sofinov"), a
shareholder of Solfitech, of its option to exchange its Solfitech shares
for shares of the Company. Since May 26, 1998, the results of operations
have been fully consolidated. On July 1, 1998, the Company acquired all
the outstanding shares of 3439470 Canada Inc. ("Telecom Solutions"), a
corporation incorporated by Bell Canada and into which the assets of the
Bell Sygma Telecom Solutions and the Bell Sygma International operations
of Bell Sygma Inc. (with the exception of certain units) were
transferred. Finally, on September 1, 1998, the Company acquired all the
outstanding shares of Perigon Solutions Inc. These acquisitions were
accounted for using the purchase method, as follows:
INSURANCE TELECOM
SYSTEMS SOLUTIONS OTHER TOTAL
--------- --------- -------- --------
$ $ $ $
Non-cash working capital items.......... 10,494 (21,120) 2,004 (8,622)
Fixed assets............................ 12,702 17,570 1,124 31,396
Contract costs.......................... 5,000 25,000 271 30,271
Deferred income taxes................... 9,431 -- 890 10,321
Goodwill................................ 90,005 163,593 2,225 255,823
Assumption of long-term debt............ (636) -- (1,092) (1,728)
Non-controlling interest................ -- -- 247 247
------- -------- ------ -------
126,996 185,043 5,669 317,708
Cash position at acquisition............ 23,334 29,356 (1,255) 51,435
------- -------- ------ -------
150,330 214,399 4,414 369,143
======= ======== ====== =======
Consideration
Cash.................................. 30,330 16,771 2,614 49,715
Issuance of 1,507,856 Class A
Subordinate Shares.................. -- -- 1,800 1,800
Issuance of 21,060,800 First Preferred
Shares, Series 4 and 5.............. 120,000 -- -- 120,000
Issuance of 17,200,000 First Preferred
Shares, Series 6.................... -- 197,628 -- 197,628
------- -------- ------ -------
150,330 214,399 4,414 369,143
======= ======== ====== =======
F-23
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
10. SUPPLEMENTARY CASH FLOW INFORMATION
YEARS ENDED SEPTEMBER 30,
------------------------------
2000 1999 1998
-------- -------- --------
$ $ $
i) Non-cash investing and financing activities
Investing activities
Business acquisitions.......................... 57,112 -- 319,428
Purchase of fixed assets under capital
leases....................................... 2,882 11,943 6,479
------ ------ -------
59,994 11,943 325,907
====== ====== =======
Financing activities
Issuance of capital stock...................... 57,112 -- 319,428
Increase in obligations under capital leases... 2,882 11,943 6,479
------ ------ -------
59,994 11,943 325,907
====== ====== =======
ii) Interest paid and income taxes paid (recovered) for the years ended
September 30, are as follows:
2000 1999 1998
-------- -------- --------
$ $ $
Interest paid.................................... 3,754 1,509 923
Income taxes paid (recovered).................... 67,154 73,303 (865)
11. SEGMENTED INFORMATION
During the fourth quarter of fiscal 2000, the Company announced changes to
its organizational structure. The Company's six strategic business units
("SBU"), that were organized along geographic lines, except for the
Telecommunications SBU, were regrouped into three SBUs: Canada, U.S. and
International. Each SBU is evaluated primarily on its revenue, operating
earnings and net contribution (net contribution being defined as earnings before
interest, income taxes, entity subject to significant influence and amortization
of goodwill) by its respective senior executive, who reports directly to the
chief executive officer.
Each business unit, with the exception of the corporate segment, offers
end-to-end IT services including management of IT and business functions,
systems integration and consulting services to clients in industry sectors such
as telecommunications, financial services and manufacturing/retail/
distribution. The corporate segment comprises management of cash and cash
equivalents and general corporate activities such as strategy and market
development, coordination of large projects and capital investment decisions.
Costs, which have not been allocated to the other segments, are included in this
segment as they represent common costs and general head office expenses; the
allocation of these costs to the other segments would not assist in the
evaluation of the respective segments' contributions.
Because the Company has undergone significant changes of its internal
organization in a manner that causes the composition of its reportable segments
to change, those internal organization changes
F-24
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
11. SEGMENTED INFORMATION (CONTINUED)
had a major impact on the financial reporting system of the Company and it is
impracticable to present 1998 comparative figures under the new segmentation
basis.
AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 2000
---------------------------------------------------------------------------
INTERSEGMENT
CANADA U.S. INTERNATIONAL CORPORATE ELIMINATION TOTAL
--------- -------- ------------- --------- ------------ ---------
$ $ $ $ $ $
Revenue.............................. 1,131,872 215,442 179,531 -- (90,837) 1,436,008
Operating expenses................... 956,546 208,249 166,498 23,855 (90,837) 1,264,311
--------- ------- ------- ------- ------- ---------
Operating earnings before:........... 175,326 7,193 13,033 (23,855) -- 171,697
Depreciation and amortization........ 41,023 4,009 2,046 1,300 -- 48,378
--------- ------- ------- ------- ------- ---------
Earnings before interest, income
taxes, entity subject to
significant influence and
amortization of goodwill........... 134,303 3,184 10,987 (25,155) -- 123,319
========= ======= ======= ======= ======= =========
Total assets......................... 590,047 207,469 95,095 28,262 -- 920,873
========= ======= ======= ======= ======= =========
AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1999
---------------------------------------------------------------------------
INTERSEGMENT
CANADA U.S. INTERNATIONAL CORPORATE ELIMINATION TOTAL
--------- -------- ------------- --------- ------------ ---------
$ $ $ $ $ $
Revenue.............................. 1,204,719 140,617 121,179 -- (57,057) 1,409,458
Operating expenses................... 995,938 123,077 108,002 25,221 (57,057) 1,195,181
--------- ------- ------- ------- ------- ---------
Operating earnings before:........... 208,781 17,540 13,177 (25,221) -- 214,277
Depreciation and amortization........ 41,991 3,992 905 1,403 -- 48,291
--------- ------- ------- ------- ------- ---------
Earnings before interest, income
taxes, entity subject to
significant influence and
amortization of goodwill........... 166,790 13,548 12,272 (26,624) -- 165,986
========= ======= ======= ======= ======= =========
Total assets......................... 500,014 186,315 150,238 29,922 -- 866,489
========= ======= ======= ======= ======= =========
GEOGRAPHIC INFORMATION
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
2000 1999 1998
--------------------- --------------------- --------------------
REVENUE ASSETS(1) REVENUE ASSETS(1) REVENUE ASSETS(1)
--------- --------- --------- --------- -------- ---------
$ $ $ $ $ $
Canada.................... 1,043,978 412,138 1,143,874 369,399 614,911 315,055
U.S....................... 215,401 104,845 136,479 115,658 94,535 55,474
Other..................... 176,629 31,536 129,105 36,598 31,517 30,606
--------- ------- --------- ------- ------- -------
Total..................... 1,436,008 548,519 1,409,458 521,655 740,963 401,135
========= ======= ========= ======= ======= =======
- ------------------------
(1) Includes fixed assets, contract costs and goodwill.
F-25
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
11. SEGMENTED INFORMATION (CONTINUED)
REVENUE BY SERVICE LINE
YEARS ENDED SEPTEMBER 30,
---------------------------------
2000 1999 1998
--------- --------- ---------
$ $ $
Management of IT and business functions (outsourcing)....... 891,726 1,009,844 517,078
Systems integration......................................... 326,569 239,768 134,331
Consulting.................................................. 217,713 159,846 89,554
--------- --------- ---------
Total....................................................... 1,436,008 1,409,458 740,963
========= ========= =========
The Canada and International segments comprise revenues from contracts with
a shareholder, its subsidiaries and its affiliated companies. Other than that
group, no single customer represents more than 10% of the Company's revenue (see
Note 12).
AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 2001
--------------------------------------------------------------------------
INTERSEGMENT
CANADA U.S. INTERNATIONAL CORPORATE ELIMINATION TOTAL
-------- -------- ------------- --------- ------------ ---------
$ $ $ $ $ $
(UNAUDITED)
Revenue............................... 590,265 100,880 38,828 -- (21,812) 708,161
Operating expenses.................... 473,384 104,246 39,328 17,143 (21,812) 612,289
------- ------- ------ ------- ------- ---------
Operating earnings before:............ 116,881 (3,366) (500) (17,143) -- 95,872
Depreciation and amortization......... 23,592 1,602 837 557 -- 26,588
------- ------- ------ ------- ------- ---------
Earnings before interest, income
taxes, entity subject to significant
influence and amortization of
goodwill............................ 93,289 (4,968) (1,337) (17,700) 69,284
======= ======= ====== ======= ======= =========
Total assets.......................... 797,867 198,360 63,615 47,409 -- 1,107,251
======= ======= ====== ======= ======= =========
AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 2000
-------------------------------------------------------------------------
INTERSEGMENT
CANADA U.S. INTERNATIONAL CORPORATE ELIMINATION TOTAL
-------- -------- ------------- --------- ------------ --------
$ $ $ $ $ $
(UNAUDITED)
Revenue................................. 603,176 105,990 119,211 -- (43,171) 785,206
Operating expenses...................... 498,556 96,216 103,023 12,569 (43,171) 667,193
------- ------- ------- ------- ------- -------
Operating earnings before:.............. 104,620 9,774 16,188 (12,569) -- 118,013
Depreciation and amortization........... 21,363 2,382 882 663 -- 25,290
------- ------- ------- ------- ------- -------
Earnings before interest, income taxes,
entity subject to significant
influence and amortization of
goodwill.............................. 83,257 7,392 15,306 (13,232) -- 92,723
======= ======= ======= ======= ======= =======
Total assets............................ 516,187 169,302 147,372 60,462 -- 893,323
======= ======= ======= ======= ======= =======
F-26
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
12. RELATED PARTY TRANSACTIONS
In the normal course of business, the Company is party to contracts with
certain of BCE Inc.'s (a shareholder) subsidiaries and affiliated companies,
pursuant to which the Company is its preferred supplier for information systems
and IT needs. Transactions and resulting balances as of and for the years ended
September 30, which were measured at exchange amounts, are presented below:
2000 1999 1998
-------- -------- --------
$ $ $
Revenue.......................................... 572,630 526,696 140,000
Purchase of services............................. 169,910 110,009 12,213
Accounts receivable.............................. 53,235 11,961 8,000
Accounts payable................................. 12,645 20,960 13,550
Work in progress................................. 12,072 38,561 --
Deferred revenue................................. 11,998 5,912 11,313
Contract costs and other items................... 25,711 31,200 --
13. COMMITMENTS AND CONTINGENCIES
At September 30, 2000, the Company is committed under terms of operating
leases with various expiration dates, primarily for rental of premises and
computer equipment used in outsourcing contracts, in the aggregate amount of
approximately $210,456,000. At September 30, 2000, minimum lease payments due in
each of the next five years are as follows:
$
2001....................................................... 56,713
2002....................................................... 43,426
2003....................................................... 30,772
2004....................................................... 21,359
2005....................................................... 18,169
The Company concluded four long-term services agreements representing a
total commitment of $77,649,000. At September 30, 2000, minimum payments under
these agreements due in each of the next four years are as follows:
$
2001....................................................... 28,332
2002....................................................... 24,652
2003....................................................... 19,810
2004....................................................... 4,855
F-27
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
14. FINANCIAL INSTRUMENTS
FAIR VALUE
At September 30, 2000 and 1999, the estimated fair values of cash and cash
equivalents, accounts receivable, work in progress and accounts payable and
accrued liabilities approximate their respective carrying values.
The estimated fair values of long-term debt and obligations under capital
leases are not significantly different than their respective carrying values at
September 30, 2000 and 1999.
The Company does not hold or issue financial instruments for trading
purposes.
CREDIT RISK
Credit risk concentration with respect to trade receivables is limited due
to the Company's large client base. Furthermore, as described in Note 12, the
Company generates a significant portion of its revenues from a shareholder's
subsidiaries and affiliates. Management does not believe that the Company is
subject to any significant credit risk.
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES
The material differences between Canadian and U.S. GAAP affecting the
Company's consolidated financial statements are detailed as follows:
RECONCILIATION OF NET EARNINGS
SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
------------------- ------------------------------
2001 2000 2000 1999 1998
-------- -------- -------- -------- --------
$ $ $ $ $
(UNAUDITED)
Net earnings--Canadian GAAP........................ 25,628 46,371 55,666 83,816 34,828
Adjustments
Foreign currency translation (ii)................ 62 232 462 389 (1,869)
Goodwill amortization (iii)...................... (76) (250) (500) (142) --
Integration costs (iv)........................... (5,190) -- (1,764) -- --
Income taxes (i)................................. -- -- -- 550 (1,649)
Research and development (v)..................... -- -- -- 2,178 264
Purchased in-process R&D (vi).................... -- -- -- (741) 1,220
------- ------ ------ ------ ------
Net earnings--U.S. GAAP............................ 20,424 46,353 53,864 86,050 32,794
======= ====== ====== ====== ======
Basic EPS--U.S. GAAP............................... 0.07 0.17 0.20 0.32 0.14
======= ====== ====== ====== ======
Diluted EPS--U.S. GAAP............................. 0.07 0.17 0.20 0.32 0.14
======= ====== ====== ====== ======
F-28
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES (CONTINUED)
RECONCILIATION OF SHAREHOLDERS' EQUITY
AS AT
AS AT SEPTEMBER 30,
MARCH 31, ------------------------------
2001 2000 1999 1998
---------- -------- -------- --------
$ $ $ $
(UNAUDITED)
Shareholders' equity--Canadian GAAP................... 815,987 677,301 563,055 474,247
Adjustments
Adjustment for change in accounting policy (i)...... 9,134 9,134 -- --
Foreign currency translation (ii)................... 2,548 1,659 1,562 1,039
Goodwill amortization (iii)......................... (718) (642) (142) --
Integration costs (iv).............................. (6,954) (1,764) -- --
Income taxes (i).................................... -- -- (2,456) (3,006)
Research and development (v)........................ -- -- -- (2,178)
Purchased in-process R&D (vi)......................... -- -- -- 741
------- ------- ------- -------
Shareholders' equity--U.S. GAAP....................... 819,997 685,688 562,019 470,843
======= ======= ======= =======
- ------------------------
(i) Income taxes and adjustment for change in accounting policy
On October 1, 1999, the Company adopted the recommendations of CICA
Handbook Section 3465 "Income taxes" (see Note 2). The recommendations of
Section 3465 are similar to the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes" issued
by the Financial Accounting Standards Board ("FASB"). Upon the
implementation of Section 3465, the Company recorded an adjustment to
reflect the difference between the assigned value and the tax basis of an
asset acquired in a purchase business combination, which resulted in a
future income tax liability; the Company offset this amount through a
reduction of retained earnings as part of the cumulative adjustment. Under
U.S. GAAP, this amount would have been reflected as additional goodwill.
Prior to the issuance of Section 3465, under Canadian GAAP, accounting for
income taxes was similar to the provisions of the United States Accounting
Principles Board No. 11. Under U.S. GAAP, the Company would have followed
the provisions of SFAS No. 109. Comparative adjustments represent the
difference between the deferral and liability methods.
F-29
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES (CONTINUED)
(ii) Translation of foreign currencies
Under Canadian GAAP, the financial statements of the Company's foreign
subsidiaries, which are considered integrated operations, have been
translated using the temporal method. Under this method, monetary assets
and liabilities are translated at the exchange rates in effect at the
balance sheet dates and non-monetary assets and liabilities are translated
at historical exchange rates. Revenues and expenses are translated at
average rates for the period. Translation exchange gains or losses of such
subsidiaries are reflected in net earnings.
Under U.S. GAAP, SFAS No. 52, "Foreign Currency Translation", requires
companies to translate functional-currency financial statements into
reporting currency using the current exchange rate method whereby the
rates in effect on the balance sheet dates for assets and liabilities and
the weighted average rate for statement of earnings elements are used. Any
translation adjustments, resulting from the process of translating the
financial statements of foreign subsidiaries into Canadian dollars, are
excluded from the determination of net earnings and are reported as a
separate component in shareholders' equity.
(iii) Goodwill amortization
As described in (i) above, goodwill recorded by the Company as a result of
a purchase business combination is greater for U.S. GAAP purposes than for
Canadian GAAP purposes. The adjustment reflects the additional goodwill
amortization expense for U.S. GAAP purposes.
(iv) Integration costs
Under Canadian GAAP, certain costs relating to the purchaser may be
recognized in the purchase price allocation when accounting for business
combinations, subject to certain conditions. Under U.S. GAAP, only costs
relating directly to the acquired business may be considered in the
purchase price allocation. The adjustment represents the charge to net
earnings, net of income taxes, under U.S. GAAP.
(v) Research and development (R&D)
Under U.S. GAAP, software and development costs capitalized by a subsidiary
company would have been expensed. The adjustment represents the reversal of
the amortization expense, net of income taxes.
(vi) Purchased in-process R&D
As a result of the acquisition of a subsidiary company, an amount was
allocated to software and development costs incurred by a subsidiary
company prior to its acquisition. Under U.S. GAAP, this charge would be
considered as purchased in-process R&D. Purchased in-process R&D that
represents products in the development stage and not considered to have
reached technological feasibility at the time of the acquisition is
required to be expensed. The adjustment represents the reversal of the
amortization expense, net of income taxes.
(vii) Comprehensive income
Cumulative other comprehensive income is comprised solely of foreign
currency translation adjustments which result from the process of
translating the financial statements of foreign subsidiaries (see (ii)).
As at March 31, 2001, cumulative other comprehensive income amounts to
$10,351,000 (unaudited). As at September 30, 2000 and 1999, cumulative
other comprehensive income amounts to $4,804,000 and $3,042,000,
respectively.
F-30
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES (CONTINUED)
The following table presents comprehensive income in accordance with
SFAS 130 "Reporting Comprehensive Income":
SIX MONTHS ENDED YEARS ENDED
MARCH 31, SEPTEMBER 30,
------------------- ------------------------------
2001 2000 2000 1999 1998
-------- -------- -------- -------- --------
$ $ $ $ $
(UNAUDITED)
Net earnings--
U.S. GAAP......................... 20,424 46,353 53,864 86,050 32,794
Other comprehensive income:
Foreign currency translation
adjustment, net of tax........ 5,547 (169) 1,762 134 2,908
------ ------ ------ ------ ------
Comprehensive income................ 25,971 46,184 55,626 86,184 35,702
====== ====== ====== ====== ======
(viii) Proportionate consolidation
The proportionate consolidation method is used to account for interests in
joint ventures. Under U.S. GAAP, entities in which the Company owns a majority
of the share capital would be fully consolidated and those which are less than
majority-owned but over which the Company exercises significant influence, would
be accounted for using the equity method. This would result in reclassifications
in the consolidated balance sheet and statement of earnings as at and for the
year ended September 30, 2000. However, the differences in the case of
majority-owned joint ventures were not considered material and have consequently
not been presented (see Note 9). In accordance with practices prescribed by the
U.S. Securities and Exchange Commission, the Company has elected, for the
purpose of this reconciliation, to account for interests in joint ventures using
the proportionate consolidation method.
(ix) Recent pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement, as amended by SFAS No. 138
in June 2000, is effective for year ends beginning after June 15, 2000. SFAS
No. 133 requires all derivatives, including those embedded in other contracts,
to be recorded on the balance sheet at fair value. Changes in the fair values of
derivatives are recorded either in current earnings or other comprehensive
income, depending on whether or not the derivative is designated as a part of a
hedge transaction and the type of hedge transaction. The ineffective portion of
all hedges will be recorded in current earnings.
The Company has adopted SFAS No. 133 effective October 1, 2000, and
accordingly, the Company will be required to periodically revalue any derivative
instruments to fair values and record any resulting gains or losses to current
earnings or other comprehensive income, as appropriate. The adoption of SFAS
No. 133 did not have a material impact on its consolidated results of operations
or financial position.
F-31
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES (CONTINUED)
Furthermore, the Company determined that the adoption of Staff Accounting
Bulletin No. 101, Revenue Recognition in financial statements, had no material
adverse effect on the business, results of operations and financial condition.
(x) Earnings before interest, taxes, depreciation and amortization
("EBITDA") and other non-U.S. GAAP measures
Under Canadian GAAP, companies are permitted to provide supplementary
measures of earnings, such as EBITDA, in the notes to the consolidated financial
statements, provided that these measures are not given the same prominence as
reported earnings per share. For the purpose of reporting under U.S. GAAP,
companies do not disclose these supplementary measures.
EBITDA is equal to operating earnings before depreciation and amortization.
EBITDA is presented because it is a widely accepted financial indicator of a
company's ability to service and incur debt. EBITDA should not be considered by
an investor as an alternative to operating income or net income, as an indicator
of operating performance or to the statement of cash flows or as a measure of
liquidity. EBITDA as presented may not be comparable to similarly titled
measures of other companies.
(xi) Earnings before amortization of goodwill
In Canada, the Accounting Standards Board has approved an addendum to
"Business Combinations", Section No. 1580 that permits goodwill amortization
expense to be presented net-of-tax on a separate line in the Consolidated
Statement of Earnings. This presentation is not currently permitted under U.S.
GAAP.
(xii) Depreciation and amortization
Under U.S. GAAP, depreciation and amortization amounts would be included in
operating expenses.
(xiii) Consolidated statements of cash flows
The Company's consolidated statements of cash flows for each of the years in
the three-year period ended September 30, 2000 and for the six months ended
March 31, 2001 and 2000 were prepared in accordance with Section No. 1540, CASH
FLOW STATEMENTS, of the CICA Handbook the provisions of which are substantially
similar to those of SFAS No. 95, STATEMENT OF CASH FLOWS."
The following items present other supplementary U.S. GAAP disclosures:
A) ACCOUNTS RECEIVABLE
Accounts receivable at September 30, 2000 and 1999 are net of an allowance
for doubtful accounts of approximately $6,559,000 and $4,449,000, respectively.
B) GOODWILL
F-32
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES (CONTINUED)
The carrying value of goodwill at September 30, is as follows:
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
-------- ------------ --------
$ $ $
2000.......................................... 467,269 71,366 395,903
1999.......................................... 411,000 52,213 358,787
C) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at September 30, comprise the
following:
2000 1999
-------- --------
$ $
Trade..................................................... 70,088 114,931
Accrued payroll........................................... 41,211 51,063
Other..................................................... 31,455 38,403
------- -------
142,754 204,397
======= =======
D) FAIR VALUE OF STOCK OPTIONS
The fair value of each option is estimated at the date of grant using the
Black-Scholes option pricing model, regarding the Company's Stock option plan.
The following assumptions were used for grants, for the years ended
September 30:
2000 1999 1998
-------- -------- --------
Dividend yield................................... 0.0% 0.0% 0.0%
Expected volatility.............................. 88.6% 90.0% 95.6%
Risk-free interest rates......................... 5.9% 5.1% 5.4%
Expected life.................................... 5 YEARS 5 years 5 years
The Company applied U.S. Accounting Principles Board ("APB") No. 25 and
related interpretations in accounting for its stock-based compensation plans. No
compensation expense was charged against income for the years ended
September 30, 2000, 1999 and 1998. Had costs for the stock-based compensation
plans been determined based on the fair value at the grant dates for awards
F-33
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
15. RECONCILIATION OF RESULTS REPORTED IN ACCORDANCE WITH CANADIAN GAAP TO U.S.
GAAP AND OTHER SUPPLEMENTARY U.S. GAAP DISCLOSURES (CONTINUED)
consistent with SFAS 123, the Company's pro-forma net earnings and earnings per
share for the years ended September 30 would have been as follows:
2000 1999 1998
-------- -------- --------
$ $ $
Net earnings--U.S. GAAP
As reported....................................... 53,864 86,050 32,794
Pro forma......................................... 41,681 76,139 29,604
Basic and diluted earnings per share--U.S. GAAP
As reported....................................... 0.20 0.32 0.14
Pro forma......................................... 0.15 0.28 0.12
Weighted average fair value of options granted by
the Company....................................... 11.52 10.61 4.83
E) COSTS OF SERVICES, SELLING AND ADMINISTRATIVE EXPENSES
Costs of services, selling and administrative expenses for the years ended
September 30, were as follows:
2000 1999 1998
--------- --------- --------
$ $ $
Cost of services.............................. 1,061,540 998,094 533,494
Selling and administrative expenses........... 192,811 187,469 100,122
--------- --------- -------
1,254,351 1,185,563 633,616
========= ========= =======
F) PRO FORMA INFORMATION
The following unaudited table compares CGI's reported operating results to
pro forma information prepared on the basis that the acquisitions completed
during 2000 (see Note 9) had taken place at the beginning of the fiscal years
presented.
YEARS ENDED
SEPTEMBER 30,
---------------------
2000 1999
--------- ---------
As reported:
Revenue................................................... 1,436,008 1,409,458
Net earnings.............................................. 53,864 86,050
Basic earnings per share.................................. 0.20 0.32
Diluted earnings per share................................ 0.20 0.32
Pro forma (unaudited):
Pro forma revenue......................................... 1,498,065 1,475,647
Pro forma net earnings.................................... 48,787 81,486
Pro forma basic earnings per share........................ 0.18 0.30
Pro forma diluted earnings per share...................... 0.18 0.30
F-34
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
16. COMPARATIVE FIGURES
Certain comparative figures have been reclassified in order to conform to
the presentation adopted in 2000.
17. SUBSEQUENT EVENTS
a) During the six months ended March 31, 2001, the Company made the
following acquisitions:
The Company acquired all the outstanding shares of C.U. Processing Inc. and
RSI Realtime Inc. on October 4, 2000, and on December 12, 2000, respectively,
and acquired 49% of the outstanding shares of AGTI (see Note 9) on November 27,
2000. In addition, the Company acquired all the outstanding shares of
Groupe-conseil CDL Inc. on January 4, 2001. Furthermore, on January 9, 2001, the
Company announced that its offer to purchase all of the outstanding common
shares of Star Data Systems Inc. ("Star Data") on the basis of 0.737 Class A
Subordinate Shares of the Company for each Star Data common share, was
successful with all the conditions of its offer having been satisfied. Finally,
on January 12, 2001, the Company increased its interest in CIA from 35% to 49%
(see Note 9) and began using the proportionate consolidation method to account
for this investment; prior to January 12, 2001, the Company used the equity
method to account for this investment. A contingent payment of $1,640,000 for
AGTI was made in the three months ended March 31, 2001 based on the
accomplishment of specified financial goals as of December 31, 2000. The
contingent payment resulted in a corresponding increase of the purchase price
and the resulting goodwill.
STAR C.U.
DATA AGTI PROCESSING OTHER TOTAL
-------- -------- ---------- -------- --------
$ $ $ $ $
Non-cash working capital
items........................ (15,791) 2,216 (9,811) 2,543 (20,843)
Fixed assets................... 21,211 448 3,296 485 25,440
Contract costs................. 7,613 -- 447 -- 8,060
Future income taxes............ 16,013 10 4,228 428 20,679
Goodwill....................... 71,814 14,602 39,351 10,214 135,981
Assumption of long-term debt... (10,799) -- (812) (1,462) (13,073)
------- ------- ------ ------ -------
90,061 17,276 36,699 12,208 156,244
Cash position at acquisition... 12,759 7,639 1,837 635 22,870
------- ------- ------ ------ -------
102,820 24,915 38,536 12,843 179,114
======= ======= ====== ====== =======
Consideration
Cash......................... -- 24,915 38,536 6,542 69,993
Issuance of 14,299,441
Class A Subordinate
Shares..................... 102,820 -- -- 5,033 107,853
------- ------- ------ ------ -------
Equity value of CIA
investment at acquisition
date....................... -- -- -- 1,268 1,268
------- ------- ------ ------ -------
102,820 24,915 38,536 12,843 179,114
======= ======= ====== ====== =======
b) On February 21, 2001, the Company signed a definitive merger agreement
providing for the acquisition by the Company of all outstanding shares of common
stock of IMRglobal Corp. ("IMR"),
F-35
CGI GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS ONLY ARE IN THOUSANDS OF CANADIAN DOLLARS)
17. SUBSEQUENT EVENTS (CONTINUED)
on the basis of 1.5974 Class A Subordinate Shares of the Company for each share
of IMR common stock. As a result of the proposed merger, based on the number of
outstanding shares of IMRglobal common stock and IMR stock options outstanding
at June 4, 2001, the Company will issue approximately 70.6 million Class A
Subordinate Shares and outstanding IMR stock options will become up to
approximately 9.5 million options to acquire Class A Subordinate Shares. The
total purchase price will be determined using the Class A Subordinate Share
weighted average trading price on the Toronto Stock Exchange for the
twenty-one-day period starting ten days before and ending ten days after the
merger date. Estimated professional fees and integration costs related to the
acquisition of approximately $74,000,000 will be included in the total purchase
consideration.
Certain holders of Class B Shares have committed to exercise their
preemptive rights in connection with the merger pursuant to which approximately
6.0 million Class B Shares will be issued, up to a maximum aggregate amount of
$(Cdn)60,000,000. BCE Inc., a shareholder, has determined not to exercise its
preemptive rights to acquire additional Class A Subordinate Shares and has
indicated that it will decide prior to closing of the merger whether or not it
will exercise these preemptive rights to acquire additional Class B Shares.
However, in the event BCE Inc. decides to exercise its preemptive rights to
acquire additional Class B Shares, approximately 3.6 million additional Class B
Shares of the Company would be issued at the same price per share described
above.
Completion of the transaction is subject to customary conditions, including
satisfaction of regulatory requirements. The merger is also subject to approval
of IMRglobal shareholders at a special meeting, to be held on July 13, 2001, by
resolution adopted by a majority of shareholders. The transaction will be
accounted for using the purchase method and the excess of the purchase price
over the estimated fair value of net assets acquired will be accounted for as
goodwill and will be amortized on a straight-line basis over 20 years.
c) On May 1, 2001, Mouvement Desjardins and the Company signed an agreement
confirming a strategic alliance for the management of data and micro-computing
of Mouvement Desjardins operations. In the context of this agreement, a warrant
was issued by the Company to La Confederation des Caisses Populaires et
d'Economie Desjardins du Quebec which is entitled to subscribe, until April 30,
2006, for up to 4,000,000 Class A Subordinate Shares of the Company at a price
of $6.55 per share.
Upon the exercise of this warrant, Class B shareholders may subscribe to
additional Class B Shares in order to maintain their then current voting rights
associated with those shares at a price of $6.55 per share. Furthermore, BCE,
through its additional rights in connection with certain issuances of Class A
Subordinate Shares, will also have the right to acquire additional Class A
Subordinate Shares, at the same price as above, allowing it to maintain its
equity participation in the Company.
d) On June 4, 2001, the Company entered into an agreement in principle with
Laurentian Bank of Canada to sign, before June 14, 2001, a ten year outsourcing
contract, worth approximately US$194 million. In connection with the signing of
the contract, the Company will issue a warrant to Laurentian Bank of Canada
entitling it to subscribe to 1,118,260 Class A Subordinate Shares at a price of
$8.95 per share.
F-36
Appendix A
Agreement and Plan of Merger
by and among
IMRglobal CORP.,
CGI GROUP INC.
and
CGI FLORIDA CORPORATION
Dated as of February 21, 2001
A-i
TABLE OF CONTENTS
ARTICLE I THE MERGER.......................................................A-2
Section 1.1. The Merger....................................................A-2
Section 1.2. Conversion and Exchange of Shares.............................A-2
Section 1.3. Surrender and Exchange........................................A-3
Section 1.4. Company Stock Options.........................................A-6
Section 1.5. Fractional Shares.............................................A-6
Section 1.6. The Surviving Corporation.....................................A-7
Section 1.7. Lost, Stolen or Destroyed Certificates........................A-8
Section 1.8. Dissenters' Rights............................................A-8
Section 1.9. Withholding Rights............................................A-8
Section 1.10. Shares Held by Company Affiliates.............................A-8
ARTICLE II REPRESENTATIONS AND WARRANTIES..................................A-9
Section 2.1. Representations and Warranties of the Company.................A-9
2.1.1. Organization, Good Standing and Qualification.........A-9
2.1.2. Capital Structure....................................A-10
2.1.3. Authority, Approval and Fairness Opinion.............A-11
2.1.4. Governmental Filings, No Violations..................A-12
2.1.5. Reports; Financial Statements........................A-13
2.1.6. Absence of Certain Changes...........................A-14
2.1.7. Litigation and Liabilities...........................A-15
2.1.8. Employee Benefit Plans...............................A-16
2.1.9. Labor and Employment Matters.........................A-18
2.1.10. Non-competition Agreements...........................A-19
2.1.11. Absence of Sensitive Payments........................A-19
2.1.12. Affiliate Transactions...............................A-20
2.1.13. Licenses.............................................A-20
2.1.14. Intellectual Property................................A-20
2.1.15. Continuity of Business...............................A-22
2.1.16. Compliance with Laws.................................A-23
2.1.17. Certain Contracts....................................A-23
2.1.18. Tax Treatment........................................A-23
2.1.19. Tax Matters..........................................A-24
2.1.20. Environmental Matters................................A-25
2.1.21. Registration Rights Agreements.......................A-26
2.1.22. Takeover Statutes....................................A-26
2.1.23. Real Property........................................A-27
2.1.24. Brokers and Finders..................................A-28
Section 2.2. Representations and Warranties of Parent.....................A-29
A-ii
2.2.1. Organization, Good Standing and Qualification........A-29
2.2.2. Capital Structure....................................A-30
2.2.3. Corporate Authority and Approval.....................A-30
2.2.4. Governmental Filings, No Violations..................A-31
2.2.5. Reports; Financial Statements........................A-32
2.2.6. Absence of Certain Changes...........................A-32
2.2.7. Litigation and Liabilities...........................A-33
2.2.8. Employee Benefit Plans...............................A-33
2.2.9. Labor and Employment Matters.........................A-34
2.2.10. Licenses.............................................A-35
2.2.11. Intellectual Property................................A-35
2.2.12. Continuity of Business...............................A-37
2.2.13. Compliance with Laws.................................A-37
2.2.14. Tax Treatment........................................A-37
2.2.15. Merger Sub's Operations..............................A-37
2.2.16. Tax Matters..........................................A-37
2.2.17. Environmental Matters................................A-39
2.2.18. Brokers and Finders..................................A-39
ARTICLE III COVENANTS....................................................A-39
Section 3.1. Interim Operations of the Company............................A-39
Section 3.2. Interim Operations of Parent.................................A-43
Section 3.3. Acquisition Proposals........................................A-44
Section 3.4. Information Supplied.........................................A-46
3.4.1. Registration Statement; Other SEC Filings............A-46
Section 3.5. Meetings.....................................................A-48
Section 3.6. Filings; Other Actions; Notification.........................A-48
Section 3.7. Access.......................................................A-50
Section 3.8. Publicity....................................................A-50
Section 3.9. Benefits and Other Matters...................................A-51
3.9.1. Employee Benefits....................................A-51
3.9.2. Director and Officer Indemnification and Insurance...A-52
Section 3.10. Expenses.....................................................A-53
Section 3.11. Other Actions by the Company and Parent......................A-53
3.11.1. Takeover Statutes....................................A-53
3.11.2. Notices of Certain Events............................A-53
Section 3.12. Listing Applications; Establishment of Parent Common Shares..A-54
Section 3.13. Letters of Accountants.......................................A-54
Section 3.14. Agreements of Company Affiliates.............................A-55
Section 3.15. Tax Representation Letters...................................A-55
Section 3.16. Information to be Supplied to Five Percent Transferee
Shareholder..................................................A-55
A-iii
ARTICLE IV CONDITIONS.....................................................A-55
Section 4.1. Conditions to Each Party's Obligation to Effect the Merger...A-55
4.1.1. Company Shareholder Approval.........................A-56
4.1.2. Regulatory Consents..................................A-56
4.1.3. Laws and Orders......................................A-56
4.1.4. Effectiveness of Form F-4............................A-56
4.1.5. Listing..............................................A-56
4.1.6. Third Party Consents.................................A-56
4.1.7. Parent Shareholder Approval..........................A-57
Section 4.2. Conditions to Obligations of Parent and Merger Sub...........A-57
4.2.1. Representations and Warranties of the Company........A-57
4.2.2. Performance of Obligations of the Company............A-58
4.2.3. Tax Opinion..........................................A-58
4.2.4. Executive Agreements.................................A-58
4.2.5. Affiliate Letters....................................A-58
4.2.6. Voting Agreement.....................................A-58
Section 4.3. Conditions to Obligation of the Company......................A-58
4.3.1. Representations and Warranties of Parent and Merger
Sub..................................................A-59
4.3.2. Performance of Obligations of Parent.................A-59
4.3.3. Tax Opinion..........................................A-59
ARTICLE V TERMINATION.....................................................A-60
Section 5.1. Termination by Mutual Consent................................A-60
Section 5.2. Termination by Either Parent or the Company..................A-60
Section 5.3. Termination by the Company...................................A-60
Section 5.4. Termination by Parent........................................A-61
Section 5.5. Effect of Termination and Abandonment........................A-61
ARTICLE VI MISCELLANEOUS AND GENERAL.....................................A-63
Section 6.1. Survival.....................................................A-63
Section 6.2 Modification or Amendment....................................A-63
Section 6.3. Waiver of Conditions.........................................A-63
Section 6.4. Failure or Indulgence not Waiver; Remedies Cumulative........A-63
Section 6.5. Counterparts.................................................A-64
Section 6.6. Governing Law................................................A-64
Section 6.7. Notices......................................................A-64
Section 6.8. Entire Agreement.............................................A-65
Section 6.9 Severability.................................................A-65
Section 6.10. Interpretation...............................................A-66
Section 6.11. Assignment...................................................A-66
Section 6.12. Specific Performance.........................................A-66
A-iv
Section 6.13. Forms of Currency............................................A-66
EXHIBITS
Exhibit A Executive Agreements
Exhibit B Form of Company Affiliate Letter
Exhibit C Voting Agreement
A-v
DEFINITIONS
TERM SECTION
- ---- -------
Acquisition Proposal.....................................................3.3.1
Affiliate...............................................................2.1.12
Agreement........................................................... preamble
Antitrust Division.......................................................3.6.6
Bankruptcy and Equity Exception..........................................2.1.3
Business Day...............................................................6.7
Canadian GAAP............................................................2.2.5
CCA....................................................................2.1.4.1
Certificate..............................................................1.2.3
Class B Shares...........................................................2.2.2
Closing..................................................................1.1.3
Closing Date.............................................................1.1.3
Code..................................................................recitals
Company...............................................................preamble
Company Affiliates........................................................3.14
Company Balance Sheet....................................................2.1.5
Company Balance Sheet Date...............................................2.1.5
Company Common Shares.................................................recitals
Company Disclosure Schedule................................................2.1
Company Employee Plans.................................................2.1.8.1
Company Employees......................................................2.1.8.1
Company Employment Agreements..........................................2.1.8.1
Company Foreign Plan...................................................2.1.8.1
Company Indemnification Rights..........................................2.1.20
Company Lease Consents..................................................2.1.23
Company Lease List......................................................2.1.23
Company Officers.................................................2.1.11. 2.1.7
Company Preference Shares................................................2.1.2
Company Proxy Statement................................................3.4.1.1
Company Reports..........................................................2.1.5
Company Required Consents..............................................2.1.4.1
Company Requisite Vote...................................................2.1.3
Company Shareholders' Meeting..............................................3.5
Company Stock Option.....................................................1.4.1
Company Stock Plans......................................................2.1.2
Confidentiality Agreement................................................3.3.1
Contracts..............................................................2.1.4.2
A-vi
control.................................................................2.1.12
Disclosure Schedules.......................................................2.2
Effective Time...........................................................1.1.2
Environmental Laws......................................................2.1.20
ERISA..................................................................2.1.8.1
ERISA Affiliate........................................................2.1.8.2
Excess Shares..............................................................1.5
Excess Shares Trust........................................................1.5
Exchange Act...........................................................2.1.4.1
Exchange Agent...........................................................1.3.1
Exchange Ratio...........................................................1.2.2
Excluded Share...........................................................1.2.1
Executive Agreements..................................................recitals
FBCA.....................................................................1.1.1
Five-Percent Transferee Shareholder.......................................3.16
Form F-4...............................................................3.4.1.1
FTC......................................................................3.6.6
Governmental Consents....................................................4.1.2
Governmental Entity....................................................2.1.4.1
HSR Act................................................................2.1.4.1
Indemnitee...............................................................3.9.2
IP Rights...............................................................2.1.14
Law....................................................................2.1.4.2
Licenses................................................................2.1.13
Lien...................................................................2.1.4.2
Material Adverse Effect..................................................2.1.1
Merger................................................................recitals
Merger Agreement......................................................preamble
Merger Sub............................................................preamble
Nasdaq...................................................................1.3.4
NYSE...................................................................2.1.4.1
Orders...................................................................4.1.3
Parent................................................................preamble
Parent Balance Sheet.....................................................2.2.5
Parent Balance Sheet Date................................................2.2.5
Parent Certificates......................................................1.3.1
Parent Common Shares.....................................................1.2.2
Parent Disclosure Schedule.................................................2.2
Parent Employee Plans..................................................2.2.8.1
Parent Employees.......................................................2.2.8.1
Parent Executive Officers................................................2.2.7
Parent Foreign Plan....................................................2.2.8.1
A-vii
Parent Reports...........................................................2.2.5
Parent Required Consents...............................................2.2.4.1
Parent Shareholder Approval..............................................4.1.7
Payment.................................................................2.1.11
Person...................................................................2.1.1
Reports..................................................................2.2.5
Representatives..........................................................3.3.1
SEC......................................................................1.4.2
Securities Act...........................................................1.4.2
Subsidiary...............................................................2.1.1
Superior Proposal........................................................3.3.1
Surviving Corporation....................................................1.1.1
Takeover Statute........................................................2.1.22
Tax Representation Letter.................................................3.15
Tax Returns..........................................................2.1.19(a)
Taxes................................................................2.1.19(c)
Termination Date...........................................................5.2
TSE....................................................................2.1.4.1
U.S. GAAP................................................................2.1.5
Voting Agreement......................................................recitals
A-viii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 21, 2001
(this "AGREEMENT" or the "MERGER AGREEMENT"), by and among CGI GROUP INC., a
company incorporated under the laws of Quebec ("PARENT"), IMRglobal CORP., a
Florida corporation (the "COMPANY") and CGI FLORIDA CORPORATION, a Florida
corporation and a direct, wholly owned subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of the Company, Parent
and Merger Sub have adopted this Agreement and have determined that it is
advisable and in the best interests of their respective shareholders to
consummate the merger of Merger Sub with and into the Company on the terms and
conditions set forth in this Agreement (the "MERGER");
WHEREAS, for U.S. federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "CODE"), and the rules and
regulations promulgated thereunder;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent to
enter into this Agreement, Parent and Merger Sub are entering into a Voting
Agreement, dated as of the date of this Agreement (the "VOTING AGREEMENT"), with
certain shareholders of the Company pursuant to which these shareholders, among
other things, are agreeing to vote all of their shares of common stock, par
value $0.10, of the Company ("COMPANY COMMON SHARES") in favor of the approval
of this Agreement and the Merger, and the Board of Directors of the Company has
approved the entry into the Voting Agreement by the parties thereto; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent to
enter into this Agreement, Parent, the Company and Merger Sub are entering into
a Letter Agreement, dated as of the date of this Agreement, with Mr. Satish K.
Sanan, the Chairman and Chief Executive Officer of the Company, and the Company
and Parent are entering into an Executive Employment Agreement, dated as of the
date of this Agreement, with Mr. Sanan, each in the form attached hereto as
EXHIBIT A (together, the "EXECUTIVE AGREEMENTS").
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto, intending to be legally bound, agree as follows:
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ARTICLE I
THE MERGER
Section 1.1. THE MERGER.
1.1.1. At the Effective Time (as defined in Section 1.1.2), Merger
Sub shall be merged with and into the Company in accordance with the Florida
Business Corporation Act (the "FBCA"), whereupon the separate existence of
Merger Sub shall cease, and the Company shall be the surviving corporation in
the Merger (the "SURVIVING CORPORATION") and shall continue as a wholly owned
subsidiary to be governed by the laws of the State of Florida, and the separate
corporate existence of the Company, with all its rights, privileges, immunities,
powers, franchises, restrictions, disabilities and duties, shall continue
unaffected by the Merger except as set forth in this Article I. The Merger shall
have the effects specified in the FBCA.
1.1.2. On the Closing Date (as defined in Section 1.1.3), the
Company and Merger Sub will file articles of merger with the Secretary of State
of the State of Florida and make all other filings or recordings required by
applicable Law (as defined in Section 2.1.4.2) in connection with the Merger.
The Merger shall become effective at the time the articles of merger are duly
filed with the Secretary of State of the State of Florida or at any later time
as Parent and the Company shall agree and shall specify in the articles of
merger (the "EFFECTIVE TIME").
1.1.3. The consummation of the Merger (the "CLOSING") shall take
place (i) at 10:00 A.M. (New York City time) at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, New York, New York, as soon as
practicable, but in any event within three Business Days (as defined in Section
6.7) after the day on which the last to be fulfilled or waived of the conditions
set forth in Article IV (other than those conditions that by their nature are to
be fulfilled at the Closing, but subject to the fulfillment or waiver of these
conditions) shall be fulfilled or waived in accordance with this Agreement
unless otherwise agreed by the Company and Parent (the "CLOSING DATE").
1.1.4. Parent shall have the right to elect to cause Merger Sub to
be a second-tier, wholly-owned subsidiary of Parent; provided that this election
shall not in any material respect adversely affect the rights of the Company
under this Agreement, the benefits to the Company shareholders of the Merger
(including the tax-free nature of the Merger) or otherwise materially delay the
consummation of the Merger.
Section 1.2. CONVERSION AND EXCHANGE OF SHARES. At the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
party or shareholder:
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1.2.1. Each Company Common Share held by the Company or any
wholly-owned subsidiary of the Company as treasury stock or held by Parent or
any Subsidiary (as defined in Section 2.1.1) of Parent immediately prior to the
Effective Time (each, an "EXCLUDED SHARE") shall be canceled and no
consideration shall be exchanged with respect to these shares.
1.2.2. Subject to Section 1.5, each Company Common Share outstanding
immediately prior to the Effective Time, other than the Excluded Shares, shall
be converted into and shall be canceled in exchange for the right to receive
1.5974 (the "EXCHANGE RATIO") Class A Subordinate Shares, without par value, of
Parent ("PARENT COMMON SHARES").
1.2.3. At the Effective Time, all Company Common Shares shall no
longer be outstanding, shall be canceled and retired and shall cease to exist,
and each certificate (a "CERTIFICATE") formerly representing any Company Common
Shares (other than Excluded Shares) shall thereafter represent only the right to
receive Parent Common Shares as provided in Section 1.2.2 and the right, if any,
to receive cash in lieu of fractional interests in Parent Common Shares pursuant
to Section 1.5 and any distribution or dividend pursuant to Section 1.3.6, in
each case without interest.
1.2.4. Each share of common stock of Merger Sub, par value $0.10 per
share, outstanding immediately prior to the Effective Time shall be converted
into one newly issued, fully-paid and non-assessable share of common stock, par
value $0.10 per share, of the Surviving Corporation.
1.2.5. At the Effective Time, the Surviving Corporation will issue
shares of its common stock to Parent in consideration for Parent's issuing
Parent Common Shares to the holders of Company Common Shares. The fair market
value and number of shares issued to Parent will be equal to the fair market
value and number of Company Common Shares (other than Excluded Shares)
outstanding immediately before the Effective Time.
1.2.6. In the event that, subsequent to the date of this Agreement
but prior to the Effective Time, the Company changes the number of Company
Common Shares, or Parent changes the number of Parent Common Shares, issued and
outstanding, as a result of a stock split, reverse stock split, stock dividend,
recapitalization or redenomination of share capital, the Exchange Ratio and
other items dependent thereon shall be appropriately adjusted.
Section 1.3. SURRENDER AND EXCHANGE.
1.3.1. Prior to the Effective Time, Parent shall appoint an agent
reasonably acceptable to the Company as exchange agent (the "EXCHANGE AGENT") in
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connection with the Merger for the purpose of exchanging Certificates for
certificates representing Parent Common Shares ("PARENT CERTIFICATES"), and cash
in lieu of fractional Parent Common Shares in accordance with Section 1.5, in
connection with the Merger. Parent shall deposit with the Exchange Agent, from
time to time that number of Parent Certificates, in any denominations as the
Exchange Agent shall specify, as are issuable in respect of Company Common
Shares for which Certificates have been properly delivered to the Exchange
Agent. Parent shall also from time to time deposit or cause to deposit with the
Exchange Agent U.S. dollars in an amount sufficient to provide the Exchange
Agent with the cash to fund payments to be made pursuant to Section 1.3.6.
1.3.2. As promptly as reasonably practicable after the Effective
Time, the Surviving Corporation shall send, or shall cause the Exchange Agent to
send, to each holder of record as of the Effective Time of Company Common Shares
(other than holders of shares that constitute Excluded Shares) a letter of
transmittal, in a form upon which the Company and Parent may reasonably agree,
for use in effecting delivery of Certificates to the Exchange Agent. Each holder
of Company Common Shares that have been converted in the Merger into the right
to receive the consideration set forth in Section 1.2.2 shall, upon surrender to
the Exchange Agent of a Certificate or Certificates, together with a properly
completed letter of transmittal covering the Company Common Shares represented
by the Certificate or Certificates, be entitled to receive (i) the number of
whole Parent Common Shares into which all of the Company Common Shares,
represented by the holder's Certificate or Certificates, are converted in
accordance with Section 1.2.2 and (ii) a check in an amount of U.S. dollars
(after giving effect to any required tax withholdings) of (A) any cash in lieu
of fractional interests in shares to be paid pursuant to Section 1.5 without
interest, plus (B) any cash dividends or other distributions that any holder has
the right to receive pursuant to Section 1.3.6. Until so surrendered, each
Certificate shall, after the Effective Time, represent for all purposes only the
right to receive the number of whole Parent Common Shares into which the Company
Common Shares represented by that Certificate are converted in accordance with
Section 1.2.2 and the applicable amounts provided in the foregoing clause (ii).
1.3.3. If any Parent Common Shares are to be issued, or if any cash
in lieu of fractional interests pursuant to Section 1.5 or any cash dividends or
distributions pursuant to Section 1.3.6 are to be paid, to a person other than
the registered holder of Company Common Shares represented by a Certificate or
Certificates surrendered with respect thereto, it shall be a condition to this
issuance or payment that the Certificate or Certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person (as defined in Section 2.1.1) requesting this issuance or payment shall
pay to the Exchange Agent any transfer or other taxes required as a result of
this issuance or payment to a Person other than the registered holder of these
Company Common Shares or establish to the satisfaction of the Exchange Agent
that this tax has been paid or is not payable.
A-4
1.3.4. The stock transfer books of the Company shall be closed on
the close of trading on the Nasdaq National Market System ("NASDAQ") on the day
prior to the Effective Time, and thereafter there shall be no further
registration of transfers of Company Common Shares that were outstanding prior
to the Effective Time. After the Effective Time, Certificates presented to the
Surviving Corporation for transfer shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article I.
1.3.5. Any Parent Common Shares issued in respect of Company Common
Shares pursuant to this Article I and any cash in lieu of fractional interests
in Parent Common Shares to be paid pursuant to Section 1.5, plus any cash
dividend or other distribution that a former holder of Company Common Shares has
the right to receive pursuant to Section 1.3.6, that remains unclaimed by any
former holder of Company Common Shares six months after the Effective Time shall
be delivered by the Exchange Agent to Parent and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate which had represented
Company Common Shares may surrender such Certificate to the Surviving
Corporation or Parent and (subject to the provisions of this Section and
applicable abandoned property, escheat and similar laws) receive in exchange
therefor Parent Common Shares, together with any cash for the payment of any
fractional shares referred to in Section 1.5, into which the Company Common
Shares theretofore represented by the Certificate were converted by virtue of
the Merger. Parent shall not be liable to any former holder of Company Common
Shares for any securities delivered or any amount paid by the Exchange Agent or
its nominee to a public official pursuant to applicable abandoned property,
escheat or similar laws. Any cash and Parent Common Shares remaining unclaimed
by holders of Company Common Shares three years after the Effective Time (or any
earlier date immediately prior to that time as this cash would otherwise escheat
to or become property of any Governmental Entity (as defined in Section
2.1.4.1)) or as is otherwise provided by applicable Law shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation or
Parent, as Parent may determine, free and clear of any claims or interest of any
Person previously entitled thereto.
1.3.6. No dividends or other distributions with respect to Parent
Common Shares payable with respect to the Company Common Shares shall be paid to
the holder of any unsurrendered Certificates until those Certificates are
surrendered as provided in this Article I. Upon surrender, there shall be issued
and/or paid to the holder of Parent Common Shares issued in exchange therefor,
without interest, (A) at the time of surrender, the dividends or other
distributions payable with respect to those Parent Common Shares with a record
date on or after the date of the Effective Time and a payment date on or prior
to the date of such surrender and not previously paid and (B) at the appropriate
payment date, the dividends or other distributions payable with respect to those
Parent Common Shares with a record date on or after the date of the Effective
Time
A-5
but with a payment date subsequent to surrender. For purposes of dividends or
other distributions in respect of Parent Common Shares, all Parent Common Shares
to be issued and delivered pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time.
Section 1.4. COMPANY STOCK OPTIONS.
1.4.1. At the Effective Time, all employee and director stock
options to purchase Company Common Shares (each, a "COMPANY STOCK OPTION") which
are then outstanding and unexercised shall cease to represent a right to acquire
Company Common Shares and shall be converted automatically into options to
acquire Parent Common Shares as provided below, and Parent shall assume each
Company Stock Option subject to the terms of any of the Company Stock Plans (as
defined in Section 2.1.2) and the agreements evidencing grants thereunder. From
and after the Effective Time, (i) the number of Parent Common Shares purchasable
upon exercise of each outstanding Company Stock Option shall be equal to the
product of (x) the number of Company Common Shares that were purchasable under
that Company Stock Option immediately prior to the Effective Time multiplied by
(y) the Exchange Ratio (subject to adjustment as provided in Section 1.2.5),
rounded down to the nearest whole Parent Common Share, and (ii) the exercise
price per Parent Common Share under each Company Stock Option shall be obtained
by dividing (x) the exercise price per Company Common Share of each Company
Stock Option immediately prior to the Effective Time by (y) the Exchange Ratio
(subject to adjustment as provided in Section 1.2.5), and rounding up or down to
the nearest cent. The Board of Directors of the Company (or a duly empowered
committee thereof) has adopted all resolutions and otherwise taken all action
necessary to effectuate the foregoing. If any further action is necessary or
appropriate to implement the foregoing, each of Parent and the Company agrees to
take such action.
1.4.2. Prior to the Effective Time, Parent shall reserve for
issuance and make available for issuance in accordance with Section 1.4.1 the
number of Parent Common Shares necessary to satisfy Parent's obligations under
Section 1.4.1. As soon as reasonably practicable after the Effective Time, but
no later than three business days after the Effective Time, Parent shall file
with the U.S. Securities and Exchange Commission (the "SEC") a registration
statement on an appropriate form under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), with respect to Parent Common Shares which are subject
to the Company Stock Options as provided in Section 1.4.1, and shall use
reasonable best efforts to maintain the current status of the prospectus
contained therein, as well as comply with any applicable state securities or
"blue sky" laws, for so long as those options remain outstanding.
Section 1.5. FRACTIONAL SHARES. No fraction of a Parent Common Share will
be issued pursuant to the Merger, but in lieu thereof each former holder of
Company Common Shares otherwise entitled to receive a fractional interest in a
Parent Common
A-6
Share will be entitled to receive in accordance with the provisions of this
Section 1.5 a cash payment in lieu of that fractional interest in a Parent
Common Share representing the holder's proportionate interest in the net
proceeds from the sale by the Exchange Agent on behalf of all holders otherwise
entitled to fractional interests in Parent Common Shares which would otherwise
be issued pursuant to the Merger (the "EXCESS SHARES"). The sale of the Excess
Shares by the Exchange Agent shall be executed through the NYSE. Until the net
proceeds of the sale of the Excess Shares have been distributed to the former
holders of Company Common Shares, the Exchange Agent will hold the proceeds in
trust for those former holders (the "EXCESS SHARES TRUST"). Commissions,
transfer taxes and other out-of-pocket transaction costs, including the expenses
and compensation, of the Exchange Agent incurred in connection with the sale of
the Excess Shares shall be paid from cash held in the Excess Shares Trust. The
Exchange Agent shall determine the portion of the Excess Shares Trust to which
each former holder of Company Common Shares shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Excess
Shares Trust by a fraction the numerator of which shall be the fractional
interest of Parent Common Shares to which such former holder would otherwise be
entitled and the denominator of which is the aggregate amount of fractional
interests in Parent Common Shares to which all former holders of Company Common
Shares would otherwise be entitled. As soon as practicable after the
determination of the amount of cash, if any, to be paid to former holders of
Company Common Shares in lieu of fractional interests in a Parent Common Share,
the Exchange Agent shall make available those amounts to the former holders
without interest. The parties hereto acknowledge that payment of the cash
consideration in lieu of issuing fractional shares was not separately bargained
for consideration but merely represents a mechanical rounding off for purposes
of simplifying the corporate and accounting problems that would otherwise be
caused by the issuance of fractional shares.
Section 1.6. THE SURVIVING CORPORATION.
1.6.1. The articles of incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation until amended as provided herein or in accordance
with applicable Law; provided, however, that at the Effective Time, such
certificate shall be amended by virtue of this Agreement as follows:
(i) Article I shall be amended to read: "The name of
the Corporation is IMRglobal Corp.";
(ii) Section 3.1 shall be amended to read: "The Corporation
is authorized to issue seventy-five million five hundred (75,000,500) shares, of
which 75,000,000 shall be shares of common stock par value $0.10 per share and
500 shares shall be shares of preferred stock, par value $0.10 per share."
A-7
1.6.2. The by-laws of Merger Sub as in effect immediately prior to
the Effective Time shall be the by-laws of the Surviving Corporation until
amended as provided herein or in accordance with applicable Law.
1.6.3. From and after the Effective Time, until successors are duly
elected or appointed and qualified in accordance with applicable Law, (i) the
directors of Merger Sub at the Effective Time shall be the directors of the
Surviving Corporation, and (ii) the officers of Merger Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation.
Section 1.7. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the holder's
compliance with the replacement requirements established by the Exchange Agent,
including, if necessary, the posting by the holder of a bond in customary amount
as indemnity against any claim that may be made against it with respect to the
Certificate, the Exchange Agent will issue and deliver in exchange for the lost,
stolen or destroyed Certificate the applicable number of whole Parent Common
Shares (including cash in lieu of fractional shares in accordance with Section
1.5), and any unpaid dividends or other distributions deliverable pursuant to
Section 1.3.6 in respect of Company Common Shares represented by the Certificate
pursuant to this Agreement.
Section 1.8. DISSENTERS' RIGHTS. In accordance with Section 607.1302 of
the FBCA, no dissenters' rights shall be available to holders of Company Common
Shares in connection with the Merger.
Section 1.9. WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article I such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of Company Common Shares in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent, as
the case may be.
Section 1.10. SHARES HELD BY COMPANY AFFILIATES. Anything to the contrary
herein notwithstanding, no Parent Common Shares (or certificates therefor) shall
be issued in exchange for any Certificate to any Person who may be an
"affiliate" of the Company (identified pursuant to Section 3.14) until such
Person shall have delivered to Parent a duly executed letter as contemplated by
Section 3.14. Such Person shall be subject to the restrictions described in such
letter, and such Parent Common Shares (or certificates therefor) shall bear a
legend describing such restrictions.
A-8
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
disclosed in the Company Reports (as defined in Section 2.1.5) filed with the
SEC prior to the date of this Agreement and except as set forth in the
corresponding sections of the disclosure schedule to this Agreement (the
"COMPANY DISCLOSURE SCHEDULE") (it being agreed that disclosure of any item
under a subsection of this Section 2.1 in the Company Disclosure Schedule shall
be deemed disclosure with respect to other subsections of this Section 2.1 if
the applicability of such item to any such other subsection is reasonably
apparent from the face of the Company Disclosure Schedule), the Company
represents and warrants to Parent and Merger Sub as follows:
2.1.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION.
Each of the Company and its Subsidiaries is duly organized, validly
existing and in good standing or with active status (with respect to
jurisdictions that recognize the concept of good standing or active status)
under the Laws of its respective jurisdiction of organization and has all
requisite corporate or similar power and authority, and all government licenses,
authorizations, consents and approvals required to own, operate and lease its
properties and assets and to carry on its business as presently conducted and is
duly qualified to do business and is in good standing or with active status
(with respect to jurisdictions that recognize the concept of good standing or
active status) in each jurisdiction where the ownership, operation or leasing of
its assets or properties or conduct of its business requires qualification,
except where the failure to be so organized, qualified or in good standing or
with active status (with respect to jurisdictions that recognize the concept of
good standing or active status) or to have such power or authority, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect (as defined below) on the Company. The Company has made available
to Parent complete and correct copies of the articles of incorporation and
by-laws, in each case as amended to the date of this Agreement, of the Company
and each of its Subsidiaries listed on Schedule 2.1.1 hereto. These articles of
incorporation and by-laws, as so made available, are in full force and effect.
As used in this Agreement, the term (i) "SUBSIDIARY" means, with respect to the
Company or Parent, any entity, whether incorporated or unincorporated, in which
the Company or Parent, as the case may be, owns, directly or indirectly, more
than fifty percent of the securities or other ownership interests having by
their terms ordinary voting power to elect more than fifty percent of the
directors or other persons performing similar functions, or the management and
policies of which the Company or Parent, as the case may be, otherwise has the
power to direct; (ii) "MATERIAL ADVERSE EFFECT", with respect to any party,
means a material adverse effect on the business, properties, results of
operations, or financial condition of such
A-9
party and its Subsidiaries taken as a whole, other than any conditions, events,
changes or effects that result from or arise out of (a) changes in the economy
in general or (b) changes or circumstances affecting the industries in which
such party operates which change or circumstance does not affect the Company or
Parent, as the case may be, disproportionately relative to the other entities in
such industry; and (iii) "PERSON" shall mean any individual, corporation,
general or limited partnership, limited liability or unlimited liability
company, joint venture, estate, trust, association, organization, Governmental
Entity or other entity of any kind or nature.
2.1.2. CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 100,000,000 Company Common Shares and 10,000,000 shares of
Preferred Stock, par value $0.10 per share (the "COMPANY PREFERRED Shares"). As
of the close of business on February 14, 2001, (i) 43,963,742 shares of Company
Common Shares were issued and outstanding (ii) no Company Preferred Shares were
issued and outstanding, (iii) 331,360 Company Common Shares and no Company
Preferred Shares were held as treasury shares by the Company or any of its
Subsidiaries and (iv) 19,340,955 Company Common Shares were reserved for
issuance upon exercise of options issued pursuant to the Company Stock Plans (as
hereinafter defined) and there were outstanding options to purchase an aggregate
of 6,513,093 Company Common Shares under the Company Stock Plans. All of the
outstanding Company Common Shares have been duly authorized and validly issued
and are fully paid and nonassessable and are free of preemptive rights. The
exercise prices, vesting schedules and expiration dates of the stock options
issued by the Company, the plans or agreements pursuant to which these stock
options have been issued (the "COMPANY STOCK PLANS") and the holders of these
stock options are set forth in Section 2.1.2 of the Company Disclosure Schedule.
Except as set forth in this Section, the Company has no outstanding stock or
securities convertible into or exchangeable for any shares of its equity
securities, or any outstanding rights (either preemptive or other) to subscribe
for or to purchase, or any outstanding options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
outstanding calls, commitments, obligations to purchase or redeem, or claims of
any character relating to, any equity securities or any stock or securities
convertible into or exchangeable for any equity securities of the Company,
including any rights plan or any other anti-takeover agreement. Since February
14, 2001, except as permitted by this Agreement, the Company has not (i) issued,
granted or sold any Company Common Shares or any other shares of its capital
stock, other than pursuant to the exercise of Company Stock Options outstanding
on February 14, 2001 or pursuant to the Company's Employee Stock Purchase Plan
or (ii) issued or granted any options, warrants, or securities convertible into
or exercisable for shares of its capital stock.
Each of the outstanding shares of capital stock or other ownership
interests of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by the Company or a direct or
indirect wholly owned
A-10
Subsidiary of the Company, in each case free and clear of any lien, pledge,
security interest, claim or other encumbrance and free of any other limitation
or restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests). Except as
set forth above, as of the date of this Agreement, there are no preemptive or
other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements, calls, commitments or rights of any kind which obligate the
Company or any of its Subsidiaries to issue or sell any shares of capital stock
or other securities of the Company or any of its Subsidiaries or any securities
or obligations convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire from the Company or any of its
Subsidiaries, any securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing any rights are authorized, issued or
outstanding. As of the date of this Agreement, neither the Company nor any of
its Subsidiaries has outstanding any bonds, debentures, notes or other
obligations (i) the holders of which have the right to vote with the
shareholders of the Company or of any of its Subsidiaries on any matter or (ii)
which are convertible, exchangeable or exercisable for or into shares of capital
stock or other voting securities or ownership interests in the Company or in any
significant Subsidiary of the Company. There are no outstanding obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any of its outstanding securities.
2.1.3. AUTHORITY, APPROVAL AND FAIRNESS OPINION. (a) The Company has
all requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Merger and
the other transactions contemplated hereby, subject only to the approval of this
Agreement by the affirmative vote of the holders of record of not less than a
majority of all of the votes entitled to be cast by holders of Company Common
Shares at the Company Shareholders' Meeting (as defined in Section 3.5) (the
"COMPANY REQUISITE VOTE"). Each Company Common Share entitles its record holder
to one vote per share in connection with a vote of the shareholders of the
Company with respect to the approval of this Agreement. The execution and
delivery of this Agreement, the performance by the Company of its obligations
hereunder and the consummation by the Company of the Merger and the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to approval of the
Merger Agreement by the shareholders of the Company pursuant to the Company
Requisite Vote, and assuming the due authorization, execution and delivery of
this Agreement by Parent and Merger Sub, this Agreement constitutes a valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles (collectively,
the "BANKRUPTCY AND EQUITY EXCEPTION"). The Board of Directors of the Company
has adopted resolutions (A) adopting this Agreement and approving the Merger
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and the other transactions contemplated hereby and thereby, (B) declaring the
advisability of this Agreement, (C) determining that this Agreement, the Merger
and the other transactions contemplated hereby are in the best interests of the
Company's shareholders, (D) recommending that the Company's shareholders vote in
favor of the approval of this Agreement at the Company Shareholders' Meeting,
(E) approving the Voting Agreement and the execution thereof by Parent and
Merger Sub and certain shareholders of the Company, and (F) approving the
Executive Agreements and the execution thereof by the Company, Parent and Mr.
Satish K. Sanan. The Board of Directors of the Company has received the opinion
of its financial advisor, Updata Capital Inc., to the effect that, as of the
date of this Agreement, the Exchange Ratio is fair to the holders of Company
Common Shares from a financial point of view.
2.1.4. GOVERNMENTAL FILINGS, NO VIOLATIONS.
2.1.4.1. Other than the necessary filings, notices,
approvals, confirmations, consents, declarations and/or decisions (A) pursuant
to Sections 1.1.2 and 3.4, (B) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), the Securities Act, the Canadian
Securities laws, and the Competition Act (Canada) (the "CCA"), and any approvals
for the European Commission or the European Union, (C) to comply with the rules
and regulations of the New York Stock Exchange (the "NYSE"), the Toronto Stock
Exchange (the "TSE") and the Nasdaq and (D) under the "blue sky" laws in the
United States and similar Canadian securities laws (such filings, notices,
approvals, confirmations, consents, declarations and/or decisions to be made,
given or obtained by the Company being, if any, the "COMPANY REQUIRED
CONSENTS"), no filings, notices, declarations and/or decisions are required to
be made by the Company or any of its Subsidiaries with, nor are any approvals or
other confirmations or consents required to be obtained by the Company or any of
its Subsidiaries from, any governmental or regulatory (including stock exchange)
authority, agency, court, commission, body or other governmental entity (each, a
"GOVERNMENTAL ENTITY"), in connection with the execution and delivery by the
Company of this Agreement and the performance by the Company of its obligations
hereunder and the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement, except those the failure of which
to make, give or obtain, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company or prevent,
materially delay or materially impair the Company's ability to consummate the
Merger or any of the other transactions contemplated by this Agreement.
2.1.4.2. The execution, delivery and performance of this
Agreement by the Company do not, and the performance by the Company of its
obligations hereunder and the consummation by the Company of the Merger and the
other transactions contemplated by this Agreement will not, constitute or result
in (A) a breach
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or violation of, or a default under, the Company's articles of incorporation or
by-laws (as amended from time to time), (B) a breach or violation of, or a
default under, or the acceleration or creation of any obligations, or the
creation of a lien, pledge, security interest, right of purchase, sale or
termination or other encumbrance (each a "LIEN") on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both) under
any provisions of any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, (C) subject to making, giving or obtaining all
necessary filings, notices, approvals, confirmations, declarations and/or
decisions specified by Section 2.1.4.1, a breach or violation of, or a default
under, the acceleration or creation of any obligations or the creation of any
Lien pursuant to any agreement, license, contract, note, mortgage, indenture,
arrangement or other obligation ("CONTRACTS") binding upon the Company or any of
its Subsidiaries or any law, ordinance, regulation, judgment, order, decree,
injunction, arbitration, award, license or permit of any Governmental Entity
("LAW") or governmental or non-governmental permit or license to which the
Company or any of its Subsidiaries is subject, or (D) any change in the rights
or obligations of any party under any of these Contracts, except, in the case of
clause (B), (C) or (D) above, for any breach, violation, default, acceleration,
creation or change that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Company or prevent,
materially delay or materially impair the Company's ability to consummate the
Merger or any of the other transactions contemplated by this Agreement.
2.1.5. REPORTS; FINANCIAL STATEMENTS. Since December 31, 1997, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, post-effective amendments and supplements
thereto) required to be filed by it under each of the Securities Act, the
Exchange Act and the respective rules and regulations thereunder (such filings
through the date hereof collectively, the "COMPANY REPORTS"). As of their
respective dates, the Company Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the consolidated balance
sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, in all material
respects, the financial position of the Company and its Subsidiaries as of its
date, and each of the related consolidated statements of operations, cash flows
and charges in equity (deficit) included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presents,
in all material respects, the results of operations and cash flows of the
Company and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to notes and normal year-end audit adjustments
that will not be material in amount or effect), in each case in conformity with
generally accepted accounting principles in the United States ("U.S. GAAP")
consistently applied during the periods involved except as may be noted therein.
"COMPANY BALANCE SHEET" means the
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consolidated balance sheet of the Company as of December 31, 2000 set forth in
Schedule 2.1.5 and "COMPANY BALANCE SHEET Date" means December 31, 2000.
2.1.6. ABSENCE OF CERTAIN CHANGES. Except as expressly contemplated
by this Agreement, since the Company Balance Sheet Date, the Company and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction or incurred any material expenditure other
than in accordance with, the ordinary and usual course of such businesses, and
since the Company Balance Sheet Date there has not been (i) any change in the
financial condition, properties, business or results of operations of it and its
Subsidiaries except those changes that, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company; (ii) any declaration, setting aside or payment of any dividend
or other distribution in cash, stock or property in respect of its capital stock
or any securities convertible, exchangeable or exercisable for or into shares of
its capital stock, except for dividends paid by Subsidiaries of the Company
solely to the Company or any of its wholly owned Subsidiaries; (iii) any
redemption, repurchase or other acquisition of any shares of its capital stock
or any securities convertible, exchangeable or exercisable for or into shares of
its capital stock; (iv) any split in its capital stock, combination, subdivision
or reclassification of any of its capital stock or issuance or authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (v) any change by it in accounting
principles, practices or methods except as required by changes in U.S. GAAP;
(vi) any amendment of any material term of any outstanding security of the
Company or any of its Subsidiaries; (vii) any transaction or commitment made, or
any contract, agreement or settlement entered into, by (or judgment, order or
decree affecting) the Company or any of its Subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its Subsidiaries of any contract or
other right, in either case, material to the Company and its Subsidiaries taken
as a whole, other than transactions, commitments, contracts, agreements or
settlements (including without limitation settlements of litigation and tax
proceedings) in the ordinary course of business consistent with past practice,
those contemplated by this Agreement, or as agreed to in writing by Parent;
(viii) any (a) grant of any severance or termination pay to (or amendment to any
such existing arrangement with) any director, officer or employee of the Company
or any of its Subsidiaries other than pursuant to existing arrangements or, with
respect to employees who are not directors or executive officers, consistent
with past practice, not to exceed, in any event, more than thirty (30) days'
pay, (b) entering into of any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of the Company or any of its Subsidiaries except with
respect to persons who are not directors or executive officers and whose
agreements do not provide for more than a maximum severance or other obligation
upon termination of thirty days' pay, (c) except as set forth in Section 2.1.6
of the Company Disclosure Schedule, increase in benefits
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payable under any existing severance or termination pay policies or employment
agreements or (d) increase in (or amendments to the terms of) compensation,
bonus or other benefits payable to directors, officers or employees of the
Company or any of its Subsidiaries, other than as permitted by this Agreement,
or as agreed to in writing by Parent; (ix) any material Tax election made or
changed, any audit settled or any amended Tax returns filed; (x) any incurrence,
assumption or guarantee by the Company or any of its Subsidiaries of any
indebtedness for borrowed money or any other agreement or arrangement entered
into by the Company or any of its Subsidiaries except pursuant to loan and other
financing agreements disclosed in the Company Reports; (xi) any loans, advances
or capital contributions by the Company to or investments in, any other person,
other than to any direct or indirect wholly-owned Subsidiary of the Company and
other than payroll (not to exceed $3,000 with respect to any one employee)
travel and entertainment advances to employees of the Company in the ordinary
course of business consistent with past practices or in connection with
development projects disclosed to Parent; (xii) except for this Agreement and
any other agreement executed and delivered pursuant to this Agreement, any
material expenditure incurred by the Company other than in the ordinary course
of business or permitted under other Sections of this Agreement or in connection
with the transactions contemplated hereby; and (xiii) except as specifically
contemplated by Section 2.1.6 of the Company Disclosure Schedule, any payments
or other distributions by the Company or any of its Subsidiaries to any of its
officers, directors or affiliates, except for compensation for service as a
director or officer as disclosed in the Company Reports.
2.1.7. LITIGATION AND LIABILITIES. (a) There are no civil, criminal
or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the Company's executive officers (as
defined in the Exchange Act) ("COMPANY OFFICERS"), threatened against the
Company or any of its Subsidiaries or to which any of their respective
properties, assets, or rights are reasonably likely to be subject, nor is there
any judgment, decrees, injunction, rule or order of any court or arbitrator or
any governmental body, agency or official outstanding against the Company or any
of its Subsidiaries except, in each case, for those that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company or prevent, materially delay or materially impair
the Company's ability to consummate the Merger or any of the other transactions
contemplated by this Agreement.
(b) Neither the Company nor any of its Subsidiaries had at
Company Balance Sheet Date, or has incurred since that date and as of the date
of this Agreement, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (i) liabilities, obligations or
contingencies (1) which are accrued or reserved against in the Company Balance
Sheet or reflected in the notes thereto, (2) which would not, individually or in
the aggregate, be reasonably expected to have a Material
A-15
Adverse Effect on the Company (3) which have been disclosed in the Company
Reports filed prior to the date of this Agreement (4) which were incurred after
Company Balance Sheet Date in the ordinary course of business and consistent
with past practices, or (5) which have been discharged or paid in full prior to
the date of this Agreement in the ordinary course of business.
2.1.8. EMPLOYEE BENEFIT PLANS.
2.1.8.1. Set forth in Section 2.1.8.1 of the Company
Disclosure Schedule is a list of each stock option, stock purchase, stock
appreciation right or stock based incentive plan, or other similar arrangement
or policy applicable to any current, former, or retired employee, officer,
consultant, independent contractor, agent or director of the Company or any of
its Subsidiaries (collectively, the "COMPANY EMPLOYEES"), each plan, program, or
policy providing for bonuses, profit-sharing or other forms of incentive or
deferred compensation, vacation benefits, insurance coverage and self-insured
arrangements, health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and
post-employment or retirement benefits or other employee benefits of any kind,
whether funded or unfunded, which is maintained, administered or contributed to
by the Company or any of its Subsidiaries and covers any Company Employee
employed or providing services or formerly employed or providing services in the
United States or Canada to the Company or any of its Subsidiaries, or under
which the Company or any of its Subsidiaries has any liability, contingent or
otherwise (including but not limited to each "employee benefit plan," as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), but excluding any plan that is a "multiemployer plan" as
defined in Section 3(37) of ERISA) (collectively, the "COMPANY EMPLOYEE PLANS"),
and each employment, severance, consulting, non-compete, or similar agreement or
contract between the Company or any Subsidiary and any Company Employee employed
or providing services or formerly employed or providing services in the United
States or Canada to the Company or any of its Subsidiaries who received in 2000
total salary and bonuses in excess of $125,000 ("COMPANY EMPLOYMENT
AGREEMENTS"). True and complete copies of all Company Employee Plans, including,
but not limited to, any trust instruments and insurance contracts forming a part
of any Company Employee Plan, and all amendments have been provided or made
available to Parent. For purposes of this Agreement, the term "COMPANY FOREIGN
PLAN" shall refer to each plan, program or contract maintained, sponsored or
contributed to by the Company or a Subsidiary that is subject to or governed by
the laws of any jurisdiction other than the United States or Canada, and which
would have been treated as a Company Employee Plan had it been a United States
or Canada plan, program or contract. The Company shall use its reasonable
commercial efforts to make available to Parent, within forty-five (45) days
following the date of this Agreement, a list and copies of the Company Foreign
Plans.
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2.1.8.2. Each Company Employee Plan, Company Foreign Plan
and Company Employment Agreement has been established and maintained in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations (including but
not limited to ERISA and the Code) which are applicable to the plan or
agreement, except where failure to comply would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither the
Company, any of its Subsidiaries nor any ERISA Affiliate contributes to, or is
or has ever been required to contribute to, any "multiemployer plan" as defined
in Section 3(37) of ERISA. Neither the Company, any of its Subsidiaries, nor any
of its ERISA Affiliates presently sponsors, maintains, contributes to, nor is
the Company, any of its Subsidiaries or any of its ERISA Affiliates required to
contribute to, nor has the Company, any of its Subsidiaries, nor any of its
ERISA Affiliates ever sponsored, maintained, contributed to, or been required to
contribute to, an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA which is subject to Title IV of ERISA. For purposes of this
Agreement, "ERISA AFFILIATE" means, with respect to the Company or Parent, as
applicable, each business or entity which is a member of a "controlled group of
corporations," under "common control" or an "affiliated service group" with the
Company or Parent, as applicable, within the meaning of Sections 414(b), (c) or
(m) of the Code, or required to be aggregated with the Company or Parent, as
applicable, under Section 414(o) of the Code, or is under "common control" with
the Company or Parent, as applicable, within the meaning of Section 4001(a)(14)
of ERISA. Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, all contributions
required to be made under the terms of any Company Employee Plan or Company
Foreign Plan have been made. Each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service that it is so qualified,
and each trust forming a part thereof is exempt from federal income tax pursuant
to Section 501(a) of the Code and, to the knowledge of the Company Officers, no
circumstances exist which would reasonably be expected to adversely affect
qualification or exemption. There is no pending or, to the knowledge of the
Company Officers, threatened litigation or governmental audit, examination or
investigation relating to any Company Employee Plan or Company Foreign Plan,
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
2.1.8.3. Neither the Company, any of its Subsidiaries nor
any of its ERISA Affiliates (i) maintains, contributes to or is party to any
Company Employee Plan, any Company Foreign Plan, or any Company Employment
Agreement which provides, or has any liability to provide, life insurance,
medical, severance or other employee welfare benefits to any Company Employee
upon his retirement or termination of employment, except as may be required by
Section 4980B of the Code; or (ii) has ever represented, promised or contracted
(whether in oral or written form) to any Company
A-17
Employee (either individually or to the Company Employees as a group) that the
Company Employee(s) would be provided with life insurance, medical, severance or
other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by Section 4980B of the Code.
2.1.8.4. Except as set forth in Section 2.1.8.4 of the
Company Disclosure Schedule, the execution, delivery of and performance by the
parties hereto of their obligations under, and the consummation of the
transactions contemplated by, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event under
any Company Employee Plan, any Company Foreign Plan or any trust or loan related
to a plan or agreement, that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Company Employee, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of the Company, any of its Subsidiaries
or Parent to amend or terminate any Company Employment Agreement, any Company
Foreign Plan or any Company Employee Plan. No payment or benefit which will or
may be made by the Company, any of the Subsidiaries of the Company, Parent or
any of their respective ERISA Affiliates with respect to any Company Employee
will be characterized as an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code. There is no commitment covering any Company
Employee that, individually or in the aggregate, would reasonably be expected to
give rise to the payment of any amount that would result in a material loss of
tax deductions pursuant to Section 162(m) of the Code.
2.1.8.5. There has been no amendment to, written
interpretation or announcement (whether or not written) by the Company, or, to
the knowledge of the Company's Officers, any of its Subsidiaries or any of its
ERISA Affiliates relating to, or change in employee participation or coverage
under, any Company Employee Plan, Company Foreign Plan or Company Employment
Agreement which would significantly increase the expense of maintaining the plan
or agreement above the level of the expense incurred in respect thereof for the
12 months ended on December 31, 2000. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, all Company Foreign Plans (i) have been maintained in accordance with
all applicable requirements; (ii) if they are intended to qualify for special
tax treatment, meet all requirements for that treatment; and (iii) if they are
intended to be funded and/or book-reserved are fully funded and/or book
reserved, as appropriate, based upon reasonable actuarial assumptions.
2.1.9. LABOR AND EMPLOYMENT MATTERS. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, the Company and each Subsidiary (i) is in
compliance with all applicable Laws respecting employment, employment practices,
labor, terms and conditions of
A-18
employment and wages and hours; and (ii) is not liable for any payment to any
trust or other fund or to any Governmental Entity, with respect to unemployment
compensation benefits, social security or other similar benefits for the Company
Employees outside the ordinary course of business. No work stoppage or labor
strike against the Company or any Subsidiary is pending or, to the knowledge of
the Company Officers, threatened. Neither the Company, nor any Subsidiary (i) is
involved in or threatened with any labor dispute, grievance, or litigation
relating to labor matters, including, without limitation, violation of any
federal, state or local labor, safety or employment laws (domestic or foreign),
charges of unfair labor practices or discrimination complaints; or (ii) except
as previously disclosed to Parent regarding the Company Employees located in
France, is presently, nor has been in the past a party to, or bound by, any
collective bargaining agreement or union contract with respect to Company
Employees and no such agreement or contract is currently being negotiated by the
Company or any Subsidiary.
2.1.10. NON-COMPETITION AGREEMENTS. Neither the Company nor any of
its Subsidiaries is a party to any agreement which (i) purports to restrict or
prohibit in any material respect any of them or any corporation affiliated with
any of them from, directly or indirectly, engaging in any business and (ii)
would restrict or prohibit Parent or any Subsidiary of Parent (other than the
Company and its Subsidiaries that are currently so restricted or prohibited)
from engaging in such business.
2.1.11. ABSENCE OF SENSITIVE PAYMENTS. To the knowledge, of the
Company Officers none of the Company, or any Subsidiary or affiliate or any
officer or director of any of them acting alone or together, has performed any
of the following acts, except to the extent that such acts, individually or
collectively, would not reasonably be expected to have a Material Adverse Effect
on the Company: (i) the making of any contribution, payment, remuneration, gift
or other form of economic benefit (a "PAYMENT") to or for the private use of any
governmental official, employee or agent where the Payment or the purpose of the
payment was illegal under the laws of the United States or the jurisdiction in
which such payment was made, (ii) the establishment or maintenance of any
unrecorded fund, asset or liability for any purpose or the making of any false
or artificial entries on its books, (iii) the making of any Payment to any
person or the receipt of any Payment with the intention or understanding that
any part of the Payment was to be used for any purpose other than that described
in the documents supporting the Payment, or (iv) the giving of any Payment to,
or the receipt of any Payment from, any person who was or could have been in a
position to help or hinder the business of the Company or any Subsidiary (or
assist the Company or any Subsidiary in connection with any actual or proposed
transaction) which (A) would reasonably have been expected to subject the
Company or any Subsidiary to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (B) if not given in the past, would have
had a Material Adverse Effect on the Company or (C) if it had not continued in
the future, would have had a Material Adverse Effect on the Company. "COMPANY
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OFFICERS" means the officers (as such term is defined in Rule 16(a)-1(f) under
the Exchange Act) of the Company.
2.1.12. AFFILIATE TRANSACTIONS. Except to the extent disclosed in
any Company Report or set forth in Section 2.1.12 of the Company Disclosure
Schedule, there are no other transactions, agreements, arrangements or
understandings between the Company or its Subsidiaries, on the one hand, and the
Company's Affiliates (other than wholly-owned Subsidiaries of the Company) or
other Persons, on the other hand, that would be required to be disclosed under
Regulation S-K under the Securities Act. For purposes of this Agreement, the
term "AFFILIATE" when used with respect to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person. As used in the definition of Affiliate the term "CONTROL" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
2.1.13. LICENSES. Each of the Company and its Subsidiaries has all
material permits, licenses, certificates, waivers or authorizations ("LICENSES")
from all Governmental Entities having jurisdiction over any part of its business
necessary for the conduct of any of its activities and all Licenses are valid
and in full force and effect, except for any Licenses the failure of which to
have or to be in full force and effect would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, no event has occurred
or other fact exists with respect to any of the Licenses held by the Company or
any of its Subsidiaries which permits, or after notice or lapse of time or both
would permit, revocation or termination thereof or would result in any other
material impairment of the rights of the holder of any of the Licenses.
2.1.14. INTELLECTUAL PROPERTY. (a) Each of the Company and its
Subsidiaries owns or has a valid right to use patents, trademarks, trade names,
domain names, service marks, copyrights, processes, formulae, methods,
schedules, technology, know-how, computer software programs and applications and
other proprietary information ("IP RIGHTS") as are necessary in connection with
its respective businesses, except where the failure to own or have a valid right
to use the IP Rights, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Section 2.1.14(b) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of the following
categories of IP Rights of the Company and its Subsidiaries: (A) trademarks that
are registered or for which an application for registration is pending; (B)
patents; (C) software (other than commercial shrink-wrap, click-wrap or other
similarly available off-the-shelf-type software); (D) copyrights that are
registered or for which an application for registration is
A-20
pending; (E) key trade secrets; (F) mask works that are registered or for which
an application for registration is pending. Where listed IP Rights are
registered with a Governmental Entity or an application for registration is
pending, the jurisdiction, registration or application number, date of
registration or application, named owner and/or assignee, and international
classes of registration are indicated, as applicable.
(c) Section 2.1.14(c) of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of (A) all material
licenses, sublicenses and other agreements under which the Company or its
Subsidiaries are licensed to use third party IP Rights (other than (1)
shrink-wrap, click-wrap or other similarly available off-the-shelf type software
and any related trade secrets and (2) customary rights included in
confidentiality, non-disclosures or similar agreements) and (B) all material
licenses and sublicenses, except for rights granted specifically for use with a
hardware product sold by the Company or its Subsidiaries, under which the
Company or its Subsidiaries have granted rights to third parties to use IP
Rights of the Company or its Subsidiaries. The Company and its Subsidiaries are
not currently required to pay any royalties, fees or other amounts to any Person
in connection with the use of the their respective IP Rights.
(d) The Company and its Subsidiaries have good and valid title to
all IP Rights owned by any of them and valid and enforceable license rights to
all IP Rights used under license, free and clear, to the knowledge of the
Company Officers, of all material liens, security interests and other
encumbrances (other than Taxes not yet due and payable), and to the knowledge of
the Company Officers, all IP Rights are in full force and effect and will remain
in full force and effect immediately following the Effective Time.
(e) The Company and its Subsidiaries have a practice to secure, and
have secured, from all current and former employees, consultants and independent
contractors who contribute or have contributed to the creation or development of
their IP Rights valid written assignments by such persons to the Company and its
Subsidiaries of the rights to such contributions the Company and its
Subsidiaries do not already own by operation of law. The Company and its
Subsidiaries have taken reasonable steps to protect and preserve the
confidentiality of all of their trade secrets, and to the knowledge of the
Company Officers (i) as of the date of this Agreement, there are no unauthorized
uses, disclosures or infringements of any IP Rights of the Company or its
Subsidiaries, and (ii) as of the date of this Agreement, all use by, and
disclosure to, any Person of trade secrets that comprise any part of the IP
Rights of the Company or its Subsidiaries has been pursuant to the terms of a
written agreement with such Person, and (iii) all use by the Company and its
Subsidiaries of trade secrets owned by another Person has been pursuant to the
terms of a written agreement with such Person or is otherwise lawful. If after
the date of this Agreement the Company has knowledge of any of the foregoing
A-21
conditions, the Company shall take appropriate and prompt action to remedy such
conditions. Neither the IP Rights owned by the Company or its Subsidiaries or
incorporated into any products or services currently provided by the Company or
its Subsidiaries nor the use or other exploitation thereof by the Company or its
Subsidiaries in the conduct of their business, nor any product or service
currently provided by the Company or its Subsidiaries, infringes on,
misappropriates, breaches or violates any third party IP Rights.
(f) Neither the Company nor any of its Subsidiaries: (A) has been
notified or has knowledge of any actual or threatened adverse proceeding brought
by any Person pertaining to any challenge to the scope, validity or
enforceability of (provided, however, no representation or warranty is made
regarding the scope, validity or enforceability of any patent application), or
the Company's ownership of, any of the IP Rights owned by the Company and its
Subsidiaries; (B) is the subject of any claim of infringement or
misappropriation by the Company or any of its Subsidiaries of any third party IP
Rights; or (C) to the knowledge of the Company Officers, has any claim for
infringement or misappropriation of, or breach of any license or agreement
involving, any of the IP Rights owned by the Company and its Subsidiaries.
(g) (A) The Company has not taken any action or failed to take any
action (including the manner in which it has conducted its business, or used or
enforced, or failed to use or enforce, any of the IP Rights of the Company and
its Subsidiaries) that would result in the abandonment, cancellation,
forfeiture, relinquishment, invalidation or unenforceability of any of the IP
Rights of the Company and its Subsidiaries, (B) the Company has taken reasonable
steps (based on standard industry practices) to protect and maintain the
Company's and its Subsidiaries' rights in and to IP Rights of the Company and
its Subsidiaries, (C) all registered trademarks and all IP registered copyrights
of the Company and its Subsidiaries and registered mask works of the Company and
its Subsidiaries have been registered and all owned patents of the Company and
its Subsidiaries have been filed and obtained, in accordance with all applicable
legal requirements and are currently in effect and in compliance with all
applicable legal requirements, and without limiting the generality of any of the
foregoing, the Company has timely paid all filing, examination, issuance,
post-registration and maintenance fees, annuities and the like associated or
required with respect to any of the IP Rights of the Company and its
Subsidiaries.
2.1.15. CONTINUITY OF BUSINESS. Section 2.1.15 of the Company
Disclosure Schedule sets forth certain clients of the Company and its
Subsidiaries. No client of the Company or any of its Subsidiaries identified on
Section 2.1.15 of the Company Disclosure Schedule has advised the Company or any
Subsidiary orally or in writing that it (y) is terminating or considering
terminating the handling of its business by the Company or any of its
Subsidiaries, as applicable, as a whole or in respect of any
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particular project or service or (z) is planning to reduce the amount contracted
with the Company or any of its Subsidiaries in any material manner.
2.1.16. COMPLIANCE WITH LAWS. Except with respect to Taxes and
Environmental Laws, which are the subject of Sections 2.1.19 and 2.1.20,
respectively, (a) neither the Company nor any of its Subsidiaries is in
violation of, or has violated, any applicable provisions of any Laws except for
any violations that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries has received
since January 1, 1998 any written notification or communication from any
Governmental Entity (A) asserting that the Company or any of its Subsidiaries is
not in compliance with any of the statutes, regulations or ordinances which such
Governmental Entity enforces or (B) threatening to revoke any license,
franchise, permit or governmental authorization, except for notices or other
written communication asserting or relating to noncompliance with any statute,
regulation or ordinance or threatening to revoke any license, franchise, permit
or governmental authorization that individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect on the Company.
2.1.17. CERTAIN CONTRACTS. Section 2.1.17 of the Company Disclosure
Schedule sets forth a list of all material Contracts to which the Company or any
of its Subsidiaries is a party. Within two weeks of the date hereof, the Company
shall deliver to Parent additional information with respect to such material
Contracts as follows: (1) Contracts with customers - the project or engagement
name, the contract date, the parties to the contract, and the contract value,
(ii) credit facilities - the parties, the date of the contract and the amount of
the credit line; (iii) any material performance bonds - name of the parties and
the amount, (iv) material technology agreements - the date of the contract, the
parties and the nature of the contract, and (v) any other material Contracts -
the parties and the date. Neither the Company nor any of its Subsidiaries is in
default under any material Contract to which it is a party, by which its
respective assets, business, or operations may be bound or affected, and there
has not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default, except for such defaults that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company.
2.1.18. TAX TREATMENT. From and after the date of this Agreement,
neither the Company nor any of its Subsidiaries has taken or agreed to take any
action, and the Company Officers do not know of any other action taken by any
other Person, which action would jeopardize the treatment of the Merger as a
reorganization within the meaning of Section 368 of the Code or the ability of
counsel to render the opinions described in Sections 4.2.3 and 4.3.3 of this
Agreement.
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2.1.19. TAX MATTERS.
(a) All returns, declarations, reports, estimates, information
returns and statements required to be filed on or before the Effective Time
under United States federal or state or local or any foreign tax laws ("TAX
RETURNS") with respect to (i) the Company and its Subsidiaries, and (ii) any of
their respective income, properties, or operations, have been or will be timely
filed, or requests for extensions have been timely filed and have not expired,
except where a failure or failures to so timely file would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(b) All material Tax Returns filed by the Company and its
Subsidiaries are complete and accurate in all material respects.
(c) The Company and its Subsidiaries have paid all Taxes due and
payable (without regard to whether those taxes have been assessed), or adequate
reserves have been established for the payment of those Taxes. No governmental
authority in a jurisdiction where the Company or any of its Subsidiaries does
not file a Tax Return has made a claim, assertion, or threat that the Company or
any of its Subsidiaries is or may be subject to Taxes in such jurisdiction. For
purposes of this Agreement, "TAXES" shall mean all taxes, charges, fees, levies
or other assessments, however denominated, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, goods and
services, capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, custom duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority whether arising before, on or
after the Effective Time.
(d) Except as set forth in Section 2.1.19(d) of the Company
Disclosure Schedule, there are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any material Tax Returns
required to be filed by or with respect to the Company or any of its
Subsidiaries.
(e) The proper and accurate amounts have been withheld from all
employees, customers, and other applicable payees (and timely paid to the
appropriate Governmental Entity or set aside in an account for these purposes)
for all periods through the Closing Date in compliance in all material respects
with all Tax withholding provisions of applicable federal, state, local and
foreign laws (including, without limitation, income, social security, and
employment Tax withholding for all types of compensation).
(f) Neither the Company nor any of its Subsidiaries is a party to
any Tax sharing or similar agreement or any agreement pursuant to which it or
any of its
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Subsidiaries has an obligation to indemnify any party (other than the Company or
one of its Subsidiaries) with respect to Taxes or has been a member of an
affiliated group filing consolidated or combined tax returns (other than a group
the common parent of which was the Company).
(g) All Taxes due with respect to completed and settled
examinations or concluded litigation relating to the Company or any of its
Subsidiaries have been paid in full or adequate reserves have been established
for the payment thereof.
(h) Except as set forth in Section 2.1.19(h) of the Company
Disclosure Schedule, no material audit or examination or refund litigation with
respect to any Tax Return is pending.
(i) The Company is not, nor has it ever been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
2.1.20. ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, "ENVIRONMENTAL LAWS" means all
environmental, health and safety Laws (including common law) and regulations in
effect on the date of this Agreement, relating to the protection of human health
and safety as affected by exposure to pollutants, contaminants, or hazardous or
toxic wastes, substances or materials and to the protection of the environment
including, without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, the Clean
Water Act, the Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended, regulations promulgated thereunder, and state
counterparts.
(b) (x) Neither the conduct or operations of the Company or its
Subsidiaries nor any condition of any property presently or previously owned,
leased or operated by any of them violates or, within the applicable statute or
limitations period, violated Environmental Laws, except for violations that are
not material and (y) no condition has existed or event has occurred with respect
to any of them or any such property that would reasonably be expected to result
in a Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries has received any written notice from any Governmental Entity that
it or its Subsidiaries or the operation or condition of any property ever owned,
leased, operated, held as collateral or held as a fiduciary by any of them are
or were in material violation of or otherwise are alleged to have material
liability under any Environmental Law, including, but not limited to,
responsibility (or potential responsibility) for the cleanup or other
remediation of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from any such property.
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(c) To the knowledge of the Company Officers, none of the property
currently owned, leased or operated by the Company or by its Subsidiaries is
subject to, or as a result of this transaction would be subject to, (i) any
Environmental Laws which would impose restrictions, such as notice, disclosure
or obtaining advance approval prior to this transaction, or (ii) any liens under
any Environmental Laws.
(d) All indemnification provisions and rights in any contract,
agreement, license, permit, authorization, or other arrangement which are in
favor of the Company or any of its Subsidiaries as set forth on Schedule
2.1.20(d) hereto (the "COMPANY INDEMNIFICATION RIGHTS") are, and shall remain,
in full force and effect, and the execution and delivery of this Agreement by
the Company do not, and the performance by the Company of its obligations
hereunder will not, and the consummation of the Merger and the other
transactions contemplated hereby will not, affect any such Company
Indemnification Rights in any manner adverse to the Company or any of its
Subsidiaries or Parent or any of its Subsidiaries. In addition, the Company and
any of its applicable Subsidiaries are, and shall remain, in compliance with all
their duties and obligations under any agreement, contract, license, permit,
authorization or other arrangement granting the Company or any of its
Subsidiaries any Company Indemnification Rights, and the Company Indemnification
Rights are, and shall remain, fully assignable and transferable by the Company
and any of its applicable Subsidiaries to Parent or any of its Subsidiaries,
free and clear of any Liens and without the consent of any third parties or any
Governmental Entity.
2.1.21. REGISTRATION RIGHTS AGREEMENTS. Schedule 2.1.21 hereto
is a complete list of each agreement which requires the Company to register
any Company Common Shares under the Securities Act.
2.1.22. TAKEOVER STATUTES. The Board of Directors of the Company has
taken all action appropriate and necessary to render Section 607.0901 of the
FBCA, and any other potentially applicable control share acquisition,
anti-takeover or similar statute or regulation inapplicable to this Agreement,
the Merger and the other transactions contemplated hereby or by the Voting
Agreement. No other "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation, including Section 607.0902 of
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the FBCA (each, a "TAKEOVER STATUTE"), and no anti-takeover or similar provision
in the articles of incorporation or by-laws of the Company, is applicable to
this Agreement, the Merger or any of the other transactions contemplated hereby
or by the Voting Agreement. Without limiting the foregoing, the Board of
Directors of the Company has approved the entry into the Voting Agreement by
Parent, Merger Sub and certain shareholders of the Company and (i) neither
Parent nor Merger Sub shall be an "interested person" for purposes of Section
607.0901 of the FBCA and the provisions of such Section shall not apply to the
Merger and (ii) the entry into the Voting Agreement shall not result in a
"control share acquisition" within the meaning of Section 607.0902 of the FBCA
and the record holders of the Company Common Shares subject to the Voting
Agreement, Parent or Merger Sub shall not be restricted by such Section from
voting those Company Common Shares.
2.1.23. REAL PROPERTY. (a) Schedule 2.1.23(a) hereto sets forth
all real property owned of record or beneficially by the Company or any of its
Subsidiaries and all leases or subleases of real property to which any of them
is a party (including through assignment, change of control or otherwise) and a
brief description of each property, with the annual rental of each lease, the
size of each property in square feet, the termination date of each lease being
given in each case. In addition, Schedule 2.1.23(a) hereto sets forth all leases
of personal property to which the Company or any of its Subsidiaries is a party
(including through assignment, change of control or otherwise) with any vendor,
who, together with its Affiliates, receives annual rental payments of $200,000
or more pursuant to such leases. Except as set forth on Schedule 2.1.23(a)
hereto, the Company and its Subsidiaries have good, valid, marketable and fee
simple title to all of their real properties listed on Schedule 2.1.23(a) and
have good title to, or valid and enforceable leasehold interests in, their
leased real properties and all their other properties and assets listed on
Schedule 2.1.23(a) hereto, in each such case, free and clear of all Liens,
individually or in the aggregate, except, in the case of owned real property,
(i) Liens for current taxes, payments of which are not yet delinquent, and (ii)
such imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's and its
Subsidiaries' business operations (in the manner presently carried on by the
Company and its Subsidiaries). The leases pursuant to which the Company or any
of its Subsidiaries leases any real or personal property as listed on Schedule
2.1.23(a) hereto are valid and binding on the Company or the applicable
Subsidiary and valid and binding on all other respective parties to such leases
in accordance with their respective terms. Except as set forth on Schedule
2.1.23(a), none of the rights of the Company or any of its Subsidiaries under
any such leases of real or personal property is subject to termination or
modification as a result of or in connection with the transactions contemplated
hereby. None of the Company or any of its Subsidiaries is subject to, or will be
subject to, as a result of the consummation of the transactions contemplated
hereby, any penalties, liabilities or charges (including any increases in rental
payments or any liabilities incurred due to the modification, termination or
replacement of such leases or subleases) under any leases or subleases of real
or personal property to which it, its Subsidiaries or any of their respective
predecessors or acquired companies is a party, except for those which,
individually or in the aggregate, would not reasonably be expected to have
aggregate economic costs of more than $3 million. There are not under any leases
or subleases of real or personal property set forth on Schedule 2.1.23(a) any
existing breaches, defaults, events of default by the Company or any of its
Subsidiaries or events which with notice and/or lapse of time would constitute a
breach, default or event
A-27
of default by the Company or any of its Subsidiaries, nor does the Company know,
nor has the Company received any notice of, or made a claim with respect to, any
breach of default, the consequences of which, individually or in the aggregate,
would have a Material Adverse Effect on the Company and its Subsidiaries. True
and complete copies of all the leases and subleases (including any amendments,
annexes or schedules thereto) of real and personal property (in the case of
leases or subleases of personal property, those with annual rental payments of
$200,000 or more) to which the Company, any of its Subsidiaries, or any of their
respective predecessors or acquired companies is a party and true and complete
copies of which have not, as of the date of this Agreement, yet been provided to
Parent shall have been delivered to Parent and Merger Sub on or prior to March
31, 2001. In addition, all the information the Company is required to disclose
pursuant to this Section 2.1.23(a) on Schedule 2.1.23(a) hereto shall have been
delivered to Parent as Schedule 2.1.23(a), in the form and substance reasonably
acceptable to Parent on or prior to March 31, 2001. The Company shall promptly
notify Parent on a Business Day that the delivery of all such leases and
subleases and of Schedule 2.1.23(a) to Parent and Merger Sub has been completed.
Within fourteen (14) days after the receipt of such notice from the Company
regarding the completion of the delivery of true and complete copies of all such
leases and subleases and of Schedule 2.1.23(a), Parent shall notify the Company
whether it will reasonably require the Company to obtain required consents under
any leases or subleases to which the Company or any of its Subsidiaries, or any
of their respective predecessors or acquired companies is a party (the "COMPANY
LEASE CONSENTS") and provide the Company with a list of any such leases or
subleases under which such Company Lease Consents are to be obtained (the
"COMPANY LEASE List"), and the Company (with reasonable support from Parent)
shall use its reasonable best efforts to obtain any such Company Lease Consents.
If Parent does not so notify the Company within such fourteen (14) day period,
the Company shall not be obligated to obtain any such Company Lease Consents.
The real properties owned, leased or licensed by the Company or any of its
Subsidiaries listed on Schedule 2.1.23(a) constitute all real properties used or
held for use in, and necessary to, the conduct of the business of the Company
and its Subsidiaries as presently conducted or proposed to be conducted.
(b) Except as set forth on Schedule 2.1.23(b), the buildings,
facilities, machinery, equipment, furniture, leasehold and other improvements,
fixtures, vehicles, structures, any related items and other tangible property
that are owned or leased by the Company or any of its Subsidiaries or that are
required to properly conduct the business of the Company and its Subsidiaries
are in good operating condition and repair (normal wear and tear excepted), free
of any material structural or engineering defects, are being maintained and
replaced in accordance with good business practice, and are suitable for their
current and intended uses.
2.1.24. BROKERS AND FINDERS. Neither the Company nor any of its
Subsidiaries, officers, directors or employees has employed any broker or finder
or
A-28
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the execution and delivery of this Agreement or the Merger or
the other transactions contemplated by this Agreement, except that the Company
has retained Updata Capital Inc. as its financial advisor, the fees and expenses
of which will be paid by the Company and the arrangements with which have been
disclosed to Parent prior to the date of this Agreement. The Company has
delivered to Parent true and complete copies of all agreements under which any
such fees or expenses are payable and all indemnifications and other agreements
related to the engagement of the persons to whom such fees are payable. The
Company has previously provided Parent with its good faith current estimate of
the aggregate of the fees and expenses of any accountant, broker, financial
advisor, consultant, legal counsel or other person retained by the Company or
any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby which will be paid by or on behalf of the Company in
connection with this Agreement and the transactions contemplated hereby.
Section 2.2. REPRESENTATIONS AND WARRANTIES OF PARENT. Except as disclosed
in the Parent Reports (as defined in Section 2.2.5) filed with the SEC or with
the Canadian securities regulatory authorities prior to the date of this
Agreement and except as set forth in the corresponding sections of Parent's
disclosure schedule to this Agreement (the "PARENT DISCLOSURE SCHEDULE" and,
together with the Company Disclosure Schedule, the "DISCLOSURE SCHEDULES") (it
being agreed that disclosure of any item under a subsection of this Section 2.2
in the Parent Disclosure Schedule shall be deemed disclosure with respect to
other subsections of this Section 2.2 if the applicability of such item to any
such other subsection is reasonably apparent from the face of the Parent
Disclosure Schedule), Parent represents and warrants to the Company that:
2.2.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of Parent
and its Subsidiaries is duly organized, validly existing and in good standing
(with respect to jurisdictions that recognize the concept of good standing)
under the Laws of its jurisdiction or organization and has all requisite
corporate or similar power and authority, and all government licenses,
authorizations, consents and approvals required to own, operate and lease its
properties and assets and to carry on its business as presently conducted and is
duly qualified to do business and is in good standing (with respect to
jurisdictions that recognize the concept of good standing) in each jurisdiction
where the ownership, operation or leasing of its assets or properties or conduct
of its business requires this qualification, except where the failure to be so
organized, qualified or in good standing (with respect to jurisdictions that
recognize the concept of good standing), or to have this power or authority,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. Parent has made available to the Company
complete and correct copies of its certificate of incorporation, as amended to
the date of this Agreement. This certificate of incorporation, as so made
available, is in full force and effect.
A-29
2.2.2. CAPITAL STRUCTURE. The authorized share capital of Parent is
comprised of an unlimited number of First Preferred Shares, Second Preferred
Shares, Parent Common Shares and Class B Shares (multiple voting) ("CLASS B
SHARES") of which, as at February 14, 2001, 255,162,941 Parent Common Shares and
34,846,526 Class B Shares were validly issued and outstanding. All of the
outstanding Parent Common Shares and Class B Shares are, and all of Parent
Common Shares to be issued pursuant to the Merger are, or will be when issued,
duly authorized and validly issued and fully paid and non-assessable. Except as
set forth in Section 2.22 of the Parent Disclosure Schedule, as of the date of
this Agreement, Parent has no Parent Common Shares reserved for or otherwise
subject to issuance, except no more than 8,506,275 Parent Common Shares subject
to issuance pursuant to outstanding options to purchase Parent Common Shares. As
of the date of this Agreement, except as set forth above, Parent or any of its
Subsidiaries does not have outstanding any bonds, debentures, notes or other
obligations (i) the holders of which have the right to vote with the
shareholders of Parent or any of its Subsidiaries on any matter or (ii) which
are convertible into or exercisable for shares of capital stock or other voting
securities or ownership interests in Parent or any Significant Subsidiary of
Parent.
(b) Each of the outstanding shares of capital stock or other
ownership interests of each of Parent's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by Parent or a direct or indirect
wholly owned Subsidiary of Parent, in each case free and clear of any material
lien, pledge, security interest, claim or other encumbrance and free of any
other material limitation or restriction (including any restriction or the right
to vote, sell or otherwise dispose of such capital stock or ownership
interests).
2.2.3. CORPORATE AUTHORITY AND APPROVAL. Each of Parent and Merger
Sub has all requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Merger and
the other transactions contemplated hereby. The execution and delivery by each
of Parent and Merger Sub of this Agreement, the performance by each of Parent
and Merger Sub of its obligations hereunder and, subject to the Company's
shareholders' approval of this Agreement, the Merger, and the other transactions
contemplated hereby, the consummation by Parent and Merger Sub of the Merger and
the other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub, and assuming
the due authorization, execution and delivery of this Agreement by the Company,
this Agreement constitutes valid and binding agreement of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, subject
to the Bankruptcy and Equity Exception. The Board of Directors of Parent has
approved this Agreement and the Merger and the other transactions contemplated
hereby.
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2.2.4. GOVERNMENTAL FILINGS, NO VIOLATIONS.
2.2.4.1. Other than the necessary filings, notices,
approvals, confirmations, consents, declarations and/or decisions (A) pursuant
to Sections 1.1.2 and 3.4, (B) under the HSR Act, the Exchange Act, the
Securities Act, the Canadian securities laws, and the CCA, and any approvals
from the European Commission or the European Union, (C) to comply with the rules
and regulations of the NYSE, the TSE and the Nasdaq, and (D) under the "blue
sky" laws in the United States and similar Canadian securities laws (such
filings, notices, approvals, confirmations, consents, declarations and/or
decisions to be made, given or obtained by Parent being the "PARENT REQUIRED
CONSENTS"), no filings, notices, declarations and/or decisions are required to
be made by Parent with, nor are any approvals or other confirmations or consents
required to be obtained by Parent from, any Governmental Entity, in connection
with the execution and delivery by Parent and Merger Sub of this Agreement, the
performance by Parent and Merger Sub of their obligations hereunder and the
consummation by Parent and Merger Sub of the Merger and the other transactions
contemplated by this Agreement, except those the failure of which to make, give
or obtain, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Parent or prevent, materially delay or
materially impair Parent's or Merger Sub's ability to consummate the Merger or
any of the other transactions contemplated by this Agreement.
2.2.4.2. The execution and delivery of this Agreement by
Parent and Merger Sub do not, and the performance of Parent and Merger Sub of
their obligations hereunder and the consummation by Parent and Merger Sub of the
Merger and the other transactions contemplated hereby (including the issuance of
Parent Common Shares) will not, constitute or result in (A) a breach or
violation of, or a default under Parent's certificate of incorporation or
by-laws (as amended from time to time) or the articles of incorporation and
by-laws of Merger Sub (as amended from time to time), (B) a breach or violation
of or a default under, or the acceleration or creation of any obligations, or
the creation of any Lien on the assets of Parent or any of its Subsidiaries
(with or without notice, lapse of time or both) pursuant to any provisions of
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, (C) subject to making, giving or obtaining all necessary
filings, notices, approvals, confirmations, declarations and/or decisions
specified by Section 2.2.4.1, a breach or violation of, or a default under, the
acceleration of any obligations or the creation of any Lien on the assets of
Parent or any of its Subsidiaries (with or without notice, lapse of time or
both) pursuant to any Contract binding upon Parent or any of its Subsidiaries or
any Law or governmental or non-governmental permit or license to which Parent or
any of its Subsidiaries is subject, or (D) any change in the rights or
obligations of any party under any of its Contracts, except, in the case of
clause (B), (C) or (D) above, for any breach, violation, default, acceleration,
creation or change that, individually or in the aggregate,
A-31
would not reasonably be expected to have a Material Adverse Effect on Parent or
prevent, materially delay or materially impair Parent's or Merger Sub's ability
to consummate the Merger or any of the other transactions contemplated by this
Agreement.
2.2.5. REPORTS; FINANCIAL STATEMENTS. Since December 31, 1998,
Parent has filed with the SEC and the appropriate Canadian securities regulatory
authorities all material forms, statements and documents (including all
exhibits, post-effective amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder (such filings through the date
hereof, collectively the "PARENT REPORTS" and, together with the Company
Reports, the "REPORTS"). As of their respective dates, the Parent Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of Parent and its
subsidiaries included in or incorporated by reference into the Parent Reports
(including the related notes and schedules) presents fairly, in all material
respects, the financial position of Parent and its subsidiaries as of its date,
and each of the related consolidated statements of income, changes in equity
(deficit) and cash flows included in or incorporated by reference into the
Parent Reports (including any related notes and schedules) presents fairly, in
all material respects, the results of operations and cash flows of Parent and
its subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in conformity with generally
accepted accounting principles in Canada ("CANADIAN GAAP") consistently applied
during the periods involved except as may be noted therein. The related notes
reconciling to U.S. GAAP the consolidated financial statements of Parent, or any
portion thereof, as applicable, comply in all material respects with the
requirements of the SEC applicable to such reconciliation. "PARENT BALANCE
SHEET" means the consolidated balance sheet of Parent as of September 30, 2000
set forth in the Parent 2000 Annual Report and "PARENT BALANCE SHEET DATE" means
September 30, 2000.
2.2.6. ABSENCE OF CERTAIN CHANGES. Since the Parent Balance Sheet
Date there has not been (i) any change in the financial condition, properties,
business or results of operations of Parent and its Subsidiaries except those
changes that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on Parent; (ii) any
declaration, setting aside or payment of any dividend or other distribution in
cash, stock or property in respect of Parent's capital stock, except for regular
cash dividends in the ordinary course, or (iii) any change by Parent in
accounting principles, practices or methods, except as required by changes in
Canadian GAAP or U.S. GAAP, as applicable.
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2.2.7. LITIGATION AND LIABILITIES. (a) There are no civil, criminal
or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of Parent's executive officers (the
"PARENT EXECUTIVE OFFICERS"), threatened against Parent or any of its
Subsidiaries or to which any of their respective properties, assets or rights
are reasonably likely to be subject nor is there any judgment, decrees,
injunction, rule or order of court arbitrator or any governmental body, agency
or official outstanding against Parent or any of its Subsidiaries, except, in
each case, for those that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent or prevent,
materially delay or materially impair Parent's or Merger Sub's ability to
consummate the Merger or any of the other transactions contemplated by this
Agreement.
(b) Neither Parent nor any of its Subsidiaries had at Parent
Balance Sheet Date, or has incurred since that date and as of the date of this
Agreement, any liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of any nature, except (i) liabilities, obligations or
contingencies (1) which are accrued or reserved against in the Parent Balance
Sheet or reflected in the notes thereto, (2) which were incurred after Parent
Balance Sheet Date in the ordinary course of business and consistent with past
practices, (3) which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent, (4) which have been
discharged or paid in full prior to the date of this Agreement in the ordinary
course of business, or (5) which are of a nature not required to be reflected in
the consolidated financial statements of Parent and its Subsidiaries prepared in
accordance with Canadian GAAP consistently applied.
2.2.8. EMPLOYEE BENEFIT PLANS.
2.2.8.1. Each stock option, stock purchase, stock
appreciation right or stock based incentive plan, or other similar arrangement
or policy, each plan, program, or policy providing for bonuses, profit-sharing
or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage and self-insured arrangements, health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits or other employee
benefits of any kind, whether funded or unfunded, and each "employee pension
benefit" plan as defined in Section 3(2) of ERISA, and each "registered pension
plan" as that term is defined in subsection 248(1) of the Income Tax Act,
Canada, in which directors, former directors, employees and former employees of
Parent or any of its Subsidiaries (collectively "PARENT EMPLOYEES") may
participate are collectively referred to as "PARENT EMPLOYEE PLANS". For
purposes of this Agreement, the term "PARENT FOREIGN PLAN" shall refer to each
plan, program or contract maintained, sponsored or contributed to by the Parent
or a Subsidiary that is subject to or governed by the laws of any jurisdiction
other than the United States or Canada, and which would have
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been treated as a Parent Employee Plan had it been a United States or Canada
plan, program or contract.
2.2.8.2. Each Parent Employee Plan and Parent Foreign Plan
has been established and maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such plan, except where failure to so comply would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent. Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, neither
Parent, any of its Subsidiaries nor any ERISA Affiliate contributes to, or is or
has ever been required to contribute to, any "multiemployer plan" as defined in
Section 3(37) of ERISA. Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, neither
Parent, any of its Subsidiaries nor any of its ERISA Affiliates has incurred a
liability, contingent or otherwise, under Title IV of ERISA that has not been
satisfied in full.
2.2.8.3. The execution, delivery of and performance by the
parties hereto of their obligations under and the consummation of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event under
any Parent Employee Plan, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Parent Employee, or (ii) result in the triggering
or imposition of any restrictions or limitations on the right of Parent or any
of its Subsidiaries to amend or terminate any Parent Employee Plan and receive
the full amount of any excess assets remaining or resulting from such amendment
or termination, subject to applicable taxes.
2.2.8.4. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Parent, all Parent Foreign Plans (i) have been maintained in accordance with all
applicable requirements; (ii) if they are intended to qualify for special tax
treatment, meet all requirements for that treatment; and (iii) if they are
intended to be funded and/or book-reserved are fully funded and/or book
reserved, as appropriate, based upon reasonable actuarial assumptions.
2.2.9. LABOR AND EMPLOYMENT MATTERS. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent, Parent and each Subsidiary (i) is in compliance with
all applicable Laws respecting employment, employment practices, labor, terms
and conditions of employment and wages and hours, in each case, with respect to
the Parent Employees; and (ii) is not liable for any payment to any trust or
other fund or to any Governmental Entity, with respect to
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unemployment compensation benefits, social security or other benefits for the
Parent Employees. No work stoppage or labor strike against Parent or any
Subsidiary by the Parent Employees is pending or, to the knowledge of the Parent
Executive Officers, threatened.
2.2.10. LICENSES. Each of Parent and its Subsidiaries has all
material Licenses from all Governmental Entities having jurisdiction over any
part of its business necessary for the conduct of any of its activities and all
such material Licenses are valid and in full force and effect, except for any
Licenses the failure of which to have or to be in full force and effect would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent. Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, no event has
occurred or other fact exists with respect to any of the Licenses held by Parent
or any of its Subsidiaries which permits, or after notice or lapse of time or
both would permit, revocation or termination thereof or would result in any
other material impairment of the rights of the holder of any of the Licenses.
2.2.11. INTELLECTUAL PROPERTY. (a) Each of Parent and its
Subsidiaries own or have a valid right to use IP Rights as are necessary in
connection with its respective businesses, except where the failure to own or
have a valid right to use such IP Rights, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Parent.
Except as would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, neither Parent nor any of its Subsidiaries has infringed on
any IP Rights of any third party.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, Parent and
its Subsidiaries have good and valid title to all IP Rights owned by any of them
and valid and enforceable license rights to all IP Rights used under license,
free and clear, to Parent's knowledge, of all material liens, security interests
and other encumbrances (other than Taxes not yet due and payable), and to
Parent's knowledge, all IP Rights are in full force and effect and will remain
in full force and effect immediately following the Effective Time, except for IP
Rights, the failure of which to be in full force and effect would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
(c) Parent and its Subsidiaries have a practice to secure, and
have secured, from all current and former employees, consultants and independent
contractors who contribute or have contributed to the creation or development of
their IP Rights valid written assignments by such persons to Parent and its
Subsidiaries of the rights to such contributions Parent and its Subsidiaries do
not already own by operation of law, except where the failure to secure such
written assignments would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent. Parent and its
Subsidiaries have taken reasonable steps to protect and preserve the
confidentiality
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of all of their trade secrets, and to Parent's knowledge (i) as of the date of
this Agreement, there are no unauthorized uses, disclosures or infringements of
any IP Rights of Parent or its Subsidiaries, and (ii) as of the date of this
Agreement, all use by, and disclosure to, any Person of trade secrets that
comprise any part of the IP Rights of Parent or its Subsidiaries has been
pursuant to the terms of a written agreement with such Person, and (iii) all use
by Parent and its Subsidiaries of trade secrets owned by another Person has been
pursuant to the terms of a written agreement with such Person or is otherwise
lawful, except, in each case, for such uses, disclosures or infringements, that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. If after the date of this Agreement Parent
has knowledge of any of the foregoing conditions, Parent shall take appropriate
and prompt action to remedy such conditions. Neither the IP Rights owned by
Parent or its Subsidiaries or incorporated into any products or services
currently provided by Parent or its Subsidiaries nor the use or other
exploitation thereof by Parent or its Subsidiaries in the conduct of their
business, nor any product or service currently provided by Parent or its
Subsidiaries, infringes on, misappropriates, breaches or violates any third
party IP Rights, except for such infringements, misappropriations, breaches and
violations that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, neither
Parent nor any of its Subsidiaries: (A) has been notified or has knowledge of
any actual or threatened adverse proceeding brought by any Person pertaining to
any challenge to the scope, validity or enforceability of (provided, however, no
representation or warranty is made regarding the scope, validity or
enforceability of any patent application), or Parent's ownership of, any of the
IP Rights owned by Parent and its Subsidiaries; (B) is the subject of any claim
of infringement or misappropriation by Parent or any of its Subsidiaries of any
third party IP Rights; or (C) to Parent's knowledge, has any claim for
infringement or misappropriation of, or breach of any license or agreement
involving, any of the IP Rights owned by Parent and its Subsidiaries.
(e) Except as would not, individually or in the aggregate
reasonably be expected to have a Material Adverse Effect on Parent, (A) Parent
has not taken any action or failed to take any action (including the manner in
which it has conducted its business, or used or enforced, or failed to use or
enforce, any of the IP Rights of Parent and its Subsidiaries) that would result
in the abandonment, cancellation, forfeiture, relinquishment, invalidation or
unenforceability of any of the IP Rights of Parent and its Subsidiaries, (B)
Parent has taken reasonable steps (based on standard industry practices) to
protect and maintain Parent's and its Subsidiaries' rights in and to IP Rights
of Parent and its Subsidiaries, (C) all registered trademarks and all IP
registered copyrights of Parent and its Subsidiaries and registered mask works
of Parent and its Subsidiaries have been registered and all owned patents of
Parent and its Subsidiaries have been filed and
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obtained, in accordance with all applicable legal requirements and are currently
in effect and in compliance with all applicable legal requirements, and without
limiting the generality of any of the foregoing, Parent has timely paid all
filing, examination, issuance, post-registration and maintenance fees, annuities
and the like associated or required with respect to any of the IP Rights of
Parent and its Subsidiaries.
2.2.12. CONTINUITY OF BUSINESS. Section 2.2.12 of the Parent
Disclosure Schedule sets forth certain clients of Parent and its Subsidiaries.
No client of Parent or any of its Subsidiaries identified on Section 2.2.12 of
Parent Disclosure Schedule has advised Parent or any Subsidiary orally or in
writing that it (y) is terminating or considering terminating the handling of
its business by Parent or any of its Subsidiaries, as applicable, as a whole or
in respect of any particular project or service or (z) is planning to reduce the
amount contracted with Parent or any of its Subsidiaries in any material manner.
2.2.13. COMPLIANCE WITH LAWS. (a) Except with respect to Taxes and
Environmental Laws, which are the subject of Sections 2.2.16 and 2.2.17,
respectively, neither Parent nor any of its Subsidiaries is in violation of, or
has violated, any applicable provisions of any Laws except for any violations
that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on Parent.
(b) Neither Parent nor any of its Subsidiaries has received
since January 1, 1998 any written notification or communication from any
Governmental Entity (A) asserting that Parent or any of its Subsidiaries is not
in compliance with any of the statutes, regulations or ordinances which such
Governmental Entity enforces or (B) threatening to revoke any license,
franchise, permit or governmental authorization.
2.2.14. TAX TREATMENT. From and after the date of this Agreement,
neither Parent nor any of its Subsidiaries has taken or agreed to take any
action, and the Parent Executive Officers do not know of any action taken by any
other Person, which action would jeopardize the treatment of the Merger as a
reorganization within the meaning of Section 368 of the Code or the ability of
counsel to render the opinions described in Sections 4.2.3 and 4.3.3 of this
Agreement.
2.2.15. MERGER SUB'S OPERATIONS. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby and has not (i)
engaged in any business activities, (ii) conducted any operations or (iii)
incurred any liabilities other than pursuant to this Agreement and in connection
with the Merger and other transactions contemplated by this Agreement, the
Executive Agreements and the Voting Agreement.
2.2.16. TAX MATTERS. (a) All Tax Returns required to be filed on or
before the Effective Time under Canadian federal or provincial or United States
Federal or state or local or any foreign tax laws with respect to (i) Parent and
its Subsidiaries, and (ii) any
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of their income, properties, or operations have been or will be timely filed, or
requests for extensions have been timely filed and have not expired, except
where a failure or failures to so timely file would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent.
(b) All material Tax Returns filed by Parent and its Subsidiaries
are complete and accurate in all material respects.
(c) Parent and its Subsidiaries have paid all Taxes due and
payable (without regard to whether those taxes have been assessed), or adequate
reserves have been established for the payment of those Taxes. No governmental
authority in a jurisdiction where Parent or any of its Subsidiaries does not
file a Tax Return has made a claim, assertion, or threat that Parent or any of
its Subsidiaries is or may be subject to Taxes in such jurisdiction. All Taxes
shown to be due and payable (without regard to whether those such Taxes have
been assessed) on the Tax Returns of Parent or any of its Subsidiaries have been
paid or adequate reserves have been established for the payment of those Taxes.
(d) There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any material Tax Returns required
to be filed by or with respect to Parent or any of its Subsidiaries.
(e) The proper and accurate amounts have been withheld from all
employees, customers, and other applicable payees (and timely paid to the
appropriate Governmental Entity or set aside in an account for these purposes)
for all periods through the Closing Date in compliance in all material respects
with all Tax withholding provisions of applicable federal, state, local and
foreign laws (including, without limitation, income, social security, and
employment Tax withholding for all types of compensation).
(f) Neither Parent nor any of its Subsidiaries is a party to any
Tax sharing or similar agreement or any agreement pursuant to which it or any of
its Subsidiaries has an obligation to indemnify any party (other than Parent or
one of its Subsidiaries) with respect to Taxes or has been a member of an
affiliated group filing consolidated or combined tax returns (other than a group
the common parent of which was Parent).
(g) All Taxes due with respect to completed and settled
examinations or concluded litigation relating to Parent or any of its
Subsidiaries have been paid in full or adequate reserves have been established
for the payment thereof.
(h) No material audit or examination or refund litigation with
respect to any Tax Return is pending.
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(i) Parent is not, nor has it ever been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
2.2.17. ENVIRONMENTAL MATTERS. (a) (x) Neither the conduct or
operations of Parent or its Subsidiaries nor any condition of any property
presently or previously owned, leased or operated by any of them violates or,
within the applicable statute of limitations period, violated Environmental
Laws, except for violations that are not material and (y) no condition has
existed or event has occurred with respect to any of them or any such property
that would reasonably be expected to result in a Material Adverse Effect on
Parent. Neither Parent nor any of its Subsidiaries has received any written
notice from any Governmental Entity that it or its Subsidiaries or the operation
or condition of any property ever owned, leased, operated, held as collateral or
held as a fiduciary by any of them are or were in material violation of or
otherwise are alleged to have material liability under any Environmental Law,
including, but not limited to, responsibility (or potential responsibility) for
the cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or originating from
any such property.
(b) To Parent's knowledge, none of the property currently owned,
leased or operated by Parent or by its Subsidiaries is subject to, or as a
result of this transaction would be subject to, (i) any Environmental Laws which
would impose restrictions, such as notice, disclosure or obtaining advance
approval prior to this transaction, or (ii) any liens under any Environmental
Laws.
2.2.18. BROKERS AND FINDERS. Neither Parent nor any of its
Subsidiaries, officers, directors or employees has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the execution and delivery of this Agreement, the Merger or
the other transactions contemplated hereby, except that Parent has employed
Salomon Smith Barney as its financial advisor.
ARTICLE III
COVENANTS
Section 3.1. INTERIM OPERATIONS OF THE COMPANY. During the period from the
date of this Agreement until the Effective Time, the Company shall, and shall
cause each of its Subsidiaries to (unless Parent shall otherwise approve in
writing (which consent shall not be unreasonably withheld) and except as
otherwise expressly contemplated by or provided in this Agreement):
3.1.1. conduct its businesses in the ordinary and usual course
consistent with past practice in all material respects and, to the extent
consistent therewith, use
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reasonable best efforts to preserve its business organization intact and
maintain its existing relations and goodwill with employees, customers, clients,
suppliers, creditors, lessors, employees and business associates;
3.1.2. not (i) amend, or propose any change in, the articles of
incorporation or by-laws of the Company or any of its Subsidiaries; (ii) split,
combine, subdivide or reclassify any of the outstanding shares of capital stock
of the Company or any of its Subsidiaries; or (iii) adopt a plan of complete or
partial liquidation;
3.1.3. (i) not declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect of any of its capital
stock or any securities convertible, exchangeable or exercisable for or into
shares of its capital stock, other than dividends paid to the Company or to
wholly owned Subsidiaries of the Company by any of the Subsidiaries of the
Company; and (ii) not repurchase, redeem or otherwise acquire any shares of its
capital stock, or any securities convertible, exchangeable or exercisable for or
into any shares of its capital stock;
3.1.4. not (i) issue, sell, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable or exercisable for, or
rights, options, warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements, arrangements, calls,
commitments or rights of any kind to acquire, its capital stock (other than
Company Common Shares issuable upon the exercise of Company Stock Options
outstanding on the date of this Agreement under the Company Stock Plans or
pursuant to the Company's Employee Stock Purchase Plan); (ii) incur or modify in
any material respect (x) any material indebtedness or any of the terms of any
material indebtedness or (y) any other liability except in the ordinary and
usual course of business; (iii) enter into any merger, reorganization,
consolidation or share exchange; (iv) sell, lease, license to any Person(s) or
otherwise dispose of any business or any assets, outside the ordinary and usual
course of business (by merger, consolidation, stock or asset disposition or
otherwise); or (v) purchase, lease or license from any Person or otherwise
acquire any assets and/or business(es) (by merger, consolidation, stock or asset
acquisition or otherwise), except for such purchases, leases, or acquisitions
requiring payments which do not in the aggregate exceed $300,000 in any single
purchase, lease or acquisition (or series of related transactions), or enter
into any agreement with respect to any of the foregoing;
3.1.5. except as set forth on Schedule 3.1.5 of the Company
Disclosure Schedule, not (i) terminate, establish, adopt, enter into, implement,
make any new grants or awards of equity-based compensation or other benefits
under, amend or otherwise modify any compensation or benefit plan or outstanding
award thereunder or agreement or increase the salary, wage, bonus or other
compensation of any directors, officers or employees, or enter into or adopt any
employment or severance agreement or arrangement except for increases in salary,
wages or non-equity bonus compensation or non-equity
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benefits for employees other than directors or executive officers in the
ordinary and usual course of business consistent with past practice, (ii) cause
the acceleration of the time of payment or vesting or trigger any payment or
funding of any compensation, benefits or awards, under any Company Employment
Agreement, any Company Employee Plan or any Company Foreign Plan, except in each
case as required by applicable Company Employment Agreement, Company Employee
Plan or Company Foreign Plan pursuant to the terms in effect as of the date of
this Agreement, (iii) permit a cashless exercise of stock options, except as
currently permitted by the Company Stock Plans, or (iv) settle the exercise of
stock options in other than Company Common Shares;
3.1.6. not take any action or omit to take any action which to the
knowledge of the Company Officers would prevent, materially delay or materially
impede the consummation of the Merger or the other transactions contemplated by
this Agreement, or take any action that would cause the Merger to fail to
qualify as a reorganization under Section 368 of the Code;
3.1.7. not waive any of its rights under, or release any other
party from, amend, or fail to enforce its rights under, any provision of any
standstill agreement;
3.1.8. not enter into, or modify, amend the terms of, or
terminate any material joint venture, partnership or similar arrangement or
any material contract;
3.1.9. not (i) change its (w) Tax accounting policies, practices
or methods, or (x) Tax elections; and (ii) settle any material audits,
examinations or litigation with respect to Taxes;
3.1.10. not take any action to cause the Company Common Shares to
cease to be listed on the Nasdaq;
3.1.11. except for any change which is not material or which is
required by reason of a concurrent change in U.S. GAAP, not change any method
or principle of accounting or accounting practice used by it;
3.1.12. not take any action that would make any representation or
warranty of the Company hereunder inaccurate in any material respect at, or
as of any time prior to, the Effective Time;
3.1.13. not adopt, enter into or amend to increase benefits or
obligations any pension or retirement plan, trust or fund and not adopt, enter
into or amend in any material respect any bonus, profit sharing, compensation,
stock option, deferred compensation, health care, employment or other employee
benefit plan, agreement, trust, fund or arrangement for the benefit or welfare
of any employees or retirees generally, other than in the ordinary course of
business, except (i) as required to comply with
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changes in applicable law, (ii) any of the foregoing involving any such then
existing plans, agreements, trusts, funds or arrangements of any company
acquired after the date hereof, or (iii) as required pursuant to an existing
contractual arrangement or agreement;
3.1.14. not (i) incur or become contingently liable with respect to
any indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business (other than pursuant to credit facilities) or borrowings
under the existing credit facilities of the Company or any of its Subsidiaries
or borrowings under the credit facilities to be entered into substantially on
the terms set forth in Section 3.1.14 of the Company Disclosure Schedule as such
facilities may be amended in a manner that does not have a Material Adverse
Effect on the Company up to the existing borrowing limit on the date hereof;
3.1.15. not enter into any contract or commitment or make
expenditures, including, but not limited to, capital expenditures, or enter into
any binding commitment or contract to make expenditures, (i) other than any
contract or commitment (or series of related contracts or commitments) providing
for the provision of services by the Company or any of its Subsidiaries to any
new client of the Company or any of its Subsidiaries which is reasonably
expected to generate less than $2 million in revenues over its term or (ii)
other than contracts or commitments which are reasonably expected to involve
payments by or to the Company or any of its Subsidiaries of less than $300,000
in any single contract or commitment (or series of contracts or commitments
relating to the same matter) over its term; PROVIDED, that this clause (ii) does
not apply to those contracts or commitments which are referred to in clause (i)
of this paragraph;
3.1.16. timely satisfy, or cause to be timely satisfied, all
applicable Tax reporting and filing requirements contained in the Code with
respect to the transactions contemplated by this Agreement, including, without
limitation, the reporting requirements contained in United States Treasury
Regulation Section 1.367(a)-3(c)(6), which covenant shall continue after the
Effective Time until such time as all such reporting and filing requirements are
satisfied;
3.1.17. use best efforts to obtain waivers, by March 15, 2001, under
its credit facility with First Union Bank dated December 28, 1999, as amended
from time to time, and its credit facility with AmSouth Bank dated December 8,
2000, as amended from time to time, so that the Company shall no longer be in
violation of its covenants thereunder;
3.1.18. subject to restrictions imposed by applicable law, confer
with one or more representatives of Parent to report operational matters of
materiality and the general status of ongoing operations; or3.1.19. not
authorize or enter into an agreement to take any of the actions referred to
in subsections 3.1.2 through 3.1.15.
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Section 3.2. INTERIM OPERATIONS OF PARENT. During the period from the date
of this Agreement until the Effective Time, Parent shall, and shall cause each
of its Subsidiaries to, as applicable (unless the Company shall otherwise
approve in writing (which consent shall not be unreasonably withheld) and except
as otherwise expressly contemplated by or provided in this Agreement or as set
forth in the corresponding section of the Parent Disclosure Schedule):
3.2.1. not take any action which would reasonably be expected to
materially impair or delay the ability of Parent or Merger Sub to consummate
the Merger;
3.2.2. not (i) amend, or propose any change in, the certificate
of incorporation of Parent; (ii) split, combine, subdivide or reclassify the
outstanding share capital of Parent or (iii) adopt a plan of complete or
partial liquidation;
3.2.3. (i) not declare, set aside or pay any dividend or
distribution payable in cash, stock or property in respect of any of its capital
stock, other than regular cash dividends, consistent with past practice
(including increases consistent with past practice); or (ii) repurchase, redeem
or otherwise acquire (except for repurchases, redemptions or acquisitions (A)
required by the terms of its capital stock or securities outstanding on the date
of this Agreement, (B) required by the terms as of the date of this Agreement
of, or in the ordinary course of the operation of, any Parent employee stock
option or other employee plan or scheme or (C) otherwise in the ordinary course)
any shares of its capital stock or any securities convertible, exchangeable or
exercisable for or into shares of its capital stock;
3.2.4. not take any action or omit to take any action which, to the
knowledge of the Parent Executive Officers, would prevent, materially delay or
materially impede the consummation of the Merger or the other transactions
contemplated by this Agreement or take any action that would cause the Merger to
fail to qualify as a reorganization under Section 368 of the Code;
3.2.5. not take any action to cause Parent Common Shares to
cease to be listed on the NYSE or the TSE;
3.2.6. except for any change which is not material or which is
required by reason of a concurrent change in Canadian GAAP, not change any
method of accounting practice used by it;
3.2.7. not take any action that would make any representation or
warranty of Parent hereunder inaccurate in any material respect at, or as of
any time prior to, the Effective Time;
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3.2.8. timely satisfy, or cause to be timely satisfied, all
applicable Tax reporting and filing requirements contained in the Code with
respect to the transactions contemplated by this Agreement, including, without
limitation, the reporting requirements contained in United States Treasury
Regulation Section 1.367(a)-3(c)(6), which covenant shall continue after the
Effective Time until all such reporting and filing requirements are satisfied;
or
3.2.9. not authorize or enter into an agreement to take any of
the actions referred to in subsections 3.2.1 through 3.2.7.
Section 3.3. ACQUISITION PROPOSALS.
3.3.1. After the execution of this Agreement and prior to the
Effective Time, the Company agrees that neither it nor any of its Subsidiaries
nor any of its or any of its Subsidiaries' officers or directors shall, and the
Company shall direct and use its best efforts to cause its and its Subsidiaries'
officers, directors, employees, investment bankers, attorneys, accountants,
financial advisors, agents or other representatives (collectively, the
"REPRESENTATIVES") not to, directly or indirectly, initiate, solicit, encourage
or otherwise facilitate any inquiries by any Person not a party to this
Agreement or the making of any proposal or offer by any Person not a party to
this Agreement with respect to, a merger, reorganization, share exchange,
business combination, liquidation, dissolution, recapitalization, consolidation
or similar transaction involving the Company or any purchase of, or offer to
purchase, (i) 10% or more of the outstanding shares of the capital stock of the
Company or capital stock of, or other equity or voting interests in, any of the
Company's Subsidiaries, or (ii) assets or businesses of the Company and its
Subsidiaries taken as a whole that constitute or represent 10% or more of the
assets or businesses of the Company and its Subsidiaries (any indication of
interest in any of the foregoing or inquiry, proposal or offer relating to or
reasonably likely to lead to any of the foregoing being an "ACQUISITION
PROPOSAL"). The Company further agrees that neither it nor any of its
Subsidiaries nor any of its or any of its Subsidiaries' officers or directors
will, and that it will direct and use its best efforts to cause its
Representatives not to, directly or indirectly, engage in or continue any
discussions or negotiations with or provide any confidential information or data
to any Person not a party to this Agreement relating to an Acquisition Proposal
or engage in any negotiations concerning an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
Notwithstanding the foregoing, prior to receipt of the Company Requisite Vote,
in the event that (i) the Company shall receive an Acquisition Proposal and has
not at any time violated the terms of this Section 3.3.1, (ii) the Board of
Directors of the Company determines in its good faith judgment (x) after
receiving the advice of its financial advisor that this Acquisition Proposal is
reasonably likely to result in a Superior Proposal and (y) after receiving the
advice of its outside counsel that, in light of this Acquisition Proposal, if
the Company fails to participate in discussions or negotiations
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with, or furnish confidential information or data to, the Person making the
Acquisition Proposal, that the Board of Directors would be in violation of its
fiduciary duties under applicable Law and (iii) after giving Parent three
Business Days notice of its intention to do so, the Company may, prior to the
receipt of the Company Requisite Vote, engage in discussions and/or negotiations
with the Person that made the Acquisition Proposal and/or furnish confidential
information and data to that Person pursuant to a customary confidentiality
agreement containing terms no less restrictive than those set forth in the
Confidentiality Agreement previously entered into by the Company and Parent (the
"CONFIDENTIALITY AGREEMENT"); PROVIDED that a copy of all written information
furnished to the Person that made the Acquisition Proposal is promptly provided
to Parent. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any bona
fide written Acquisition Proposal that (A) shall have a value of at least 105%
of the value of the consideration offered pursuant to the Merger and (B) the
Board of Directors of the Company determines in its good faith judgment (x)
after consultation with its financial advisors (and taking into account all the
terms and conditions of the Acquisition Proposal deemed relevant by the
Company's Board of Directors, including any break-up fees, expense reimbursement
provisions, conditions to consummation, and the ability of the Person making the
Acquisition Proposal to obtain any financing necessary to effect the
transactions contemplated by the Acquisition Proposal), to be more favorable
from a financial point of view to its shareholders than the Merger, and (y)
taking into account all legal, financial, regulatory and other aspects of the
Acquisition Proposal, to constitute a transaction that is reasonably likely to
be consummated on the terms set forth in the Acquisition Proposal.
3.3.2. As of the date of this Agreement, the Company has and has
caused each of its Subsidiaries and Representatives to have (i) terminated any
existing activities, discussions or negotiations with any Person not a party to
this Agreement conducted heretofore with respect to any Acquisition Proposal and
(ii) requested the prompt return of all confidential information relating to the
Company or any of its Subsidiaries previously furnished to any such third
parties.
3.3.3. The Company agrees that it will take the necessary steps
promptly to inform its Subsidiaries and its Subsidiaries' Representatives of the
obligations undertaken in this Section 3.3. The Company agrees that it will
promptly (and in no event later than 24 hours after receipt of an Acquisition
Proposal) notify Parent (which notice shall be provided orally and in writing
and shall identify the Person making the Acquisition Proposal and set forth its
material terms) after receipt of an Acquisition Proposal, or if any nonpublic
information is requested from, or any discussions or negotiations are sought to
be initiated or continued with, any of its or its Subsidiaries' Representatives
and thereafter shall keep Parent informed, on a current basis, of the status and
material terms of any proposals or offers.
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3.3.4. Except as provided in Section 3.3.5, nothing contained in
this Agreement shall prohibit the Company from (i) taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act
with respect to an Acquisition Proposal by means of a tender or exchange offer
or (ii) making any disclosure to its shareholders if, in the good faith judgment
of the Board of Directors of the Company, after consultation with outside
counsel, failure so to disclose would be inconsistent with applicable Law.
3.3.5. The Board of Directors of the Company shall recommend that
the shareholders of the Company vote to approve this Agreement (and this
recommendation shall be included in the Company Proxy Statement (as defined in
Section 3.4.1.1)) and it may not withdraw or modify its recommendation in a
manner adverse to Parent or recommend that the Company's shareholders vote in
favor of or accept an Acquisition Proposal; PROVIDED that the Board of Directors
of the Company (i) will not be required to make its recommendation described
above, (ii) may withdraw or modify its recommendation described above, and (iii)
may recommend that its shareholders vote in favor of or accept an Acquisition
Proposal, if (w) after receiving an Acquisition Proposal that constitutes a
Superior Proposal, the Board of Directors of the Company determines in its good
faith judgment, after receiving the advice of outside counsel that, in light of
this Superior Proposal, if it makes its recommendation described above, fails to
withdraw or modify its recommendation described above or fails to recommend that
its shareholders vote in favor of or accept the Superior Proposal, as
applicable, there is a reasonable possibility that the Board of Directors of the
Company would be in violation of its fiduciary duties under applicable Law, (x)
after five Business Days have elapsed following delivery by the Board of
Directors of the Company of written notice advising Parent that it intends to do
so absent modification to the terms and conditions of this Agreement, (y)
assuming this Agreement were amended by Parent before the expiration of this
five Business Day period, the Acquisition Proposal would nonetheless constitute
a Superior Proposal, and (z) the Company has complied with its obligations set
forth in Section 3.3.1.
Section 3.4. INFORMATION SUPPLIED.
3.4.1. REGISTRATION STATEMENT; OTHER SEC FILINGS.
3.4.1.1. Each of Parent and the Company shall cooperate and
as promptly as reasonably practicable prepare and Parent shall file with the SEC
as soon as reasonably practicable a Registration Statement on Form F-4 (or any
successor form) (the "FORM F-4") under the Securities Act with respect to Parent
Common Shares issuable and deliverable pursuant to this Agreement. A portion of
the Form F-4 shall serve as a prospectus with respect to Parent Common Shares
issuable and deliverable pursuant to the terms of this Agreement and as the
Company's proxy statement with respect to the Company Shareholders' Meeting (as
defined in Section 3.5) (the "COMPANY PROXY
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STATEMENT"). The parties hereto will cause the Form F-4 to comply as to form in
all material applicable respects with the applicable provisions of the
Securities Act and Exchange Act and the rules and regulations under the
Securities Act and Exchange Act. Each of Parent and the Company shall use
reasonable best efforts to have the Form F-4 declared effective by the SEC as
promptly as reasonably practicable after the filing. Parent shall use reasonable
best efforts to obtain, prior to the effective date of the Form F-4, all
necessary state securities law or "blue sky" permits or approvals required to
effect the transactions contemplated by this Agreement. Parent will advise the
Company, as promptly as practicable after it receives notice, of the time when
the Form F-4 has become effective or any supplement or amendment has been filed,
the issuance of any stop order, the suspension of the qualification of Parent
Common Shares issuable and deliverable in connection with the Merger for
offering or sale in any jurisdiction.
3.4.1.2. The Company and Parent each agrees, as to itself
and its Subsidiaries, that none of the information supplied or to be supplied by
it or its Subsidiaries for inclusion or incorporation by reference in the Form
F-4 or the Company Proxy Statement, including any amendment or supplement, will,
at the time the Form F-4 becomes effective under the Securities Act, or in the
case of the Company Proxy Statement, at the date of mailing to shareholder and
at the time of Company Shareholder Meeting, 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 the light of the
circumstances under which they were made, not misleading. If at any time prior
to the date of the consummation of the Merger any information relating to the
Company or Parent, or any of their respective Affiliates, officers or directors,
should be discovered by the Company or Parent which should be set forth in an
amendment and/or a supplement to the Form F-4 or the Company Proxy Statement, so
that the Form F-4 or the Company Proxy Statement would not, at the time the Form
F-4 becomes effective under the Securities Act, or, in the case of the Company
Proxy Statement, at the date of mailing to shareholders and at the time of the
Company Shareholder Meeting, include any misstatement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, the party which discovers this information shall promptly
notify the other party and, to the extent required by Law, an appropriate
amendment or supplement describing such information shall be as promptly as
reasonably practicable filed with the SEC or any other applicable Governmental
Entity and, to the extent required by Law, disseminated to the Company's
shareholders.
3.4.1.3. The Company will use reasonable best efforts to
cause the Company Proxy Statement to be mailed to its shareholders as promptly
as practicable after the date of this Agreement.
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Section 3.5. MEETINGS. The Company will take all action necessary to
convene a meeting to be held as promptly as reasonably practicable after the
Form F-4 has been declared effective by the SEC, of the holders of Company
Common Shares at which those shareholders will vote with respect to the approval
of this Agreement (the "COMPANY SHAREHOLDERS' MEETING").
Section 3.6. FILINGS; OTHER ACTIONS; NOTIFICATION.
3.6.1. The Company and Parent shall each cooperate with the other
and (i) use (and shall cause their respective Subsidiaries to use) their
reasonable best efforts as promptly as practicable to take or cause to be taken
all actions, and do or cause to be done all things, necessary, proper or
advisable under this Agreement and applicable Laws to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable,
including preparing and filing as promptly as reasonably practicable all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents, and
(ii) use (and shall cause their respective Subsidiaries to use) reasonable best
efforts to obtain as promptly as practicable all approvals, consents,
registrations, permits, authorizations and other confirmations required to be
obtained from any third party, including the Company Required Consents and the
Parent Required Consents, necessary, proper or advisable to consummate the
Merger and the other transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that neither party shall be required by this Section 3.6.1 to take any
action, including to accept or agree to any conditions, terms or restrictions or
any disposition of assets or businesses, as the case may be, which, individually
or in the aggregate, would reasonably be expected to have either a Material
Adverse Effect on Parent or a Material Adverse Effect on the Company. The
Company shall not accept or agree to any conditions, terms, or restrictions or
any disposition of assets or business pursuant to this Section 3.6.1 without the
prior written consent of Parent (not to be unreasonably withheld). Subject to
applicable Laws relating to the exchange of information, the Company and Parent
shall have the right to review in advance, and to the extent practicable each
will consult the other on, all the information relating to the Company and its
Subsidiaries or Parent and its Subsidiaries, as the case may be, that appears in
any filing made with, or written materials submitted to, any third party and/or
any Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
Company and Parent shall act reasonably and as promptly as practicable.
3.6.2. The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and shareholders, as applicable, and any
other matters as may be reasonably necessary or advisable in connection with the
Form F-4, the Company Proxy Statement, or any other necessary filing, notice,
statement, registration, submission of
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information or application made by or on behalf of the Company or Parent or any
of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
3.6.3. The Company and Parent each shall keep the other apprised of
the status of matters relating to the Merger and the other transactions
contemplated by this Agreement, including promptly furnishing the other with
copies of notices or other communications received by the Company or Parent, as
the case may be, or any of its Subsidiaries, from any third party whose consent
or approval is required or advisable and/or any Governmental Entity with respect
to the Merger and the other transactions contemplated by this Agreement. The
Company and Parent each shall give prompt notice to the other of any change that
would reasonably be expected to have a Material Adverse Effect on it or of any
failure of any condition set forth in Article IV to the other party's
obligations to effect the Merger.
3.6.4. Prior to making any filing, notice, petition, statement,
registration, submission of information or application to or with any third
party and/or Governmental Entity (including any securities exchange) in
connection with the consummation of the Merger and the other transactions
contemplated by this Agreement and except as may be required by Law or by
obligations pursuant to any listing agreement with or the rules of any
securities exchange, each party shall make all reasonable best efforts to
consult with the other party with respect to the content of the filing, notice,
petition, statement, registration, submission of information or application and
to provide the other party with copies of the proposed filing, notice, petition,
statement, registration, submission of information or application. The Company
and Parent each shall not agree to participate in any meeting with any
Governmental Entity in respect of any filings, investigation or other inquiry
relating to the Merger and the other transactions contemplated by this Agreement
unless it consults with the other party in advance and, to the extent
practicable and permitted by the Governmental Entity, gives the other party the
opportunity to attend and participate thereat.
3.6.5. In the event any claim, action, suit, investigation or other
proceeding by any Governmental Entity or other Person or other legal or
administrative proceeding is commenced that questions the validity or legality
of this Agreement, the Merger or the other transactions contemplated hereby or
claims or damages in connection therewith, the parties hereto agree to cooperate
and use commercially reasonable efforts, subject to the limitations set forth in
Section 3.6.1, to defend against and respond thereto.
3.6.6. Without limitation of the foregoing, each of Parent and the
Company undertakes and agrees to file as promptly as practicable, and in any
event prior to 15 days after the date hereof, a Notification and Report Form
under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Justice Department (the "ANTITRUST DIVISION"). Each of
Parent and the Company shall (i) respond
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as promptly as practicable to any inquiries received from the FTC or the
Antitrust Division for additional information or documentation and to all
inquires and requests received from any State Attorney General or other
governmental authority in connection with antitrust matters, and (ii) not extend
any waiting period under the HSR Act or enter into any agreement with the FTC or
the Antitrust Division not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other parties hereto.
Parent shall take all reasonable steps necessary to avoid or eliminate
impediments under any antitrust, competition, or trade regulation law that may
be asserted by the FTC, the Antitrust Division, any State Attorney general or
any other governmental entity with respect to the Merger so as to enable the
Closing to occur as soon as reasonably possible. Each party shall promptly
notify the other parties hereto of any written communication to that party from
the FTC, the Antitrust Division, any State Attorney General or any other
governmental entity and permit the other parties hereto to review in advance any
proposed written communication to any of the foregoing.
Section 3.7. ACCESS. In order to facilitate the consummation of the Merger
and the other transactions contemplated by this Agreement, the Company agrees
that, upon reasonable request to any executive officer of the Company designated
for the purpose, and except as may otherwise be required by applicable Law, the
Company shall (and shall cause its Subsidiaries to) provide reasonable access to
Parent and the Representatives of Parent, during normal business hours
throughout the period prior to the Effective Time, to its and its Subsidiaries'
properties, books, contracts, commitments and records (including any tax
returns) and, during this period, the Company shall (and shall cause its
Subsidiaries to) furnish promptly to the other all information concerning its
business, properties and personnel as may reasonably be requested by Parent or
Merger Sub and furnish promptly a copy of each report, schedule and other
document filed or received by the Company or its Subsidiaries promptly pursuant
to the requirements of federal or state securities laws; PROVIDED that no
receipt of information pursuant to this Section 3.7 shall affect or be deemed to
modify any representation or warranty made by the Company hereunder; and
PROVIDED, FURTHER, that the foregoing shall not require the Company to permit
any inquiry, or to disclose any information, that in the reasonable judgment of
the Company, would (i) violate any antitrust or competition Law or (ii) result
in the disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality to third parties if the Company
shall have used commercially reasonable efforts to obtain the consent of the
third party to inspection or disclosure.
Section 3.8. PUBLICITY. The initial press release concerning this
Agreement, the Merger and the other transactions contemplated by this Agreement
shall be a joint press release, and thereafter the Company and Parent shall
consult with each other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other transactions
contemplated by this Agreement.
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Section 3.9. BENEFITS AND OTHER MATTERS.
3.9.1. EMPLOYEE BENEFITS.
3.9.1.1. For at least the twelve month period immediately
following the Effective Time, Parent intends to, and intends to cause the
Surviving Corporation to, provide to Company Employees (i) employee benefits
(other than salary, incentive compensation or stock-based benefits) which in the
aggregate are substantially comparable to the benefits provided pursuant to the
Company Employee Plans and Company Foreign Plans as in effect on the date hereof
and (ii) salary, incentive compensation and stock-based benefits pursuant to
criteria and procedures established by Parent which will be substantially
similar to the criteria and procedures applied to similarly situated employees
of Parent or its Subsidiaries; PROVIDED, HOWEVER, that, (x) with respect to
Company Employees who are subject to collective bargaining or other labor
agreements, all benefits shall be provided in accordance with the applicable
collective bargaining or other labor agreements and (y) with respect to Company
Employees party to an employment agreement with the Company, all salary,
incentive compensation and other employee benefits shall be provided in
accordance with the employment agreement with the Company Employee; and
PROVIDED, FURTHER, that the foregoing shall not be construed to limit Parent's
flexibility in determining the design of any benefit plan or program, or prevent
the amendment or termination of any Company Employee Plan or Company Foreign
Plan to the extent permitted by the terms and conditions thereof as in effect on
the date hereof.
3.9.1.2. As of and after the Effective Time, Parent will, or
will cause the Surviving Corporation to, give Company Employees full credit for
purposes of eligibility and vesting, but not benefit accrual, under any employee
benefit plans, programs, policies and arrangements maintained for the benefit of
Company Employees as of and after the Effective Time by Parent, its Subsidiaries
or the Surviving Corporation for the Company Employees' service with the
Company, its Subsidiaries and their predecessor entities to the same extent
recognized by the Company immediately prior to the Effective Time.
3.9.1.3 Parent agrees to grant options to purchase an
aggregate of 1,000,000 Parent Common Shares as promptly as practicable after the
Effective Time, but in no event later than 90 days thereafter. Such options
shall be issued to current members of senior management of the Company who
remain with the Company after the Effective Time, as determined by Parent after
consultation with the Chief Executive Officer of the Company. Such options shall
be granted at fair market value at the time of grant and shall have such other
terms as are consistent with Parent's stock option plans.
3.9.1.4. Nothing expressed or implied in this Agreement
shall confer upon any employee or any beneficiary, dependent, legal
representative, or
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collective bargaining agent of such employee any right or remedy or any nature
or kind whatsoever under or by reason of this Agreement, including without
limitation any right to employment or continued employment for any specified
period, at any specified location or under any specified job category.
3.9.2. DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE. (a)
Parent agrees that all rights to indemnification and all limitations on
liability existing in favor of each present or former director or officer of the
Company or any of its Subsidiaries (each, an "INDEMNITEE") in respect of acts or
omissions of such Indemnitees on or prior to the Effective Time as provided in
an agreement between an Indemnitee and the Company or its Subsidiaries in effect
as of the date of this Agreement shall continue in full force and effect in
accordance with its terms as obligations of the Surviving Corporation.
(b) The articles of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the articles of incorporation and the by-laws of the Company, which
provisions shall not be amended, modified or otherwise repealed for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder as of the Effective Time of individuals who at the Effective
Time were directors, officers, employees or agents of the Company, unless such
modification is required after the Effective Time by law and then only to the
minimum extent required by such law.
(c) For six years after the Effective Time, Parent shall procure
the provision of officers' and directors' liability insurance in respect of acts
or omissions occurring prior to the Effective Time covering each Person
currently covered by the Company's officers' and directors' liability insurance
policy on terms with respect to coverage and in amounts no less favorable than
those of the policy in effect on this date; PROVIDED, HOWEVER, that during this
period, Parent shall not be required to procure any coverage in excess of the
amount that can be obtained for the remainder of the period for an annual
premium of 250% of the current annual premium paid by the Company for its
existing coverage.
(d) For six years after the Effective Time, Parent shall
indemnify and hold harmless the Indemnitees (i) with respect to all acts or
omissions by them in their capacities as officers or directors of the Company or
any of its Subsidiaries in connection with the adoption and approval of this
Agreement and the transactions contemplated hereby and (ii) to the fullest
extent permitted under applicable law, with respect to all other actions or
omissions by them prior to the Effective Time in their capacities as officers or
directors of the Company or any of its Subsidiaries or taken by them at the
request of, the Company or any of its Subsidiaries. In the event any claim in
respect of which indemnification is available pursuant to the foregoing
provisions is asserted or made within such six-year period, all rights to
indemnification shall continue until such
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claim is disposed of or all judgments, orders, decrees or other rulings in
connection with such claim are duly satisfied.
Section 3.10. EXPENSES. Except as otherwise provided in Section 5.5,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated hereby and thereby shall be paid by the party incurring the
expense, except that the Company and Parent shall share equally the costs and
expenses of filing, printing and distributing the Form F-4, the Company Proxy
Statement and related documents, provided, however, that Parent shall pay all
fees required in connection with any filing required under the HSR Act.
Section 3.11. OTHER ACTIONS BY THE COMPANY AND PARENT.
3.11.1. TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement the Company and its Board of Directors shall, subject to applicable
Law, grant any approvals and take any actions as are necessary so that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as reasonably practicable on the terms contemplated by
this Agreement, and otherwise act to eliminate or minimize the effects of any
Takeover Statute on these transactions.
3.11.2. NOTICES OF CERTAIN EVENTS.
3.11.2.1. The Company shall as promptly as practicable after
executive officers of the Company acquire knowledge thereof, notify Parent of:
(i) any notice or other communication from any person alleging that the consent
of such person (or another person) is or may be required in connection with the
transactions contemplated by this Agreement which consent relates to a material
Contract to which the Company or any of its Subsidiaries is a party or the
failure of which to obtain would materially delay the consummation of the
Merger; (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and (iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting the Company or any of its
Subsidiaries that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to this Agreement or which relate to
the consummation of the transactions contemplated by this Agreement.
3.11.2.2. Each of Parent and Merger Sub shall as promptly as
practicable after executive officers of Parent acquire knowledge thereof, notify
the Company of: (i) any notice or other communication from any person alleging
that the consent of such person (or other person) is or may be required in
connection with the transactions contemplated by this Agreement which consent
relates to a material Contract
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to which Parent or its Subsidiaries are a party or the failure of which to
obtain would materially delay the Merger, (ii) any notice or other communication
from any governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement, and (iii) any actions, suits,
claims, investigations or proceedings commenced or, to the best of its knowledge
threatened, against Parent or Merger Sub, which relate to consummation of the
transactions contemplated by this Agreement.
3.11.2.3. Each of the Company, Parent and Merger Sub agrees
to give prompt notice to each other of, and to use commercially reasonable
efforts to remedy, (i) the occurrence or failure to occur of any event which
occurrence or failure to occur would be likely to cause any of its
representations or warranties in this Agreement to be untrue or inaccurate at
the Effective Time unless such failure or occurrence would not have a Material
Adverse Effect on such party giving notice and (ii) any failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder unless such failure or occurrence would not have a
Material Adverse Effect on such party giving notice; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 3.11.2.3 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 3.12. LISTING APPLICATIONS; ESTABLISHMENT OF PARENT COMMON SHARES.
Parent shall as promptly as reasonably practicable prepare and submit to the
NYSE and the TSE a listing application with respect to Parent Common Shares
issuable pursuant to the Merger, and shall use reasonable best efforts to
obtain, approval for the listing, subject to official notice of issuance, of
such Parent Common Shares.
Section 3.13. LETTERS OF ACCOUNTANTS.
(a) The Company shall use commercially reasonable efforts to
cause to be delivered to Parent "comfort" letters of Ernst & Young, the
Company's independent public accountants, dated the effective date of the Form
F-4 and the Closing Date, respectively, and addressed to the Company and its
directors and Parent and its directors, in form reasonably satisfactory to
Parent and customary in scope and substance for "comfort" letters delivered by
independent public accountants in connection with registration statements
similar to the Form F-4.
(b) Parent shall use commercially reasonable efforts to cause to
be delivered to the Company "comfort" letters of Samson, Belair, Deloitte &
Touche, Parent's independent public accountants, dated the effective date of the
Form F-4 and the Closing Date, respectively, and addressed to Parent and its
directors and the Company and its directors, in form reasonably satisfactory to
the Company and customary in scope and substance for "comfort" letters delivered
by independent public accountants in connection with registration statements
similar to the Form F-4.
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Section 3.14. AGREEMENTS OF COMPANY AFFILIATES. The Company shall promptly
cause to be prepared and delivered to Parent a list identifying all persons who
may be deemed to be as of the date of the Company Shareholders' Meeting
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
(the "COMPANY AFFILIATES"), and shall use reasonable best efforts to cause each
Company Affiliate to deliver to Parent an executed agreement in the form
attached as EXHIBIT B as promptly as practicable prior to the Closing Date.
Section 3.15. TAX REPRESENTATION LETTERS. Parent shall deliver to counsel
to Parent and to counsel to the Company as of the Closing Date a "TAX
REPRESENTATION LETTER" containing such customary representations as shall be
necessary to enable counsel to render the opinions described in Sections 4.2.3
and 4.3.3 of this Agreement. The Company shall deliver to counsel to the Company
and to counsel to Parent as of the Closing Date a Tax Representation Letter
containing such customary representations as shall be necessary to enable
counsel to render the opinions described in Sections 4.2.3 and 4.3.3 of this
Agreement.
Section 3.16. INFORMATION TO BE SUPPLIED TO FIVE PERCENT TRANSFEREE
SHAREHOLDER. Parent shall cooperate with any reasonable request by any
"five-percent transferee shareholder" with respect to Parent within the meaning
of the United States Treasury Regulation Section 1.367(a)-3(c)(5)(ii) (a
"FIVE-PERCENT TRANSFEREE SHAREHOLDER"), in order for the Five-Percent Transferee
Shareholder to be able to comply with the gain recognition agreement
requirements of United States Treasury Regulation Section 1.367(a)-8, including
the annual certification required thereunder. This cooperation shall solely
require the provision of information upon specific written request for
information to Parent, with sufficient advance notice, on a timely basis to the
Five-Percent Transferee Shareholder as to transfers of shares of stock or assets
of the Company that are required to be reported by the Five-Percent Transferee
Shareholder to the Internal Revenue Service pursuant to United States Treasury
Regulation Section 1.367(a)-8, in each case in a manner consistent with Parent's
obligations under applicable securities and other law, as determined by Parent
in its discretion. Each Five-Percent Transferee Shareholder agrees to keep
confidential all information received from the Company pursuant to this Section
3.16 and not use such information for any purpose other than compliance with
United States Treasury Regulation Section 1.367(a)-8.
ARTICLE IV
CONDITIONS
Section 4.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each of Parent, Merger Sub and the Company to
effect the Merger are subject to the satisfaction or waiver of each of the
following conditions:
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4.1.1. COMPANY SHAREHOLDER APPROVAL. This Agreement shall have
been approved by the shareholders of the Company by the Company Requisite
Vote.
4.1.2. REGULATORY CONSENTS. All the Company Required Consents and
the Parent Required Consents from or with any Governmental Entity (collectively,
"GOVERNMENTAL CONSENTS") in connection with the consummation of the Merger and
the other transactions contemplated by this Agreement shall have been made or
obtained, except where the failure to obtain any Governmental Consent would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent or on the Company after the Effective Time or would
result in a violation of the civil or criminal law of that jurisdiction. No
Governmental Consents shall contain any terms or impose any condition or
restriction relating or applying to, or requiring changes in or limitations on,
the operation of any asset or businesses of the Company, Parent or any of their
respective Subsidiaries which term, condition or restriction, individually or in
the aggregate, would reasonably be expected to have either a Material Adverse
Effect on Parent or a Material Adverse Effect on the Company. Any applicable
waiting period under the HSR Act or the CCA relating to the Merger shall have
expired.
4.1.3. LAWS AND ORDERS. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits the consummation of the Merger, or
that would materially frustrate the express intent and purposes of this
Agreement (collectively, "ORDER") and no Government Entity shall have instituted
or threatened any proceeding seeking any Order.
4.1.4. EFFECTIVENESS OF FORM F-4. The Form F-4 shall have become
effective and no stop order suspending the effectiveness of the Form F-4 shall
then be in effect, and no proceeding for that purpose shall then be threatened
by the SEC or shall have been initiated by the SEC and not concluded or
withdrawn; and all state securities or "blue sky" permits or approvals required
to consummate the Merger shall have been received.
4.1.5. LISTING. Parent Common Shares to be issued pursuant to
the Merger and those to be reserved for issue upon exercise of stock options
shall have been authorized for listing on the NYSE and the TSE, subject to
official notice of issuance.
4.1.6. THIRD PARTY CONSENTS. Any consents of third parties required
in connection with the consummation of the Merger and the other transactions
contemplated by this Agreement shall have been obtained, except where the
failure to obtain such consents would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or
Parent after the Effective Time. In addition, the obligations of each of Parent
and Merger Sub to effect the Merger are subject to the condition that (i) any
consents or waivers of third parties listed on Schedule 4.1.6(a)
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which may be required in connection with the consummation of the Merger and the
transactions contemplated by this Agreement shall have been obtained, and (ii)
the Company shall have used its reasonable best efforts to avoid the termination
or modification of the agreements, contracts or arrangements listed on Schedule
4.1.6(b) by any of the respective parties thereto and to avoid any adverse
effect to, or change in, the benefits to the Company or its Subsidiaries
thereunder, which termination, modification, effect or change arises in
connection with or as a result of the consummation of the Merger and the
transactions contemplated by this Agreement, and (iii) any penalties,
liabilities or charges arising in connection with or as a result of the
consummation of the transactions contemplated hereby under any leases or
subleases of real or personal property listed or referred to on the Company
Lease List (including any penalties, liabilities or charges arising pursuant to
any of the provisions of such leases or subleases and any penalties, liabilities
or charges incurred due to the modification, termination, amendment,
re-negotiation or replacement of such leases or subleases (including increased
rentals payments or replacement values) and any penalties, liabilities or
charges in connection with or arising out of the failure to obtain any Company
Lease Consents), shall not have exceeded, in Parent's reasonable and informed
assessment, aggregate economic costs of more than $3 million, and that the
Company shall have used reasonable best efforts to help Parent assess such
aggregate economic costs.
4.1.7. PARENT SHAREHOLDER APPROVAL. If any approvals by the
shareholders of Parent for the issuance of Parent Common Shares, this Agreement
or the transactions required hereby are required by the rules of the NYSE or the
TSE ("PARENT SHAREHOLDER APPROVAL"), then such approvals shall have been
obtained.
Section 4.2. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligation of Parent to effect the Merger is also subject to the satisfaction or
waiver by Parent prior to the Closing Date of the following conditions:
4.2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
representations and warranties of the Company set forth in Section 2.1.2 of this
Agreement shall be true and correct in all material respects, all
representations and warranties set forth in this Agreement (other than Section
2.1.2) that are qualified as to material, materiality or Material Adverse Effect
shall be true and correct in all respects, and all representations and
warranties set forth in this Agreement other than Section 2.1.2 not so qualified
shall be true and correct except as would not reasonably be expected to have a
Material Adverse Effect on the Company in each case when made and as of the
Closing Date as if made on and as of that date (provided that, in either case,
those representations and warranties which are by their express provisions made
as of a specific date need be true and correct only as of the specified date),
and Parent shall have received a certificate signed on behalf of the Company by
an executive officer of the Company to that effect.
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4.2.2. PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations and covenants required
to be performed by it or complied with by it under this Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed on behalf
of the Company by an executive officer of the Company to that effect.
4.2.3. TAX OPINION. Parent shall have received an opinion from
Fried, Frank, Harris, Shriver & Jacobson (or, if Fried, Frank, Harris, Shriver &
Jacobson refuses to issue such opinion, from other counsel reasonably
satisfactory to Parent), dated as of the Closing Date, substantially to the
effect that, on the basis of the facts, representations and assumptions set
forth in the opinion, (i) the Merger will be treated for U.S. federal income tax
purposes as a reorganization within the meaning of Section 368 of the Code, (ii)
Parent will be treated as a corporation under Section 367(a) of the Code with
respect to each transfer of property thereto pursuant to the Merger, (iii) no
gain or loss will be recognized by the shareholders of the Company who exchange
Company Common Shares solely for Parent Common Shares pursuant to the Merger
(except with respect to cash received in lieu of fractional interests in Parent
Common Shares), and (iv) each of Parent, Merger Sub and the Company will be a
party to the reorganization within the meaning of Section 368 of the Code. The
opinion set forth in clause (ii) shall not address the Tax consequences
applicable to any shareholder of the Company who, immediately after the Merger,
will be a "five-percent transferee shareholder" with respect to Parent within
the meaning of United States Treasury Regulation Section 1.367(a)-3(c)(5)(ii).
In rendering its opinion, counsel shall be entitled to rely upon customary
representations of Parent and the Company reasonably requested by counsel.
4.2.4. EXECUTIVE AGREEMENTS. Mr. Satish Sanan shall have
executed and delivered to the other parties thereto the Executive Agreements
in the form attached hereto as EXHIBIT A, and the Executive Agreements shall
be in full force and effect. In addition, Mr. Satish Sanan shall have
performed all of his duties and obligations under the Executive Agreements
which are required to be performed by him prior to or at the Effective Time
pursuant to the terms of the Executive Agreements.
4.2.5. AFFILIATE LETTERS. Each Company Affiliate shall have
executed and delivered to Parent an Affiliate Letter in the form attached as
EXHIBIT B, and each such Affiliate Letter shall be in full force and effect.
4.2.6. VOTING AGREEMENT. Mr. Satish Sanan and A&S Family
Limited Partnership shall have executed and delivered to Parent a Voting
Agreement in the form attached as EXHIBIT C, and each such Voting Agreement
shall be in full force and effect.
Section 4.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company prior to the Closing Date of the following conditions:
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4.3.1. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. The
representations and warranties of Parent set forth in Section 2.2.2 of this
Agreement shall be true and correct in all material respects, all
representations and warranties set forth in this Agreement (other than Section
2.2.2) that are qualified as to material, materially or Material Adverse Effect
shall be true and correct in all respects, and all representations and
warranties set forth in this Agreement (other than Section 2.2.2) not so
qualified shall be true and correct except as would not reasonably be expected
to have a Material Adverse Effect on Parent, in each case when made and as of
the Closing Date as if made on and as of that date (provided that, in either
case, those representations and warranties which are by their express provisions
made of a specific date need be true and correct only as of the specified date),
and the Company shall have received a certificate signed on behalf of Parent by
an executive officer of Parent to that effect.
4.3.2. PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have
performed in all material respects all obligations and covenants required to be
performed by it or complied with by it under this Agreement at or prior to the
Closing Date, and the Company shall have received a certificate signed on behalf
of Parent by an executive officer of Parent to that effect.
4.3.3. TAX OPINION. The Company shall have received an opinion from
Holland & Knight LLP (or, if Holland & Knight LLP refuses to issue such opinion,
from other counsel reasonably satisfactory to the Company), dated as of the
Closing Date, substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in the opinion, (i) the Merger will be
treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368 of the Code, (ii) Parent will be treated as a corporation
under Section 367(a) of the Code with respect to each transfer of property
thereto pursuant to the Merger, (iii) no gain or loss will be recognized by the
shareholders of the Company who exchange Company Common Shares solely for Parent
Common Shares pursuant to the Merger (except with respect to cash received in
lieu of fractional Parent Common Shares) and (iv) each of Parent, Merger Sub and
the Company will be a party to the reorganization within the meaning of Section
368 of the Code. The opinion set forth in clause (ii) shall not address the Tax
consequences applicable to any shareholder of the Company who, immediately after
the Merger, will be a "five-percent transferee shareholder" with respect to
Parent within the meaning of United States Treasury Regulation Section
1.367(a)-3(c)(5)(ii). In rendering this opinion, counsel shall be entitled to
rely upon customary representations of Parent and the Company reasonably
requested by counsel.
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ARTICLE V
TERMINATION
Section 5.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the shareholders of the
Company by mutual written consent of the Company and Parent, by action of their
respective Boards of Directors.
Section 5.2. TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the Board of Directors of either Parent or the
Company if (i) the Merger shall not have been consummated by the eight month
anniversary of the date of this Agreement (the "TERMINATION DATE"), whether this
date is before or after the date of approval of this Agreement by shareholders
of the Company; PROVIDED that the right to terminate this Agreement pursuant to
this clause (i) shall not be available to any party whose failure to fulfill in
any material respect its obligations under this Agreement has caused or resulted
in the failure of the Merger to have been consummated on or before the
Termination Date; (ii) a Governmental Entity of competent jurisdiction shall
have enacted any Law or issued a final non-appealable permanent injunction or
order that prohibits the consummation of the Merger; PROVIDED that the right to
terminate this Agreement pursuant to this clause (ii) shall not be available to
any party who has not used reasonable best efforts to prevent this injunction or
order from being issued or this injunction or order is due to a material breach
by a party of its obligations under this Agreement; (iii) the Company Requisite
Vote shall not have been obtained at a duly held Company Shareholders' Meeting
after such Company Shareholders' Meeting has been held, including any
adjournments or postponements; or (iv) if Parent Shareholder Approval is
required, such Approval shall not have been obtained at a meeting of Parent
shareholders, duly held, after such meeting has been held (or has not been
obtained by written consent of shareholders).
Section 5.3. TERMINATION BY THE COMPANY. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval of this Agreement by the shareholders of the
Company, by action of the Board of Directors of the Company, if (i) any
representation or warranty of Parent contained in this Agreement shall be
inaccurate or Parent shall breach any covenant or agreement contained in this
Agreement, in either case as a result of which (because of the failure of Parent
to cure within twenty (20) Business Days following written notice of this breach
from the Company) a condition set forth in Sections 4.3.1 or 4.3.2 would not be
satisfied prior to or as of the Termination Date, (ii) prior to receipt of the
Company Requisite Vote, the Company receives a Superior Proposal, resolves to
accept such Superior Proposal, and the Company shall have given Parent five
days' prior written notice of its intention to terminate pursuant to this
provision; PROVIDED, HOWEVER, that such termination shall not be effective until
such time as the payment required by Section 5.5.2 shall have been received by
Parent, or (iii) prior to receipt of the Company Requisite Vote (A) a tender or
exchange offer is commenced by a potential acquirer for all outstanding shares
of Company Common Shares, (B) the Company's Board of Directors determines, in
good faith and after consultation with an independent financial advisor, that
such offer constitutes a Superior Proposal and resolves to accept such Superior
Proposal or recommend to the shareholders that they tender their shares in such
tender or exchange offer, and (C) the Company shall have given Parent five days'
prior written
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notice of its intention to terminate pursuant to this provision; PROVIDED,
HOWEVER, that such termination shall not be effective until such time as the
payment required by Section 5.5.2 shall have been received by Parent.
Section 5.4. TERMINATION BY PARENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by action
of the Board of Directors of Parent, if (i) the Board of Directors of the
Company shall have withdrawn or adversely modified its recommendation that the
Company's shareholders vote to approve this Agreement and the transactions
contemplated by this Agreement or failed to reconfirm this recommendation within
two Business Days after a written request by Parent to do so; (ii) the Company
or its Board of Directors shall recommend an Acquisition Proposal to its
shareholders; or (iii) any representation or warranty of the Company contained
in this Agreement shall be inaccurate or the Company shall breach any covenant
or agreement contained in this Agreement, in either case as a result of which
(because of the failure of the Company to cure within twenty (20) Business Days
following written notice of this breach from Parent) a condition set forth in
Sections 4.2.1 or 4.2.2 would not be satisfied prior to or as of the Termination
Date.
Section 5.5. EFFECT OF TERMINATION AND ABANDONMENT.
5.5.1. In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article V, this Agreement (other than
as set forth in Section 6.1) shall become void and of no effect with no
liability on the part of either party (or of any of their Representatives);
PROVIDED, HOWEVER, that no termination shall relieve either Parent or the
Company of any liability for damages resulting from any willful and intentional
breach of this Agreement or from any obligation to pay, if applicable, the
amounts payable pursuant to Section 5.5.2 or 5.5.3.
5.5.2. (a) If:
(i) Parent shall terminate this Agreement pursuant to
clauses (i) or (ii) of Section 5.4;
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(ii) any Person shall have made a bona fide Acquisition Proposal
relating to the Company or shall have publicly announced such an
Acquisition Proposal (or an intention to make such an Acquisition
Proposal) and thereafter (x) this Agreement is terminated pursuant to
clause (i) of Section 5.2, and (y) within 9 months after the termination
of this Agreement, the Company enters into an agreement in respect of any
Acquisition Proposal or a transaction pursuant to an Acquisition Proposal
is consummated;
(iii) Parent shall terminate this Agreement pursuant to clause (iii)
of Section 5.4 and either (x) prior thereto a bona fide Acquisition
Proposal relating to the Company shall have been made by any Person to the
Company or a Person shall have publicly announced such an Acquisition
Proposal (or an intention to make such an Acquisition Proposal) or (y)
within 9 months after termination of this Agreement, the Company enters
into an agreement in respect of an Acquisition Proposal or a transaction
pursuant to an Acquisition Proposal is consummated;
(iv) either the Company or Parent shall terminate this Agreement
pursuant to clause (iii) of Section 5.2 and (x) prior thereto a bona fide
Acquisition Proposal relating to the Company shall have been made or a
Person shall have publicly announced such an Acquisition Proposal Company
(or any intention to make such an Acquisition Proposal) and (y) within 9
months after the termination of this Agreement, the Company enters into an
agreement in respect of any Acquisition Proposal or a transaction with
respect to an Acquisition Proposal is consummated; or
(v) the Company shall terminate this Agreement pursuant
to clauses (ii) or (iii) of Section 5.3,
then in any case as described in clause (i), (ii), (iii), (iv) or (v) the
Company shall pay to Parent (by wire transfer of immediately available funds not
later than, in the case of clauses (i), (iv) and (v) the date of termination of
this Agreement or, in the case of clauses (ii) and (iii), the date of the
agreement in respect of the Acquisition Proposal or, if earlier, consummation of
the transaction in respect thereof) an amount equal to $13 million. The
termination of this Agreement by the Company under Sections 5.3(ii) and 5.3(iii)
hereto shall not be effective until such time as the payment required by this
Section shall have been received by Parent.
5.5.3. If Parent or the Company shall terminate this Agreement
pursuant to clause (iv) of Section 5.2, Parent shall pay to the Company (by wire
transfer of immediately available funds no later than the date of termination of
this Agreement) an amount equal to $3.0 million.
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The parties acknowledge that the agreements contained in Sections
5.5.2 and 5.5.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties would not enter into
this Agreement; accordingly, if the Company or Parent fails promptly to pay any
amounts due pursuant to Sections 5.5.2 or 5.5.3, as the case may be, and, in
order to obtain the payment, either the Company or Parent commences a suit which
results in a judgment against the other party for the payments set forth in this
Section 5.5.2 or 5.5.3, as the case may be, the prevailing party shall be
entitled to its costs and expenses (including attorneys' fees) in connection
with its suit from the non-prevailing party, together with interest on the
amounts due from each date for payment until the date of the payment at the
prime rate of Citibank, N.A. in effect on the date the payment was required to
be made plus 2 percent.
ARTICLE VI
MISCELLANEOUS AND GENERAL
Section 6.1. SURVIVAL. This Article VI and the agreements of the Company
and Parent contained in Section 3.9 shall survive the Effective Time. This
Article VI, the representations and warranties contained in Sections 2.1.24 and
2.2.17, the agreements of the Company and Parent contained in Sections 3.10 and
5.5 shall survive the termination of this Agreement. All other representations,
warranties, agreements and covenants in this Agreement shall not survive the
Effective Time or the termination of this Agreement.
Section 6.2 MODIFICATION OR AMENDMENT. This Agreement may be modified or
amended by agreement of the parties, by action taken or authorized by their
respective Boards of Directors, at any time prior to the Effective Time;
PROVIDED, HOWEVER, that, after approval by shareholders of the Company of the
matters presented at the Company Shareholders' Meeting, no modification or
amendment shall be made which under applicable Law requires further approval by
the shareholders without such further approval. This Agreement may not be
modified or amended except by an instrument in writing executed and delivered by
duly authorized officers of each of the parties.
Section 6.3. WAIVER OF CONDITIONS. Any provision of this Agreement may be
waived prior to the Effective Time if, and only if, such waiver is in writing
and signed by the party against whom the waiver is to be effective.
Section 6.4. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES Cumulative. No
failure or delay by any party hereto 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. Except as otherwise herein provided, the
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by Law.
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Section 6.5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all counterparts shall together constitute the same agreement.
Section 6.6. GOVERNING LAW. This Agreement shall be deemed to be made in,
and in all respects shall be interpreted, construed and governed by and in
accordance with the laws of the State of Florida applicable to contracts to be
performed wholly in such state.
Section 6.7. NOTICES. Notices, requests, instructions or other documents
to be given under this Agreement shall be in writing and shall be deemed given,
(i) when sent if sent by facsimile, provided that the facsimile is promptly
confirmed by telephone confirmation thereof, (ii) when delivered, if delivered
personally to the intended recipient, and (iii) one Business Day later, if sent
by overnight delivery via a national courier service, and in each case,
addressed to a party at the following address for that party:
If to IMRglobal CORP.:
Mr. Satish K. Sanan
IMRglobal Corp.
100 South Missouri Avenue
Clearwater, FL 33756
Facsimile: (727) 467-9688
with a copy to:
HOLLAND & KNIGHT LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Attention: Robert Grammig
Facsimile: (813) 229-0134
If to CGI GROUP INC. or CGI FLORIDA CORPORATION:
CGI GROUP INC.
1130 Sherbrooke Street West
Montreal, Quebec
Canada H3A 2M8
Attention: Executive Vice President
Mergers and Acquisitions
Facsimile: (514) 841-3294
with a copy to:
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McCARTHY TETRAULT
Windsor Tower, 5th Floor
1170 Peel Street
Montreal, Quebec
H3B 4S8
Canada
Attention: Christiane Jodoin
Facsimile: (514) 875-6246
and
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
One New York Plaza
New York, New York 10004
United States
Attention: Peter Golden, Esq.
Facsimile: (212) 859-4000
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above. For purposes of this Agreement,
"BUSINESS DAY" means any day other than a Saturday, Sunday or a bank holiday in
the United States or Canada.
Section 6.8. ENTIRE AGREEMENT. This Agreement (including the exhibits),
the Disclosure Schedules (including the exhibits thereto), constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, between the parties hereto
with respect to the subject matter of this Agreement. References to this
Agreement shall for all purposes be deemed to include references to the
Disclosure Schedules (including the exhibits). Except as set forth in Section
3.9.2, this Agreement is not intended to confer upon any Person other than the
parties hereto any rights (including third party beneficiary rights) or remedies
hereunder.
Section 6.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions. If any provision
of this Agreement, or the application to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of the invalid or unenforceable provision
unless the substitution of that provision would materially frustrate the express
intent and purposes of this Agreement and (b) the remainder of this Agreement
and the application of this provision to other Persons or circumstances shall
not be affected by its invalidity or unenforceability, nor shall invalidity or
unenforceability affect the validity or
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enforceability of such provision, or the application thereof, in any other
jurisdiction.
Section 6.10. INTERPRETATION. The headings in this Agreement are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 6.11. ASSIGNMENT. Except as provided in Section 1.1.4, this
Agreement shall not be assignable by operation of law or otherwise, and any
purported assignment in violation of this provision shall be void.
Section 6.12. SPECIFIC PERFORMANCE. Each party hereto acknowledges and
agrees that the other parties hereto could be irreparably damaged in the event
that its obligations contained in this Agreement are not performed in accordance
with their specific terms or are otherwise breached in each case on or prior to
the Effective Time. Accordingly, each party hereto agrees that the other parties
will be entitled to an injunction or injunctions to enforce specifically such
covenants in any action in any court having personal and subject matter
jurisdiction, in addition to any other remedy to which each such party may be
entitled at law or in equity.
Section 6.13. FORMS OF CURRENCY. Unless otherwise specified in this
Agreement, all forms of currency shall be denominated in United States dollars.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Parent, the Company and Merger Sub
as of the date of this Agreement.
IMRglobal CORP.
By: /s/ Vincent Addonisio
-----------------------------------------
Name: Vincent Addonisio
Title: Executive Vice President
and Chief Administrative Officer
CGI GROUP INC.
By: /s/ Serge Godin
-----------------------------------------
Name: Serge Godin
Title: Chairman, president and chief
executive officer
CGI FLORIDA CORPORATION
By: /s/ Andre Imbeau
-----------------------------------------
Name: Andre Imbeau
Title: Executive vice president and
chief financial officer
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EXHIBIT B
TO THE MERGER AGREEMENT
FORM OF COMPANY AFFILIATE LETTER
CGI Group Inc. __________, 2001
1130 Sherbrooke Street West
5th Floor
Montreal, Quebec
H3A 2M8
CANADA
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of IMRglobal Corp., a Florida corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). Pursuant to the terms of the Agreement and Plan of Merger, dated as of
February 21, 2001 (the "Merger Agreement"), among CGI Group Inc., a company
incorporated under the laws of Quebec ("Parent"), CGI Florida Corporation, a
Florida corporation and a direct, wholly owned subsidiary of Parent
("MergerSub"), and the Company, MergerSub will be merged with and into the
Company (the "Merger") and the Company will become a wholly owned subsidiary of
Parent.
As a result of the Merger, I will receive Class A Subordinate Shares
of Parent (the "Parent Common Shares") in exchange for the shares of common
stock, par value $0.10, of the Company I hold immediately prior to the effective
time of the Merger in accordance with the terms set forth the Merger Agreement.
I understand that the representations, warranties and covenants set forth herein
will be relied upon by Parent, stockholders of Parent, the Company, other
shareholders of the Company, and their respective counsel.
I hereby represent and warrant to, and covenant with, Parent that in
the event I receive any Parent Common Shares as a result of the Merger:
A. I have full power and authority to execute and deliver this
letter and to make the representations and warranties set forth herein and to
perform my obligations hereunder.
B. I shall not make any sale, transfer, pledge or other
disposition of the Parent Common Shares in violation of the Act or the
rules and regulations thereunder.
C. I have carefully read this letter and the Merger Agreement and
discussed the requirements of these documents and other applicable limitations
upon my
ability to sell, transfer or otherwise dispose of the Parent Common Shares, to
the extent I felt necessary, with my counsel or counsel for the Company.
D. I have been advised that any issuance of Parent Common Shares to
me pursuant to the Merger has been, or will be, registered with the Commission
under the Act on a Registration Statement on Form F-4. However, I have also been
advised that, since at the time the Merger was or will be submitted for a vote
of the stockholders of the Company, (i) I may be deemed to be or have been an
affiliate of the Company and (ii) the distribution by me of the Parent Common
Shares will not be registered under the Act in connection with the Merger, I may
not sell, transfer, pledge or otherwise dispose of any Parent Common Shares
issued to me in the Merger unless (a) the sale, transfer or other disposition
has been registered under the Act, (b) the sale, transfer or other disposition
is made in conformity with Rule 145 (as that rule may be hereafter amended), or
(c) Parent shall have received either an opinion of counsel, which opinion and
counsel shall be reasonably acceptable to Parent, or a "no action" letter
obtained by me from the staff of the Commission, to the effect that the sale,
transfer or other disposition is otherwise exempt from registration under the
Act.
E. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Common Shares by me or on my
behalf under the Act or to take any other action necessary in order to comply
with an exemption from the registration requirements of the Act available.*
F. I also understand that stop transfer instructions will be given
to Parent's transfer agents with respect to the Parent Common Shares and that
there will be placed on the certificates for the Parent Common Shares issued to
me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITES LAWS, APPLIES, AND MAY NOT
BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED, AND NO REGISTRATION OF
ANY TRANSFER WILL BE MADE ON THE BOOKS OF THE ISSUER, UNLESS THE SALE
OR TRANSFER IS MADE IN COMPLIANCE WITH THE REQUIREMENTS OF RULE 145
OR PURSUANT TO A REGISTRATION STATEMENT UNDER THAT
- --------
* CEO letter will add: except as provided in a Voting Agreement to which
Parent and I are parties.
-2-
ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THAT ACT
AND ANY APPLICABLE STATE SECURITES LAWS"
F. I also understand that unless the transfer by me of Parent Common
Shares has been registered under the Act or is a sale made in conformity with
the provisions of Rule 145, Parent reserves the right to place the following
legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS, AND WERE ACQUIRED FROM A PERSON WHO RECEIVED THESE SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THAT ACT APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A
REGISTRATION STATEMENT UNDER THAT ACT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THAT ACT."
It is understood and agreed that the legends set forth in paragraphs
E and F above shall be removed by delivery of substitute certificates without
any legend if either of these legends are not required for purposes of the Act
or this Agreement. It is understood and agreed that these legends and the stop
transfer orders referred to above will be removed if (i) evidence or
representations satisfactory to Parent (it being understood that the opinion of
counsel reasonably satisfactory to Parent shall constitute such evidence) that
the Parent Common Shares represented by the certificates will be sold in a
transaction made in conformity with the provisions of Rule 145(d) (as that rule
may be hereafter amended) or (ii) Parent has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Parent,
or a "no action" letter obtained by me from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under the Act no longer apply
to me.
-3-
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter, or as a waiver of any rights I may have to object to any claim
that I am an "affiliate" on or after the date of this letter.
Except to be the extent written notification to the contrary is
received by Parent from me prior to the Merger, the representations herein will
be true, complete and correct at all times form the date hereof through the time
of consummation of the Merger.
Very truly yours,
--------------------------------
Name:
Title:
Accepted this ____ day of
________________, 2001 by
CGI GROUP INC.
By:
-------------------------
Name:
Title:
-4-
APPENDIX B
FAIRNESS OPINION LETTER
February 16, 2001
CONFIDENTIAL
Board of Directors
IMR Global Corporation
100 South Missouri Avenue
Clearwater, FL 33756
Dear Members of the Board:
We understand that IMRglobal Corporation, a Florida corporation (the
"Company"), CGI Inc., a stock corporation organized under the laws of Quebec
(the "Parent"), and CGI Merger Corp., a Florida corporation and wholly-owned
subsidiary of Parent (the "Merger Subsidiary"), propose to enter into an
Agreement and Plan of Merger (the "Agreement"), which provides, among other
things, for the merger of Merger Subsidiary with and into the Company, with the
Company surviving the merger (the "Transaction").
Pursuant to the Transaction, each share of common stock, par value $.10 per
share, of the Company ("Company Common Stock"), other than shares owned or held,
directly or indirectly, by the Company or the Parent, will be converted into the
right to receive 1.6 shares (the "Exchange Ratio") of Class A Subordinate
Shares, each without par value, of Parent ("Parent Stock"). The other terms and
conditions of the Transaction are set forth in the Agreement.
You have requested our opinion as to whether the Exchange Ratio pursuant to
the Agreement is fair, from a financial point of view, to the Company and its
shareholders. Updata Capital, Inc. focuses on providing merger and acquisition
advisory services to information technology companies. In this capacity, we are
continually engaged in valuing such businesses, and we maintain extensive
databases for comparative purposes.
In rendering our opinion, we have, among other things:
1. reviewed a draft of the Agreement dated February 9, 2001 and related
documents, and based our opinion on our understanding that the terms and
conditions of the Agreement will not materially change;
2. reviewed the Company's and the Parent's respective historical and
projected financial statements;
3. reviewed certain internal financial and operating information, including
certain projections relating to the Company and Parent prepared by their
respective managements (including projections under various financing and
operating assumptions);
4. participated in discussions with Company management and Parent
management concerning the operations, business strategy, financial
performance and prospects for each of the Company and the Parent;
5. reviewed the recent reported closing prices and trading activity for the
Company Common Stock and the Parent Stock;
B-1
APPENDIX B
6. compared certain aspects of the financial and market performance of the
Company and Parent with public companies we deemed comparable in whole or
in part;
7. analyzed available information, both public and private, concerning
other mergers and acquisitions we believe to be comparable in whole or in
part to the Transaction;
8. reviewed certain publicly available financial statements and other
information of the Parent;
9. reviewed the Company's Annual Reports on Form 10-K for the fiscal years
ended December 31, 1999 and December 31, 1998, including the audited
financial statements included therein, and Quarterly Reports on
Form 10-Q for the fiscal quarters ending March 31, 2000, June 30, 2000
and September 30, 2000;
10. reviewed the Company's unaudited financial statements for the fiscal
year ended December 31, 2000;
11. assessed, based on discussions with the Company's senior management and
the Parent's senior management, the strategic rationale for the
Transaction;
12. assisted in negotiations and discussions related to the Transaction
among the Company, the Parent and their respective legal and investment
banking advisors; and
13. conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation, the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by the Company or
the Parent and have relied on the assurances of management of the Company and
the Parent that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial projections examined by
us, we have assumed that they were reasonably prepared and reflect the best
available estimates and good faith judgments of Company management and Parent
management as to the future performance of the Company or the Parent, as the
case may be. We have neither made nor obtained an independent appraisal or
valuation of any of the Company's or the Parent's respective assets and have
conducted only a limited inspection of the respective properties and facilities
of the Company and the Parent. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated only
as of the date of this opinion. Any change in such conditions may impact this
opinion.
For purposes of this opinion, we have assumed that the Company is not
currently involved in any material transaction other than the Transaction and
those activities undertaken in the ordinary course of conducting its business.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair, from a financial point of view, to the Company and the
holders of Company Common Stock.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services. In addition, the Company
has agreed to indemnify us for certain liabilities which may arise out the
rendering of this opinion.
B-2
APPENDIX B
This opinion speaks only as of the date hereof, which is the day prior to
the public announcement of the proposed Transaction. It is understood that this
opinion is solely for the information of the Board of Directors of the Company
in connection with its consideration of the Transaction and does not constitute
a recommendation to any Company shareholder as to whether such shareholder
should vote its, his or her shares of Company Common Stock in favor of the
Transaction. Updata does not believe that any other person other than the Board
of Directors of IMRglobal has the legal right under state law to rely on this
opinion, and, in the absence of any governing precedents, we would resist any
assertion otherwise by any such person. THIS OPINION MAY NOT BE PUBLISHED OR
REFERRED TO, IN WHOLE OR PART, WITHOUT OUR PRIOR WRITTEN PERMISSION.
Sincerely,
/s/ Updata Capital, Inc.
Updata Capital, Inc.
B-3
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 17 of CGI's bylaws provide:
"INDEMNIFICATION. In addition to the provisions of the applicable laws
governing the indemnification of the Company's representatives, the Board of
Directors may purchase, to the benefit of the directors, officers or their
predecessors or any other person who has assumed or who is about to assume a
responsibility on behalf of the Company or any corporation controlled by it,
insurance covering the liability they incur for having acted in their capacity
as directors or officers of the Company, with the exception of the liability
resulting from their own negligence or a personal fault separable from the
performance of their duties."
Sections 123.87, 123.88 and 123.89 of the Companies Act (Quebec) provide as
follows:
"123.87 [DEFENCE]. A company shall assume the defence of its mandatary
prosecuted by a third person for an act done in the exercise of his duties and
shall pay damages, if any, resulting from that act, unless the mandatary has
committed a grievous offence or a personal offence separable from the exercise
of his duties.
[CRIMINAL PROCEEDINGS]. However, in a penal or criminal proceeding the
company shall assume only the payment of the expenses of its mandatary if he had
reasonable grounds to believe that his conduct was in conformity with the law,
or the payment of the expenses of its mandatary if he has been freed or
acquitted.
123.88 [EXPENSES]. A company shall assume the expenses of its mandatary if,
having prosecuted him for an act done in the exercise of his duties it loses its
case and the court so decides.
[EXPENSES]. If the company wins its case only in part, the court may
determine the amount of the expenses it shall assume.
123.89 [OBLIGATIONS]. A company shall assume the obligations contemplated in
sections 123.87 and 123.88 in respect of any person who acted at its request as
director for a legal person of which it is a shareholder or creditor."
CGI maintains directors' and officers' insurance coverage, which, subject to
policy terms and limitations will include coverage to reimburse CGI for amounts
that it may be required or permitted by law to pay directors or officers of CGI.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) The following Exhibits are filed herewith unless otherwise indicated:
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
*2.1 Agreement and Plan of Merger, dated as of February 21, 2001,
by and among CGI Group Inc., IMRglobal Corp. and CGI Florida
Corporation (included as Appendix A to the proxy
statement/prospectus which is part of this Registration
Statement).
*3.1 Articles of Incorporation of CGI Group Inc.
*3.2 By-Laws of CGI Group Inc.
*5 Opinion of McCarthy Tetrault regarding validity of
securities being registered.
*8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding United States tax consequences of the merger.
*8.2 Opinion of Holland & Knight LLP regarding United States tax
consequences of the merger.
II-1
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
*10.1 Voting Agreement, dated as of February 21, 2001, by and
among CGI Group Inc., CGI Florida Corporation, Satish K.
Sanan and A&S Family Limited Partnership.
*10.2 Letter Agreement dated February 21, 2001 among CGI Group
Inc., IMRglobal Corp. and Satish K. Sanan.
*10.3 Executive Employment Agreement, dated as of February 21,
2001, by and between IMRglobal Corp. and Satish K. Sanan.
*10.4 Amendment to Executive Employment Agreement of Philip
Shipperlee.
*10.5 Amendment to Executive Employment Agreement of Vincent
Addonisio.
23.1 Consent of Samson Belair/Deloitte & Touche
23.2 Consent of Ernst & Young LLP.
*23.3 Consent of McCarthy Tetrault (included in the opinion filed
as Exhibit 5 to this Registration Statement and incorporated
herein by reference).
*23.4 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in the opinion filed as Exhibit 8.1 to this
Registration Statement and incorporated herein by
reference).
*23.5 Consent of Holland & Knight LLP (included in the opinion
filed as Exhibit 8.2 to this Registration Statement and
incorporated herein by reference).
*23.6 Consent of Updata Capital.
*24 Powers of Attorney (included in the signature page of this
Registration Statement).
99.6 Form of Proxy Card of IMRglobal Corp.
- ------------------------
* Previously filed.
(b) Financial Statement Schedules. All supporting schedules have been
omitted because they are either not required, are not applicable or
because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.
(c) Reports, Opinions and Appraisals. Included as Appendix B to the proxy
statement/prospectus which is part of this Registration Statement.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective Registration Statement; and
II-2
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
will be deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the Registration Statement to
include any financial statements required by Item 8.A. of Form 20-F
at the start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise required by
Section 10(a)(3) of the Securities Act of 1933 need not be furnished,
provided, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to
this paragraph (a)(4) and other information necessary to ensure that
all other information in the prospectus is at least as current as the
date of those financial statements.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in
the Registration Statement will be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time will be deemed to be the initial BONA FIDE
offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the
applicable form.
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately preceding,
or (ii) that purports to meet the requirements of Section 10(a)(3)
of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment will
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time will be deemed to be the initial BONA FIDE offering
thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
II-3
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes: (i) to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means; and (ii) to arrange or
provide for a facility in the U.S. for the purpose of responding to such
requests. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Montreal, Quebec, Canada,
on June 7, 2001.
CGI GROUP INC.
BY: /S/ SERGE GODIN
-----------------------------------------
Serge Godin
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the following
capacities as of June 7, 2001.
SIGNATURE TITLE
--------- -----
/s/ SERGE GODIN Chairman of the Board, President and Chief
------------------------------------------- Executive Officer
Serge Godin (Principal Executive Officer and Director)
Executive Vice President, Chief Financial
/s/ SERGE GODIN as Attorney-in-Fact Officer and Treasurer
------------------------------------------- (Principal Financial Officer, Principal
Andre Imbeau Accounting Officer and Director)
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
Yvan Allaire
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
David L. Johnston
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
Claude Chamberland
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
Claude Boivin
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
Paule Dore
II-5
SIGNATURE TITLE
--------- -----
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
Jean Brassard
/s/ SERGE GODIN as Attorney-in-Fact Director
-------------------------------------------
Charles Sirois
/s/ SERGE GODIN as Attorney-in-Fact Authorized Representative in the U.S.
-------------------------------------------
Pierre Turcotte
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
*2.1 Agreement and Plan of Merger, dated as of February 21, 2001,
by and among CGI Group Inc., IMRglobal Corp. and CGI Florida
Corporation (included as Appendix A to the proxy
statement/prospectus which is part of this Registration
Statement).
*3.1 Articles of Incorporation of CGI Group Inc.
*3.2 By-Laws of CGI Group Inc.
*5 Opinion of McCarthy Tetrault regarding validity of
securities being registered.
*8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding United States tax consequences of the merger.
*8.2 Opinion of Holland & Knight LLP regarding United States tax
consequences of the merger.
*10.1 Voting Agreement, dated as of February 21, 2001, by and
among CGI Group Inc., CGI Florida Corporation, Satish K.
Sanan and A&S Family Limited Partnership.
*10.2 Letter Agreement dated February 21, 2001 among CGI Group
Inc., IMRglobal Corp. and Satish K. Sanan.
*10.3 Executive Employment Agreement, dated as of February 21,
2001, by and between IMRglobal Corp. and Satish K. Sanan.
*10.4 Amendment to Executive Employment Agreement of Philip
Shipperlee.
*10.5 Amendment to Executive Employment Agreement of Vincent
Addonisio.
23.1 Consent of Samson Belair/Deloitte & Touche
23.2 Consent of Ernst & Young LLP.
*23.3 Consent of McCarthy Tetrault (included in the opinion filed
as Exhibit 5 to this Registration Statement and incorporated
herein by reference).
*23.4 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in the opinion filed as Exhibit 8.1 to this
Registration Statement and incorporated herein by
reference).
*23.5 Consent of Holland & Knight LLP (included in the opinion
filed as Exhibit 8.2 to this registration statement and
incorporated herein by reference).
*23.6 Consent of Updata Capital.
*24 Powers of Attorney (included in the signature page of this
registration statement).
99.6 Form of Proxy Card of IMRglobal Corp.
- ------------------------
* Previously filed.