September 9, 1999
Consoltex Group Inc.
8555 route Transcanadienne
Saint-Laurent, Quebec
H4S 1Z6
Canada
Attention: Richard H. Willett, Chairman of the Board,
President and Chief Executive Officer
Dear Sirs:
This letter agreement, including all schedules hereto, (the
"Agreement") sets out the terms and conditions upon which AIP/CGI NB
Acquisition Corp., a corporation incorporated under the laws of New
Brunswick (the "Offeror"), will make an offer (the "Offer"), on
substantially the terms and conditions summarized in Schedule A forming
part of this Agreement, to purchase all of the issued and outstanding
subordinate voting shares (including any subordinate voting shares which
may become outstanding pursuant to the exercise of outstanding options to
acquire subordinate voting shares) (the "SV Shares") of Consoltex Group
Inc. (the "Company"). The term "Offer" shall include any amendments to, or
extensions of, the Offer made in accordance with the terms of this
Agreement, including, without limitation, removing or waiving any condition
or extending the date by which SV Shares may be deposited. The Offeror
has, concurrently with the execution of this Agreement, entered into a
lock-up agreement with Clairvest Group Inc. ("CGI"), a holder of the SV
Shares (the "Lock-Up Agreement"), a shareholders agreement with the
Company, Les Gantiers Holding B.V., the sole holder of the multiple voting
shares (the "MV Shares") of the Company, Les Gantiers Limited and The Big
Sky Trust (the "Stockholders Agreement"), a loan purchase agreement with
Les Gantiers Holding B.V., Les Gantiers Limited, Richard Willett, the
Company and CGI (the "Loan Purchase Agreement"), a guaranty of American
Industrial Partners Capital Fund II L.P. in favour of the Company and an
option agreement with the Company pursuant to which the Offeror has been
granted the option to purchase SV Shares (the "Option Agreement"). This
Agreement also sets out the terms and conditions of the agreement by the
Company, among other things, to recommend that the holders of the SV Shares
accept the Offer and not to solicit expressions of interest for, or assist
or encourage competing offers for, the SV Shares or the MV Shares.
All references to dollar amounts in this Agreement are to Canadian
dollars, unless otherwise stated. The definitions for the capitalized
terms used and not otherwise defined in the body of this Agreement are set
out in Schedule B hereto.
1. COVENANTS OF THE OFFEROR. Upon execution of this Agreement, the
Offeror will:
(a) as soon as practicable, and in any event not later than September
24, 1999, make a take-over bid (the date of such bid, the
"Proposed Offer Date") to purchase 100% of the SV Shares issued
and outstanding as of such date, on substantially the terms and
conditions summarized in Schedule A forming part of this
Agreement;
(b) subject to the satisfaction of the terms and conditions of the
Offer, take-up and pay for SV Shares tendered under the Offer in
accordance with Canadian securities laws and United States
securities laws, if applicable; and
(c) upon the last take-up and payment of SV Shares under the Offer,
proceed expeditiously with a compulsory acquisition transaction
whereby holders of SV Shares will receive cash consideration per
Share at least equal to the consideration payable pursuant to the
Offer.
The Offeror will mail the Offer and accompanying take-over bid
circular (such circular, together with the Offer, being referred to herein
as the "Bid Circular") in accordance with applicable laws to each holder of
SV Shares (a "Shareholder") as soon as reasonably practicable and not later
than 11:59 p.m. (Toronto time) on September 24, 1999 (such time on such
date being referred to herein as the "Latest Mailing Time"); provided,
however, that if the mailing of the Offer is delayed by (i) an injunction
or order made by a Governmental Entity of competent jurisdiction or (ii)
the Offeror not having obtained any regulatory waiver, consent or approval
which is necessary to permit it to mail the Offer then, provided that such
injunction or order is being contested or appealed or such regulatory
waiver, consent or approval is being actively sought, as applicable, the
Latest Mailing Time shall be extended for a period ending on the fifth
business day following the date on which such injunction or order ceases to
be in effect or such waiver, consent or approval is obtained, as
applicable, provided however that if such event has not occurred by
November 30, 1999 this Agreement will terminate.
The Company and its financial and legal advisors shall be given a
reasonable opportunity to review the Bid Circular prior to it being mailed
to holders of record of SV Shares and filed with applicable securities
regulatory authorities. The Offeror shall provide each registered holder
of SV Shares and the company with a final copy of the Bid Circular to be
mailed to all registered holders of SV Shares. The Offeror shall file the
Bid Circular on a timely basis with the appropriate securities commissions
and other required Entities. The Bid Circular, when filed with
the appropriate securities commissions and other required Governmental
Entities, shall contain all information which is required to be included
therein in accordance with applicable Laws, including, without limitation,
the CBCA and the Securities Act (and all rules, regulations, published
policies and notices thereunder) and shall comply in all material respects
with the requirements of applicable Law. The Bid Circular and all
information to be supplied by the Offeror for inclusion in the Director's
Circular (as defined in section 3) and any amendments or supplements
thereto, at the time filed with applicable securities regulatory
authorities or first published, sent or given to Shareholders, as the case
may be, shall not contain any misrepresentation (as defined in the
Securities Act) or 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 circumstances under
which they were made, not misleading. The Offeror shall comply with all
Laws of the Province of Quebec relating to the use of the French language
in connection with the Bid Circular to be delivered to the registered
holders of SV Shares. The terms of the Offer as set out in the Bid
Circular shall comply with the terms of this Agreement. The Offeror agrees
to correct promptly any information in the Bid Circular that shall have
become false or misleading in any material respect.
The Offer will be made in accordance with applicable Laws and shall be
open for acceptance for an initial period of 21 calendar days. The Offer
shall not expire or be withdrawn and shall be extended for successive 10
day periods until the earlier of (i) 75 days after the date of the Offer,
and (ii) the date which is 10 days after the Offeror has publicly announced
that the conditions set out in sections 3(b), (c) and (l) of Schedule A
have been satisfied or waived, and may be extended from time to time at the
option of the Offeror as permitted in Schedule A. The final date of expiry
of the Offer in accordance with the foregoing is herein referred to as the
"Expiry Time". Subject to the terms and conditions hereof, the Offeror
shall use all reasonable efforts to consummate the Offer including (i)
making timely filings to satisfy the conditions set out in sections 3(b)
and (c) of Schedule A hereto, and (ii) retaining a Canadian dealer manager
to solicit tenders to the Offer. Any and all filing fees required to be
paid in connection with the premerger notification pursuant to the HSR Act
shall be borne and paid by the Company.
The Offeror will permit any Shareholder to deposit SV Shares through
the deposit (the "Holdco Alternative") of all of the issued and outstanding
shares (the "Holdco Shares") of any single-purpose holding company,
constituted or continued under the laws of Canada or any province of Canada
on or after 1992, which has not carried on any activity or business of any
nature whatsoever (other than the acquisition and holding of SV Shares)
which is a resident of Canada for purposes of the INCOME TAX ACT (Canada),
which holds SV Shares as capital property and which has no liabilities (a
"Special Holdco"), provided that all of the following terms and conditions
are satisfied:
(a) The Shareholder provides the Offeror with a certified copy of the
Special Holdco's articles or constating documents;
(b) The Shareholder advises the Offeror in writing, with a copy to
the depository under the Offer, on or before 5:00 p.m. not later
than 10 Business Days after the date of the Offer, that it wishes
to take advantage of the Holdco Alternative;
(c) The Shareholder properly completes and duly signs the letter of
transmittal (in a form to be provided by the Offeror) in respect
of its Holdco Shares and deposits the letter of transmittal
together with the certificates representing the Holdco Shares and
the SV Shares held by the Special Holdco, with the depository
prior to the Expiry Time;
(d) The Shareholder enters into a Share Purchase Agreement (a "Share
Purchase Agreement") with the Offeror in the form attached hereto
as Schedule D not later than 10 Business Days after the date of
the Offer;
(e) The Special Holdco will not declare or pay any dividends other
than stock dividends or make any other redemptions or
distributions other than stock dividends;
(f) Where the Shareholder is a non-resident of Canada for purposes of
the INCOME TAX ACT (Canada), the Shareholder provides to the
Offeror:
(i) evidence sufficient that the Special Holdco has withheld and
remitted, on a timely basis, the amount required to be
withheld and remitted pursuant to Part XIII of the INCOME
TAX ACT (Canada) prior to the acquisition of the Holdco
Shares by the Offeror; and
(ii) a certificate under section 116 of the INCOME TAX ACT
(Canada) (and, where applicable, the equivalent certificate
under section 1098 of the TAXATION ACT (Quebec)) in form and
substance satisfactory to the Offeror; and
(g) Where there is more than one Shareholder in a Special Holdco, all
such Shareholders shall elect to avail themselves of the Holdco
Alternative with respect to all their Holdco Shares;
2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE OFFEROR.
Notwithstanding the foregoing, the obligations of the Offeror to make the
Offer shall be subject to the satisfaction, on the Proposed Offer Date, of
each of the following conditions precedent:
(i) each of the conditions set forth in paragraphs (d) through
(k) of section 3 of Schedule A hereto shall have been
satisfied; and
(ii) the Offeror shall have received a certificate of the Company
addressed to the Offeror and dated the Proposed Offer Date,
signed on behalf of the Company by two senior executive
officers of the Company, confirming the condition set forth
in paragraph (e) of section 3 of Schedule A hereto as at the
Proposed Offer Date.
The foregoing conditions precedent are for the sole benefit of the
Offeror and may be waived by the Offeror in whole or in part at any time or
from time to time.
3. DIRECTORS' CIRCULAR. The Company hereby approves of and consents to
the Offer and to the inclusion in the Bid Circular of reference to the
determinations, approvals and recommendations of the Company's board of
directors (the "Board") and of Salomon Smith Barney Canada Inc. referred to
in sections 6(cc) and (dd) hereof. The Company agrees to prepare and file
in accordance with all applicable Laws and make available for mailing,
concurrently and together with the Bid Circular, sufficient copies of a
directors' circular meeting the requirements of Canadian securities laws,
in both the English and French languages as circumstances may require, and
a Schedule 14D-1F meeting the requirements of U.S. securities laws relating
to the Offer (collectively, the "Directors' Circular"). Prior to the final
approval of the Directors' Circular by the Board, the Company shall provide
the Offeror with a reasonable opportunity to review and comment on the form
of the Directors' Circular, the Offeror recognizing that whether any such
comments are appropriate will be determined by the Board, acting
reasonably. The Company agrees to provide the Offeror and its counsel in
writing with any comments that the Company receives from the applicable
securities regulatory authorities in Canada or the U.S. on the Directors'
Circular or in connection with the Offer. The Directors' Circular and all
information supplied by the Company for inclusion in the Bid Circular and
any amendments or supplements thereto, at the time filed with applicable
securities regulatory authorities or first published, sent or given to
Shareholders, as the case may be, shall not contain any misrepresentation
(as defined in the Securities Act) or 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.
4. MUTUAL COVENANTS. Each of the parties covenants and agrees that,
except as contemplated in this Agreement, between the date hereof and the
Expiry Time or the day on which this Agreement is terminated, whichever is
earlier:
(a) it shall use its reasonable efforts to comply promptly with all
requirements which applicable Laws may impose on it or, in the
case of the Company, its subsidiaries, with respect to the
transactions contemplated by this Agreement;
(b) it shall use its reasonable best efforts, and, in the case of the
Company, shall cause its subsidiaries to use their reasonable
best efforts, to perform all obligations required or desirable to
be performed by it or, in the case of the Company, any of its
subsidiaries under this Agreement, it shall not take any action
or shall refrain from taking any action that would be
inconsistent with this Agreement or which would reasonably be
expected to significantly impede the consummation of the
transactions contemplated in this Agreement, and it shall do all
such other acts and things as may be necessary or desirable in
order to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated in this Agreement and,
without limiting the generality of the foregoing, it shall and
where appropriate, in the case of the Company, cause its
subsidiaries to:
(i) apply for and use reasonable efforts to obtain all
Appropriate Regulatory Approvals relating to it or, in the
case of the Company, any of its subsidiaries;
(ii) defend all lawsuits or other legal, regulatory or other
proceedings challenging or affecting this Agreement or the
consummation of the transactions contemplated hereby;
(iii) use reasonable commercial efforts to have lifted or
rescinded any injunction or restraining order or other order
which may adversely affect the ability of the parties to
consummate the transactions contemplated hereby;
(iv) effect all necessary registrations, filings and submissions
of information required by Governmental Entities from the
parties or any of their subsidiaries;
(v) cooperate with the other parties to this Agreement in
connection with the performance by them of their obligations
hereunder;
(vi) subject to applicable Laws, make and cooperate in the making
of all filings and applications and submissions of
information under all Laws which are applicable in
connection with the transactions contemplated herein and
take all reasonable actions in connection therewith,
including without limitation, in connection with the
Appropriate Regulatory Approvals and by participating and
appearing in any proceedings of either party before
Governmental Entities, and use reasonable best efforts to
coordinate the parties' discussions with and responses to
all Governmental Entities where both parties are seeking to
obtain material approvals or make material filings; and
(c) it shall have performed and satisfied, in all material respects,
all covenants and agreements required by this Agreement to be
performed or satisfied by it prior to the Expiry Time.
5. COVENANTS OF THE COMPANY. The Company hereby covenants that from the
date hereof, until the earlier of: (i) the Offeror having taken up and paid
for SV Shares deposited under the Offer or withdrawn the Offer; or (ii)
this Agreement having been terminated pursuant to section 14 hereof:
(a) it shall and shall cause each of its subsidiaries to, conduct its
and their respective businesses only in, and not take any action
except in, the ordinary and usual course of business, consistent
with past practice;
(b) it shall not, without the prior written consent of the Offeror
(which consent shall not be unreasonably withheld), directly or
indirectly, do or permit to occur any of the following:
(i) allot, reserve, set aside or issue, authorize or propose the
allotment, reservation, setting aside or issuance of any
shares in its capital stock or of any subsidiary thereof or
any class or securities convertible or exchangeable into, or
rights, warrants or options to acquire, any such shares or
other convertible or exchangeable securities, except
pursuant to the exercise (but not the granting) of stock
options or currently outstanding rights under existing
compensation-related share issuance plans other than
pursuant to the Option Agreement;
(ii) amend or propose to amend its articles or by-laws;
(iii) fail to pay any fee to maintain the registrations of the
Intellectual Property of the Company or any of its
subsidiaries;
(iv) split, combine or reclassify any outstanding shares or
declare, set aside or pay any dividends on or make any other
distributions on or in respect of its outstanding shares;
(v) redeem, purchase or offer to purchase any of its shares or
any shares or other securities convertible into or
exchangeable for SV Shares or MV Shares, unless otherwise
permitted or required by the terms of such securities;
(vi) authorize or propose, or enter into any agreement,
arrangement or understanding (or permit any subsidiary to do
so) with respect to (A) any acquisition of businesses,
assets or securities the value of the consideration for
which (including assumed debt or other obligations) would
exceed $2,500,000 individually (including in a series of
related transactions), or (B) any disposition of businesses,
assets or securities the value of the consideration for
which (including assumed debt or other obligations) would
exceed $2,500,000 individually (including in a series of
related transactions);
(vii) except in the ordinary course of business, grant any
license to or otherwise transfer or encumber any interest in
the Intellectual Property of the Company or any of its
subsidiaries;
(viii) make or change any election, change an annual accounting
period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment relating to the Company or any
of its subsidiaries, surrender any right to claim a refund
of Taxes, or take any similar action relating to the filing
of any Tax Return or the payment of any Tax, if such action
would have a Material Adverse Effect on the Tax liability of
the Company or any of its subsidiaries for any period ending
after the Proposed Offer Date;
(ix) enter into any amendments, extensions or renewals with
respect to any material Lease nor enter into any new
material Lease or other material agreement for the use or
occupancy of real property; or
(x) otherwise engage in any practice, take any action or enter
into any transaction of the sort described in section 6 (h);
(c) it shall:
(i) use its reasonable best efforts and cause each of its
subsidiaries to use its reasonable best efforts to preserve
intact their respective present business organizations,
Intellectual Property and goodwill, to keep available the
services of their present officers and to maintain
satisfactory relationships with suppliers, agents,
distributors, customers and others having business dealings
with it or its subsidiaries;
(ii) promptly upon any of the Executive Officers having knowledge
advise the Offeror orally and, if then requested, in writing
of any change, effect, event or occurrence which has a
Material Adverse Effect, or any change, effect, event or
occurrence which would reasonably be expected to have a
Material Adverse Effect, in respect of its or any of its
subsidiaries' businesses and of any material Governmental
Entity's or third party's complaints, investigations or
hearings (or communications indicating that the same may be
contemplated);
(iii) promptly deliver to the Offeror interim unaudited monthly
and quarterly financial statements prepared in the ordinary
course of business;
(iv) provide written notice to the Offeror of any change in
accounting methods or practices used by the Company or its
subsidiaries; and
(v) have performed or satisfied, in all material respects, all
covenants and agreements required by this Agreement to be
performed or satisfied by it prior to the Proposed Offer
Date;
(d) it shall not settle or compromise any claim brought by any
present, former or purported holder of any of its securities in
connection with the transactions contemplated in this Agreement
prior to the Effective Date without the prior written consent,
which consent shall not be unreasonably withheld, of the Offeror;
(e) it shall continue to provide the Offeror and its Representatives
with information as reasonably requested by them from time to
time concerning its business, assets, liabilities and affairs and
its subsidiaries subject to and in accordance with this
Agreement, and with access (on a basis that does not detract
unreasonably from normal business operations) to all premises,
properties, personnel, books, records, contracts and documents of
or pertaining to the Company and its subsidiaries, to the
management and employees of the Company and to the management and
employees of the Company's subsidiaries;
(f) neither it nor any of its subsidiaries will enter into, amend or
terminate any employment agreement, collective bargaining
agreement, consulting services agreement, non-competition
agreement, severance agreement or arrangement with respect to the
termination of employment or any arrangement with respect to the
increase of compensation or fringe benefits, with any of its
directors, officers or CGI or any of its affiliates;
(g) neither it nor any of its subsidiaries shall authorize, commit or
propose or agree to take any action which could reasonably be
expected to make any of the representations or warranties of the
Company contained in this Agreement materially untrue or
materially incorrect, or which could reasonably be expected to
result in any of the conditions of the Offer (as set forth in
section 3 of Schedule A hereto) not being satisfied;
(h) prior to the Expiry Time, use all reasonable efforts (including
obtaining applicable regulatory or Shareholder approvals) to
amend the Company stock option plan, if necessary, to accelerate
the vesting of any unvested Company Options so that such unvested
Company Options may be exercised prior to the Expiry Time;
(i) use all reasonable efforts to cause each holder of Company
Options to exercise their respective Company Options prior to the
Expiry Time;
(j) it and its affiliates, officers and employees will take no action
that, together with the transactions contemplated by this
Agreement, would give rise to any right of termination or
acceleration of indebtedness, or cause any third party
indebtedness to come due before its stated maturity or cause any
available credit to cease to be available;
(k) it shall provide lists of holders of SV Shares of the Company and
a list of holders of stock options and any other rights, warrants
or convertible or exchangeable securities currently outstanding
(with full particulars as to the number held, date of purchase,
grant or acquisition, exercise or conversion price, vesting and
expiry date) prepared by the Company or the transfer agent of the
Company (as well as security position listing from each
depository, including without limitation The Canadian Depository
for Securities Limited) and deliver such lists to the Offeror
within two (2) business days after execution of this Agreement
and obtain and deliver to the Offeror thereafter on demand
supplemental lists setting out any changes thereto, all such
deliveries to be both in printed form and if available in
computer-readable format. The Company shall, if requested by the
Offeror, in connection with the Offer, permit its registrar and
transfer agent to act as the Offeror's depository under the
Offer. The Company shall otherwise co-operate in good faith with
the Offeror to facilitate the mailing of the Offer;
(l) it and its subsidiaries shall participate and co-operate in all
reasonable respects with the Offeror and shall use their
respective reasonable best efforts to take all appropriate action
or to do or cause to be done all things necessary, proper or
advisable under applicable Laws to consummate and make effective
the transactions contemplated by this Agreement, including to
diligently make all required regulatory filings and applications
(including, without limitation, filings and applications under
the HSR Act, if necessary) and to obtain all licenses, permits,
consents, approvals, authorizations, qualification and orders of
Governmental Entities and parties to contracts with the Company
and its subsidiaries as are necessary for the consummation of the
transactions contemplated by this Agreement and to fulfill the
conditions to the Offer. The Company will participate and
cooperate in all reasonable respects with the Offeror in the
preparation and filing of the Bid Circular and the Schedule
14D-1F relating thereto;
(m) it agrees to use its reasonable best efforts to cooperate with
the Offeror in structuring a transaction or carrying out any
necessary reorganization immediately prior to the completion of
the Offer that is beneficial to the Offeror and not detrimental
to the Shareholders, provided such transaction or reorganization
shall not delay the completion of the Offer and provided that the
Offeror shall have first agreed in writing with the Company and
have publicly announced that all conditions to the Offer have
been satisfied or waived;
(n) upon the take-up and payment for SV Shares by the Offeror
pursuant to the Offer, and provided the Offeror thereby acquires
at least 90% of the outstanding SV Shares, it shall use its
reasonable best efforts to assist the Offeror in acquiring
pursuant to a compulsory acquisition transaction, or other
transaction proposed by the Offeror, all of the SV Shares not
tendered to the Offer; and
(o) it and its subsidiaries will consult on an ongoing basis with
representatives of the Offeror to report on operational matters
and as to the general status of the business, and in order that
the representatives of the Offeror will become more familiar with
the philosophy and techniques of the Company and its
subsidiaries, as well as with their business and financial
affairs, and in order to provide experience as a basis for
ongoing relationships in connection with the acquisition of the
Company by the Offeror.
Nothing contained in this Agreement shall give to the Offeror,
directly or indirectly, rights to control or direct the Company's
operations prior to the completion of the Offer. Prior to the completion
of the Offer, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Offeror, except as otherwise provided or disclosed in
the Company Disclosure Letter, as follows:
(a) ORGANIZATION.
(i) Each of the Company and its subsidiaries is a corporation
which has been duly incorporated or formed under its
jurisdiction of incorporation or formation and is validly
subsisting and has full corporate or legal power and
capacity to own its properties and to conduct its businesses
as currently owned and conducted by it. All of the
outstanding shares of capital stock and other ownership
interests of the Company and each of its subsidiaries are
validly issued, fully paid and non-assessable and all the
shares and other ownership interests of the Company's
subsidiaries are owned directly or indirectly by the
Company, free and clear of all material Security Interests
and there are no outstanding options, rights, entitlements,
understandings or commitments (pre-emptive, contingent or
otherwise) regarding the right to acquire any such shares of
capital stock or other ownership interests in any of the
Company's subsidiaries. The Company has made available to
the Offeror correct and complete copies of the charters and
by-laws of the Company and each of its subsidiaries. The
Company has disclosed in the Company Disclosure Letter the
names and jurisdictions of incorporation, and the number of
authorized, issued and outstanding shares of capital stock,
the holders thereof and the number of shares held by each
such holder, of each of its subsidiaries and the names of
the directors and officers of the Company and each of its
subsidiaries as of the date hereof.
(ii) Other than the Material Subsidiaries, the Company does not
have any subsidiaries which are material in relation to the
business and financial condition of the Company on a
consolidated basis. For the purposes hereof, a subsidiary
and its subsidiaries shall be considered material in
relation to the Company if (A) the investments in and
advances to the subsidiary and its subsidiaries by the
Company and its other subsidiaries exceed five percent of
the total assets of the Company and its subsidiaries on a
consolidated basis as at June 30, 1999, or (B) the equity of
the Company and its other subsidiaries in the income from
continuing operations before income taxes and extraordinary
items of the subsidiary and its subsidiaries exceeds five
percent of such income of the Company and its subsidiaries
on a consolidated basis for the six months ended June 30,
1999.
(iii) The Company does not have any ownership interest in any
other Person.
(b) CAPITALIZATION. The authorized equity capital of the Company
consists of (i) an unlimited number of first preferred shares,
(ii) an unlimited number of second preferred shares, (iii) an
unlimited number of SV Shares, and (iv) an unlimited number of MV
Shares. As of the date hereof, there were 13,901,051 SV Shares
and 3,140,000 MV Shares issued and outstanding and no first
preferred shares or second preferred shares issued or
outstanding. An aggregate of not more than 4% of the SV Shares
are held of record by 5 Persons in the United States. In
addition, as of the date hereof, 1,194,000 SV Shares were
reserved, in the aggregate, for issuance in respect of the
Company Options. The Company Disclosure Letter sets forth a list
of all the Company Options granted by the Company, including the
name of each option holder, the date of grant, the expiry date,
the number of options granted, the exercise price and the vesting
period. Other than in connection with the Option Agreement and
except as described herein, there are no options, warrants,
conversion privileges or other rights, agreements, arrangements
or commitments (pre-emptive, contingent or otherwise) obligating
the Company or any of its subsidiaries to issue or sell any
shares of the Company or any of its subsidiaries or securities or
obligations of any kind convertible into or exchangeable for any
shares of the Company, any of its subsidiaries or any other
Person, and there are no outstanding stock appreciation rights,
phantom equity or similar rights, agreements, arrangements or
commitments based upon the book value, income or any other
attribute of the Company or any of its subsidiaries. All
outstanding SV Shares have been duly authorized and are validly
issued and outstanding as fully paid and non-assessable shares,
free of pre-emptive rights. There are no outstanding bonds,
debentures or other evidences of indebtedness of the Company or
any subsidiary having the right to vote (or that are convertible
for or exercisable into securities having the right to vote) with
the holders of the SV Shares on any matter. There are no
outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of
its outstanding securities or with respect to the voting or
disposition of any outstanding securities of any of its
subsidiaries, other than the Option Agreement. No holder of
securities issued by the Company has any right to compel the
Company to register or otherwise qualify such securities for
public sale in Canada or the United States.
(c) AUTHORITY AND NO VIOLATION.
(i) The Company has the requisite corporate power and authority
to enter into this Agreement, the Option Agreement and the
Shareholders Agreement, and to perform its obligations
hereunder and thereunder. The execution and delivery of
this Agreement, the Option Agreement and the Shareholders
Agreement by the Company and the consummation of the
transactions contemplated herein and therein, have been duly
authorized by the Board and no other corporate proceedings
on its part are necessary to authorize this Agreement, the
Option Agreement or the Shareholders Agreement, or the
transactions contemplated hereby or thereby, other than as
contemplated by this Agreement.
(ii) Each of this Agreement, the Option Agreement and the
Shareholders Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid and binding
obligation, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency and other similar
Laws affecting creditors' rights generally, and to general
principles of equity.
(iii) The approval of this Agreement, the Option Agreement and
the Shareholders Agreement by the Company, the execution and
delivery by the Company of this Agreement, the Option
Agreement and the Shareholders Agreement, and the
performance by it of its obligations hereunder and
thereunder and the completion by it of the Offer and the
transactions contemplated thereby, will not:
(A) result in a violation or breach of, require any consent
to be obtained under or give rise to any material
termination rights or material payment obligation under
any provision of:
(I) its certificate of incorporation, articles,
by-laws or other constating documents;
(II) subject to obtaining the Appropriate Regulatory
Approvals relating to the Company, any Laws,
regulation, order, judgment or decree; or
(III) any Material Contract or material license,
franchise or permit to which the Company is a
party or by which the Company is bound;
(B) individually or in the aggregate have a Material
Adverse Effect on the Company, result in the imposition
of any Security Interest upon any of its assets, or
restrict, hinder, impair or limit the ability of the
Company to carry on the business of the Company as and
where it is now being carried on; or
(C) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of
the Company or any subsidiary or increase any benefits
otherwise payable under the Employee Plans or result in
the acceleration of time of payment or vesting of any
such benefits, including the time of exercise of stock
options.
No consent, approval, order or authorization of, or declaration
or filing with or notice to, any Governmental Entity or other
Person is required to be obtained by the Company and its
subsidiaries in connection with the execution and delivery of
this Agreement, the Option Agreement or the Shareholders
Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby or thereby other than (i)
the Appropriate Regulatory Approvals relating to the Company, and
(ii) any other consents, approvals, orders, authorizations,
declarations or filings of or with a Governmental Entity which,
if not obtained, would not individually or in the aggregate have
a Material Adverse Effect.
(d) NO DEFAULTS OR ACCELERATION. Neither the Company nor any of its
subsidiaries is in default under, and there exists no event,
condition or occurrence which, after notice or lapse of time or
both, would constitute such a default under any Contract,
agreement, license or franchise to which it is a party which
would, if terminated due to such default, cause a Material
Adverse Effect. As of the date hereof, no event has occurred
which would give rise to any right of termination or acceleration
of indebtedness, or cause any third party indebtedness to come
due before its stated maturity or cause any available credit to
cease to be available.
(e) YEAR 2000 COMPLIANCE. To the knowledge of the Company, none of
the Company's systems (including, without limitation,
telecommunications, automation and computer related systems of
the Company), assets (including those assets with embedded
software) or technology (including, without limitation, all
computer software (including embedded software) and hardware
owned or licensed by the Company or its subsidiaries or used by
any of them) has or will have any Year 2000 Error (as hereinafter
defined). For the purposes hereof, "Year 2000 Error" means (a)
any failure of computer hardware or software products or
technology to properly record, store, process, calculate or
present calendar dates in and between the twentieth and
twenty-first centuries as a result of the occurrence, or use
of data consisting of, such dates; (b) any failure of computer
hardware or software products or technology to calculate any
information dependent on or relating to dates in and between
the twentieth and twenty-first centuries in the same manner,
and with the same functionality, data integrity and performance,
as such computer hardware or software products or technology
records, stores, processes, calculates and presents calendar
dates on or before the date hereof, or information dependent
on or relating to such dates; or (c) any loss of
functionality or performance with respect to the introduction
of records or processing of date related data.
(f) OSC REPORTS.
(i) The Company has furnished or made available to the Offeror
true and complete copies of all forms, reports, schedules,
prospectuses, statements and other documents filed by it
with the OSC since January 1, 1997 and, prior to the Expiry
Time, the Company will have furnished or made available to
the Offeror true and complete copies of any additional
documents filed with the OSC by the Company prior to the
Expiry Time (such forms, reports, schedules, prospectuses,
statements and other documents, including any financial
statements or other documents, including any schedules
included therein, are referred to as the "the Company
Documents").
(ii) The Company Documents are all forms, reports, schedules,
prospectuses, statements or other documents required to be
filed by the Company with the OSC since January 1, 1997.
The Company Documents, at the time filed, (i) did not
contain any misrepresentation (as defined in the Securities
Act) and (ii) complied in all material respects with the
requirements of applicable securities Laws.
(iii) The Company has not filed any confidential material change
report with the OSC or any other securities authority or
regulator or any stock exchanges or other self-regulatory
authority which at the date hereof remains confidential.
(iv) The Company has publicly disclosed in the Company Documents
any information regarding any event, circumstance or action
taken or failed to be taken by the Company or its
subsidiaries which could individually or in the aggregate
reasonably be expected to have a Material Adverse Effect.
(g) FINANCIAL STATEMENTS. The financial statements of the Company,
including the notes thereto, included in the Company Documents
(the "Company Financial Statements") comply as to form in all
material respects with applicable accounting requirements and
with the published rules and regulations of applicable
Governmental Entities and the OSC with respect thereto as of
their respective dates, and have been prepared in accordance with
Canadian generally accepted accounting principles applied on a
basis consistent throughout the periods indicated and consistent
with each other (except as may be indicated in the notes thereto
or, in the case of unaudited statements, in quarterly reports to
shareholders). The Company Financial Statements and the
unaudited interim monthly financial statements for the months
through July, 1999 present fairly in all material respects the
consolidated financial position and results of operations of the
Company and its subsidiaries at the dates and during the periods
indicated therein (subject, in the case of quarterly and monthly
unaudited financial statements, to normal, recurring year-end
adjustments and the absence of notes thereto) and reflect
appropriate and adequate reserves in respect of contingent
liabilities, if any, of the Company and its subsidiaries on a
consolidated basis. The results of operations of the Company and
its subsidiaries for such periods are complete and correct and
are consistent with the books and records of the Company and its
subsidiaries. There has been no change in the Company's
accounting policies since January 1, 1997.
(h) ABSENCE OF CERTAIN CHANGES. Except as disclosed in publicly
available reports filed by the Company with the OSC prior to the
date hereof or as disclosed to the Offeror through monthly
financial data prior to the execution of this Agreement, since
December 31, 1998 (the "the Company Balance Sheet Date"), the
Company has conducted its business in the ordinary and usual
course consistent with past practice and none of the following
has occurred:
(i) any change in its affairs or in its business, assets,
liabilities, financial condition, results of operations or
prospects caused by the actions of the Company or any of its
subsidiaries which could reasonably be expected to have a
Material Adverse Effect;
(ii) any acquisition, sale or transfer of any material asset of
the Company or any of its subsidiaries;
(iii) any change in accounting methods or practices (including
any change in depreciation or amortization policies or
rates) by the Company or any revaluation by the Company of
any of its or any of its subsidiaries' assets;
(iv) any declaration, setting aside or payment of a dividend or
other distribution with respect to the shares of the
Company, or any direct or indirect redemption, purchase or
other acquisition by the Company of any of its shares of
capital stock;
(v) any Material Contract entered into by the Company or any of
its subsidiaries, other than in the ordinary course of
business, or any material amendment or termination of, or
default under, any Material Contract to which the Company or
any of its subsidiaries is a party or by which any of them
is bound;
(vi) any action taken by the Company or any of its subsidiaries
causing the acceleration, termination, modification or
cancellation of any agreement, contract, lease or license
(or series of related agreements, contracts, leases or
licenses) involving more than $2,500,000 to which the
Company or any of its subsidiaries is a party or by which
any of them is bound;
(vii) any action taken by the Company or any of its subsidiaries
causing the imposition of any material Security Interest
upon any of the assets, tangible or intangible, of the
Company or its subsidiaries;
(viii) any action taken by the Company or any of its subsidiaries
relating to the issuance of any note, bond or other debt
security, the creation, incurring, assumption or guarantee
of any indebtedness for borrowed money, or the
capitalization of any lease obligation, either involving
more than $2,500,000 individually or $2,500,000 in the
aggregate;
(ix) any action taken by the Company or any of its subsidiaries
causing the delay or postponement of the payment of accounts
payable and other liabilities outside the ordinary course of
business;
(x) any action taken by the Company or any of its subsidiaries
to cancel, compromise, waive or release any right or claim
(or series of rights or claims) either involving more than
$2,500,000 or outside the ordinary course of business;
(xi) any action taken by the Company or any of its subsidiaries
granting any license or sublicense of any rights under or
with respect to any Intellectual Property;
(xii) the entering into of any agreement by the Company or any of
its subsidiaries to do any of the things described in the
preceding clauses (i) through (xi) (other than negotiations
with the Offeror and its Representatives regarding the
transactions contemplated by this Agreement); or
(xiii) any agreement or arrangement to take any action which, if
taken prior to the date hereof, would have made any
representation or warranty set forth in this Agreement
materially untrue or incorrect as of the date when made.
(i) ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
of its subsidiaries has any material obligations or liabilities
of any nature (matured or unmatured, fixed or contingent) and, to
the knowledge of the Company, there is no basis for any present
or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against any of them giving
rise to any such material obligations or liabilities, other than:
(i) those set forth or adequately provided for in the balance
sheet included in the Company's audited financial statements
as at and for the period ended December 31, 1998 (the
"Company Balance Sheet");
(ii) those incurred in the ordinary course of business since the
Company Balance Sheet Date and consistent with past
practice, none of which results from, arises out of, relates
to, is in the nature of or was caused by any breach of
contract, breach of warranty, tort, infringement or
violation of law; and
(iii) those incurred in connection with the execution of this
Agreement.
(j) MATERIAL CONTRACTS. None of the Company, its subsidiaries or, to
the knowledge of the Company, any of the other parties thereto,
is in default or breach of, in any material respect, and neither
the Company nor any of its subsidiaries has received any notice
of material default or termination under, any Material Contract
and, to the knowledge of the Company, there exists no state of
facts which after notice or lapse of time or both would
constitute such a material default or breach. Except for the
Material Contracts disclosed in the Company Disclosure Letter,
neither the Company nor any of its subsidiaries is a party to any
(i) Contract which involves the payment to or by the Company or
its subsidiaries of more than $2,500,000 during the remainder of
the Contract, or (ii) Contract not made in the ordinary course of
business or which creates liabilities or obligations which are
not in the ordinary course of business. Descriptions of each of
the Company's Material Contracts are set forth in the Company
Disclosure Letter.
(k) CUSTOMERS AND SUPPLIERS. The Company Disclosure Letter sets forth
the names of the top 20 customers by dollar volume ("Principal
Customers") and top 20 suppliers by dollar volume of the Company
and its subsidiaries on a consolidated basis for the fiscal year
ended on the Company Balance Sheet Date. Since the Company
Balance Sheet Date, there has been no termination or cancellation
of, and no material modification or material change in, the
business relationship with any of the Principal Customers. As of
the date hereof, the Company has no knowledge that the benefits
of any relationship with any of the customers or suppliers of the
Company and its subsidiaries will not continue after the Expiry
Time in substantially the same manner as prior to the date
hereof.
(l) INSURANCE. The Company has furnished or made available to the
Offeror accurate particulars of the policies of insurance
maintained by the Company and its subsidiaries as of the date
hereof, including the name of the insurer, the risks insured
against and the amount of coverage. All such policies are in
full force and effect. None of the Company or its subsidiaries
or, to the knowledge of the Company, any of the other parties
thereto, is in default or breach of, whether as to the payment of
premiums or otherwise, and neither the Company nor any of its
subsidiaries has received any notice of material default or
termination under, any such policy and, to the knowledge of the
Company, there exists no state of facts which after notice or
lapse of time or both would constitute such a material default or
breach. There is no reason to believe that any of the existing
insurance policies of the Company and each of its subsidiaries
will not be renewed by the insurer upon the scheduled expiry of
the policy or will be renewed by the insurer only on the basis
that there will be a material increase in the premiums payable in
respect of the policy. True and complete copies of all of the
existing insurance policies of the Company and its subsidiaries
have been made available to the Offeror.
(m) BOOKS AND RECORDS. The books, records and accounts of the
Company and each of its subsidiaries (in the case of each
subsidiary, since such subsidiary was acquired by the Company or
a subsidiary of the Company), in all material respects, (i) have
been maintained in accordance with good business practices on a
basis consistent with prior years, (ii) are stated in reasonable
detail and accurately and fairly reflect the transactions and
dispositions of the assets of the Company and its subsidiaries,
and (iii) accurately and fairly reflect the basis for the Company
consolidated financial statements. The Company maintains a
system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization;
and (ii) transactions are recorded as necessary (A) to permit the
preparation of financial statements in conformity with Canadian
generally accepted accounting principles or any other criteria
applicable to such statements, and (B) to maintain accountability
for assets.
(n) LITIGATION, ETC. There is no claim, action, proceeding, charge,
complaint, grievance or investigation pending or, to the
knowledge of the Company, threatened against or relating to the
Company or any of its subsidiaries affecting any of their
businesses, properties, Intellectual Property, licenses or assets
before any court or Governmental Entity or which could come
before any arbitrator, that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, or
prevent or materially delay or materially hinder the consummation
of the transactions contemplated by this Agreement, and the
Company has no knowledge of any basis for any such claim, action,
proceeding or investigation. Neither the Company nor any of its
subsidiaries, nor their respective assets, properties or
Intellectual Property, is subject to any outstanding judgment,
order, writ, injunction, decree or settlement obligation that has
had or is reasonably likely to have a Material Adverse Effect,
that involves or may involve, or restricts or may restrict, or
requires or may require, the expenditure of a material amount of
money as a condition to or a necessity for the right or ability
of the Company or any of its Material Subsidiaries, as the case
may be, to conduct its or their business in any manner in which
such business has been carried on prior to the date hereof, or
prevent or materially delay or materially hinder the consummation
of the transactions contemplated by this Agreement.
(o) ENVIRONMENTAL. All operations of the Company and its
subsidiaries have been conducted, and are now in compliance with,
all Environmental Laws. Neither the Company nor any of its
subsidiaries is subject to:
(i) any governmental or regulatory remedial or control action,
proceeding, application, order or directive which relates to
environmental, health or safety matters or any investigation
or evaluation concerning environmental, health or safety
matters; or
(ii) any demand or notice with respect to the breach of, or
liability under, any Environmental Laws and the Company has
no knowledge of any facts or circumstances that could
reasonably be expected to result in any such action,
proceeding, application, order, directive, demand, or notice
to which the Company or any of its subsidiaries would be
subject.
(p) ZONING AND OTHER MATTERS RELATING TO REAL PROPERTY.
(i) The Company Disclosure Letter lists the address and legal
description of all of the Owned Real Property. The Company
or one of its subsidiaries has good, marketable and
indefeasible fee simple title to all of its Owned Real
Property, free and clear of all Security Interests; there
are no Leases or other agreements (written or oral) granting
to any person the right to use or occupy such parcel or
portion thereof; and there are no outstanding options,
rights of first refusal to purchase such parcel or any
portion thereof or interest therein.
(ii) The Company Disclosure Letter sets forth a list of all
Leases and other occupancy agreements, including all
amendments, extensions and other modifications for Leased
Real Property to which the Company or any of its
subsidiaries is a party. The Company or one of its
subsidiaries has a good and valid leasehold interest in and
to all of the Leased Real Property, subject to no Security
Interests. Each Lease is in full force and effect and is
enforceable in accordance with its terms. There exists no
default under any Lease. No party to any Lease has
repudiated any term thereof, and there are no disputes, oral
agreements or forbearance programs in effect with respect to
the Leased Real Property. No security deposit or portion
thereof deposited with respect to any Leased Real Property
has been redeposited in full. Neither the Company nor any
of its subsidiaries has assigned, subleased, mortgaged,
deeded in trust or otherwise transferred or encumbered any
Leased Real Property or any interest therein. There are no
outstanding options or rights of first refusal with respect
to the purchase or use of any of the Leased Real Property,
any portion thereof or interest therein. Neither the
Company nor any of its subsidiaries is obligated to purchase
or lease any real property. The Company has made available
to the Offeror true and complete copies of all the Leases.
(iii) The buildings and other structures located on the real
property owned, leased or operated by the Company or its
subsidiaries (the "Company Property") and the operation and
maintenance thereof, as now operated and maintained, comply
in all material respects with all applicable Laws, municipal
or otherwise. None of such buildings or other structures
encroaches upon any land not owned or leased by the Company
or its subsidiaries and there are no restrictive covenants,
municipal by-laws or other Laws which in any way restrict or
prohibit the use of the Company Property or such buildings
or structures for the purposes for which they are presently
being used.
(iv) There are no expropriation or similar proceedings, actual or
threatened, of which the Company or its subsidiaries has
received notice against any of the Company Property or any
part thereof.
(v) No buildings or other structures located on the Company
Property contain any friable asbestos or any other substance
containing asbestos and deemed hazardous by any
Environmental Laws applicable to the Company or its
subsidiaries.
(q) NO CONTAMINANTS. To the knowledge of the Company, the Company
Property has not been and is not now used as a landfill or waste
disposal site, there has been no hazardous substance or
contaminant deposited in or disposed of on, in, under or at, the
Company Property, or at any other property or facility in
connection with or as a result of operations of the Company or
any of its subsidiaries and there has not been any release,
spill, emission or discharge of any contaminant at or from the
Company Property which would give rise to any action or claim by
a third party or a Governmental Entity relating to violation of
or give rise to any liability under any such Environmental Laws
or other requirements.
(r) TAX MATTERS.
(i) The Company and each of its subsidiaries have timely filed,
or caused to be filed, all Tax Returns required to be filed
by them (all of which returns were correct and complete in
all material respects) and have paid, or caused to be paid,
all Taxes that are due and payable and the Company has
provided adequate accruals in accordance with Canadian
generally accepted accounting principles in its most
recently published financial statements for any Taxes of the
Company and each of its subsidiaries for the period covered
by such financial statements that have not been paid,
whether or not shown as being due on any Tax Returns. The
Company and each of its subsidiaries have made adequate
provision in their respective books and records for any
Taxes which have accrued in respect of any period subsequent
to the period covered by such financial statements. Since
the date of such published financial statements, no material
Tax liability not reflected in such statements or otherwise
provided for has been assessed, proposed to be assessed,
incurred or accrued other than in the ordinary course of
business. The Company and each of its subsidiaries have
withheld from all payments made by them, or otherwise
collected, all material amounts in respect of Taxes required
to be withheld therefrom or collected by them, and have
remitted same to the applicable Governmental Entity within
the required time periods. Neither the Company nor any of
its subsidiaries has any liability for the Taxes of any
other Person.
(ii) Neither the Company nor any of its subsidiaries has received
any notice of deficiency or proposed adjustments or any
written notification that any material issues have been
raised (and are currently pending) by Revenue Canada, the
United States Internal Revenue Service or any other
Governmental Entity, including, without limitation, any
sales tax authority, and no waivers of statutes of
limitations have been given or requested with respect to the
Company or any subsidiary. No claim has ever been made by a
taxing authority in a jurisdiction where neither the Company
nor any of its subsidiaries files tax returns that the
Company or any of its subsidiaries is or may be subject to
taxes assessed by such jurisdiction and, to the knowledge of
the Company, neither the Company nor any of its subsidiaries
is liable for taxes in any jurisdiction where it has not
filed a tax return. All Tax liability of the Company and
its subsidiaries has been assessed for all fiscal years up
to and including the fiscal year ended December 31, 1998.
To the knowledge of the Company, there are no material
proposed (but unassessed) additional Taxes and none has been
asserted. No Tax liens have been filed other than for Taxes
not yet due and payable. Neither the Company nor any of its
subsidiaries is a party to or bound by (i) any tax
allocation or tax sharing agreement or (ii) any agreement,
contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in the payment of
any "excess parachute payment" within the meaning of section
280G of the United States Internal Revenue Code (or any
corresponding provision of state, local or foreign tax law).
Neither the Company nor any of its subsidiaries has been a
member of any group filing a combined, consolidated, unitary
or similar tax return.
(s) NON-ARMS LENGTH TRANSACTIONS.
(i) None of the Company or its subsidiaries has any outstanding
payment or payments, which is or are material individually
or in the aggregate, owing from, or loan to, or has borrowed
any monies from or is otherwise indebted to, any officer,
director, employee or shareholder of the Company or any of
its subsidiaries or any Person not dealing with it at arm's
length (within the meaning of the INCOME TAX ACT (Canada))
or any affiliate of any of the foregoing, except as
disclosed in the Company Financial Statements and except for
usual compensation paid in the ordinary course of business
consistent with past practice.
(ii) Except for Contracts made solely between the Company and its
subsidiaries and except for contracts of employment, none of
the Company or any of its subsidiaries is a party to any
Contract with any officer, director, employee or shareholder
of the Company or any of its subsidiaries or any Person not
dealing with it at arm's length (within the meaning of the
INCOME TAX ACT (Canada)) or any affiliate of any of the
foregoing.
(t) EMPLOYEES. The Company Disclosure Letter lists all employees
employed by, and all individuals engaged on, a formal contractual
basis (for greater certainty, a formal contractual basis does not
include hire letters and similar correspondence between the
Company, its subsidiaries and any of their employees) to provide
services to the Company or any of its subsidiaries as at the date
hereof (the "Employees"). For each of the Employees compensated
as at September 1, 1999, the Company Disclosure Letter lists such
employee's date of hire, title or classification, rate of salary,
commission or bonus entitlements (if any) and any other material
benefits extended, or circumstances unique, to each such
employee. The Company Disclosure Letter sets out the name of each
Employee who is entitled to a sales incentive or other payment
from the Company in connection with the Offeror making the Offer
or the other transactions contemplated in this Agreement, and the
amount of such payment.
(u) EMPLOYEE BENEFIT PLANS.
(i) The Company Disclosure Letter lists all of the employee
benefit, health, welfare, supplemental employment benefit,
bonus, pension, supplementary executive retirement plan,
profit sharing, deferred compensation, stock compensation,
stock option or purchase, retirement, hospitalization
insurance, medical, dental, legal, disability and similar
plans or arrangements or practices applicable to the
Employees or to former employees of the Company or any of
its subsidiaries which are currently maintained or
participated in by the Company or its subsidiaries and each
loan to a non-officer Employee in excess of $20,000, and
each loan to an officer or director of the Company (the
"Employee Plans").
(ii) All of the Employee Plans are registered where required by,
and are in good standing under, all applicable Laws or other
legislative, administrative or judicial promulgations
applicable to the Employee Plans and there are no actions,
claims, proceedings or governmental audits pending (other
than routine claims for benefits) relating to the Company or
any of its subsidiaries.
(iii) All of the Employee Plans have been administered and funded
in material compliance with their terms and all applicable
Laws or other legislative, administrative or judicial
promulgations applicable to the Employee Plans and there are
no unfunded liabilities in respect of the Employee Plans and
all required contributions thereunder have been made in
accordance with all applicable Laws or other legislative,
administrative or judicial promulgations applicable to the
Employee Plans and the terms of such Employee Plans.
(iv) No amendments to any Employee Plan have been promised and no
amendments to any Employee Plan will be made or promised
prior to the Expiry Time.
(v) True and complete copies of all the Employee Plans as
amended as of the date hereof and, if available, current
plan summaries and employee booklets in respect thereof as
are applicable to the Employees and all related documents
or, where oral, written summaries of the terms thereof, have
been made available to Offeror. For the purpose of the
foregoing, related documents means all current plan
documentation and amendments relating thereto, summary plan
descriptions and summaries of material modifications, if
any, all related trust agreements, funding agreements and
similar agreements, the most recent annual reports filed
with any Governmental Entity and the three most recent
actuarial reports, if any, related thereto.
(vi) There are no agreements or undertakings by the Company or
any of its subsidiaries to provide post-retirement profit
sharing, medical, health, life insurance or other benefits
to Employees or any former employee of the Company or any of
its subsidiaries.
(vii) The assets of each Employee Plan which is a registered
pension plan are at least equal to the liabilities,
contingent or otherwise, of such plan on a plan termination
basis and each such plan is fully funded on a going concern
and solvency basis in accordance with its terms, applicable
actuarial assumptions and applicable Laws.
(v) LABOUR MATTERS.
(i) The Company Disclosure Letter sets forth a complete list of
all collective bargain agreements or other agreements or
commitments with any trade union or other employee
bargaining representatives (together, "collective
agreements") and neither the Company nor any of its
subsidiaries is in default of any of its material
obligations under such collective agreements.
(ii) There are no outstanding labour tribunal proceedings of any
kind, including any proceedings which could result in
certification of a trade union as bargaining agent for any
Employees not already covered by a collective agreement.
(iii) There are no union organizing or decertification activities
pending, or to the knowledge of the Company, threatened
involving Employees not already covered by a collective
agreement. No labour representatives hold bargaining rights
with respect to any Employees and no labour representatives
have applied to have the Company or any of its subsidiaries
declared a related employer pursuant to the LABOUR RELATIONS
ACT (Ontario).
(iv) Neither the Company nor any of its subsidiaries has any
material unresolved grievances or material pending
arbitration cases outstanding. Neither the Company nor any
of its subsidiaries has any serious labour problems that
might materially affect the value of the Company or its
subsidiaries, taken as a whole, or lead to an interruption
of its operations at any location. There is no strike,
dispute, slowdown, lockout, shutdown, work stoppage,
unresolved material labour union grievance, unfair labour
practice or successor rights or other concerted action or
formal grievance existing, pending or, to the knowledge of
the Company, threatened against the Company or any of its
subsidiaries.
(w) COMPLIANCE WITH LAWS. Each of the Company and its Material
Subsidiaries (in the case of each such Material Subsidiary, since
such Material Subsidiary was acquired by the Company or a
subsidiary of the Company) has complied with and is not in
violation of any applicable Laws, orders, judgments, settlements
and decrees. Without limiting the generality of the foregoing,
all securities of the Company (including, without limitation, all
options, rights or other convertible or exchangeable securities)
have been issued in compliance with all applicable securities
Laws and all securities to be issued upon exercise of any such
options, rights and other convertible or exchangeable securities
will be issued in compliance with all applicable securities Laws.
(x) RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement,
judgment, injunction, order or decree binding upon the Company or
any of its subsidiaries that has or could reasonably be expected
to have the effect of prohibiting, restricting or materially
impairing any business practice of the Company or any of its
Material Subsidiaries, any use of the Company's owned or licensed
Intellectual Property, any acquisition of property by the Company
or any of its Material Subsidiaries or the conduct of business by
the Company or any of its Material Subsidiaries as currently
conducted.
(y) REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company herein or in the Company
Disclosure Letter, when all such documents are read together in
their entirety, contains any untrue statement of a material fact,
or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the
circumstances under which such statements were made, not
misleading.
(z) INTELLECTUAL PROPERTY.
(i) The Company Disclosure Letter contains a complete and
accurate listing of all (A) registrations and applications
relating to Intellectual Property that are owned by the
Company or its subsidiaries (the "Owned Intellectual
Property"), and (B) licensed Intellectual Property material
to the Company's business (the "Licensed Intellectual
Property") and for each the governing license agreements and
(C) all licenses or similar agreements or its arrangements
covering Intellectual Property rights to which the Company
or any of its subsidiaries is a party, either as a licensee
or licensor, or a third party beneficiary;
(ii) The Company or one of its subsidiaries owns and possesses
all right, title and interest in and to the Owned
Intellectual Property or has a valid and enforceable right
or license to use the Licensed Intellectual Property used in
the Company's business as currently conducted;
(iii) The Company or one of its subsidiaries is the owner of all
of the Owned Intellectual Property, with good and marketable
title thereto, free and clear of any and all liens. To the
knowledge of the Company, all of the Owned Intellectual
Property is duly and validly registered, where applicable;
(iv) To the knowledge of the Company, the Owned and Licensed
Intellectual Property and the conduct of the business of the
Company and its subsidiaries do not infringe upon, violate
or breach the Intellectual Property rights of any other
Person;
(v) There has been no unauthorized or improper use by the
Company or its subsidiaries of the Owned or Licensed
Intellectual Property that has affected or could reasonably
be expected to affect the validity or distinctiveness
thereof or rights therein;
(vi) To the knowledge of the Company, no Person is infringing or
misappropriating any of the Licensed or Owned Intellectual
Property;
(vii) Neither the Company nor any of its subsidiaries has
received any written notice or claim challenging the Company
or any of its subsidiaries respecting the validity, use or
ownership of the Owned or Licensed Intellectual Property
and, to the knowledge of the Company, there are no facts
upon which such a challenge could be made;
(viii) The consummation of the transactions contemplated by this
Agreement will not affect the availability or terms and
conditions of any material software license to which the
Company or any of its subsidiaries is a party;
(ix) The Company has obtained any third-party consents required
relating to Owned Intellectual Property, Licensed
Intellectual Property and Material Contracts; and
(x) The Owned Intellectual Property and Licensed Intellectual
Property will be available for use immediately after the
consummation of the transactions contemplated by this
Agreement in the same manner as they were available for use
by the Company and its subsidiaries immediately prior to the
consummation of the transactions contemplated by this
Agreement.
(aa) COMPETITION ACT (CANADA). The aggregate value of the assets in
Canada of the Company together with each of its affiliates (as
such term is defined in the COMPETITION ACT (Canada)), determined
in accordance with the COMPETITION ACT (Canada), does not exceed
$250 million. The aggregate gross revenues from sales in, from
or into Canada of the Company together with each of its
affiliates (as such term is defined in the COMPETITION ACT
(Canada)), determined in accordance with the COMPETITION ACT
(Canada), does not exceed $250 million.
(bb) NO BROKER. Except as specifically noted in the Company
Disclosure Letter and section 12(b), the Company has carried on
all negotiations relating to this Agreement and the transactions
contemplated in this Agreement directly and without intervention
on its behalf by any other party in such manner as to give rise
to any valid claim for a brokerage commission, finder's fee or
other like payment.
(cc) RECOMMENDATION OF THE OFFER. The Board, after consultation with
its advisers and after receiving the report of the independent
committee of the Board, by a resolution of Board, has unanimously
(i) determined that the Offer is fair to the SV Shareholders from
a financial point of view and that the transactions contemplated
hereby are in the best interests of the Company and the
Shareholders, (ii) approved this Agreement and the transactions
contemplated hereby, and (iii) resolved to recommend that the
Shareholders accept and tender their SV Shares to the Offer.
(dd) FAIRNESS OPINION AND VALUATION. The Company has received a
valuation prepared by its financial advisor, Salomon Smith Barney
Canada Inc., to the effect that the fair market value of the SV
Shares is in the range of $4.25 to $6.50, and an opinion of
Salomon Smith Barney Canada Inc. to the effect that, in the
context of the transactions contemplated by this Agreement, the
Offer is fair to the Shareholders from a financial point of view.
Salomon Smith Barney Canada Inc. has authorized the Company to
permit references to such valuation and fairness opinion to be
included in the Bid Circular.
(ee) SUPPORT OF DIRECTORS. Each of the directors of the Company has
advised the Company that he or she intends to tender his or her
SV Shares to the Offer.
(ff) No event has occurred that would cause the MV Shares to convert
to SV Shares.
7. REPRESENTATIONS AND WARRANTIES OF THE OFFEROR. The Offeror represents
and warrants to the Company as follows:
(a) ORGANIZATION. The Offeror is, and the Offeror will be at the
date of the Offer, a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation.
(b) AUTHORITY. The Offeror has all requisite corporate power and
authority to enter into this Agreement, the Option Agreement and
the Shareholders Agreement and the Offeror will have at the date
of the Offer all necessary corporate power and authority to make
the Offer and to carry out the transactions contemplated hereby
and thereby and by the Offer. The execution and delivery of this
Agreement, the Option Agreement and the Shareholders Agreement
and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary
corporate action on the part of the Offeror, and no other
corporate proceedings on the part of the Offeror are necessary to
authorize this Agreement, the Option Agreement and the
Shareholders Agreement. Each of the Agreement, the Option
Agreement and the Shareholders Agreement has been duly executed
and delivered by the Offeror and constitutes a legal, valid and
binding agreement enforceable by the Company against the Offeror
in accordance with its terms, subject to bankruptcy, insolvency
and other similar Laws affecting creditors' rights generally, and
to general principles of equity.
(c) NO CONFLICT. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby nor compliance with any of the provisions hereof will
result in a violation of breach of, require any consent to be
obtained under or give rise to any material termination rights or
material payment obligations under any provision of (i) the
certificate constating documents of the Offeror; (ii) subject to
obtaining the Appropriate Regulatory Approvals relating to the
Offeror, any Laws, regulations, order, judgment or decree; or
(iii) any material contract or material license, franchise or
permit to which the Offeror is a party or by which the Offeror is
bound.
(d) FINANCING. The Offeror has entered into a binding agreement (the
"Commitment Letter") with American Industrial Partners Capital
Fund II L.P. (the "Fund") pursuant to which the Fund has agreed
to provide the required funds to effect the full payment by the
Offeror of the cash consideration payable pursuant to the Offer
and the Offeror has provided to the Company a copy of the
executed Commitment Letter.
(e) LITIGATION, ETC. There is no claim, action, proceeding or
investigation pending or, to the knowledge of the Offeror,
threatened against or relating to the Offeror or affecting any of
its properties, licenses or assets before any court or
Governmental Entity that, if adversely determined, could
reasonably be expected to materially hinder or materially delay
consummation of the transactions contemplated by this Agreement
or the Offer, and the Offeror has no knowledge of any basis for
any such claim, action, proceeding or investigation. Neither the
Offeror nor any of its assets and properties is subject to any
outstanding judgment, order, writ, injunction or decree that may
materially hinder or materially delay consummation of the
transactions contemplated by this Agreement or the Offer.
(f) REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Offeror herein, when read together in
their entirety, contains any untrue statement of a material fact,
or omits to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the
circumstances under which such statements were made, not
misleading.
(g) COMPETITION ACT (CANADA). The aggregate value of the assets in
Canada of the Offeror together with each of its affiliates (as
such term is defined in the COMPETITION ACT (Canada)), determined
in accordance with the COMPETITION ACT (Canada), does not exceed
$50 million. The aggregate gross revenues from sales in, from or
into Canada of the Offeror together with each of its affiliates
(as such term is defined in the COMPETITION ACT (Canada)),
determined in accordance with the COMPETITION ACT (Canada), does
not exceed $50 million.
(h) NO BROKER. The Offeror has carried on all negotiations relating
to this Agreement and the Offer and the transactions contemplated
in this Agreement directly and without intervention on its behalf
by any other party in such manner as to give rise to any valid
claim for a brokerage commission, finder's fee or other like
payment.
8. EXCLUSIVITY.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, Representative, financial advisor or
agent, or any of its subsidiaries, (i) solicit, initiate or
knowingly encourage (including by way of furnishing information
or entering into any form of agreement, arrangement or
understanding) the initiation of any Acquisition Proposal or
inquiries or proposals in connection therewith, (ii) participate
in any discussions or negotiations regarding any Acquisition
Proposal, (iii) withdraw or modify the approval of the Board of
the transactions contemplated hereby in a manner adverse to the
Offeror, (iv) approve or recommend any Acquisition Proposal, or
(v) enter into any agreement related to any Acquisition Proposal;
PROVIDED, HOWEVER, that, subject to compliance with section 9,
but notwithstanding the preceding part of this section 8(a) or
any other provision of this Agreement, nothing shall prevent the
Board from considering, negotiating, approving, recommending to
its shareholders or entering into an agreement in respect of an
unsolicited bona fide written Acquisition Proposal (x) that the
Board determines in good faith, after receiving (i) a written
opinion from its financial advisors (a copy of which shall be
provided to the Offeror) that the Acquisition Proposal would
reasonably be expected to, if consummated in accordance with its
terms, result in a transaction more favourable to Shareholders
from a financial point of view than the transaction contemplated
by this Agreement, and (ii) a written opinion of outside counsel
(a copy of which shall be provided to the Offeror) to the effect
that it is appropriate that the Board take such action in order
to discharge properly its fiduciary duties, would reasonably be
expected to, if consummated in accordance with its terms, result
in a transaction more favourable to its Shareholders than the
transaction contemplated by this Agreement, and (y) that is
received prior to the Expiry Time (any such Acquisition Proposal
being referred to herein as a "Superior Proposal").
(b) The Company shall forthwith notify the Offeror, at first orally
and then in writing, of all current and future Acquisition
Proposals of which its directors or senior officers are or become
aware, or any amendments to the foregoing, or any request for
non-public information relating to the Company or any of its
subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any
of its subsidiaries by any Person. Such notice shall include a
description of the material terms and conditions of any proposal
and provide such details of the proposal, inquiry or contact as
the Offeror may reasonably request including the identity of the
Person making such proposal, inquiry or contact.
(c) If the Company receives a request for material non-public
information from a Person who proposes a bona fide Acquisition
Proposal in respect of the Company (the existence and content of
which have been disclosed to the Offeror), and the Board
determines that such proposal would be likely to be a Superior
Proposal pursuant to section 8(a) having received the advice
referred to therein, then, and only in such case, the Board may,
subject to the execution by such Person of a non-disclosure
agreement, provide such Person with access to information
regarding the Company and its subsidiaries; PROVIDED, HOWEVER,
that the Person making the Acquisition Proposal shall not be
precluded under such non-disclosure agreement from making the
Acquisition Proposal, and provided further that the Company sends
a copy of any such non-disclosure agreement to the Offeror
immediately upon its execution and the Offeror is provided with a
list or copies of the information provided to such Person and
immediately provided with access to similar information to which
such Person was provided.
(d) The Company shall ensure that its officers, directors and
employees and its subsidiaries and their officers, directors and
employees and any financial advisors or other advisors or
Representatives retained by it are aware of the provisions of
this section 8 and, for greater certainty, the Company shall be
responsible for any breach of this section 8 by its financial
advisors or other advisors or Representatives.
9. NOTICE OF SUPERIOR PROPOSAL DETERMINATION
(a) The Company shall not accept, approve, recommend or enter into
any agreement, arrangement or understanding in respect of an
Acquisition Proposal (other than a non-disclosure agreement as
contemplated by section 8(c)) unless (i) it has provided the
Offeror with a copy of the Acquisition Proposal document which
the Board has determined would be a Superior Proposal, and (ii)
five Business Days shall have elapsed from the later of the date
the Offeror received notice of the Company's proposed
determination to accept, approve, recommend or enter into an
agreement in respect of such Acquisition Proposal, and the date
the Offeror received a copy of the Acquisition Proposal.
Information provided under this section 9(a) shall constitute
Information for the purposes of section 10(b).
(b) During such five Business Day period, the Company acknowledges
that the Offeror shall have the opportunity, but not the
obligation, to offer to amend the terms of this Agreement and the
Offer. The Board will review any offer by the Offeror to amend
the terms of this Agreement and the Offer in good faith in order
to determine, in its discretion in the exercise of its fiduciary
duties, whether the Offer, as amended, upon acceptance by the
Company would result in the Acquisition Proposal not being a
Superior Proposal. If the Board so determines, it will enter
into an amended agreement with the Offeror reflecting the amended
proposal. If the Board continues to believe, in good faith and
after consultation with its financial advisors and outside
counsel, that the Acquisition Proposal is nonetheless a Superior
Proposal and therefore rejects the amended proposal, the Company
shall terminate the Agreement under section 14(b)(iii) forthwith
and pay to the Offeror the compensation payable to the Offeror
under section 15.
(c) The Company also acknowledges and agrees that each successive
modification of any Acquisition Proposal shall constitute a new
Acquisition Proposal for purposes of the requirement under clause
(ii) of section 9(a) to initiate an additional five Business Day
notice period.
10. ACCESS TO INFORMATION
(a) Subject to sections 10(b) to and including 10(i) and applicable
Laws, upon reasonable notice, the Company shall (and shall cause
each of its subsidiaries to) continue to afford the
Representatives of the Offeror access, during normal business
hours from the date hereof and until the earlier of the Expiry
Time or the termination of this Agreement, to its properties,
books, contracts and records as well as to its management
personnel, and, during such period, each party shall (and shall
cause each of its subsidiaries to) furnish promptly to the other
party all information concerning its business, properties and
personnel as such party may reasonably request, including monthly
financial information.
(b) The Information will be kept strictly confidential and shall not,
without the prior written consent of the Company, be disclosed by
the Offeror, or by its Representatives, in any manner whatsoever,
in whole or in part, and shall not be used by the Offeror or its
Representatives other than in connection with the Offer.
Moreover, the Offeror agrees to reveal the Information only to
its Representatives who have a reasonable need to know the
Information for the purposes of evaluating the Offer, who are
informed by it of the confidential nature of the Information and
who have agreed to act in accordance with the terms and
conditions of this Agreement. Notwithstanding such agreement,
the Offeror shall continue to be responsible for any breach of
this Agreement by its Representatives and shall indemnify and
save the Company harmless from any breach by any of its
Representatives.
(c) All copies of the Information, except for that portion of the
Information which consists of analyses, compilations, forecasts,
studies or other documents prepared by the Offeror or its
Representatives, will be returned to the Company immediately upon
the termination of this Agreement. That portion of the
Information which consists of analyses, compilations, forecasts,
studies or other documents prepared by the Offeror or its
Representatives, will be destroyed upon the Company's request and
any oral Information will continue to be subject to the terms of
this Agreement. Upon the request of the Company, the Offeror
shall provide a certificate certifying as to the complete return
and destruction of all Information in accordance with the terms
of this paragraph.
(d) The Offeror acknowledges that the Information is confidential and
a valuable asset of the Company and all right, title and interest
in and to the Information is and at all times shall remain the
exclusive property of the Company.
(e) The Offeror acknowledges that, other than as contained in this
Agreement, none of the Company, its Representatives or any of its
or their respective affiliates makes any express or implied
representation or warranty as to the accuracy or completeness of
the Information.
(f) If the Offeror or anyone to whom the Offeror transmits the
Information pursuant to this Agreement becomes legally compelled
to disclose any of the Information, the Offeror shall provide the
Company with prompt notice so that the Company may seek a
protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If such
protective order or other remedy is not obtained or the Company
waives compliance with the provisions of this Agreement, the
Offeror shall furnish only that portion of the Information which
it is advised, by written opinion of counsel addressed to the
Offeror and to the Company, is legally required and shall
exercise commercially reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the
Information.
(g) Without the prior written consent of the Company, until the
earlier of the acquisition by the Offeror of 100% of the SV
Shares pursuant to the transactions contemplated by this
Agreement and December 31, 2000, neither the Offeror nor any of
its affiliates shall, directly or indirectly, solicit for
employment any person who is then employed or who, within the 90
day period prior to the date of such solicitation, was employed
(either as an employee or a consultant) by the Company or any of
its subsidiaries.
(h) The Offeror acknowledges that disclosure of any Information may
cause significant damage and harm to the Company, its affiliates,
subsidiaries and shareholders and that remedies at law may be
inadequate to protect against breach of this Agreement, and the
Offeror hereby in advance agrees to the granting of injunctive
relief in favour of the Company without proof of actual damages,
in addition to any other remedy the Company may be entitled to.
(i) The provisions of sections 10(b) to and including 10(i) and this
section 9 shall survive for a period of two years after the
termination of this Agreement.
(j) Each of the Offeror and the Company shall deliver, at the closing
of the transactions contemplated hereby, such customary
certificates, resolutions and other closing documents as may be
required by the other parties hereto, acting reasonably.
11. STANDSTILL. Until the earlier of (i) the acquisition by the Offeror
of 100% of the SV Shares pursuant to the transactions contemplated by this
Agreement, and (ii) the date which is the second anniversary of the day on
which this Agreement is terminated, the Offeror agrees that it will not,
otherwise than pursuant to this Agreement, the Offer and the transactions
contemplated hereby and thereby (including, for greater certainty, those
contemplated by the Option Agreement) or with the prior written approval of
the Company (which approval may be given on such terms as the Company may
determine):
(a) in any manner acquire, agree to acquire or make any proposal or
offer to acquire, directly or indirectly, any securities or
property of the Company;
(b) propose or offer to enter into, directly or indirectly, any
merger or business combination involving the Company or to
purchase, directly or indirectly, a material portion of the
assets of the Company;
(c) directly or indirectly, solicit or participate or join with any
Person in the solicitation of any proxies to vote, to seek to
advise or to influence any Person with respect to the voting of
any voting securities of the Company;
(d) otherwise act alone or in concert with others to seek to control
or to influence the management, Board or policies of the Company;
(e) make any public or private disclosure of any consideration,
intention, plan or arrangement inconsistent with any of the
foregoing; or
(f) advise, assist or encourage any of the foregoing or work in
concert with others in respect of the foregoing.
For the purpose of this section 11, each reference to the Offeror or the
Company shall include its affiliates and its successors.
12. FEES AND EXPENSES.
(a) Subject to sections 1 and 15, the parties agree that all
out-of-pocket expenses of the parties relating to the Offer
and the transactions contemplated hereby, including legal fees,
accounting fees, financial advisory fees, regulatory filing fees,
all disbursements of advisors and printing and mailing costs,
shall be paid by the party incurring such expenses.
(b) The Offeror and the Company acknowledge and agree that $1.5
million (plus applicable taxes) owing by the Company to Salomon
Smith Barney Canada Inc. upon the delivery of its valuation and
fairness opinion shall be paid out by the Company on or prior to
the Expiry Time.
13. BINDING NATURE. The parties acknowledge that this Agreement represents
the binding and legally enforceable obligations of the parties hereto with
respect of the matters covered hereby. The parties each agree to proceed
in good faith to cause their respective counsel, accountants and personnel
to obtain any and all necessary authorizations, regulatory approvals and
consents as may be required or desirable to consummate the Offer.
14. TERMINATION.
(a) If any condition contained in section 2 is not satisfied at or
before the Proposed Offer Date to the satisfaction of the
Offeror, then the Offeror may by notice to the Company terminate
this Agreement and the obligations of the parties hereunder
except as otherwise herein provided.
(b) This Agreement may, until the Expiry Time:
(i) be terminated by the mutual agreement of the Company and the
Offeror;
(ii) be terminated by the Company if the Offeror breaches this
Agreement in any material respect;
(iii) be terminated by the Company, provided that the Company is
not then in breach or default in any material respect of any
of its obligations hereunder, upon any determination by the
Board at the conclusion of the process set out in sections 8
and 9 that an Acquisition Proposal constitutes a Superior
Proposal, and further provided the Company has paid the
compensation payable to the Offeror under section 15;
(iv) be terminated by the Offeror if the Company breaches this
Agreement in any material respect;
(v) be terminated by the Offeror if at any time after the date
hereof:
(A) the Board shall have approved or recommended any
Superior Proposal, or determined at the conclusion of
the process set out in sections 8 and 9 that any
Acquisition Proposal is a Superior Proposal, or
resolved to take any of the foregoing actions,
(B) the Board shall have withdrawn or modified in a manner
adverse to the Offeror or shall have failed upon
request by the Offeror to confirm its approval or
recommendation of the Offer (other than as a direct
result of and in direct response to a material breach
by the Offeror of its obligations hereunder), or
resolved to take any of the foregoing actions,
(C) the Offer has been outstanding for at least 10 days
after the Offeror has publicly announced that the
conditions set out in sections 3(b) and (c) of
Schedule A have been satisfied or waived, and upon the
Expiry Time, the minimum share tender condition (as
such term is defined in section 3(a) of Schedule A) is
not met, or
(D) an Acquisition Proposal is publicly announced,
proposed, offered or made by a third party to the
Shareholders and at the Expiry Time such Acquisition
Proposal has not expired or been withdrawn and the
minimum share tender condition (as defined in section
3(a) of Schedule A) has not been satisfied or waived by
the Offeror,
subject to the payment by the Company of the compensation payable
to the Offeror under section 15.
(c) If the Offeror has not taken up and paid for the SV Shares
deposited under the Offer on or before the date that is the
earliest of (i) the date by which the Offeror is required to take
up and pay for SV Shares tendered to the Offer pursuant to the
provisions of the SECURITIES ACT,(ii) 10 days after the Expiry
Time and (iii) the 75{th} day after the date of the Offer if no
Acquisition Proposal has been made or publicly announced by a
third party prior to such 75{th} day and when the Offer is
outstanding, then this Agreement shall automatically terminate,
provided that the Company and the Offeror may mutually agree to
extend the date for termination of the Agreement.
(d) If this Agreement is terminated in accordance with the foregoing
provisions of this section 14, no party shall have any further
liability to perform its obligations hereunder except as
otherwise expressly contemplated hereby, and provided that,
subject to section 15, neither the termination of this Agreement
nor anything contained in this section 14(d) shall relieve any
party from any liability for any breach by it of this Agreement,
including from any inaccuracy in its representations and
warranties and any non-performance by it of its covenants made
herein.
15. OFFEROR'S COMPENSATION.
(a) If the Agreement is terminated pursuant to section 14(b)(iii),
section 14(b)(v)(A) or section 14(b)(v)(B), provided the Offeror
is not in material breach of its obligations to make the Offer in
accordance with this Agreement, then the Company shall pay to the
Offeror an amount equal to the Cash Compensation Amount in
immediately available funds to an account designated by the
Offeror. Such cash payment shall be paid, in case of termination
by the Company, prior to any such termination and in case of
termination by the Offeror, forthwith following any such
termination.
(b) If the Agreement is terminated pursuant to section 14(b)(v)(D),
provided the Offeror is not in material breach of its obligations
to make the Offer in accordance with this Agreement, then the
Company shall pay forthwith to the Offeror an amount equal to the
Cash Compensation Amount in immediately available funds to an
account designated by the Offeror.
(c) If the Agreement is terminated pursuant to section 14(b)(v)(C),
provided the Offeror is not in material breach of its obligations
to make the Offer in accordance with this Agreement, then the
Company shall pay to the Offeror the amount of the aggregate
out-of-pocket costs and expenses of the Offeror and its
affiliates in connection with the transactions contemplated by
this Agreement to a maximum of $2,085,190, in immediately
available funds to an account designated by the Offeror. Such
payment shall be due on the first Business Day following the
receipt by the Company of documentation satisfactory to it,
acting reasonably, substantiating the incurrence of such costs
and expenses.
(d) For greater certainty, the parties hereto agree that the
compensation to be received pursuant to section 15(a) or 15(b) is
the sole remedy of the party receiving such payment provided that
nothing shall preclude a party from seeking injunctive relief to
restrain any breach or threatened breach of the covenants or
agreements set forth in this Agreement (including pursuant to
section 10) or otherwise to obtain specific performance of any of
such act, covenants or agreements, without the necessity of
posting bond or security in connection therewith.
16. NOTICE AND CURE PROVISIONS.
(a) The Offeror and the Company shall give prompt notice to the
other, after obtaining knowledge of the occurrence, or failure to
occur, at any time until the Expiry Time, of any event or state
of facts which occurrence or failure would, or would be likely
to:
(i) cause any of the representations or warranties of the other
contained herein to be untrue or inaccurate in any material
respect on the date made; or
(ii) result in the failure to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by the other hereunder prior to the Expiry Time
which is susceptible to being cured.
(b) Neither the Offeror nor the Company may elect not to complete the
transactions contemplated hereby pursuant to the conditions
contained herein including in section 3(e) of Schedule A, or
exercise any termination right arising therefrom, unless
forthwith and in any event prior to the Expiry Time, the Offeror
or the Company has, as the case may be, delivered a written
notice to the other specifying in reasonable detail all breaches
of covenants, representations and warranties or other matters
which the Offeror or the Company is, as the case may be,
asserting as the basis for the non-fulfillment of the applicable
condition precedent or the exercise of the termination right, as
the case may be. If any such notice is delivered, provided that
the Offeror or the Company is, as the case may be, proceeding
diligently to cure such matter, if such matter is susceptible to
being cured, the other may not terminate this Agreement until the
earlier of the Expiry Time and the expiration of a period of 10
days from such notice.
17. PUBLICATION/DISCLOSURE. Except as may otherwise be required by law or
by regulatory authorities or stock exchanges having discretion over such
matters, each party hereto agrees that it will not publish, file with any
securities commission or other regulatory authority, or otherwise make
public or make any public disclosure with respect to this Agreement or the
negotiations related to this Agreement, in each case without the prior
approval of the other party not to be unreasonably withheld. If any party
deems that it is required by law or such regulatory authority to make any
public announcement or release concerning this Agreement, such party agrees
to provide a written copy thereof to the other party in advance of any such
announcement or release and to reasonably consider any suggested
modifications, which will be provided by the other party in a timely
manner. The parties acknowledge that the terms of this Agreement will be
summarized in the Bid Circular and in the Directors' Circular.
18. INSURANCE, INDEMNITY AND RELEASE.
(a) In the event the condition set out in section 3(a) of Schedule A
is satisfied or waived and the Offeror acquires SV Shares
pursuant to the transactions contemplated by this Agreement,
there shall be maintained in effect, for not less than six years
from the Expiry Time, coverage equivalent to that in effect under
the current policies of the directors' and officers' liability
insurance maintained by the Company which is no less advantageous
and with no gaps or lapses in coverages with respect to matters
occurring prior to the Expiry Time, provided that in no event
shall the Offeror be obliged to pay premiums in respect of such
coverage which are in excess of 200% of the premiums paid by the
Company as of the date of the Agreement.
(b) In the event that the condition set out in section 3(a) of
Schedule A is satisfied or waived and the Offeror acquires SV
Shares pursuant to the transactions contemplated by this
Agreement, the Offeror shall, and shall cause the Company (or its
successor) to, indemnify the directors and officers of the
Company and its subsidiaries to the fullest extent to which the
Offeror and the Company are permitted to indemnify such directors
and officers under their respective charter, by-law, applicable
law and contracts of indemnity. The Offeror agrees that all
rights to indemnification or exculpation now existing in favour
of the directors or officers of the Company or any subsidiary as
provided in its articles of incorporation or by-laws or
indemnification agreements in effect on the date hereof, copies
of which have been provided to the Offeror, shall survive this
Agreement and shall continue in full force and effect for a
period of not less than six years from the Expiry Time and the
Offeror hereby assumes, effective upon consummation of the
transactions contemplated by this Agreement, all such liability
with respect to any matters arising prior to the Expiry Time.
(c) In the event that the condition set out in section 3(a) of
Schedule A is satisfied or waived and the Offeror acquires SV
Shares pursuant to the transactions contemplated by this
Agreement, the Offeror shall, and shall cause the Company (or its
successor) to, on the one hand, and the directors of the Company
on the date of this Agreement shall, on the other hand, remise,
release and forever discharge each other and, in the case of the
Offeror and the Company, its present and former directors,
officers, agents, servants and employees (the "Releasees", which
term includes their respective successors, assigns, heirs,
executors, estate trustees, personal representatives and
administrators) of and from all actions, causes of action, suits,
debts, dues, accounts, bonds, covenants, contracts, claims and
demands whatsoever, known or unknown, suspected or unsuspected
(collectively, the "claims") which the respective individual or
entity ever had, now has or may hereafter have against the
Releasees, or any of them, for or by reason of, or in any way
arising out of any cause, matter or thing other than any claim
for unlawful conduct or fraud and the obligations set out in
section 18(a) and section 18(b) of this Agreement.
19. NOTICES. Any notice required or permitted to be given hereunder shall
be written, and shall be either (i) personally delivered, (ii) sent by a
reputable common carrier guaranteeing next business day delivery, or (iii)
sent by facsimile, to the respective addresses of the parties set forth
below, or to such other place as any party hereto may by notice given as
provided herein designate for receipt of notices hereunder. Any such
notice shall be deemed given and effective upon receipt or refusal of
receipt thereof by the primary party to whom it is to be sent.
If to the Company:
Consoltex Group Inc.
8555 route Transcanadienne
Saint-Laurent, Quebec
Canada
H4S 1Z6
Attention: Richard H. Willett
Facsimile: (514) 335-7020
- 2 -
With a copy to:
Osler, Hoskin & Harcourt
280 Park Avenue
30W
New York, NY 10017
Attention: John W. Stevens
Facsimile: (212) 867-5802
and to:
Goodman Phillips & Vineberg
1501 McGill College Ave.
26{th} Floor
Montreal, Quebec
H3A 3N9
Attention: Sidney Horn
Facsimile: 9514) 841-6499
and to:
Clairvest Group Inc.
22 St. Clair Avenue East
Suite 1700
Toronto, Ontario
M4T 2S3
Attention: Heather Crawford
Facsimile: (416) 925-5753
If to the Offeror:
AIP/CGI Acquisition Corp.
One Maritime Plaza, Suite 2525
San Francisco, CA 94111
Attention: Kim Marvin, Managing Director
Facsimile: (415) 788-5302
- 3 -
With a copy to:
Kirkland & Ellis
655 15{th} Street NW
Washington, DC 20005
Attention: Jack Feder
Facsimile: (202) 879-5200
20. NOTIFICATION OF CERTAIN MATTERS. Each of the Company and the Offeror
agrees to give prompt notice to the other of, and to use its reasonable
best efforts to prevent or promptly remedy, (a) the occurrence or failure
to occur, or the impending or threatened occurrence of failure to occur, of
any event which would be likely to cause any of its representations or
warranties in this Agreement to be untrue or inaccurate at any time from
the date hereof to the date of termination of this Agreement and (b) any
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this section 20 shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
21. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained in this Agreement
shall terminate on the Expiry Time or upon the termination of this
Agreement pursuant to section 14, as the case may be, except that the
agreements set forth in section 4 (further action, reasonable best efforts)
and section 17 shall survive the Expiry Time indefinitely and those set
forth in section 10, section 11, section 12, section 15, section 17,
section 18 and section 24 shall survive termination indefinitely (in
accordance with the terms of such provisions).
22. KNOWLEDGE. In this Agreement, references to "to the knowledge of"
means the actual knowledge of any of the Executive Officers of the Company
or the Offeror, as the case may be, after reasonable inquiry, and such
Executive Officers shall make such inquiry as is reasonable in the
circumstances.
23. PRINCIPLES OF INTERPRETATION. The division of this Agreement into
sections and other portions and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation hereof. Unless otherwise indicated, all references to a
"section" or "Schedule" followed by a number and/or a letter refer to the
specified section or Schedule of this Agreement. The terms "this
Agreement", "hereof", "herein" and "hereunder" and similar expressions
refer to this Agreement (including the Schedules hereto) and not to any
particular section or other portion hereof and include any agreement or
instrument supplementary or ancillary hereto. Unless the context otherwise
requires, words importing the singular shall include the plural and vice
versa and words importing any gender shall include all genders. In the
event that any date on which any action is required to be taken hereunder
by any of the parties hereto is not a Business Day, such action shall be
required to be taken on the next succeeding day which is a Business Day.
24. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein. The parties hereto irrevocably submit to the
non-exclusive jurisdiction of the courts of the Province of Ontario in
respect of the interpretation and enforcement of this Agreement.
25. COUNTERPARTS. This Agreement may be executed by facsimile signature,
or otherwise, in two or more counterparts, all of which taken together will
constitute one binding agreement.
26. ENTIRE AGREEMENT. This Agreement constitutes and comprises the entire
agreement and understanding between the Company and the Offeror with regard
to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof.
27. BENEFICIARIES. Except as expressly provided herein, no third party
shall be entitled to enforce any provision hereof, and no third party is
intended to benefit from this Agreement.
28. AUTHORSHIP. The parties hereto agree that the terms and language of
this Agreement and all agreements contemplated hereby were the results of
negotiations between the parties and, as a result, there shall be no
presumption that any ambiguity in this Agreement shall be resolved against
either party.
29. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
30. ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise, except that the Offeror may assign all or any of its rights
and obligations hereunder to any direct or indirect wholly-owned subsidiary
of the Offeror, PROVIDED that no such assignment shall relieve the Offeror
of its obligations hereunder if such assignee does not perform such
obligations.
31. AMENDMENT; WAIVER. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by each of the parties hereto. Any party hereto may (a)
extend the time for the performance of any of the obligations or other acts
of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
- 4 -
If the foregoing accurately expresses the Company's understanding and
agreement with respect to the matters described herein, please execute this
letter below and return it to us.
AIP/CGI NB ACQUISITION CORP.
By: _________________________________
Name:
Title:
Accepted and Agreed as of September , 1999.
CONSOLTEX GROUP INC.
By: _________________________________
Name:
Title:
- 2 -
SCHEDULE A
TERMS OF THE OFFER
1. GENERAL TERMS. The Offer shall be made to purchase all of the SV
Shares by way of a take-over bid circular prepared in compliance with
the Securities Act and other applicable provincial securities laws
and, if necessary, in accordance with the applicable laws of the
United States. The Offer shall be made on the terms set forth in the
Offer Agreement including this Schedule and upon such other terms and
conditions as are required by law. Take-up and payment pursuant to
the Offer shall occur simultaneously.
The Offeror shall have the right to vary the terms of the Offer to effect
one or more of the following:
(a) increase the consideration offered for the SV Shares;
(b) subject to the following two paragraphs, extend the period during
which SV Shares may be deposited to the Offer;
(c) waive any condition of the Offer or reduce the minimum deposit
condition contained in paragraph 3(a) hereof; and
(d) comply with applicable securities laws.
Except as described in the following paragraph, the Offeror shall no later
than 75 calendar days from the date of the Offer either:
(a) withdraw the Offer and return all SV Shares deposited thereunder;
or
(b) waive any conditions that have not been satisfied, if any, and
take up and pay for all SV Shares deposited under the Offer.
The Offer may be extended by the Offeror beyond the date which is 75
calendar days from the date the Offer (the "75{th} Day"), from
time-to-time, in the event that the Offeror first takes up and pays for all
deposited SV Shares. If there has been an Acquisition Proposal made or
publicly announced by a third party on or before the 75{th} Day and the
conditions of the Offer have not been satisfied or waived at the then
current expiry date of the Offer , the Offeror may extend the Offer
(without having to first take up and pay for all deposited SV Shares), from
time to time, beyond the 75{th} Day until the earlier of: (i) the date on
which all conditions under the Offer have been satisfied or waived or (ii)
a date which is not later than 10 days after such Acquisition Proposal has
expired or been withdrawn.
1. PRICE OF THE OFFER. The Offeror shall offer to pay, for each whole
Share validly deposited under the Offer and not withdrawn, $5.60 in
cash.
2. CONDITIONS OF THE OFFER. The Offer shall not be subject to any
conditions other than the following:
(a) there shall have been validly deposited and not withdrawn under
the Offer as at the expiry time of the Offer such number of SV
Shares (calculated on a fully diluted basis) which represents not
less than 90% of the SV Shares outstanding (on a fully diluted
basis) as at the expiry time of the Offer other than SV Shares
held on the date of the Offer by or on behalf of the Offeror, its
affiliates and associates (the "minimum share tender condition");
(b) all government or regulatory consents or approvals (including in
Canada, the United States or elsewhere) which the Offeror, in its
sole judgment, views as being necessary to enable the Offeror to
acquire the Company shall have been received by the Offeror on
terms and conditions satisfactory to the Offeror including the
expiration or early termination of any applicable waiting periods
under the INVESTMENT CANADA ACT (Canada) and the HSR Act;
(c) the Offeror shall have obtained such orders or exemptive relief
from the appropriate governmental or regulatory authorities in
each applicable jurisdiction as are necessary in connection with
completing the Offer and the transactions contemplated thereby;
(d) there shall not exist any prohibition at law against the Offeror
making the Offer or taking up and paying for SV Shares deposited
under the Offer, or completing any subsequent compulsory
acquisition or going private transaction;
(e) as of the date of this Agreement, each of the representations and
warranties of the Company set forth in this Agreement which are
qualified by materiality shall be true and correct in all
respects, each of the other representations and warranties of the
Company set forth in the Offer Agreement shall be true and
correct in all material respects, and, with respect to breaches
of representation or warranty resulting from events occurring
between the date of this Agreement and the Expiry Time, such
breach(es) shall not, either individually or in the aggregate,
have a Material Adverse Effect, and the Company shall have
performed in all material respects any covenant or complied in
all material respects with any agreement to be performed by it
under this Agreement;
(f) the Offeror shall have determined in its sole judgment that (i)
no act, action suit or proceeding shall have been threatened or
taken before or by any domestic or foreign court or tribunal or
governmental agency or other regulatory authority or
administrative agency or commission, or by any Governmental
Entity or private Person in Canada or elsewhere, whether or not
having the force of law, and (ii) no law, regulation, policy,
directive or order, whether or not having the force of law, shall
have been proposed, enacted, promulgated or applied, in the case
of either (i) or (ii):
(A) to cease trade, enjoin, prohibit or impose material
limitations or conditions on the purchase by or the sale to
the Offeror of the SV Shares, the right of the Offeror to
own SV Shares or exercise full rights of ownership of the SV
Shares or the right of the Offeror to complete a compulsory
acquisition transaction;
(B) which, if the Offer were consummated, could, in the
Offeror's sole judgment, be reasonably expected to have a
Material Adverse Effect;
(g) there shall not have occurred any actual or threatened change
(including any announcement, governmental or regulatory
initiative, condition, event or development involving a change or
a prospective change) that the Offeror determines, based upon
written advice from its tax advisors, a copy of which has been
delivered to the Company, could reasonably be expected to
materially increase the effective tax cost to the Offeror of
acquiring, holding or disposing of the SV Shares or making
distributions or interest payments from the Company and its
subsidiaries;
(h) there shall not exist or have occurred (or, if there does exist
or shall have previously occurred, there shall not have been
disclosed or the Offeror shall not otherwise discover, if not
previously disclosed to the Offeror in writing prior to the
commencement of the Offer), any condition, event, development or
change (or any condition, event or development involving a
prospective change) in the business, operations, assets,
capitalization, condition (financial or otherwise), results of
operations, cash flows, prospects, properties, licenses, permits,
rights, privileges or liabilities, whether contractual or
otherwise, of or relating to the Company or any of its
subsidiaries which, in the Offeror's sole judgment, could
reasonably be expected to be adverse and significant to a
purchaser of SV Shares;
(i) the Offeror shall not have become aware of any untrue statement
of material fact, or an omission to state a material fact that is
required to be stated or that is necessary to make a statement
not misleading in the light of the circumstances in which it was
made and at the date it was made (after giving effect to all
subsequent filings in relation to all matters covered in earlier
filings) in any document filed by or on behalf of the Company
with any securities commission or similar securities regulatory
authority in any of the provinces of Canada of in the United
States, including without limitation any annual information form,
financial statement, material change report or management proxy
circular or in any document so filed or released by the Company
to the public;
(j) there shall not have occurred, developed or come into effect any
occurrence of national or international consequence, or any law,
regulation, action, government regulation, inquiry or other
occurrences of any nature whatsoever, which seriously adversely
affects, or may seriously adversely affect, the financial markets
in Canada or the United States, generally which could reasonably
be expected to prevent or materially impair the ability of the
Company to refinance the indebtedness outstanding under the
Credit Facilities and Senior Notes upon maturity on commercially
reasonable terms;
(k) the Offeror shall not have the right under this Agreement, the
Loan Purchase Agreement, the Stockholders Agreements or the
Lock-Up Agreement to terminate any such agreement; and
(l) the Company shall have amended the Credit Facilities to extend
the term of the Tranche B term loan facility and the revolving
credit facility to October 31, 2000, and otherwise the Credit
Facilities shall be on substantially the terms and conditions set
out in the term sheet dated September 9, 1999 executed by the
Company and Bank of America, N.A. and National Bank of Canada, a
copy of which has been presented to the Offeror.
The foregoing conditions are for the exclusive benefit of the Offeror and
may be asserted by the Offeror regardless of the circumstances (including
any action or inaction by the Offeror) giving rise to such assertion or may
be waived by the Offeror in whole or in part at any time and from time to
time, in its sole discretion and shall be exclusive of any other right
which the Offeror may have under the Offer. The failure by the Offeror at
any time to exercise or assert any of the foregoing rights shall not be
deemed to constitute a waiver of any such right, the wavier of any such
right with respect to particular facts or other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each
such right shall be deemed an on-going right which may be asserted at any
time and from time to time by the Offeror. Any determination by the
Offeror concerning the foregoing conditions shall be final and binding upon
all parties.
SCHEDULE B
DEFINITIONS
"Acquisition Proposal" means (i) any sale of material assets of the Company
or any of its Material Subsidiaries, other than sales of inventory or
accounts receivable or sales in the ordinary course, or any lease,
long-term supply agreement or any other agreement having the same
economic effect as such a sale, (ii) any amalgamation, merger,consolidation,
take-over bid, reorganization, dissolution, recapitalization, business
combination or similar transaction involving the Company or any of the SV
Shares or the MV Shares (or rights to acquire such shares), or (iii) a sale
or transfer, directly or indirectly, of any of the SV Shares or the MV
Shares held by CGI or LGBV other than as provided for or permitted by the
Lock-Up Agreement and the Shareholders Agreement;
"APPROPRIATE REGULATORY APPROVALS" means those sanctions, rulings,
consents, orders, exemptions, permits and other approvals (including the
lapse, without objection, of a prescribed time under a statute or
regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an objection
being made) of any Governmental Entity, regulatory agency or
self-regulatory organisation, as set out on Schedule "C" hereto;
"BUSINESS DAY" means any day on which commercial banks are open for
business in New York, New York and Toronto, Ontario other than a Saturday,
a Sunday or a day observed as a holiday in Toronto, Ontario under the laws
of the Province of Ontario or the federal laws of Canada applicable therein
or in New York, New York under the laws of the State of New York or the
federal laws of the United States of America applicable therein;
"CASH COMPENSATION AMOUNT" means $4,170,381;
"CBCA" means the CANADA BUSINESS CORPORATIONS ACT (Canada) as now in effect
and as it may be amended from time to time prior to the Expiry Time;
"COMPANY BALANCE SHEET" has the meaning ascribed thereto in section 5(i);
"COMPANY BALANCE SHEET DATE" has the meaning ascribed thereto in section
5(h);
"COMPANY DISCLOSURE LETTER" means that certain letter dated the date hereof
and delivered by Company to the Offeror;
"COMPANY DOCUMENTS" has the meaning ascribed thereto in section 5(f);
"COMPANY FINANCIAL STATEMENTS" has the meaning ascribed thereto in section
5(g);
"COMPANY OPTIONS" means the outstanding stock options providing for the
issuance of 1,207,666 SV Shares upon the exercise thereof as set forth in
the Company Disclosure Letter, disclosing the names of the holders, the
number of SV Shares underlying each such option and the exercise price
thereof;
"COMPANY PROPERTY" has the meaning ascribed thereto in section 5(p);
"CONTRACT" means any pending and/or executory contract, agreement,
arrangement or understanding to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective assets is bound or affected;
"CREDIT FACILITIES" means the credit facilities under the credit agreement
dated March 19, 1996 among, INTER ALIA, the Company, National Bank of
Canada and NationsBank, National Association;
"EMPLOYEE" has the meaning ascribed thereto in section 5(t);
"EMPLOYEE PLANS" has the meaning ascribed thereto in section 5(u);
"ENVIRONMENTAL LAWS" means all applicable Laws, including applicable common
laws, relating to the protection of the environment and employee and public
health and safety, including any such environmental laws relating to a
discharge, spill, emission or other release, whether actual or potential,
of any contaminant (as defined in the ENVIRONMENTAL PROTECTION ACT
(Ontario)) and any other applicable legislation, regulation, guideline,
policy or by-law as well as any order, directive or decision rendered by
any Governmental Entity;
"EXECUTIVE OFFICERS" in the case of the Company means the individuals named
for such purpose in the Company Disclosure Letter and in the case of the
Offeror means Kim Marvin, Theodore Rogers and Kenneth Diekroeger;
"EXPIRY TIME" has the meaning ascribed thereto in section 1;
"GOVERNMENTAL ENTITY" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or
public department, central bank, court, tribunal, arbitral body,
commission, board, bureau or agency, whether domestic or foreign, (b) any
subdivision, agent, commission, board, or authority of any of the
foregoing, or (c) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(United States);
"INFORMATION" means all information furnished under section 10(a) by the
Company relating to the business, assets, corporate structure, financial
position and operations of the Company, including, without limitation, all
documentation, business plans, Intellectual Property, studies, records,
knowledge, systems, ideas, know-how, source codes, object codes, manuals
and other tangible or intangible information relating to the Company's
business, products or services together with all financial information,
plans, corporate records, product information, analyses, compilations,
forecasts, studies or other documents prepared by the Company or its
Representatives which contain or otherwise reflect such information. The
term "Information" shall not include such portions of the Information
which: (i) are or become generally available to the public other than as a
result of a disclosure by the Offeror, one of its affiliates or their
Representatives; or (ii) are received from an independent third party who
had obtained such information lawfully and was under no obligation of
secrecy or confidentiality; (iii) were independently developed by the
Offeror or on the Offeror's behalf, or (iv) the Offeror shows was lawfully
in the possession of the Offeror or one of its affiliates before the
Offeror received such information from the Company;
"INTELLECTUAL PROPERTY" means industrial and intellectual property
including:
(i) all registered or unregistered trade-marks, trade names, business
names, domain names, brand names, brands, designs, logos,
identifying indicia and service marks, including any goodwill
attached thereto and all registrations and applications relating
thereto;
(ii) all inventions, patents, patent rights, patent applications
(including all reissues, divisions, continuations,
continuations-in-part and extensions of any patent or patent
applications), industrial designs and applications for
registration of industrial designs;
(iii) all copyrights, registrations and applications for registration
of copyrights and works of authorship including all computer
programs (including source codes), databases and related works;
and
(iv) all processes, data, trade secrets, designs, know-how, product
information, manuals, technology, research and development
reports, technical information, technical assistance, design
specifications and similar materials recording or evidencing
expertise or proprietary information;
"LAWS" means all statutes, regulations, statutory rules, principles of law,
orders, published policies and guidelines, and terms and conditions of any
grant of approval, permission, authority or licence of any court,
Governmental Entity, statutory body (including The Toronto Stock Exchange
or the Montreal Exchange) or self-regulatory authority, and the term
"applicable" with respect to such Laws and in the context that refers to
one or more Persons, means that such Laws apply to such Person or Persons
or its or their business, undertaking, property or securities and emanate
from a Person having jurisdiction over the Person or Persons or its or
their business, undertaking, property or securities;
"LGBV" means Les Gantiers Holding B.V., a corporation incorporated under
the laws of the Netherlands;
"LEASED REAL PROPERTY" means all land, building, fixtures or other real
property in which the Company or any of its subsidiaries holds a leasehold
or subleasehold estate, or is granted a licence, concession or other right
of use or occupancy.
"LEASEHOLD IMPROVEMENTS" means all buildings, fixtures and other
improvements located on each Leased Real Property which are owned by the
Company or any of its subsidiaries, regardless of whether such buildings,
fixtures or improvements are subject to reversion to the landlord or other
third party upon the expiration or termination of the Lease for such Leased
Real Property.
"LEASES" means all leases, subleases, licences, concessions and other
agreements (written or oral), together with all amendments, extensions,
renewals guaranties and other agreements with respect thereto, for any
Leased Real Property.
"MATERIAL ADVERSE EFFECT" means any effect that is, or would reasonably be
expected to be, material and adverse to the business, assets, liabilities,
financial condition, results of operations or prospects of the Company and
its subsidiaries taken as a whole, or to the value of the SV Shares to the
Offeror, other than any effect resulting from (i) general economic,
financial or market conditions; (ii) conditions or circumstances generally
affecting the industries in which the Company and its subsidiaries operate;
or (iii) any event or item identified in the Company Disclosure Letter as
having a Material Adverse Effect;
"MATERIAL CONTRACT" means any Contract:
(i) for the purchase and sale of goods or services for an aggregate
cumulative purchase price in excess of $2,500,000; or
(ii) for the purpose of analyzing, developing, purchasing or providing
goods or services or for any business arrangement, asset
acquisition or potential investment in excess of $2,500,000;
(iii) for the purchase or sale of real property or any Lease of real
property; or
(iv) which is a collective bargaining agreement;
"MATERIAL SUBSIDIARY" means each of the subsidiaries identified in the
Company Disclosure Letter as a material subsidiary;
"OSC" means the Ontario Securities Commission;
"OWNED REAL PROPERTY" means all land, together with all buildings, fixtures
and other improvements located thereon, including, without limitation, all
electrical, mechanical, plumbing and other building systems (fire
protection, security and surveillance systems, telecommunications,
computer, wiring and cable installations, irrigation and other water
distribution systems), easements and other rights and interest appurtenant
thereto, owned by the Company or any of its subsidiaries;
"PERSON" includes any individual, firm, partnership, joint venture, venture
capital fund, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity, syndicate
or other entity, whether or not having legal status;
"REPRESENTATIVES" means all employees, directors, officers, agents,
lawyers, accountants and financial advisers of a party including, but not
limited to, Salomon Smith Barney Canada Inc. and CGI, in the case of the
Company, and BT Alex Brown, Bank of America and Donaldson, Lufkin &
Jenrette, in the case of Offeror;
"SECURITIES ACT" means the SECURITIES ACT (Ontario) as now in effect and as
it may be amended from time to time prior to the Expiry Time;
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, other than (i) mechanics', materialmen's and
similar liens, (ii) liens for Taxes not yet due and payable, (iii) money
purchase liens and liens securing rental payments under capital lease
arrangements, and (iv) other liens arising out of the ordinary course of
business and not incurred in connection with the borrowing of money;
"SENIOR NOTES" means the notes governed by the indenture dated as of
September 30, 1993 among, INTER ALIA, the Company and First Trust National
Association;
"SHAREHOLDERS" means the holders of the SV Shares;
"SUBSIDIARY" has the meaning ascribed thereto in the SECURITIES ACT
(Ontario);
"SUPERIOR PROPOSAL" has the meaning ascribed thereto in section 7(a);
"TAX" and "TAXES" means, with respect to any entity, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings
or profits) and all capital taxes, gross receipts taxes, environmental
taxes, sales taxes, use taxes, ad valorem taxes, value added taxes,
transfer taxes, franchise taxes, licence taxes, withholding taxes, payroll
taxes, employment taxes, Canada or Qu<e'>bec Pension Plan premiums, excise,
severance, social security premiums, workers' compensation premiums,
unemployment insurance or compensation premiums, stamp taxes, occupation
taxes, premium taxes, property taxes, windfall profits taxes, alternative
or add-on minimum taxes, goods and services tax, customs duties or other
taxes, fees, imports, assessments or charges of any kind whatsoever,
together with any interest and any penalties or additional amounts imposed
by any taxing authority (domestic or foreign) on such entity, and any
interest, penalties, additional taxes and additions to tax imposed with
respect to the foregoing, and (ii) any liability for the payment of any
amount of the type described in the immediately preceding clause (i) as a
result of being a "transferee" (within the meaning of section 6901 of the
United States Internal Revenue Code or any other applicable Laws) of
another entity or a member of an affiliated or combined group;
"TAX RETURNS" means all returns, declarations, reports, information returns
and statements required to be filed with any Governmental Entity relating
to Taxes (including any attached schedules), including, without limitation,
any information return, claim for refund, amended return and declaration of
estimated Tax;
"YEAR 2000 ERROR" shall have the meaning ascribed thereto in section 5(e).
SCHEDULE C
APPROPRIATE REGULATORY APPROVALS
(i) Approval under the Investment Canada Act (Canada)
SCHEDULE D
FORM OF SPECIAL HOLDCO SHARE PURCHASE AGREEMENT