EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
STANTEC INC.,
STANTEC CONSULTING CALIFORNIA INC.
and
THE KEITH COMPANIES, INC..
Dated as of April 14, 2005
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TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.......................................................1
SECTION 1.02. Effective Time; Closing..........................................1
SECTION 1.03. Effect of the Merger.............................................2
SECTION 1.04. Articles of Incorporation; By-laws...............................2
SECTION 1.05. Directors and Officers...........................................2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.........................................3
SECTION 2.02. Exchange of Certificates.........................................7
SECTION 2.03. Stock Transfer Books.............................................9
SECTION 2.04. Company Stock Options............................................9
SECTION 2.05. Company Restricted Stock........................................10
SECTION 2.06. [Reserved]......................................................10
SECTION 2.07. Dissenting Shares...............................................10
SECTION 2.08. [Reserved]......................................................11
SECTION 2.09. Affiliates......................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries....................11
SECTION 3.02. Articles of Incorporation and By-laws...........................12
SECTION 3.03. Capitalization..................................................12
SECTION 3.04. Authority Relative to This Agreement............................13
SECTION 3.05. No Conflict; Required Filings and Consents......................13
SECTION 3.06. Permits; Compliance.............................................14
SECTION 3.07. SEC Filings; Financial Statements...............................14
SECTION 3.08. Absence of Certain Changes or Events............................16
SECTION 3.09. Absence of Litigation...........................................16
SECTION 3.10. Employee Benefit Plans..........................................16
SECTION 3.11. Labor and Employment Matters....................................18
SECTION 3.12. Real Property; Title to Assets..................................19
SECTION 3.13. Intellectual Property...........................................20
SECTION 3.14. Taxes 20
SECTION 3.15. Environmental Matters...........................................21
SECTION 3.16. [Reserved]......................................................21
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SECTION 3.17. Material Contracts..............................................21
SECTION 3.18. Insurance.......................................................22
SECTION 3.19. Board Approval; Vote Required...................................23
SECTION 3.20. Customers and Suppliers.........................................23
SECTION 3.21. [Reserved]......................................................23
SECTION 3.22. Interested Party Transactions...................................23
SECTION 3.23. Opinion of Financial Advisor....................................24
SECTION 3.24. Brokers 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01. Corporate Organization..........................................24
SECTION 4.02. Articles of Incorporation and By-Laws...........................24
SECTION 4.03. Capitalization..................................................24
SECTION 4.04. Authority Relative to This Agreement............................25
SECTION 4.05. No Conflict; Required Filings and Consents......................26
SECTION 4.06. Permits; Compliance.............................................26
SECTION 4.07. ASC Filings; Financial Statements...............................27
SECTION 4.08. Absence of Certain Changes or Events............................28
SECTION 4.09. Absence of Litigation...........................................28
SECTION 4.10. Stockholder Vote................................................29
SECTION 4.11. Operations of Merger Sub........................................29
SECTION 4.12. Taxes 29
SECTION 4.13. Board Approval..................................................29
SECTION 4.14. [Reserved]......................................................30
SECTION 4.15. Ownership of Company Common Stock...............................30
SECTION 4.16. Brokers 30
SECTION 4.17. Intellectual Property...........................................30
SECTION 4.18. Environmental Matters...........................................30
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger...........31
SECTION 5.02. Conduct of Business by Parent Pending the Merger................33
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Proxy Statement.........................33
SECTION 6.02. Company Stockholders' Meeting...................................35
SECTION 6.03. Access to Information; Confidentiality..........................35
SECTION 6.04. No Solicitation of Transactions.................................35
SECTION 6.05. Employee Benefit Matters........................................38
SECTION 6.06. Directors' and Officers' Indemnification and Insurance..........38
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SECTION 6.07. Notification of Certain Matters.................................39
SECTION 6.08. Company Affiliates..............................................39
SECTION 6.09. Further Action; Reasonable Best Efforts.........................39
SECTION 6.10. Plan of Reorganization..........................................40
SECTION 6.11. Obligations of Merger Sub.......................................40
SECTION 6.12. Consents of Accountants.........................................41
SECTION 6.13. Listing 41
SECTION 6.14. Subsequent Financial Statements.................................41
SECTION 6.15. Public Announcements............................................41
SECTION 6.16. Board of Directors of Parent....................................41
SECTION 6.17. Company Contribution............................................41
SECTION 6.18. Unvested Company Restricted Stock...............................41
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party.....................42
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub..........42
SECTION 7.03. Conditions to the Obligations of the Company....................44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.....................................................45
SECTION 8.02. Effect of Termination...........................................46
SECTION 8.03. Fees and Expenses...............................................46
SECTION 8.04. Amendment.......................................................47
SECTION 8.05. Waiver 47
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non Survival of Representations, Warranties and Agreements......47
SECTION 9.02. Notices 48
SECTION 9.03. Certain Definitions.............................................49
SECTION 9.04. Severability....................................................54
SECTION 9.05. Entire Agreement; Assignment....................................54
SECTION 9.06. Parties in Interest.............................................54
SECTION 9.07. Specific Performance............................................55
SECTION 9.08. Governing Law...................................................55
SECTION 9.09. Headings........................................................55
SECTION 9.10. Counterparts....................................................55
SECTION 9.11. Waiver of Jury Trial............................................55
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of April 14, 2005
(this "AGREEMENT"), among Stantec Inc., a Canadian corporation ("PARENT"),
Stantec Consulting California Inc., a California corporation and a wholly owned
subsidiary of Parent ("MERGER SUB"), and The Keith Companies, Inc., a California
corporation (the "COMPANY").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the California Corporations Code (the "CCC"), Parent and the
Company will enter into a business combination transaction pursuant to which the
Company will merge with and into Merger Sub (the "MERGER");
WHEREAS, the Board of Directors of the Company (the "COMPANY BOARD") has
(i) determined that the Merger is consistent with and in furtherance of the
long-term business strategy of the Company and fair to, and in the best
interests of, the Company and its stockholders and has approved and adopted this
Agreement and declared its advisability and approved the Merger and the other
transactions contemplated by this Agreement (the "TRANSACTIONS") and (ii) has
recommended the approval and adoption of this Agreement by the stockholders of
the Company;
WHEREAS, the Board of Directors of Parent (the "PARENT BOARD") has
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of Parent and fair to, and in the best interests of,
Parent and its stockholders and has approved and adopted this Agreement, the
Merger and the other Transactions ;
WHEREAS, Parent and Company CEO ("STOCKHOLDER") have entered into a Support
Agreement, dated as of the date hereof (the "SUPPORT AGREEMENT"), in connection
with this Agreement, the Merger and the other Transactions; and
WHEREAS, for United States federal income tax purposes, the Merger is
intended to qualify as a reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER.
(a) Upon the terms and subject to the conditions set forth in Article
VII, and in accordance with the CCC, at the Effective Time (as defined
in Section 1.02), the Company will be merged with and into the Merger
Sub. As a result of the Merger, the separate corporate existence of
the Company shall cease and the Merger Sub shall continue as the
surviving corporation of the Merger (the "SURVIVING CORPORATION").
SECTION 1.02. EFFECTIVE TIME; CLOSING. On the second Business Day
immediately following the satisfaction or, if permissible, waiver of the last
conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Agreement (or an Agreement of Merger that includes only the
information required by the CCC), an officers' certificate of the Company and an
officers' certificate of Merger Sub (together, the "CERTIFICATE OF MERGER") with
the Secretary of State of the State of California, in such form as is required
by, and executed in accordance with, the relevant provisions of the CCC (the
date and time of such filing of the Certificate of Merger (or such later time as
may be agreed by each of the parties hereto and specified in the Certificate of
Merger) being the "EFFECTIVE TIME"). Immediately prior to such filing of the
Certificate of Merger, a closing (the "CLOSING") shall be held at the offices of
the Company, 19 Technology Drive, Irvine, California 92618, or such other place
as the parties shall agree, for the purpose of confirming the satisfaction or
waiver, as the case may be, of the conditions set forth in Article VII.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the CCC. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of each of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.04. ARTICLES OF INCORPORATION; BY-LAWS. (a) At the Effective
Time, subject to Section 6.06, the Articles of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective Time, and
subject to Section 6.06, at the Effective Time, the By-laws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be
the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Articles of Incorporation of the Surviving
Corporation and such By-laws.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-laws of the Surviving Corporation, and the officers of
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until the earlier of their death,
resignation or removal.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) each share of common stock, par value US$0.001 per share, of the
Company ("COMPANY COMMON STOCK," all issued and outstanding shares of
Company Common Stock being hereinafter collectively referred to as the
"SHARES") issued and outstanding immediately prior to the Effective
Time (other than any Shares to be cancelled pursuant to Section
2.01(i), substituted for pursuant to Section 2.05 and any Dissenting
Shares (as hereinafter defined)) shall be cancelled and shall be
converted automatically, subject to Section 2.01 (h) and Section 2.02,
into the right to receive:
(i) (A) 0.23 common shares, without par value, of Parent ("PARENT
COMMON STOCK") (the "FIXED RATIO STOCK") and (B) that number of
shares of Parent Common Stock equal to US$16.50 divided by the
Average Stock Price (the "FLOATING RATIO Stock" and, together
with the Fixed Ratio Stock, the "EXCHANGE STOCK"); or
(ii) cash equal the sum of (A) US$16.50 and (B) the product of (x)
0.23 and (y) Average Stock Price (the "CASH PAYMENT"); or
(iii) (A) US$11.00, (B) the Fixed Ratio Stock and (C) that number of
Parent Common Stock equal to US$5.50 divided by the Average Stock
Price (the "US$5.50 STOCK" and, together with the Fixed Ratio
Stock, the "MIXED ELECTION STOCK"); or
(iv) such other combination of shares of Parent Common Stock and cash
determined in accordance with Section 2.01(e) or Section 2.01(f)
(the "MERGER CONSIDERATION," which when used herein shall be deemed to include
cash in lieu of any fractional shares of Parent Common Stock to which a holder
is entitled pursuant to Section 2.02(e)), in each case upon surrender by the
holder of such share of Company Common Stock of the Certificate representing
such share in accordance with Section 2.02. "AVERAGE STOCK PRICE" means the
simple average of the daily weighted average sales price of Parent Common Stock
on the Toronto Stock Exchange ("TSX"), as reported by Bloomberg L.P., for each
of the 20 consecutive trading days ending on (and including) the second trading
day prior to the Effective Time. The weighted average sales price for each
trading day shall be converted from Canadian dollars to U.S. dollars at the noon
buying rate quoted by the Federal Reserve Bank of New York on such trading day;
(b) The aggregate number of shares of Parent Common Stock (the "AGGREGATE
STOCK AMOUNT") to be issued as Merger Consideration shall be equal to
the product of (i) the Mixed Election Stock and (ii) the difference of
(A) the number of Shares outstanding immediately prior to the
Effective Time minus (B) the sum of (x) the number of Shares held by
any Subsidiary of the Company or Parent or any Subsidiary of Parent,
(y) the number of Shares of unvested Company Restricted Stock and (z)
the number of Dissenting Shares. The aggregate
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amount of cash to be paid by Parent as Merger Consideration (the
"AGGREGATE CASH AMOUNT") shall be equal to the product of (i) US$11.00
and (ii) the difference of (A) the number of Shares outstanding
immediately prior to the Effective Time minus (B) the sum of (x) the
number of Shares held by any Subsidiary of the Company or Parent or
any Subsidiary of Parent, (y) the number of Shares of unvested Company
Restricted Stock and (z) the number of Dissenting Shares. Any right to
receive cash as all or part of the Merger Consideration shall be
without interest.
(c) Subject to the allocation and election procedures set forth in this
Section 2.01, each record holder of Shares immediately prior to the
Effective Time (other than Shares held by the Company or any
Subsidiary of the Company or Parent or any Subsidiary of Parent and
Dissenting Shares) will be entitled to elect to receive:
(i) cash per Share equal the Cash Payment (a "CASH ELECTION"); or
(ii) the number of shares, or fraction thereof, of Parent Common Stock
per Share equal to the Exchange Stock (a "STOCK ELECTION"); or
(iii) the "MIXED CONSIDERATION" per Share, which consists of US$11.00
in cash and the Mixed Election Stock (a "MIXED ELECTION", and
together with the Cash Election and the Stock Election, the
"ELECTIONS");
Each holder shall make the same Election with respect to all of such holder's
Shares. All such Elections shall be made on a form in compliance with the terms
of Section 2.02 (a "FORM OF ELECTION"). Holders of record of Shares who hold
such shares as nominees, trustees or in other representative capacities (a
"HOLDER REPRESENTATIVE") may submit multiple Forms of Election, PROVIDED that
such Holder Representative certifies that each such Form of Election covers all
the Shares held by such Holder Representative for a particular beneficial owner.
For purposes hereof, a holder of Company Common Stock who does not make a valid
Election prior to the Election Deadline, including by failure to return the Form
of Election to the Exchange Agent prior to the Election Deadline and as a result
of revocation, shall be deemed to have made a Mixed Election. If Parent or the
Exchange Agent shall determine that any purported Cash Election or Stock
Election was not properly made, such purported Cash Election or Stock Election
shall be deemed to be of no force and effect and the stockholder making such
purported Cash Election or Stock Election shall for purposes hereof be deemed to
have made a Mixed Election.
(d) At the Effective Time, each Share covered by a Mixed Election (a
"MIXED ELECTION Share") shall be converted into and exchanged for the
right to receive from Parent the Mixed Consideration;
(e) At the Effective Time, each Share covered by a Stock Election (a
"STOCK ELECTION Share") shall be converted into the right to receive
the Exchange Stock; PROVIDED, HOWEVER, if after taking into account
the Elections made and deemed made pursuant to Section 2.01(c), the
number of shares of Parent Common Stock to be issued as Merger
Consideration would exceed the Aggregate Stock Amount, then, at the
Effective Time, each Stock Election Share shall be converted into the
right to receive:
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(i) a number of shares (the "PRO RATA NUMBER OF SHARES") of Parent
Common Stock equal to the quotient determined by (A) the
difference of the Aggregate Stock Amount minus the number of
shares of Parent Common Stock to be issued in exchange for Mixed
Election Shares, divided by (B) the number of Stock Election
Shares; and
(ii) an amount in cash equal to the product of (A) the difference of
(x) the Exchange Stock, minus (y) the Pro Rata Number of Shares,
multiplied by (B) the Average Stock Price;
(f) At the Effective Time, each Share covered by a Cash Election (a "CASH
ELECTION Share") shall be converted into the right to receive the Cash
Payment; PROVIDED, HOWEVER, if, taking into account the Elections made
and deemed made pursuant to Section 2.01(c), the amount of cash to be
paid by Parent as Merger Consideration would exceed the Aggregate Cash
Amount, then, at the Effective Time, each Cash Election Share shall be
converted into the right to receive:
(i) an amount in cash (the "PRO RATA AMOUNT OF CASH") equal to the
quotient determined by (A) the difference of the Aggregate Cash
Amount minus the amount of cash to be paid in exchange for Mixed
Election Shares, divided by (B) the number of Cash Election
Shares; and
(ii) a number of shares of Parent Common Stock equal to the quotient
of (A) the difference of (x) the Cash Payment, minus (y) the Pro
Rata Amount of Cash, divided by (B) the Average Stock Price;
(g) The Company shall mail the Form of Election to each person who is a
holder of record of Company Common Stock on the record date for the
Company Stockholders' Meeting contemplated by Section 6.02 and shall
use its reasonable best efforts to make the Form of Election available
to all persons who become holders of Company Common Stock during the
period between such record date and the Election Deadline;
(h) To be effective, a Form of Election must be properly completed and
signed by a record holder of Company Common Stock and submitted to the
Exchange Agent and accompanied by the Certificates as to which the
Election is being made. All Certificates so surrendered shall be
subject to the exchange procedures set forth in Section 2.02. The
Exchange Agent will have the discretion to determine whether Forms of
Election have been properly completed, signed and submitted or revoked
and to disregard immaterial defects in Forms of Election. The decision
of the Exchange Agent in such matters shall be conclusive and binding.
Neither Parent nor the Exchange Agent will be under any obligation to
notify any person of any defect in a Form of Election submitted to the
Exchange Agent. The Exchange Agent shall also make all computations
contemplated by this Section 2.01 and all such computations shall be
conclusive and binding on the holders of Company Common Stock absent
manifest error. The Form of Election and the Certificates must be
received by the Exchange Agent by the close of business on the last
business day prior to the date on which the vote with respect to the
adoption and approval of this Agreement and the approval of the Merger
at the Company Stockholders' Meeting contemplated by Section 6.02
hereof is held (the "ELECTION DEADLINE") in order to be
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effective. The Exchange Agent shall not accept guarantee of delivery
of Certificates in lieu of physical delivery of Certificates. An
Election may be revoked, but only by written notice received by the
Exchange Agent prior to the Election Deadline. Upon any such
revocation, unless a duly completed Form of Election, accompanied by a
Certificate, is thereafter submitted in accordance with this Section
2.01(i), such shares shall be deemed to be Mixed Election Shares. In
the event that this Agreement is terminated pursuant to the provisions
hereof and any Certificates have been transmitted to the Exchange
Agent pursuant to the provisions hereof, such Certificates shall be
promptly be returned without charge to the person submitting same;
(i) each Share held in the treasury of the Company and each Share
owned by Merger Sub, Parent or any direct or indirect wholly
owned subsidiary of Parent or of the Company immediately prior to
the Effective Time shall be cancelled without any conversion
thereof and no payment or distribution shall be made with respect
thereto; and
(j) each share of common stock, par value US$0.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall
be one validly issued, fully paid and nonassessable share of common
stock, par value US$0.01 per share, of the Surviving Corporation;
(k) Notwithstanding anything to the contrary contained in this Agreement,
if:
(i) Parent or the Company receives written notice from its counsel
specified in Article VII to the effect that such counsel is
unlikely to be able to deliver a tax opinion required pursuant to
Section 7.02(l) or Section 7.03(e), as the case may be, on the
date of the Effective Time; and
(ii) instead of depositing the Aggregate Cash Amount and the Aggregate
Stock Amount in accordance with Section 2.02(a), Parent deposits,
or causes to be deposited (including as contemplated by Section
7.02(f)), with the Exchange Agent (as defined below), for the
benefit of the holders of Shares, for exchange in accordance with
this Article II through the Exchange Agent, cash in an amount
equal to US$22.00 per Share,
Parent shall have the right, at its sole and absolute discretion, to reverse the
Merger so that Merger Sub will merge with and into the Company, such that the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the Surviving Corporation of the Merger (a "REVERSE-SUBSIDIARY
MERGER"). A Reverse-Subsidiary Merger would not be intended to constitute a
"plan of reorganization" within the meaning of section 1.368-2(g) of the income
tax regulations promulgated under the Code. In the event Parent effects the
acquisition of the Company pursuant to a Reverse Subsidiary Merger in accordance
with this Section 2.01(k), (x) all references to the "Merger" in this Agreement
and all other related agreements, documents and instruments, shall be deemed to
be to the "Reverse-Subsidiary Merger," all references to the "Surviving
Corporation" shall be deemed to be to the Company, all references to Merger
Consideration shall be deemed to mean US$22.00 per Share, and this Agreement and
(y) the conditions in Section 7.02(l) and Section 7.03(e) shall be deemed to be
waived.
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SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. Immediately
prior to the Effective Time, Parent shall deposit, or shall cause to be
deposited (including as contemplated by Section 7.02(f)), with such bank or
trust company that may be designated by Parent and is reasonably satisfactory to
the Company (the "EXCHANGE AGENT"), for the benefit of the holders of Shares,
for exchange in accordance with this Article II through the Exchange Agent, cash
equal to the Aggregate Cash Amount and certificates representing the Aggregate
Stock Amount, and cash, from time to time as required to make payments in lieu
of any fractional shares pursuant to Section 2.02(e) (such cash and certificates
for shares of Parent Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "EXCHANGE FUND"). The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the cash and
shares of Parent Common Stock contemplated to be issued pursuant to Section
2.01. Except as contemplated by Section 2.02(g) hereof, the Exchange Fund shall
not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each person who
was, at the Effective Time, a holder of record of Shares entitled to
receive the Merger Consideration pursuant to Section 2.01(a): (i) a
letter of transmittal (which shall be in customary form and shall
specify that delivery shall be effected, and risk of loss and title to
the certificates evidencing such Shares (the "CERTIFICATES") shall
pass, only upon proper delivery of the Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the
Certificates pursuant to such letter of transmittal. Upon surrender to
the Exchange Agent of a Certificate for cancellation, together with
such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as
may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the
Merger Consideration, and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.02(c), and the
Certificate so surrendered shall forthwith be cancelled. In the event
of a transfer of ownership of Shares that is not registered in the
transfer records of the Company the Merger Consideration and any
dividends or other distributions to which such holder is entitled
pursuant to Section 2.02(c) may be issued to a transferee if the
Certificate representing such Shares is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at all times after the
Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, and any dividends or other
distributions to which such holder is entitled pursuant to Section
2.02(c). The Merger Consideration (plus any dividends or other
distributions to which such holder is entitled pursuant to Section
2.02(c)) shall be delivered to each former stockholder of the Company
by the Exchange Agent as promptly as practicable following surrender
of a Certificate and a duly executed letter of transmittal.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON
STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to the Parent Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common
Stock represented thereby, and no cash payment shall be paid to any
such holder pursuant to Section 2.01(a) or 2.02(e), until the holder
of such Certificate shall surrender such Certificate. Subject to the
effect of escheat, tax or other applicable Laws (as defined in Section
3.05(a)), following
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surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole shares of Parent Common Stock
issued as part of the Merger Consideration in exchange therefor, (i)
promptly, the amount of any cash payable with respect to a fractional
share of Parent Common Stock to which such holder is entitled pursuant
to Section 2.02(e) and the amount of dividends or other distributions
with a record date after the Effective Time and theretofore paid with
respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior
to surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Parent Common Stock.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. The Merger Consideration
issued upon surrender of a Certificate in accordance with the terms of
this Article II (including, with respect to Shares, any cash paid
pursuant to Section 2.02(c) or (e)) shall be deemed to have been
issued in full satisfaction of all rights pertaining to the Shares
formerly represented by such Certificate.
(e) NO FRACTIONAL SHARES. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a
shareholder of Parent. Each holder of a fractional share interest
shall be paid an amount in cash (without interest and subject to the
amount of any withholding taxes as contemplated in Section 2.02(i))
equal to the product obtained by multiplying (i) such fractional share
interest to which such holder (after taking into account all
fractional share interests then held by such holder) would otherwise
be entitled by (ii) the simple average of the daily weighted average
sales price of Parent Common Stock on the TSX, as reported by
Bloomberg L.P., for each of the 20 consecutive trading days ending on
(and including) the second trading day prior to the Effective Time
(the weighted average sales price for each trading day shall be
converted from Canadian dollars to U.S. dollars at the noon buying
rate quoted by the Federal Reserve Bank of New York on such trading
day). As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional share interests,
the Exchange Agent shall so notify Parent, and Parent shall deposit
such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional share interests
subject to and in accordance with the terms of Sections 2.02(b) and
(c).
(f) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration shall be
adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or
Company Common Stock), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or
other like change with respect to Parent Common Stock or Company
Common Stock occurring on or after the date hereof and prior to the
Effective Time.
(g) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of the Company Common Stock for
twelve months after the Effective Time shall be delivered to Parent,
upon demand, and any holders of the Shares who have not theretofore
complied with this Article II shall thereafter look only to Parent for
the Merger Consideration, and any dividends or other distributions
with respect to the Parent
8
Common Stock to which they are entitled pursuant to Section 2.02(c).
Any portion of the Exchange Fund remaining unclaimed by holders of
Shares as of a date which is immediately prior to such time as such
amounts would otherwise escheat to or become property of any
government entity shall, to the extent permitted by applicable Law,
become the property of Parent free and clear of any claims or interest
of any person previously entitled thereto.
(h) NO LIABILITY. None of the Exchange Agent, Parent or the Surviving
Corporation shall be liable to any holder of Shares for any such
Shares (or dividends or distributions with respect thereto), or cash
delivered to a public official pursuant to any abandoned property,
escheat or similar Law.
(i) WITHHOLDING RIGHTS. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld
by the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Surviving Corporation
or Parent, as the case may be.
(j) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may
direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration, and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.02(c), subject to
Section 2.02(g).
SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates representing
Shares outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Shares, except as otherwise provided in this
Agreement or by Law. On or after the Effective Time, any Certificates presented
to the Exchange Agent or Parent for any reason shall be exchanged for the Merger
Consideration, and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 2.02(c).
SECTION 2.04. COMPANY STOCK OPTIONS. At the Effective Time, all options to
purchase Company Common Stock, whether or not exercisable and whether or not
vested (the "COMPANY STOCK OPTIONS"), outstanding under the Company's Amended
and Restated 1994 Stock Incentive Plan, in each case as such may have been
amended, supplemented or modified (collectively, the "COMPANY STOCK OPTION
PLANS") shall be cancelled without further rights. At least 20 days prior to the
Effective Time, the Company shall offer to purchase each Company Stock Option
which as of the Effective Time would be unexercisable and unvested (the
"UNVESTED OPTIONS"), at a price equal to the Cash Payment less the exercise
price of such
9
Unvested Option ( the "OPTION CONSIDERATION"), which offer to purchase shall be
conditional upon the approval of this Agreement by the Stockholders of the
Company and the satisfaction or waiver of all of the conditions hereunder. Prior
to the Effective Time, Parent shall have deposited, or shall have caused to be
deposited with the Exchange Agent, for the benefit of holders of the Unvested
Options that surrender such Unvested Options for purchase by the Company for
exchange in accordance with this Section 2.04, cash equal to the aggregate
Option Consideration (such cash being hereinafter referred to as the "OPTION
EXCHANGE Fund"). The Exchange Agent shall, pursuant to irrevocable instructions,
deliver the cash contemplated to be delivered to the holders of the Unvested
Options pursuant to this Section 2.04 out of the Option Exchange Fund. The
Option Exchange Fund shall not be used for any other purpose.
SECTION 2.05. COMPANY RESTRICTED STOCK. At the Effective Time, each share
of Company Common Stock outstanding immediately prior to the Effective Time that
is unvested or is subject to a repurchase option, risk of forfeiture or other
condition under the Company Stock Option Plans or any applicable restricted
stock purchase agreement or other agreement with the Company ("COMPANY
RESTRICTED STOCK") shall be substituted with Exchange Stock, which shall be
subject to the same terms and conditions (including, without limitation, vesting
conditions) as such Company Restricted Stock, except that current references to
the Company shall, after the Effective Time, mean Parent.
SECTION 2.06. [RESERVED].
SECTION 2.07. DISSENTING SHARES. (a) Notwithstanding anything in this
Agreement to the contrary, any Shares that are issued and outstanding
immediately prior to the Effective Time and held by a holder (a "DISSENTING
SHAREHOLDER") who has not voted in favor of the Merger or consented thereto in
writing and who has dissented in accordance with Chapter 13 of the CCC
("DISSENTING SHARES") as well as any Shares (a "POTENTIAL DISSENTING SHARES")
held by a holder (a "POTENTIAL DISSENTING SHAREHOLDER") that are not voted in
favor of the Merger but that have not dissented in accordance with Chapter 13 of
the CCC, shall not be converted into a right to receive the Merger Consideration
in accordance with Section 2.01, but shall represent and become the right to
receive such consideration as may be determined to be due such Dissenting
Shareholder or Potential Dissenting Shareholder pursuant to the laws of the
State of California, unless and until such holder fails to perfect or withdraws
or otherwise loses such holder's right to dissent under Chapter 13 of the CCC.
If, after the Effective Time, such holder fails to perfect or withdraws or
otherwise loses such holder's right to dissent, such former Dissenting Shares or
Potential Dissenting Shares held by such holder shall be treated as if they had
been converted as of the Effective Time into a right to receive, upon surrender
as provided above, such holders ratable portion of the Merger Consideration,
without any interest or dividends thereon, in accordance with Section 2.01. In
this Agreement, references to "Dissenting Shareholders" shall be deemed to
include Potential Dissenting Shareholders and references to "Dissenting Shares"
shall be deemed to include Potential Dissenting Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the CCC and received by the
Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the CCC. The
10
Company shall not, except with the prior written consent of Parent,
make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
SECTION 2.08. [RESERVED]
SECTION 2.09. AFFILIATES. Notwithstanding anything to the contrary herein,
no Merger Consideration shall be delivered to a person who may be deemed an
"affiliate" of the Company in accordance with Section 6.08 hereof for purposes
of Rule 145 under the Securities Act until such person has executed and
delivered to Parent an executed copy of the affiliate letter contemplated in
Section 6.08 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub to enter into this Agreement, the
Company hereby represents and warrants to Parent and Merger Sub that, except as
disclosed in the Company's Disclosure Schedule, which has been prepared by the
Company and delivered to Parent and Merger Sub concurrently with the execution
and delivery of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), or in the
Company's Annual Report on Form 10-K for the year ended December 31, 2004 (as
filed with the SEC on March 10, 2005), Current Reports on Form 8-K (as filed
with the SEC on February 10, 2005 and February 14, 2005) and Definitive Proxy
Statement on Schedule 14A (as filed with the SEC on April 12, 2005), to the
Company's knowledge:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. (a) Each of the
Company and each subsidiary of the Company (each a "SUBSIDIARY") is a
corporation or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has the requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined in Section
9.03(a)). Each of the Company and each Subsidiary is duly qualified or licensed
as a foreign corporation or limited liability company, as the case may be, to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Company Material Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary and the percentage of
the outstanding capital stock of each Subsidiary owned by the Company
and each other Subsidiary, is set forth in Section 3.01(b) of the
Company Disclosure Schedule. Except as disclosed in Section 3.01(b) of
the Company Disclosure Schedule, the Company does not directly or
indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any
11
equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
SECTION 3.02. ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore made available to Parent a complete and correct copy of the Articles
of Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company. Such Articles of Incorporation, By-laws or
equivalent organizational documents are in full force and effect. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
Articles of Incorporation, By-laws or equivalent organizational documents. The
Company has heretofore provided to the Parent the minutes of the meetings of the
Board of Directors of the Company and any committee thereof in respect of
meetings of the Board of Directors and such committees held since January 1,
2002 through the date hereof for which minutes have been prepared and approved.
SECTION 3.03. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of (i) 100,000,000 Shares and (ii) 5,000,000 shares of
preferred stock, par value $0.001 per share ("COMPANY PREFERRED STOCK"). As of
April 2, 2005, (i) 7,985,085 Shares were issued and outstanding, all of which
are validly issued, fully paid and nonassessable, (ii) no Shares are held in the
treasury of the Company, (iii) no Shares are held by the Subsidiaries, and (iv)
230,995 Shares are reserved for future issuance pursuant to outstanding Company
Stock Options, Company Restricted Stock and other purchase rights (the "COMPANY
STOCK AWARDS") granted pursuant to the Company Stock Option Plans. As of the
date of this Agreement, no shares of Company Preferred Stock are issued and
outstanding. Except as set forth in this Section 3.03 there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. As of April 2, 2005, there were (x) 265,510 outstanding Unvested
Options exercisable for an aggregate of 265,510 Shares at a weighted average
exercise price of US$12.27 per Share, and (y) 512,026 Company Stock Options
(excluding Unvested Options), exercisable for an aggregate of 512,026 Shares at
a weighted average exercise price of US$8.23 per Share. As of the date of this
Agreement, there were 117,668 Shares of unvested Company Restricted Stock. The
Company has made available to Parent accurate and complete copies of all Company
Stock Option Plans pursuant to which Company has granted the Company Stock
Awards that are currently outstanding and the form of all stock award agreements
evidencing such Company Stock Awards. All Shares subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Shares or any capital stock of any Subsidiary or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary or any other person. All
outstanding Shares, all outstanding Company Stock Awards, and all outstanding
shares of capital stock of each subsidiary of the Company have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable Laws (as defined below) and (ii) all requirements set forth in
applicable contracts.
12
(b) Each outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and each
such share is owned by the Company or another Subsidiary free and
clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or
any Subsidiary's voting rights, charges and other encumbrances of any
nature whatsoever.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the then-outstanding Shares
and the filing and recordation of appropriate merger documents as required by
the CCC). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Merger Sub, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies). No state takeover statute is applicable to the Merger or
the Transactions.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate the
Articles of Incorporation or By-laws or any equivalent organizational documents
of the Company or any Subsidiary, (ii) conflict with or violate any United
States or non-United States statute, law, ordinance, regulation, rule, code,
executive order, injunction, judgment, decree or other order ("LAW") applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any Subsidiary
pursuant to, any Material Contract (as defined below), except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any United States federal, state, county or local or
other foreign government, governmental, regulatory or administrative
authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body (a "GOVERNMENTAL AUTHORITY"),
except (i) for applicable requirements, if any, of the Exchange Act,
state securities or "blue sky" laws ("BLUE SKY LAWS"), the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") and filing and
recordation of appropriate merger documents as required by the CCC,
and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to
13
make such filings or notifications, would not, individually or in the
aggregate, individually or in the aggregate, have a Company Material
Adverse Effect.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and the Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Authority necessary for each of the Company or the
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "COMPANY Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not, individually or in the aggregate, have a Company Material
Adverse Effect. As of the date of this Agreement, no suspension or cancellation
of any of the Company Permits is pending or threatened, except where the failure
to have, or the suspension or cancellation of, any of the Company Permits would
not, individually or in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any Subsidiary is in conflict with, or in default,
breach or violation of, (a) any Law applicable to the Company or any Subsidiary
or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (b) any note, bond, mortgage, indenture, contract, agreement,
lease, license, Company Permit, franchise or other instrument or obligation to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound,
except for any such conflicts, defaults, breaches or violations that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed
all forms, reports and documents required to be filed by it with the Securities
and Exchange Commission (the "SEC") since December 31, 2004, and has heretofore
previously made available to Parent, in the form filed with the SEC, (i) its
Annual Reports on Form 10-K for the fiscal years ended December 31, 2002, 2003
and 2004, respectively, (ii) all proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since May 20, 2003 and
(iii) all other forms, reports and other registration statements filed by the
Company with the SEC since December 31, 2004 (the forms, reports and other
documents referred to in clauses (i), (ii), (iii) and (iv) above being,
collectively, the "COMPANY SEC REPORTS"). The Company SEC Reports (i) complied
in all material respects with either the requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT"), or the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), as the case may be, and the rules and
regulations promulgated thereunder, and (ii) did not, at the time they were
filed, or, if amended, as of the date of such amendment, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, except
that to the extent information as of a later date conflicts with information of
an earlier date, the information of such later date shall be deemed to modify
such earlier information. No Subsidiary is required to file any form, report or
other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Company SEC Reports was
prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except
that unaudited financial statements are subject to year-end audit
adjustments and may not contain notes in full compliance with GAAP)
throughout the periods indicated (except as may be
14
indicated in the notes thereto) and each fairly presents, in all
material respects, the consolidated financial position, results of
operations and cash flows of the Company and its consolidated
Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein.
(c) Except as and to the extent set forth on, or reserved against, the
consolidated balance sheet of the Company and the Subsidiaries as at
December 31, 2004, including the notes thereto (the "2004 BALANCE
SHEET"), neither the Company nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or
otherwise), except for liabilities and obligations, incurred in the
ordinary course of business consistent with past practice since
December 31, 2004, which have not had, individually or in the
aggregate, a Company Material Adverse Effect.
(d) The Company has responded to all comments or requests received from
the SEC or the staff of the SEC since January 1, 2002 and the SEC or
the staff of the SEC, as the case may be, has not made any
supplemental comments or requests with respect to the matters
described therein.
(e) The Company has timely filed all certifications and statements
required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or
(y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of
2002) with respect to any Company SEC Report. The Company maintains
disclosure controls and procedures required by Rule 13a-15 or Rule
15d-15 under the Exchange Act; such controls and procedures are
effective to ensure that all material information concerning the
Company and its Subsidiaries is made known on a timely basis to the
individuals responsible for the preparation of the Company's SEC
filings.
(f) The Company maintains and will continue to maintain books and records
in accordance with GAAP, in all material respects and to the extent
that GAAP is applicable to the maintenance of books and records. The
Company and its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
(g) Accounts receivable, book debts and other debts due or accruing to the
Company and its Subsidiaries, taken as a whole, reflected on the 2004
Balance Sheet or arising thereafter, have arisen, in all material
respects, from BONA FIDE, arm's length transactions between unrelated
parties in the ordinary course of business consistent with past
practice and, subject to an allowance for doubtful accounts that has
been reflected on the books and records of the Company and its
Subsidiaries, as applicable, in accordance with GAAP and the
regulations of the SEC, which are collectible without setoff or
counterclaim, except as would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(h) Accounts payable of the Company and its Subsidiaries, taken as a
whole, reflected on the 2004 Balance Sheet or arising thereafter are,
in all material respects, the result of
15
bona fide transactions in the ordinary course of business and have
been paid or are not yet due or payable. Since the date of the 2004
Balance Sheet, the Company and its Subsidiaries have not altered in
any material respects their practices for the payment of such accounts
payable, including the timing of such payment, except as would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
(i) The work in progress reflected on the 2004 Balance Sheet was owned by
the Company and its Subsidiaries on December 31, 2004. The value of
such work in progress at December 31, 2004 has been recorded
appropriately and represents work in progress that can be invoiced and
collected in the ordinary course of business, except as would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
(j) The Company and its Subsidiaries have appropriately accrued project
liabilities on its financial statements in accordance with GAAP, in
all material respects.
(k) The Company and its Subsidiaries have appropriately deferred the
recognition of revenues on projects where amounts have been invoiced
in advance of the underlying work having been completed in accordance
with GAAP, in all material respects.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
2004, except as expressly contemplated by this Agreement (a) the Company and the
Subsidiaries have conducted their businesses in all material respects only in
the ordinary course and in a manner consistent with past practice, and (b) there
has not been any Company Material Adverse Effect.
SECTION 3.09. ABSENCE OF LITIGATION. Except as set forth in Section 3.09 of
the Company Disclosure Schedule, there is no (i) litigation, suit, claim,
action, proceeding or investigation (an "ACTION") pending or threatened against
the Company or any Subsidiary, or any property or asset of the Company or any
Subsidiary, before any Governmental Authority, or (ii) material property or
asset of the Company or any Subsidiary that is subject to any continuing order
of, consent decree, settlement agreement or other similar written agreement
with, or continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that, in each case, would, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 3.10. EMPLOYEE BENEFIT PLANS. (a) Section 3.10(a) of the Company
Disclosure Schedule lists (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all other material employment benefit agreements or arrangements
including, without limitation, all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, which are
maintained, contributed to or sponsored by the Company or any Subsidiary for the
benefit of any current or former employee, officer or director of the Company or
any Subsidiary, (ii) each employee benefit plan for which the Company or any
16
Subsidiary could incur liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated, (iii) any plan in respect of which the
Company or any Subsidiary could incur liability under Section 4212(c) of ERISA
(collectively, the "PLANS"). Neither the Company nor any Subsidiary has any
express or implied commitment, whether legally enforceable or not, (i) to
create, incur liability with respect to or cause to exist any other Plan, or
(ii) to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA, the Code or this
Agreement.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "MULTIEMPLOYER PLAN") or a
single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which the Company or any Subsidiary could
incur liability under Section 4063 or 4064 of ERISA (a "MULTIPLE
EMPLOYER PLAN"). None of the Plans (i) obligates the Company or any
Subsidiary to pay separation, severance, termination or similar-type
benefits solely or partially as a result of any transaction
contemplated by this Agreement, or (ii) obligates the Company or any
Subsidiary to make any payment or provide any benefit as a result of a
"change in control", within the meaning of such term under Section
280G of the Code. None of the Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or
former employee, officer or director of the Company or any Subsidiary.
(c) Each Plan is now and always has been operated in all material respects
in accordance with its terms and the requirements of all applicable
Laws including, without limitation, ERISA and the Code. The Company
and the Subsidiaries have performed all obligations required to be
performed by them under, are not in any respect in default under or in
violation of, and have no knowledge of any default or violation by any
party to, any Plan. No Action is pending or threatened with respect to
any Plan (other than claims for benefits in the ordinary course) and
no fact or event exists that could reasonably be expected to give rise
to any such Action. The Company and the Subsidiaries are in compliance
with the applicable requirements of Section 4980(B) of the Code, with
respect to each Plan that is a "group health plan", as such term is
defined in Section 5000(b)(1) of the Code.
(d) Each Plan that is intended to be qualified under Section 401(a) of the
Code or Section 401(k) of the Code has timely received a favorable
determination letter from the Internal Revenue Service (the "IRS")
covering all of the provisions applicable to the Plan for which
determination letters are currently available that the Plan is so
qualified and each trust established in connection with any Plan which
is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS
that it is so exempt, and no fact or event has occurred since the date
of such determination letter or letters from the IRS to adversely
affect the qualified status of any such Plan or the exempt status of
any such trust. Each Plan that is intended to be qualified under
Section 401(a) of the Code has been submitted to the IRS for a
determination that "GUST" amendments have been appropriately made
prior to the end of the GUST remedial period. Each Plan that is
intended to be qualified under Section 401(a) of the Code has adopted
good faith amendments designed to comply with the requirements of the
Economic Growth Tax Relief Reconciliation Act, and such amendments
were effective prior to the applicable amendment deadline.
(e) There has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan. Neither the Company nor any Subsidiary has incurred any
liability under, arising out of or by operation of
17
Title IV of ERISA (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course),
including, without limitation, any liability in connection with (i)
the termination or reorganization of any employee benefit plan subject
to Title IV of ERISA, or (ii) the withdrawal from any Multiemployer
Plan or Multiple Employer Plan, and no fact or event exists which
could reasonably be expected to give rise to any such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All
such contributions have been fully deducted for income tax purposes
and no such deduction has been challenged or disallowed by any
Governmental Authority and no fact or event exists which could
reasonably be expected to give rise to any such challenge or
disallowance.
(g) In addition to the foregoing, with respect to each Plan that is not
subject to United States law (a "NON-U.S. BENEFIT PLAN"):
(i) all employer and employee contributions to each Non-U.S. Benefit
Plan required by law or by the terms of such Non-U.S. Benefit
Plan have been made, or, if applicable, accrued in accordance
with normal accounting practices, and a pro rata contribution for
the period prior to and including the date of this Agreement has
been made or accrued;
(ii) the fair market value of the assets of each funded Non-U.S.
Benefit Plan, the liability of each insurer for any Non-U.S.
Benefit Plan funded through insurance or the book reserve
established for any Non-U.S. Benefit Plan, together with any
accrued contributions, is sufficient to procure or provide for
the benefits determined on any ongoing basis (actual or
contingent) accrued to the date of this Agreement with respect to
all current and former participants under such Non-U.S. Benefit
Plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such
Non-U.S. Benefit Plan, and no Transaction shall cause such assets
or insurance obligations to be less than such benefit
obligations; and
(iii) each Non-U.S. Benefit Plan required to be registered has been
registered and has been maintained in good standing with
applicable regulatory authorities. Each Non-U.S. Benefit Plan has
been operated in full compliance with all applicable non-United
States laws.
SECTION 3.11. LABOR AND EMPLOYMENT MATTERS. (a) Except as set forth in
Section 3.11(a) of the Company Disclosure Schedule, (i) there are no material
labor controversies, material labor strikes, material slowdowns, material work
stoppages or material lockouts pending or threatened between the Company or any
Subsidiary and any of their respective employees and neither the Company nor any
Subsidiary has experienced any such controversy, strike, slowdown, work stoppage
or lockout within the past three years; (ii) neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary,
nor has any union certification or decertification been filed or threatened that
relates to employees of the
18
Company or any of its Subsidiaries and no union authorization campaign has been
conducted within the 12 months prior to the date of this Agreement; (iii)
neither the Company nor any Subsidiary has breached or otherwise failed to
comply with any provision of any such collective bargaining agreement or labor
union contract, and there are no grievances outstanding against the Company or
any Subsidiary under any such collective bargaining or material labor union
agreement or contract; and (iv) there are no unfair labor practice complaints
pending against the Company or any Subsidiary before the National Labor
Relations Board (or similar foreign agency). The consent of each labor union
which is a party to the collective bargaining agreements listed in Section 3.11
of the Company Disclosure Schedule is not required to consummate the
Transactions.
(b) The Company and the Subsidiaries are in compliance, in all material
respects, with all applicable laws relating to the employment of
labor, including those related to wages, hours, collective bargaining,
worker classification and the payment and withholding of taxes and
other sums as required by the appropriate Governmental Authority and
have withheld and paid to the appropriate Governmental Authority or
are holding for payment not yet due to such Governmental Authority all
amounts required to be withheld from employees of the Company or any
Subsidiary and are not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the
foregoing, except in each case those that would not, individually or
in the aggregate, have a Company Material Adverse Effect. The Company
and the Subsidiaries have paid in full to all employees or adequately
accrued for in accordance with GAAP consistently applied all wages,
salaries, commissions, bonuses, benefits and other compensation due to
or on behalf of such employees and there is no material claim with
respect to payment of wages, salary, vacation, improper worker
classification or overtime pay that has been asserted or is now
pending or threatened before any Governmental Authority with respect
to any persons currently or formerly employed by the Company or any
Subsidiary, except in each case those that would not, individually or
in the aggregate, have a Company Material Adverse Effect. Neither the
Company nor any Subsidiary is a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority
relating to employees or employment practices, except those that would
not, individually or in the aggregate, have a Company Material Adverse
Effect. There is no charge or proceeding with respect to a violation
of any occupational safety or health standards that has been asserted
or is now pending or threatened with respect to the Company, except in
each case those that would not, individually or in the aggregate, have
a Company Material Adverse Effect. There is no charge of
discrimination in employment or employment practices, for any reason,
including, without limitation, age, gender, race, religion or other
legally protected category, which has been asserted or is now pending
or threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in
which the Company or any Subsidiary has employed or employ any person.
SECTION 3.12. REAL PROPERTY; TITLE TO ASSETS. (a) Section 3.12 of the
Company Disclosure Schedule sets forth a complete and accurate list and
description of all real property leased, subleased or otherwise occupied by the
Company or its Subsidiaries (the "LEASED REAL PROPERTY"). The Company and its
subsidiaries do not own and have never owned any real property. All of the
leases or subleases of any Leased Property (the "LEASES") are valid, binding and
in full force and effect and there is not, under any such Leases, any existing
material default
19
or event of default (or event which, with notice or lapse of time, or both,
would constitute a default) by the Company or any Subsidiary.
(b) There are no material contractual or material legal restrictions that
preclude or restrict the ability to use any real property leased by
the Company or any Subsidiary for the purposes for which it is
currently being used. There are no material defects or material
adverse physical conditions affecting the real property, and
improvements thereon leased by the Company or any Subsidiary other
than those that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 3.13. INTELLECTUAL PROPERTY. Except as would not, individually or
in the aggregate, have a Company Material Adverse Effect, (a) the conduct of the
business of the Company and the Subsidiaries as currently conducted does not
infringe upon or misappropriate the Intellectual Property rights of any third
party, and no claim has been asserted to the Company that the conduct of the
business of the Company and the Subsidiaries as currently conducted infringes
upon or may infringe upon or misappropriates the Intellectual Property Rights of
any third party; (b) with respect to each item of Intellectual Property owned by
the Company or a Subsidiary and material to the business, financial condition or
results of operations of the Company and the Subsidiaries taken as a whole
("COMPANY OWNED INTELLECTUAL PROPERTY"), the Company or a Subsidiary is the
owner of the entire right, title and interest in and to such Company Owned
Intellectual Property and is entitled to use such Company Owned Intellectual
Property in the continued operation of its respective business; (c) with respect
to each item of Intellectual Property licensed to the Company or a Subsidiary
that is material to the business of the Company and the Subsidiaries as
currently conducted ("COMPANY LICENSED INTELLECTUAL PROPERTY"), the Company or a
Subsidiary has the right to use such Company Licensed Intellectual Property in
the continued operation of its respective business in accordance with the terms
of the license agreement governing such Company Licensed Intellectual Property;
(d) the Company Owned Intellectual Property is valid and enforceable, and has
not been adjudged invalid or unenforceable in whole or in part; (e) each license
of the Company Licensed Intellectual Property is valid and enforceable, is
binding on all parties to such license, and is in full force and effect; and (f)
neither the execution of this Agreement nor the consummation of the Merger shall
adversely affect any of the Company's rights with respect to any material
Company Owned Intellectual Property or any material Company Licensed
Intellectual Property.
SECTION 3.14. TAXES. The Company and the Subsidiaries have filed all United
States federal, state, local and non-United States Tax returns and reports
required to be filed by them and have paid and discharged all Taxes required to
be paid or discharged, other than such payments as are being contested in good
faith by appropriate proceedings. All such Tax returns are true, accurate and
complete. Except as set forth in Section 3.14 of the Company Disclosure
Schedule, neither the IRS nor any other United States or non-United States
taxing authority or agency is now asserting or threatening to assert against the
Company or any Subsidiary any deficiency or claim for any Taxes or interest
thereon or penalties in connection therewith. Neither the Company nor any
Subsidiary has granted any waiver of any statute of limitations with respect to,
or any extension of a period for the assessment of, any Tax. The accruals and
reserves for Taxes reflected in the 2004 Balance Sheet are adequate to cover all
Taxes accruable through such date (including interest and penalties, if any,
thereon) in accordance with GAAP. There are no Tax liens upon any property or
assets of the Company or any of the Subsidiaries
20
except liens for current Taxes not yet delinquent. Neither the Company nor any
of the Subsidiaries has been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by the Company or any of the Subsidiaries, and the
IRS has not initiated or proposed any such adjustment or change in accounting
method, in either case which adjustment or change would have a Company Material
Adverse Effect. Neither the Company nor any Subsidiary has been a "distributing
corporation" or a "controlled corporation" in a distribution intended to qualify
under Section 355(e) of the Code within the past five years. Neither the Company
nor any of its affiliates has taken or agreed to take any action that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code. The Company is not aware of any agreement, plan or
other circumstance that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. The Company
does not have any interest in any joint venture, partnership or other entity or
arrangement that could be treated as a partnership for United States federal
income tax purposes.
SECTION 3.15. ENVIRONMENTAL MATTERS. Except as described in Section 3.15 of
the Company Disclosure Schedule or as would not, individually or in the
aggregate, have a Company Material Adverse Effect, (a) none of the Company nor
any of the Subsidiaries has violated or is in violation of any Environmental
Law; (b) none of the properties currently or formerly owned, leased or operated
by the Company or any Subsidiary (including, without limitation, soils and
surface and ground waters) are contaminated with any Hazardous Substance; (c)
none of the Company or any of the Subsidiaries is actually, potentially or
allegedly liable for any off-site contamination by Hazardous Substances; (d)
none of the Company or any of the Subsidiaries is actually, potentially or
allegedly liable under any Environmental Law (including, without limitation,
pending or threatened liens); (e) each of the Company and each Subsidiary has
all permits, licenses and other authorizations required under any Environmental
Law ("ENVIRONMENTAL PERMITS"); and (f) each of the Company and each Subsidiary
is in compliance with its Environmental Permits; and (g) neither the execution
of this Agreement nor the consummation of the Merger will require any
investigation, remediation or other action with respect to Hazardous Substances,
or any notice to or consent of Governmental Authorities or third parties,
pursuant to any applicable Environmental Law or Environmental Permit.
SECTION 3.16. [RESERVED].
SECTION 3.17. MATERIAL CONTRACTS. (a) Subsections (i) through (viii) of
Section 3.17(a) of the Company Disclosure Schedule list the following types of
contracts and agreements to which the Company or any Subsidiary is a party (such
contracts and agreements as are required to be set forth in Section 3.17(a) of
the Company Disclosure Schedule being the "MATERIAL CONTRACTS"):
(i) each "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to the
Company and its Subsidiaries;
(ii) each contract and agreement which is likely to involve
consideration of more than US$5,000,000, in the aggregate, in any
12-month period;
21
(iii) any employment or consulting agreement or any other written
agreement with any other officer, employee or consultant with
annual compensation in excess of US$100,000 or which includes a
change of control provision or provides for severance obligations
upon termination;
(iv) all management contracts (excluding contracts (i) for employment
or (ii) which involve consideration of less than US$100,000 in
any 12-month period or (iii) which are terminable with no more
than 90 days notice without payment of a termination fee),
including any contracts involving the payment of royalties or
other amounts calculated based upon the revenues or income of the
Company or any Subsidiary or income or revenues related to any
product of the Company or any Subsidiary to which the Company or
any Subsidiary is a party;
(v) all contracts and agreements with any Governmental Authority to
which the Company or any Subsidiary is a party that are not for
professional services or not otherwise in the ordinary course of
business;
(vi) all contracts and agreements that limit, or purport to limit, the
ability of the Company or any Subsidiary to compete in any line
of business or in any geographic area;
(vii) all material contracts or arrangements that result in any person
or entity holding a power of attorney from the Company or any
Subsidiary that relates to the Company, any Subsidiary or their
respective businesses, excluding any power of attorney entered
into in the ordinary course of business consistent with past
practice; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, which the breach, non-performance,
amendment, termination or the absence of would, individually,
have a Company Material Adverse Effect.
No contract pursuant to which the Company or any Subsidiary performs
professional services in the ordinary course of business shall constitute a
Material Contract.
(b) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, (i) each Material Contract is a valid and
binding agreement and neither the Company nor any Subsidiary is in
default of a Material Contract; (ii) no Material Contract has been
cancelled by the other party; (iii) the Company and the Subsidiaries
have not received any claim of default by the Company or the
Subsidiaries under any such agreement; and (iv) neither the execution
of this Agreement nor the consummation of any Transaction shall
constitute a default under, give rise to cancellation rights under,
any Material Contract. The Company has furnished or made available to
Parent true and complete copies of all Material Contracts, including
any amendments thereto through the date of this Agreement.
SECTION 3.18. INSURANCE. The Company and its Subsidiaries have in effect
insurance coverage with reputable insurers or are self-insured, which in respect
of amounts, premiums, assets, types and risks insured, constitutes reasonably
adequate coverage against all risks customarily insured against by companies in
the same or similar lines of business as the
22
Company and its Subsidiaries and comparable in size and operations to the
Company and its Subsidiaries. The Company has made available to Parent a copy of
all material insurance policies and all material self insurance programs or
arrangements relating to the business, assets and operations of the Company and
its subsidiaries (the "INSURANCE POLICIES"). Each of such Insurance Policies is
in full force and effect as of the date of this Agreement. From December 31,
2002 through the date hereof, none of the Company or any of its Subsidiaries has
received any notice or other communications regarding any actual or possible (a)
cancellation of any Insurance Policy that has not been renewed in the ordinary
course of business without lapse of coverage, (b) invalidation of any Insurance
Policy, (c) refusal of any coverage or rejection of any material claim under any
Insurance Policy or (d) any material adjustment in the amount of any of the
premiums payable with respect to any Insurance Policy.
SECTION 3.19. BOARD APPROVAL; VOTE REQUIRED. (a) The Company Board, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly
called and held and not subsequently rescinded or modified in any way, has duly
(i) determined that this Agreement and the Merger are fair to and in the best
interests of the Company and its stockholders, (ii) approved this Agreement and
the Merger, and (iii) recommended that the stockholders of the Company approve
and adopt this Agreement and approve the Merger and directed that this Agreement
and the Transactions be submitted for consideration by the Company's
stockholders at the Company Stockholders' Meeting (as defined below).
(b) The only vote of the holders of any class or series of capital stock
of the Company necessary to approve this Agreement, the Merger and the
other Transactions is the affirmative vote of the holders of a
majority of the outstanding Shares in favor of the approval and
adoption of this Agreement.
SECTION 3.20. CUSTOMERS AND SUPPLIERS. Section 3.20 of the Company
Disclosure Schedule sets forth a true and complete list of the top ten (10)
customers of the Company and its Subsidiaries (based on the revenue from such
customer during the 12-month period ended March 31, 2005). As of the date of
this Agreement, the loss of any single customer or supplier of the Company and
its Subsidiaries would not cause a Company Material Adverse Effect.
SECTION 3.21. [Reserved].
SECTION 3.22. INTERESTED PARTY TRANSACTIONS. Except as set forth in the
Company SEC Reports or employment or other compensation arrangements in the
ordinary course, there are no transactions, agreements, arrangements or
understandings between the Company and the Subsidiaries, on the one hand, and
any affiliate (including any officer or director) thereof, (excluding any
Subsidiary of the Company that is an affiliate of the Company solely by virtue
of it being a Subsidiary of the Company). The Company and the Subsidiaries have
not, since July 30, 2002, (i) extended or maintained credit, arranged for the
extension of credit or renewed an extension of credit in the form of a personal
loan to or for any director or executive officer (or equivalent thereof) of the
Company, or (ii) materially modified any term of any such extension or
maintenance of credit.
23
SECTION 3.23. OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received the written opinion of Bear Stearns & Co. Inc., dated the
date of this Agreement, to the effect that, as of the date of this Agreement,
the Merger Consideration is fair, from a financial point of view, to the
Company's stockholders, a copy of which opinion will be delivered to Parent on
the date of this Agreement.
SECTION 3.24. BROKERS. No broker, finder or investment banker (other than
Bear Stearns & Co. Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Bear Stearns
& Co. Inc. pursuant to which such firm would be entitled to any payment relating
to the Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the Company to enter into this Agreement, Parent and
Merger Sub hereby, jointly and severally, represent and warrant to the Company
that, except as disclosed in Parent's (i) Annual Information Form dated as of
March 20, 2005; (ii) Management Information Circular; and (iii) 2004 Annual
report (each as filed with the Alberta Securities Commission (the "ASC") on
March 31, 2005), to Parent and Merger Sub's knowledge:
SECTION 4.01. CORPORATE ORGANIZATION. Parent is a corporation validly
subsisting under the Canada Business Corporations Act and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and each of them has the requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Parent Material Adverse Effect (as defined in Section
9.03(a)).
SECTION 4.02. ARTICLES OF INCORPORATION AND BY-LAWS. Parent has heretofore
furnished to the Company a complete and correct copy of the Articles of
Incorporation and the By-Laws of Parent and Merger Sub, each as amended to date.
Such Articles of Incorporation and By-Laws are in full force and effect. Neither
Parent nor Merger Sub is in violation of any of the provisions of its Articles
of Incorporation or By-Laws. Parent has heretofor furnished to the Company the
minutes of the meetings of the Board of Directors of Parent and any committee
thereof in respect of meetings of the Board of Directors and such committees
held since January 1, 2001 through the date hereof for which minutes have been
prepared and approved
SECTION 4.03. CAPITALIZATION. (a) The authorized share capital of Parent
consists of (i) unlimited shares of Parent Common Stock and (ii) unlimited
preferred shares, without par value ("PARENT PREFERRED STOCK"). As of April 13,
2005, (i) 18,937,019 shares of Parent Common Stock are issued and outstanding,
all of which are validly issued, fully paid and
24
non-assessable, (ii) no shares of Parent Common Stock are held in the treasury
of Parent (excluding shares of Parent Common Stock purchased pursuant to
Parent's normal course issuer bid which are to be cancelled) and (iii) no shares
of Parent Common Stock are held by subsidiaries of Parent. As of the date of
this Agreement, no shares of Parent Preferred Stock are issued and outstanding.
Except as set forth in this Section 4.03 and except for stock options granted
pursuant to the stock option plans of Parent (the "PARENT STOCK OPTION PLANS"),
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
Parent or Merger Sub or obligating Parent or Merger Sub to issue or sell any
shares of capital stock of, or other equity interests in, Parent or Merger Sub.
All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding contractual obligations of Parent or
Merger Sub to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or any capital stock of Merger Sub. There are no outstanding
contractual obligations of Parent to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, Merger Sub or any
other person excluding Parent or any subsidiary of Parent).
(b) The authorized capital stock of Merger Sub consists of 100 shares of
common stock, par value US$0.001 per share, all of which are duly
authorized, validly issued, fully paid and non-assessable and free of
any preemptive rights in respect thereof and all of which are owned by
Parent. Each outstanding share of capital stock of Merger Sub is duly
authorized, validly issued, fully paid and non-assessable and each
such share is owned by Parent or Merger Sub free and clear of all
security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or Merger Sub's voting
rights, charges and other encumbrances of any nature whatsoever,
except where failure to own such shares free and clear would not,
individually or in the aggregate, have a Parent Material Adverse
Effect.
(c) The shares of Parent Common Stock to be issued pursuant to the Merger
in accordance with Section 2.01 (i) will be duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, Parent's Articles of Incorporation or
By-Laws or any agreement to which Parent is a party or is bound and
(ii) will, when issued, be registered under the Securities Act and the
Exchange Act and registered or exempt from registration under
applicable Blue Sky Laws.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by Parent and
Merger Sub and the consummation by Parent and Merger Sub of the Transactions
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by the CCC). This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against each of Parent
and Merger Sub in accordance with its terms (except as may
25
be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies).
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution
and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, (i) conflict
with or violate the Articles of Incorporation or By-laws of either Parent or
Merger Sub, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 4.05(b) have been obtained and all filings and
obligations described in Section 4.05(b) have been made, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or Merger Sub or by which any property or asset of either of them is
bound or affected, or (iii) result in any breach of, or constitute a default (or
an event which, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or Merger Sub pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any property or asset of either of them is bound or
affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub
will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority, except
(i) for applicable requirements, if any, of the Exchange Act, Blue Sky
Laws and state takeover laws, the HSR Act and filing and recordation
of appropriate merger documents as required by the CCC, and (ii) where
the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not,
individually or in the aggregate, prevent or materially delay
consummation of any of the Transactions or otherwise prevent Parent or
Merger Sub from performing their material obligations under this
Agreement.
SECTION 4.06. PERMITS; COMPLIANCE. Each of Parent and Merger Sub is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for Parent or Merger Sub to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "PARENT PERMITS"), except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits would not, individually or in the
aggregate, have a Parent Material Adverse Effect. As of the date of this
Agreement, no suspension or cancellation of any of the Parent Permits is pending
or threatened, except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits would not, individually or in the
aggregate, have a Parent Material Adverse Effect. Neither Parent nor Merger Sub
is in conflict with, or in default, breach or violation of, (a) any Law
applicable to Parent or Merger Sub or by which any property or asset of Parent
or Merger Sub is bound or affected, or (b) any note, bond, mortgage, indenture,
contract, agreement, lease, license, Parent Permit, franchise or other
instrument or obligation to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any property or asset of Parent or Merger Sub is bound,
except for any such conflicts,
26
defaults, breaches or violations that would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 4.07. ASC FILINGS; FINANCIAL STATEMENTS. (a) Parent has filed all
forms, reports and documents required to be filed by it with the Alberta
Securities Commission ("ASC") since December 31, 2004, and has heretofore
previously made available to the Company, in the form filed with the ASC, (i)
the Annual Information Forms, dated as of March 30, 2005, March 31, 2004 and May
15, 2003, (ii) the Management Information Circular for Annual and Special
Meeting, May 10, 2005; and (iii) the 2004, 2003 and 2002 Annual Reports (the
form, reports and other documents referred to in clauses (i), (ii) and (iii)
being collectively, the "PARENT REPORTS"). The Parent Reports (i) complied in
all material respects with the requirements of the Alberta Securities Act and
the rules and regulations promulgated thereunder, and (ii) did not, at the time
they were filed, or, if amended, as of the date of such amendment, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading,
except that to the extent information as of a later date conflicts with
information of an earlier date, the information of such later date shall be
deemed to modify such earlier information. No subsidiary of Parent is required
to file any form, report or other document with the ASC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the Parent Reports was prepared
in accordance with Canadian generally accepted accounting principles
("CANADIAN GAAP") applied on a consistent basis (except that unaudited
financial statements are subject to year-end audit adjustments and may
not contain notes in full compliance with Canadian GAAP) throughout
the periods indicated (except as may be indicated in the notes
thereto) and each fairly presents, in all material respects, the
consolidated financial position, results of operations and cash flows
of Parent and its consolidated subsidiaries as at the respective dates
thereof and for the respective periods indicated therein.
(c) Except as and to the extent set forth on, or reserved against, the
consolidated balance sheet of Parent and its consolidated subsidiaries
as at December 31, 2004, including the notes thereto (the "PARENT 2004
BALANCE SHEET"), neither the Parent nor any of its Subsidiaries has
any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), except for liabilities and obligations,
incurred in the ordinary course of business consistent with past
practice since December 31, 2004, which have not had, individually or
in the aggregate, a Parent Material Adverse Effect.
(d) Parent has responded to all comments or requests received from the ASC
or the staff of the ASC since January 1, 2002 and the ASC or the staff
of the ASC, as the case may be, has not made any supplemental comments
or requests with respect to the matters described therein.
(e) Parent maintains and will continue to maintain a system of accounting
established and administered in accordance with Canadian GAAP, in all
material respects and to the extent Canadian GAAP is applicable to a
system of accounting. Parent and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that
27
(i) transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with Canadian GAAP, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(f) Accounts receivable, book debts and other debts due or accruing to
Parent and its subsidiaries, taken as a whole, and reflected on the
Parent 2004 Balance Sheet or arising thereafter, have arisen, in al
material respects, from BONA FIDE, arm's length transactions between
unrelated parties in the ordinary course of business consistent with
past practice and, subject to an allowance for doubtful accounts that
has been reflected on the books and records of the Parent and its
subsidiaries, as applicable, in accordance with Canadian GAAP and the
regulations of the ASC, which are collectible without setoff or
counterclaim, except as would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
(g) Accounts payable of Parent and its subsidiaries, taken as a whole,
reflected on the Parent 2004 Balance Sheet or arising thereafter are,
in all material respects, the result of BONA FIDE transactions in the
ordinary course of business and have been paid or are not yet due or
payable. Since the date of the Parent 2004 Balance Sheet, Parent and
its subsidiaries have not altered in any material respects their
practices for the payment of such accounts payable, including the
timing of such payment, except as would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(h) The work in progress reflected on the Parent 2004 Balance Sheet was
owned by Parent and its subsidiaries on December 31, 2004. The value
of such work in progress at December 31, 2004 has been recorded
appropriately and represents work in progress that can be invoiced and
collected in the ordinary course of business, except as would not,
individually or in the aggregate, have a Parent Material Adverse
Effect.
(i) Parent and its Subsidiaries have appropriately accrued project
liabilities on its financial statements in accordance with Canadian
GAAP, in all material respects.
(j) Parent and its Subsidiaries have appropriately deferred the
recognition of revenues on projects where amounts have been invoiced
in advance of the underlying work having been completed in accordance
with Canadian GAAP, in all material respects.
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 2004
or as expressly contemplated by this Agreement, (a) Parent has conducted its
business only in the ordinary course and in a manner consistent with past
practice, and (b) there has not been any Parent Material Adverse Effect.
SECTION 4.09. ABSENCE OF LITIGATION. Except as specifically disclosed in
any Parent Report filed prior to the date of this Agreement, there is no Action
pending or threatened against Parent or Merger Sub, or any property or asset of
Parent or Merger Sub, before any Governmental Authority that (a) individually or
in the aggregate, has had or would have a Parent Material Adverse Effect or (b)
seeks to materially delay or prevent the consummation of the
28
Merger. Neither Parent nor Merger Sub nor any material property or asset of
Parent or Merger Sub is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or continuing
investigation by, any Governmental Authority that would, individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 4.10. STOCKHOLDER VOTE. The sole stockholder of Merger Sub has
approved this Agreement and the consummation of the Transactions. No vote of the
stockholders of Parent is required by Law, Parent's Articles of Incorporation or
Bylaws or otherwise in order for Parent and Merger Sub to consummate the
Transactions.
SECTION 4.11. OPERATIONS OF MERGER SUB. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
SECTION 4.12. TAXES. Parent and its subsidiaries have filed all Canadian
federal, provincial, local and non-Canadian Tax returns and reports required to
be filed by them and have paid and discharged all Taxes required to be paid or
discharged, other than such payments as are being contested in good faith by
appropriate proceedings. All such Tax returns are true, accurate and complete.
Neither the Canada Revenue Agency nor any other Canadian or non-Canadian taxing
authority or agency is now asserting or threatening to assert against Parent or
any subsidiary any deficiency or claim for any Taxes or interest thereon or
penalties in connection therewith. Neither Parent nor any subsidiary has granted
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax. The accruals and reserves for Taxes
reflected in the Parent 2004 Balance Sheet are adequate to cover all Taxes
accruable through such date (including interest and penalties, if any, thereon)
in accordance with Canadian GAAP. There are no Tax liens upon any property or
assets of Parent or any of the subsidiaries except liens for current Taxes not
yet delinquent. Neither Parent nor any of its affiliates has taken or agreed to
take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Parent is not
aware of any agreement, plan or other circumstance that would prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code. Neither Parent nor any of its subsidiaries has been required to include in
income any adjustment by reason of a voluntary change in accounting method
initiated by Parent or any of its subsidiaries, and the Canada Revenue Agency
has not initiated or proposed any such adjustment or change in accounting
method, in either case, which adjustment or change would have a Parent Material
Adverse Effect.
SECTION 4.13. BOARD APPROVAL. The board of directors of each of Parent and
Merger Sub, by resolutions duly adopted by unanimous vote of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any
way, has (i) determined that this Agreement and the Merger are fair and in the
best interests of Parent and Merger Sub and their respective stockholders, (ii)
approved this Agreement and Merger, and (iii) in the case of the board of
directors of the Parent, have approved the registration of the Parent Common
Stock to be issued in connection with the Transactions under the Securities Act
and the Exchange Act and the listing of the Parent Common Stock for trading on
the U.S. Exchange.
29
SECTION 4.14. [Reserved].
SECTION 4.15. OWNERSHIP OF COMPANY COMMON STOCK. As of the date hereof,
neither Parent nor any of its subsidiaries, owns any Shares.
SECTION 4.16. BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or Merger
Sub.
SECTION 4.17. INTELLECTUAL PROPERTY. Except as would not, individually or
in the aggregate, have a Parent Material Adverse Effect, (a) the conduct of the
business of Parent and its subsidiaries as currently conducted does not infringe
upon or misappropriate the Intellectual Property rights of any third party, and
no claim has been asserted to Parent that the conduct of the business of Parent
and its subsidiaries as currently conducted infringes upon or may infringe upon
or misappropriates the Intellectual Property Rights of any third party; (b) with
respect to each item of Intellectual Property owned by Parent or a subsidiary of
Parent and material to the business, financial condition or results of
operations of Parent and its subsidiaries taken as a whole ("PARENT OWNED
INTELLECTUAL PROPERTY"), Parent or a subsidiary of Parent is the owner of the
entire right, title and interest in and to such Parent Owned Intellectual
Property and is entitled to use such Parent Owned Intellectual Property in the
continued operation of its respective business; (c) with respect to each item of
Intellectual Property licensed to Parent or a subsidiary of Parent that is
material to the business of Parent and its subsidiaries as currently conducted
("PARENT LICENSED INTELLECTUAL PROPERTY"), Parent or a subsidiary of Parent has
the right to use such Parent Licensed Intellectual Property in the continued
operation of its business in accordance with the terms of the license agreement
governing such Parent Licensed Intellectual Property; and (d) Parent Owned
Intellectual Property is valid and enforceable, and has not been adjudged
invalid or unenforceable in whole or in part.
SECTION 4.18. ENVIRONMENTAL MATTERS. Except as would not, individually or
in the aggregate, have a Parent Material Adverse Effect, (a) neither Parent nor
any of its subsidiaries has violated or is in violation of any Environmental
Law; (b) none of the properties currently or formerly owned, leased or operated
by Parent or any subsidiary of Parent (including, without limitation, soils and
surface and ground waters) are contaminated with any Hazardous Substance; (c)
neither Parent nor any of its subsidiaries is actually, potentially or allegedly
liable for any off-site contamination by Hazardous Substances; (d) neither
Parent nor any of its subsidiaries is actually, potentially or allegedly liable
under any Environmental Law (including, without limitation, pending or
threatened liens); (e) each of Parent and its subsidiaries has all Environmental
Permits; and (f) each of the Parent and its subsidiaries is in compliance with
its Environmental Permits; and (g) neither the execution of this Agreement nor
the consummation of the Merger will require any investigation, remediation or
other action with respect to Hazardous Substances, or any notice to or consent
of Governmental Authorities or third parties, pursuant to any applicable
Environmental Law or Environmental Permit.
30
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company agrees that, between the date of this Agreement and until the earlier of
the termination of this Agreement or the Effective Time, except as set forth in
Section 5.01 of the Company Disclosure Schedule or as expressly contemplated by
any other provision of this Agreement, unless Parent shall otherwise consent in
writing (which consent will not be unreasonably withheld or delayed):
(i) the businesses of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not
take any action except in, the ordinary course of business and in
a manner consistent with past practice; and
(ii) the Company shall use its reasonable best efforts to preserve
substantially intact the business organization of the Company and
the Subsidiaries, to keep available the services of the current
officers, key employees and key consultants of the Company and
the Subsidiaries and to preserve the current advantageous
relationships of the Company and the Subsidiaries with customers,
suppliers and other persons with which the Company or any
Subsidiary has significant business relations.
By way of amplification and not limitation, except as expressly
contemplated by any other provision of this Agreement or as set forth in Section
5.01 of the Company Disclosure Schedule, neither the Company nor any Subsidiary
shall, between the date of this Agreement and until the earlier of the
termination of this Agreement or the Effective Time, do, any of the following
without the prior written consent of Parent (which consent will not be
unreasonably withheld or delayed):
(a) amend or otherwise change its Articles of Incorporation or By-laws or
equivalent organizational documents;
(b) (i) issue any shares of any class of capital stock of the Company or
any Subsidiary, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock,
or any other ownership interest (including, without limitation, any
phantom interest), of the Company or any Subsidiary (except for
issuances of Shares issuable pursuant to Company Stock Awards
outstanding on the date of this Agreement) or (ii) sell, pledge,
dispose of, grant or encumber any material assets of the Company or
any Subsidiary, except in the ordinary course of business and in a
manner consistent with past practice or pursuant to contracts in force
on the date hereof;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
its capital stock, except for dividends by any direct or indirect
wholly-owned Subsidiary to the Company or any other wholly-owned
Subsidiary;
31
(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock
(other than in connection with the cashless exercise of Company Stock
Options outstanding on the date hereof);
(e) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets or any other business combination)
any corporation, partnership, other business organization or any
division thereof or any material amount of assets; (ii) incur any
indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for, the
obligations of any person, or make any loans or advances, or grant any
security interest in any of its material assets except in the ordinary
course of business and consistent with past practice; (iii) enter into
any Material Contract; (iv) authorize any capital expenditure if, when
added to all other capital expenditures previously recorded in fiscal
2005, the total of all such capital expenditures would exceed
US$4,500,000; or (v) enter into or amend any contract, agreement,
commitment or arrangement with respect to any matter set forth in this
Section 5.01(e);
(f) hire any additional employees other than in the ordinary course of
business, increase the compensation payable or to become payable or
the benefits provided to its directors, officers or employees, except
for increases in the ordinary course of business in salaries or wages
of employees of the Company or any Subsidiary who are not directors or
officers of the Company or any Subsidiary, or grant any severance or
termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the Company
or of any Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit-sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
current or former director, officer, employee or consultant;
(g) implement or adopt any change in its accounting principles, practices
or methods, other than as is consistent with or as may be required by
law, GAAP or regulatory guidelines;
(h) make any tax election or settle or compromise any material United
States federal, state, local or non-United States income tax
liability;
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities (i)
reflected or reserved against on the consolidated balance sheet of the
Company and the Subsidiaries as of March 31, 2005, (ii) subsequently
incurred in the ordinary course of business and consistent with past
practice, or (iii) subsequently incurred not in the ordinary course of
business, which shall not in the aggregate exceed US$100,000;
32
(j) enter into any material amendment to any Material Contract or consent
to the termination of any Material Contract, or amend, waive, modify
or consent to the termination of the Company's or any Subsidiary's
rights thereunder;
(k) commence or settle any material Action; or
(l) announce an intention to, or enter into any agreement or otherwise
make a commitment, to do any of the foregoing.
SECTION 5.02. CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. Except as
expressly contemplated by any other provision of this Agreement, Parent agrees
that from the date of this Agreement until the earlier of the termination of
this Agreement and the Effective Time, Parent shall not, directly or indirectly,
do, or propose to do, any of the following without the prior written consent of
the Company (which consent will not be unreasonably withheld or delayed):
(a) engage in any action that could reasonably be expected to cause the
Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code;
(b) take any action to cause Parent's representations and warranties set
forth in Article IV to be untrue in any material respect or cause any
condition set forth in Section 7.03(a) and Section 7.03(b) not to be
satisfied; or
(c) take any action that would reasonably be likely to materially delay
the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT; PROXY STATEMENT. (a) As promptly as
practicable after the execution of this Agreement, (i) Parent and the Company
shall prepare the proxy statement to be sent to the stockholders of the Company
relating to the meeting of the Company's stockholders (the "COMPANY
STOCKHOLDERS' MEETING") to be held to consider approval and adoption of this
Agreement or any information statement to be sent to such stockholders, as
appropriate (such proxy statement or information statement, as amended or
supplemented, being referred to herein as the "PROXY STATEMENT") and (ii) Parent
shall prepare and file with the SEC a registration statement on Form F-4
(together with all amendments thereto, the "REGISTRATION STATEMENT") in which
the Proxy Statement shall be included as a prospectus, in connection with the
registration under the Securities Act of the shares of Parent Common Stock to be
issued to the stockholders of the Company pursuant to the Merger. Parent and the
Company each shall use their reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Parent shall take all or any
action required under any applicable federal or state securities laws in
connection with the issuance of shares of Parent Common Stock pursuant to the
Merger. The Company shall furnish all information concerning the Company as
Parent may reasonably request in connection with such actions and the
preparation of the Registration
33
Statement and Proxy Statement. As promptly as practicable after the Registration
Statement shall have become effective, the Company shall mail the Proxy
Statement to its stockholders.
(b) Except as provided in Section 6.04(c) and Section 8.01(g), the Company
covenants that none of the Company Board or any committee thereof
shall withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Merger Sub, the approval or recommendation
by the Company Board or any committee thereof of this Agreement, the
Merger or any other Transaction (the "COMPANY RECOMMENDATION") and the
Proxy Statement shall include the recommendation of the Company Board
to the stockholders of the Company in favor of approval and adoption
of this Agreement and approval of the Merger.
(c) No amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Parent or the Company without the approval
of the other party (such approval not to be unreasonably withheld or
delayed). Parent and the Company each will advise the other, promptly
after they receive notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been
filed, of the issuance of any stop order, of the suspension of the
qualification of the Parent Common Stock issuable in connection with
the Merger for offering or sale in any jurisdiction, or of any request
by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the
SEC for additional information.
(d) Parent represents that the information supplied by Parent for
inclusion in the Registration Statement and the Proxy Statement shall
not, at (i) the time the Registration Statement is declared effective,
(ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the
Company, (iii) the time of the Company Stockholders' Meeting and (iv)
the Effective Time, contain any untrue statement of a material fact or
fail to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any
time prior to the Effective Time, any event or circumstance relating
to Parent or Merger Sub, or their respective officers or directors,
should be discovered by Parent which should be set forth in an
amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company. All documents
that Parent is responsible for filing with the SEC in connection with
the Merger or the other Transactions will comply as to form and
substance in all material aspects with the applicable requirements of
the Securities Act and the rules and regulations thereunder and the
Exchange Act and the rules and regulations thereunder.
(e) The Company represents that the information supplied by the Company
for inclusion in the Registration Statement and the Proxy Statement
shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any amendment thereof
or supplement thereto) is first mailed to the stockholders of the
Company, (iii) the time of the Company Stockholders' Meeting and (iv)
the Effective Time, contain any untrue statement of a material fact or
fail to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any
time prior to the Effective Time, any event or circumstance relating
to the Company or any Company Subsidiary, or their respective officers
or directors, should be discovered by the Company which should be set
forth in an amendment or a
34
supplement to the Registration Statement or Proxy Statement, the
Company shall promptly inform Parent. All documents that the Company
is responsible for filing with the SEC in connection with the Merger
or the other Transactions will comply as to form and substance in all
material respects with the applicable requirements of the Securities
Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.
SECTION 6.02. COMPANY STOCKHOLDERS' MEETING. The Company shall call the
Company Stockholders' Meeting as promptly as practicable for the purpose of
voting upon the approval of this Agreement and the Company shall use its
reasonable best efforts to hold the Company Stockholders' Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. The Company shall use its reasonable best efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement and
shall use its reasonable best efforts to take all other action necessary or
advisable to secure the required vote or consent of its stockholders, except in
the event and to the extent that the Company Board, in accordance with Section
6.04(c), withdraws or modifies its recommendation to the stockholders of the
Company in favor of the approval and adoption of this Agreement.
SECTION 6.03. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Except pursuant
to applicable Law, from the date of this Agreement until the Effective Time, the
Company and Parent shall (and shall cause their respective subsidiaries to): (i)
provide to the other party (and the other party's officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives, collectively, "REPRESENTATIVES") access at reasonable times
upon prior notice to the officers, employees, agents, properties, offices and
other facilities of such party and its subsidiaries and to the books and records
thereof; and (ii) furnish promptly to the other party such information
concerning the business, properties, contracts, assets, liabilities, personnel
and other aspects of such party and its subsidiaries as the other party or its
Representatives may reasonably request.
(b) All information obtained by the parties pursuant to this Section 6.03
shall be kept confidential in accordance with the confidentiality
agreement, dated February 18, 2005 (the "CONFIDENTIALITY AGREEMENT"),
between Parent and the Company.
(c) No investigation pursuant to this Section 6.03 shall affect any
representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
(d) The Company hereby waives the provisions of the Confidentiality
Agreement as and to the extent necessary to permit the consummation of
each Transaction.
SECTION 6.04. NO SOLICITATION OF TRANSACTIONS. (a) The Company agrees that
neither it nor any Subsidiary nor any of the directors, officers or employees of
it or any Subsidiary will, and that it will not authorize or knowingly permit
its or its Subsidiaries' agents, advisors and other representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any Subsidiary) to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing nonpublic information), or take any
other action to facilitate the making of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, a Competing
35
Transaction (as defined below), or (ii) enter into or maintain or continue
discussions or negotiations with any person or entity in furtherance of such
inquiries or to obtain a proposal or offer for a Competing Transaction, or (iii)
agree to, approve, endorse or recommend any Competing Transaction or enter into
any letter of intent or other contract, agreement or commitment contemplating or
otherwise relating to any Competing Transaction. The Company shall notify Parent
as promptly as practicable (and in any event within two (2) days after any
director or executive officer of the Company attains knowledge thereof), orally
and promptly thereafter in writing, if any proposal or offer, or any inquiry or
contact with any person with respect thereto, regarding a Competing Transaction
is made, specifying the material terms and conditions thereof and the identity
of the party making such proposal or offer or inquiry or contact (including
material amendments or proposed material amendments). The Company shall provide
Parent with 48 hours prior notice (or such lesser prior notice as is provided to
the members of the Company Board) of any meeting of the Company Board at which
the Company Board is reasonably expected to consider any Competing Transaction.
The Company immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction. The Company shall not release any third party from,
or waive any provision of, any confidentiality or standstill agreement to which
it is a party.
(b) Notwithstanding anything to the contrary in this Section 6.04, the
Company Board may furnish information to, and enter into discussions
with, a person who has made an unsolicited, written, bona fide
proposal or offer regarding a Competing Transaction, if the Company
Board has (i) determined, in its good faith judgment (after having
received the advice of a financial advisor of nationally recognized
reputation), that such proposal or offer constitutes a Superior
Proposal (as defined below), (ii) determined, in its good faith
judgment after consultation with independent legal counsel (who may be
the Company's regularly engaged independent legal counsel), that, in
light of such Superior Proposal, the failure to furnish such
information or enter into discussions would cause the members of the
Company Board of Directors to breach their fiduciary duties to the
Company and its stockholders under applicable Law, (iii) provided
written notice to Parent of its intent to furnish information or enter
into discussions with such person at least three (3) business days
prior to taking any such action, and (iv) obtained from such person an
executed confidentiality agreement on terms no less favorable to the
Company than those contained in the Confidentiality Agreement (it
being understood that such confidentiality agreement and any related
agreements shall not include any provision calling for any exclusive
right to negotiate with such party or having the effect of prohibiting
the Company from satisfying its obligations under this Agreement).
(c) Except as set forth in this Section 6.04(c), neither the Company Board
nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Merger Sub, the
Company Recommendation (a "CHANGE IN THE COMPANY RECOMMENDATION") or
approve or recommend, or cause or permit the Company to enter into any
letter of intent, agreement or obligation with respect to, any
Competing Transaction. Notwithstanding the foregoing, if the Company
Board determines, in its good faith judgment prior to the time of the
Company Stockholders' Meeting and after consultation with independent
legal counsel (who may be the Company's regularly engaged independent
legal counsel), that a failure to make a Change in the Company
Recommendation would cause the members of the Company Board of
Directors to breach their fiduciary duties to the Company and its
stockholders
36
under applicable Law, the Company Board may (i) recommend a Superior
Proposal or (ii) terminate this Agreement pursuant to Section 8.01(g),
but only (A) after providing written notice to Parent (a "NOTICE OF
SUPERIOR PROPOSAL") advising Parent that the Company Board has
received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making
such Superior Proposal and indicating that the Company Board intends
to effect a Change in the Company Recommendation and the manner in
which it intends (or may intend) to do so, and (B) if Parent does not,
within three (3) business days of Parent's receipt of the Notice of
Superior Proposal, make an offer that the Company Board determines, in
its good faith judgment (after having received the advice of a
financial advisor of internationally recognized reputation) to be at
least as favorable to the Company's stockholders as such Superior
Proposal. Any disclosure that the Company Board may be compelled to
make with respect to the receipt of a proposal or offer for a
Competing Transaction or otherwise in order to comply with its
fiduciary duties to the Company and its stockholders under applicable
Law or Rule 14d-9 or 14e-2 will not constitute a violation of this
Agreement, provided that such disclosure states that no action will be
taken by the Company Board in violation of this Section 6.04(c).
Notwithstanding anything to the contrary contained in this Agreement,
the obligation of the Company to call, give notice of, convene and
hold the Company Stockholders' Meeting shall not be limited or
otherwise affected by the commencement, disclosure, announcement or
submission to it of any Competing Transaction, or by any Change in the
Company Recommendation. The Company shall not submit to the vote of
its stockholders any Competing Transaction, or propose to do so at the
Company Stockholders' Meeting.
(d) A "COMPETING TRANSACTION" means any of the following (other than the
Transactions): (i) any merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any Subsidiary; (ii) any
sale, lease, exchange, transfer or other disposition of assets or
businesses that constitute or represent 15% or more of the total
revenue, operating income, EBITDA or assets of the Company and its
Subsidiaries, taken as a whole; (iii) any sale, exchange, transfer or
other disposition of 15% or more of any class of equity securities of
the Company or of any Significant Subsidiary (as defined in Rule 1-02
of Regulation S-X under the Securities Act); (iv) any tender offer or
exchange offer that, if consummated, would result in any person
beneficially owning 15% or more of any class of equity securities of
the Company or of any Significant Subsidiary; (v) any solicitation in
opposition to approval of this Agreement by the Company's
stockholders; or (vi) any other transaction the consummation of which
would reasonably be expected to prevent or materially delay the
Merger.
(e) A "SUPERIOR PROPOSAL" means an unsolicited written bona fide offer
made by a third party to consummate any of the following transactions:
(i) a merger, consolidation, share exchange, business combination or
other similar transaction involving the Company pursuant to which the
stockholders of the Company immediately preceding such transaction
would hold less than 50% of the equity interest in the surviving or
resulting entity of such transaction; or (ii) the acquisition by any
person or group (including by means of a tender offer or an exchange
offer or a two-step transaction involving a tender offer followed with
reasonable promptness by a cash-out merger involving the Company),
directly or indirectly, of ownership of 50% of the then outstanding
shares of stock of the Company, in each case on terms (including
conditions to consummation of the contemplated transaction) that the
Company Board determines, in its good faith judgment (after having
received the advice of a financial advisor of
37
nationally recognized reputation), to be more favorable to the Company
stockholders than the Merger and for which financing, to the extent
required, is then committed.
SECTION 6.05. EMPLOYEE BENEFIT MATTERS. From and after the Effective Time,
Parent shall cause the Surviving Corporation and its subsidiaries to honor in
accordance with their terms, all contracts, agreements, arrangements, policies,
plans and commitments of the Company and the Subsidiaries as in effect
immediately prior to the Effective Time that are applicable to any current or
former employees or directors of the Company or any Subsidiary. Parent shall use
reasonable best efforts to provide that employees of the Company or any
Subsidiary receive credit, for purposes of eligibility to participate and
vesting (but not for benefit accruals) under any employee benefit plan, program
or arrangement established or maintained by the Surviving Corporation or any of
its subsidiaries, for service accrued or deemed accrued prior to the Effective
Time with the Company or any Subsidiary; PROVIDED, HOWEVER, that such crediting
of service shall not operate to duplicate any benefit or the funding of any such
benefit. In addition, Parent shall use reasonable best efforts to waive, or
cause to be waived, any limitations on benefits relating to any pre-existing
conditions to the same extent such limitations are waived under any comparable
plan of Parent or its subsidiaries and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by employees of the Company and its
subsidiaries in the calendar year in which the Effective Time occurs.
SECTION 6.06. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a)
The By-laws of the Surviving Corporation shall contain provisions no less
favorable, taken as a whole, with respect to indemnification than are set forth
in Article VI of the By-laws of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who, at or prior to the Effective Time, were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by law.
(b) The Surviving Corporation shall use its reasonable best efforts to
maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance
policies maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions that are not materially less
favorable) with respect to matters occurring prior to the Effective
Time; PROVIDED, HOWEVER, that in no event shall the Surviving
Corporation be required to expend pursuant to this Section 6.06(b)
more than an amount per year equal to 175% of current annual premiums
paid by the Company for such insurance (which premiums the Company
represents and warrants to be US$131,920 in the aggregate); PROVIDED,
HOWEVER, that in the event of an expiration, termination or
cancellation of such current policies, Merger Sub or the Surviving
Corporation shall be required to obtain as much coverage as is
possible under substantially similar policies for aggregate annual
premiums which shall not exceed 175% of current annual premiums paid
by the Company for such insurance.
(c) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of
its
38
properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of
the Surviving Corporation or at Parent's option, Parent, shall assume
the obligations set forth in this Section 6.06.
(d) Parent and Merger Sub acknowledge that the Company is party to
indemnification agreements with each director and executive officer of
the Company and that at the Effective Time the Company's obligations
under such indemnification agreements shall become the obligations of
the Surviving Corporation.
SECTION 6.07. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which could reasonably be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (b) any failure of the Company, Parent or
Merger Sub, as the case may be, to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 6.07 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.08. COMPANY AFFILIATES(a) . (a) No later than 30 days after the
date of this Agreement, the Company shall deliver to Parent a list of names and
addresses of those persons who were, in the Company's reasonable judgment, on
such date, affiliates (within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act (each such person being a
"COMPANY AFFILIATE")) of the Company. The Company shall provide Parent with such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. The Company shall use its reasonable best efforts to
deliver or cause to be delivered to Parent, prior to the Effective time, an
affiliate letter in the form attached hereto as Exhibit 6.08, executed by each
of the Company Affiliates identified in the foregoing list and any person who
shall, to the knowledge of the Company, have become a Company Affiliate
subsequent to the delivery of such list.
(b) Parent agrees that it shall make available "current public
information" in accordance with Rule 144(c) under the Securities Act
for a period of two years from the Effective Time. Parent further
agrees that it shall cooperate with each Company Affiliate to remove
the legend from Parent Common Stock received by such Company Affiliate
as Merger Consideration and sold by such Company Affiliate in
accordance with Rule 145(d) under the Securities Act.
SECTION 6.09. FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the terms and
subject to the conditions of this Agreement, each of the parties hereto shall
(i) make promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act or other applicable foreign, federal or state
antitrust, competition of fair trade Laws with respect to the Transactions and
(ii) use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws or otherwise to consummate and make effective
the Transactions, including, without limitation, using its reasonable best
efforts to obtain all Permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to contracts
39
with the Company and the Subsidiaries as are necessary for the consummation of
the Transactions and to fulfill the conditions to the Merger; PROVIDED that
neither Merger Sub nor Parent will be required by this Section 6.09 to take any
action, including entering into any consent decree, hold separate orders or
other arrangements, that (A) requires the divestiture of any assets of any of
Merger Sub, Parent, the Company or any of their respective subsidiaries or (B)
limits Parent's freedom of action with respect to, or its ability to retain, the
Company and the Subsidiaries or any portion thereof or any of Parent's or its
affiliates' other assets or businesses. In case, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall use their reasonable best efforts to take all such action.
SECTION 6.10. PLAN OF REORGANIZATION. (a) Subject to Section 2.01(k), this
Agreement is intended to constitute a "plan of reorganization" within the
meaning of section 1.368-2(g) of the income tax regulations promulgated under
the Code. From and after the date of this Agreement and until the Effective
Time, each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any action, cause any action to
be taken, fail to take any action or cause any action to fail to be taken which
action or failure to act could prevent the Merger from qualifying, as a
reorganization within the meaning of Section 368(a) of the Code. Following the
Effective Time, neither the Surviving Corporation, Parent nor any of their
affiliates shall knowingly take any action, cause any action to be taken, fail
to take any action or cause any action to fail to be taken, which action or
failure to act could cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code.
(b) As of the date hereof, the Company does not know of any reason (i) why
it would not be able to deliver to counsel to the Company and Parent
at the date of the legal opinions referred to below, certificates
substantially in compliance with IRS published advance ruling
guidelines, with customary exceptions and modifications thereto, to
enable such firms to deliver the legal opinions contemplated by
Section 7.02(j) and Section 7.03(e), and the Company hereby agrees,
subject to Section 2.01(k), to deliver such certificates effective as
of the date of such opinions or (ii) why counsel to the Company and
Parent would not be able to deliver the opinions required by Section
7.02(j) and Section 7.03(e). Subject to Section 2.01(k), the Company
will deliver such certificates to counsel to the Company and Parent.
(c) As of the date hereof, Parent does not know of any reason (i) why it
would not be able to deliver to counsel to the Company or Parent at
the date of the legal opinions referred to below, certificates
substantially in compliance with IRS published advance ruling
guidelines, with customary exceptions and modifications thereto, to
enable such firms to deliver the legal opinions contemplated by
Section 7.02(j) and Section 7.03(e), and Parent hereby agrees, subject
to Section 2.01(k), to deliver such certificates effective as of the
date of such opinions or (ii) why counsel to the Company and Parent
would not be able to deliver the opinions required by Section 7.02(j)
and Section 7.03(e). Subject to Section 2.01(k), Parent will deliver
such certificates to counsel to the Company and Parent.
SECTION 6.11. OBLIGATIONS OF MERGER SUB. Parent shall take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to the conditions set
forth in this Agreement.
40
SECTION 6.12. CONSENTS OF ACCOUNTANTS. Parent and the Company will each use
all reasonable efforts to cause to be delivered to each other consents from
their respective independent auditors, in form reasonably satisfactory to the
recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form F-4 under the Securities Act.
SECTION 6.13. LISTING. Parent shall promptly prepare and submit to (i)
either the New York Stock Exchange ("NYSE") or the National Market System of the
NASDAQ Stock Market ("NASDAQ" and, together with the NYSE, the "U.S. EXCHANGE")
and (ii) the TSX, listing applications covering the shares of Parent Common
Stock to be issued in the Merger and shall use its reasonable efforts to obtain,
prior to the Effective Time, approval for the listing or quotation, as the case
may be, of such Parent Common Stock by the U.S. Exchange and the TSX, subject in
each case to official notice of issuance, and the Company shall cooperate with
Parent with respect to such listing or quotation, as the case may be.
SECTION 6.14. SUBSEQUENT FINANCIAL STATEMENTS. The Company shall, if
practicable, consult with Parent prior to making publicly available its
financial results for any period after the date of this Agreement and prior to
filing any report or document with the SEC after the date of this Agreement, it
being understood that Parent shall have no liability by reason of such
consultation.
SECTION 6.15. PUBLIC ANNOUNCEMENTS. The initial press release relating to
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Thereafter, unless otherwise required by
applicable Law or the requirements of the U.S. Exchange or the TSX, each of
Parent and the Company shall each use its reasonable best efforts to consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement, the Merger or any of the other
Transactions.
SECTION 6.16. BOARD OF DIRECTORS OF PARENT. Parent shall take all such
action as may be necessary to cause the Chief Executive Officer of the Company
(the "COMPANY DESIGNATED DIRECTOR") to be appointed to the Board of Directors of
Parent as of the first meeting of the Board of Directors of Parent after the
Effective Time, to serve until the next annual election of directors of Parent.
SECTION 6.17. COMPANY CONTRIBUTION. Immediately prior to the Effective
Time, at Parent's request, Company shall deposit, or shall cause to be
deposited, with the Exchange Agent for the benefit of the holders of Shares the
lesser of (i) $18,000,000 and (ii) the maximum amount of cash that would not
preclude the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
SECTION 6.18. UNVESTED COMPANY RESTRICTED STOCK. The Company will cooperate
to enter into an agreement with each holder of an unvested Company Restricted
Stock to amend the agreement between the Company and such holder pursuant to
which such unvested Company Restricted Stock was granted and such amendment
shall be reasonably satisfactory to Parent.
41
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and no proceeding for that purpose shall
have been initiated by the SEC.
(b) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been approved
and adopted by the requisite affirmative vote of the stockholders of
the Company in accordance with the CCC and the Company's Articles of
Incorporation.
(c) NO ORDER. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award (an "ORDER") which is then in effect
and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(d) U.S. ANTITRUST APPROVALS AND WAITING PERIODS. Any waiting period (and
any extension thereof) applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(e) TSX LISTING. The shares of Parent Common Stock to be issued in the
Merger shall have been authorized for listing on the TSX, subject to
official notice of issuance.
SECTION 7.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in this Agreement shall have been true and
correct when made and shall be true and correct as of the Effective
Time, with the same force and effect as if made as of the Effective
Time (other than such representations and warranties as are made as of
another date which shall be true and correct as of such date), except
where the failure to be so true and correct (without giving effect to
any limitations or qualification as to "materially" (including the
word "material") or "Company Material Adverse Effect" set forth
therein) would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or complied
in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to
the Effective Time.
42
(c) OFFICER CERTIFICATE. The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the Chief
Executive Officer of the Company, certifying as to the satisfaction of
the conditions specified in Sections 7.02(a), 7.02(b) and 7.02(e).
(d) CONSENTS. All consents, approvals and authorizations legally required
to be obtained to consummate the Merger shall have been obtained from
and made with all Governmental Entities.
(e) MATERIAL ADVERSE EFFECT. No Company Material Adverse Effect shall have
occurred since the date of this Agreement.
(f) COMPANY CONTRIBUTION. The Company shall have deposited, or shall have
caused to be deposited, with the Exchange Agent for the benefit of the
holders of the Company Common Stock the lesser of (i) $18,000,000 and
(ii) the maximum amount of cash that would not preclude the Merger
from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(g) COMPANY CASH BALANCE. The Company shall have at least $40,000,000 of
cash on deposit in cash or cash equivalents, less the amount of cash
deposited with the Exchange Agent pursuant to Section 2.04 and Section
7.02(f).
(h) DISSENTING SHARES. The number of Dissenting Shares shall be less than
5% of the issued and outstanding Shares.
(i) CANCELLATION OF COMPANY 401(K) PLAN. Prior to the Effective Time, the
Company Board shall have duly adopted a resolution providing for the
termination and cancellation, as of the day immediately preceding the
date on which the Effective Time occurs, of the Company's Plan
qualified under Section 401(k) of the Code (the "401(K) PLAN") and
provided a certified copy of such resolution to Parent, which is
reasonably satisfactory to Parent. Notwithstanding the foregoing, the
Board of Directors of the Company shall not act to terminate and
cancel the 401(k) Plan if Parent provides written notice to that
effect to the Company at least two (2) days prior to the Effective
Time.
(j) TAXES. Subject to Section 2.01(k), Parent shall have received the
opinion of Shearman & Sterling LLP, counsel to Parent, based upon
representations of Parent and the Company, and normal assumptions, to
the effect that, for federal income tax purposes, the Merger will
qualify as a reorganization within the meaning of Section 368(a) of
the Code and that each of Parent, Merger Sub and the Company will be a
party to the reorganization within the meaning Section 368(b) of the
Code, which opinion shall not have been withdrawn or modified in any
material respect. The issuance of such opinion shall be conditioned on
receipt by Shearman & Sterling LLP of representation letters from each
of Parent and Company contemplated in Section 6.10. Each such
representation letter shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material
respect as of the Effective Time.
43
SECTION 7.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger are subject to the satisfaction or
waiver (where permissible) of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been true
and correct when made and shall be true and correct as of the
Effective Time, with the same force and effect as if made as of the
Effective Time (other than such representations and warranties as are
made as of another date which shall be true and correct as of such
date), except where the failure to be so true and correct (without
giving effect to any limitations or qualification as to "materially"
(including the word "material") or "Parent Material Adverse Effect"
set forth therein) would not, individually or in the aggregate, have a
Parent Material Adverse Effect.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on
or prior to the Effective Time.
(c) MATERIAL ADVERSE EFFECT. No Parent Material Adverse Effect shall have
occurred since the date of this Agreement.
(d) OFFICER CERTIFICATE. Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or
any Vice President of Parent, certifying as to the satisfaction of the
conditions specified in Sections 7.03(a), 7.03(b) and 7.03(c).
(e) TAXES. Subject to Section 2.01(k), the Company shall have received the
opinion of Akin Gump Strauss Hauer & Feld LLP, counsel to the Company,
based upon representations of Parent and the Company, and normal
assumptions, to the effect that, for federal income tax purposes, the
Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code and that each of Parent, Merger Sub and the Company
will be a party to the reorganization within the meaning Section
368(b) of the Code, which opinion shall not have been withdrawn or
modified in any material respect. The issuance of such opinion shall
be conditioned on receipt by Akin Gump Strauss Hauer & Feld LLP of
representation letters from each of Parent and Company contemplated in
Section 6.10. Each such representation letter shall be dated on or
before the date of such opinion and shall not have been withdrawn or
modified in any material respect as of the Effective Time.
(f) U.S. EXCHANGE LISTING. The shares of Parent Common Stock to be issued
in the Merger shall have been authorized for listing or quotation, as
the case may be, on the U.S. Exchange, subject to official notice of
issuance.
44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time by action taken or authorized by the Board of Directors of the terminating
party, notwithstanding any requisite approval and adoption of this Agreement and
the Transactions by the stockholders of the Company, as follows:
(a) by mutual written consent of Parent and the Company duly authorized by
the Boards of Directors of Parent and the Company; or
(b) by either Parent or the Company if the Effective Time shall not have
occurred on or before December 31, 2005; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date; or
(c) by Parent if a Company Triggering Event (as defined below) shall have
occurred; or
(d) by either Parent or the Company if this Agreement shall fail to
receive the requisite vote for approval at the Company Stockholders'
Meeting; or
(e) by Parent upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section
7.02(a) and Section 7.02(b) would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall
have become untrue ("TERMINATING COMPANY BREACH"); PROVIDED, HOWEVER,
that, if such Terminating Company Breach is curable by the Company,
Parent may not terminate this Agreement under this Section 8.01(e) for
so long as the Company continues to exercise its best efforts to cure
such breach, unless such breach is not cured within 15 days after
written notice of such breach is provided by Parent to the Company; or
(f) by the Company upon a breach of any representation, warranty, covenant
or agreement on the part of Parent and Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent and Merger
Sub shall have become untrue, in either case such that the conditions
set forth in Section 7.03(a) and Section 7.03(b) would not be
satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue ("TERMINATING
PARENT BREACH"); PROVIDED, HOWEVER, that, if such Terminating Parent
Breach is curable by Parent and Merger Sub, the Company may not
terminate this Agreement under this Section 8.01(f) for so long as
Parent and Merger Sub continue to exercise their best efforts to cure
such breach, unless such breach is not cured within 15 days after
written notice of such breach is provided by the Company to Parent.
45
(g) by the Company in order to accept a Superior Proposal; PROVIDED,
HOWEVER, in order for the termination of this Agreement pursuant to
this paragraph 8.01(g) to be effective, the Company shall have
complied with the provisions of Section 6.04(c) and the provisions of
Section 8.03(b) (including the payment of the Fee and Parent's
Expenses).
For purposes of this Agreement, a "COMPANY TRIGGERING EVENT" shall be deemed to
have occurred if: (i) the Company Board withdraws, modifies or changes the
Company Recommendation in a manner adverse to Parent or shall have resolved to
do so; (ii) the Company Board shall have recommended to the stockholders of the
Company a Competing Transaction or shall have resolved to do so or shall have
entered into any letter of intent or similar document or any agreement, contract
or commitment accepting any Competing Transaction; (iii) the Company shall have
failed to include in the Proxy Statement the recommendation of the Company Board
in favor of the approval of this Agreement; (iv) the Company Board fails to
reaffirm its recommendation in favor of the approval of this Agreement and the
approval of the Merger within five business days after Parent requests in
writing that such recommendation be reaffirmed; (v) as a result of the Company's
breach of its obligation hereunder, the Merger is not, prior to December 15,
2005, submitted for the approval of the holders of Company Common Stock at the
Company Stockholders' Meeting; (vi) the Company shall have intentionally
breached its obligations under Section 6.04; or (vii) a tender offer or exchange
offer for 15% or more of the outstanding shares of capital stock of the Company
is commenced, and the Company Board fails to recommend against acceptance of
such tender offer or exchange offer by its stockholders (including by taking no
position with respect to the acceptance of such tender offer or exchange offer
by its stockholders) within ten (10) business days after such tender offer or
exchange offer is commenced.
SECTION 8.02. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability under this Agreement on the part of any
party hereto, except (a) as set forth in Section 8.03 and (b) nothing herein
shall relieve any party from liability for any willful breach of any of its
representations, warranties, covenants or agreements set forth in this Agreement
prior to such termination; PROVIDED, HOWEVER, that the Confidentiality Agreement
shall survive any termination of this Agreement.
SECTION 8.03. FEES AND EXPENSES. (a) Except as set forth in this Section
8.03, all Expenses (as defined below) incurred in connection with this Agreement
and the Transactions shall be paid by the party incurring such expenses, whether
or not the Merger or any other transaction is consummated, except that the
Company and Parent shall each pay one-half of all Expenses relating to (i)
printing, filing and mailing the Registration Statement and the Proxy Statement
and all SEC and other regulatory filing fees incurred in connection with the
Registration Statement and the Proxy Statement and (ii) the filing fee for the
Notification and Report Forms filed under HSR Act. "Expenses", as used in this
Agreement, shall include all reasonable out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Registration Statement and the
Proxy Statement, the solicitation of
46
stockholder approvals, the filing of any required notices under the HSR Act or
other similar regulations and all other matters related to the closing of the
Merger and the other Transactions.
(b) The Company agrees that:
(i) if Parent shall terminate this Agreement pursuant to Section
8.01(c); or
(ii) if the Company shall terminate this Agreement pursuant to Section
8.01(g);
then the Company shall pay to Parent promptly (but in any event no later than
one business day after the first of such events shall have occurred) a fee of
US$3,000,000 (the "FEE"), which amount shall be payable in immediately available
funds, plus an amount equal to the amount of Parent's Expenses.
(c) The Company acknowledges that the agreements contained in this Section
8.03 are an integral part of the Transactions. In the event that the
Company shall fail to pay the Fee or any Expenses when due, the term
"Expenses" shall be deemed to include the costs and expenses actually
incurred or accrued by Parent (including, without limitation, fees and
expenses of counsel) in connection with the collection under and
enforcement of this Section 8.03, together with interest on such
unpaid Fee and Expenses, commencing on the date that the Fee or such
Expenses became due, at a rate equal to the rate of interest publicly
announced by Citibank, N.A., from time to time, in The City of New
York, as such bank's Prime Rate plus 2.00%. Payment of the fees and
expenses described in this Section 8.03 shall not be in lieu of any
damages incurred in the event of willful or intentional breach of this
Agreement.
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after the
approval of this Agreement by the stockholders of the Company, no amendment may
be made that would reduce the amount or change the type of consideration into
which each Share shall be converted upon consummation of the Merger without the
approval of the Stockholders of the Company. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
SECTION 8.05. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement of any other party
or any condition to its own obligations 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.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement and in any
certificate
47
delivered pursuant hereto shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 8.01, as the case may be,
except that the agreements set forth in Articles I and II and Sections 6.03(b),
6.06, 6.10, 8.03 and this Article IX shall survive the Effective Time.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 9.02):
if to Parent or Merger Sub:
Stantec Inc.
10160 - 112 Street
Edmonton, Alberta T5K 2L6
Canada
Attention: Jeffrey S. Lloyd
Facsimile No: (780) 917-7330
Email: jlloyd@stantec.com
with a copy to:
Shearman & Sterling LLP
Commerce Court West
Suite 4405, P.O. Box 247
Toronto, Canada M5L 1E8
Attention: Christopher J. Cummings, Esq.
Facsimile No: (416) 360 2958
Email: ccummings@shearman.com
if to the Company:
The Keith Companies, Inc.
19 Technology Drive
Irvine, CA 92618
U.S.A.
Attention: Aram H. Keith
Facsimile No: (949) 923-6026
Email: aram.keith@keithco.com
48
with a copy to:
Akin Gump Strauss Hauer & Feld LLP
2029 Century Park East
Suite 2400
Los Angeles, CA 90067-3012
Attention: C.N. Franklin Reddick III, Esq.
Facsimile No: (310) 229 1001
Email: freddick@akingump.com
SECTION 9.03. CERTAIN DEFINITIONS. (a) For purposes of this Agreement:
"AFFILIATE" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"BENEFICIAL OWNER", with respect to any Shares, has the meaning ascribed to
such term under Rule 13d-3(a) of the Exchange Act.
"BUSINESS DAY" means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in The City of New York.
"COMPANY MATERIAL ADVERSE EFFECT" means any event, circumstance, change or
effect that, individually or in the aggregate with all other events,
circumstances, changes and effects, is or is reasonably likely to be materially
adverse to (i) the business, prospects, condition (financial or otherwise),
assets, liabilities or results of operations of the Company and the Subsidiaries
taken as a whole or (ii) the ability of the Company to consummate the
Transactions; PROVIDED, HOWEVER, that Company Material Adverse Effect (i) shall
not include any event, circumstance, change or effect resulting from (x) changes
in general economic, regulatory or political conditions (including, without
limitation, acts of war or terrorism) or changes in securities markets in
general that do not have a materially disproportionate effect (relative to other
industry participants) on the Company or its Subsidiaries, (y) general changes
in the industries in which the Company and the Subsidiaries operate, except
those events, circumstances, changes or effects that adversely affect the
Company and its subsidiaries to a materially greater extent than they affect
other entities operating in such industries or (z) the execution, announcement
or consummation of this Agreement and the Transactions, including the impact
thereof on relationships, contractual or otherwise, with customers, suppliers or
employees.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
with") means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
"ENVIRONMENTAL LAWS" means any United States federal, state or local or
non-United States laws relating to (i) releases or threatened releases of
Hazardous Substances
49
or materials containing Hazardous Substances; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (iii) pollution or protection of
the environment, health, safety or natural resources.
"HAZARDOUS SUBSTANCES" means (i) those substances defined in or regulated
under the following United States federal statutes and their state counterparts,
as each may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (ii)
petroleum and petroleum products, including crude oil and any fractions thereof;
(iii) natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos and radon; (v) any other contaminant; and (vi) any
substance, material or waste regulated by any Governmental Authority pursuant to
any Environmental Law.
"INTELLECTUAL PROPERTY" means (i) United States, non-United States and
international patents, patent applications and statutory invention
registrations, (ii) trademarks, service marks, trade dress, logos, trade names,
corporate names and other source identifiers, and registrations and applications
for registration thereof, (iii) copyrightable works, copyrights, and
registrations and applications for registration thereof, and (iv) confidential
and proprietary information, including trade secrets and know-how.
"KNOWLEDGE" of the Company means the actual knowledge of any of the Chief
Executive Officer, the Chief Financial Officer, the Chief Operating Officer or
the General Counsel of the Company, after due investigation.
"KNOWLEDGE" of Parent and Merger Sub means the actual knowledge of any
executive officer of Parent, after due investigation.
"LIENS" means mortgages, pledges, liens, security interest, conditional and
installment sale agreements, encumbrances, charges or other claims of third
parties of any kind, including, without limitation, any easement, right of way
or other encumbrance to title, or any option, right of first refusal, or right
of first offer, other than (A) liens for current taxes and assessments not yet
past due, (B) inchoate mechanics' and materialmen's liens arising in the
ordinary course of business consistent with past practice.
"PARENT MATERIAL ADVERSE EFFECT" means any event, circumstance, change or
effect that, individually or in the aggregate with all other events,
circumstances, changes and effects, is or is reasonably likely to be materially
adverse to (i) the business, prospects, condition (financial or otherwise),
assets, liabilities or results of operations of Parent and its subsidiaries
taken as a whole or (ii) the ability of Parent to consummate the Transactions;
PROVIDED, HOWEVER, that Parent Material Adverse Effect clause (i) shall not
include any event, circumstance, change or effect resulting from (x) changes in
general
50
economic, regulatory or political conditions (including without, limitation,
acts of war or terrorism) or changes in securities markets in general that do
not have a materially disproportionate effect (relative to other industry
participants) on Parent or its subsidiaries, (y) general changes in the
industries in which Parent and its subsidiaries operate, except those events,
circumstances, changes or effects that adversely affect Parent and its
subsidiaries to a materially greater extent than they affect other entities
operating in such industries or (z) the execution, announcement or consummation
of this Agreement and the Transactions, including the impact thereof on
relationships, contractual or otherwise, with customers, suppliers or employees.
"PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving Corporation,
Parent or any other person means an affiliate controlled by such person,
directly or indirectly, through one or more intermediaries.
"TAXES" shall mean any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Authority or taxing authority, including, without
limitation: taxes or other charges on or with respect to income, franchise,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and similar
charges.
(b) The following terms have the meaning set forth in the Sections set
forth below:
DEFINED TERM LOCATION OF DEFINITION
Action............................................ ss. 3.09
"affiliate"....................................... ss. 2.09
Aggregate Cash Amount............................. ss. 2.01(b)
Aggregate Stock Amount............................ ss. 2.01(b)
ASC............................................... ss. 4.07(a)
Average Stock Price............................... ss. 2.01(a)
Agreement......................................... Preamble
Blue Sky Laws..................................... ss. 3.05(b)
Canadian GAAP..................................... ss. 4.07(b)
Cash Election..................................... ss. 2.01(e)
Cash Election Share............................... ss. 2.01(e)
Cash Payment...................................... ss. 2.01(a)
CCC............................................... Recitals
51
Certificate of Merger............................. ss. 1.02
Certificates...................................... ss. 2.02(b)
Change in the Company Recommendation.............. ss. 6.04(c)
Closing........................................... ss. 1.02
Code.............................................. Recitals
Company........................................... Preamble
Company Affiliate................................. ss. 6.08
Company Board..................................... Recitals
Company Common Stock.............................. ss. 2.01(a)
Company Designated Director....................... ss. 6.16
Company Disclosure Schedule....................... Article III
Company Licensed Intellectual Property............ ss. 3.13(a)
Company Owned Intellectual Property............... ss. 3.13(a)
Company Permits................................... ss. 3.06
Company Preferred Stock........................... ss. 3.03(a)
Company Recommendation............................ ss. 6.01(b)
Company Restricted Stock.......................... ss. 2.05
Company SEC Reports............................... ss. 3.07(a)
Company Stock Awards.............................. ss. 3.03(a)
Company Stock Options............................. ss. 2.04(a)
Company Stock Option Plans........................ ss. 2.04(a)
Company Stockholders' Meeting..................... ss. 6.01(a)
Company Triggering Event.......................... ss. 8.01
Competing Transaction............................. ss. 6.04(d)
Confidentiality Agreement......................... ss. 6.03(b)
Dissenting Shareholder............................ ss. 2.07(a)
Dissenting Shares................................. ss. 2.07(a)
Effective Time.................................... ss. 1.02
Election Deadline................................. ss. 2.01(i)
Elections......................................... ss. 2.01(c)
Environmental Permits............................. ss. 3.15
ERISA............................................. ss. 3.10(a)
Exchange Act...................................... ss. 3.07(a)
Exchange Agent.................................... ss. 2.02(a)
Exchange Fund..................................... ss. 2.02(a)
Exchange Stock.................................... ss. 2.01(a)
Expenses.......................................... ss. 8.03(a)
Fee............................................... ss. 8.03(b)
Fixed Ratio Stock................................. ss. 2.01(a)
Floating Ratio Stock.............................. ss. 2.01(a)
Form of Election.................................. ss. 2.01(c)
Forward LLC Merger................................ ss. 2.01(l)
GAAP.............................................. ss. 3.07(b)
Governmental Authority............................ ss. 3.05(b)
52
Holder Representative............................. ss. 2.01(c)
HSR Act........................................... ss. 3.05(b)
Insurance Policies................................ ss. 3.18
IRS............................................... ss. 3.10(a)
Law............................................... ss. 3.05(a)
Leased Real Property.............................. ss. 3.12(a)
Leases............................................ ss. 3.12(a)
Material Contracts................................ ss. 3.17(a)
Merger............................................ Recitals
Merger Consideration.............................. ss. 2.01(a)
Merger LLC........................................ ss. 2.01(l)
Merger Sub........................................ Preamble
Mixed Consideration............................... ss. 2.01(c)
Mixed Election.................................... ss. 2.01(c)
Mixed Election Share.............................. ss. 2.01(d)
Mixed Election Share.............................. ss. 2.01(a)
Multiemployer Plan................................ ss. 3.10(b)
Multiple Employer Plan............................ ss. 3.10(b)
Non-U.S. Benefit Plan............................. ss. 3.10(g)
Notice of Superior Proposal....................... ss. 6.04(c)
Nasdaq............................................ ss. 6.13
NYSE.............................................. ss. 6.13
Option Consideration.............................. ss. 2.04
Option Exchange Fund.............................. ss. 2.04
Order............................................. ss. 7.01(c)
Parent............................................ Preamble
Parent Board...................................... Recitals
Parent Common Stock............................... ss. 2.01(a)
Parent Licensed Intellectual Property............. ss. 4.17
Parent Owned Intellectual Property................ ss. 4.17
Parent Permits.................................... ss. 4.06
Parent Preferred Stock............................ ss. 4.03(a)
Parent Reports.................................... ss. 4.07(a)
Parent Stock Option Plans......................... ss. 4.03(a)
Parent 2004 Balance Sheet......................... ss. 4.07(c)
Plans............................................. ss. 3.10(a)
Potential Dissenting Shareholder.................. ss. 2.07(a)
Potential Dissenting Shares....................... ss. 2.07(a)
Pro Rata Amount of Cash........................... ss. 2.01(f)
Pro Rata Number of Shares......................... ss. 2.01(e)
Proxy Statement................................... ss. 6.01(a)
Registration Statement............................ ss. 6.01(a)
Representatives................................... ss. 6.03(a)
Reverse-Subsidiary Merger......................... ss. 2.01(k)
53
SEC............................................... ss. 3.07(a)
Securities Act.................................... ss. 3.07(a)
Significant Subsidiary ss. 6.04(d)
Shares............................................ ss. 2.01(a)
Stock Election.................................... ss. 2.01(c)
Stock Election Share.............................. ss. 2.01(e)
Stockholder....................................... Recitals
Subsidiary........................................ ss. 3.01(a)
Superior Proposal................................. ss. 6.04(e)
Support Agreement................................. Recitals
Surviving Corporation............................. ss. 1.01
Terminating Company Breach........................ ss. 8.01(e)
Terminating Parent Breach......................... ss. 8.01(f)
Transactions...................................... ss. 3.01(a)
TSX............................................... ss. 2.01(a)
Unvested Options.................................. ss. 2.04
U.S. Exchange..................................... ss. 6.13
2004 Balance Sheet................................ ss. 3.07(c)
401(k) Plan....................................... ss. 7.02(i)
US$5.50 Stock..................................... ss. 2.01(a)
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and the Support
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede, except as set forth in Sections 6.03(b),
all prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement shall
not be assigned (whether pursuant to a merger, by operation of law or
otherwise), except that Parent and Merger Sub may assign all or any of their
rights and obligations hereunder to any affiliate of Parent, PROVIDED that no
such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
SECTION 9.06. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or
54
implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State (other than those
provisions set forth herein that are required to be governed by the CCC). All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined exclusively in any New York state or federal court. The
parties hereto hereby (a) submit to the exclusive jurisdiction of any New York
state or federal court for the purpose of any Action arising out of or relating
to this Agreement brought by any party hereto, and (b) irrevocably waive, and
agree not to assert by way of motion, defense, or otherwise, in any such Action,
any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that the Action is brought in an inconvenient forum, that the venue
of the Action is improper, or that this Agreement or the Transactions may not be
enforced in or by any of the above-named courts.
SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 9.11. WAIVER OF JURY TRIAL. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Transactions. Each of
the parties hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce that foregoing waiver and
(b) acknowledges that it and the other hereto have been induced to enter into
this Agreement and the Transactions, as applicable, by, among other things, the
mutual waivers and certifications in this Section 9.11.
55
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
STANTEC INC.
By /s/ Anthony P. Franceschini
-----------------------------------------------
Name: Anthony P. Franceschini
Title: President & CEO
By /s/ Jeffrey S. Lloyd
-----------------------------------------------
Name: Jeffrey S. Lloyd
Title: Vice President, Secretary &
General Counsel
STANTEC CONSULTING CALIFORNIA INC.
By /s/ Anthony P. Franceschini
-----------------------------------------------
Name: Anthony P. Franceschini
Title: President
By /s/ Michael J. Slocombe
-----------------------------------------------
Name: Michael J. Slocombe
Title: Secretary
THE KEITH COMPANIES, INC.
By /s/ Aram H. Keith
-----------------------------------------------
Name: Aram H. Keith
Title: CEO
By /s/ Gary Campanaro
-----------------------------------------------
Name: Gary Campanaro
Title: Secretary
EXHIBIT 6.08
FORM OF AFFILIATE LETTER FOR
AFFILIATES OF THE COMPANY
[___] [_], 2005
Stantec Inc.
10160 - 112 Street
Edmonton, Alberta T5K 2L6
Canada
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of The Keith Companies, Inc., (the "COMPANY"), as the term
"affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145 of the
rules and regulations (the "RULES AND REGULATIONS") of the Securities and
Exchange Commission (the "COMMISSION") under the Securities Act of 1933, as
amended (the "ACT"). Pursuant to the terms of the Agreement and Plan of Merger
and Reorganization, dated as of April 14, 2005 (the "MERGER AGREEMENT"), among
Stantec Inc., a Canadian corporation ("PARENT"), Stantec Consulting California
Inc. a California corporation ("MERGER SUB"), and the Company, the Company will
be merged with and into Merger Sub (the "MERGER"). Capitalized terms used in
this letter agreement without definition shall have the meanings assigned to
them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock, without
par value, of Parent (the "PARENT SHARES"). I would receive such Parent Shares
in exchange for shares (or upon exercise of options for shares) owned by me of
common stock, par value US$ per share, of the Company (the "COMPANY SHARES").
I represent, warrant and covenant to Parent that in the event I receive any
Parent Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the Parent
Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
the Parent Shares, to the extent I felt necessary, with my counsel or
counsel for the Company.
C. I have been advised that the issuance of the Parent Shares to me
pursuant to the Merger has been registered with the Commission under
the Act on a Registration Statement on Form F-4. However, I have also
been advised that, because at the time the Merger is submitted for a
vote of the shareholders of the Company, (a) I may be deemed to be an
affiliate of the Company and (b) the distribution by me of the Parent
Shares has not been registered under the Act, I may not sell, transfer
or otherwise dispose of the Parent Shares issued to me in the Merger
unless (i) such sale, transfer or other disposition
is made in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Act, (ii) such sale,
transfer or other disposition has been registered under the Act or
(iii) in the opinion of counsel reasonably acceptable to Parent, such
sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of the Parent Shares by me or on my
behalf under the Act or, except as provided in paragraph 2(A) below,
to take any other action necessary in order to make compliance with an
exemption from such registration available.
E. I understand that there will be placed on the certificates for the
Parent Shares issued to me, or any substitutions therefor, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED [______], 2005 BETWEEN THE REGISTERED HOLDER
HEREOF AND PARENT, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF PARENT."
F. I understand that unless a sale or transfer is made in conformity with
the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the
certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
G. Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date
of this letter.
2
Very truly yours,
-------------------------------------
Name:
Agreed and accepted this [___] day
of [_________], 2005, by
STANTEC INC.
By:
---------------------------------------
Name:
Title: