EXHIBIT 10.18
EXECUTION COPY
OPTIMAL ROBOTICS CORP.
("Optimal")
and
TERRA PAYMENTS INC.
("Terra")
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COMBINATION AGREEMENT
DATED
January 20, 2004
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND PRINCIPLES OF INTERPRETATION.........................3
1.1 Definitions...........................................................3
1.2 Certain Rules of Interpretation......................................11
1.3 Entire Agreement.....................................................13
1.4 Schedule.............................................................13
1.5 Accounting Matters...................................................13
1.6 Knowledge............................................................14
ARTICLE 2 THE TRANSACTION.....................................................14
2.1 The Amalgamation.....................................................14
2.2 Implementation Steps by Terra........................................14
2.3 Implementation Steps by Optimal......................................15
2.4 Joint Proxy Circular.................................................15
2.5 Closing Matters......................................................16
2.6 Securities Compliance................................................16
2.7 Preparation of Filings, etc..........................................16
2.8 Treatment of Stock Option Plans and Warrants.........................17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES......................................18
3.1 Representations and Warranties of Terra..............................18
3.2 Representations and Warranties of Optimal............................33
3.3 Survival.............................................................45
ARTICLE 4 COVENANTS...........................................................45
4.1 Retention of Goodwill................................................45
4.2 Covenants of Terra...................................................45
4.3 Covenants of Optimal.................................................51
4.4 Terra Covenants Regarding Non-Solicitation...........................53
4.5 Matching Rights......................................................55
4.6 Access to Information................................................56
4.7 Optimal Board Designees..............................................57
4.8 Optimal Covenant Regarding Non-Solicitation..........................57
4.9 Indemnification......................................................57
ARTICLE 5 CONDITIONS..........................................................58
5.1 Mutual Conditions Precedent..........................................58
5.2 Additional Conditions Precedent to the Obligations of Optimal........59
5.3 Additional Conditions Precedent to the Obligations of Terra..........60
5.4 Notice and Cure Provisions...........................................62
5.5 Satisfaction of Conditions...........................................63
ARTICLE 6 AMENDMENT AND TERMINATION...........................................63
6.1 Amendment............................................................63
6.2 Termination..........................................................64
6.3 Break and Other Fees.................................................66
6.4 Remedies.............................................................67
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TABLE OF CONTENTS
(continued)
Page
ARTICLE 7 GENERAL.............................................................67
7.1 Notices..............................................................67
7.2 Assignment...........................................................69
7.3 Further Assurances...................................................69
7.4 Expenses.............................................................69
7.5 Public Notices.......................................................69
7.6 Execution and Delivery...............................................70
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COMBINATION AGREEMENT
THIS AGREEMENT is made the 20th day of January, 2004
B E T W E E N :
OPTIMAL ROBOTICS CORP.
a corporation governed by the laws of Canada
("Optimal")
- and -
TERRA PAYMENTS INC.
a corporation governed by the laws of Canada
("Terra")
RECITALS:
A. Upon the terms and subject to the conditions of this Agreement (as defined
in Section 1.1) and in accordance with the Canada Business Corporations
Act, as now in effect and as it may be amended from time to time prior to
the Effective Time (as defined in Section 1.1) (the "Act") Optimal and
Terra intend to enter into a business combination transaction.
B. The Board of Directors of Terra (i) has determined that the Amalgamation
(as defined in Section 1.1) and the other transactions contemplated herein
(collectively, the "Transaction") are fair to, and in the best interests
of, Terra and its shareholders, (ii) has approved this Agreement, the
Amalgamation and the other transactions contemplated by this Agreement and
(iii) has determined to recommend that the shareholders of Terra approve
the Terra Resolution.
THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF
INTERPRETATION
1.1 Definitions
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings respectively:
"1933 Act" means the United States Securities Act of 1933;
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"Acquisition Proposal" means any proposal or offer with respect to any
merger, amalgamation, arrangement, business combination, liquidation,
dissolution, recapitalization, take-over bid, tender offer, purchase of
any assets representing greater than 25% of the fair market value of the
Transaction, or purchase of more than 20% of the equity (or rights
thereto) of Terra or a Subsidiary of Terra, or similar transactions or
series of transactions involving Terra or any of its Subsidiaries,
excluding the Transaction;
"Act" has the meaning ascribed to it in the Recitals to this Agreement;
"Affiliate" has the meaning ascribed to it under the Act;
"Agreement" means this agreement, including all schedules, and all
amendments or restatements as permitted, and references to "Article" or
"Section" mean the specified Article or Section of this agreement;
"Amalco" means the corporation continuing as a result of the Amalgamation;
"Amalco Common Shares" means the common shares in the capital of Amalco;
"Amalgamation" means the amalgamation of Optimal Subco and Terra pursuant
to the provisions of the Act on the terms and subject to the conditions
set out in the Amalgamation Agreement, subject to any amendments or
variations thereto made in accordance with this Agreement;
"Amalgamation Agreement" means an amalgamation agreement providing for the
Amalgamation in form and content satisfactory to the Parties, acting
reasonably;
"Ancillary Documents" means the Schedules to this Agreement and any
disclosure letters between the Parties as contemplated in this Agreement;
"AOL Warrant" means a share purchase warrant issued by Terra to AOL Canada
Inc. entitling the holder thereof to purchase up to 50,000 Terra Shares at
an exercise price of $61.50 per share from the vesting date of such
warrant until October 13, 2005;
"Arm's Length" has the meaning that it has for purposes of the Income Tax
Act (Canada);
"Articles of Amalgamation" means the articles of amalgamation of Terra and
Optimal Subco in respect of the Amalgamation that are required under the
Act to be filed with the Director";
"Balance Sheet" means the consolidated balance sheet of Terra as at March
31, 2003, forming part of the Financial Statements;
"Break Fee" means $2,000,000;
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"Business Day" means any day on which commercial deposit taking banks are
generally open for business in Montreal, Quebec and New York, New York
other than a Saturday, a Sunday or a day observed as a holiday in such
locations under applicable Laws;
"Change of Control" means any proposal or offer with respect to any
transaction which would result in any Person or group acquiring ownership,
directly or indirectly, beneficially or of record, of voting stock of
Optimal representing more than 50% of the then outstanding stock of
Optimal entitled to vote for members of the Optimal Board.
"Confidentiality Agreement" means the confidentiality agreement dated
January 8, 2004 between Terra and Optimal;
"Contracts" means a contract, lease, instrument, note, bond, debenture,
mortgage, agreement, arrangement or understanding to which a Party, or any
of its subsidiaries, is a party or under which a Party or any of its
subsidiaries is bound, has unfulfilled obligations or contingent
liabilities or is owed unfulfilled obligations, whether known or unknown,
whether asserted or not;
"CVMQ" means the Commission des valeurs mobilieres du Quebec;
"Director" means the Director appointed pursuant to the Act;
"Disclosure Letter" means the disclosure letter provided by Terra to
Optimal concurrently with the execution of the Agreement, in a form and
with contents that is accepted by Optimal;
"Dissent Rights" means the rights of dissent in respect of the
Amalgamation under Section 190 of the Act;
"EBS Warrant" means the warrant agreement dated April 1, 2003 between
Terra and EBS Holding AG pursuant to which EBS Holding AG has the
non-transferable option to receive 0.21 of a Terra Share for each Terra
Share issued by Terra pursuant to the exercise of Terra Options granted
prior to April 1, 2003, at an exercise price of $0.01 per 0.21 of a Terra
Share so issued.
"Effective Date" means the date shown on the certificate of Amalgamation
to be issued under the Act giving effect to the Amalgamation;
"Effective Time" has the meaning ascribed to it in Section 2.5;
"End User Laws" means Laws or portions of Laws dealing with or pertaining
to privacy, personal information, data protection, gaming, lotteries,
gambling, contests, consumer protection, unfair business practices,
adhesion contracts, unfair business practices, language, import and export
restrictions, labeling, packaging and any other related Laws, including
the Consumer Protection Act, S.Q., c. P-40.1 (Quebec), the Charter of
French Language, S.Q., c. C-11
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(Quebec), the Act Respecting the Protection of Personal Information in the
Private Sector, S.Q., c. P-39.1 (Quebec), the Act Respecting a Legal
Framework for Information Technology, S.Q., c. C-1.1 (Quebec), the Act
Respecting Lotteries, Publicity Contests and Amusement Machines, S.Q., c.
L-6 (Quebec) and the Information Protection and Electronic Documents Act
(Canada);
"Environmental Laws" means all applicable Laws relating to the environment
and employee and public health and safety, including any such
environmental Laws relating to a discharge, spill, emission or other
release, whether actual or potential of any contaminant and any other
applicable Laws;
"Exchange Act" means the United States Securities Exchange Act of 1934;
"Exchange Ratio" means 0.4532, being 0.4532 Optimal Shares for each Terra
Share;
"Financial Statements" means the audited consolidated financial statements
of Terra for the fiscal year ended March 31, 2003, including the Balance
Sheet and the notes to such statements and the unaudited consolidated
financial statements of Terra for the six months ended September 30, 2003;
"Governmental Authority" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or
public department, central bank, court, tribunal, arbitral body,
commission, board, bureau or agency, domestic or foreign, (b)
self-regulatory organization or stock exchange, including NASDAQ and TSX,
(c) any subdivision, agent, commission, board, or authority of any of the
foregoing, or (d) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"Holders" means, when used with reference to the Terra Shares, the holders
thereof shown from time to time in the register maintained by or on behalf
of Terra in respect of such securities;
"Intellectual Property" shall mean any or all of the following and all
common law and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, re-extensions,
continuations and continuations-in-part thereof; (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, processes, procedures,
technical data, manuals, records and customer lists, and all documentation
relating to any of the foregoing; (iii) copyrights, copyright
registrations and applications therefor, and all other rights
corresponding thereto; (iv) domain names, uniform resource locators and
other names and locators associated with the Internet, together with the
goodwill associated therewith; (v) industrial designs or similar rights
and any registrations and applications therefor; (vi) trade names, logos,
common law trademarks and service marks, trademark and service mark
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registrations and applications therefor, together with the goodwill
associated therewith; (vii) all databases and data collections and all
rights therein; (viii) all moral and economic rights of authors and
inventors, however denominated, and (ix) any similar or equivalent rights
to any of the foregoing (as applicable);
"Joint Circular" has the meaning ascribed thereto in Section 2.4;
"Laws" means all applicable laws (including common law), statutes,
regulations, statutory rules, orders, ordinances, policies and notices
having the force of law, and the terms and conditions of any approvals,
licences or judgments of any applicable published notes and policies of
any Governmental Authority having the force of law, and the term
"applicable", with respect to such Laws and in the context that refers to
one or more Persons, means such Laws that apply to such Person or Persons
or its or their business, undertaking, property or securities and that
emanate from a Governmental Authority having jurisdiction over the Person
or Persons or its or their business, undertaking, property or securities;
"Material Adverse Change" means, with respect to any Party, any change,
effect, event or occurrence with respect to the condition (financial or
otherwise), properties, assets, liabilities, obligations (whether
absolute, accrued, conditional or otherwise), businesses, operations or
results of operations or prospects of such Party or those of its
subsidiaries that is, or could reasonably be expected to be, material and
adverse to such Party and its subsidiaries on a consolidated basis;
provided, however, that changes in the trading price for such Party's
shares shall not constitute, or be considered in determining the existence
of, a Material Adverse Change;
"Material Adverse Effect" when used in connection with a Party, means any
effect of a Material Adverse Change relating to such Party;
"material fact" has the meaning ascribed to it under the Securities Act
(Ontario);
"Meetings" means the Optimal Meeting and the Terra Meeting;
"NASDAQ" means The NASDAQ Stock Market;
"New Terra Option" has the meaning ascribed thereto in Section 2.8;
"Optimal Balance Sheet" means the consolidated balance sheet of Optimal as
at December 31, 2002, forming part of the Optimal Financial Statements;
"Optimal Benefit Plans" means all plans, arrangements, agreements,
programs, policies, practices or undertakings, whether oral or written,
formal or informal, funded or unfunded, registered or unregistered to
which Optimal or its Subsidiaries is a party or bound by or under which
Optimal or its Subsidiaries has, or will have, any liability or contingent
liability, relating to: pension plans, insurance plans (whether insured or
self-insured) or compensation plans with respect to any of its employees
or former employees (or any spouses, dependants,
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survivors or beneficiaries of any such employees or former employees),
directors or officers, individuals working on contract with Optimal or its
Subsidiaries or other individuals providing services to it of a kind
normally provided by employees or eligible dependants of such person;
"Optimal Board" has the meaning ascribed to it in Section 4.7;
"Optimal Disclosure Letter" means the disclosure letter provided by
Optimal to Terra concurrently with the execution of this Agreement in a
form and with contents that is accepted by Terra;
"Optimal Financial Statements" means the audited consolidated financial
statements of Optimal for the fiscal year ended December 31, 2002,
including the Optimal Balance Sheet and the notes thereto and the
unaudited consolidated financial statements of Optimal for the nine months
ended September 30, 2003;
"Optimal Meeting" means the annual and special meeting of Optimal
Shareholders, including any adjournment or postponement thereof, to be
called and held in accordance with applicable Laws and this Agreement to
consider, among other things, the Optimal Resolution;
"Optimal Meeting Date" has the meaning ascribed to it in Section 2.3(a);
"Optimal Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Optimal or any of
its Subsidiaries and that is material to the conduct of Optimal's
business;
"Optimal Resolution" means the resolution of the Optimal Shareholders to
authorize the issue of the Optimal Shares in order to implement the
Transaction;
"Optimal Shareholders" means all of the holders of securities of Optimal
entitled to vote in respect of the Optimal Resolution;
"Optimal Shares" means the Class "A" shares in the capital of Optimal;
"Optimal Subco" means a wholly-owned subsidiary of Optimal to be
incorporated under the laws of Canada for the purpose of amalgamating with
Terra pursuant to the Amalgamation Agreement;
"OSC" means the Ontario Securities Commission;
"Outside Date" means, subject to Section 5.4(b), May 31, 2004 or such
later date as may be mutually agreed by the Parties;
"Party" or "Parties" means a signatory or the signatories to this
Agreement, respectively;
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"Person" includes any individual, sole proprietorship, partnership, firm,
entity, limited partnership, limited liability company, unlimited
liability company, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body, corporation, or Governmental
Authority, and where the context requires any of the foregoing when they
are acting as trustee, executor, administrator or other legal
representative;
"Pre-Effective Date Period" means the period from the time of the
execution and delivery of this Agreement between the Parties and the
closing of the Transaction on the Effective Date, subject to the earlier
termination of this Agreement in accordance with its terms;
"Publicly Disclosed by Optimal" means disclosed by Optimal in a public
filing made by it with the SEC or the OSC on the EDGAR or SEDAR systems,
respectively, from December 31, 2002 to the date hereof;
"Publicly Disclosed by Terra" means disclosed by Terra in a public filing
made by it with the CVMQ on the SEDAR system from March 31, 2003 to the
date hereof;
"Registered Intellectual Property" means all Intellectual Property that is
the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any private, state, government
or other legal authority;
"Regulatory Approvals" means those sanctions, rulings, consents, orders,
exemptions, permits, waivers, agreements, certificates and other approvals
(including the lapse, without objection, of a prescribed time under a
statute or regulation that states that a transaction may only be
implemented if a prescribed time lapses following the giving of notice
without an objection being made) of any Governmental Authority, the
failure of which to be obtained would cause the consummation of the
Transaction to result in the contravention or breach of any Laws, as set
out in Schedule 3.1 to this Agreement;
"Representatives" has the meaning ascribed to it in Section 4.6(a);
"SEC" means the United States Securities and Exchange Commission;
"Securities Act" means the Securities Act (Quebec);
"subsidiary" or "Subsidiary" means, with respect to a specified body
corporate, any body corporate of which more than 50% of the outstanding
shares ordinarily entitled to elect a majority of the board of directors
thereof (whether or not shares of any other class or classes shall or
might be entitled to vote upon the happening of any event or contingency)
are at the time owned directly or indirectly by such specified body
corporate, and shall include any body corporate, partnership, joint
venture or other entity over which it exercises direction or control or
which is in a like relation to a subsidiary;
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"Superior Proposal" means any bona fide written Acquisition Proposal that,
in the good faith determination of the board of directors of Terra after
consultation with its financial advisors and with outside counsel, (a) is
reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of such proposal and the party
making such proposal, and (b) would, if consummated in accordance with its
terms, reasonably be expected to result in a transaction more favourable
to the Terra Shareholders, from a financial point of view, than the
Transaction;
"Tax" and "Taxes" means, with respect to any entity, all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings
or profits) and all surtaxes, capital taxes, gross receipts taxes,
environmental taxes, sales taxes, use taxes, ad valorem taxes, value added
taxes, land transfer taxes, transfer taxes, franchise taxes, license
taxes, withholding taxes or other withholding obligations, payroll taxes,
employment taxes, Canada or Quebec Pension Plan premiums, excise,
severance, social security premiums, workers' compensation premiums,
employment insurance or compensation premiums, stamp taxes, occupation
taxes, premium taxes, property taxes, windfall profits taxes, alternative
or add-on minimum taxes, goods and services tax, harmonized sales tax,
customs duties and import and export duties or other taxes of any kind
whatsoever, together with any interest and any penalties or additional
amounts imposed by any taxing authority (domestic or foreign) on such
entity or for which such entity is responsible;
"Tax Act" means the Income Tax Act (Canada);
"Tax Returns" means all returns, reports, claims for refund, declarations,
statements and other documents (whether in tangible, electronic or other
form) and including any amendments, schedules, attachments, supplements
and exhibits thereto, made, prepared, filed or required by any
Governmental Authority to be made, prepared or filed in respect of Taxes;
"Terra Benefit Plans" means all plans, arrangements, agreements, programs,
policies, practices or undertakings, whether oral or written, formal or
informal, funded or unfunded, registered or unregistered to which Terra or
its subsidiaries is a party or bound by or under which Terra or its
Subsidiaries has, or will have, any liability or contingent liability,
relating to: pension plans, insurance plans (whether insured or
self-insured) or compensation plans with respect to any of its employees
or former employees (or any spouses, dependants, survivors or
beneficiaries of any such employees or former employees), directors or
officers, individuals working on contract with Terra or its subsidiaries
or other individuals providing services to it of a kind normally provided
by employees or eligible dependants of such person;
"Terra Broker Warrants" means the 186,667 broker warrants to purchase an
aggregate of 186,667 units at an exercise price of $3.90 per unit at any
time on or prior to December 19, 2005, each unit comprised of one Terra
Share and one-half
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of one common share purchase warrant, each whole common share purchase
warrant exercisable for one Terra Share at an exercise price of $4.50 per
share at any time on or prior to December 19, 2005;
"Terra Documents" has the meaning given to it in Section 3.1(u);
"Terra Intellectual Property" shall mean any Intellectual Property that is
owned by, or licensed to, Terra and its Subsidiaries and that is material
to the conduct of Terra's business;
"Terra Meeting" means the special meeting of Terra Shareholders, including
any adjournment or postponement thereof, to be called and held to consider
the Terra Resolution;
"Terra Meeting Date" has the meaning given to it in Section 2.2(a);
"Terra Options" means the options granted under the Terra Stock Option
Plan to purchase Terra Shares;
"Terra Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Terra or any of
its Subsidiaries and that is material to the conduct of Terra's business;
"Terra Resolution" means the special resolution of the Terra Shareholders,
approving the Amalgamation in form and content satisfactory to the
Parties, acting reasonably;
"Terra Shareholders" means holders of Terra Shares;
"Terra Shares" means the common shares in the capital of Terra;
"Terra Stock Option Plan" means the Stock Option Plan of Terra, as amended
to the date hereof;
"Terra Warrants" means the 1,333,334 share purchase warrants to purchase
an aggregate of 1,333,334 Terra Shares at an exercise price of $4.50 per
share at any time on or prior to December 19, 2005 and the 93,333 common
share purchase warrants underlying the Terra Broker Warrants;
"Transaction" has the meaning ascribed to it in the Recitals to this
Agreement; and
"TSX" means The Toronto Stock Exchange Inc.
1.2 Certain Rules of Interpretation
In this Agreement:
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(a) Consent - Whenever a provision of this Agreement requires an
approval or consent, such approval or consent shall be provided in
writing and if such approval or consent is not delivered within the
applicable time limit, then, unless otherwise specified, the Party
whose consent or approval is required shall be conclusively deemed
to have withheld its approval or consent. Unless otherwise
specified, whenever a provision of this Agreement requires an
approval or consent, such consent or approval shall not be
unreasonably withheld by the Party that is requested to provide it.
(b) Currency - Unless otherwise specified, all references to money
amounts are to lawful currency of Canada.
(c) Governing Law - This Agreement is a contract made under and shall be
governed by and construed in accordance with the laws of the
Province of Quebec and the federal laws of Canada applicable in the
Province of Quebec.
(d) Headings - Headings of Articles and Sections are inserted for
convenience of reference only and shall not affect the construction
or interpretation of this Agreement.
(e) Including - Where the word "including" or "includes" is used in this
Agreement, it means "including (or includes) without limitation".
(f) No Strict Construction - The language used in this Agreement is the
language chosen by the Parties to express their mutual intent, and
no rule of strict construction shall be applied against any Party.
(g) Number and Gender - Unless the context otherwise requires, words
importing the singular include the plural and vice versa and words
importing gender include all genders.
(h) Severability - If, in any jurisdiction, any provision of this
Agreement or its application to any Party or circumstance is
restricted, prohibited or unenforceable, such provision shall, as to
such jurisdiction, be ineffective only to the extent of such
restriction, prohibition or unenforceability without invalidating
the remaining provisions of this Agreement and without affecting the
validity or enforceability of such provision in any other
jurisdiction or without affecting its application to the other Party
or other circumstances.
(i) Statutory references - A reference to a statute includes all rules
and regulations made pursuant to such statute and, unless otherwise
specified, the provisions of any statute or regulation or rule which
amends, supplements or supersedes any such statute or any such
regulation or rule.
(j) Time - Time is of the essence in the performance of the Parties'
respective obligations.
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(k) Time Periods - Unless otherwise specified, time periods within or
following which any payment is to be made or act is to be done shall
be calculated by excluding the day on which the period commences and
including the day on which the period ends and by extending the
period to the next Business Day following if the last day of the
period is not a Business Day.
(l) Subsidiaries - To the extent any covenants or agreements contained
in this Agreement relate, directly or indirectly, to a Subsidiary of
any Party, each such provision shall be construed as a covenant by
such Party to cause (to the fullest extent to which it is legally
capable) such Subsidiary to perform the required action.
1.3 Entire Agreement
This Agreement, together with the agreements and other documents required
to be delivered pursuant to this Agreement, constitutes the entire agreement
between the Parties and sets out all the covenants, promises, warranties,
representations, conditions, understandings and agreements between the Parties
pertaining to the subject matter of this Agreement and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, it being understood that the Confidentiality Agreement (except for
sections 13 and 14 thereof) shall continue in full force and effect until the
closing of the transactions contemplated hereby and shall survive any
termination of this Agreement. No reliance has been made upon, and there are no
covenants, promises, warranties, representations, conditions, understandings or
other agreements, oral or written, between the Parties in connection with the
subject matter of this Agreement except as specifically set forth in this
Agreement and any document required to be delivered pursuant to this Agreement.
1.4 Schedule
The schedule to this Agreement, as listed below, is an integral part of
this Agreement:
Schedule Description
-------- -----------
3.1 Regulatory Approvals
1.5 Accounting Matters
Unless otherwise stated, all accounting terms used in this Agreement in
respect of any Party shall have the meanings attributable thereto under Canadian
generally accepted accounting principles and all determinations of an accounting
nature in respect of any Party required to be made shall be made in a manner
consistent with Canadian generally accepted accounting principles and such
Party's past practice.
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1.6 Knowledge
(a) Any reference to the knowledge of Optimal shall mean to the best of
the knowledge, information and belief of the persons listed in the
Optimal Disclosure Letter after reviewing all relevant records and
making reasonable inquiries regarding the relevant matter of their
direct reports.
(b) Any reference to the knowledge of Terra shall mean to the best of
the knowledge, information and belief of the persons listed in the
Disclosure Letter after reviewing all relevant records and making
reasonable inquiries regarding the relevant matter of their direct
reports.
ARTICLE 2
THE TRANSACTION
2.1 The Amalgamation
Subject to the terms and conditions of this Agreement, the Parties agree
that Terra and Optimal Subco will amalgamate pursuant to the Act on the terms
and conditions set forth herein, as a result of which, among other things, each
Holder of Terra Shares will be entitled to receive the number of Optimal Shares
per Terra Share equal to the Exchange Ratio.
2.2 Implementation Steps by Terra
Terra covenants in favour of Optimal that Terra shall:
(a) subject to Section 2.4, convene and hold the Terra Meeting as soon
as practicable after the date hereof, but in any case, before April
30, 2004 (the "Terra Meeting Date") for the purpose of considering
the Terra Resolution and, with the consent of Optimal, for any other
proper purpose as may be set out in the notice for such meeting;
(b) subject to Section 4.5(a) and Section 5.4(b), except as required for
quorum purposes, not postpone or cancel (or propose the adjournment,
postponement or cancellation of) the Terra Meeting without Optimal's
prior written consent, except as required by Law or by the Terra
Shareholders;
(c) use commercially reasonable efforts to solicit from the Terra
Shareholders proxies in favour of the approval of the Terra
Resolution, including, if so requested by Optimal, using the
services of dealers and proxy solicitation services and take all
other action that is necessary or desirable to secure the approval
of the Terra Resolution by the Terra Shareholders, except to the
extent that the Terra board of directors has changed its
recommendation in accordance with the terms of this Agreement; and
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(d) subject to the satisfaction or waiver of the conditions herein
contained in favour of each Party, on the date contemplated in
Section 2.5, send to the Director, for immediate endorsement and
filing by the Director, the Articles of Amalgamation and such other
documents as may be required in connection therewith under the Act
to give effect to the Transaction so that, on the Effective Date,
Terra and Optimal Subco shall amalgamate and continue as one
corporation under the Act on the terms and conditions set out in the
Amalgamation Agreement.
2.3 Implementation Steps by Optimal
Optimal covenants in favour of Terra that Optimal shall:
(a) subject to Section 2.4, convene and hold the Optimal Meeting as soon
as practicable after the date hereof, but in any case, before April
30, 2004 (the "Optimal Meeting Date") for the purpose of, among
other things, considering the Optimal Resolution (and for any other
proper purpose not in contravention of Section 4.3 as may be set out
in the notice for such meeting);
(b) subject to Section 5.4(b), except as required for quorum purposes or
to enable the Optimal Meeting to occur on the same day as the Terra
Meeting, in the event that the Terra Meeting is adjourned, postponed
or cancelled, not adjourn, postpone or cancel (or propose for
adjournment, postponement or cancellation) the Optimal Meeting
without Terra's prior written consent, except as required by Laws or
by the Optimal Shareholders; and
(c) use commercially reasonable efforts to solicit from the Optimal
Shareholders proxies in favour of the approval of the Optimal
Resolution in accordance with the practices generally followed in
Optimal's jurisdiction in similar circumstances and to take all
other action that is necessary to secure the approval of the Optimal
Resolution by the Optimal Shareholders, except to the extent that
the Optimal board of directors has changed its recommendation in
accordance with the terms of this Agreement.
2.4 Joint Proxy Circular
As promptly as reasonably practical after the execution of this Agreement,
the Parties shall prepare and complete in consultation with each other, a joint
proxy circular concerning the Transaction (the "Joint Circular"). As promptly as
reasonably practicable thereafter, subject to obtaining any required Regulatory
Approvals in connection with the mailing of the Joint Circular, each Party shall
cause such Joint Circular and other documentation required in connection with
the respective Meetings to be mailed to their respective securityholders in
connection with the Meetings, and filed in all jurisdictions where the same is
required, all in accordance with Laws. Each Party, to
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the extent required, shall also, as soon as reasonably practicable in
consultation with the other Party, prepare, mail and file any unique materials
required in connection with each Party's respective Meeting.
2.5 Closing Matters
The Effective Date shall be the third Business Day following the later of
the Optimal Meeting Date, the Terra Meeting Date and the date upon which the
last Regulatory Approval is obtained, or such later date as the Parties may
agree in writing. Closing shall take place at the offices of Osler, Hoskin &
Harcourt LLP, 1000 de La Gauchetiere Street West, Suite 2100, Montreal, Quebec
H3B 4W5 at 9:00 a.m. on the Effective Date (the "Effective Time") or at such
other place, date and time as the Parties shall agree. Each of Optimal and Terra
shall deliver, at the closing of the Transaction, such customary certificates,
resolutions and other customary closing documents as may be required by the
other Party, acting reasonably.
2.6 Securities Compliance
Optimal shall use commercially reasonable efforts to obtain all orders, if
any, required from applicable Canadian and United States securities regulatory
authorities to permit the offer, sale and issuance of the Optimal Shares to be
issued pursuant to the Transaction and to be issued upon exercise of the New
Terra Options and to permit the resale of such Optimal Shares over NASDAQ or
otherwise in the United States, without any hold period (subject to compliance
with section 4(4) of the 1933 Act), qualification with or approval of or the
filing of any prospectus, or the taking of any proceeding with, or the obtaining
of any further order, ruling or consent from, any Governmental Authority under
any United States or Canadian federal, state, provincial or territorial
securities or other United States or Canadian Laws or pursuant to the rules and
regulations of any regulatory authority administering such United States or
Canadian Laws, or the fulfilment of any other legal requirement in the United
States or any such Canadian jurisdiction (other than, with respect to such
resale, any restrictions on transfer by reason of a holder being a "control
person" of Optimal for purposes of Canadian federal, provincial or territorial
securities Laws or similar Laws in the United States).
2.7 Preparation of Filings, etc.
(a) Each of Optimal and Terra shall furnish to the other all information
that may be required under Law to be provided concerning such Party
and its shareholders for the Joint Circular and the implementation
of the other actions described in Section 2.4 and Section 2.6. Each
Party covenants with the other that information to be furnished by
it (to its knowledge in the case of information concerning its
shareholders) in connection with the Joint Circular, actions or
otherwise in connection with the consummation of the Transaction
will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated in any such document
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or which is necessary in order to make any information so furnished
for use in any such document not misleading in the light of the
circumstances in which it is furnished.
(b) Optimal and Terra shall each promptly notify the other if, at any
time before the Effective Time, it becomes aware that the Joint
Circular, an application for an order or any other document
described in Section 2.6 contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein
or which is necessary to make the statements contained therein not
misleading in light of the circumstances in which they are made, or
that otherwise requires an amendment or supplement to the Joint
Circular or such application or other document. In any such event,
Optimal and Terra shall cooperate in the preparation of a supplement
or amendment to the Joint Circular or such application or other
document, as required and as the case may be, and, if required,
shall cause the same to be distributed to shareholders of Optimal or
Terra and/or filed with the relevant Governmental Authorities.
2.8 Treatment of Stock Option Plans and Warrants
(a) Each Terra Option granted prior to the Effective Time that remains
outstanding immediately prior to the Effective Time shall cease to
represent a right to acquire Terra Shares and as at and from the
Effective Time shall represent an option (a "New Terra Option") to
acquire, on the same terms and conditions as were applicable under
the Terra Option that number of Optimal Shares determined by
multiplying the number of Terra Shares subject to the Terra Option
by the Exchange Ratio, rounded to the nearest whole Optimal Share,
at a price per Optimal Share equal to the Terra Option per share
exercise price divided by the Exchange Ratio (rounded off to the
nearest cent);
(b) From and after the Effective Time, the Terra Warrants, the Terra
Broker Warrants, the EBS Warrant and the AOL Warrant shall cease to
represent a right to acquire Terra Shares and shall represent a
warrant to acquire, on the same terms and conditions as were
applicable under such warrants that number of Optimal Shares
determined by multiplying the number of Terra Shares subject to the
Terra Warrants, the Terra Broker Warrants, the EBS Warrant and the
AOL Warrant, as the case may be, by the Exchange Ratio (rounded to
the nearest whole Optimal Share other than in respect of the EBS
Warrant which shall be dealt with accordance with section 2.6
thereof) at a price per Optimal Share equal to the applicable per
share exercise price divided by the Exchange Ratio (rounded off to
the nearest cent);
(c) Prior to the Effective Date and conditional upon the consummation of
the Transaction, Terra shall grant to certain of its employees Terra
Options to acquire in the aggregate 1,289,720 Terra Shares on the
terms and
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conditions set out in the Disclosure Letter. The allocation of such
Terra Options among Terra employees shall be determined by mutual
agreement of Terra and Optimal, acting reasonably;
(d) Prior to the Effective Date, the employees of Terra listed in the
Disclosure Letter shall have agreed to waive acceleration of the
vesting of the Terra Options held by them which results from the
completion of the Transaction, and shall have agreed that all Terra
Options held by them, whether or not then vested, will vest on the
same dates and in the same proportions as the first options issued
to any senior officer of Optimal following the date of this
Agreement.
(e) As soon as practicable after the Effective Time, Optimal shall
deliver or cause to be delivered to the holders of New Terra
Options, Terra Warrants, Terra Broker Warrants, the EBS Warrant and
the AOL Warrant appropriate notices setting forth such holders'
rights pursuant to the Terra Stock Option Plan and such other
options and warrants, and agreements evidencing the New Terra
Options and such other amended options and warrants as altered in
accordance with Section 2.8(a) and Section 2.8(b) and stating that
such New Terra Options and other options and warrants have been
assumed by Optimal and shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section
2.8); and
(f) No later than five Business Days from the Effective Date, Optimal
shall either amend its registration on Form S-8 filed with the SEC
or file a new registration statement on Form S-8 with the SEC with
respect to the Optimal Shares issuable upon the exercise of New
Terra Options and shall maintain the effectiveness of such
registration statement for so long as the New Terra Options remain
outstanding.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Terra
Terra represents and warrants to and in favour of Optimal as follows and
acknowledges that Optimal is relying upon such representations and warranties in
connection with the matters contemplated by this Agreement:
(a) Organization. Each of Terra and its Subsidiaries has been duly
incorporated or formed under the laws of its respective jurisdiction
of incorporation, is validly existing and has all necessary
corporate or legal power, authority, and capacity to own its
property and assets and to carry on its business as currently owned
and conducted. Except as set out in the Disclosure Letter, all
Subsidiaries are wholly owned, directly or indirectly, by Terra.
Except as set out in the Disclosure Letter, all of the outstanding
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shares and other ownership interests of its Subsidiaries which are
held directly or indirectly by Terra are validly issued, fully paid
and non-assessable, and except as set forth in the Disclosure Letter
or for encumbrances in connection with security granted by Terra to
its lenders in the ordinary course of business which are not in
default, all such shares and other ownership interests are owned
directly or indirectly by Terra, free and clear of all material
liens, claims or encumbrances. There are no outstanding options,
rights, entitlements, understandings or commitments (contingent or
otherwise) regarding the right to acquire any such shares or other
ownership interests in any of Terra's Subsidiaries. The Disclosure
Letter sets out the names and jurisdictions of incorporation of each
of Terra's Subsidiaries.
(b) Capitalization. The authorized capital of Terra consists of an
unlimited number of Terra Shares and an unlimited number of
preferred shares. As of the date hereof, there are 15,978,216 Terra
Shares (and no more) and no preferred shares issued and outstanding.
In addition, as at the date hereof, options to acquire an aggregate
of not more than 995,045 Terra Shares have been granted and are
outstanding under the Terra Stock Option Plan, 1,613,334 Terra
Shares may be issued upon the exercise of the Terra Warrants, 50,000
Terra Shares may be issued upon the exercise of the AOL Warrant and
up to 59,368 Terra Shares may be issued upon the exercise of the EBS
Warrant. Except for such options, warrants and broker warrants as
are described in the preceding sentence of this Section 3.1(b),
there are no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments (pre-emptive,
contingent or otherwise) obligating Terra or any of its Subsidiaries
to issue or sell any shares of Terra or of any such Subsidiary or
securities or obligations of any kind convertible into or
exchangeable for any shares of Terra or any of its Subsidiaries. All
outstanding Terra Shares have been duly authorized and are validly
issued and outstanding as fully paid and non-assessable shares, free
of pre-emptive rights. There are no outstanding bonds, debentures or
other evidences of indebtedness of Terra or any of its Subsidiaries
having the right to vote (or that are convertible for or exercisable
into securities having the right to vote) with the Holders of the
Terra Shares on any matter. Except as set out in the Disclosure
Letter, neither Terra nor any of its Subsidiaries have any
obligation to repurchase, redeem or otherwise acquire any of its
outstanding securities or with respect to the voting or disposition
of any outstanding securities of any of Terra Subsidiaries. No
holder of securities issued by Terra or any of its Subsidiaries has
any right to compel Terra to register or otherwise qualify
securities for public sale in Canada or the United States or
elsewhere.
(c) Authority and No Violation.
(i) Terra has the necessary corporate power, authority and
capacity to enter into, and to perform its obligations under,
this Agreement.
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The execution and delivery of this Agreement by Terra and the
consummation by Terra of the transactions contemplated by this
Agreement have been duly authorized by its board of directors
and no other corporate proceedings on its part are necessary
to authorize this Agreement or the transactions contemplated
under this Agreement, other than:
(A) with respect to the Joint Circular and other matters
relating solely thereto, the approval of the board of
directors of Terra; and
(B) with respect to the completion of the Amalgamation, the
approval of the Terra Shareholders as described in
Article 2.
(ii) This Agreement has been duly executed and delivered by Terra
and constitutes a legal, valid and binding obligation of
Terra, enforceable against Terra in accordance with its terms,
subject to bankruptcy, insolvency and other applicable Laws
affecting creditors' rights generally, and to general
principles of equity.
(iii) The board of directors of Terra has (A) unanimously determined
as of the date hereof that the Transaction is fair to the
Terra Shareholders and is in the best interest of Terra, (B)
received a written opinion of Terra's financial advisor,
McColl Partners, LLC, rendered to the board of directors of
Terra and dated the date of this Agreement that, as of the
date of the opinion and based upon and subject to the various
assumptions and limitations set forth in the opinion, the
Exchange Ratio for the Optimal Shares proposed to be received
by the Terra Shareholders in exchange for their Terra Shares
in connection with the Transaction is fair to Terra
Shareholders from a financial point of view and (C) determined
as of the date hereof to unanimously recommend that the Terra
Shareholders vote in favour of the Terra Resolution. Terra's
directors have advised Terra that they intend to vote Terra
Shares held by them in favour of the Terra Resolution and will
so represent in the Joint Circular.
(iv) The authorization of this Agreement, the execution and
delivery by Terra of this Agreement and the performance by it
of its obligations hereunder and the completion of the
Transaction will not, except as set out in the Disclosure
Letter:
(A) result (with or without notice or the passage of time)
in a violation or breach of, or constitute a default
under, require any consent to be obtained under or give
rise to any third party right of termination,
cancellation, acceleration,
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penalty or payment obligation or right of purchase or
sale under, any provision of:
A. Terra's or any of its Subsidiaries' certificate of
incorporation, articles, by-laws or other charter
documents or any agreement with a shareholder;
B. any Laws (subject to obtaining the Regulatory
Approvals), except to the extent that the
violation or breach of, or failure to obtain any
consent would not, individually or in the
aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse
Effect on Terra; or
C. any Contract, licence, permit or government grant
to which Terra or any of its Subsidiaries is party
or by which it is bound, except as would not,
individually or in the aggregate, reasonably be
expected to prevent or delay the Transaction or
have a Material Adverse Effect on Terra;
(B) give rise to any right of termination or acceleration of
indebtedness of Terra or any of its Subsidiaries, or
cause any such indebtedness to come due before its
stated maturity, or cause any available credit of Terra
or any of its Subsidiaries to cease to be available,
except as would not, individually or in the aggregate,
reasonably be expected to prevent or delay the
Transaction or have a Material Adverse Effect on Terra;
(C) result in the imposition of any encumbrance, charge or
lien upon any of Terra's assets or the assets of any of
its Subsidiaries, except as would not, individually or
in the aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse Effect
on Terra;
(D) restrict, hinder, impair or limit the ability of Terra
or any of its Subsidiaries to carry on the business of
Terra or any of its Subsidiaries as and where it is now
being carried on, except as would not, individually or
in the aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse Effect
on Terra; or
(E) result in any payment (including retention, severance,
unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director, officer or
employee of Terra or any of its Subsidiaries or increase
any
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benefits otherwise payable under any Terra Benefit Plan
or result in the acceleration of time of payment or
vesting of any such benefits, including the time of
exercise of stock options.
(v) No consent, approval, order or authorization of, or
declaration or filing with, any Governmental Authority is
required to be obtained by Terra and its Subsidiaries in
connection with the execution and delivery of this Agreement
or the consummation by Terra of the Transaction other than (A)
filings under the Act contemplated by this Agreement, (B) the
Regulatory Approvals relating to Terra, (C) filings under the
Securities Act, stock exchange rules and similar Laws as
contemplated by this Agreement or to provide notice of the
Transaction and (D) any other consents, approvals, orders,
authorizations, declarations or filings of or with a
Governmental Authority which, if not obtained, could not,
individually or in the aggregate, reasonably be expected to
prevent or delay the Transaction or have a material affect on
Terra.
(d) Financial Statements. The Financial Statements have been prepared in
accordance with generally accepted accounting principles in Canada
and applicable Laws. Such Financial Statements present fairly, in
all material respects, the consolidated financial position and
results of operations of Terra as of the respective dates thereof
and for the respective periods covered thereby applied on a basis
consistent with the immediately prior period and throughout the
periods indicated (except as may be indicated expressly in the notes
thereto) and in the case of unaudited statements, to normal,
recurring year-end adjustments and the absence of notes applicable
to audited year-end financial statements. Such Financial Statements
reflect appropriate and adequate reserves in respect of contingent
liabilities, if any, of Terra and its Subsidiaries on a consolidated
basis.
(e) Indebtedness for Borrowed Money and Contingent Liabilities. Except
as set forth in the Disclosure Letter, or as Publicly Disclosed by
Terra, or for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of
the Balance Sheet, neither Terra nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) except for those that could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect
on Terra. Neither Terra or any of its Subsidiaries has any
indebtedness for borrowed money.
(f) Absence of Certain Changes or Events. Except as set out in the
Disclosure Letter or as Publicly Disclosed by Terra, since the date
of the Balance Sheet each of Terra and its Subsidiaries has
conducted its business only in
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the ordinary course of business consistent with past practice and
there has not occurred:
(i) a Material Adverse Change with respect to Terra or any
circumstances or events that could individually or in the
aggregate, reasonably be expected to give rise to a Material
Adverse Change with respect to Terra;
(ii) any material damage, destruction or loss not fully covered by
insurance;
(iii) any redemption, repurchase or other acquisition of Terra
Shares by Terra or Terra Benefits Plans, or any declaration,
setting aside or payment of any dividend or other distribution
(whether in cash, shares or property) with respect to Terra
Shares;
(iv) any increase in or modification of the compensation payable or
to become payable by it to any of its directors or officers,
or any grant to any director, officer or employee of any
increase in entitlements under, or general institution of,
retention, severance or termination programs or pay other than
annual increases consistent with past practice or as a result
of promotions in the ordinary course of business;
(v) any increase in or modification of any bonus, pension,
retention, insurance or benefit arrangement (including the
granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of such
directors, officers or employees other than annual increases
consistent with past practice, as required under Law or as a
result of promotions in the ordinary course of business;
(vi) any acquisition or sale by it of any material asset(s) or
investment except in the ordinary course of business with
Subsidiaries or Arm's Length Persons consistent with past
practice;
(vii) a material change in the level of its accounts receivable or
payable, or employees other than in the ordinary course;
(viii) any entering into by it, or an amendment by it of, any
material Contract other than in the ordinary course of
business with subsidiaries or Arm's Length Persons consistent
with past practice;
(ix) relinquishment, termination or non-renewal by it of any
material Contracts;
(x) any creation or assumption by it of any hypothec, mortgage,
pledge, security interest or lien or other encumbrance on any
asset
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except to Arm's Length Persons in the ordinary course of
business consistent with past practice;
(xi) any resolution to approve a split, consolidation or
reclassification of any of its outstanding shares;
(xii) any change in its accounting methods, policies or practices or
revaluation of assets;
(xiii) any guarantee by it of the payment of material indebtedness
or any incurrence by it of material indebtedness for money
borrowed or any issue or sale by it of any debt securities or
securities convertible or exchangeable for debt securities;
(xiv) any satisfaction or settlement by it of any material claims or
liabilities that were not reflected in the Balance Sheet,
other than settlement of liabilities incurred in the ordinary
course of business with Arm's Length Persons consistent with
past practice;
(xv) any entering into by it into any licensing or other agreement
with regard to the acquisition or disposition of any
Intellectual Property other than licenses in the ordinary
cause of business consistent with past practice; or
(xvi) any agreement by it to do any of the foregoing.
(g) Books and Records. The financial books, records and accounts of
Terra and its Subsidiaries, in all material respects, (i) have been
maintained in accordance with accounting principles generally
accepted in Canada on a basis consistent with prior periods, (ii)
are stated in reasonable detail and accurately and fairly reflect
the material transactions and dispositions of the assets of Terra
and its Subsidiaries and (iii) accurately and fairly reflect the
basis for the Financial Statements. Terra has devised and maintains
a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; and
(ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with Canadian
generally accepted accounting principles, or any other criteria
applicable to such statements and (B) to maintain accountability for
assets. Except as set out in the Terra Disclosure Letter, Terra's
corporate minute books contain minutes of all meetings and
resolutions of the directors and Terra Shareholders held, and full
access thereto has been provided to Optimal with the exception of
minutes relating to the Transaction.
(h) No Defaults. Except as set out in the Terra Disclosure Letter,
neither Terra nor any of its Subsidiaries is in default under, and
there exists no event,
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condition or occurrence which, after notice or lapse of time or
both, would constitute such a default under any material Contract;
(i) Customers and Suppliers. There is no single customer or supplier of
Terra or its Subsidiaries, the loss of which would be material to
Terra. Since September 30, 2003, there has been no termination or
cancellation of, and no material adverse modification or change in,
the business relationship with any customer or group of customers
which individually or in the aggregate provided more than 5% of the
consolidated gross revenues of Terra and its Subsidiaries for the
twelve months ended December 31, 2003.
(j) Litigation. Except as set out in the Disclosure Letter or Publicly
Disclosed by Terra: (i) as of the date hereof, there is no claim,
action, proceeding or investigation that has been commenced or, to
the knowledge of Terra, threatened against Terra or any of its
Subsidiaries before any Governmental Authority and, at the Effective
Time, there will be no claim, action, proceeding or investigation
that will have been commenced or, to the knowledge of Terra,
threatened against Terra or any of its Subsidiaries before any
Governmental Authority, that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect on Terra or
prevent or delay consummation of the Transaction; (ii) neither Terra
nor any of its Subsidiaries, nor any of their respective assets and
properties, is subject to any outstanding judgment, order, writ,
injunction or decree that has had or is reasonably likely to have a
Material Adverse Effect on Terra or prevent or delay consummation of
the Transaction; and (iii) neither Terra nor any of its Subsidiaries
is subject to any material warranty, negligence, performance or
other claims or disputes or potential claims or disputes in respect
of products or services currently being delivered or previously
delivered, and to the knowledge of Terra there are no events or
circumstances which could reasonably be expected to give rise to any
such claims or disputes or potential claims or disputes;
(k) Restrictions on Business Activities. Except as set out in the
Disclosure Letter, there is no agreement, judgment, injunction,
order or decree binding upon Terra or any of its Subsidiaries that
has or could reasonably be expected to have the effect of
prohibiting, restricting or materially impairing any material
business practice of Terra or any of its Subsidiaries, any
acquisition of property by Terra or any of its Subsidiaries or the
conduct of business by Terra or any of its Subsidiaries as currently
conducted (including following the Transaction).
(l) Intellectual Property.
(i) The Disclosure Letter contains a complete and accurate list of
all Terra Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of
Terra
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Registered Intellectual Property has been filed, applied for,
issued or registered and lists any proceedings or actions
before any court or tribunal (including the United States
Patent and Trademark Office or equivalent authority anywhere
in the world) related to any Terra Registered Intellectual
Property. All items of Terra Registered Intellectual Property
have been properly maintained and, where applicable, renewed
in accordance with the Laws of the jurisdictions in which such
registration of intellectual property were made, except where
the failure to maintain and renew the Terra Registered
Intellectual Property could not reasonably be expected to have
a Material Adverse Effect on Terra.
(ii) No Terra Intellectual Property is subject to any proceeding or
outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Terra or any of its
Subsidiaries, or which may affect the validity, use or
enforceability of such Terra Intellectual Property.
(iii) Terra owns and has good and exclusive title to, each material
item of Terra Intellectual Property owned by it free and clear
of any lien or encumbrance (excluding non-exclusive licenses
and related restrictions granted in the ordinary course). All
Intellectual Property necessary for or used in the business of
Terra and its Subsidiaries which is not Terra Intellectual
Property is used by Terra and its Subsidiaries with the
consent of or license from the rightful owner thereof.
(iv) Except as set out in the Disclosure Letter, neither Terra nor
any of its Subsidiaries has transferred ownership of, or
granted any license with respect to, any Intellectual Property
that is Terra Intellectual Property, to any third party. All
Terra Intellectual Property is in full force and effect and
has not been used or enforced or failed to have been used or
enforced in a manner that would result in abandonment,
cancellation or unenforceability of any Terra Intellectual
Property.
(v) The Disclosure Letter lists all material contracts, licenses
and agreements to which Terra or any of its Subsidiaries is a
party: (A) with respect to Terra Intellectual Property
licensed or transferred to any third party (other than
end-user licenses in the ordinary course); or (B) pursuant to
which a third party has licensed or transferred any material
Intellectual Property to Terra.
(vi) All material contracts, licenses and agreements relating to
either (A) Terra Intellectual Property or (B) Intellectual
Property of a third party licensed to Terra or any of its
Subsidiaries, are in full
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force and effect. Except as disclosed in the Disclosure
Letter, the Transaction will neither violate nor result in the
breach, modification, cancellation, termination or suspension
of such contracts, licenses and agreements. Each of Terra and
its Subsidiaries is in material compliance with, and has not
materially breached any term of, such contracts, licenses and
agreements and, to the knowledge of Terra, all other parties
to such contracts, licenses and agreements are in compliance
with, and have not materially breached any term of, such
contracts, licenses and agreements. Following the Effective
Date, Terra will be permitted to exercise all of its rights
under such contracts, licenses and agreements to the same
extent it and its Subsidiaries would have been able to had the
transactions contemplated by this Agreement not occurred and
without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which it would
otherwise be required to pay. Neither this Agreement nor the
transactions contemplated by this Agreement, will result in
(A) Terra granting to any third party any right to or with
respect to any material Intellectual Property right owned by,
or licensed to it, (B) Terra being bound by, or subject to,
any non-compete or other material restriction on the operation
or scope of its business, or (C) Terra being obligated to pay
any royalties or other material amounts to any third party in
excess of those payable by Terra, prior to the Effective Date.
(vii) Except as set out in the Disclosure Letter, the operation of
the business of Terra and its Subsidiaries as such business
currently is conducted, including (A) Terra's and its
Subsidiaries' design, development, manufacture, distribution,
reproduction, marketing or sale of the products or services of
Terra and its Subsidiaries and (B) Terra's use of any product,
device or process, has not, does not and, to its knowledge,
will not infringe or misappropriate the Intellectual Property
of any third party or constitute unfair competition or trade
practises under the laws of any jurisdiction.
(viii) Except as set out in the Disclosure Letter, neither Terra nor
any of its Subsidiaries has received notice from any third
party that the operation of the business of Terra or any of
its Subsidiaries or any act, product or service of Terra or
any of its Subsidiaries, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair
competition or trade practises under the laws of any
jurisdiction.
(ix) To the knowledge of Terra, no Person has or is infringing or
misappropriating any Terra Intellectual Property. Terra has
not commenced legal proceedings relating to an infringement by
any Person of Terra Intellectual Property.
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(x) Terra and each of its Subsidiaries has taken reasonable steps
to protect Terra's and its Subsidiaries' rights in Terra's
confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of
third parties provided to Terra or any of its Subsidiaries,
and, without limiting the foregoing, each of Terra and its
Subsidiaries has enforced and currently enforces a policy
requiring each employee and contractor to execute a
proprietary information/confidentiality agreement
substantially in the form provided to Optimal and all current
and former employees and contractors of Terra and any of its
Subsidiaries have executed such an agreement, except where the
failure to do so could not reasonably be expected to have a
Material Adverse Effect on Terra.
(m) Employment Matters.
(i) Terra has provided Optimal with a true and complete list of
all employees of Terra and its Subsidiaries as of the date
hereof, including details regarding compensation.
(ii) Except as set out in the Disclosure Letter or as Publicly
Disclosed by Terra, neither Terra nor any of its Subsidiaries
is a party to any agreement, obligation or understanding
providing for severance or termination payments to any of
their directors, officers or employees, other than any
obligations of reasonable notice of termination or pay in lieu
thereof under applicable Laws.
(iii) Neither Terra nor any of its Subsidiaries is subject to any
collective bargaining agreements, or subject to any
application or threatened or apparent union organizing
campaigns for employees not under a collective bargaining
agreement, nor are there any current, pending or, to the
knowledge of Terra, threatened strikes, work stoppages or
lockouts at Terra or any of its Subsidiaries.
(n) Pension and Employee Benefits.
Except as set out in the Disclosure Letter:
(i) The Terra Benefit Plans comply in all material respects with
all applicable Laws and such plans have been administered in
compliance with applicable Laws and their terms;
(ii) All of the Terra Benefit Plans that are pension plans are
either (A) fully insured or (B) fully funded in accordance
with applicable Laws on a going concern solvency basis and
winding-up solvency basis. Neither Terra nor any of its
Subsidiaries has received, or applied for, any payment of
surplus out of any Terra Benefit Plan or any payment in
respect of the demutualization of an insurer.
-28-
Neither Terra nor its Subsidiaries has taken any contribution
or premium holidays under any Terra Benefit Plan except as
permitted by applicable Laws and the terms of the Terra
Benefit Plan;
(iii) None of the Terra Benefit Plans, other than pension plans
which only provide monetary retirement payments in accordance
with the terms of such plans, provides benefits beyond
retirement or other termination of service to employees or
former employees or to the beneficiaries or dependants of such
employees, or such benefits have been properly accrued on the
Financial Statements in accordance with generally accepted
accounting principles;
(iv) No event has occurred and no condition or circumstance exists
that has resulted in or could reasonably be expected to result
in any Terra Benefit Plan being ordered, or required to be,
terminated or wound up in whole or in part, having its
registration under applicable Laws refused or revoked, being
placed under the administration of any trustee or receiver or
regulatory authority or being required to pay any material
Taxes, penalties, payments or levies under applicable Laws;
(v) There are no outstanding stock appreciation rights, phantom
equity, profit saving plan or similar rights, agreements,
arrangements or commitments payable to directors, officers or
employees based upon the revenue, value, income or any other
attribute of Terra or any of its Subsidiaries; and
(vi) None of the Terra Benefit Plans is subject to the provisions
of Title I of the U.S. Employee Retirement Income Security Act
of 1974, as amended.
(o) Tax Matters. Except as set out in the Disclosure Letter:
(i) Terra and each of its Subsidiaries have filed, or caused to be
filed, all Tax Returns required to be filed by them in the
form and within the time prescribed under applicable Laws for
so doing (all of which Tax Returns were true and complete).
Terra and each of its Subsidiaries have duly and timely paid,
collected, withheld and remitted all Taxes (including all
instalments on account of Taxes) each of them is required to
pay, collect, withhold or remit (respectively) and the
Financial Statements contain an adequate provision in
accordance with Canadian generally accepted accounting
principles for all material amounts of Taxes payable in
respect of each period covered by such Financial Statements
and all prior periods to the extent such Taxes have not been
paid, whether or not due and whether or not shown as being due
on any
-29-
Tax Returns. On a consolidated basis, Terra has made adequate
provision in accordance with generally accepted accounting
principles in its books and records for any material amounts
of Taxes accruing in respect of any accounting period which
has ended subsequent to the period covered by such Financial
Statements;
(ii) All Tax Returns of Terra and its Subsidiaries have been
assessed and all deficiencies proposed with respect to Terra
and its Subsidiaries as a result of such assessments or
reassessments of the Tax Returns have been paid or settled.
There are no proceedings, investigations, audits or claims now
pending or, to the knowledge of Terra, threatened against
Terra or any of its Subsidiaries in respect of any material
amount of Taxes and there are no matters under discussion,
audit or appeal with any Governmental Authority relating to a
material amount of Taxes. No written claim (or to the
knowledge of Terra, other claims) has ever been made by a
Governmental Authority in a jurisdiction where neither Terra
nor any of its Subsidiaries file Tax Returns that Terra or any
Subsidiary is or may be subject to taxation in that
jurisdiction. No Tax liens have been filed for material
amounts of Taxes other than for Taxes not yet due or payable.
Neither Terra nor any of its Subsidiaries has acquired
property from another person for consideration, the value of
which is less than the fair market value of the property
acquired, in circumstances which could subject Terra or a
Subsidiary, as applicable, to liability for any Taxes of such
other person who was, at the time the property was acquired, a
member of the same combined, affiliated, related or
consolidated group, or under common control with Terra or any
such Subsidiary (including pursuant to section 160 of the Tax
Act). Since December 31, 2000, none of Terra nor any of its
Subsidiaries has requested, offered to enter into or entered
into any agreement or other arrangement, or executed any
waiver, providing for any extension of time within which (i)
to file any Tax Return covering any Taxes for which Terra or
any of its Subsidiaries is or may be liable; (ii) to file any
elections, designations or similar filings relating to Taxes
for which Terra or any of its Subsidiaries is or may be
liable; or (iii) Terra or any of its Subsidiaries is required
to pay or remit any Taxes or amounts on account of Taxes. None
of Terra nor any of its Subsidiaries has requested, offered to
enter into or entered into any agreement or other arrangement,
or executed any waiver, providing for any extension of time
within which any Governmental Authority may assess or collect
Taxes for which Terra or any of its Subsidiaries is or may be
liable. Neither Terra nor any of its Subsidiaries is a party
to any tax sharing or other similar agreement or arrangement
of any nature with any other Person (other than Terra or any
of its Subsidiaries) pursuant to
-30-
which Terra or any of the Subsidiaries has or could have any
material liabilities in respect of Taxes, other than any
liability arising under an agreement providing for the sale or
other disposition of property by Terra or any of its
Subsidiaries. Neither Terra nor any of its Subsidiaries has
received a refund of any material amount of Taxes to which it
was not entitled; and
(iii) For purposes of this Section 3.1(o), the term "material amount
of Taxes" shall mean an amount of Taxes that is material to
Terra and its Subsidiaries taken as a whole.
(p) Compliance with Laws. Except as set out in the Disclosure Letter,
Terra and its Subsidiaries have complied in all material respects
with and are not in violation of any Laws, including applicable End
User Laws, other than non-compliance or violations which would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Terra. Without limiting the generality of
the foregoing, all securities of Terra (including, all options,
warrants, rights or other convertible or exchangeable securities)
have been issued in compliance with all applicable securities Laws
and all securities to be issued upon exercise of any such options,
warrants, rights and other convertible or exchangeable securities
will be issued in compliance with all applicable securities Laws.
(q) Licences, Etc. Terra and each of its Subsidiaries owns, possesses,
or has obtained and is in compliance with, all material licences,
permits, certificates, orders, grants and other authorizations of or
from any Governmental Authority necessary to conduct its business
substantially as now conducted except where failure would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Terra.
(r) Environmental. Except as set out in the Disclosure Letter or as
Publicly Disclosed by Terra or for any matters that, individually or
in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Terra:
(i) all operations of Terra and its Subsidiaries have been
conducted and are now in compliance with all Environmental
Laws; and
(ii) neither Terra nor any of its Subsidiaries is subject to:
(A) any Environmental Laws or terms of any environmental
authorization, permit or licence which requires or may
require any work, repairs, construction, change in
business practices or operations, or expenditures; or
-31-
(B) any written demand, notice or order with respect to a
breach of or liability under any Environmental Laws
applicable to Terra or any of its Subsidiaries.
(s) Property. Neither of Terra nor any of its Subsidiaries owns any
immovable (real) property. Neither Terra nor any of its Subsidiaries
is in default under any lease or sublease relating to immovable
(real) property which could give any other party the right to
terminate the lease or sublease, as the case may be.
(t) Non-Arm's Length Transactions. Except as set out in the Disclosure
Letter, there are no material Contracts or other transactions
between Terra or any of its Subsidiaries, on the one hand, and any
(i) officer or director of Terra or any of its Subsidiaries, (ii)
any holder of record or beneficial owner of 5% or more of the voting
securities of Terra, or (iii) any Affiliate or associate of any such
officer, director or beneficial owner, on the other hand.
(u) Reports. Terra has filed with the CVMQ, by posting upon the SEDAR
system, true and complete copies of all forms, reports, schedules,
statements and other documents required in accordance with
applicable Laws to be filed by it in the last three years. (Such
forms, reports, schedules, statements and other documents, including
any financial statements or other documents, including any schedules
included therein, are referred to as the "Terra Documents".) The
Terra Documents at the time filed (i) did not contain any
misrepresentation of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, and (ii) complied in all material
respects with the requirements of applicable securities Laws. Terra
has not filed any confidential material change report with the CVMQ
or any other securities authority or regulator or any stock exchange
or other self-regulatory authority which at the date hereof remains
confidential.
(v) Fees. The Disclosure Letter contains a true and complete list of of
all agreements that could give rise to any claim for an advisory
fee, success fee, brokerage commission, finder's fee or other like
payment against Terra or any of its Subsidiaries in connection with
the Transaction.
(w) Insurance. Terra has made available to Optimal a true and correct
summary of all material policies of insurance to which each of Terra
and its Subsidiaries are a party or a beneficiary or named insured.
Except as set out in the Disclosure Letter, Terra and its
Subsidiaries maintain insurance coverage with reputable insurers in
such amounts and covering such risks as are in accordance with
normal industry practice for companies engaged in businesses similar
to that of Terra and its Subsidiaries.
-32-
(x) Cumulative Breach. The breaches, if any, of the representations made
by Terra in this Agreement that would occur if all references in
such representations to phrases concerning materiality were deleted,
are not breaches that in the aggregate represent circumstances which
(i) have or could reasonably be expected to have a Material Adverse
Effect on Terra, or (ii) constitute or could reasonably be expected
to constitute a Material Adverse Change in respect of Terra.
(y) Investment Canada. Terra is not a financial institution within the
meaning of the Investment Canada Act (Canada).
(z) Inter-Company Guarantees. Except as set out in the Disclosure
Letter, Terra has not guaranteed any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) of any of its
Subsidiaries nor has any Terra Subsidiary provided any such
guarantee for any other Terra Subsidiary.
3.2 Representations and Warranties of Optimal
Optimal represents and warrants to and in favour of Terra as follows and
acknowledges that Terra is relying upon such representations and warranties in
connection with the matters contemplated by this Agreement:
(a) Organization. Each of Optimal and its Subsidiaries has been duly
incorporated or formed under the laws of its respective jurisdiction
of incorporation, is validly existing and has all necessary
corporate or legal power, authority, and capacity to own its
property and assets and to carry on its business as currently owned
and conducted. Except as set out in the Optimal Disclosure Letter,
all Subsidiaries of Optimal are wholly owned, directly or
indirectly, by Optimal. All of the outstanding shares and other
ownership interests of its Subsidiaries which are held directly or
indirectly by Optimal are validly issued, fully paid and
non-assessable, and except as set forth in the Optimal Disclosure
Letter or for encumbrances in connection with security granted by
Optimal to its lenders in the ordinary course of business which are
not in default, all such shares and other ownership interests are
owned directly or indirectly by Optimal, free and clear of all
material liens, claims or encumbrances. Except as set out in the
Optimal Disclosure Letter, there are no outstanding options, rights,
entitlements, understandings or commitments (contingent or
otherwise) regarding the right to acquire any such shares or other
ownership interests in any of Optimal's Subsidiaries.
(b) Capitalization. Optimal has sufficient authorized capital to issue
all of the Optimal Shares that may be required to be issued under
the transactions contemplated by this Agreement. As of the date
hereof, there are 14,936,235 Optimal Shares (and no more) issued and
outstanding. In addition, as at the date hereof, options to acquire
an aggregate of not more
-33-
than 8,500 Optimal Shares have been granted and are outstanding.
Additional options to acquire Optimal Shares may be issued by
Optimal to directors, senior officers and employees of Optimal prior
to the Effective Time. Other than the foregoing, there are no
outstanding securities having the right to vote (or that are
convertible for or exercisable into securities having the right to
vote) with the holders of Optimal Shares on any matter. There are no
outstanding contractual obligations of Optimal to repurchase or
acquire any Optimal Shares. Prior to the Effective Date, additional
Optimal Shares may be issued in consideration for cash and other
property.
(c) Authority and No Violation.
(i) Optimal has the necessary corporate power, authority and
capacity to enter into this Agreement and to perform its
obligations under this Agreement. The execution and delivery
of this Agreement by Optimal and the consummation by Optimal
and its Subsidiaries of the transactions contemplated by this
Agreement have been duly authorized by its board of directors
and no other corporate proceedings on the part of Optimal are
necessary to authorize this Agreement or the transactions
contemplated under this Agreement, other than:
(A) with respect to the Optimal Meeting, the Joint Circular
and other matters relating solely thereto, the approval
of the Optimal Board; and
(B) the approval of the Optimal Shareholders described in
Article 2.
(ii) This Agreement has been duly executed and delivered by Optimal
and constitutes a legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency and other applicable Laws affecting
creditors' rights generally, and to general principles of
equity.
(iii) The Optimal Board has (A) unanimously determined as of the
date hereof that the Transaction is in the best interests of
Optimal, and (B) determined as of the date hereof to
unanimously recommend that the Optimal Shareholders vote in
favour of the Optimal Resolution. Optimal's directors have
advised Optimal that they intend to vote Optimal Shares held
by them in favour of the Optimal Resolution and will so
represent in the Joint Circular.
(iv) The approval of this Agreement, the execution and delivery by
Optimal of this Agreement, and the performance by it of its
-34-
obligations hereunder and the completion of the Transaction,
will not:
(A) result (with or without notice or the passage of time)
in a violation or breach of, require any consent to be
obtained under or give rise to any termination, purchase
or sale rights or payment obligation under any provision
of:
A. Optimal's or any of its Subsidiaries' certificate
of incorporation, articles, by-laws or other
charter documents;
B. any Laws (subject to obtaining the Regulatory
Approvals), except to the extent that the
violation or breach of, or failure to obtain any
consent would not, individually or in the
aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse
Effect on Optimal; or
C. any Contract, license, permit or government grant
to which Optimal or any of its Subsidiaries is
party or by which it is bound or is subject or is
the beneficiary, except as would not, individually
or in the aggregate, reasonably be expected to
prevent or delay the Transaction or have a
Material Adverse Effect on Optimal;
(B) give rise to any right of termination or acceleration of
indebtedness of Optimal or any of its Subsidiaries, or
cause any such indebtedness to come due before its
stated maturity or cause any available credit of Optimal
or any of its Subsidiaries to cease to be available,
except as would not, individually or in the aggregate,
reasonably be expected to prevent or delay the
Transaction or have a Material Adverse Effect on
Optimal;
(C) result in the imposition of any encumbrance, charge or
lien upon any of Optimal's assets or the assets of any
of its Subsidiaries except as would not, individually or
in the aggregate, reasonably be expected to prevent or
delay the Transaction or have a Material Adverse Effect
on Optimal; or
(D) restrict, hinder, impair or limit the ability of Optimal
or any of its Subsidiaries to carry on business as and
where it is now being carried on, except as would not,
individually or in the aggregate, reasonably be expected
to prevent or delay
-35-
the Transaction or have a Material Adverse Effect on
Optimal.
(v) No consent, approval, order or authorization of, or
declaration or filing with, any Governmental Authority is
required to be obtained by Optimal and its Subsidiaries in
connection with the execution and delivery of this Agreement
or the consummation by Optimal of the Transaction other than
(A) the Regulatory Approvals relating to Optimal; (B) filings
under the Securities Act (Ontario), stock exchange rules or
similar laws contemplated by this Agreement or to provide
notice of the Transaction; (C) any filings required in
connection with the issue of the Optimal Shares; (D) any
orders or decisions obtained by Optimal from Canadian
securities regulatory authorities prior to Closing; and (E)
any other consents, approvals, orders, authorizations,
declarations or filings of or with a Governmental Authority
which are set out in the Optimal Disclosure Letter, or, with
respect to (D) and (E) above, which, if not obtained, would
not, individually or in the aggregate, reasonably be expected
to prevent or delay the Transaction or have a Material Adverse
Effect on Optimal.
(d) Reports. Optimal has filed with the OSC by posting on the SEDAR
system and with the SEC by posting on the EDGAR system true and
complete copies of all forms, reports, schedules, statements and
other documents required in accordance with applicable Laws to be
filed by it in the last three years. Such documents, at the time
filed, (i) did not contain any misrepresentation of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (ii)
complied in all material respects with the requirements of
applicable securities Laws. Optimal has not filed any confidential
material change report with any securities authority or regulator or
any stock exchange or other self-regulatory authority which at the
date hereof remains confidential.
(e) Financial Statements. The Optimal Financial Statements have been
prepared in accordance with Canadian generally accepted accounting
principles and applicable Laws. The Optimal Financial Statements
present fairly, in all material respects, the consolidated financial
position and results of operations of Optimal as of the respective
dates thereof and for the respective periods covered thereby applied
on a basis consistent with the immediately prior period and
throughout the periods indicated (except as may be indicated
expressly in the notes thereto) and in the case of unaudited
statements, to normal, recurring year-end adjustments and the
absence of notes. The Optimal Financial Statements reflect
appropriate and adequate reserves in respect of contingent
liabilities, if any, of
-36-
Optimal and its Subsidiaries on a consolidated basis as of the date
of the balance sheets contained in such statements.
(f) Contingent Liabilities. Except as set forth in the Optimal
Disclosure Letter, or as Publicly Disclosed by Optimal, or for
liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the Optimal
Balance Sheet, neither Optimal nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) except for those that could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect
on Optimal.
(g) Absence of Certain Changes or Events. Except as Publicly Disclosed
by Optimal or as set out in Optimal Disclosure Letter, since
December 31, 2003 Optimal and each of its Subsidiaries has conducted
its business only in the ordinary and regular course of business
consistent with past practice.
(h) Books and Records. Except as set out in the Optimal Disclosure
Letter, the financial books, records and accounts of Optimal and its
Subsidiaries, in all material respects, (i) have been maintained in
accordance with accounting principles generally accepted in the
country of domicile of each such entity on a basis consistent with
prior periods, (ii) are stated in reasonable detail and accurately
and fairly reflect the material transactions and dispositions of the
assets of Optimal and its Subsidiaries and (iii) accurately and
fairly reflect the basis for the Optimal Financial Statements.
Optimal has devised and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; and (ii) transactions are recorded as
necessary (A) to permit preparation of Optimal Financial Statements
in conformity with Canadian generally accepted accounting
principles, or any other criteria applicable to such statements and
(B) to maintain accountability for assets. Except as set out in the
Optimal Disclosure Letter, Optimal's and its Subsidiaries' corporate
minute books contain minutes of all meetings and resolutions of the
directors and Optimal Shareholders held, and full access thereto has
been provided to Terra with the exception of minutes relating to the
Transaction.
(i) Optimal Shares. The Optimal Shares to be issued upon the completion
of the Transaction and upon the due exercise of the New Terra
Options and the Terra Warrants in accordance with their terms,
including the payment of the exercise price, will be duly and
validly issued by Optimal on their respective dates of issue as
fully paid and non-assessable securities and, subject to currently
existing hold periods and compliance with section 4(4) of the 1933
Act, the Optimal Shares to be issued upon the completion of
-37-
the Transaction and upon the due exercise of the New Terra Options
will be freely tradable in the United States.
(j) No Default. Neither Optimal nor any of its Subsidiaries is in
default under, and there exists no event, condition or occurrence
which, after notice or lapse of time or both, would constitute such
a default under, any contract, agreement, license or franchise to
which it is a party which would reasonably be expected to have a
Material Adverse Effect on Optimal.
(k) Customers and Suppliers. Since December 31, 2002, there has been no
termination or cancellation of, and no material adverse modification
or change in, the business relationship with any customer or group
of customers which individually or in the aggregate provided more
than 5% of the consolidated gross revenues of Optimal and its
Subsidiaries for the twelve months ended December 31, 2003.
(l) Litigation. Except as set out in the Optimal Disclosure Letter or
Publicly Disclosed by Optimal: (i) there is no claim, action,
proceeding or investigation that has been commenced or, to the
knowledge of Optimal, threatened against Optimal or any of its
Subsidiaries before any Governmental Authority that would reasonably
be expected to have a Material Adverse Effect on Optimal; (ii)
neither Optimal nor any of its Subsidiaries, nor any of their
respective assets and properties, is subject to any outstanding
judgment, order, writ, injunction or decree that has had or is
reasonably likely to have a Material Adverse Effect on Optimal or
prevent or delay consummation of the Transaction; and (iii) neither
Optimal nor any of its Subsidiaries is subject to any material
warranty, negligence, performance or other claims or disputes or
potential claims or disputes in respect of products or services
currently being delivered or previously delivered that could
reasonably be expected to have a Material Adverse Effect on Optimal,
and to the knowledge of Optimal there are no events or circumstances
which could reasonably be expected to give rise to any such claims
or disputes or potential claims or disputes.
(m) Restrictions on Business Activities. Except as set out in the
Optimal Disclosure Letter, there is no agreement, judgment,
injunction, order or decree binding upon Optimal or any of its
Subsidiaries that has or could reasonably be expected to have the
effect of prohibiting, restricting or materially impairing any
material business practice of Optimal or any of its Subsidiaries,
any acquisition of property by Optimal or any of its Subsidiaries or
the conduct of business by Optimal or any of its Subsidiaries as
currently conducted (including following the Transaction).
(n) Intellectual Property.
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(i) The Optimal Disclosure Letter contains a complete and accurate
list of all Optimal Registered Intellectual Property and
specifies, where applicable, the jurisdictions in which each
such item of Optimal Registered Intellectual Property has been
issued or registered and lists any proceedings or actions
before any court or tribunal (including the United States
Patent and Trademark Office or equivalent authority anywhere
in the world) related to any Optimal Registered Intellectual
Property.
(ii) No Optimal Intellectual Property is subject to any proceeding
or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use,
transfer, or licensing thereof by Optimal or any of its
Subsidiaries, or which may affect the validity, use or
enforceability of such Optimal Intellectual Property.
(iii) Optimal owns and has good and exclusive title to, each
material item of Optimal Intellectual Property owned by it
free and clear of any lien or encumbrance (excluding
non-exclusive licenses and related restrictions granted in the
ordinary course). All Intellectual Property necessary for or
used in the business of Optimal and its Subsidiaries which is
not Optimal Intellectual Property is used by Optimal and its
Subsidiaries with the consent of or license from the rightful
owner thereof.
(iv) Except as set out in the Optimal Disclosure Letter, neither
Optimal nor any of its Subsidiaries has transferred ownership
of, or granted any license with respect to, any Intellectual
Property that is material Optimal Intellectual Property, to
any third party. All Optimal Intellectual Property is in full
force and effect and has not been used or enforced or failed
to have been used or enforced in a manner that would result in
abandonment, cancellation or unenforceability of any Optimal
Intellectual Property.
(v) The Optimal Disclosure Letter lists all material contracts,
licenses and agreements to which Optimal or any of its
Subsidiaries is a party: (A) with respect to Optimal
Intellectual Property licensed or transferred to any third
party (other than end-user licenses in the ordinary course);
or (B) pursuant to which a third party has licensed or
transferred any material Intellectual Property to Optimal.
(vi) All material contracts, licenses and agreements relating to
either (A) Optimal Intellectual Property or (B) Intellectual
Property of a third party licensed to Optimal or any of its
Subsidiaries, are in full force and effect. The consummation
of the transactions contemplated by this Agreement will
neither violate nor result in
-39-
the breach, modification, cancellation, termination or
suspension of such contracts, licenses and agreements. Each of
Optimal and its Subsidiaries is in material compliance with,
and has not materially breached any term of, such contracts,
licenses and agreements and, to the knowledge of Optimal, all
other parties to such contracts, licenses and agreements are
in compliance with, and not have materially breached any term
of, such contracts, licenses and agreements. Following the
Effective Date, Optimal will be permitted to exercise all of
its rights under such contracts, licenses and agreements to
the same extent it and its Subsidiaries would have been able
to had the transactions contemplated by this Agreement not
occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments
which it would otherwise be required to pay. Neither this
Agreement nor the transactions contemplated by this Agreement,
will result in (A) Optimal granting to any third party any
right to or with respect to any material Intellectual Property
right owned by, or licensed to it, (B) Optimal being bound by,
or subject to, any non-compete or other material restriction
on the operation or scope of its business, or (C) Optimal
being obligated to pay any royalties or other material amounts
to any third party in excess of those payable by Optimal,
prior to the Effective Date.
(vii) The operation of the business of Optimal and its Subsidiaries
as such business currently is conducted, including (A)
Optimal's and its Subsidiaries' design, development,
manufacture, distribution, reproduction, marketing or sale of
the products or services of Optimal and its Subsidiaries and
(B) Optimal's use of any product, device or process, has not,
does not and, to its knowledge, will not infringe or
misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practises under the
laws of any jurisdiction.
(viii) Except as set out in the Optimal Disclosure Letter or as
Publicly Disclosed by Optimal, neither Optimal nor any of its
Subsidiaries has received notice from any third party that the
operation of the business of Optimal or any of its
Subsidiaries or any act, product or service of Optimal or any
of its Subsidiaries, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair
competition or trade practises under the laws of any
jurisdiction.
(ix) To the knowledge of Optimal, no Person has or is infringing or
misappropriating any Optimal Intellectual Property. Optimal
has not commenced legal proceedings relating to an
infringement by any Person of Optimal Intellectual Property.
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(x) Optimal and each of its Subsidiaries has taken reasonable
steps to protect Optimal's and its Subsidiaries' rights in
Optimal's confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential
information of third parties provided to Optimal or any of its
Subsidiaries, and, without limiting the foregoing, each of
Optimal and its Subsidiaries has enforced and currently
enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement
and all current and former employees and contractors of
Optimal and any of its Subsidiaries have executed such an
agreement, except where the failure to do so is not reasonably
expected to be material to Optimal.
(o) Pension and Employee Benefits.
Except as set out in the Optimal Disclosure Letter or as Publicly
Disclosed by Optimal:
(i) The Optimal Benefit Plans comply in all material respects with
all applicable Laws and such plans have been administered in
compliance with applicable Laws and their terms;
(ii) All of the Optimal Benefit Plans that are pension plans are
either (A) fully insured or (B) fully funded in accordance
with applicable Laws on a going concern solvency basis and
winding-up solvency basis. Neither Optimal nor any of its
Subsidiaries has received, or applied for, any payment of
surplus out of any Optimal Benefit Plan or any payment in
respect of the demutualization of an insurer. Neither Optimal
nor its Subsidiaries has taken any contribution or premium
holidays under any Optimal Benefit Plan except as permitted by
applicable Laws and the terms of the Optimal Benefit Plan;
(iii) None of the Optimal Benefit Plans, other than pension plans
which only provide monetary retirement payments in accordance
with the terms of such plans, provides benefits beyond
retirement or other termination of service to employees or
former employees or to the beneficiaries or dependants of such
employees, or such benefits have been properly accrued on the
Optimal Financial Statements in accordance with generally
accepted accounting principles;
(iv) No event has occurred and no condition or circumstance exists
that has resulted in or could reasonably be expected to result
in any Optimal Benefit Plan being ordered, or required to be,
terminated or wound up in whole or in part, having its
registration under applicable Laws refused or revoked, being
placed under the
-41-
administration of any trustee or receiver or regulatory
authority or being required to pay any material Taxes,
penalties, payments or levies under applicable Laws;
(v) There are no outstanding stock appreciation rights, phantom
equity, profit saving plan or similar rights, agreements,
arrangements or commitments payable to directors, officers or
employees based upon the revenue, value, income or any other
attribute of Optimal or any of its Subsidiaries; and
(vi) Notwithstanding anything in this Agreement to the contrary,
the term Optimal Benefit Plans does not include any Optimal
Benefit Plan that is subject to the provisions of Title I of
the U.S. Employee Retirement Income Security Act of 1974, as
amended. Each employee benefit plan that would be an Optimal
Benefit Plan except for the fact that it is subject to the
provisions of Title I of the U.S. Employee Retirement Income
Security Act of 1974, as amended, complies in all material
aspects and has been administered in compliance in all
material aspects with Laws and their terms and any failure to
so comply would not have a Material Adverse Effect on Optimal.
(p) Environmental. Except as set out in the Optimal Disclosure Letter or
as Publicly Disclosed by Optimal and except for any matters that,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Optimal, to the knowledge of
Optimal:
(i) all operations of Optimal and its Subsidiaries have been
conducted, and are now, in compliance with all Environmental
Laws; and
(ii) neither Optimal nor any of its Subsidiaries is subject to:
(A) any Environmental Law or terms of any environmental
authorization, period or licence which requires or may
require any material work, repairs, construction, change
in business practices or operations, or expenditures; or
(B) any written demand, notice or order with respect to a
breach of or liability under any Environmental Laws
applicable to Optimal or any of its Subsidiaries.
(q) Compliance with Laws. Except as set out in the Optimal Disclosure
Letter or as Publicly Disclosed by Optimal, Optimal and its
Subsidiaries have complied in all material respects with and are not
in violation of any applicable Laws, other than non-compliance or
violations which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Optimal.
Without limiting the generality of the foregoing, all securities of
Optimal (including, all options, warrants, rights
-42-
or other convertible or exchangeable securities) have been issued in
compliance with all applicable securities Laws and all securities to
be issued upon exercise of any such options, warrants, rights and
other convertible or exchangeable securities will be issued in
compliance with all applicable securities Laws.
(r) Tax Matters. Except as set out in the Optimal Disclosure Letter:
(i) Optimal and each of its Subsidiaries have filed, or caused to
be filed, all Tax Returns required to be filed by them in the
form and within the time prescribed under applicable Laws for
so doing (all of which Tax Returns were true and complete).
Terra and each of its Subsidiaries have duly and timely paid,
collected, withheld and remitted all Taxes (including all
instalments on account of Taxes) each of them is required to
pay, collect, withhold or remit (respectively) and the Optimal
Financial Statements contain an adequate provision in
accordance with Canadian generally accepted accounting
principles for all material amounts of Taxes payable in
respect of each period covered by such Optimal Financial
Statements and all prior periods to the extent such Taxes have
not been paid, whether or not due and whether or not shown as
being due on any Tax Returns. On a consolidated basis, Optimal
has made adequate provision in accordance with Canadian
generally accepted accounting principles in its books and
records for any material amounts of Taxes accruing in respect
of any accounting period which has ended subsequent to the
period covered by the Optimal Financial Statements.
(ii) All Tax Returns of Optimal and its Subsidiaries have been
assessed and all deficiencies proposed with respect to Optimal
and its Subsidiaries as a result of such assessments or
reassessments of the Tax Returns have been paid or settled.
There are no proceedings, investigations, audits or claims now
pending or, to the knowledge of Optimal, threatened against
Optimal or any of its Subsidiaries in respect of any material
amount of Taxes and there are no matters under discussion,
audit or appeal with any Governmental Authority relating to a
material amount of Taxes. No written claim (or to the
knowledge of Optimal, other claims) has ever been made by a
Governmental Authority in a jurisdiction where neither Optimal
nor any of its Subsidiaries file Tax Returns that Optimal or
any Subsidiary is or may be subject to taxation in that
jurisdiction. No Tax liens have been filed for material
amounts of Taxes other than for Taxes not yet due or payable.
Neither Optimal nor any of its Subsidiaries has acquired
property from another person for consideration, the value of
which is less than the fair market value of the property
acquired, in circumstances which could subject Optimal or a
Subsidiary, as applicable, to liability for any Taxes of
-43-
such other person who was, at the time the property was
acquired, a member of the same combined, affiliated, related
or consolidated group, or under common control with Optimal or
any such Subsidiary (including pursuant to section 160 of the
Tax Act). Since December 31, 2000, none of Optimal nor any of
its Subsidiaries has requested, offered to enter into or
entered into any agreement or other arrangement, or executed
any waiver, providing for any extension of time within which
(i) to file any Tax Return covering any Taxes for which
Optimal or any of its Subsidiaries is or may be liable; (ii)
to file any elections, designations or similar filings
relating to Taxes for which Optimal or any of its Subsidiaries
is or may be liable; or (iii) Optimal or any of its
Subsidiaries is required to pay or remit any Taxes or amounts
on account of Taxes. None of Optimal nor any of its
Subsidiaries has requested, offered to enter into or entered
into any agreement or other arrangement, or executed any
waiver, providing for any extension of time within which any
Governmental Authority may assess or collect Taxes for which
Optimal or any of its Subsidiaries is or may be liable.
Neither Optimal nor any of its Subsidiaries is a party to any
tax sharing or other similar agreement or arrangement of any
nature with any other Person (other than Optimal or any of its
Subsidiaries) pursuant to which Optimal or any of its
Subsidiaries has or could have any material liabilities in
respect of Taxes, other than any liability arising under an
agreement providing for the sale or other disposition of
property by Optimal or any of its Subsidiaries. Neither
Optimal nor any of its Subsidiaries has received a material
refund of any Taxes to which it was not entitled; and
(iii) For purposes of this Section 3.2(r), the term "material amount
of Taxes" shall mean an amount of Taxes that is material to
Optimal and its Subsidiaries taken as a whole.
(s) Licences etc. Optimal and each of its Subsidiaries owns, possesses,
or has obtained and is in compliance with all licences, permits,
certificates, orders, grants and other authorizations of or from any
Governmental Authority necessary to conduct its business as now
conducted except where failure would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
on Optimal.
(t) Property. Neither of Optimal nor any of its Subsidiaries owns any
immovable (real) property. Neither Optimal nor any of its
Subsidiaries is in default under any lease or sublease relating to
immovable (real) property which would give the other party the right
to terminate the lease or sublease as the case may be.
-44-
(u) Non-Arm's Length Transactions. Except as set out in the Optimal
Disclosure Letter or as Publicly Disclosed by Optimal, there are no
material Contracts or other transactions between Optimal or any of
its Subsidiaries, on the one hand, and any (i) officer or director
of Optimal or any of its Subsidiaries, (ii) any holder of record or
beneficial owner of 5% or more of the voting securities of Optimal,
or (iii) any Affiliate or associate of any such officer, director or
beneficial owner, on the other hand.
(v) Fees. There are no agreements that could give rise to any claim for
an advisory fee, success fee, brokerage commission, finder's fee or
other like payment against Optimal or any of its Subsidiaries in
connection with the Transaction.
(w) Cumulative Breach. The breaches, if any, of the representations made
by Optimal in this Agreement that would occur if all references in
such representations to phrases concerning materiality, were
deleted, are not breaches that in the aggregate represent
circumstances which (i) have or would reasonably be expected to have
a Material Adverse Effect on Optimal, or (ii) constitute, or would
reasonably be expected to constitute, a Material Adverse Change in
respect of Optimal.
3.3 Survival
For greater certainty, the representations and warranties of Terra and
Optimal contained herein shall survive the execution and delivery of this
Agreement but shall terminate on the earlier of the termination of this
Agreement in accordance with its terms and the day after the Effective Date. Any
investigation by a Party and its advisors shall not mitigate, diminish or affect
the representations and warranties of the other Party.
ARTICLE 4
COVENANTS
4.1 Retention of Goodwill
During the Pre-Effective Date Period, Terra will, subject to the fact that
a transaction involving its business is contemplated hereby, continue to carry
on the business of Terra and its Subsidiaries in a manner consistent with prior
practice, working to preserve the attendant goodwill of such entities and to
contribute to retention of that goodwill to and after the Effective Date, but
subject to the following provisions of this Article 4. The provisions of Section
4.2(a) are intended to be in furtherance of this general commitment.
4.2 Covenants of Terra
(a) Terra covenants and agrees that, during the Pre-Effective Date
Period, except (i) with the consent of Optimal to any deviation
therefrom; (ii) as set out in the Disclosure Letter; (iii) as
Publicly Disclosed by Terra; (iv)
-45-
with respect to any matter expressly contemplated by this Agreement
or Ancillary Documents, including the transactions involving the
business of Terra and Optimal contemplated by such documents, or (v)
as required by Law; Terra will, and will cause each of its
Subsidiaries to:
(i) continue to carry on its business in the ordinary course
consistent with past practice in all material respects, and to
use commercially reasonable efforts to preserve intact its
present business organization and its relationships with those
having material business dealings with it, to the end that its
goodwill and business shall be maintained; provided, however,
that no action by Terra or its Subsidiaries with respect to
matters specifically addressed by any other provision of this
Section 4.2(a) shall be deemed a breach of this Section 4.2(a)
unless such action would constitute a breach of one or more of
such other provisions;
(ii) not split, consolidate or reclassify any of the outstanding
shares of Terra nor declare, set aside or pay any dividends on
or make any other distributions on or in respect of the
outstanding shares of Terra;
(iii) not amend the articles or by-laws of Terra or amend the
articles or by-laws of any of its Subsidiaries that is not
wholly owned in a manner that would affect its ownership or
control by Terra;
(iv) not sell, pledge, encumber, allot, reserve, set aside or
issue, or purchase or redeem, any shares in its capital or the
capital of any of its Subsidiaries or any class of securities
convertible or exchangeable into, or rights, warrants or
options to acquire, any such shares or other securities having
a right to vote or convertible or exchangeable into such
shares or securities, except for: (A) transactions between two
or more wholly owned Terra Subsidiaries or between a
wholly-owned Subsidiary of Terra and Terra; (B) the issuance
of Terra Shares pursuant to Terra Options and Terra Warrants
granted prior to the date of this Agreement; and (C) the
issuance of Terra Options pursuant to Section 2.8(c);
(v) not amend, vary or modify the Terra Stock Option Plan, Terra
Options or Terra Benefit Plans involving Terra Shares or
phantom equity, including any action to vest unvested Terra
Options or accelerate the release or expiry date of any hold
period relating to the Terra Shares;
(vi) not reorganize, amalgamate or merge Terra or any of its
Subsidiaries with any other Person, nor acquire or agree to
acquire by amalgamating, merging or consolidating with,
purchasing a substantial equity interest or substantial
portion of the business of,
-46-
any business or Person, which acquisition would be material to
Terra's business or financial condition on a consolidated
basis;
(vii) not sell, lease, encumber or otherwise dispose of any material
assets except (A) transactions between two or more wholly
owned Terra Subsidiaries or between a wholly-owned Subsidiary
of Terra and Terra; or (B) with respect to the sale of
inventory of Terra or any Subsidiary in the ordinary course of
business consistent with past practice;
(viii) not:
(A) in the case of directors and officers of Terra, enter
into or modify any employment, retention, severance, or
similar agreements, policies or arrangements with, or
grant any bonuses, salary increases, pension or
supplemental pension benefits, profit sharing,
retirement allowances, deferred compensation, incentive
compensation, retention, severance or termination pay to
or any other form of compensation to, or increase the
benefits payable to, or make any loan to, any officers
or directors of Terra or any of its Subsidiaries other
than as contemplated by this Agreement or required under
the terms of a Terra Benefit Plan, existing bonus plan
or written employment agreement in effect prior to the
date of this Agreement (or permitted to be entered under
this Agreement); or
(B) in the case of employees who are not officers or
directors of Terra or any of its Subsidiaries, take any
action with respect to the entering into or modification
of any employment, retention, severance, collective
bargaining or similar agreements, policies or
arrangements or grant any bonuses, salary increases,
pension or supplemental pension benefits, profit
sharing, retirement allowances, deferred compensation,
incentive compensation, retention, severance or
termination pay or any other form of compensation that
are individually or in the aggregate material to Terra
and its Subsidiaries on a consolidated basis or increase
the benefits payable to, or make any loans to employees
that are individually or in the aggregate material to
Terra and its Subsidiaries on a consolidated basis,
other than as required by Law, or as contemplated by
this Agreement or as required under the terms of a Terra
Benefit Plan, existing bonus plan or written employment
agreement in effect prior to the date of this Agreement
(or permitted to be entered under this Agreement) or for
annual increases in the ordinary course of business
consistent with
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past practice or in connection with promotions in the
ordinary course of business consistent with past
practice;
(ix) not guarantee the payment of material indebtedness of another
Person or enter into any "keep well" or other agreement having
the economic effect of the foregoing (other than in respect of
a wholly owned Affiliate or pursuant to contractual
obligations in effect prior to the date of this Agreement);
(x) not incur indebtedness for money borrowed or issue or sell any
debt securities or warrants or other rights to acquire debt
securities other than (A) in connection with the renewal or
replacement (on substantially equivalent terms) of existing
credit facilities; or (B) for short term indebtedness incurred
in the ordinary course of business consistent with past
practice;
(xi) not, except in the ordinary course of business consistent with
past practice: (A) satisfy or settle any claims or liabilities
substantially prior to the same being due, except such as have
been reserved against in the Financial Statements or which
are, individually or in the aggregate, not material to Terra
on a consolidated basis; (B) grant any waiver, exercise any
option or relinquish any contractual rights which are,
individually or in the aggregate, material to Terra on a
consolidated basis; or (C) enter into any interest rate,
currency equity or commodity swaps, hedges or other similar
financial instruments;
(xii) not make any changes to existing accounting policies relating
to Terra or any of its Subsidiaries, except as required by Law
or a Government Authority or required by applicable generally
accepted accounting principles;
(xiii) use its reasonable commercial efforts (or cause each of its
Subsidiaries to use reasonable commercial efforts) to cause
its current insurance (or re-insurance) policies not to be
cancelled or terminated or any of the coverage thereunder to
lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies underwritten by
insurance and re-insurance companies of nationally recognized
standing providing coverage equal to or greater than the
coverage under the cancelled, terminated or lapsed policies
for substantially similar premiums are in full force and
effect;
(xiv) not make any loan, advances or capital contributions to, or
investments in, any other Person, except for:
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(A) loans or investments by Terra or a Subsidiary of
Terra to or in Terra or any Subsidiary of Terra
or, in the ordinary course of business consistent
with past practice, any other Person in which
Terra or any Subsidiary has an existing equity
interest; or
(B) in the ordinary course of business consistent with
past practice which are not, individually or in
the aggregate, material to Terra on a consolidated
basis (provided that none of such transactions
referred to in this clause presents a material
risk of making it more difficult to obtain, under
applicable Laws, any approval or authorization
required in connection with the transactions
contemplated by this Agreement);
(xv) not incur or commit to any capital expenditures except in the
ordinary course of business provided that such capital
expenditures are reflect in the financial projections provided
to Optimal;
(xvi) not make any changes to existing accounting practices relating
to Terra or any of its Subsidiaries, except as required by Law
or a Government Authority or required by applicable generally
accepted accounting principles;
(xvii) not make or rescind any material express or deemed election
relating to Taxes;
(xviii) not make a request for a Tax ruling or enter into any
material agreement with any Governmental Authority with
respect to Taxes;
(xix) not settle or compromise any material assessment,
reassessment, litigation, arbitration, investigation, audit or
dispute relating to Taxes;
(xx) not change in any material respect any of its methods of
reporting income, deductions or accounting for Tax purposes
from those employed in the preparation of its most recently
filed Tax Returns, except as may be required by applicable
Law;
(xxi) promptly inform Optimal as to any material communication in
respect of Taxes received by it after the date hereof from any
Governmental Authority;
(xxii) not authorize, agree or propose to take any actions
prohibited by this Section 4.2(a).
-49-
(b) During the Pre-Effective Date Period, Terra shall and shall cause
its Subsidiaries to perform all obligations required or desirable to
be performed by Terra or any of its Subsidiaries under this
Agreement, co-operate with Optimal in connection therewith, and do
all such other acts and things as may be necessary or desirable in
order to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated in this Agreement and,
without limiting the generality of the foregoing, Terra shall and
where appropriate shall cause its Subsidiaries to:
(i) use commercially reasonable efforts to obtain the requisite
approvals of the Terra Shareholders to the Terra Resolution
including participating in joint presentations to Terra
Shareholders and Optimal Shareholders, except to the extent
that the board of directors of Terra has withdrawn, modified
or qualified its recommendation to shareholders in accordance
with the terms of this Agreement;
(ii) advise Optimal as requested, and on a daily basis on each of
the last seven Business Days prior to the Terra Meeting as to
the aggregate tally of the proxies and votes received in
respect of the Terra Meeting and all matters to be considered
at such meeting;
(iii) apply for and use commercially reasonable efforts to obtain
all Regulatory Approvals relating to Terra or any of its
Subsidiaries or to the Transaction and, in doing so, to keep
Optimal informed as to the status of the proceedings related
to obtaining the Regulatory Approvals, including, but not
limited to, providing Optimal with copies of all related
applications and notifications, in draft form, in order for
Optimal to provide its reasonable comments and providing
Optimal with copies of all material correspondence;
(iv) use commercially reasonable efforts to effect all necessary
registrations, filings and submissions of information required
by Governmental Authorities from Terra or any of its
Subsidiaries relating to the Transaction;
(v) use commercially reasonable efforts to obtain all necessary
waivers, consents and approvals required to be obtained by
Terra or any of its Subsidiaries in connection with the
Transaction from other parties to any material loan
agreements, leases or other material contracts;
(vi) use commercially reasonable efforts to comply promptly with
all requirements which applicable Laws may impose on Terra or
its Subsidiaries with respect to the transactions contemplated
by this Agreement;
-50-
(vii) use commercially reasonable efforts to defend all lawsuits and
other legal, regulatory or other proceedings to which it is a
party, challenging or affecting this Agreement or the
consummation of the transactions contemplated by this
Agreement;
(viii) use commercially reasonable efforts to have lifted or
rescinded any injunction or restraining order relating to
Terra or other order which may adversely affect the ability of
the Parties to consummate the transactions contemplated by
this Agreement;
(ix) provide Optimal with a copy of any purported exercise of the
Dissent Rights and written communications with any holders
exercising or purporting to exercise Dissent Rights; and not
settle or compromise any claim brought by any present, former
or purported holder of any of its securities in connection
with the Transaction;
(x) promptly advise Optimal orally and, if then requested, in
writing:
(A) of any event occurring subsequent to the date of this
Agreement that would render any representation or
warranty of Terra contained in this Agreement (except
any such representation or warranty which speaks solely
as of a date prior to the occurrence of such event), if
made on or as of the date of such event or the Effective
Time, untrue or inaccurate in any material respect;
(B) of any Material Adverse Change in respect of Terra; and
(C) of any material breach by Terra of any covenant or
agreement contained in this Agreement; and
(xi) use commercially reasonable efforts to ensure that Terra's
Affiliates (for the purposes of Rule 145 under the 1933 Act)
execute and deliver an Affiliate's Letter to Optimal on or
prior to the Effective Date.
4.3 Covenants of Optimal
(a) Optimal covenants and agrees that, during the Pre-Effective Date
Period, except (i) with the consent of Terra to any deviation
therefrom, which consent shall not be unreasonably withheld or
delayed; (ii) as set out in the Optimal Disclosure Letter; (iii) as
Publicly Disclosed by Optimal; (iv) with respect to any matter
expressly contemplated by this Agreement or Ancillary Documents,
including the transactions involving the business of Optimal and
Terra contemplated by such documents; or (v) as required by Law;
Optimal will, and will cause each of its Subsidiaries to:
-51-
(i) not split, consolidate or, except as permitted by Section 4.8,
reclassify any of the outstanding shares of Optimal nor
declare, set aside or pay any dividends on or make any other
distributions on or in respect of the outstanding shares of
Optimal;
(ii) except as permitted by Section 4.8, not amend the articles or
by-laws of Optimal or amend the articles or by laws of any of
its Subsidiaries that is not wholly owned in a manner that
would affect its ownership or control by Optimal;
(iii) not purchase or redeem any shares in its capital or the
capital of any of its Subsidiaries or any class of securities
convertible or exchangeable into, or rights, warrants or
options to acquire, any such shares or other securities having
a right to vote or convertible or exchangeable into such
shares or securities, except for transactions between two or
more wholly owned Optimal Subsidiaries or between a wholly
owned Subsidiary of Optimal and Optimal;
(iv) except as permitted by Section 4.8, not reorganize, amalgamate
or merge Optimal or any of its Subsidiaries with any other
Person;
(v) not change in any material respect any of its methods of
reporting income, deductions or accounting for Tax purposes
from those employed in the preparation of its most recently
filed Tax Returns, except as may be required by applicable
Law; and
(vi) not authorize, agree or propose to take any actions prohibited
by this Section 4.3(a).
(b) Optimal shall and shall cause its Subsidiaries to perform all
obligations required or desirable to be performed by Optimal or by
any of its Subsidiaries under this Agreement, to co-operate with
Terra in connection therewith, and to do all such other acts and
things as may be necessary or desirable in order to consummate and
make effective, as soon as reasonably practicable, the transactions
contemplated by this Agreement and, without limiting the generality
of the foregoing:
(i) to apply for and use commercially reasonable efforts to obtain
all Regulatory Approvals relating to the Transaction and, in
doing so, to keep Terra informed as to the status of the
proceedings related to obtaining the Regulatory Approvals,
including, but not limited to, providing Terra with copies of
all related applications and notifications, in draft form, in
order for Terra to provide its reasonable comments and
providing Terra with copies of all material correspondence;
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(ii) to effect all necessary registrations, filings and submissions
of information required by Governmental Authorities from
Optimal or its Subsidiaries relating to the Transaction;
(iii) to use commercially reasonable efforts to comply promptly with
all requirements which applicable Laws may impose on Optimal
or its Subsidiaries with respect to the transactions
contemplated by this Agreement;
(iv) to use commercially reasonable efforts to defend all lawsuits
or other legal, regulatory or other proceedings, to which it
is a party, challenging or affecting this Agreement or the
consummation of the transactions contemplated by this
Agreement;
(v) to use commercially reasonable efforts to have lifted or
rescinded any injunction or restraining order or other order
relating to Optimal which may adversely affect the ability of
the Parties to consummate the transactions contemplated by
this Agreement; and
(vi) to promptly advise Terra orally and, if then requested, in
writing:
(A) of any event occurring subsequent to the date of this
Agreement that would render any representation or
warranty of Optimal contained in this Agreement (except
any such representation or warranty which speaks solely
as of a date prior to the occurrence of such event), if
made on or as of the date of such event or the Effective
Time, untrue or inaccurate in any material respect;
(B) of any Material Adverse Change in respect of Optimal;
and
(C) of any material breach by Optimal of any covenant or
agreement contained in this Agreement.
4.4 Terra Covenants Regarding Non-Solicitation
(a) Terra shall, and shall cause the officers, directors, employees,
representatives and agents of Terra and its Subsidiaries to, cease
immediately all current discussions and negotiations regarding any
proposal that constitutes, or may reasonably be expected to lead to,
an Acquisition Proposal, and request and enforce the return or
destruction of all confidential information provided in connection
therewith. Terra shall not release any third party from any
confidentiality agreement or standstill agreement. Prior to the
Effective Time, Terra shall confirm to Optimal that third parties
with whom it has discussed any Acquisition Proposal in the last six
months have either returned such confidential information or have
certified its destruction.
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(b) Subject to Section 4.5, Terra shall not, directly or indirectly,
through any officer, director, employee, representative (including
for greater certainty any investment banker, lawyer or accountant)
or agent of Terra or any of its Subsidiaries (i) solicit, initiate,
knowingly encourage or otherwise facilitate (including by way of
furnishing information or entering into any form of agreement,
arrangement or understanding) the initiation of any inquiries or
proposals regarding an Acquisition Proposal, (ii) participate in any
discussions or negotiations regarding, or provide any confidential
information with respect to, any Acquisition Proposal, (iii) approve
or recommend, or publicly propose to approve or recommend, any
Acquisition Proposal, or (iv) accept or enter into, or publicly
propose to accept or enter into, any letter of intent, agreement,
arrangement or understanding related to any Acquisition Proposal.
(c) Notwithstanding Section 4.4(b) and any other provision of this
Agreement, nothing shall prevent the board of directors of Terra
from (i) taking any action to the extent ordered or otherwise
mandated by any court of competent jurisdiction, or (ii) from
considering, participating in any discussions or negotiations, or
entering into a confidentiality agreement and providing information
pursuant to Section 4.4(e), if and only to the extent that, in any
such case referred to in clause (ii), (A) Terra has complied with
Section 4.4 and (B) the board of directors of Terra concludes in
good faith in the case of clause (ii), after consultation with their
outside legal and financial advisors, that (x) any required
financing of such Acquisition Proposal is reasonably likely to be
obtained; and that (y) in the case of clause (ii) that, after taking
the steps contemplated in clause (ii), it is reasonably likely that
the board of directors of Terra would determine that such
Acquisition Proposal is a Superior Proposal.
(d) Terra shall forthwith notify Optimal of any Acquisition Proposal and
any inquiry of which a director or an officer of Terra or Terra's
financial advisor is made aware that could lead to an Acquisition
Proposal, or any amendments to the foregoing, or any request for
non-public information relating to Terra or any of its Subsidiaries
in connection with an Acquisition Proposal or for access to the
properties, books or records of Terra or any of its Subsidiaries by
any Person. Such notice shall include a description of the material
terms and conditions of any proposal, the identity of the Person
making such proposal, inquiry or contact and provide such other
details of the proposal, inquiry or contact as Optimal may
reasonably request. Terra shall promptly (and in any event within 24
hours) advise Optimal of any material modification or proposed
modification to any such Acquisition Proposal or inquiry.
(e) If Terra receives a request for material non-public information from
a Person who has made an unsolicited bona fide written Acquisition
Proposal and Terra is permitted, subject to and as contemplated
under Section 4.4(c), to negotiate the terms of such Acquisition
Proposal, then,
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and only in such case, the board of directors of Terra may, subject
to the execution by such Person of a confidentiality agreement
containing employee non-solicitation provisions substantially
similar to those contained in this Agreement and the Confidentiality
Agreement provide such Person with access to information regarding
Terra; provided that Terra sends a copy of any such confidentiality
agreement to Optimal promptly upon its execution and Optimal is
provided with a list of, and copies of, the information provided to
such Person and is also provided upon request with access to similar
information to which such Person was provided on a timely basis.
(f) Terra shall ensure that its officers, directors and employees and
its Subsidiaries and their officers, directors and employees and any
financial advisors or other advisors or representatives retained by
it or its Subsidiaries are aware of the provisions of this Section
4.4, and Terra shall be responsible for any breach of this Section
4.4 by its and its Subsidiaries' officers, directors, employees,
representatives or agents.
4.5 Matching Rights
(a) Notwithstanding Section 4.4(b), Terra may accept, approve, recommend
or enter into any agreement, understanding or arrangement in respect
of an unsolicited Superior Proposal if, and only if: (i) it has
complied with this Article 4; (ii) it has provided Optimal with a
copy of the Superior Proposal document; (iii) five Business Days
(the "Match Period") shall have elapsed from the later of the date
Optimal received written notice advising Optimal that Terra's board
of directors has resolved, subject only to compliance with this
Section 4.5, to accept, approve, recommend or enter into an
agreement, understanding or arrangement in respect of such Superior
Proposal and the date Optimal received a copy of such Superior
Proposal and (iv) at the Expiry of the Match Period it remains a
Superior Proposal under Section 4.5(b). In such circumstances,
Terra's board of directors may also withdraw, modify or qualify its
recommendation of the Transaction. In the event that Terra provides
Optimal with the notice contemplated in this Section on a date that
is less than five Business Days prior to the Terra Meeting, if
requested by Optimal, Terra shall adjourn the Terra Meeting to a
date that is not less than seven Business Days and not more than ten
Business Days after the date of such notice.
(b) During the Match Period, Terra agrees that Optimal shall have the
right, but not the obligation, to offer to amend the terms of this
Agreement. The board of directors of Terra will review any offer by
Optimal to amend the terms of this Agreement in good faith in order
to determine, in its discretion in the exercise of its fiduciary
duties (but without regard to any requirement for approval or
further approval by Optimal's Shareholders, unless it has reasonable
grounds to expect that such shareholder approval will not be
obtained), whether Optimal's offer upon acceptance by Terra
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would result in such Superior Proposal ceasing to be a Superior
Proposal. If the board of directors of Terra so determines, it will
enter into an amended agreement with Optimal reflecting Optimal's
amended proposal. If the board of directors of Terra continues to
believe, in good faith, after consultation with its financial
advisors and outside counsel, that such Superior Proposal remains a
Superior Proposal (without regard to any requirement for approval or
further approval by Optimal's Shareholders, unless it has reasonable
grounds to expect that such shareholder approval will not be
obtained) and therefore rejects Optimal's amended proposal, at the
expiry of the Match Period in accordance with Section 4.5(a), Terra
may approve, recommend, accept or enter into an agreement,
understanding or arrangement with respect to the Superior Proposal;
provided that such acceptance or agreement does not obligate Terra
or any other Person to seek to interfere with the completion of the
Transaction or impose on Terra or any subsidiary any "break",
"hello" or other fees or options or rights to acquire assets or
securities, or any other obligations that would survive the
Effective Date, unless and until this Agreement is terminated in
accordance with its terms and the fees referred to in Section 6.3(a)
are paid. In addition, in such circumstances, Terra may proceed with
such approvals, consents, filings with, of or required by
Governmental Authorities and such other Person as Terra shall
consider appropriate in order to consummate such Superior Proposal,
provided that such activity does not interfere with the completion
of the Transaction. If as a result of the application of this
Section 4.5 there is another Acquisition Proposal that is a Superior
Proposal to be considered at the Terra Meeting, the order of
presentation, signage, proxy forms and other matters related thereto
shall be acceptable to Optimal.
(c) Subject to the last sentence of Section 4.5(a), nothing contained in
this Section 4.5 shall limit in any way the obligation of Terra to
convene and hold the Terra Meeting in accordance with Section 2.2 of
this Agreement.
(d) Terra acknowledges and agrees that each successive material
amendment to any Acquisition Proposal, including any amendment to
the consideration for Terra Shares, shall constitute a new
Acquisition Proposal requiring the initiation of a new Match Period
in respect of that amended Acquisition Proposal.
4.6 Access to Information
(a) Subject to applicable Laws, upon reasonable notice, Terra shall (and
shall cause each of its Subsidiaries to) afford Optimal's officers,
employees, counsel, accountants and other authorized representatives
and advisors ("Representatives") access, during normal business
hours from the date hereof and until the earlier of the Effective
Date or the termination of this Agreement, to its and its
Subsidiaries' properties, books, contracts and records as well as to
its management personnel, and, during such period,
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Terra shall (and shall cause each of its Subsidiaries to) furnish
promptly to Optimal all information concerning Terra's and its
Subsidiaries' businesses, properties and personnel as Optimal may
reasonably request. Subject to applicable Laws, upon reasonable
notice, Optimal shall afford Terra's Representatives the
opportunity, upon reasonable notice and during normal business hours
from the date hereof and until the earlier of the Effective Date or
termination of this Agreement, to speak to appropriate Optimal
management personnel as Terra may reasonably request, without
materially interfering with their other responsibilities.
4.7 Optimal Board Designees
At the Effective Time, Optimal shall cause two mutually agreed upon
individuals to be appointed to the board of directors of Optimal (the "Optimal
Board") and shall cause such individuals to be nominated for election to the
Optimal Board at the next annual meeting of Optimal Shareholders.
4.8 Optimal Covenant Regarding Non-Solicitation
During the Pre-Effective Date Period, Optimal shall not, directly or
indirectly, through any officer, director, employee, representative (including
for greater certainty any investment banker, lawyer or accountant) or agent of
Optimal or any of its Subsidiaries, solicit, initiate, knowingly encourage or
otherwise facilitate (including by way of furnishing information or entering
into any form of agreement, arrangement or understanding) the initiation of any
inquiries or proposals regarding a Change of Control; provided, however, that
nothing contained in this Section 4.8 or any other provision of this Agreement
shall prevent the Optimal Board from responding to an unsolicited proposal or
offer from, providing information to, or entering into any agreement with, any
other Person, if the Optimal Board determines in good faith that it is required
to do so in order to properly discharge its fiduciary duties.
4.9 Indemnification
(a) Optimal agrees that all rights to indemnification or exculpation
existing in favour of the directors or officers of Terra or any
Subsidiary as provided in its articles or by-laws as at the date of
the Confidentiality Agreement shall survive the Transaction and
shall continue in full force and effect for a period of not less
than six years from the Effective Time.
(b) There shall be maintained in effect, for not less than six years
from the Effective Time, coverage substantially equivalent to that
in effect under the current policies of the directors' and officers'
liability insurance maintained by Terra or any of its Subsidiaries,
as the case may be, which is no less advantageous, and with no gaps
or lapses in coverage with respect to matters occurring prior to the
Effective Time; provided that in no event shall Optimal be required
to expend in any one year an amount in excess of 200% and if the
annual premiums of such insurance coverage
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exceed such amount, Optimal shall be obligated to obtain a
substantially similar policy with the greatest coverage available
(as to quantum and events) for such maximum cost. Alternatively, at
Optimal's option, it may cause Terra to purchase "run-off"
directors' and officers' liability insurance providing coverage
substantially as favourable to such directors and officers as that
in effect under such current policies to cover prior events during
such six year period or the balance thereof.
ARTICLE 5
CONDITIONS
5.1 Mutual Conditions Precedent
The respective obligations of the Parties to complete the Transaction
shall be subject to the satisfaction, on or before the Effective Time, of the
following conditions precedent, each of which may only be waived by the mutual
consent of Optimal and Terra:
(a) the Terra Resolution shall have been approved at the Terra Meeting
by not less than 66 2/3% of votes cast by the Terra Shareholders who
are represented at the Terra Meeting;
(b) the Articles of Amalgamation shall be in content consistent with
this Agreement and in form satisfactory to the Parties acting
reasonably in that context;
(c) the Optimal Shareholders shall have approved the Optimal Resolution
at the Optimal Meeting by a simple majority of the votes cast at the
Optimal Meeting;
(d) there shall not be in force any Law, final and non-appealable
injunction, order or decree prohibiting, restraining or enjoining
the consummation of the Transaction;
(e) the Regulatory Approvals shall have been obtained or satisfied on
terms and conditions satisfactory to Optimal and Terra acting
reasonably, (but in case of Terra only insofar as it would directly
materially adversely affect Terra Shareholders);
(f) other than the Regulatory Approvals, all consents, waivers, permits,
orders and approvals of any Governmental Authority, and the expiry
of any waiting periods, in connection with, or required to permit,
the consummation of the Transaction, the failure of which to obtain
or the non-expiry of which would constitute a criminal offence or
would have a Material Adverse Effect on Optimal or Terra, as the
case may be, shall have been obtained or satisfied on terms that
could not reasonably be expected to have a Material Adverse Effect
on Optimal and/or Terra;
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(g) the orders referred to in Section 2.6 shall have been obtained, and
the Optimal Shares issuable pursuant to the Transaction and upon the
exercise of the New Terra Options, the Terra Warrants, the Terra
Broker Warrants, the AOL Warrant and the EBS Warrant shall have been
approved for quotation on NASDAQ, subject to the filing of required
documentation, notice of issuance and/or other usual requirements
and compliance with all applicable securities laws; and
(h) this Agreement shall not have been terminated pursuant to Article 6.
5.2 Additional Conditions Precedent to the Obligations of Optimal
(a) The obligation of Optimal to complete the Transaction shall also be
subject to the fulfillment of each of the following conditions
precedent (each of which is for Optimal's exclusive benefit and may
be waived by Optimal):
(i) all covenants of Terra under this Agreement to be performed on
or before the Effective Time shall have been duly performed by
Terra and Optimal shall have received a certificate of Terra
addressed to Optimal and dated the Effective Date, signed on
behalf of Terra by two senior executive officers of Terra (on
Terra's behalf and without personal liability), confirming the
same as at the Effective Date;
(ii) (A) the representations and warranties of Terra that are
qualified by references to materiality shall be true and
correct; (B) the representations and warranties of Terra not
so qualified (except Section 3.1(a), Section 3.1(b) and
Section 3.1(c)(i) through (iii)) shall be true and correct in
all material respects; and (C) the representations in Section
3.1(a), Section 3.1(b) and Section 3.1(c)(i) through (iii)
shall be true and correct, in each case as of the Effective
Time as if made on and as of such time (except to the extent
such representations and warranties speak solely as of an
earlier date, in which event such representations and
warranties shall be true and correct to such extent as of such
earlier date, or except as affected by transactions
contemplated or permitted by this Agreement), and Optimal
shall have received a certificate of Terra addressed to Terra
and dated the Effective Date, signed on behalf of Terra by two
senior executive officers of Terra (on Terra's behalf and
without personal liability), confirming the same as at the
Effective Date;
(iii) the board of directors of Terra shall have adopted all
necessary resolutions, and all other necessary corporate
action shall have
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been taken by Terra and its Subsidiaries to permit the
consummation of the Transaction;
(iv) during the Pre-Effective Date Period, there shall not have
occurred or have been disclosed to the public, in each case if
previously undisclosed to the public or Optimal, a Material
Adverse Change to Terra;
(v) there shall not be pending or threatened in writing any suit,
action or proceeding by any Person: (A) seeking to prohibit or
restrict the acquisition by Optimal or any of its Subsidiaries
of any Terra Shares, seeking to restrain or prohibit the
consummation of the Transaction or seeking to obtain from
Terra or Optimal any material damages directly or indirectly
in connection with the Transaction, (B) seeking to prohibit or
materially limit the ownership or operation by Optimal or any
of its Subsidiaries of Terra or any material portion of the
business or assets of Terra or any of its Subsidiaries or to
compel Optimal or any of its Subsidiaries to dispose of or
hold separate any portion of the business or assets of Terra
or any of its Subsidiaries, (C) seeking to impose limitations
on the ability of Optimal or any of its Subsidiaries to
acquire or hold, or exercise full rights of ownership of, any
Terra Shares, including the right to vote the Terra Shares to
be acquired by them on all matters properly presented to the
shareholders of Terra, (D) seeking to prohibit Optimal or any
of its Subsidiaries from effectively controlling in any
material respect the business or operations of Terra or any of
its Subsidiaries or (E) which, if successful, in the judgement
of Optimal is reasonably likely to have a Material Adverse
Effect on Terra or Optimal; and
(vi) the Holders of Terra Shares representing in excess of 10% of
the outstanding Terra Shares shall not have exercised Dissent
Rights in connection with the Amalgamation that have not been
withdrawn.
(b) Optimal may not rely on the failure to satisfy any of the conditions
precedent in Section 5.1 or Section 5.2 if the condition precedent
would have been satisfied but for a material default by Optimal in
complying with its obligations in this Agreement.
5.3 Additional Conditions Precedent to the Obligations of Terra
(a) The obligation of Terra to complete the Transaction shall also be
subject to the following conditions precedent (each of which is for
the exclusive benefit of Terra and may be waived by Terra):
(i) all covenants of Optimal under this Agreement to be performed
on or before the Effective Time shall have been duly
performed, and
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Terra shall have received a certificate of Optimal addressed
to Terra and dated the Effective Date, signed on behalf of
Optimal by two senior executive officers of Optimal (on
Optimal's behalf and without personal liability), confirming
the same as at the Effective Date;
(ii) (A) the representations and warranties of Optimal that are
qualified by references to materiality shall be true and
correct; (B) the representations and warranties of Optimal not
so qualified (except Section 3.2(a), Section 3.2(b) and
Section 3.2(c)(i) through (iii)) shall be true and correct in
all material respects; and (C) the representations in Section
3.2(a), Section 3.2(b) and Section 3.2(c)(i) through (iii)
shall be true and correct, in each case as of the Effective
Time as if made on and as of such time except to the extent
such representations and warranties speak solely as of an
earlier date, in which event such representations and
warranties shall be true and correct to such extent as of such
earlier date, or except as affected by transactions
contemplated or permitted by this Agreement), and Terra shall
have received a certificate of Optimal addressed to Terra and
dated the Effective Date, signed on behalf of Optimal by two
senior executive officers of Optimal (on Optimal's behalf and
without personal liability), confirming the same as at the
Effective Date;
(iii) the Optimal Board shall have adopted all necessary
resolutions, and all other necessary corporate action shall
have been taken by Optimal to permit the consummation of the
Transaction and the issue of Optimal Shares upon the due
exercise of New Terra Options and the Terra Warrants in
accordance with their terms, including the payment of the
exercise price;
(iv) during the Pre-Effective Date Period, there shall not have
occurred or have been disclosed to the public, in each case if
previously undisclosed to the public or Terra, a Material
Adverse Change to Optimal; and
(v) there shall not be pending or threatened in writing any suit,
action or proceeding by any Person: (A) seeking to prohibit or
restrict the acquisition by Terra Shareholders of any Optimal
Shares, seeking to restrain or prohibit the consummation of
the Transaction or seeking to obtain from Optimal or Terra any
material damages directly or indirectly in connection with the
Transaction, or (B) which, if successful, in the judgement of
Terra is reasonably likely to have a Material Adverse Effect
on Optimal or Terra.
(b) Terra may not rely on the failure to satisfy any of the conditions
precedents in Section 5.1 or Section 5.3 if the condition precedent
would
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have been satisfied but for a material default by Terra in complying
with its obligations in this Agreement.
5.4 Notice and Cure Provisions
(a) Optimal and Terra will give prompt notice to the other of the
occurrence, or failure to occur, at any time during the
Pre-Effective Period of any event or state of facts which occurrence
or failure would, or would be likely to:
(i) cause any of the representations or warranties of it contained
in this Agreement to be untrue or inaccurate on the date
hereof or on the Effective Time such that the conditions set
forth in Section 5.2 or Section 5.3, as applicable, would not
be satisfied as of the Effective Time; or
(ii) result in the failure in any material respect to comply with
or satisfy any covenant, condition or agreement to be complied
with or satisfied by the other under this Agreement prior to
the Effective Time such that the conditions set forth in
Section 5.2 or Section 5.3, as applicable, would not be
satisfied as of the Effective Time.
(b) Neither Optimal nor Terra may seek to rely upon any conditions
precedent contained in Section 5.1, Section 5.2 or Section 5.3, or
exercise any termination right arising therefrom, unless forthwith
and in any event prior to the filing of the Articles of Amalgamation
for acceptance by the Director, Optimal or Terra, as the case may
be, has delivered a written notice to the other specifying in
reasonable detail all breaches of covenants, representations and
warranties or other matters which Optimal or Terra, as the case may
be, are asserting as the basis for the non-fulfillment of the
applicable condition precedent or the exercise of the termination
right, as the case may be. If any such notice is delivered, provided
that Terra or Optimal, as the case may be, is proceeding diligently
to cure such matter, if such matter is susceptible to being cured
(for greater certainty, except by way of disclosure in the case of
representations and warranties), the other may not terminate this
Agreement as a result thereof until the earlier of the Outside Date
and 60 days from delivery of such notice. If such notice has been
delivered prior to the date of the Terra Meeting and/or the Optimal
Meeting, such meetings shall, unless the Parties agree otherwise, be
postponed or adjourned until the expiry of such period. If such
notice has been delivered prior to the filing of the Articles of
Amalgamation with the Director, such filing shall be postponed until
the expiry of such period. For greater certainty, in the event that
such matter is cured within the time period referred to herein
without a Material Adverse Effect on the Party in
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breach, this Agreement may not be terminated as a result of the
cured breach.
5.5 Satisfaction of Conditions
The conditions precedent set out in Section 5.1, Section 5.2 and Section
5.3, shall be conclusively deemed to have been satisfied, waived or released
when, with the agreement of Optimal and Terra, a Certificate of Amalgamation in
respect of the Amalgamation is issued by the Director.
ARTICLE 6
AMENDMENT AND TERMINATION
6.1 Amendment
(a) This Agreement may, at any time and from time to time before or
after the holding of the Terra Meeting or the Optimal Meeting but
not later than the Effective Date, be amended by mutual written
agreement of the Parties, and any such amendment may, without
further shareholder approvals, subject to applicable Laws, without
limitation:
(i) change the time for performance of any of the obligations or
acts of the Parties;
(ii) waive any inaccuracies or modify any representation or
warranty contained in this Agreement or in any document
delivered pursuant to this Agreement;
(iii) waive compliance with or modify any of the covenants contained
in this Agreement and waive or modify performance of any of
the obligations of the Parties; and/or
(iv) waive compliance with or modify any conditions precedent
contained in this Agreement provided that any such change does
not decrease the consideration payable to Terra Shareholders.
(b) During the Pre-Effective Date Period, the Parties will use
commercially reasonable efforts to maximize present and future
financial and tax planning opportunities for Optimal and Terra as a
subsidiary of Optimal as and to the extent that the same shall not
prejudice any Party or its securityholders. The Parties will ensure
that such planning activities do not impede the progress of the
Transaction in any material way. If, at the request of Optimal,
Terra effects any transaction before the Effective Date for such
purposes, Optimal will be responsible for any structuring and
unwinding costs if the Transaction is not consummated.
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6.2 Termination
(a) If any condition contained in Section 5.1 or Section 5.2 is not
satisfied at or before the Effective Time, then Optimal may, subject
to Section 5.4 and to Section 5.2(b), by notice to Terra terminate
this Agreement and the obligations of the Parties hereunder (except
as otherwise herein provided, including under Section 6.3), but
without detracting from the rights of Optimal arising from any
breach by Terra but for which the condition would have been
satisfied.
(b) If any condition contained in Section 5.1 or Section 5.3 is not
satisfied at or before the Effective Time, then Terra may, subject
to Section 5.4 and to Section 5.3(b), by notice to Optimal terminate
this Agreement and the obligations of the Parties hereunder (except
as otherwise herein provided, including under Section 6.3), but
without detracting from the rights of Terra arising from any breach
by Optimal but for which the condition would have been satisfied.
(c) This Agreement may:
(i) be terminated by the mutual agreement of Terra and Optimal,
(and for greater certainty, without further action on the part
of the Terra Shareholders or the Optimal Shareholders if
terminated after the holding of the Terra Meeting or the
Optimal Meeting, as applicable);
(ii) be terminated by either Terra or Optimal if there shall be
passed any Law that makes consummation of the Amalgamation
illegal or otherwise prohibited;
(iii) be terminated by Optimal, if (A) the board of directors of
Terra shall have failed to recommend or shall have withdrawn,
modified or changed in a manner adverse to Optimal its
approval or recommendation of this Agreement, the Transaction
or the Terra Resolution (unless the condition set forth in
Section 5.3(a)(iv) is not satisfied or Optimal shall have made
a misrepresentation at the date hereof or breached a covenant
under this Agreement in such a manner that, taking into
account Section 5.3(b) and Section 5.4, Terra would be
entitled to rely on the failure of a condition set forth in
Section 5.3(a) as a reason not to complete the Transaction),
or (B) the board of directors of Terra shall have approved or
recommended any Acquisition Proposal other than the
Transaction;
(iv) be terminated by Terra, if the Optimal Board shall have failed
to recommend or shall have withdrawn, modified or changed in a
manner adverse to Terra its approval or recommendation of this
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Agreement, the Transaction or the Optimal Resolution (unless
the condition set forth in Section 5.2(a)(iv) is not satisfied
or Terra shall have made a misrepresentation at the date
hereof or breached a covenant under this Agreement in such a
manner that, taking into account Section 5.2(b) and Section
5.4, Optimal would be entitled to rely on the failure of a
condition set forth in Section 5.25.2(a) as a reason not to
complete the Transaction);
(v) be terminated by either Optimal or Terra, if either the Terra
Shareholder approval or Optimal Shareholder approval shall not
have been obtained by reason of the failure to obtain the
requisite vote set out in Section 5.1 at the Terra Meeting or
the Optimal Meeting, respectively;
(vi) be terminated by Optimal if the Terra Meeting has not occurred
on or before the Terra Meeting Date (unless the condition set
forth in Section 5.3(a)(iv) is not satisfied or Optimal shall
have made a misrepresentation at the date hereof or breached a
covenant under this Agreement in such a manner that, taking
into account Section 5.3(b) and Section 5.4, Terra would be
entitled to rely on the failure of a condition set forth in
Section 5.3(a) as a reason not to complete the Transaction);
or
(vii) be terminated by Terra if the Optimal Meeting has not occurred
on or before the Optimal Meeting Date (unless the condition
set forth in Section 5.2(a)(iv) is not satisfied or Terra
shall have made a misrepresentation at the date hereof or
breached a covenant under this Agreement in such a manner
that, taking into account Section 5.2(b) and Section 5.4,
Optimal would be entitled to rely on the failure of a
condition set forth in Section 5.2(a) as a reason not to
complete the Transaction);
in each case, prior to the Effective Time.
(d) If the Effective Date has not occurred on or prior to the Outside
Date, then, unless otherwise agreed in writing by the Parties, this
Agreement shall terminate provided that the right to terminate this
Agreement pursuant to this Section 6.2(d) shall not be available to
the Party seeking to terminate if any action of such Party or its
Affiliates or the failure of such Party or its Affiliates to perform
any of its obligations under this Agreement required to be performed
at or prior to the Effective Time shall have resulted in the
conditions contained in Section 5.1, Section 5.2 or Section 5.3 (as
applicable) not having been satisfied prior to the Outside Date.
(e) If this Agreement is terminated in accordance with the foregoing
provisions of this Section 6.2, no Party shall have any further
liability to
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perform its obligations under this Agreement except as provided in
Section 6.3 and as otherwise expressly contemplated by this
Agreement, and provided that neither the termination of this
Agreement nor anything contained in this Section 6.2(e) shall
relieve any Party from any liability for any breach by it of this
Agreement, including from any inaccuracy in its representations and
warranties and any non-performance by it of its covenants made in
this Agreement.
6.3 Break and Other Fees
(a) If:
(i) Optimal shall terminate this Agreement pursuant to Section
6.2(c)(iii);
(ii) Optimal shall terminate this Agreement pursuant to Section
6.2(a) and an Acquisition Proposal has been publicly made,
publicly announced or otherwise publicly disclosed by any
Person other than Optimal prior to the Terra Meeting and has
not been withdrawn before the Terra Meeting; or
(iii) Terra shall terminate this Agreement pursuant to Section
6.2(b) or Section 6.2(c)(iv), in each case, in circumstances
where the requisite Terra Shareholder approval has not been
obtained, and an Acquisition Proposal has been publicly made,
publicly announced or otherwise publicly disclosed by any
Person other than Optimal prior to the Terra Meeting and has
not been withdrawn before the Terra Meeting;
then in any such case Terra shall pay to Optimal the Break Fee in
immediately available funds to an account designated by Optimal. Such
payment shall be due within one Business Day after demand by Optimal.
Terra shall not be obligated to make more than one payment pursuant to
this Section 6.3(a).
(b) If Terra shall terminate this Agreement pursuant to Section
6.2(c)(iv), other than in the circumstances described in Section
6.3(a)(iii), then Optimal shall pay to Terra the Break Fee in
immediately available funds to an account designated by Terra. Such
payment shall be due within one Business Day after demand by Terra.
(c) If Optimal shall terminate this Agreement pursuant to Section
6.2(c)(vi) or if the Terra Shareholders shall fail to approve the
Transaction at the Terra Meeting (unless the condition set forth in
Section 5.3(a)(iv) is not satisfied or Optimal shall have made a
misrepresentation at the date hereof or breached a covenant under
this Agreement in such a manner that, taking into account Section
5.3(b) and Section 5.4, Terra would be entitled to rely on the
failure of a condition set forth in Section 5.3(a) as a reason not
to complete the Transaction), then, except in the circumstances
contemplated
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in Section 6.2(c)(iv), on the first Business Day following the
termination of this Agreement as a result thereof, Terra shall pay
to Optimal $500,000 as payment in full of Optimal's out-of-pocket
costs and expenses in connection with the Transaction in immediately
available funds to an account designated by Optimal. Any payment due
under Section 6.3(a) shall be reduced dollar for dollar by any
payment previously made under this Section 6.3(c).
(d) If Terra shall terminate this Agreement pursuant to Section
6.2(c)(vii) or if the Optimal Shareholders shall fail to approve the
Optimal Resolution at the Optimal Meeting (unless the condition set
forth in Section 5.2(a)(iv) is not satisfied or Terra shall have
made a misrepresentation at the date hereof or breached a covenant
under this Agreement in such a manner that, taking into account
Section 5.4, Optimal would be entitled to rely on the failure of a
condition set forth in Section 5.2(a) as a reason not to complete
the Transaction) then, except in the circumstances contemplated in
Section 6.3(a) above, on the first Business Day following the
termination of this Agreement as a result thereof, Optimal shall pay
to Terra $500,000 as payment in full of Terra's out-of-pocket costs
and expenses in connection with the Transaction in immediately
available funds to an account designated by Terra. Any payment due
under Section 6.3(b) shall be reduced dollar for dollar by any
payment previously made under this Section 6.3(d).
6.4 Remedies
The Parties acknowledge and agree that an award of money damages would be
inadequate for any breach of this Agreement by any Party or its representatives
and any such breach would cause the non-breaching Party irreparable harm.
Accordingly, the Parties agree that, in the event of any breach or threatened
breach of this Agreement by one of the Parties, the non-breaching Party will
also be entitled, without the requirement of posting a bond or other security,
to equitable relief, including injunctive relief and specific performance. Such
remedies will not be the exclusive remedies for any breach of this Agreement but
will be in addition to all other remedies available at law or equity to each of
the Parties.
ARTICLE 7
GENERAL
7.1 Notices
Any notice, consent or approval required or permitted to be given in
connection with this Agreement (in this Section referred to as a "Notice") shall
be in writing and shall be sufficiently given if delivered (whether in person,
by courier service or other personal method of delivery), or if transmitted by
facsimile or email:
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(a) If to Optimal, at:
4700 de la Savane
Suite 101
Montreal, Quebec
H4P 1T7
Attention: Holden L. Ostrin
Telecopier No.: (514) 738-8355
Email: holdeno@opmr.com
with a copy to:
Osler, Hoskin & Harcourt LLP
1000 de La Gauchetiere Street West
Suite 2100
Montreal, Quebec
H3B 4W5
Attention: Warren M. Katz
Telecopier No.: (514) 904-8101
Email: wkatz@osler.com
(b) If to Terra at:
2 Place Alexis Nihon
Suite 700
3500 de Maisonneuve Boulevard West
Westmount, Quebec
H3Z 3C1
Attention: Mitchell A. Garber
Telecopier No.: (514) 380-2768
Email: mitch@terrapayments.com
with a copy to:
Stikeman Elliott LLP
1155 Rene-Levesque Boulevard West
40th Floor
Montreal, Quebec
H3B 3V2
Attention: Sidney M. Horn and Peter Castiel
Telecopier No.: (514) 397-3222
Email: smhorn@stikeman.com
pcastiel@stikeman.com
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Any Notice delivered or transmitted to a Party as provided above shall be
deemed to have been given and received on the day it is delivered or
transmitted, provided that it is delivered or transmitted on a Business Day
prior to 5:00 p.m. local time in the place of delivery or receipt. However, if
the Notice is delivered or transmitted after 5:00 p.m. local time or if such day
is not a Business Day then the Notice shall be deemed to have been given and
received on the next Business Day.
Any Party may, from time to time, change its address by giving Notice to
the other Party in accordance with the provisions of this Section.
7.2 Assignment
Neither this Agreement nor any rights or obligations under this Agreement
shall be assignable by any Party without the prior written consent of the other
Party, except that Optimal may assign all or part of its rights or obligations,
including the rights to acquire the Terra Shares, without reducing its own
obligations under this Agreement, to a wholly-owned Subsidiary. Subject to the
previous sentence, this Agreement shall enure to the benefit of and be binding
upon the Parties and their respective successors (including any successor by
reason of amalgamation of any Party) and permitted assigns. No third party shall
have any rights under this Agreement unless expressly stated to the contrary.
7.3 Further Assurances
The Parties shall with reasonable diligence do all such things and provide
all such reasonable assurances as may be required to consummate the transactions
contemplated by this Agreement, and each Party shall provide such further
documents or instruments required by any other Party as may be reasonably
necessary or desirable to effect the purpose of this Agreement and carry out its
provisions.
7.4 Expenses
Subject to Section 6.3, the Parties agree that all costs and expenses of
the Parties relating to the Transaction and the transactions contemplated by
this Agreement, including legal fees, accounting fees, financial advisory fees,
regulatory filing fees, stock exchange fees, all disbursements of advisors and
printing and mailing costs, shall be paid by the Party incurring such expenses.
7.5 Public Notices
All public notices to third parties and all other publicity concerning the
transactions contemplated by this Agreement shall be jointly planned and
co-ordinated by the Parties and no Party shall act unilaterally in this regard
without the prior approval of the other Party, such approval not to be
unreasonably withheld, unless such disclosure shall be required to meet timely
disclosure obligations of any Party under applicable securities Laws and stock
exchange rules in circumstances where prior consultation with the other Party is
not practicable.
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7.6 Execution and Delivery
This Agreement may be executed by the Parties in counterparts and may be
executed and delivered by facsimile and all such counterparts and facsimiles
shall together constitute one and the same agreement.
IN WITNESS WHEREOF the Parties have executed this Combination Agreement as
of the date first written above.
OPTIMAL ROBOTICS CORP.
By: /s/ Holden L. Ostrin
-------------------------------
Authorized Signing Officer
By: /s/ Neil S. Wechsler
-------------------------------
Authorized Signing Officer
TERRA PAYMENTS INC.
By: /s/ Mitchell A. Garber
-------------------------------
Authorized Signing Officer
By: /s/ David Schwartz
-------------------------------
Authorized Signing Officer
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