EXHIBIT 2.1
PRE-ACQUISITION AGREEMENT
THE PRE-ACQUISITION AGREEMENT entered into this 10th day of August, 1998.
BETWEEN: RELTEC CORPORATION, a corporation existing
under the laws of the State of Delaware,
USA,
(hereinafter called the "ACQUIROR")
AND: POSITRON FIBER SYSTEMS CORPORATION, a
corporation existing under the laws of
Canada,
(hereinafter called the "COMPANY")
RECITALS
WHEREAS:
1. The Acquiror has indicated that it is willing, subject to certain
conditions, to make a take-over bid to the shareholders of the Company offering
to purchase all of the outstanding common shares of the Company at a price of
US$13.625 per common share;
2. The board of directors of the Company has determined to recommend
acceptance of the Acquiror offer to the shareholders of the Company, to
cooperate with the Acquiror and to take all reasonable action to support the
Acquiror offer;
3. The board of directors of the Company has determined to enter into this
Agreement; and
4. The Acquiror will make an offer subject to the terms and conditions of this
Agreement.
NOW THEREFORE IN CONSIDERATION of the mutual covenants hereinafter set out,
the parties hereto hereby agree as follows:
ARTICLE 1
THE OFFER
THE OFFER. Subject to the terms and conditions of this Agreement the Acquiror
agrees to cause a wholly-owned Canadian subsidiary ("BIDCO") to mail, as soon as
practicable but, in any event, no later than August 24, 1998 to the holders of
common shares of the Company, an offer to purchase all of the common shares
(hereinafter called the "SHARES" and the holders of Shares are hereinafter
called "SHAREHOLDERS") at a price of US$13.625 per Share, subject to the terms
and
conditions set out in Schedule A to this Agreement as the same may be amended
pursuant to the terms hereof (the "OFFER") and provided that the following
conditions have been satisfied:
Positron Inc. shall have executed the intervention hereto contemporaneously
herewith;
the Company and Positron Inc. shall have executed and delivered an
agreement satisfactory to the Acquiror and Positron Inc. amending the
Manufacturing Agreement dated as of June 24, 1997 between Positron
Inc. and the Company contemporaneously herewith; and
amendments to the employment agreements, on terms satisfactory to the
Acquiror, with the Company's senior executive officers identified in
Schedule B shall have been executed and delivered contemporaneously
herewith, such agreements to become effective on successful completion
of the Offer.
COMPANY APPROVAL OF THE OFFER.
The Company represents that its board of directors, upon consultation with
its advisors has approved the execution and delivery of this Agreement
and has determined unanimously that:
the Offer is fair from a financial point of view to the Shareholders;
and
it will recommend that Shareholders accept the Offer.
The Company represents that the board of directors has received an opinion
from each of the Company's financial advisors that the Offer is fair
from a financial point of view to the Shareholders.
COMPANY COOPERATION. The Company covenants to cooperate with the Acquiror, to
take all reasonable action to support the Offer and to provide the Acquiror with
a draft copy of any Directors' Circular to be issued, from time to time, prior
to the mailing thereof, on a confidential basis, and to provide the Acquiror
with a reasonable opportunity to review and provide comments thereon. The
Company further covenants to use reasonable commercial efforts to mail the
Directors' Circular to be issued in connection with the mailing of the Offer on
the same date that the Acquiror mails the Offer to the Shareholders. The
Acquiror covenants to provide the Company with a draft copy of any take-over bid
circular to be issued in respect of the Offer, prior to the mailing thereof, on
a confidential basis, and to provide the Company with a reasonable opportunity
to review and provide comments thereon.
JOINT PRESS RELEASE. The parties agree to jointly issue a press release as soon
as practicable in a mutually agreeable form.
POST OFFER COVENANTS. If the Acquiror takes up and pays for Shares pursuant to
the Offer, the Acquiror and the Company agree to use all reasonable efforts to
enable the Acquiror to acquire the balance of the Shares as soon as practicable
after completion of the Offer by way of compulsory acquisition, arrangement,
amalgamation or other type of acquisition transaction carried out for a
consideration per Share of not less than that offered under the Offer. The
Company agrees and represents that its board of directors has determined
unanimously to use its and their respective reasonable efforts to enable the
Acquiror to elect or appoint all of the directors of the Company as soon as
possible after the Acquiror takes up and pays for at least 50% of the Shares
pursuant to the Offer.
OUTSTANDING STOCK OPTIONS. The Acquiror agrees to offer to all holders of
outstanding options, other than the directors of the Company, whether held
pursuant to the Company's stock option plan and other compensation arrangements
or otherwise, the opportunity to exchange their options into options to acquire
common shares of the capital of the Acquiror (the "EXCHANGE OPTIONS") on terms
and in accordance with the conditions set forth in Schedule C. The Company
agrees and represents that its board of directors has unanimously resolved to
use its and their respective reasonable efforts to encourage all such holders of
outstanding options, other than the directors of the Company, to exchange their
options, at the expiry of the Offer, into Exchange Options. The Acquiror will
take all reasonable actions under applicable securities laws in the United
States and the Province of Quebec to enable the holders of Exchange Options to
resell the underlying shares of the Acquiror without registration or other
similar requirements.
The directors of the Company will be permitted to exercise their vested
options and to sell the Shares they will have acquired pursuant to such exercise
under the Offer provided however that the vesting schedule for such options
shall not be accelerated by the Company in connection with the Offer or
otherwise after the date hereof.
ARTICLE 2
COVENANTS OF THE COMPANY
ORDINARY COURSE OF BUSINESS. The Company covenants and agrees that, prior to the
time (the "EFFECTIVE TIME") of the appointment or election to the board of
directors of the Company of persons designated by the Acquiror pursuant to
Section 0, unless the Acquiror shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by this Agreement:
The Company shall, and shall cause each corporation or other legal entity
of which the Company or any of its subsidiaries owns or controls,
directly or indirectly, 50% or more of the stock or other equity
interest entitled to vote on the election of members to the board of
directors or similar governing body (collectively its "SUBSIDIARIES")
to conduct its and their respective business only in and not take any
action except in, the usual, ordinary and regular course of business
and consistent with past practice;
The Company shall not directly or indirectly do or permit to occur any of
the following, whether directly or indirectly:
issue, sell, pledge, lease, dispose of, grant any interest in, encumber or
agree to issue, sell, pledge, lease, dispose of, grant any interest in
or encumber (or permit any of its Subsidiaries to issue, sell, pledge,
lease, dispose of, grant
any interest in, encumber or agree to issue, sell, pledge, lease,
dispose of, grant any interest in or encumber):
any additional shares of, or any options, warrants, calls, conversion
privileges or rights of any kind to acquire any shares of, any
capital stock of the Company or any of its Subsidiaries (other
than pursuant to the exercise of employee and director stock
options currently outstanding), or
any assets of the Company having a value individually of more than
US$100,000 or in the aggregate of more than US$500,000, or of any
of its Subsidiaries (except for sales of inventory in the
ordinary course of business and except as required for the lease
for the new Montreal premises);
amend or propose to amend its articles or by-laws or those of any of its
Subsidiaries;
split, combine or reclassify any outstanding Shares, or declare, set aside
or pay any dividend or other distribution payable in cash, stock,
property or otherwise with respect to the Shares;
redeem, purchase or offer to purchase (or permit any of its Subsidiaries to
redeem, purchase or offer to purchase) any Shares or other securities
of the Company or any of its Subsidiaries;
except as set forth in Section 1.5, reorganize, amalgamate or merge the
Company or any of its Subsidiaries with any other person, corporation,
partnership or other business organization whatsoever;
acquire or agree to acquire (by merger, amalgamation, acquisition of stock
or assets or otherwise) any person, corporation, partnership or other
business organization or division or acquire or agree to acquire any
material assets except as necessary or advisable for the purposes of
the relocation of its Montreal office and except for acquisition of
assets in the ordinary course of business having a value not exceeding
individually US$100,000 and in the aggregate US$500,000; or
incur or commit to incur any indebtedness for borrowed money except for
borrowings not exceeding in the aggregate Cdn.$1.5 million for the
purposes of working capital or equipment purchases in the ordinary
course of business and consistent with past practice;
The Company shall not, and shall cause each of its Subsidiaries to not
(otherwise than as may be contemplated in Sections 1.1, 0 and 0 of this
Agreement):
enter into or modify any employment, severance, collective bargaining or
similar agreements, policies or arrangements with, or grant any
bonuses, salary increases, severance or termination pay to, any
officers or directors of the Company other than pursuant to agreements
in effect (without amendment) on the date hereof; or
in the case of employees who are not officers or directors, take any action
other than in the ordinary course of business with respect to the
entering into or modifying of any employment, severance, collective
bargaining or similar agreements, policies or arrangements or with
respect to the grant of any bonuses, salary increases, stock options,
pension benefits, retirement allowances, deferred compensation,
severance or termination pay or any other form of compensation or
profit sharing or with respect to any increase of benefits payable
otherwise than pursuant to agreements, policies or arrangements in
effect (without amendment) on the date hereof;
The Company shall use its reasonable efforts to cause its current insurance (or
re-insurance) policies not to be canceled 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;
The Company shall:
use its reasonable efforts, and cause each of its Subsidiaries to use its
reasonable efforts, to preserve intact their respective business
operations, business organizations and goodwill, to keep available the
services of its officers and employees as a group and to maintain
satisfactory relationships with suppliers, agents, distributors,
customers and others having business relationships with it or its
Subsidiaries;
not take any action, or permit any of its Subsidiaries to take any action,
that would render, or that reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue in any
material respect at any time prior to the Effective Time if then made;
and
promptly notify the Acquiror orally and in writing of any material adverse
change in the normal course of its or any of its Subsidiaries'
businesses or in the operation of its or any of its Subsidiaries'
businesses or in the operation of its or any of its Subsidiaries'
properties, and of any material governmental or third party
complaints, orders, investigations or hearings (or communications
indicating that the same may be contemplated);
The Company shall not settle or compromise any claim brought by any
current, future, former or purported holder of any securities of the
Company in connection with
the transactions contemplated by this Agreement or the Offer prior to
the Effective Time;
The Company shall not enter into or modify any contract, agreement,
commitment or arrangement with respect to any of the matters set forth
in this Section 0, except as contemplated herein; and
The Company shall not settle, compromise or enter into any agreement with
any person with respect to allegations related to infringements of
Intellectual Property (as defined in Section 12 of Schedule A) rights
of such person.
NON-SOLICITATION.
The Company shall not, directly or indirectly, through any officer,
director, employee, representative or agent of the Company or any
of its Subsidiaries, solicit or encourage (including by way of
furnishing information or entering into any form of agreement,
arrangement or understanding) any inquiries or proposals regarding
any merger, amalgamation, reorganization, recapitalization,
take-over bid, sale of substantial assets, sale of treasury shares
or similar transactions involving the Company or any Subsidiaries
of the Company (any of the foregoing inquiries or proposals being
referred to herein as an "ACQUISITION PROPOSAL"), provided nothing
contained in this Section 0 or in any other provision of this
Agreement shall prevent the board of directors of the Company from
considering, negotiating, approving and recommending to the
Shareholders an unsolicited BONA FIDE written Acquisition Proposal
for which adequate financial arrangements have been made, which the
board of directors of the Company determines in good faith (after
consultation with its financial advisors, and after receiving a
written opinion of outside counsel, or advice of outside counsel
that is reflected in the minutes of the board of directors of the
Company, to the effect that the board of directors is required to
do so in order to discharge properly its fiduciary duties) would,
if consummated in accordance with its terms, result in a
transaction more favourable to the Shareholders than the
transaction contemplated by this Agreement (any such Acquisition
Proposal being referred to herein as a "SUPERIOR PROPOSAL").
The Company shall immediately cease and cause to be terminated any existing
discussions or negotiations with any parties (other than the Acquiror)
with respect to any potential Acquisition Proposal. The Company agrees
not to release any third party from any confidentiality agreement
(other than confidentiality agreements entered into in the ordinary
course of business not related to any potential Acquisition Proposal)
or standstill agreement to which the Company and such third party is a
party or to waive any of the provisions of such agreements. The
Company shall immediately request the return or destruction of all
information provided to any third parties who have entered into a
confidentiality agreement with the Company relating to a potential
Acquisition Proposal and shall use all reasonable efforts to ensure
that such requests are honoured.
The Company shall immediately notify the Acquiror of any Acquisition
Proposal or any request for non-public information relating to the
Company or any of its Subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or
records of the Company or any Subsidiary by any person or entity
that informs any member of the board of directors of the Company or
such Subsidiary that it is considering making, or has made, an
Acquisition Proposal. Such notice to the Acquiror shall be made,
from time to time, orally and confirmed in writing and shall
indicate such material details of the proposal, inquiry or contact
known to such person other than the identity of the person making
such proposal, inquiry or contact.
If the board of directors of the Company receives a request for material
non-public information from a party who proposes to the Company a BONA
FIDE Acquisition Proposal and the board of directors of the Company
determines that such proposal is a Superior Proposal pursuant to
Section 0, then, and only in such case, the Company may, subject to
the prior execution and delivery of a confidentiality agreement in
substantially the same form and containing the same restrictions and
limitations as are set forth in the confidentiality agreement then in
effect between the Company and the Acquiror, provide such party with
access to information regarding the Company.
The Company shall ensure that the officers, directors and senior employees
of the Company and its Subsidiaries and any investment bankers or
other advisors or representatives retained by the Company are aware of
the provisions of this Section 0, and the Company shall be responsible
for any breach of this Section 0 by such bankers, advisors or
representatives.
ACCESS TO INFORMATION. Subject to the existing Confidentiality Agreement (the
"CONFIDENTIALITY AGREEMENT") between NationsBanc Xxxxxxxxxx Securities LLC, on
behalf of the Company, and the Acquiror dated June 18, 1998, upon reasonable
notice, the Company shall (and shall cause each of its Subsidiaries to) afford
the Acquiror's officers, employees, counsel, accountants and other authorized
representatives and advisors ("REPRESENTATIVES") reasonable access, during
normal business hours from the date hereof and until the expiration of this
Agreement, to its properties, books, contracts and records as well as to its
management personnel, and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the Acquiror all
information concerning its business, properties and personnel as the Acquiror
may reasonably request, subject to any prior agreements as to confidentiality
binding upon the Company.
EMPLOYMENT ARRANGEMENTS. The Company shall use all reasonable efforts to
negotiate and settle amendments to existing agreements with the senior executive
officers listed in Schedule B hereto as contemplated in Section 0(0).
STANDSTILL, NON-SOLICITATION AND RELATED PROVISIONS. The Company hereby waives
the standstill provisions found in Section 5 of the Confidentiality Agreement in
respect of the Offer and the acquisition of Shares and options for Shares
thereunder in accordance with applicable securities legislation, and
acknowledges that the provisions of the second sentence of Section 11
are no longer effective and have been superseded and replaced by the provisions
of this Agreement. For greater certainty, the parties acknowledge that the
Confidentiality Agreement shall otherwise continue in full force and effect.
ARTICLE 3
FEES AND OTHER ARRANGEMENTS
FEE EVENTS. If at any time after the execution of this Agreement:
the board of directors has withdrawn, redefined or changed,
during the term of the Offer, any of its recommendations,
resolutions or determinations referred to in Section 0 in a
manner adverse to the Acquiror or shall have resolved to do
so;
the board of directors shall have failed to reaffirm its
recommendation of the Acquiror's Offer (i) by press
statement within 5 days after the public announcement or
commencement of any Acquisition Proposal or any amendment
to such Acquisition Proposal, and (ii) in a Directors'
Circular within 10 days after the mailing of any such
Acquisition Proposal or amendment; or
an Acquisition Proposal is made to the Shareholders or to the
Company and upon the expiry of the Offer, Shares have been
taken up and paid for under such other Acquisition Proposal
or such other Acquisition Proposal has not expired or been
withdrawn, and, in either case, the Minimum Condition (as
defined in Schedule A to this Agreement) of the Offer has
not been satisfied;
(each of the above being a "FEE EVENT"), then the Company shall
pay to the Acquiror: (i) if the proposer of the Acquisition
Proposal is an entity that executed a confidentiality agreement
with the Company related to a possible Acquisition Proposal prior
to the date hereof, or an affiliate (within the meaning of the
CANADA BUSINESS CORPORATION ACT ("CBCA")) of, or an entity acting
in concert with such an entity, an aggregate amount of
US$10.0 million; or (ii) in all other cases, an aggregate amount
of US$7.5 million; in either case, in immediately available funds
to an account designated by the Acquiror, such amount to be due
and payable within one business day after the first to occur of
the Fee Events described above; provided that the Company shall
only be obligated to make one payment pursuant to this
Section 3.1.
ARTICLE 4
COVENANTS OF THE ACQUIROR
EMPLOYMENT AGREEMENTS. The Acquiror covenants and agrees, and after the
Effective Time will cause the Company and any successor to the Company, to
agree, to honour and comply with
the terms of those existing written employment agreements and severance
agreements and severance policies of the Company which the Company has disclosed
to the Acquiror in the Disclosure Letter.
INDEMNIFICATION. The Acquiror shall cause the Company to indemnify the existing
directors and officers of the Company to the extent permitted or required by the
CBCA and the by-laws of the Company (as in effect on the date hereof) with
respect to any claim based in whole or in part on, or arising in whole or in
part out of, the fact that such director or officer is or was a director or an
officer of the Company or any of its Subsidiaries.
OFFICERS' AND DIRECTORS' INSURANCE. The Acquiror agrees to use reasonable
efforts to secure directors' and officers' insurance coverage for the Company's
current and former directors and officers on a six-year "TRAILING" (or
"RUN-OFF") basis. If a trailing policy is not available at a reasonable cost (a
"REASONABLE COST" being not greater than the estimated cost of providing the
coverage referred to in this and the next sentence), then the Acquiror agrees
that for the entire period from the Effective Time until three years after the
Effective Time, the Acquiror will cause the Company or any successor to the
Company to maintain the Company's current directors' and officers' insurance
policy or an equivalent policy, subject in either case to terms and conditions
no less advantageous to the directors and officers of the Company than those
contained in the policy in effect on the date hereof ("EQUIVALENT INSURANCE"),
for all current and former directors and officers of the Company, covering
claims made prior to or within three years after the Effective Time. Further,
the Acquiror agrees that after the expiration of that three year period, the
Acquiror will use its reasonable efforts to cause such directors and officers to
be covered under the Acquiror's then existing directors' and officers' insurance
policy.
FINANCING AND PAYMENT FOR THE SHARES. The Acquiror shall ensure that Bidco has
all financing required and otherwise takes all actions necessary to give effect
to this Agreement. Bidco shall take up and pay for all Shares deposited under
the Offer within ten days of the satisfaction or waiver of the Minimum Condition
as defined in Schedule A and if, on such date, all other conditions described in
Schedule A hereto shall have been satisfied or waived.
AMENDMENT TO THE OFFER. The Acquiror hereby agrees that it will not amend,
modify or change the Offer without the prior written consent of the Company
other than to increase the consideration, extend the expiry thereof to a date
not later than November 15, 1998 (unless the Acquiror has taken up Shares under
the Offer on or prior to that date, in which event it may, in its sole
discretion, extend the expiry thereof beyond such date) or waive any conditions
to the Offer. The Acquiror shall consult with the Company with respect to the
terms and conditions of such proposed amendment, modification or change to the
Offer. Notwithstanding this Section 0, the Acquiror may, in its sole discretion,
without any approval from or consultation with the Company, but subject to
compliance with applicable securities laws, amend the Offer or commence another
offer or offers containing such provisions as it may deem necessary or desirable
from time to time, at any time after the announcement of an Acquisition Proposal
by any person other than the Acquiror or Bidco.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
REPRESENTATIONS. The Company hereby provides to the Acquiror, as of the date
hereof, those representations and warranties as set forth in Schedule D to this
Agreement (and acknowledges that the Acquiror is relying upon those
representations and warranties in connection with entering into this Agreement).
INVESTIGATION. Any investigation by the Acquiror and its advisors shall not
mitigate, diminish or affect the representations and warranties of the Company
provided pursuant to this Agreement. Where the provisions of Schedule D or
elsewhere in this Agreement refer to disclosure in writing, such disclosure
shall be made expressly in response to the applicable provision and shall be
signed by a senior officer of the Company.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
REPRESENTATIONS. The Acquiror hereby provides to the Company, as of the date
hereof, those representations and warranties set forth in Schedule E to this
Agreement (and acknowledges that the Company is relying upon such
representations and warranties in connection with the entering into of this
Agreement).
ARTICLE 7
MUTUAL COVENANTS
CONSULTATION. The Acquiror and the Company agree to consult with each other in
issuing any press releases or otherwise making public statements with respect to
the Offer or any other Acquisition Proposal (other than a Superior Proposal) and
in making any filings with any federal, provincial or state governmental or
regulatory agency or with any securities exchange with respect thereto. Each
party shall use its reasonable efforts to enable the other party to review and
comment on all such press releases prior to release thereof.
FURTHER ASSURANCE. Subject to the terms and conditions herein, the Acquiror and
the Company agree to use their respective reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, to consummate the
transactions contemplated by this Agreement and the Offer. The Company and the
Acquiror will, and will cause each of their respective Subsidiaries to, use
their reasonable efforts (i) to obtain all necessary waivers, consents and
approvals from other parties to material loan agreements, leases and other
contracts or agreements (including, in particular but without limitation, the
agreement of any persons as may be required pursuant to any agreement,
arrangement or understanding relating to the Company's or to its Subsidiaries'
operations), (ii) to obtain all necessary consents, approvals and authorizations
as are required to be obtained under any federal, provincial, state or foreign
law or regulations with respect to this Agreement or the Offer, (iii) to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby or
by the Offer, and (iv) to fulfil all conditions and satisfy all provisions of
this Agreement and the Offer. The Acquiror and the Company agree to use
reasonable efforts, and more specifically to make available their respective
personnel, to plan for the smooth integration of the operations of the Company
with those of the Acquiror.
ARTICLE 8
TERMINATION
TERMINATION. This Agreement may be terminated prior to the Effective Time:
by mutual written consent of the Acquiror and the Company;
by either the Acquiror or the Company after November 15, 1998 if the
Acquiror has not accepted and taken-up any Shares pursuant to the
Offer by such date;
by either the Acquiror or the Company, if the Minimum Condition or any
other condition of the Offer has not been satisfied or waived on the
expiry of the Offer, as the same may be extended from time to time by
the Acquiror pursuant to the terms of the Offer;
by the Company (upon payment of the fee set forth in Section 3.1) or by the
Acquiror at any time following the occurrence of a Fee Event as
provided in Section 0; or
by the Company, if the Acquiror does not mail the Offer as provided in
Section 0, provided that no Fee Event has occurred;
except that the obligations set forth in Section 0 shall survive the termination
of this Agreement, other than in respect of a termination pursuant to Section 0
above and any termination pursuant hereto shall be without prejudice to any
rights a party may have related to a breach of representation, warranty or
covenant prior to such termination.
WITHDRAWAL OF OFFER. If this Agreement is terminated as provided in
Sections 0.1, 8.1.2, 8.1.3 or 8.1.4 above, the Acquiror may terminate or
withdraw the Offer without any liability or further obligation under this
Agreement.
ARTICLE 9
MISCELLANEOUS
SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Accordingly, it is agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the
terms and provisions hereof in any national or provincial court having
jurisdiction, this being in addition to any other remedy to which they are
entitled to at law or in equity.
AMENDMENT OR WAIVER. This Agreement may be amended, modified or superseded, and
any of the terms, covenants, representations, warranties or conditions hereof
may be waived, but only by written instrument executed by the Acquiror and the
Company; provided, however, that either the Acquiror or the Company may in its
discretion waive a condition herein which is solely for its benefit without the
consent of the other. No waiver of any nature, in any one or more instances,
shall be deemed or construed as a further or continued waiver of any condition
or any breach of any other term, representation or warranty in this Agreement.
ENTIRE AGREEMENT. This Agreement and the documents referred to herein constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements, arrangements or understandings with
respect thereto.
HEADINGS. The descriptive headings are for convenience of reference only and
shall not control or affect the meaning or construction of any provisions of
this Agreement.
NOTICES. All notices or other communications which are required or permitted
hereunder shall be communicated confidentially and in writing and shall be
sufficient if delivered personally, or sent by confidential telecopier addressed
as follows:
To the Acquiror:
RELTEC CORPORATION
0000 Xxxxxxxxxxx Xx.
Xxxxx 000
Xxxxxxxxx, XX
00000-0000
ATTENTION: XXXXX X. FINE, VICE-PRESIDENT, FINANCE
Facsimile: (000) 000-0000
With a Copy to:
STIKEMAN, XXXXXXX
1155 Xxxx Xxxxxxxx Blvd. West
Suite 4000
Xxxxxxxx, Xxxxxx
X0X 0X0
ATTENTION: XXXXXX X. XXXXXXX
Facsimile: (000) 000-0000
To the Company:
POSITRON FIBER SYSTEMS CORPORATION
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
ATTENTION: XXXXXX XXXXX, PRESIDENT AND CEO
Facsimile: (000) 000-0000
With a Copy to:
XXXXXXXX TTRAULT
00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxx
X0X 0X0
ATTENTION: XXXXXX X. XXXXXXX
Facsimile: (000) 000-0000
To the Intervenant:
POSITRON INC.
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
ATTENTION: XXXXXXXX XXXXXX
Facsimile: (000) 000-0000
With a Copy to:
XXXXXXXXX XXXXXX
Stock Exchange Tower
Suite 3400
800 Place Victoria
Montreal (Quebec)
H4Z 1E9
ATTENTION: XXXXXXX XXXXXXXX
Facsimile: (000) 000-0000
COUNTERPARTS. This Agreement may be executed in any number of counterparts and
each such counterpart shall be deemed to be an original instrument but all such
counterparts together shall constitute but one Agreement.
EXPENSES. Each party will pay its own expenses. The Acquiror and the Company
represent and warrant to each other that, except for NationsBanc Xxxxxxxxxx
Securities LLC and Xxxxxxxxx XxXxxxxx & Partners in the case of the Company, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission, or to the reimbursement of any of its expenses, in
connection with the Offer. The Company has provided to the Acquiror a correct
and complete copy of all agreements between the Company and each of its
financial advisors as are in existence at the date hereof. The Company covenants
not to amend the terms of any such agreements relating to the payment of fees
and expenses without the prior written approval of the Acquiror.
ASSIGNMENT. The Acquiror may assign all or any part of its rights or obligations
under this Agreement to a direct or indirect Subsidiary of the Acquiror, but, if
such assignment takes place, the Acquiror shall continue to be liable to the
Company for any default in performance by the assignee. This Agreement shall not
otherwise be assignable by either party without the prior written consent of the
other party.
SEVERABILITY. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify the Agreement to preserve each party's anticipated
benefits under the Agreement.
CHOICE OF LAW. This Agreement shall be governed by, construed and interpreted in
accordance with the laws of the Province of Quebec.
LANGUAGE. The parties have specifically requested that the present Agreement be
written in the English language. Les parties aux presentes ont expressement
exige que les presentes soient ecrites en langue anglaise.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed on their behalf by their officers thereunto duly authorized as of the
date first written above.
RELTEC CORPORATION
By:
(SIGNED)
---------------------------------
Name:
Title:
POSITRON FIBER SYSTEMS CORPORATION
By:
(SIGNED)
---------------------------------
Name:
Title:
INTERVENTION
Positron Inc. and Xxxxxxxx Xxxxxx hereby acknowledge having received a copy
of this Agreement and, having read the Agreement, agree and undertake for the
benefit of RELTEC Corporation as follows:
1. Each of Positron Inc. and Xxxxxxxx Xxxxxx hereby irrevocably agrees to
deposit or cause to be deposited all the Shares it or he beneficially owns
or controls, directly or indirectly, together with a completed and executed
letter of transmittal, under the Offer as soon as practicable after the
Offer has been made and, in any event, on or before the 3rd business day
after the date that the Offer is made. RELTEC Corporation understands that
Positron Inc. and Xxxxxxxx Xxxxxx are subject to certain restrictions
contained in an escrow agreement described in the Disclosure Letter entered
into in connection with the initial public offering of the Company, and
that Positron Inc.'s and Xxxxxxxx Xxxxxx'x respective obligations to
deposit Shares into the Offer is subject to the requirement of obtaining
consent to the release from such escrow from regulatory authorities,
notably The Toronto Stock Exchange and the Montreal Exchange. Positron Inc.
and Xxxxxxxx Xxxxxx will exercise their best efforts to obtain such consent
on a timely basis.
2. Each of Positron Inc. and Xxxxxxxx Xxxxxx irrevocably agrees not to
withdraw or take any action to withdraw or permit to be withdrawn any of
the Shares it or he beneficially owns or controls, directly or indirectly,
following their deposit under the Offer, notwithstanding any statutory
rights or other rights under the terms of the Offer or otherwise which it
or he might have, prior to the taking up of the Shares under the Offer,
except if the Acquiror or Bidco does not take up Shares under the Offer on
or prior to the date specified in Section 0 of the Agreement (subject,
however, to the rights set forth in Section 3 of this Intervention, which
shall survive the date specified in Section 8.1.2 to February 24) or if the
Acquiror permits the Offer to lapse without taking up Shares before that
date.
3. Notwithstanding Sections 1 and 2 of this Intervention, Positron Inc. and
Xxxxxxxx Xxxxxx may withdraw Shares beneficially owned or controlled by it
or him from the Offer and deposit such Shares in an offer made pursuant to
a Superior Proposal; provided that if RELTEC Corporation modifies the Offer
or makes a new offer, not later than five days prior to the final date for
acceptance and deposit or other action required by Shareholders under the
Superior Proposal, which provides for consideration in cash or in
securities or any combination thereof having a value which is equal to or
greater than the Superior Proposal (a "COUNTEROFFER"), each of Positron
Inc. and Xxxxxxxx Xxxxxx agrees to not withdraw or to deposit or cause to
be deposited (as the case may be) all the Shares it or he beneficially owns
or controls, directly or indirectly, under the Counteroffer and Sections 1,
2 and 3 of this Intervention will apply to such Shares, MUTATIS MUTANDIS.
If a Superior Proposal is made or announced to the Shareholders before
Bidco has taken-up Shares under the Offer, RELTEC Corporation agrees to
cause Bidco not to take up and pay for such Shares of Positron Inc. and
Xxxxxxxx Xxxxxx in a manner which would frustrate the withdrawal rights
granted in this Section 3 unless it has first made or announced a
Counteroffer or the Superior Offer has been withdrawn or has expired
without any Shares being taken up thereunder. If either or both of the
Superior Proposal
and the Counteroffer provides for non-cash consideration to be paid to
Shareholders, the parties shall use reasonable efforts to agree whether the
value of the consideration under the Counteroffer is, or is not, equal to
or greater than the Superior Proposal, and if unable to agree within five
days of the date on which the Board of Directors of the Company mails to
the Shareholders its directors' circular with respect to their
Counteroffer, each of RELTEC Corporation, on the one hand, and Positron
Inc. and Xxxxxxxx Xxxxxx, on the other, shall appoint a securities dealer
or other qualified valuator of securities, which securities dealers or
valuators shall use reasonable efforts to agree such matter. If such
securities dealers or valuators are unable to agree such matter within five
days of their appointment, the two shall appoint a third securities dealer
or other qualified valuator, which shall determine such matter. The fees
and expenses of the securities dealers or other valuators shall be borne by
the parties appointing them, and the fees and disbursements of the third
securities dealer or valuator, if any, shall be borne by the party whose
position relative to the question determined is not consistent with the
determination by the third securities dealer or valuator.
4. Except as expressly permitted by Section 3 of this Intervention, Positron
Inc. and Xxxxxxxx Xxxxxx will not (i) sell or transfer the Shares it
beneficially owns or controls, directly or indirectly, to any party other
than the Acquiror, or (ii) directly or indirectly, through any officer,
director, employee, representative or agent (other than the participation
of Xxxxxxxx Xxxxxx related to the discharge of his fiduciary duties as a
director of the Company, solicit or encourage (including by way of
furnishing information or entering into any form of agreement, arrangement
or understanding) the initiation of any inquiries or proposals regarding,
or participate in or undertake any discussions or negotiations regarding,
the sale or transfer of the Shares it beneficially owns or controls,
directly or indirectly, with any party other than the Acquiror, at any time
prior to the date specified in Section 8.1.2 of the Agreement. Positron
Inc. and Xxxxxxxx Xxxxxx shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties (other than the
Acquiror) with respect to such matters.
5. Positron Inc. is not aware (without having conducted any investigation or
inquiry) that any of the representations and warranties of the Company set
forth in the Agreement are untrue or inaccurate in any material respect.
6. Positron Inc. and Xxxxxxxx Xxxxxx understand that the goodwill,
intellectual property, personnel and expertise of the Company in carrying
out its business are major considerations of RELTEC Corporation agreeing to
make the Offer, and, provided that RELTEC Corporation undertakes in favour
of Positron Inc. as set out below, agree that, for a period of three years
following the first date on which RELTEC Corporation takes up Shares under
the Offer, they will not, directly or indirectly, without the prior consent
of RELTEC Corporation:
design, develop or market fiber optic add/drop multiplexers based on the
synchronous optical network ("SONET") and synchronous digital
hierarchy ("SDH") transmission standards, except that Positron Inc.
may carry on the business of a
contract manufacturer for the Company or for other entities which
carry on such a business in accordance with designs provided by the Company
or such other entities; or
contact or solicit any employee or officer of the Company for the purposes
of offering him or her employment or remunerated work with any person
other than the Company (provided that solicitation of the public in
media of general circulation will not be deemed to be solicitation for
such purposes).
7. The obligations under this Intervention shall terminate if the Offer is not
made on or prior to August 24, 1998 or if the Agreement is terminated for
whatever reasons, Positron Inc. Xxxxxxxx Xxxxxx and RELTEC Corporation
agree, however, that the obligations set out in Section 3 of this
Intervention shall survive the termination of the Agreement until
February 24, 1998 (after which the rights and obligations set out in
Section 3 shall terminate) as a binding agreement between them
notwithstanding termination of the Agreement pursuant to Section 8.1
thereof.
Positron Inc. and Xxxxxxxx Xxxxxx acknowledge that RELTEC Corporation is
relying on this intervention in connection with the Offer pursuant to this
Agreement and further acknowledge that RELTEC Corporation would not have entered
into this Agreement nor would it make the Offer without such intervention.
IN WITNESS WHEREOF, the undersigned has executed this intervention on the date
and at the place first above-mentioned.
------------------------------------
Xxxxxxxx Xxxxxx, for himself and for
Positron Inc.
RELTEC Corporation hereby accepts the terms and conditions of this intervention
by Positron Inc. and Xxxxxxxx Xxxxxx, and agrees that it will not, for a period
of three years following the first date on which RELTEC Corporation takes up
Shares under the Offer, directly or indirectly, without the prior consent of
Positron Inc., contact or solicit any employee or officer of Positron Inc. for
the purposes of offering him or her employment or remunerated work (provided
that solicitation of the public in media of general circulation will not be
deemed to be solicitation for such purposes).
RELTEC CORPORATION
By:
------------------------------
Name:
Title:
SCHEDULE A
TERMS OF THE OFFER
1. GENERAL TERMS. The Offer shall be made by a circular bid prepared in
compliance with the SECURITIES ACT (Quebec) and other applicable securities
laws.
2. EXPIRY DATE. The Offer shall be open until the 21st day following the
mailing of the Offer (provided that the Acquiror may extend such period of
time in its sole discretion to a date no later than November 15, 1998).
3. OFFER PRICE. The Offer shall be made in cash at a price of not less than
US$13.625 per Share (including Shares which may become outstanding on the
exercise of options, warrants or other rights to purchase Shares).
4. CONDITIONS OF THE OFFER. The Offer shall not be subject to any conditions
other than those substantially described as follows:
(a) at the expiry time there shall have been validly deposited under the
Offer and not withdrawn a number of Shares which constitutes at least
66 2/3% of the outstanding Shares (calculated on a Fully Diluted Basis
(the "MINIMUM CONDITION"). When used in this Agreement "Fully Diluted
Basis" shall exclude any options for which option holders of the
Company have agreed to exchange such options into Exchange Options, as
contemplated by Section 1.6 of the Agreement;
(b) the Acquiror shall have determined, acting reasonably, that: (i) no
material right, property, franchise or license of the Company or any
of its Subsidiaries has been or may be impaired (which impairment has
not been cured or waived) or otherwise adversely affected, whether as
a result of the making of the Offer, the taking up and paying for
Shares deposited under the Offer or otherwise which might make it
inadvisable for the Acquiror to proceed with the Offer and/or with the
taking up and paying for the Shares under the Offer, and (ii) no
covenant, term or condition of any instrument or agreement of the
Company or its Subsidiaries not previously disclosed or made available
to the Acquiror prior to the date hereof, exists which might make it
inadvisable for the Acquiror to proceed with the Offer and/or with the
taking up and paying for the Shares under the Offer (including without
limitation any default, acceleration or other adverse event that may
ensue as a result of the Acquiror taking up and paying for the Shares
under the Offer);
(c) there shall not have occurred, developed or come into effect or
existence any event, action, state, condition or major financial
occurrence of national or international consequence or any law,
regulation, action, governmental regulation, inquiry or other
occurrence of any nature whatsoever which, in the judgment of the
Acquiror acting reasonably, materially adversely affects or involves,
or may
materially adversely affect or involve, the financial condition,
business, operations, assets, affairs or prospects of the Company or
any of its Subsidiaries or the timing and consummation of the Offer;
(d) any applicable waiting periods under any competition, merger control
or similar law (including without limitation the XXXX-XXXXX-XXXXXX
ANTITRUST IMPROVEMENTS ACT OF 1976 (United States)), regulation or
other governmental authority having jurisdiction over the Acquiror, or
the Company or the Offer or any other transaction contemplated by the
Offer with respect to any such matters shall have expired or been
terminated in respect of such transactions;
(e) no act, action, suit or proceeding shall have been threatened or taken
before or by any Canadian or United States federal, provincial, state
or foreign court or other tribunal or governmental agency or other
regulatory or administrative agency or commission or by any elected or
appointed public official or private person (including without
limitation any individual, corporation, firm, group or other entity)
in Canada, the United States or elsewhere, whether or not having the
force of law, and no law, regulation or policy shall have been
proposed, enacted, promulgated or applied, whether or not having the
force of law, which could reasonably be expected to have the effect
of:
(i) making illegal, or otherwise directly or indirectly
restraining or prohibiting or making materially more costly
the making of the Offer, the acceptance for payment of,
payment for, or ownership, directly or indirectly, of some or
all of the Shares by the Acquiror, the completion of a
compulsory acquisition or any subsequent acquisition
transaction or the consummation of any of the transactions
contemplated by the Offer;
(ii) prohibiting or materially limiting the ownership or operation
by the Company or any of its Subsidiaries, or by the Acquiror,
directly or indirectly, of all or any material portion of the
business or assets of the Company, on a consolidated basis, or
the Acquiror, directly or indirectly, or compelling the
Acquiror, directly or indirectly, to dispose of or hold
separate all or any material portion of the business or assets
of the Company, on a consolidated basis, or the Acquiror,
directly or indirectly, as a result of the transactions
contemplated by the Offer;
(iii) imposing or confirming limitations on the ability of the
Acquiror, directly or indirectly, effectively to acquire or
hold or to exercise full rights of ownership of the Shares,
including without limitation the right to vote any Shares
acquired or owned by the Acquiror, directly or indirectly, on
all matters properly presented to the Shareholders of the
Company, including without limitation the right to vote any
shares of capital stock of any Subsidiary (other than
immaterial Subsidiaries) directly or indirectly owned by the
Company, except as such rights may be limited by applicable
securities laws and policies;
(iv) requiring divestiture by the Acquiror, directly or indirectly,
of any Shares; or
(v) materially adversely affecting the business, financial
condition or results of operations of the Company and its
Subsidiaries taken as a whole or the value of the Shares to
the Acquiror;
(f) there shall not exist any prohibition at law against the Acquiror
making the Offer or taking up and paying for all of the Shares under
the Offer or completing any compulsory acquisition or any subsequent
acquisition transaction;
(g) there shall not have occurred (or if there shall have occurred prior
to the commencement of the Offer and not publicly disclosed, there
shall not have been generally disclosed or disclosed to the Acquiror
in writing after the commencement of the Offer) any change (or any
condition, event or development involving a prospective change) in the
business, management, assets, capitalization, financial condition,
licenses, permits, rights, privileges or liabilities (including
without limitation any contingent liabilities that may arise through
outstanding, pending or threatened litigation or otherwise other than
as described in Section 2.1.8 of the Agreement), whether contractual
or otherwise, of the Company or any of its Subsidiaries considered as
a whole which, in the reasonable opinion of the Acquiror, is
materially adverse;
(h) the Director of Investigation and Research appointed under the
COMPETITION ACT (Canada) shall not have advised the Acquiror, in
writing, that he intends to oppose the acquisition of the Shares or
that he shall not have taken, threatened to take or advised the
Acquiror that he intends to take proceedings under the merger
provisions of Part VIII or under Section 45 of the COMPETITION ACT in
respect of the purchase of Shares;
(i) (A) neither the board of directors of the Company nor any committee
thereof shall have approved or recommended to the Company's
Shareholders any proposal or any other acquisition of Shares other
than the Offer, (B) no corporation, partnership, person or other
entity or group shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a take-over
bid (other than the Offer), tender offer or exchange offer, merger,
sale of assets, amalgamation, plan of arrangement, reorganization,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction with or involving the Company or
any of its Subsidiaries and (C) neither the board of directors of the
Company nor any committee thereof shall have resolved to do any of the
foregoing; and
(j) there shall not have occurred any material breach by the Company of
any of the representations, warranties or covenants of this Agreement
or any termination of this Agreement pursuant to the terms thereof.
(k) Positron Inc. shall not have repudiated its obligation to tender all
the Shares it beneficially owns, directly or indirectly, pursuant to
the Offer or otherwise breached its obligations contained in the
intervention hereto; and
(l) there shall not have been any amendment to the Company's existing
stock option agreements or senior executive officer employment
agreements, except as set forth in paragraph 1.1(iii) and Section 1.6
of this Agreement and no further issuances of stock options shall have
taken place on or after July 27, 1998.
The foregoing conditions shall be for the exclusive benefit of the Acquiror
and may be waived by the Acquiror in whole or in part at any time and from time
to time, both before or after the expiry time.
SCHEDULE B
POSITRON FIBER SYSTEMS CORPORATION
SENIOR EXECUTIVE OFFICERS
Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Xxxxxx Xxxxxxxxx
Xxxx Xxxxx
Xxxxx Xxxxxx
SCHEDULE C
TERMS OF OPTION EXCHANGE
ROLLOVER OPTIONS
Options for the purchase of Positron Fiber Systems Corporation Common Shares
("POSITRON OPTIONS") currently issued and outstanding, whether vested or
unvested, may be rolled into RELTEC Corporation options for the purchase of
Common Stock, par value $.01 per share ("ROLLED RELTEC OPTIONS") as follows:
Rolled RELTEC Options = Positron Options x Exchange Ratio
"EXCHANGE RATIO" shall mean a fraction, the numerator of which is US$13.625 and
the denominator of which is (in United States dollars) the average of the
closing price for RELTEC Common Stock on the New York Stock Exchange for the
twenty (20) trading days preceding the first day that shares are taken up under
the Offer, as that term is defined under the Pre-Acquisition Agreement between
Positron Fiber Systems Corporation and RELTEC Corporation, and weighted for
trading volumes of RELTEC Common Stock on each such day. No fractional options
will be granted. Rolled RELTEC Options will be rounded to the next lowest whole
number.
Other terms will be substantially similar to the terms of the Positron Options
(i.e., the vesting schedule will carry over from the Positron Options so that
options that were vested remain vested and options that were not vested continue
to vest on the same schedule). For further certainty, immediately following the
rollover of Positron Options, the Optionee will have Rolled RELTEC Options in an
amount and with an exercise price which, if exercised in their entirety, would
result in the same exercise costs to the Optionee as an exercise of the
Optionee's Positron Options would have had if they were exercised in their
entirety immediately prior to the rollover.
MATCHING OPTIONS
RELTEC Corporation will offer to holders of Positron Options the right to
receive an additional RELTEC Option as follows:
If the Optionee rolls vested Positron Options into Rolled RELTEC Options,
Optionee will be granted one RELTEC Option ("Matching RELTEC Option") for each
vested Rolled RELTEC Option received in the exchange, up to a maximum of 50,000
Matching RELTEC Options per Optionee.
Matching RELTEC Options would be issued in a form substantially similar to the
standard form of Non-Qualified Stock Option which has been approved for option
grants under the RELTEC Corporation 1998 Equity Plan (the "Stock Option
Agreement").
Matching RELTEC Options would be forfeitable in the event and to the extent that
the Rolled RELTEC Options (against which the Matching RELTEC Options were
issued) are exercised and the stock issued as a result of the stock option
exercise is sold prior to December 31, 1999.
Thereafter, the Matching RELTEC Options would not be forfeitable as a result of
any subsequent stock sale.
Matching RELTEC Options would vest 20% on each December 31 after the grant of
the option, with the first 20% tranche vesting on December 31, 1999. Vesting
would not be accelerated prior to December 31, 1999 in the event that there is
a "Change in Control" as defined in the Stock Option Agreement prior to that
date.
Matching RELTEC Options will have an exercise price equal to the denominator of
the Exchange Ratio, as described above.
Any reference hereinabove to an "option" shall mean an option to purchase one
share of stock.
SCHEDULE D
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
1. ORGANIZATION. Each of the Company and each of its direct and indirect
Subsidiaries (collectively, the "SUBSIDIARIES") which are listed in the
letter from the Company to the Acquiror dated the date hereof (the
"DISCLOSURE LETTER"), has been duly incorporated or formed under applicable
law, is validly existing and has full corporate or legal power and
authority to own its properties and conduct its businesses as currently
owned and conducted. Except as set forth in the Disclosure Letter, the
Company is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the Company's business or the location
of its properties makes such qualification necessary, except for any such
failure to qualify or to be in good standing as shall not have a material
adverse effect on the Company. All of the outstanding shares of capital
stock and other ownership interests of the Subsidiaries are validly issued,
fully paid and non-assessable and all such shares and other ownership
interests owned directly or indirectly by the Company are owned free and
clear of all material liens, claims or encumbrances, and except as set
forth in the Disclosure Letter, there are no outstanding options, rights,
entitlements, understandings or commitments (contingent or otherwise)
regarding the right to acquire any shares of capital stock or other
ownership interests in any of the Subsidiaries.
2. CAPITALIZATION. The authorized capital of stock of the Company consists of
an unlimited number of preferred shares, issuable in series, and an
unlimited number of common shares. As of the date hereof, there are
13,276,209 Shares issued and outstanding. As at the date hereof, up to a
maximum of 2,100,000 Shares may be issued pursuant to outstanding stock
option entitlements of which the rights to acquire 763,150 Shares are
vested. Except as described in the immediately preceding sentence, there
are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating the Company or any
Subsidiary to issue or sell any shares of any capital stock of the Company
or any of its Subsidiaries or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of the
Company, any Subsidiary or any other person, nor, except as disclosed to
the Acquiror prior to the date hereof, is there outstanding any stock
appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book value, income or any other
attribute of the Company or any Subsidiary.
3. AUTHORITY. The Company has the requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by the board of directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms subject to bankruptcy,
insolvency, reorganization, fraudulent transfer,
moratorium and other laws relating to or affecting creditors' rights
generally and to general principles of equity. Except as set forth in the
Disclosure Letter, the execution and delivery by the Company of this
Agreement and performance by it of its obligations hereunder and (subject
to satisfying the conditions to the Offer specified in Section 4(d) of
Schedule A with respect to subparagraph A(ii) below) the completion of the
Offer and the transactions contemplated thereby, will not:
(A) result in a violation or breach of or default under, require any
consent to be obtained under or give rise to any termination rights
under any provision of:
(i) its or any Subsidiary's certificate of incorporation,
articles, by-laws or other charter documents, including any
unanimous shareholder agreement or any other agreement or
understanding with any party holding an ownership interest in
any Subsidiary;
(ii) any law, regulation, order, judgment or decree; or
(iii) any material contract, agreement, license, franchise or permit
to which the Company or any Subsidiary is bound or is subject
or is the beneficiary;
(B) give rise to any right of termination or acceleration of indebtedness,
or cause any indebtedness to come due before its stated maturity or
cause any available credit to cease to be available; or
(C) result in the imposition of any encumbrance, charge or lien upon any
of its assets or the assets of any Subsidiary, or restrict, hinder,
impair or limit the ability of the Company or any Subsidiary to carry
on the business of the Company or any Subsidiary as and where it is
now being carried on.
4. ABSENCE OF CHANGES. Since March 31, 1998, and except as set forth in the
Disclosure Letter (i) the Company and the Subsidiaries have conducted their
respective businesses only in the ordinary course, (ii) no liability or
obligation of any nature (whether absolute, accrued, contingent or
otherwise) material to the Company or any Subsidiary has been incurred,
except as permitted in this Agreement, and (iii) there has not been any
material adverse change in the financial conditions, results of operations
or businesses of the Company or any Subsidiary.
5. NO SHAREHOLDERS RIGHTS PLAN. The Company is not a party to or bound by any
Shareholders rights plan or other plan of similar nature providing for any
rights of the Shareholders to acquire Shares, other securities or assets of
the Company in the event of an acquisition of a material number of Shares
by an acquiror.
6. EMPLOYMENT AGREEMENTS. Other than as disclosed in the Disclosure Letter,
neither the Company nor any Subsidiary is a party to any written or oral
policy, agreement, obligation or understanding providing for severance or
termination payments to, or any employment agreement with, any person.
7. DISCLOSURE. Except as set forth herein and in the Disclosure Letter or as
publicly disclosed prior to the date hereof, the Company is not aware of
any information known to it regarding any event, circumstance or action
taken or failed to be taken which could materially and adversely affect the
business, operations, assets, capitalization, financial condition,
prospects, rights or liabilities of or relating to the Company or any
Subsidiary.
8. FINANCIAL STATEMENTS. The audited consolidated balance sheets and
consolidated statements of loss and deficit and consolidated statements of
changes in financial position as at or for the periods ended March 31, 1998
and March 31, 1997, as applicable, were prepared in accordance with
generally accepted accounting principles in Canada and adjustments as
required for United States generally accepted accounting principles, as
disclosed in the footnotes to the financial statements, consistently
applied, and fairly present the consolidated financial condition of the
Company at the respective dates indicated and the results of operations of
the Company (on a consolidated basis) for the periods covered.
9. BOOKS AND RECORDS. The corporate records and minute books of the Company
and the material Subsidiaries have been maintained in accordance with all
applicable statutory requirements and as provided to Acquiror were and will
be continued to be complete and accurate in all material respects.
10. LITIGATION, ETC. Except as set forth in the Disclosure Letter, there is no
claim, action, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or relating to the Company or any
Subsidiary or affecting any of their properties or assets before any court
or governmental or regulatory authority or body that, if adversely
determined, is likely to have a material adverse effect on the Company or
any Subsidiary or prevent or materially delay consummation of the
transactions contemplated by this Agreement or the Offer, and the Company
is not aware of any basis for any such claim, action, proceeding or
investigation. Neither the Company nor any Subsidiary is subject to any
outstanding order, writ, injunction or decree that has had or may have a
material adverse effect upon, or prevent or materially delay consummation
of the transactions contemplated by this Agreement or the Offer.
11. ENVIRONMENTAL. Except as set forth in the Disclosure Letter, neither the
Company nor any Subsidiary is aware of, or has received:
(i) any order or directive which relates to environmental matters which
requires any material work, repairs, construction, or capital
expenditures; or
(ii) any demand, notice or other communication with respect to or alleging
the material breach of any environmental, health, or safety law
applicable to the Company or any Subsidiary, including, without
limitation, any regulations respecting the use, storage, treatment,
transportation, or disposition of environmental contaminants or
hazardous substances or materials.
12. PATENT, TRADEMARK AND RELATED MATTERS. Except as set forth in the
Disclosure Letter, no claims have been asserted by any person and the
Company is not aware of any basis
for the assertion of a claim, and neither the Company nor any of its
Subsidiaries has asserted a claim against any person, with respect to any
of the patents, patent rights, trademarks, trademark rights, service marks,
service xxxx rights, tradenames, tradename rights copyrights, know-how,
technology, trade secrets and other proprietary information (collectively
the "INTELLECTUAL PROPERTY") owned or used by the Company or its
Subsidiaries or challenging or questioning the validity or effectiveness of
any license or agreement relating thereto to which the Company or any
Subsidiary is a party. The Intellectual Property owned or used by the
Company is sufficient to permit the Company and its Subsidiaries to conduct
its business as presently conducted.
13. INSURANCE. The Acquiror has been given access to all policies of insurance
of the Company in force as of the date hereof. Except as set forth in the
Disclosure Letter, all such policies of insurance shall remain in force and
effect and shall not be cancelled or otherwise terminated as a result of
the transactions contemplated hereby or by the Offer.
14. TAX MATTERS.
(A) DEFINITIONS. For purposes of this Agreement, the following definitions
shall apply:
(i) The term "TAXES" shall mean all taxes, however denominated,
including any interest, penalties or other additions that may
become payable in respect thereof, imposed by any federal,
territorial, state, local or foreign government or any agency
or political subdivision of any such government, which taxes
shall include, without limiting the generality of the
foregoing, all income or profits taxes (including, but not
limited to, federal income taxes and provincial income taxes),
payroll and employee withholding taxes, unemployment
insurance, social insurance taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes,
transfer taxes, workers' compensation and other governmental
charges, and other obligations of the same or of a similar
nature to any of the foregoing, which the Company or any of
its material Subsidiaries is required to pay, withhold or
collect.
(ii) The term "RETURNS" shall mean all reports, estimates,
declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection
with, any Taxes.
(B) RETURNS FILED AND TAXES PAID. Except as set forth in the Disclosure
Letter, all Returns required to be filed by or on behalf of the
Company or any material Subsidiaries have been duly filed on a timely
basis and such Returns are true, complete and correct. All Taxes
shown to be payable on the Returns or on subsequent assessments with
respect thereto have been paid in full on a timely basis, and no other
Taxes are payable by the Company or any material Subsidiaries with
respect to items or periods covered by such Returns.
(C) TAX RESERVES. Except as set forth in the Disclosure Letter, the
Company has paid or provided adequate accruals in its financial
statements for the year ended dated March 31, 1997 for Taxes,
including income taxes and related deferred taxes, in conformity with
generally accepted accounting principles applicable in Canada.
(D) RETURNS FURNISHED. For all periods ending on and after March 31, 1997,
the Acquiror has been furnished by the Company true and complete
copies of (i) relevant portions of income tax audit reports,
statements of deficiencies, closing or other agreements received by
the Company or any material Subsidiary or on behalf of the Company or
any material Subsidiary relating to Taxes, and (ii) all pro-forma
separate federal and provincial income or franchise tax returns for
the Company or any material Subsidiaries.
(E) TAX DEFICIENCIES; AUDITS; STATUTES OF LIMITATIONS. Except as disclosed
in the Disclosure Letter, no deficiencies exist or have been asserted
with respect to Taxes of the Company or any material Subsidiary.
Neither the Company nor any material Subsidiary is a party to any
action or proceeding for assessment or collection of Taxes, nor has
such event been asserted or threatened against the Company or any
material Subsidiary or any of their respective assets. No waiver or
extension of any statute of limitations is in effect with respect to
Taxes or Returns of the Company or any material Subsidiary. Except as
set forth in the Disclosure Letter, neither the Company nor any
material Subsidiary has agreed to indemnify or reimburse, or to pay
any refund to, any third party for any liability or benefit with
respect to taxes that such third party may owe or be entitled to
receive, as the case may be. Except as set forth in the Disclosure
Letter, the Returns of the Company and any material Subsidiary have
never been audited by a government or taxing authority, nor is any
such audit in process, pending or threatened.
15. PENSION AND TERMINATION BENEFITS. Other than as disclosed in the Disclosure
Letter, the Company has provided adequate accruals in its financial
statements for the year ended March 31, 1998 and for the three months ended
June 30, 1998 (or such amounts are fully funded) for all pension or other
employee benefit obligations of the Company arising under or relating to
each of the pension or retirement income plans or other employee benefit
plans or agreements or policies maintained by or binding on the Company or
any of its Subsidiaries as well as for any other payment required to be
made by the Company in connection with the termination of employment or
retirement of any employee of the Company or any Subsidiary prior to June
30, 1998.
16. UNDISCLOSED LIABILITIES. Except as set forth in the Disclosure Letter or
reflected in the financial statements referred to in Section 8 of this
Schedule D, neither the Company nor any of its Subsidiaries has any
liability or obligation, secured or unsecured (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due), except those
which would not individually or in the aggregate have a material adverse
effect on the Company or any of its Subsidiaries, taken as a whole or
individually.
17. EMPLOYEE BENEFIT PLANS. For purposes of this Section 17, "COMPANY BENEFIT
PLANS" means employee benefit plans and arrangements, including without
restriction those described in Section 3(3) of the EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, as amended (ERISA), with respect to which the
Company or any Subsidiary has a liability, whether direct or indirect,
actual or contingent, and any material bonus, incentive and similar plans
maintained by the Company or any Subsidiary.
(A) The Disclosure Letter sets forth a list of all Company Benefit Plans
and the Company has delivered or made available to the Acquiror
accurate and complete copies of all Company Benefit Plans text and
related agreements.
(B) Except as set forth in the Disclosure Letter, with respect to each
Company Benefit Plan: (i) such plan has been administered in all
material respects in accordance with its terms and applicable law;
(ii) no breach of fiduciary duty or prohibited transaction has
occurred; (iii) no actions, suits, claims or disputes are pending,
or to the knowledge of the Company, threatened, other than routine
claims for benefits; (iv) all contributions and premiums due have
been made on a timely basis; and (v) all contributions made or
required to be made under such Company Benefit Plan meet requirements
for applicable tax deductibility.
18. REAL PROPERTY LEASES
(a) Neither the Company nor any Subsidiary owns any real property. The
Disclosure Letter sets forth a list of all of the leases and subleases
(the "REAL PROPERTY LEASES") under which, as of the date hereof, the
Company or any Subsidiary has the right to occupy space. The Company
has heretofore delivered to the Acquiror a true, correct and complete
copy of all of the Real Property Leases, including all amendments
thereto. Except as set forth in the Disclosure Letter, all Real
Property Leases and material leases pursuant to which the Company or
any Subsidiary leases personal property from others are, in all
material respects, valid, binding and enforceable in accordance with
their terms; neither the Company nor any Subsidiary has received
notice of any default by the Company or any Subsidiary under any Real
Property Lease which would have a material adverse effect; there are
no existing defaults, or any condition or event which with the giving
of notice or lapse of time would constitute a default, by the Company
or any Subsidiary thereunder which would have a material adverse
effect; and, with respect to the Company's or any Subsidiary's
obligations, no uncured default or event or condition exists under any
Real Property Lease which with the giving of notice or the lapse of
time would constitute a default thereunder which would have a material
adverse effect.
(c) All of the land, buildings, structures and other improvements occupied
by the Company and its Subsidiaries in the conduct of its business are
included in the Real Property Leases.
(d) Neither the Company nor any Subsidiary owns or holds, nor is obligated
under or a party to, any option, right of first refusal or other
contractual right to purchase,
acquire, sell or dispose of the Real Property Leases or any portion
thereof or interest therein.
19. COMPLIANCE WITH LAW. Except as set forth in the Disclosure Letter, the
business of the Company and its Subsidiaries is not being conducted and the
properties and assets of the Company and its Subsidiaries are not currently
owned or operated in violation of any law, ordinance, regulation, order,
judgment, injunction, award or decree of any governmental or regulatory
entity or court or arbitrator, except for possible violations which either
individually or in the aggregate do not, and so far as can be reasonably
foreseen will not, have a material adverse effect.
20. INSIDER INTERESTS. Except as set forth in the Disclosure Letter, to the
knowledge of the Company's President and Chief Executive Officer, no
officer or director of the Company or any Subsidiary, and no entity
controlled by any such officer or director, and no relative or spouse who
resides with any such officer or director (i) owns, directly or indirectly,
any material interest in any person that is or is engaged in business,
other than on an arm's-length basis, as a competitor, lessor, lessee,
customer or supplier of the Company or any Subsidiary or (ii) owns, in
whole or in part, any tangible or intangible property that the Company or
any Subsidiary uses in the conduct of the business of the Company and its
Subsidiaries.
SCHEDULE E
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
1. ORGANIZATION. The Acquiror has been duly incorporated and organized, and is
validly existing, as a corporation under the laws of the state of Delaware
and has the requisite corporate power and authority to carry on its
business as it is now being conducted.
2. AUTHORITY. The Acquiror has the requisite corporate power and authority to
enter into this Agreement and to carry out its respective obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized and no other corporate proceedings on the part of the Acquiror
are necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Acquiror
and constitutes a valid and binding obligation of the Acquiror, enforceable
by the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and to general
principles of equity. The execution and delivery of this Agreement by the
Acquiror does not, and the performance by the Acquiror and Bidco of their
obligations hereunder and the consummation of the transaction contemplated
hereby will not, conflict with or result in a violation or breach under,
any of the terms, conditions or provisions of (i) the certificates or
articles of incorporation or by-laws (or comparable charter documents) of
the Acquiror and Bidco, or (ii) subject to the taking of the actions
described in Section 4 of this Schedule E any laws or orders of any
governmental or regulatory authority applicable to the Acquiror or Bidco or
any of its assets or properties;
3. FINANCING. The Acquiror has made adequate arrangements to ensure that
required funds are available to effect payment in full for all Shares
offered to be acquired pursuant to the Offer and pursuant to Section 0 of
the Agreement.
4. NO CONSENT. Except (i) for the filing of a pre-merger notification report
by the Acquiror under the XXXX-XXXXX-XXXXXX ANTITRUST IMPROVEMENTS ACT OF
1976 (United States), (ii) for the filing of the Offer documents with the
securities commissions in all the Canadian provinces in which the holders
of Shares reside and with the Securities and Exchange Commission, no
consent, approval or action of, filing with or notice to any governmental
or regulatory authority or other public or private third party is necessary
or required under any of the terms, conditions or provisions of any law or
order of any governmental or regulatory authority or any contract to which
the Acquiror or Bidco or any of their respective assets or properties is
bound for the execution and delivery of this Agreement by the Acquiror, the
performance by each of the Acquiror or Bidco of its obligations hereunder
or the consummation of the transaction contemplated hereby, other than such
consents, approvals, actions, filings and notices which the failure to make
or obtain, as the case may be, individually or in the aggregate, could not
be reasonably expected to have a material adverse effect on the ability of
the Acquiror or Bidco to consummate the transactions contemplated by this
Agreement;
5. LITIGATION. There are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of the Acquiror, threatened against, relating
to or affecting, nor to the knowledge of the Acquiror are there any
governmental or regulatory authority investigations or audits pending or
threatened against, relating to or affecting the Acquiror or Bidco which
could be reasonably expected to have
a material adverse effect on the ability of the Acquiror or Bidco to
consummate the transaction contemplated by this Agreement, and (ii) neither
the Acquiror nor Bidco is subject to any order of any governmental or
regulatory authority which, could be reasonably expected to have a material
adverse effect on the ability of the Acquiror or Bidco to consummate the
transactions contemplated in this Agreement.
6. OPTION PLAN. The Acquiror's 1998 Stock Option Plan is in effect and the
Acquiror has the corporate power and authority and, subject to filings with
and approval from the Quebec Securities Commission, all regulatory
approvals necessary to permit the Acquiror to issue Options as contemplated
by Section 1.6 of the Agreement.
