EXHIBIT 2.1
EXECUTION COPY
SUPPORT AGREEMENT
THIS AGREEMENT is made the 23rd day of June, 2003,
AMONG:
Corinthian Colleges, Inc., a corporation existing under the laws of the
State of Delaware,
(hereinafter called "PARENT"),
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Corinthian Canada Acquisition Inc., a corporation existing under the
laws of the Province of Ontario, and a subsidiary of Parent
(hereinafter called the "OFFEROR"),
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CDI Education Corporation, a corporation existing under the laws of the
Province of Ontario,
(hereinafter called the "COMPANY").
WHEREAS Parent, through the Offeror, desires to acquire all of the common shares
in the capital of the Company (the "SHARES") and is prepared to make an offer by
way of a take-over bid to purchase the Shares;
AND WHEREAS the board of directors of the Company (the "BOARD OF DIRECTORS") has
determined, after receiving legal and financial advice and following the review
and receipt of recommendations from its special committee of directors and its
financial advisor, that it would be advisable and in the best interests of the
Company for the Board of Directors to cooperate with the Parent and the Offeror
and take all reasonable action to support the Offer (as defined herein) and to
recommend acceptance of the Offer to holders of the Shares (the "SHAREHOLDERS"),
all on the terms and subject to the conditions contained herein;
AND WHEREAS contemporaneously herewith, Parent and the Offeror have entered into
a lock-up agreement (the "LOCK-UP AGREEMENT") with ABM, 1234512 Ontario Inc. and
2020584 Ontario Limited (collectively, the "LOCKED-UP SHAREHOLDER") pursuant to
which the Locked-up Shareholder has agreed to irrevocably tender to the Offer
all Shares owned by the Locked-up Shareholder;
AND WHEREAS certain capitalized terms used herein are defined in Schedule D to
this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the respective
covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each party, the parties hereto hereby agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER
(a) The Offeror shall promptly publicly announce its intention to
make an offer and, subject to the terms and conditions set
forth below, shall make an offer (the "OFFER") to purchase all
of the Shares, including all Shares issuable upon the exercise
of stock options ("OPTIONS") granted pursuant to the Company's
Stock Option Plan prior to the date hereof and all Shares
issuable pursuant to the Convertible Debentures. The terms of
the Offer shall include any amendments to, or extensions of,
such Offer made in accordance with the terms of this
Agreement, including, without limitation, removing or waiving
any condition or extending the date by which Shares may be
deposited. The Offer shall permit a Shareholder who holds
Shares indirectly through a holding company (a "HOLDCO") to
accept the Offer by depositing all of the shares of the Holdco
(the "HOLDCO SHARES") to the Offer for consideration equal to
the consideration such Shareholder would have been entitled to
receive had the Shares owned by such Holdco been deposited
directly under the Offer (the "HOLDCO ALTERNATIVE"), provided
that the Holdco Alternative will only be available to any
particular Shareholder if the terms and conditions which are
set out in Schedule C are satisfied or waived.
(b) The Offeror shall offer to acquire the Shares for $4.33 per
Share, in cash subject to downward adjustment if the Board of
Directors declares, sets aside or pays any dividend or other
distribution payable in cash, stock, property or otherwise,
with respect to the Shares; which adjustment shall be equal to
the amount of such dividend or other distribution.
(c) Subject to subsections 1.1(g), 1.2(b) and 1.2(d), the Offeror
shall mail the Offer and accompanying take-over bid circular,
related letter(s) of transmittal and notice(s) of guaranteed
delivery (such documents, together with the Offer, being
referred to herein as the "BID CIRCULAR") in accordance with
applicable Laws to each registered Shareholder as soon as
reasonably practicable and in any event not later than 11:59
p.m. (Toronto time) on July 13, 2003 ("LATEST MAILING DATE");
provided, however, that if the mailing of the Bid Circular is
delayed by reason of (i) an injunction or order made by a
court or regulatory authority of competent jurisdiction or
(ii) the Offeror not having obtained any regulatory waiver,
consent or approval which is necessary to permit the Offeror
to mail the Offer then, provided that such injunction or order
is being contested or appealed or such regulatory waiver,
consent or approval is being actively sought, as applicable,
then the Latest Mailing Date shall be extended for a period
ending on the earlier of: (i) 11:59 p.m. (Toronto time) on
August 12, 2003 and (ii) the tenth business
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day following the date on which such injunction or order
ceases to be in effect or such waiver, consent or approval is
obtained, as applicable.
(d) Prior to the printing of the Bid Circular, the Offeror shall
provide the Company and its counsel with an opportunity to
review and comment on it, recognizing that whether or not such
comments are appropriate will be determined by the Offeror,
acting reasonably.
(e) The Offer will be made in accordance with applicable Laws and
shall expire no earlier than 12:01 a.m. (local time) on the
36th day after the day (the "MAILING DATE") that the Offer is
mailed to Shareholders, subject to the right of the Offeror to
extend the period during which Shares and Holdco Shares may be
deposited under the Offer (as it may be amended, the "EXPIRY
TIME"). The terms of the Offer shall comply with the terms of
this Agreement. The Offer shall be subject only to the
conditions set forth in Schedule A annexed hereto. The Offeror
agrees that provided all of the conditions to the Offer set
out in Schedule A hereto have been satisfied or waived by the
Offeror, the Offeror shall take up and pay for all of the
Shares and Holdco Shares tendered under the Offer as soon as
reasonably possible and in any event not later than three
business days following the time at which it becomes entitled
to take up such Shares and Holdco Shares under the Offer
pursuant to applicable Laws.
(f) It is understood and agreed that the Offeror may, in its sole
discretion, modify or waive any term or condition of the
Offer, provided that the Offeror will not, without the prior
written consent of the Company, (i) increase the Minimum
Tender Condition, (ii) decrease the consideration per Share,
(iii) change the form of consideration payable under the Offer
(other than to add additional consideration or the option of
Shareholders to choose one or more alternative forms of
consideration in addition to the form of consideration
contemplated herein), or (iv) impose additional conditions to
the Offer.
(g) The obligation of the Offeror to make the Offer by mailing the
Bid Circular to Shareholders is conditional on the prior
satisfaction of the following conditions, all of which
conditions are included for the sole benefit of the Offeror
and any or all of which may be waived by the Offeror in whole
or in part in its sole discretion without prejudice to any
other rights it may have under this Agreement or otherwise and
which shall be deemed to have been waived by the commencement
of the Offer:
(i) the obligations of the Offeror hereunder shall not
have been terminated pursuant to Section 6.1;
(ii) no circumstance, fact, change, event or occurrence
shall have occurred that would render it impossible
for one or more of the conditions set out on Schedule
A hereto to be satisfied;
(iii) the Board of Directors shall have prepared and
approved in final form, printed for distribution to
Shareholders and delivered to the Offeror for mailing
with the Bid Circular a directors' circular (the
"DIRECTORS'
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CIRCULAR"), which circular shall contain a unanimous
recommendation that Shareholders accept the Offer and
a copy of the fairness opinion of CIBC World Markets
Inc. opining that the consideration offered under the
Offer is fair, from a financial point of view, to
Shareholders;
(iv) no cease trade order, injunction or other prohibition
at Law shall exist against the Offeror making the
Offer or taking up or paying for Shares and Holdco
Shares deposited under the Offer;
(v) neither the Company nor the Offeror shall have
received any notice (written or oral) from any
Governmental Authority indicating that any School's
license, permit, accreditation, approval or
registration pursuant to (A) applicable vocational
and/or career training legislation or (B) the federal
or provincial Canada student loan program, will be
suspended or revoked;
(vi) the Offeror shall have received all waivers, rulings
or orders necessary for the making of the Offer or to
mail to Shareholders the Bid Circular from all
applicable securities commissions or other securities
or stock exchange regulatory authorities, including a
ruling which provides that subsection 97(2) of the
Securities Act (Ontario) and the equivalent
provisions of the securities laws of the other
provinces and territories of Canada are not violated
by the employment arrangements proposed for Company
employees;
(vii) the Company shall have complied with its obligations
under this Agreement;
(viii) all representations and warranties of the Company:
(A) that are qualified by a reference to
Material Adverse Effect shall be true and
correct in all respects at the time of the
making of the Offer; and
(B) that are not qualified by a reference to a
Material Adverse Effect shall be true and
correct in all respects at the time of the
making of the Offer unless the failure to be
true or correct has not had or would not
reasonably be expected to have, a Material
Adverse Effect (and, for this purpose, any
reference to "material" or other concepts of
materiality in such representations and
warranties shall be ignored);
(ix) there shall not have occurred or arisen (or there
shall not have been generally disclosed or
discovered, if not disclosed in writing to the
Offeror) any change (or any condition, event or
development involving a prospective change) in the
business, operations, affairs, assets, liabilities
(including any contingent liabilities that may arise
through outstanding, pending or threatened litigation
or otherwise), capitalization, financial condition,
licenses, permits, rights or privileges, whether
contractual or
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otherwise, or prospects of the Company or any of its
Subsidiaries considered on a consolidated basis
which, in the sole judgment of the Offeror,
individually or in the aggregate, has or may have a
material adverse effect either on the value of the
Company and its Subsidiaries considered on a
consolidated basis or on the value of the Shares to
the Offeror;
(x) the Board of Directors shall have passed and not
revoked a resolution terminating all Options
effective upon the take-up and payment by the Offeror
of Shares under the Offer provided that at such time
the Offeror has taken up and paid for, either
directly or indirectly, at least 66 2/3% of the
outstanding Shares on a fully-diluted basis;
(xi) the Board of Directors shall have passed and not
revoked a resolution suspending the operation of the
Employee Stock Purchase Plan such that no Shares
shall be issued pursuant to the Employee Stock
Purchase Plan while it is suspended;
(xii) the corporate governance committee of the Board of
Directors shall have passed and not revoked a
resolution terminating the Employee Stock Purchase
Plan effective upon the take-up and payment by the
Offeror of Shares under the Offer provided that at
such time the Offeror has taken up and paid for,
either directly or indirectly, at least 66 2/3% of
the outstanding Shares on a fully-diluted basis; and
(xiii) in the event that the escrow agreement to be entered
into pursuant to the indemnity agreement between
Xxxxx XxXxxxxx, 1234512 Ontario Inc., Golconda Inc.,
the Company, the Parent and the Offeror
(substantially in the form delivered to such parties)
has not been executed and delivered at the time of
the entering into of this Agreement, the parties
(other than the Offeror, the Parent and the escrow
agent thereunder) shall have executed and delivered
such escrow agreement.
1.2 COMPANY SUPPORT FOR THE OFFER
(a) The Company represents and warrants to and in favour of the
Offeror and Parent, and acknowledges that the Offeror and
Parent are relying upon such representations and warranties in
entering into this Agreement, that, as of the date hereof:
(i) the Board of Directors, based on the recommendation
of its special committee and upon consultation with
its legal and financial advisors, has unanimously
determined that the Offer is in the best interests of
the Company, has unanimously approved the Offer and
this Agreement, and has unanimously passed a
resolution to recommend that Shareholders accept the
Offer; and
(ii) after reasonable inquiry, the Company and the Board
of Directors has been advised and believes that each
of the directors and senior officers of the
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Company intends to directly or indirectly tender
their Shares, including (x) the Shares of which they
are the beneficial owner and (y) the Shares issuable
on the exercise of all Options held by them, to the
Offer, or otherwise agree to tender their Options for
cancellation.
(b) The Company shall prepare and make available for distribution
contemporaneously with the Bid Circular, in both the English
and French languages as may be required by applicable Laws,
sufficient copies of the Directors' Circular, prepared in
accordance with applicable Laws; provided that, in the period
following the date hereof and prior to the making of the
Offer, the Board of Directors has not, in compliance with the
terms of this Agreement, changed or withdrawn its
recommendation set out in paragraph (i) of subsection 1.2(a)
above, the Directors' Circular will reflect the determinations
and recommendations set forth in paragraph (i) of subsection
1.2(a) above, and the Company shall take all reasonable action
to support the Offer on the terms of this Agreement.
(c) Prior to the final approval of the Directors' Circular by the
Board of Directors, the Company shall provide the Offeror with
an opportunity to review and comment on it, recognizing that
whether or not such comments are appropriate will be
determined by the Company and the Board of Directors, acting
reasonably.
(d) The Company shall provide the Offeror, within two (2) business
days following the execution and delivery of this Agreement,
with a current list (in both written and electronic form) of
the registered Shareholders, together with their addresses and
respective holdings of Shares. The Company shall concurrently
provide the Offeror with the names, addresses and holdings of
all Persons having rights issued by the Company to acquire
Shares (including holders of Options and Convertible
Debentures). The Company shall from time to time request that
its registrar and transfer agent furnish the Offeror with such
additional information, including updated or additional lists
of Shareholders, a list of participants in book-based nominee
registered shareholders such as CDS & Co. and CEDE & Co.,
mailing labels and lists of securities positions and other
assistance as the Offeror may reasonably request in order to
be able to communicate the Offer to the Shareholders and to
such other Persons as are entitled to receive the Offer under
applicable Laws. All such deliveries shall be in printed form
and, if available, in computer-readable form.
1.3 DIRECTORS
The Company acknowledges that, promptly upon the purchase by the Offeror
pursuant to the Offer of such number of Shares which, when taken together with
Shares beneficially owned by the Offeror, directly or indirectly, represents in
excess of 50% of the outstanding Shares on a fully diluted basis and from time
to time thereafter, the Offeror shall be entitled to designate such number of
directors of the Board of Directors, and any committees thereof, which would
constitute a majority of the Board of Directors and any committee thereof, and
the Company shall not frustrate the Offeror's attempts to do so and covenants to
co-operate with the Offeror, subject to applicable Law, to enable the Offeror's
designees to be elected or appointed to the Board of Directors and to constitute
a majority of the Board of Directors, including, without
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limitation, at the request of the Offeror, by using its best efforts to increase
the size of the Board of Directors and reasonable commercial efforts to secure
the resignations of such directors as the Offeror may request.
1.4 SUBSEQUENT ACQUISITION TRANSACTION
If, within 120 days after the date of the Offer, the Offer has been accepted by
holders (direct or indirect) of not less than 90% of the Shares, the Offeror
shall, to the extent possible, acquire (a "COMPULSORY ACQUISITION") the
remainder of the Shares from those Shareholders who have not accepted the Offer
pursuant to Section 188 of the Business Corporations Act (Ontario) (the "OBCA").
If that statutory right of acquisition is not available, the Offeror may pursue
other means of acquiring the remaining Shares not tendered to the Offer. The
Company agrees with the Offeror that, in the event the Offeror takes up and pays
for Shares under the Offer representing at least 66 2/3% of the Shares, it will
assist the Offeror in connection with any proposed amalgamation, statutory
arrangement, capital reorganization or other transaction of the Company and the
Offeror or an affiliate of the Offeror (a "SUBSEQUENT ACQUISITION TRANSACTION")
to acquire the remaining Shares that is to be completed within 120 days of the
termination of the Offer, provided that the consideration offered in connection
with the Subsequent Acquisition Transaction is of the same form offered under
the Offer and is at least equivalent in value to the consideration offered under
the Offer.
1.5 PERFORMANCE OF THE OFFEROR
Parent hereby unconditionally and irrevocably guarantees the due and punctual
performance of each and every obligation of the Offeror arising under this
Agreement, including, without limitation, the making of the Offer, subject to
the terms of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE OFFEROR
The Offeror and Parent hereby jointly and severally represent and warrant to the
Company as follows, and acknowledge that the Company is relying upon these
representations and warranties in connection with the entering into of this
Agreement:
2.1 ORGANIZATION
Parent is a corporation validly existing under the Laws of the State of
Delaware. The Offeror is a corporation validly existing under the OBCA. Each of
Parent and the Offeror has the right, power and authority to conduct its
business as conducted at the date of this Agreement.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT
Each of the Offeror and Parent 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 each of the Offeror and Parent and
the consummation of the transactions contemplated by this Agreement have been
duly authorized as necessary by the boards of directors of Parent and the
Offeror and no other corporate proceedings on the part of either Parent or the
Offeror are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of the
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Offeror and Parent and constitutes a valid and binding obligation of each of the
Offeror and Parent, enforceable by the Company against each of the Offeror and
Parent in accordance with its terms. The execution and delivery by each of the
Offeror and Parent of this Agreement and the performance by it of its
obligations hereunder and the completion of the Offer will not violate, conflict
with or result in a breach of any provision of (a) the constating documents of
Parent or the Offeror; or (b) any Law to which Parent or the Offeror is subject
or by which Parent or the Offeror is bound, other than such violations,
conflicts or breaches which will not, individually or in the aggregate, prevent
or materially delay the consummation of the transactions contemplated by this
Agreement. Other than in connection with or in compliance with the provisions of
the Investment Canada Act (if applicable) and Canadian vocational and career
school legislation, no authorization, consent or approval of, or filing with,
any public body, court or authority is necessary on the part of the Offeror or
Parent for the consummation of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals and filings as to which the
failure to obtain or make would not, individually or in the aggregate, prevent
or materially delay consummation of the transactions contemplated by this
Agreement.
2.3 FINANCING
The Offeror has made adequate arrangements to ensure that the required funds
will be available to effect payment in full for the Shares and Holdco Shares
acquired pursuant to the Offer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 REPRESENTATIONS AND WARRANTIES
Except for the exceptions set forth in the Disclosure Schedule, the Company
represents and warrants to the Offeror and Parent as set out in Schedule B
hereto, and acknowledges that the Offeror and Parent are relying upon the
representations and warranties in Schedule B in connection with the entering
into of this Agreement and the making of the Offer.
ARTICLE 4
COVENANTS
4.1 CONDUCT OF BUSINESS BY THE COMPANY
The Company covenants and agrees that, prior to the time (the "EFFECTIVE TIME")
of the first opportunity to appoint or elect to the Board of Directors Persons
designated by the Offeror who represent a majority of the directors of the
Company, unless the Offeror shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by this Agreement:
(a) the Company shall, and shall cause each of the Subsidiaries
to, conduct its and their respective businesses only in, not
take any action except in, and maintain their respective
facilities in, the usual, ordinary and regular course of
business consistent with past practice and in compliance with
applicable Laws;
(b) the Company shall not directly or indirectly do or permit to
occur, and shall cause each of the Subsidiaries not to do or
permit to occur, any of the following:
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(i) issue, sell, pledge, lease, dispose of, encumber,
exclusively license or agree to issue, sell, pledge,
lease, dispose of, encumber or exclusively license
(x) any additional Shares, or any options, warrants,
calls, puts, conversion privileges or rights of any
kind to acquire any Shares, or other securities of
the Company or any of the Subsidiaries, (other than
pursuant to the exercise of Options or Convertible
Debentures currently outstanding); or (y) except in
the usual, ordinary and regular course of business
consistent in type and amount with past practice and
except as set out in the Disclosure Schedule, any
assets of the Company or any of the Subsidiaries;
(ii) amend or propose to amend the articles, by-laws or
other constating documents of the Company or any of
the Subsidiaries;
(iii) split, combine or reclassify any outstanding Shares;
(iv) other than as set out in the Disclosure Schedule,
redeem, purchase or offer to purchase (or permit any
of the Subsidiaries to redeem, purchase or offer to
purchase) any Shares or other securities of the
Company or any shares or other securities of any of
the Subsidiaries;
(v) declare, set aside or pay any dividend or other
distribution payable in cash, stocks property or
otherwise, with respect to the Shares other than in
the ordinary course of business and consistent with
past practice;
(vi) reorganize, amalgamate or merge the Company or any of
the Subsidiaries with any other Person, company,
partnership or other business organization
whatsoever;
(vii) reduce the stated capital of the Company or of any of
the Subsidiaries;
(viii) other than as set out in the Disclosure Schedule,
acquire or agree to acquire (by merger, amalgamation,
acquisition of shares or assets, lease or otherwise)
any Person, company, partnership or other business
organization or division or make any investment
either by purchase of shares or securities,
contributions of capital (other than to any of the
Subsidiaries), property transfer or purchase of, any
property or assets of any other Person, company,
partnership or other business organization other than
the acquisition of inventory in the usual, ordinary
and regular course of business consistent with past
practice;
(ix) sell, transfer, assign (or permit any of the
Subsidiaries to sell, transfer or assign) or licence
any interest in any of the Intellectual Property of
the Company, other than in the ordinary and regular
course of business of the instructional activities of
the Schools, carried on consistent with past
practice;
(x) other than as set out in the Disclosure Schedule,
incur or commit to incur any indebtedness for
borrowed money of the Company and its
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Subsidiaries or any other material liability or
obligation except for (A) the borrowing of working
capital in the ordinary course of business consistent
with past practice; (B) the issuance of letters of
credit; and (C) borrowings for the purpose of funding
capital expenditures permitted under paragraph (xi)
of this subsection 4.1(b), or issue any debt
securities, or guarantee, endorse or otherwise as an
accommodation become responsible for, the obligations
of any other Person, company, partnership or other
business organization, or make any loans or advances;
(xi) make any capital expenditure or incur any obligations
or liabilities in connection therewith in excess of
the capital expenditure schedule set out in the
Disclosure Schedule;
(xii) adopt a plan of liquidation or resolutions providing
for the liquidation or dissolution of the Company or
any of the Subsidiaries;
(xiii) pay, discharge or satisfy any material claims,
liabilities or obligations other than (A) the
payment, discharge or satisfaction, in the usual,
ordinary and regular course of business consistent
with past practice of liabilities reflected or
reserved against in the Company's financial
statements or incurred in the usual, ordinary and
regular course of business consistent in type and
amount with past practice; and (B) the payment,
discharge or satisfaction of the fees and expenses
payable by the Company to its legal counsel and
financial advisors, printers, accountants and other
similar service providers in connection with the
Offer or this Agreement, which fees and expenses
shall not exceed $1,200,000;
(xiv) commence or, other than as set out in the Disclosure
Schedule, settle any litigation, proceeding, claim,
action, assessment or investigation involving the
Company or a Subsidiary before any Governmental
Authority other than small claims commenced or
settled in the ordinary course of business consistent
with past practice; or
(xv) authorize, recommend, propose or agree to any release
or relinquishment of any material contractual right
or other material right under any license or permit,
except in the ordinary and regular course of business
consistent with past practice; provided, however,
that neither the Company nor any Subsidiary shall
authorize, recommend, propose or agree to any release
or relinquishment of any material right under any
license or permit held by the Company or its
Subsidiaries in connection with the Schools or any
course or program (including, without limitation, any
course, program or contract relating to the corporate
education division of the Company) or master
equipment lease program;
(c) the Company shall not, and shall cause each of the
Subsidiaries not to, enter into or modify any employment,
severance, or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination
pay to, any officers or directors other than pursuant to
binding commitments already entered into as disclosed in the
Disclosure Schedule or, in the case of employees who are
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not officers or directors, take any action other than in the
usual, ordinary and regular course of business consistent with
past practice (none of which actions shall be unreasonable or
unusual) with respect to hiring, the grant of any bonuses,
salary increases, severance or termination pay or with respect
to any increase of benefits payable in effect on the date
hereof;
(d) the Company shall not, and shall cause each of the
Subsidiaries not to, adopt or amend any Company Benefit Plans
except as required by applicable Law and except as set out in
the Disclosure Schedule;
(e) the Company shall use all commercially reasonable efforts, and
cause each of the Subsidiaries to use all commercially
reasonable 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;
(f) the Company shall use all commercially reasonable efforts, and
cause each of the Subsidiaries to use all commercially
reasonable efforts, to preserve intact their respective
business organizations, assets and goodwill, to maintain their
respective real property interests (including title to and
leasehold interests in respect of any real property) in good
standing (other than Real Property Leases surrendered in the
ordinary course of business), to keep available the services
of its and their officers and employees as a group, to
maintain satisfactory relationships with students, and not
take any action or omit to take any action, or permit any of
the Subsidiaries to take any action or omit to take any
action, which would render, or which reasonably would be
expected to render, any representation or warranty made by it
in this Agreement untrue at any time prior to the Expiry Time
if then made; and promptly notify the Offeror in writing of
any event or occurrence that would reasonably be expected to
have a Material Adverse Effect in the usual, ordinary and
regular course of its or any of the Subsidiaries' businesses
or in the operation of its or any of the Subsidiaries'
properties and of any governmental or third party complaints,
investigations or hearings (or communications indicating that
the same may be contemplated);
(g) except as disclosed in the Disclosure Schedule, the Company
and each of the Subsidiaries shall: (i) duly and timely file
all Tax returns required to be filed by it on or after the
date hereof and ensure that all such Tax returns are true and
complete and correct in all material respects; (ii) timely pay
all Taxes which are due and payable (other than those which
are being contested in good faith and in respect of which
reserves have been provided in the financial statements of the
Company contained in the Company's Public Documents); (iii)
not make or rescind any election relating to Taxes; (iv) not
make a request for a Tax ruling or enter into a closing
agreement with any taxing authorities; (v) not settle or
compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy
relating to Taxes; and (vi) not change in any material respect
any of its methods of reporting income, deductions or
accounting
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for income Tax purposes from those employed in the preparation
of its income Tax return for the taxation year ending December
31, 2002, except as may be required by applicable Law;
(h) the Company shall continue to file all documents or
information required to be filed by the Company under
applicable Laws or with the Toronto Stock Exchange (the
"TSX"), in accordance with timelines prescribed under
applicable securities Laws and by the TSX, and all such
documents or information, when filed, shall comply as to form
in all material respects with the requirements of applicable
Laws and the rules of the TSX and shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(i) the Company shall not make or permit to be made any change to
any accounting method, policy or principle used by the Company
and its Subsidiaries, except as may be prescribed by the
Canadian Institute of Chartered Accountants including any
prescribed changes to GAAP;
(j) except as otherwise described in this Agreement, the Company
shall not, and shall not permit any of the Subsidiaries to,
authorize or propose, or enter into or modify any contract,
agreement, commitment or arrangement, to do any of the matters
prohibited by the other paragraphs of this Section 4.1;
(k) the Company shall use all reasonable commercial efforts to
satisfy (or cause the satisfaction of) the conditions of the
Offer set forth in Schedule A to this Agreement, to the extent
the same is within its control, and take, or cause to be
taken, all other action and to do, or cause to be done, all
other things necessary, proper or advisable under all
applicable Laws to support the Offer, including using its
reasonable commercial efforts to:
(i) obtain all necessary consents, approvals and
authorizations as are required to be obtained by it
under any applicable Law;
(ii) co-operate with the Offeror to oppose, lift or
rescind any injunction or restraining order or other
order or action seeking to stop, or otherwise
adversely affect the Offeror's ability to consummate
the Offer;
(iii) co-operate with the Offeror in connection with the
performance by it of its obligations hereunder; and
(l) the Company shall make or co-operate as necessary in the
making of all necessary filings and applications under all
applicable Laws required in connection with the transactions
contemplated herein and take all reasonable action necessary
to be in compliance with such Laws.
- 12 -
4.2 COVENANTS OF THE OFFEROR AND PARENT
(a) Each of the Offeror and Parent covenants and agrees that,
except as contemplated in this Agreement, until the Expiry
Time or the day upon which this Agreement is terminated,
whichever is earlier:
(i) it shall use all reasonable commercial efforts to
satisfy (or cause the satisfaction of) the conditions
of the Offer set forth in Schedule A to this
Agreement, to the extent the same is within its
control, and take, or cause to be taken, all other
action and to do, or cause to be done, all other
things necessary, proper or advisable under all
applicable Laws to complete the Offer, in accordance
with the terms thereof, including using its
reasonable commercial efforts to: (i) obtain all
necessary consents, approvals and authorizations as
are required to be obtained by it under any
applicable Law and to satisfy any condition provided
for under this Agreement; (ii) oppose, lift or
rescind any injunction or restraining order or other
order or action seeking to stop, or otherwise
adversely affect its ability to consummate the Offer;
and (iii) co-operate with the Company in connection
with the performance by it of its obligations
hereunder;
(ii) it shall make or co-operate as necessary in the
making of all necessary filings and applications
under all applicable Laws in connection with the
transactions contemplated herein, and take all
reasonable action necessary to be in compliance with
such Laws; and
(iii) it shall use its reasonable commercial efforts to
conduct its affairs so all of its representations and
warranties contained herein shall be true and correct
in all material respects on and as of the Expiry Time
as if made thereon.
(b) Parent and the Offeror agree that if, prior to the printing of
the Bid Circular, the Department of Canadian Heritage under
the Investment Canada Act has confirmed in writing that a
filing with the Department of Canadian Heritage under the
Investment Canada Act (and applicable policies) is not
required in respect of the Offer based on the undertakings of
the Company, Parent and the Offeror to outsource the direct
sale of textbooks by the Company to students (and the
undertaking of the Company is satisfactory to Parent and the
Offeror, acting reasonably), then Parent and the Offeror shall
not include the Investment Canada Act approval condition set
forth in paragraph (c) of Schedule A in the Offer. If the
Department of Canadian Heritage indicates in writing that it
will not provide such confirmation or such confirmation is not
received within 30 days of the date of the Offer, then the
Offeror shall forthwith after the earlier of such event apply
for review under the Investment Canada Act.
- 13 -
ARTICLE 5
MISCELLANEOUS
5.1 FURTHER ASSURANCES
Subject to the conditions herein provided, each party agrees to use all
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 to consummate and make
effective as promptly as is practicable the transactions contemplated by the
Offer and this Agreement, including (i) the execution and delivery of such
documents as the other parties may reasonably require and (ii) obtaining such
information, documents or consents required in connection with the preparation
of the Bid Circular, and using reasonable best efforts to obtain all necessary
waivers, consents and approvals and to satisfy any condition provided for under
this Agreement, including without limitation those set forth in Sections 2.2 and
paragraph 5 of Schedule B and to effect all necessary registrations and filings,
including, but not limited to, filings under applicable Laws and submissions of
information requested by Governmental Authorities. Each of the parties shall
co-operate in all reasonable respects with the other parties in taking such
actions.
5.2 NO SOLICITATIONS
(a) The Company acknowledges that since April 1, 2003 it has
complied with the provisions of the Exclusivity Agreement. The
Company shall not and shall cause its Subsidiaries to not,
directly or indirectly, through any officer, director,
employee, advisor, representative, agent or otherwise
(including for greater certainty any investment banker, lawyer
or accountant), (i) make, solicit, initiate, encourage or
otherwise facilitate (including by way of furnishing
information or entering into any form of agreement,
arrangement or understanding) inquiries from or submissions of
proposals or offers from any other Person, company,
partnership or other business organization whatsoever
(including any of its officers or employees) relating to any
liquidation, dissolution, recapitalization, merger,
amalgamation or acquisition or purchase of all or a material
portion of the assets of, or any equity interest (including
Shares) in, the Company or any of the Subsidiaries or other
similar transaction or business combination involving the
Company or any of the Subsidiaries (any of such foregoing
inquiries or proposals being referred to herein as an
"ACQUISITION PROPOSAL"); (ii) participate in any discussions
or negotiations regarding, or furnish to any Person any
information with respect to or otherwise co-operate in any way
with, respond to, assist or participate in, facilitate or
encourage any effort or attempt by any other Person to do or
seek to do any of the foregoing; or (iii) approve or recommend
any Acquisition Proposal. Notwithstanding the preceding
sentence, nothing contained in this subsection 5.2(a) or any
other provision of this Agreement shall prevent the Board of
Directors from considering, participating in any discussions
or negotiations with respect to, co-operating in any way with,
entering into a confidentiality agreement and providing
information pursuant to Section 5.2(d) regarding or, subject
to compliance with Section 5.3, entering into any agreement,
arrangement or understanding in respect of, an unsolicited
bona fide written Acquisition Proposal (i) that is not subject
to a financing contingency and in respect of which adequate
arrangements have been made to ensure that the required funds
will be available to effect payment in full for all Shares,
(ii) that
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did not otherwise result from a breach of this Section 5.2,
and (iii) that the Board of Directors has determined in good
faith (after consultation with its financial advisors and with
outside counsel) is reasonably capable of being completed,
taking into account all legal, financial, regulatory and other
aspects of such proposal and the party making the proposal
and, would, if consummated in accordance with its terms as
proposed, result in a transaction which is more favourable to
Shareholders from a financial point of view than the Offer (a
"SUPERIOR PROPOSAL").
(b) The Company acknowledges that since April 1, 2003 it has
complied with the provisions of the Exclusivity Agreement and
shall and shall cause the officers, directors, employees,
representatives and agents of the Company and the Subsidiaries
to immediately cease and cause to be terminated, any existing
discussions or negotiations with any parties (other than
Parent and the Offeror) with respect to any proposal that
constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal. The Company agrees not to release any
third party from any confidentiality or standstill agreement
to which the Company and such third party are parties, or
waive any provision thereunder. 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 any potential
Acquisition Proposal and shall use all reasonable efforts to
ensure that such requests are honoured.
(c) The Company shall immediately provide notice to Parent of any
bona fide Acquisition Proposal or any request for non-public
information relating to the Company or any of the Subsidiaries
in connection with such a bona fide Acquisition Proposal or
for access to the properties, books or records of the Company
or any Subsidiary by any Person that informs the Company, any
member of the Board of Directors or such Subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such
notice to Parent shall be made from time to time upon a member
of the Board of Directors or a senior officer becoming aware
of such request or proposal, first immediately orally and then
promptly in writing and shall indicate the identity of the
Person making such proposal, inquiry or contact, all material
terms thereof and such other details of the proposal, inquiry
or contact known to the Company as the Offeror may reasonably
request.
(d) If the Company receives a request for non-public information
or access to properties, books or records of the Company or
any of the Subsidiaries from a party who proposes to the
Company an unsolicited bona fide written Acquisition Proposal
and the Company is permitted, subject to and as contemplated
under this Section 5.2 to negotiate the terms of such
Acquisition Proposal then, and only in such case, the Company
may provide such party with access to information regarding
the Company, subject to the execution of a confidentiality
agreement which is substantially similar to the agreement then
in effect between the Company and Parent and providing for
standstill provisions other than to effect a Superior
Proposal, provided however that the Company sends a copy of
any such confidentiality agreement to Parent promptly upon its
execution and Parent is
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provided with a list of or copies of the information provided
to such Person and is immediately provided with access to
similar information to which such Person was provided.
(e) The Company shall ensure that the officers and directors 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, and the Company shall
be responsible for any breach of this Section 5.2 by such
officers, directors, employees, bankers, advisors or
representatives.
5.3 NOTICE BY THE COMPANY OF SUPERIOR PROPOSAL DETERMINATION
(a) Subject to compliance with Section 5.2, and subject to
Parent's rights under Section 5.4 and this Section 5.3, the
Company may approve or recommend any agreement, understanding
or arrangement in respect of a Superior Proposal if, and only
if: (i) it has provided the Offeror with a copy of the
Superior Proposal document; and (ii) five business days (the
"MATCH PERIOD") shall have elapsed from the later of (A) the
date the Offeror received written notice ("SECTION 5.3
NOTICE") advising the Offeror that the Board of Directors has
resolved, subject only to compliance with this Section 5.3, to
accept, approve, recommend or enter into an agreement,
understanding or arrangement in respect of such Superior
Proposal, specifying the terms and conditions of such Superior
Proposal and identifying the Person making such Superior
Proposal and (B) the date the Offeror received a copy of such
Superior Proposal.
(b) During a Match Period, the Company agrees that the Offeror
shall have the right, but not the obligation, to offer to
amend the terms of this Agreement and/or the Offer. The Board
of Directors will review any offer by the Offeror to amend the
terms of this Agreement and/or the Offer in good faith in
order to determine, in its discretion in the exercise of its
fiduciary duties, whether the Offeror's offer, upon acceptance
by the Company, would result in such Superior Proposal ceasing
to be a Superior Proposal. If the Board of Directors so
determines, it will enter into an amended agreement with the
Offeror and Parent reflecting the Offeror's amended proposal.
If the Board of Directors continues to believe, in good faith,
after consultation with its financial advisors and outside
counsel, that such Superior Proposal remains a Superior
Proposal and therefore rejects the Offeror's offer to amend
the terms of this Agreement and/or the Offer, the Company may
terminate this Agreement pursuant to Section 6.1(e); provided
however, that the Company must pay to Parent the fee payable
to Parent under Section 5.4(a) prior to the termination of
this Agreement and the entering into of a definitive written
agreement, understanding or arrangement regarding such
Superior Proposal. The Company acknowledges and agrees that
the payment of the fee payable under Section 5.4(a) is a
condition to the valid termination of this Agreement under
Section 6.1(e) and this Section 5.3.
(c) The Company also acknowledges and agrees that each successive
amendment to any Acquisition Proposal shall constitute a new
Acquisition Proposal for purposes of the requirement under
clause (ii) of Section 5.3(a) to initiate an additional
Section 5.3 Notice and Match Period.
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5.4 EXPENSE REIMBURSEMENT
(a) If at any time after the execution of this Agreement:
(i) the Board of Directors withdraws, modifies or changes
any of its recommendations or determinations in a
manner adverse to the Offeror or resolves to do so or
recommends that Shareholders accept or vote in favour
of another transaction;
(ii) the Board of Directors approves or recommends an
Acquisition Proposal;
(iii) the Board of Directors shall have failed to reaffirm
its recommendation of the Offer by press statement
within two business days after receiving a written
request to do so by Parent following the public
announcement of any Acquisition Proposal (or, in the
event that the Offer shall be scheduled to expire
within such two business day period, prior to the
scheduled expiry of the Offer); or
(iv) the Offer is not completed (other than as a result of
(A) the conditions to the Offer in paragraphs (b),
(c), (f), (j), (l) or (m) of Schedule A not being
satisfied or waived or (B) the condition to the Offer
in paragraph (k) of Schedule A not being satisfied or
waived if (X) the Support Agreement is terminated by
the Company under subsection 6.1(c), subsection
6.1(d) or 6.1(f) or (Y) the Support Agreement is
terminated by the Parent or the Offeror if such
termination is pursuant to clause 6.1(b)(i) where the
condition to the making of the Offer that is
unsatisfied is set out in Section 1.1(g)(vi) or
Section 1.1(g)(ix) or (Z) the Support Agreement is
terminated by the Parent or the Offeror pursuant to
subsection 6.1(g) where the condition(s) relied upon
to exercise the rights of termination are set out in
paragraphs (b), (c), (f), (j), (l) or (m) of Schedule
A) and in each case the Company consummates an
Acquisition Proposal that: (i) consists of a merger,
arrangement, amalgamation or other agreement
resulting in the direct or indirect acquisition by
any Person of more than 50% of the outstanding Shares
of the Company or (ii) that consists of the sale of
assets of the Company and its Subsidiaries to another
Person with a total enterprise consideration in
excess of $25 million, in each case at any time
within twelve months following the expiry of the
Offer;
then the Company shall pay to the Offeror forthwith after such
event, by way of certified cheque or wire transfer in
immediately available funds, on account of the Offeror's and
Parent's out-of-pocket costs and expenses, an amount equal to
the greater of (i) $1.5 million and (ii) the amount of the
out-of-pocket costs and expenses of the Offeror and the Parent
(plus applicable goods and services tax and any similar
applicable value-added or multi-staged tax) incurred solely in
connection with evaluating, negotiating, structuring,
integration planning, pursuing and completing or seeking to
complete the Offer, as supported by detailed invoices.
- 17 -
(b) For greater certainty, the obligations of the Company under
this Section 5.4 shall survive termination of this Agreement,
regardless of the circumstances thereof.
5.5 NOTIFICATION OF CERTAIN MATTERS
Each party shall give prompt notice to the others of: (a) the occurrence or
failure to occur of any event, which occurrence or failure would cause or may
cause any representation or warranty on its part contained in this Agreement to
be untrue or inaccurate in any material respect at any time from the date hereof
to the Effective Time; and (b) any failure of such party, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
giving of notice in accordance with this Agreement shall not cure any breach or
default by any party under this Agreement.
5.6 INVESTIGATION
(a) Upon reasonable notice, the Company shall (and shall cause
each of its Subsidiaries to) afford Parent's or the Offeror's
officers, employees, counsel, accountants and other authorized
representatives and advisors reasonable access, during normal
business hours from the date hereof and until the earlier of
the Effective Time or the termination of this Agreement, to
its and its Subsidiaries' properties, books, contracts and
records as well as to its management and supervisory personnel
(provided that arrangements for access are co-ordinated
through the Company's senior management), and during such
period, Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Parent or the Offeror all
information concerning Company's and its Subsidiaries'
businesses, properties and personnel as Parent or the Offeror
may reasonably request subject to confidentiality obligations
of the Company and the Subsidiaries. Any further investigation
by a party hereto and its advisors shall not mitigate,
diminish or affect the representations and warranties of the
other parties contained in this Agreement or any document or
certificate given pursuant hereto.
(b) Each of the Offeror and the Parent acknowledges that
information provided to it under Section 5.6(a) above will be
non-public and/or proprietary in nature and will be subject to
the terms of the Confidentiality Agreement and Section 5.6(a).
For greater certainty, the provisions of the Confidentiality
Agreement shall survive the termination of this Agreement.
5.7 SHAREHOLDER CLAIMS
The Company shall not settle or compromise any claim brought by any present,
former or purported holder of any securities of the Company in connection with
the transactions contemplated by this Agreement prior to the Effective Time
without the prior written consent of the Offeror which shall not be unreasonably
withheld or delayed.
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION
The Offeror and the Parent agree that the Offeror and the Parent will (a) cause
the Company to purchase "runoff" directors' and officers' insurance for a period
of six years provided that it is available at a cost not in excess of the
aggregate of the annual premiums referred to in
- 18 -
subparagraph 5.8(b) below, or, if it is not available at such cost, (b) will
cause the Offeror and the Parent to maintain the Company's current directors'
and officers' insurance policy or an equivalent policy so long as the annual
premium therefor is not in excess of 150% of the last annual premium paid prior
to the date hereof ("CURRENT PREMIUM"), in each case such insurance to be
subject 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"), and in each case such insurance to cover all
current and former directors and officers of the Company for claims made prior
to or within six years after the Effective Date. Further, the Offeror and the
Parent agree that after the expiration of that six year period, the Offeror and
the Parent will use all commercially reasonable efforts to cause such directors
and officers to be covered under the Offeror's then existing directors' and
officers' insurance policy, provided such coverage can be obtained for a premium
not in excess of 150% of the Current Premium. The Offeror and the Parent shall
cause the Company (or its successor) to maintain, and not amend in a manner
adverse to the directors and/or officers of the Company or its Subsidiaries, any
indemnities currently provided to the directors and officers of the Company and
its Subsidiaries under their respective charter, by-laws, applicable Laws and
contracts of indemnity. The provisions of this paragraph are (i) for the benefit
of, and shall be enforceable by, each indemnified party, his or her heirs,
executors, administrators and other legal representatives and (ii) in addition
to, and not in substitution for, any other rights to indemnification or
contribution that any such Person may have by contract or otherwise.
5.9 REORGANIZATION
The Company agrees that, upon request by the Offeror, the Company shall (i)
effect such reorganizations of its business, operations and assets or such other
transactions as the Offeror may request, acting reasonably (each a
"PRE-ACQUISITION REORGANIZATION") and (ii) co-operate with the Offeror and its
advisors in order to determine the nature of the Pre-Acquisition Reorganizations
that might be undertaken and the manner in which they might most effectively be
undertaken; provided that the Pre-Acquisition Reorganizations are not
prejudicial to the Company in any material respect and do not result in any
breach by the Company of any of its covenants, representations or warranties
under this Agreement. The Offeror shall provide written notice to the Company of
any proposed Pre-Acquisition Reorganization at least ten business days prior to
the Expiry Time. Upon receipt of such notice, the Offeror and the Company shall
work co-operatively and use commercially reasonable efforts to prepare prior to
the Expiry Time all documentation necessary and do all such other acts and
things as are necessary to give effect to such Pre-Acquisition Reorganization.
The completion of any such Pre-Acquisition Reorganization shall be effected
immediately prior to any take-up by the Offeror of Shares tendered to the Offer.
ARTICLE 6
TERMINATION, AMENDMENT AND WAIVER
6.1 TERMINATION
This Agreement may be terminated by notice in writing:
- 19 -
(a) at any time prior to the Effective Time by mutual written
consent of Parent, the Offeror and the Company;
(b) by Parent or the Offeror at any time:
(i) after the Latest Mailing Date if any condition to
making the Offer is not satisfied or waived by such
date;
(ii) if the Company is in default of any material covenant
or obligation under this Agreement; or
(iii) if any representation or warranty of the Company:
(A) that is qualified by a reference to a
Material Adverse Effect shall be untrue or
incorrect in any respect; or
(B) that is not qualified by a reference to a
Material Adverse Effect shall be untrue or
incorrect, in any respect unless the failure
to be true or correct has not had or would
not reasonably be expected to have, a
Material Adverse Effect (and, for this
purpose, any reference to "material" or
other concepts of materiality in such
representations and warranties shall be
ignored);
provided in the case of (ii) and (iii) that the Offeror
delivers written notice to the Company of such breach, failure
to perform or observe or default, and such breach, failure to
perform or observe or default shall not have been cured by the
Company by the earlier of the Expiry Time or the close of
business on the fifth business day following the giving of
such notice;
(c) by the Company at any time (i) if the Offeror or Parent is in
default of any material covenant or obligation under this
Agreement to be performed by them; or (ii) if any
representation or warranty of the Offeror or Parent under this
Agreement shall be untrue or incorrect in any material
respect; provided in each case that the Company delivers
written notice to the Offeror or Parent of such breach,
failure to perform or observe or default, and such breach,
failure to perform or observe or default shall not have been
cured by the Offeror and/or Parent, as the case may be, by the
earlier of the Expiry Time or the close of business on the
fifth business day following the giving of such notice;
(d) by the Company if the Offeror has not taken up and paid for
Shares and Holdco Shares deposited under the Offer within 90
days after the Bid Circular is mailed to the Shareholders,
otherwise than as a result of the breach by the Company of any
material covenant or obligation under this Agreement or as a
result of any representation or warranty of the Company in
this Agreement being untrue or incorrect in any material
respect; provided, however, that if the Offeror's take-up and
payment for Shares and/or Holdco Shares deposited under the
Offer is delayed by (i) an injunction or order made by a court
or regulatory authority of competent jurisdiction, or (ii) the
Offeror not having obtained any regulatory waiver, consent or
approval which is necessary to permit the Offeror to take up
- 20 -
and pay for Shares and/or Holdco Shares deposited under the
Offer or necessary for the Company to continue to carry on its
business as currently conducted, then, provided that such
injunction or order is being contested or appealed or such
regulatory waiver, consent or approval is being actively
sought, as applicable, this Agreement shall not be terminated
by the Company pursuant to this subsection 6.1(d) until the
earlier of (A) 120 days after the Offer is commenced, and (B)
the tenth business day following the date on which such
injunction or order ceases to be in effect or such waiver,
consent or approval is obtained, as applicable;
(e) by the Company in order to enter into a definitive written
agreement, understanding or arrangement with respect to a
Superior Proposal, subject to compliance with Section 5.2, and
5.3 of this Agreement and provided the amount required to be
paid pursuant to Section 5.4(a) has been paid;
(f) by the Company if the Offeror does not mail the Offer within
the time contemplated by Section 1.1(c) (other than as a
result of any act of the Company or breach by the Company of
any of its obligations hereunder or because any of the
conditions to the making of the Offer was not satisfied or
waived);
(g) by the Offeror, at any time after the 45th day from the date
that the Bid Circular is mailed to Shareholders, if any
condition of the Offer is not satisfied at the Expiry Time of
the Offer and the Offeror elects not to waive such condition;
provided, however, that if the condition which is not
satisfied is either (i) the regulatory condition set forth in
paragraph (b) of Schedule A or (ii) the Investment Canada
condition set forth in paragraph (c) of Schedule A then this
Agreement shall not be terminated by Parent or the Offeror
pursuant to this subsection 6.1(g) until (A) the 60th day
following the date that the Bid Circular is mailed to
Shareholders in the event that the unsatisfied condition is
the regulatory condition set forth in paragraph (b) of
Schedule A or (B) the 45th day following a filing by the
Offeror with the Department of Canadian Heritage under the
Investment Canada Act (and applicable policies) in the event
that the unsatisfied condition is the Investment Canada
condition set forth in paragraph (c) of Schedule A;
(h) by Parent or the Offeror if: (i) the Board of Directors
withdraws, modifies or changes its recommendation in favour of
the Offer; (ii) the Board of Directors approves or recommends
acceptance of an Acquisition Proposal, or (iii) the Board of
Directors shall have failed to reaffirm its recommendation of
the Offer by press statement within two business days after
receiving a written request to do so by Parent following the
public announcement of any Acquisition Proposal (or, in the
event that the Offer shall be scheduled to expire within such
two business day period, prior to the scheduled expiry of the
Offer).
6.2 AMENDMENT
This Agreement may not be amended except by an instrument signed by each of the
parties hereto.
- 21 -
6.3 WAIVER
At any time prior to the Effective Time, any of the parties may: (a) extend the
time for the performance of any of the obligations or other acts of the other
parties; or (b) waive compliance with any of the agreements of the other parties
or with any conditions to its own obligations, in each case only to the extent
such obligations, agreements or conditions are intended for its benefit.
6.4 EFFECT OF TERMINATION
If this Agreement is terminated as provided in Section 6.1, there shall be no
liability or further obligation on the part of any party hereto or any of their
respective shareholders, officers or directors, except for liability arising
from a breach of any covenant, representation or warranty in this Agreement or
common Law fraud and except for the obligation of the Company to pay any amounts
payable by it in accordance with Section 5.4 of this Agreement.
ARTICLE 7
GENERAL PROVISION
7.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon termination of this Agreement pursuant to Section
6.1, as the case may be, except as set forth in Section 6.4.
7.2 BROKERS
Parent, the Offeror and the Company represent and warrant to each other that,
except for CIBC World Markets Inc., in the case of the Company and Dresdner
Kleinwort Xxxxxxxxxxx, Inc. in the case of Parent and the Offeror, 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 or any similar transaction. The Company has provided to the
Parent a true and complete copy of all agreements between the Company or any
Subsidiary or affiliate thereof and CIBC World Markets Inc. relating to the
payment of fees and expenses to it. The maximum payable under such agreements is
$600,000 and there are no ongoing obligations to CIBC World Markets Inc. other
than standard indemnities customarily provided to financial advisers.
7.3 PUBLIC STATEMENTS
Except as required by applicable Law or legal process, the Company, the Offeror
and the Parent shall not make any public announcement or statement with respect
to the Offer or this Agreement without the approval of Parent or the Company,
respectively. Moreover, in any event, each party agrees to give prior notice to
the other of any public announcement relating to the Offer or the affairs of the
Company, and agrees to consult with each other prior to issuing each such public
announcement. Each of Parent, the Offeror and the Company agrees that, promptly
after the entering into of this Agreement, it shall issue a press release
announcing the entering into of this Agreement and, in the case of Parent, its
intention to make the Offer, which press release shall, in each case, be
satisfactory in form and substance to the other party acting
- 22 -
reasonably. Any delay in excess of six hours in providing approval of a press
statement by Parent or Offeror shall operate as an extension of the time periods
set out in clause 5.4(a)(iii) and clause 6.1(h)(iii), which extension shall
match any delay by the Parent or the Offeror which is in excess of six hours.
7.4 NOTICES
All notices, requests, demands and other communications hereunder shall be
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended or delivered, or if sent by
facsimile transmission, upon confirmation that such transmission has been
properly effected, to the Person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
Person. The date of receipt of any such notice or other communication if
delivered personally shall be deemed to be the date of delivery thereof, or if
sent by facsimile transmission the date of such transmission if sent on a
business day, failing which it shall be deemed to have been received on the next
business day.
IF TO PARENT OR THE OFFEROR:
c/o Corinthian Colleges, Inc.
0 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000, Xxxxx Xxx XX
00000
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxx Xxxxxxxxx, Senior Vice President and General
Counsel
with a copy to:
Osler, Xxxxxx & Harcourt LLP
0 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX X0X 0X0
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx Xxxxxx
IF TO THE COMPANY:
- 23 -
c/o CDI Education Corporation
0 Xxxxx Xxxxxx Xxxx
Xxxxx 0000, Xxxxxxx, XX
X0X 0X0
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx XxXxxxxx, Chairman and Chief Executive
Officer
With a copy to:
Stikeman Elliott LLP
Xxxxx 0000, Xxxxxxxx Xxxxx Xxxx
X.X. Xxx 00
Xxxxxxx XX X0X 0X0
Phone No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxx Xxxxxxx
Any party may at any time change its address for service from time to time by
giving notice to the other parties in accordance with this Section 7.4.
7.5 CURRENCY
Unless otherwise indicated, all dollar amounts referred to in this Agreement are
expressed in Canadian dollars.
7.6 INTERPRETATION
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
References to Sections and articles refer to Sections and articles of this
Agreement unless otherwise stated. Unless the context otherwise requires, words
used herein importing the singular include the plural and vice versa. Each
reference herein to knowledge of a party means, unless otherwise specified, the
knowledge of such party's officers following due inquiry. If the date on which
any action is required to be taken hereunder by a party is not a business day,
such action shall be required to be taken on the next succeeding day which is a
business day. Capitalized terms used herein but not otherwise defined will have
the meaning ascribed thereto in Schedule D.
7.7 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 this
Agreement to preserve each party's anticipated benefits under this Agreement.
- 24 -
7.8 REMEDIES
The parties hereto 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 hereto 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 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.
7.9 ENTIRE AGREEMENT, ASSIGNMENT AND GOVERNING LAW
This Agreement and the Confidentiality Agreement constitute the entire agreement
and supersede all other prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof.
In the event of any inconsistency between the provisions of this Agreement and
the Confidentiality Agreement, the provisions of this Agreement shall prevail.
This Agreement: (a) shall not be assigned by operation of Law or otherwise,
except that the Offeror may assign all or any portion of its rights under this
Agreement to any affiliate of Parent; and (b) shall be governed in all respects,
including validity, interpretation and effect, exclusively by the Laws of the
Province of Ontario and the Laws of Canada applicable therein.
7.10 THIRD PARTY BENEFICIARIES
The provisions of Section 5.8 are (i) intended for the benefit of all present
and former directors and officers of the Company and its Subsidiaries, as and to
the extent applicable in accordance with their terms, and shall be enforceable
by each of such persons and his or her heirs, executors, administrators and
other legal representatives (collectively, the "THIRD PARTY BENEFICIARIES") and
the Company shall hold the rights and benefits of Section 5.8 in trust for and
on behalf of the Third Party Beneficiaries and the Company hereby accepts such
trust and agrees to hold the benefit of and enforce performance of such
covenants on behalf of the Third Party Beneficiaries, and (ii) are in addition
to, and not in substitution for, any other rights that the Third Party
Beneficiaries may have by contract or otherwise.
7.11 COUNTERPARTS
This Agreement may be executed in any number of counterparts (by facsimile or
otherwise), each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument, and it
shall not be necessary in making proof of this Agreement to produce more than
one counterpart.
- 25 -
IN WITNESS WHEREOF the parties have executed this Agreement on the date first
written above.
CORINTHIAN COLLEGES, INC.
By: /s/ Xxxxxx X. Xxxx
___________________________________
Name: Xxxxxx X. Xxxx
Title: Executive Vice President
By:___________________________________
Name:
Title:
CORINTHIAN CANADA ACQUISITION INC.
By: /s/ Xxxxx X. Xxxxx
___________________________________
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
CDI EDUCATION CORPORATION
By: /s/ A. Xxxxx XxXxxxxx
___________________________________
Name: A. Xxxxx XxXxxxxx
Title: CEO
By: /s/ X. Xxxxxxxx
___________________________________
Name: X. Xxxxxxxx
Title: President
- 26 -
SCHEDULE A
CONDITIONS OF THE OFFER
Subject to the provisions of the Agreement, the Offeror shall have the right to
withdraw the Offer and shall not be required to take up, purchase or pay for,
and shall have the right to extend the period of time during which the Offer is
open and postpone taking up and paying for, any Shares and Holdco Shares
deposited under the Offer unless all of the following conditions are satisfied
or waived by the Offeror at or prior to the Expiry Time:
(a) there shall have been deposited under the Offer and not
withdrawn (either directly or indirectly pursuant to the
Holdco Alternative) at least 66 2/3% of the Shares outstanding
on a fully diluted basis (the "MINIMUM TENDER CONDITION");
(b) all government or regulatory consents or approvals required by
law, policy or practice (other than as referred to in
paragraph (c) below), including, without limitation, those of
any provincial educational authorities, stock exchanges or
other securities regulatory authorities, including a ruling
which provides that subsection 97(2) of the Securities Act
(Ontario) and the equivalent provisions of the securities laws
of the other provinces and territories of Canada are not
violated by the employment arrangements proposed for Company
employees, shall have been obtained on terms satisfactory to
the Offeror, acting reasonably;
(c) either (i) the Department of Canadian Heritage under the
Investment Canada Act shall have confirmed in writing that a
filing with the Department of Canadian Heritage under the
Investment Canada Act (and applicable policies) is not
required in respect of the Offer based on the undertakings of
the Company, Parent and the Offeror to outsource the direct
sale of textbooks by the Company to students (and the
undertaking of the Company is satisfactory to Parent and the
Offeror, acting reasonably); or (ii) there shall have been a
determination by the Minister of Canadian Heritage under the
Investment Canada Act that the acquisition of the Shares by
the Offeror is of "net benefit to Canada", on terms and
conditions satisfactory to the Offeror, in its sole
discretion;
(d) the Offeror shall have determined in its sole discretion that
no act, action, suit or proceeding shall have been taken
before or by any Governmental Authority (including, without
limitation, any individual, company, firm, group or other
entity) in Canada or elsewhere, whether or not having the
force of Law, and no Law shall have been proposed, enacted,
promulgated or applied, in either case:
(i) to cease trade, enjoin, prohibit or impose material
limitations, damages or conditions on the purchase by
or the sale to the Offeror of the Shares and/or the
Holdco Shares or the right of the Offeror to own or
exercise full rights of ownership of the Shares
and/or the Holdco Shares; or
(ii) which, if the Offer were consummated, would
reasonably be expected to have a Material Adverse
Effect; or
(iii) which would prevent or materially delay the
completion of the acquisition by the Offeror of the
Shares pursuant to a Subsequent Acquisition
Transaction;
(e) the Offeror shall have determined in its sole discretion that
there shall not exist any prohibition at Law against the
Offeror making the Offer or taking up and paying for any
Shares and/or Holdco Shares deposited under the Offer or
completing any Compulsory Acquisition Transaction or
Subsequent Acquisition Transaction;
(f) there shall not exist or have occurred (or, if there does
exist or shall have previously occurred, there shall not have
been disclosed, generally or to the Offeror in writing) any
change (or any condition, event or development involving a
prospective change) in the business, operations (including
results of operations), affairs, assets, prospects,
properties, condition (financial or otherwise), or liabilities
(including contingent liabilities that may arise through
outstanding, pending or threatened litigation or otherwise),
capitalization, financial condition, licences, permits, rights
or privileges, whether contractual or otherwise, or prospects
of the Company or any of its Subsidiaries considered on a
consolidated basis which, in the sole judgement of the
Offeror, individually or in the aggregate, has or may have a
material adverse effect either on the value of the Company or
any of its Subsidiaries considered on a consolidated basis or
on the value of the Shares to the Offeror;
(g) the Offeror shall not have become aware of any untrue
statement of a material fact, or an omission to state a
material fact that is required to be stated or that is
necessary to make a statement not misleading in the light of
the circumstances in which it was made and at the date it was
made (after giving effect to all subsequent filings in
relation to all matters covered in earlier filings), in any
document filed by or on behalf of the Company with any
regulatory authority in Canada or elsewhere, including,
without limitation, any annual report, financial statements,
material change report, press release or management proxy
circular or in any document so filed or released by the
Company to the public;
(h) the Board of Directors shall not have withdrawn any
recommendation made by it that Shareholders accept the Offer
or issued a recommendation in a manner that has substantially
the same effect;
(i) at the Expiry Time, all representations and warranties of the
Company in this Agreement: (A) that are qualified by a
reference to Material Adverse Effect shall be true and correct
in all respects; and (B) that are not qualified by a reference
to a Material Adverse Effect shall be true and correct in all
respects unless the failure to be true or correct has not had
or would not reasonably be expected to have a Material Adverse
Effect (and, for this purpose, any reference to "material" or
other concepts of materiality in such representations and
warranties shall be ignored);
(j) at the Expiry Time, all representations and warranties of the
Locked-up Shareholder in the Lock-up Agreement: (A) that are
qualified by a reference to
- 2 -
materiality shall be true and correct in all respects; and (B)
that are not qualified by a reference to materiality shall be
true and correct in all respects unless the failure to be true
or correct has not had or would not reasonably be expected to
have a material adverse effect;
(k) the Support Agreement shall not have been terminated;
(l) the Lock-up Agreement shall not have been terminated;
(m) there shall not have occurred, developed or come into effect
or existence any event, action, state, condition, terrorist
event, war or financial occurrence of national or
international consequence or any Law, action, inquiry or other
occurrence of any nature whatsoever which adversely affects,
or may adversely affect, the financial markets in Canada or
the United States generally, or which materially adversely
affects, or would reasonably be expected to materially
adversely affect, the Company and its Subsidiaries (on a
consolidated basis);
(n) all outstanding options or other rights (except for rights
pursuant to the Convertible Debentures and the Options) or
entitlements granted to purchase or otherwise acquire
authorized and unissued Shares shall have been exercised in
full, or irrevocably released, terminated, surrendered or
waived or otherwise dealt with by the holders thereof on terms
and conditions satisfactory to the Offeror, in its sole
discretion;
(o) neither the Company nor the Offeror shall have received any
notice (written or oral) from any Governmental Authority
indicating that any School's license, permit, accreditation,
approval or registration pursuant to (A) applicable vocational
and/or career training legislation or (B) the federal or
provincial Canada student loan program, will be suspended or
revoked;
(p) the Company shall have observed and performed its covenants in
the Agreement in all material respects to the extent that such
covenants were to have been observed or performed by the
Company at or prior to the Expiry Time; and
(q) the Offeror shall have received, not more than seven hours
before the Expiry Time, a certificate of the Company, signed
by two senior officers, to the effect that to the best of
their knowledge, information and belief, after due inquiry,
(i) the representations and warranties of the Company in this
Agreement are true and correct in all respects if qualified by
a reference to Material Adverse Effect and if not qualified by
a reference to Material Adverse Effect, are true and correct
in all respects unless the failure to be true and correct has
not had or would not reasonably be expected to have a Material
Adverse Effect (and, for this purpose, any reference to
"material" or other concepts of materiality in such
representations and warranties shall be ignored) as at the
Expiry Time; and (ii) all of the covenants and obligations of
the Company under the Support Agreement have been performed or
complied with in all material respects.
The foregoing conditions are for the exclusive benefit of the Offeror and may be
asserted by the Offeror regardless of the circumstances giving rise to any such
condition. The Offeror may, in
- 3 -
the Offeror's sole discretion, waive any of the foregoing conditions, in whole
or in part, at any time and from time to time, both before and after the Expiry
Time, without prejudice to any other rights which the Offeror may have. The
failure by the Offeror at any time to exercise any of the foregoing rights will
not be deemed to be a waiver of any such right and each such right shall be
deemed to be an ongoing right which may be assessed at any time and from time to
time.
- 4 -
SCHEDULE B
REPRESENTATIONS AND WARRANTIES
1. ORGANIZATION AND QUALIFICATION
The Company is validly existing under the OBCA and has full corporate power and
authority to own its assets and conduct its business as now owned and conducted.
The Company is duly qualified to carry on business, and is in good standing, in
each jurisdiction in which the character of its properties or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect. True and complete copies of
the articles and by-laws of the Company have been made available to Parent and
the Company has not taken any action to amend or supersede such documents.
2. SUBSIDIARIES
The Company does not have any interests in any Person, company, partnership,
joint venture or other business organization, other than those listed in the
Disclosure Schedule (the "SUBSIDIARIES"). None of the Subsidiaries holds,
directly or indirectly, any equity interest in, or any options or rights for any
equity interest in, any corporation or other entity, other than in certain
circumstances, interests in another Subsidiary. Each of the Subsidiaries is
validly existing and in good standing under the Laws of its jurisdiction of
incorporation, has full corporate power and authority to own its assets and
conduct its business as now owned and conducted by it and is duly qualified to
carry on business in each jurisdiction in which the character of its properties
or the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a Material Adverse Effect. Other
than as set out in the Disclosure Schedule, the Company beneficially owns,
directly or indirectly, all of the issued and outstanding securities of each of
the Subsidiaries. All of the outstanding shares or other equity interests in the
capital of each of the Subsidiaries that is a corporation are validly issued,
fully-paid and non-assessable and, other than as set out in the Disclosure
Schedule, all such shares or other equity interests are owned free and clear of
all liens, claims or encumbrances.
3. COMPLIANCE WITH LAWS AND LICENSES
The Company and each of the Subsidiaries has complied in all material respects
with and is in compliance in all material respects with all applicable Laws,
including Laws related to education, labour, employment standards and human
rights. Each of the Company and its Subsidiaries has all licenses, permits,
accreditations, consents, certificates and authorizations, orders or approvals
of (as well as bonds and security provided in connection therewith), and has
made all required registrations with, any Governmental Authority that is
required in connection with the ownership of their respective assets or the
conduct of their respective operations and each of them has complied in all
material respects with and is in compliance with all such licenses, permits,
accreditations, consents, certificates, authorizations, orders, approvals and
registrations (as well as bonds and security provided in connection therewith).
Each license, permit, order, accreditation, consent, certificate, authorization,
approval and registration is valid, subsisting and in good standing. Neither the
Company nor any Subsidiary has received any notice, whether written or oral, of
the revocation or non-renewal of any such licenses, permits, orders,
accreditations, consents, certificates, authorizations, approvals or
registrations, or of any intention of any Governmental Authority to revoke or
refuse to re-new any of such licenses, permits, orders, accreditations,
consents, certificates, authorizations, approvals or registrations
and, to the knowledge of the Company, based on Laws currently in effect, all
such licenses, permits, orders, accreditations, consents, certificates,
authorizations, approvals and registrations shall continue to be effective and
any required renewals thereof shall be available in order for the Company and
the Subsidiaries to continue to conduct their respective businesses as they are
currently being conducted and in accordance with the existing plans of the
Company and the Subsidiaries. In the past three years, no license, permit,
order, accreditation, consent, certificate, authorization, approval or
registration held by or granted to the Company or any Subsidiary has been
suspended, revoked, terminated, put on probation or in any manner qualified.
Other than as set out in the Disclosure Schedule, none of the Company or any of
the Subsidiaries is in conflict with, or in default (including cross defaults)
under or in violation of (i) its articles or by-laws or equivalent
organizational documents, or (ii) any material agreement or understanding to
which it or by which any of its properties or assets is bound or affected.
4. CAPITALIZATION
The authorized share capital of the Company consists of an unlimited number of
common shares. As at the date hereof: (i) 9,936,401 common shares (and no other
shares in the capital of the Company) have been duly authorized and are validly
issued and outstanding as fully paid and non-assessable shares in the capital of
the Company, (ii) there are outstanding Options to purchase Shares issued under
the Stock Option Plan providing for the issuance of 1,113,881 Shares upon the
exercise thereof at the exercise price set out in the Disclosure Schedule (of
which the only options that are excersiable at price of $4.33 per Share or less
are 335,000 options which are exerciable at a price equal to $3.60 per Share);
(iii) pursuant to the Convertible Debenture there are a maximum of 1,222,222
Shares issuable upon conversion of all outstanding debentures. The material
terms of the Options granted pursuant to the Stock Option Plan (including
exercise price) are disclosed in the Disclosure Schedule. Except for the Options
and the Convertible Debenture there are no options, warrants, conversion
privileges, calls, puts or other rights, agreements, arrangements, commitments
or obligations of the Company or any of the Subsidiaries to, directly or
indirectly issue or sell any shares of the Company or of any of the Subsidiaries
or securities or obligations of any kind convertible into, exchangeable for or
otherwise carrying the right or obligation to acquire any shares of the Company
or any of the Subsidiaries, nor are 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 of the Subsidiaries. No Shareholder is entitled to any
pre-emptive or other similar right.
5. AUTHORITY RELATIVE TO THIS AGREEMENT
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 and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding obligation of
the Company, enforceable by Parent or the Offeror against the Company in
accordance with its terms. The execution and delivery by the Company of this
Agreement and the performance by it of its obligations hereunder and the
completion of the Offer will not: (a) violate, conflict with or result in a
breach of any provision of: (i) the constating documents of the Company or any
of the Subsidiaries; (ii) any material agreement, contract, indenture, deed of
- 2 -
trust, mortgage, bond, instrument, license, franchise or permit to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is bound; or (iii) any Law to which the Company or any of the
Subsidiaries is subject or by which the Company or any of the Subsidiaries is
bound; (b) except as disclosed in the Disclosure Schedule, give rise to any
right of termination, or the acceleration of any indebtedness, under any such
material agreement, contract, indenture, deed of trust, mortgage, bond,
instrument, license, franchise or permit; or (c) except as disclosed in the
Disclosure Schedule, give rise to any rights of first refusal or trigger any
change in control or influence provisions or any restriction or limitation under
any such material agreement, contract, indenture, deed of trust, mortgage, bond,
instrument, license, franchise or permit, or result in the imposition of any
encumbrance, charge or lien upon any of the Company's assets or the assets of
any of the Subsidiaries. Other than in connection with or in compliance with the
Investment Canada Act (if applicable) and the applicable Canadian vocational or
career training school legislation listed on the Disclosure Schedule, no
authorization, consent or approval of, or filing with, any Governmental
Authority is necessary for the consummation by the Company of its obligations
under this Agreement or for the completion of the Offer, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make would not, individually or in the aggregate, prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
6. OPTIONS
All unexercised Options will expire upon the take-up and payment by the Offeror
of Shares under the Offer provided that at such time the Offeror has taken up
and paid for at least 66 2/3% of the Shares on a fully-diluted basis.
7. CONVERTIBLE DEBENTURE
Upon the taking up by the Offeror of 66 2/3% of the Shares on a fully-diluted
basis, the Company will be entitled pursuant to the terms of the Convertible
Debenture to prepay (subject to the payment of additional interest at a rate of
10%) all outstanding obligations under the Convertible Debenture in accordance
with the terms of the Convertible Debenture as a change in control of the
Company will constitute a "Sale of the Company" pursuant to the terms of the
Convertible Debenture; true and complete copies of which have been provided to
Parent.
8. SHAREHOLDER AND SIMILAR AGREEMENTS
The Company is not party to any shareholder, pooling, voting trust or other
similar agreement or right capable (without the consent of the Company) of
becoming any of the foregoing relating to the issued and outstanding shares of
the Company or any of the Subsidiaries.
9. FILINGS
The Company has filed all documents or information required to be filed by it
under applicable Laws or with the TSX since January 1, 2001. All such documents
or information filed by the Company under applicable Laws or with the TSX since
January 1, 2001 (inclusive), including, without limitation, the Company's (a)
annual report to Shareholders for the financial year ended December 31, 2002,
(b) annual information form dated as of May 15, 2003, (c) management information
circular dated May 8, 2003, in respect of the annual meeting of Shareholders
held May 8, 2003, (d) interim financial statements for the three month period
ending March 31, 2003,
- 3 -
(e) material change reports filed and press releases issued between January 1,
2001 and the date hereof (collectively, the "COMPANY'S PUBLIC DOCUMENTS"), as of
their respective dates, did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading as at the time at which they were filed with applicable
securities regulatory authorities. All of the Company's Public Documents, as of
their respective date (and as of the date of any amendment thereto), complied as
to form in all material respects with the requirements of applicable Laws. The
Company has not filed any confidential material change report with any
securities regulatory authority or regulator or any stock exchange or other
self-regulatory authority that at the date hereof remains confidential.
10. FINANCIAL STATEMENTS
The audited consolidated financial statements of the Company for the financial
year ended December 31, 2002, including the notes thereto and the report of the
Company's auditors thereon, and the interim financial statements of the Company
as at and for the three month period ended March 31, 2003, all as contained in
the Company's Public Documents, were prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada applied on a basis consistent
with prior periods, except as noted therein, are correct in all material
respects, are complete and present fairly the assets, liabilities (whether
accrued, absolute, contingent or otherwise) and financial condition of the
Company and the Subsidiaries on a consolidated basis as at the respective dates
thereof and the results of operations of the Company and the Subsidiaries on a
consolidated basis for the respective periods covered thereby.
11. RECEIVABLES
Other than as set out in the Disclosure Schedule, the accounts receivable of the
Company, except to the extent of the allowance for doubtful accounts set forth
in the financial statements, are bona fide receivables, arose out of arms'
length transactions in the normal and usual practices of the Company, are
recorded on the books and records of the Company in accordance with GAAP, and
the Company has no reason to believe that such accounts receivable will not be
collected in full in the ordinary course of business within the ordinary time
frame for such receivables consistent with historical practices of the Company.
Such receivables are not subject to any defense, counterclaim or setoff or
discounts or credits not reflected in the financial statements (other than
tuition refund policies administered in accordance with all applicable Law and
the applicable Policy Guidelines, and as reflected in reserves or allowance for
doubtful accounts shown on the financial statements), and (a) to the knowledge
of the Company, no facts or circumstances exist which would cause any of such
accounts receivable to have to be written down or written off by more than
$400,000 in the aggregate in excess of the allowance for doubtful accounts set
forth in the financial statements, and (b) since the date of the Company's most
recent balance sheet at March 31, 2003, the Company has not discounted or sold
such accounts receivable or any portion thereof. For greater certainty, the
student enrolments comprising the deferred or unearned revenues were made in the
ordinary course of business, and the deferred and unearned revenues will become
earned revenues, except in the ordinary course of business.
- 4 -
12. INTEREST IN PROPERTIES
(a) Except as disclosed in the Disclosure Schedule and for
encumbrances that do not individually or in the aggregate have
a Material Adverse Effect, the Company and the Subsidiaries
have title to, or a valid and subsisting leasehold interest
in, all assets, properties and rights which are used in the
conduct of their business, free and clear of any claims,
security interests, liens or other encumbrances, and
constitute all of the assets reasonably required for the
conduct of the business of the Company and the Subsidiaries,
considered on a consolidated basis, as such business is
currently being conducted.
(b) All tangible assets of the Company and the Subsidiaries are in
good operating condition, free from any defects or flaws which
would restrict or impede their operation or sale, other than
such defects or flaws which would not, individually or in the
aggregate, have a Material Adverse Effect.
13. INTELLECTUAL PROPERTY RIGHTS
(a) The Disclosure Schedule contains a list of all of the material
registered Intellectual Property and all applications therefor
owned by the Company or a Subsidiary (the "REGISTERED
INTELLECTUAL PROPERTY"). Copies of the documentation relating
to the Registered Intellectual Property have been made
available to the Parent.
(b) Other than as set out in the Disclosure Schedule, the Company
and its Subsidiaries have all right, title and interest in, or
a valid and binding license to use, and have taken all
commercially reasonable steps to protect, all of the
Intellectual Property necessary to conduct their respective
businesses as they are currently carried on. Neither the
Company nor any of the Subsidiaries has received written
notice that any of such Intellectual Property infringes upon
the intellectual property rights of any third party.
(c) All patents, registered trade-marks and registered service
marks held by the Company or the Subsidiaries are valid and
subsisting, and to the knowledge of the Company, there are no
outstanding challenges to the validity of any such
registrations. The marketing, licensing or sale of the
products or services of the Company and the Subsidiaries does
not infringe any patent, trade-xxxx, service xxxx, copyright,
trade secret or other proprietary right of any third party.
(d) The Company has taken reasonable steps to protect and preserve
the confidentiality of all Intellectual Property not otherwise
protected by patents, patent applications, trade-marks or
other indicia of source, or copyright ("CONFIDENTIAL
INFORMATION"). All use, disclosure or appropriation by the
Company and the Subsidiaries of Confidential Information not
owned by the Company or any such Subsidiary has been pursuant
to the terms of a written agreement between the Company and
the owner of such Confidential Information, or is otherwise
lawful.
- 5 -
14. ABSENCE OF CERTAIN CHANGES OR EVENTS
Other than as set out in the Disclosure Schedule, since March 31, 2003:
(a) the Company and the Subsidiaries have conducted their
respective businesses only in the usual, ordinary and regular
course and consistent with past practice;
(b) no liability or obligation of any nature (whether absolute,
accrued, contingent or otherwise) which has had or is
reasonably likely to have a Material Adverse Effect has been
incurred;
(c) there has not been any event or occurrence which has had or is
reasonably likely to have a Material Adverse Effect;
(d) there has not been any change in the accounting practices used
by the Company and the Subsidiaries;
(e) there has not been any sale, lease or transfer of material
assets, properties or rights of the Company or the
Subsidiaries, by the Company or the Subsidiary, other than in
the usual, ordinary and regular course of business consistent
in type and amount with past practice;
(f) neither the Company nor the Subsidiaries has received any
notice of termination by or from any third party respecting
any material contract of the Company or the Subsidiaries, nor
has any such contract been terminated, and, to the knowledge
of the Company, no such notice of termination, or actual
termination, is pending or threatened;
(g) there has not been any declaration, setting aside or payment
of any dividend on, or other distribution (whether in cash,
shares or property) in respect of, any of the shares of the
Company or any of the Subsidiaries or any redemption,
retirement, acquisition by the Company or any of the
Subsidiaries, purchase for cancellation of any of the
Company's or any of the Subsidiary's securities, or any split,
reverse split, combination or reclassification of any of the
Company's or any of its Subsidiaries' shares, or any issuance
or the authorization of any issuance of any other securities
in respect of, in lieu of, or in substitution for securities
of the Company or any of its Subsidiaries;
(h) none of the Company or any of its Subsidiaries has made any
grant of credit to any customer or distributor on terms or in
amounts that are materially inconsistent in term or amount
with past practice;
(i) neither the Company nor any Subsidiary has transferred or
licensed any rights to any Intellectual Property other than in
the ordinary and regular course of business of the
instructional activities of the Schools, carried on consistent
with past practice;
- 6 -
(j) except for ordinary course adjustments to non-officer
employees, there has not been any increase in the salary or
similar remuneration payable to any non-executive employees of
any of the Company or the Subsidiaries;
(k) there has not been any increase in the salary or similar
remuneration payable to any officers of the Company or the
Subsidiaries; and
(l) there has been no act or omission by the Company or the
Subsidiaries to take any action that would result in the
occurrence of any of the foregoing.
15. SEVERANCE AND EMPLOYMENT
(a) Except as set out in the Disclosure Schedule, to the knowledge
of the Company, no employee of the Company or the Subsidiaries
is in violation of any term of any employment contract, patent
disclosure agreement, confidentiality or proprietary
information agreement, or any restrictive covenant agreement
entered into with a previous employee by reason of any such
employee being employed by the Company.
(b) Except for contracts listed in the Disclosure Schedule,
neither the Company nor any of the Subsidiaries has entered
into any written or oral agreement or understanding providing
for length of notice of or severance or termination payments
to any director, officer or senior employee in connection with
the termination of their position or their employment either
prior to or following a change in control of the Company. True
and complete copies of such contracts and all amendments
thereto have been provided to the Parent.
(c) Neither the Company nor any of the Subsidiaries is a party to
any collective bargaining agreement nor subject to any
application for certification and no trade union, council of
trade unions, employee bargaining agency or affiliated
bargaining agent, hold bargaining rights with respect to any
of the employees and there are no threatened or apparent
union-organizing campaigns for employees nor are there any
current, pending or threatened strikes or lockouts affecting
the Company or any of the Subsidiaries.
(d) Neither the Company nor any Subsidiary has or is engaged in
any unfair labour practice and no unfair labour practice
complaint, grievance or arbitration proceeding is pending or,
to the knowledge of the Company and its Subsidiaries,
threatened against the Company or any Subsidiary.
(e) Except as disclosed in the Disclosure Schedule, neither the
Company nor any of the Subsidiaries is subject to any claim
for wrongful dismissal, constructive dismissal or any other
claim, actual or, to the knowledge of the Company, threatened,
or any litigation actual or, to the knowledge of the Company,
threatened, relating to employment or termination of
employment of employees.
(f) Except as disclosed in the Disclosure Schedule, neither the
Company nor any of the Subsidiaries are subject to any
current, pending or, to the knowledge of the Company,
threatened claim, complaint, investigation, order or
proceeding before
- 7 -
any Governmental Authority pursuant to Laws with respect to
employment and labour standards, occupational health and
safety, long-term disability, employment equity, pay equity,
workers' compensation, human rights and labour relations.
(g) All current assessments under the Workplace Safety and
Insurance Act (Ontario) and under similar or the equivalent
legislation in other jurisdictions where the Company carries
on business in relation to the Company and the Subsidiaries
and all of their respective contractors and subcontractors
have been paid or accrued and none of the Company or any
Subsidiary has been or is subject to any special or penalty
assessment under such legislation which has not been paid.
(h) Except as set out in the Disclosure Schedule, each of the
Company and its Subsidiaries has obtained binding, full and
final releases from each employee with more than five years of
service with the Company or its Subsidiaries, as applicable,
that has been dismissed within the past twelve months. The
Company has provided to Parent any orders and/or decisions
issued by the Ontario Labour Relations Board in connection
with the Company's 2002 restructuring.
16. LITIGATION, ETC.
Except as set out in the Disclosure Schedule, (i) 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 of the Subsidiaries or
affecting any of their properties or assets before or by any Governmental
Authority and (ii) there is no outstanding complaint against the Company or any
of its Subsidiaries, nor, to the knowledge of the Company is the Company aware
of any existing ground on which any such claim, action, proceeding,
investigation or complaint might be commenced or made with any reasonable
likelihood of success. Neither the Company nor any of the Subsidiaries is
subject to any outstanding order, writ, injunction or decree. To the knowledge
of the Company, and other than ordinary course compliance audits, inquiries and
student surveys conducted by Governmental Authorities in a manner consistent
with industry practice, neither it nor any of its Subsidiaries or any of the
Schools is the subject of any governmental investigations or inquiries
(including inquiries as to the qualification to hold or receive any license,
permit, accreditation, certificate, authorization, approval or registration).
There is no claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
before any Governmental Authority which, if determined adversely to the Company
or any Subsidiary, would delay or prevent the consummation of the Offer and the
Company has no knowledge of any existing ground on which such claim, action,
suit, proceeding or investigation might be commenced with any reasonable
likelihood of success. Details of all outstanding litigation, other than
litigation involving individual claims not in excess of $15,000 and which are
not, in the aggregate, in excess of $60,000, have been made available to Parent
and are listed in the Disclosure Schedule.
17. TAXES
(a) Other than as set out in the Disclosure Schedule, the Company
and each of the Subsidiaries have duly and in a timely manner
filed all Tax returns required to be filed by each of them on
or before the date hereof in the form and the time prescribed
by applicable Laws for so doing, and all such Tax returns are
true and
- 8 -
complete. The Company and each of the Subsidiaries has duly
and timely paid all Taxes, including all instalments on
account of Taxes for the current year, that are due and
payable prior to the date hereof, other than those which are
being contested in good faith and in respect of which reserves
have been provided in the financial statements of the Company
contained in the Company's Public Documents. Provision has
been made in the financial statements of the Company contained
in the Company's Public Documents for amounts at least equal
to the amount of all Taxes owing by the Company and each of
its Subsidiaries that are not yet due and payable and that
relate to periods ending on or prior to the Effective Time.
Neither the Company nor any of the Subsidiaries has requested
any extension of time within which to file any Tax return,
which Tax return has not since been filed. The Company has not
received any refund of Taxes to which it is not entitled.
(b) Except as set out in the Disclosure Schedule, there are no
actions, suits, proceedings, investigations or claims pending
or, to the knowledge of the Company, threatened against the
Company or any of the Subsidiaries in respect of Taxes, or any
matters under discussion with any Governmental Authority
relating to Taxes asserted by any such authority.
(c) Neither the Company nor any of the Subsidiaries has executed
any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax returns. There are no liens for Taxes upon any
asset of the Company or any of the Subsidiaries except for
liens for Taxes not yet due.
(d) Other than as set out in the Disclosure Schedule, the Company
and each of its Subsidiaries have withheld or collected all
amounts required to be withheld or collected by them on
account of Taxes and have remitted all such amounts to the
appropriate Tax authority when required by Law to do so.
(e) Other than as set out in the Disclosure Schedule, neither the
Company nor any of its Subsidiaries is subject to any
liability for Taxes of any other Person.
(f) No claim has ever been made by a Tax authority in a
jurisdiction where the Company or any of its Subsidiaries does
not file Tax returns that the Company or any of its
Subsidiaries is or may be subject to taxation by that
jurisdiction.
18. TUITION CREDIT
For the purposes of section 118.5 of the Income Tax Act (Canada), each of the
Schools (other than the corporate education division owned, operated and
administered by the Company and its Subsidiaries) is an educational institution
in Canada that is either:
(a) a university, college or other educational institution
providing courses at a post-secondary school level, or
(b) certified by the Minister of Human Resources Development to be
an educational institution providing courses, other than
courses designed for university credit,
- 9 -
that furnish a Person with skills for, or improve a Person's
skills in, an occupation,
and each Tuition and Education Amounts Certificate (Form T2202A), and any
equivalent form or certificate issued under the Income Tax Act (Canada) or the
legislation of any province or territory in Canada, issued by a School has been
issued in respect of a course for which a student enrolled in that course would
be eligible to claim a tuition credit under section 118.5 of the Income Tax Act
(Canada).
19. EDUCATION CREDIT
For the purposes of the Income Tax Act (Canada), each of the Schools (other than
the corporate education division owned, operated and administered by the Company
and its Subsidiaries) is a "designated educational institution", as that term is
defined in subsection 118.6(1) of the Income Tax Act (Canada) and each Tuition
and Education Amounts Certificate (Form T2202A) or Education Amounts Certificate
(Form T2202), and any equivalent form or certificate issued under the Income Tax
Act (Canada) or the legislation of any province or territory in Canada, issued
by a School has been issued in respect of a "qualifying educational program", as
that term is defined in subsection 118.6(1) of the Income Tax Act (Canada).
20. INSURANCE
The Company has made available to Parent copies of all policies of insurance
maintained by the Company or any of the Subsidiaries naming the Company or any
of the Subsidiaries as an insured. No material claims have been made under
policies of insurance since January 1, 2001 and there is no claim pending under
any of such policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies. All premiums payable under such
policies of insurance have been paid and the Company and the Subsidiaries are in
compliance in all material respects with the terms of such policies. Other than
as set out in the Disclosure Schedule, the Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any
such policies.
21. PENSION AND EMPLOYEE BENEFITS
(a) Each Company Benefit Plan complies in all respects with all
applicable Laws and such plans have been administered in
compliance in all material respects with applicable Laws and
their terms.
(b) Other than as set out in the Disclosure Schedule, the Company
does not have any pension plans or any other plans which
provide benefits beyond retirement or other termination of
service to employees or former employees or to the
beneficiaries or dependants of such employees.
(c) Other than as set out in the Disclosure Schedule, all employer
or employee payments, contributions or premiums required to be
remitted, paid to or in respect of each Company Benefit Plan
have been paid or remitted in a timely fashion in accordance
with its terms and all Laws, and no Taxes, penalties or fees
are owing or exigible under any Company Benefit Plan.
- 10 -
22. ENVIRONMENTAL
(a) The Company and the Subsidiaries have not caused or permitted
nor has there been any release, emission, spill or discharge,
in violation of any Environmental Laws, of any Hazardous
Substances on, in, around, from or in connection with the
Leased Real Property.
(b) None of the Company or any of the Subsidiaries has been
required by any governmental entity with jurisdiction over the
following matters to perform any environmental closure,
decommissioning, rehabilitation, restoration or post-remedial
investigations, on, about, or in connection with any of the
Leased Real Property.
(c) The Company has disclosed to Parent in writing true and
complete copies of all environmental audits, evaluations,
assessments, studies or tests relating to the Company, the
Subsidiaries and the Real Property which are within the
possession or control of any of the Company or any of the
Subsidiaries.
(d) The Company and its Subsidiaries are in compliance in all
material respects with all Environmental Laws.
(e) The Company and the Subsidiaries have not caused or permitted
nor has there been any release, emission, spill or discharge,
in violation of any Environmental Laws, of any Hazardous
Substances on, in, around, from or in connection with any
property or facility which they previously owned or leased, or
any property or facility owned or operated by any third party
but with respect to which the Company or any of the
Subsidiaries have or may reasonably be alleged to have
liability.
(f) To the knowledge of the Company, none of the Leased Real
Property (i) has been used as a waste disposal site or as a
licensed landfill, or (ii) has ever had asbestos-containing
materials, PCBs, radioactive substances or aboveground or
underground storage systems, active or abandoned, located on,
at or under them except in compliance with Environmental Laws.
23. ABSENCE OF CERTAIN LIABILITIES
The Company, considered on a consolidated basis, does not have any liabilities
of any nature, whether accrued, absolute, fixed, contingent or otherwise,
whether due or to become due and required to be recorded or reflected on a
consolidated balance sheet of the Company under GAAP, except: (i) as reflected
or reserved against or disclosed in the Company's balance sheet for the
financial year ended December 31, 2002 included in the Company's Public
Documents, (ii) liabilities incurred since December 31, 2002 that: (x) have been
incurred in the ordinary course of business consistent with past practice and
(y) have not had and are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect; (z) and which do not violate, in any
respect, any covenants contained in this Agreement or constitute a breach of any
representation or warranty made in or pursuant to this Agreement.
- 11 -
24. BOOKS AND RECORDS
The books, records and accounts of the Company (a) have been maintained in
accordance with applicable Law; (b) fairly, correctly and accurately set out,
record and disclose in all material respects (i) the financial position of the
Company and the Subsidiaries and (ii) all financial transactions relating to
each of their businesses. The Company has devised and maintains a system of
internal accounting controls sufficient to provide reasonable assurance of (a)
and (b) above and to permit preparation of financial statements in conformity
with GAAP.
25. NO DEFAULTS
Except as set out in the Disclosure Schedule, neither Company nor any of its
Subsidiaries is in default under, and there exists no event, condition or
occurrence which, after notice or lapse of time or both, would constitute such a
default under any material contract.
26. MATERIAL CONTRACTS
(a) Except as set out in the Disclosure Schedule, each material
contract of the Company or the Subsidiaries is in full force
and effect and there exists no default or event of default or
event, occurrence, condition or act which, with the giving of
notice, the lapse of time or the happening of any other event
or condition, would become a default, an event of default or
would trigger a right to terminate thereunder.
(b) Except as set out in the Disclosure Schedule, the Company has
not violated or breached any of the terms or conditions of any
material contract, and, to the knowledge of the Company, all
the covenants to be performed by any other party thereto have
been fully performed.
(c) No action or inaction by the Company or any of the
Subsidiaries has given rise to any right of rescission or
cancellation of any franchise contract of the Company or the
Subsidiaries, and the operations of the franchised Schools are
being conducted in compliance in all material respects with
applicable Laws.
27. RESTRICTIONS ON BUSINESS ACTIVITIES
Except as set out in the Disclosure Schedule, there is no agreement, judgment,
injunction, order, decree, understanding or other restriction with any Person
binding upon the Company or any of the Subsidiaries which has or could
reasonably be expected to have the effect of restricting, prohibiting or
materially impairing:
(a) any current or currently proposed business practice of the
Company or any of the Subsidiaries;
(b) the Company or any of its Subsidiaries from carrying on its
business with any customer or within any geographic region;
(c) any acquisition of property by the Company or any of the
Subsidiaries; or
- 12 -
(d) the conduct of business by the Company or any of the
Subsidiaries as currently conducted or as currently proposed
to be conducted by the Company or any of the Subsidiaries.
28. FAIRNESS OPINION
The Company has received an opinion from its financial advisor, that, as of the
date hereof, the consideration to be received under the Offer is fair, from a
financial point of view, to Shareholders, which opinion will be included in the
Directors' Circular.
29. INTERESTED PARTY TRANSACTIONS
Except as disclosed in the Disclosure Schedule, neither the Company nor any of
the Subsidiaries is indebted to any director, officer or employee of the Company
(except for amounts due as normal salaries and bonuses and in reimbursement of
ordinary expenses). Except as disclosed in the Disclosure Schedule, no director,
officer, employee or agent of the Company or any of the Subsidiaries is a party
to any contract, arrangement or understanding or other transactions required to
be disclosed pursuant to applicable Laws.
30. LEASED REAL PROPERTY
Neither the Company nor any of its Subsidiaries owns any real property. The
Company has not owned any real property since its inception, and to the best of
the knowledge of the Company, without further investigation, none of the
Subsidiaries have owned real property. The Disclosure Schedule lists all real
property leased or subleased to the Company or any of its Subsidiaries as of the
date of this Agreement and the name(s) of the Schools operated at that location
(the "LEASED REAL PROPERTY"). Neither the Company nor any of its Subsidiaries
uses any real property other than the Leased Real Property. The Company has made
available to Parent true, correct and complete copies of the leases and
subleases (as amended to date) and other agreements for occupancy, including all
amendments, extensions and other modifications thereto as of the date of this
Agreement with respect to each Leased Real Property (each, a "REAL PROPERTY
LEASE" and, collectively, the "REAL PROPERTY LEASES"). Each Real Property Lease
is legal, valid, binding and enforceable, and in full force and effect. There
does not exist under any Real Property Lease any event of default or event or
condition that, after notice or lapse of time or both, would constitute a
default, violation, breach or event of default thereunder on the part of the
Company or any of its Subsidiaries or, to the knowledge of the Company, any
other party thereto. Other than as set out in the Disclosure Schedule, neither
the Company nor any of its Subsidiaries, as applicable, has assigned,
transferred, conveyed, mortgaged, subleased, deeded in trust or encumbered any
of its interest in any of the Real Property Leases.
31. OWNERSHIP OF SCHOOLS
Except as set out in the Disclosure Schedule, each of the Schools are owned and
operated by the Company or its wholly-owned Subsidiaries directly, and no other
Person has any ownership interest in the Schools. No other Person has any right,
option, subscription or other arrangement to purchase or otherwise acquire any
interest in the Schools or the Company.
- 13 -
32. RECRUITMENT; ADMISSIONS PROCEDURES; ATTENDANCE; REPORTS; PLACEMENT
The Company's operations with respect to the Schools have been conducted in all
material respects in accordance with the Policy Guidelines, and all relevant
standards imposed by applicable accrediting bodies, agencies administering
provincial or federal governmental programs in which the Company participates,
and other applicable Laws. The Company has submitted all reports, audits and
other information, whether periodic in nature or pursuant to specific requests,
including, without limitation, all annual compliance audits and audited
financial statements, for the Schools to all agencies or other entitles with
which such filings are required relating to its compliance with (i) applicable
accreditation standards governing its activities and (ii) Laws governing
programs pursuant to which the Schools or its students receive funding.
Materially complete and accurate records for all present and past students
attending the Schools have been maintained consistent with the operations of a
school business and as required by applicable Laws. All forms and records with
respect to the Schools and their operations have been prepared, completed,
maintained and filed in all material respects in accordance with all applicable
Laws, and are true and correct; provided however, that the Company has, where
reasonable and customary, accepted as true facts and data provided by third
parties. All financial aid grants and loans, disbursements, refunds and record
keeping relating thereto have been completed in compliance with all applicable
federal and provincial requirements, and there are no material deficiencies in
respect thereto. The Schools and the Company have complied in all material
respects with the legal requirements that no student at the Schools be funded
prior to the date for which such student was eligible for funding, and the
Schools and the Company have made all legally required refunds of monies with
respect to students who have withdrawn from the Schools in a timely manner. The
records of each student, including placement records, at the Schools conform in
all material respects to all relevant regulatory requirements.
33. TITLE; CONDITION AND QUALITY OF THE CURRICULUM
Except as set out in the Disclosure Schedule, the Company owns outright, and has
good and marketable title to, or has a valid licence or right to use, the
Curriculum free and clear of all encumbrances, and the execution and performance
of this Agreement will have no effect on the Company's ownership of the
Curriculum. Except as set out in the Disclosure Schedule, no employee or
affiliate of the Company or any other Person owns or has any interest, directly
or indirectly, in any part of the Curriculum developed by the Company and its
employees. No component of the Curriculum infringes or violates any copyright,
patent, trade secret, trade-xxxx, service xxxx, registration or other
proprietary right of any other Person, and the Company's past and current use of
any part of the Curriculum does not infringe upon or violate any such right. The
Curriculum as taught in the Schools is consistent in all material respects with
the Curriculum as filed with Governmental Authorities.
34. ACCREDITING BODY AND GOVERNMENTAL APPROVALS
Except as disclosed in the Disclosure Schedule, to the knowledge of the Company
there exist no facts or circumstances attributable to the Company or the Schools
that would reasonably cause any Governmental Authority or accrediting body whose
authorization, consent or similar approval is required for the consummation of
the transactions contemplated by this Agreement or the operation of the Schools
following the take up and payment for Shares by the Offeror, to lawfully or
rightfully refuse to deliver such authorization, consent or similar approval.
- 14 -
35. COHORT DEFAULT RATE AND REFUNDS
The Disclosure Schedule sets out the cohort default rate for the Schools (other
than the corporate education division owned, operated and administered by the
Company and its Subsidiaries) in each province where the Company knows the
cohort default rate (being Ontario and Alberta), and their programs and courses,
calculated in the manner prescribed by applicable Law as of the date such
calculations were most recently made by, or reported to, the applicable
Governmental Authorities. Except as disclosed in the Disclosure Schedule, the
applications and admissions of students have been made or completed in
accordance with applicable Laws and as directed or required by Governmental
Authorities, and all such Persons who have been admitted as students of the
Schools (other than the corporate education division owned, operated and
administered by the Company and its Subsidiaries) have done so pursuant to a
contract (where legally required) and in accordance with applicable Laws and the
Policy Guidelines (from time and time in force and effect). The Company and its
Subsidiaries have made all refunds of fees, expenses, costs and tuition, where
required, in whole or in part, in respect of the withdrawal, expulsion,
dismissal, non-commencement, cessation, abandonment, termination or cancellation
of the student or his or her contract with the School. All such refunds and
repayments have been made in accordance with all applicable Laws and the Policy
Guidelines (including as to amount and timing) and have been in amounts no less
than those required by contracts entered into with students.
36. GOVERNMENT LOANS AND FINANCIAL ASSISTANCE
Each and every School, program or course that currently is eligible for or
receiving (either directly or by or on behalf of students) government loans and
financial aid or assistance, is receiving such loans, aid or assistance, from
the respective provincial and federal Governmental Authority in the normal
manner without undue delay. To the best of the Company's knowledge, it is not
aware of any fact or circumstance that would result in a School or in respect of
a program or course, a program or course that represents a material portion of
the revenue of any School, that is currently eligible for or receiving (either
directly or by or on behalf of students) government loans, financial aid or
assistance to no longer be eligible for such loans, financial aid or assistance.
37. CORPORATE EDUCATION DIVISION
Other than as set out in the Disclosure Schedule, there is no single corporate
education customer or group of customers of the Company or any of its
Subsidiaries which individually or in the aggregate provided more than 5% of the
Company's corporate education training revenue for the 12 month period ended May
31, 2003 and none of the Persons shown on the Disclosure Schedule have
terminated, cancelled, materially adversely modified or changed, their business
relationship with the Company or any of its Subsidiaries.
38. NO JOINT VENTURE INTERESTS, ETC.
Neither the Company nor any of the Subsidiaries is a partner, beneficiary,
trustee, co-tenant, joint-venturer or otherwise a participant in any
partnership, trust, joint venture, co-tenancy or similar jointly owned business
undertaking and neither the Company nor any of the Subsidiaries has significant
investment interests in any business owned or controlled by any third party.
- 15 -
39. INVESTMENT CANADA
(a) The Company has provided to Parent all information concerning
the Company and its business operations relevant to Parent's
determination as to the applicability of the Investment Canada
Act, the Government of Canada's Revised Foreign Investment
Policy in Book Publishing and Distribution, and the Department
of Canadian Heritage's policy on foreign investment in
magazine publishing.
(b) The Company is Canadian-controlled within the meaning of the
Investment Canada Act and any applicable ministerial
determinations made under such act.
40. RIGHTS PLAN
The Company has no shareholder rights plan or similar plan contemplated to be
put in place by the Company.
41. BROKERS
The Company and its Subsidiaries will not be liable, directly or indirectly, for
the fees, commissions or expenses of any broker, finder, investment broker or
other agent or intermediary (other than CIBC World Markets Inc.) in connection
with the Offer.
42. NO ADDITIONAL LIABILITY
Except as permitted by Section 4.1(b)(xiii) and except as provided under the
Convertible Debenture, the completion of the Offer will not result in the
Company and/or any Subsidiary incurring any additional material liability or
obligation (whether absolute, contingent or otherwise).
43. FULL DISCLOSURE
The Company has made available to Parent information, including financial,
marketing, sales and operational information, on a historical basis, relating to
the Company and the Subsidiaries. All such information which has been provided
to Parent is true and correct in all material respects and no material facts
have been omitted from that information which would make such information
misleading at the time that it was provided.
44. CUMULATIVE BREACH
The breaches, if any, of the representations made by the Company in this
Schedule B that would occur, if all references in such representations to
phrases concerning materiality, including references to the qualification
"Material Adverse Effect", were deleted, in the aggregate do not have and would
not reasonably be expected to have a Material Adverse Effect.
- 16 -
SCHEDULE C
The Offer shall permit a Shareholder who holds Shares indirectly through a
holding company to accept the Offer by depositing all of the shares of the
Holdco to the Offer for a consideration equal to the consideration such
Shareholder would have been entitled to receive had the Shares owned by such
Holdco been deposited directly under the Offer, provided that the Holdco
Alternative will only be available if the following terms and conditions are
satisfied:
(i) the Holdco is resident in Canada and is a taxable
Canadian corporation for purposes of the Income Tax
Act (Canada);
(ii) the Holdco is a single purpose corporation that has
no active business, has not held and does not hold
any assets other than Shares and has no liabilities
whatsoever (other than immaterial liabilities not in
excess of $5,000 for which full cash provision has
been made);
(iii) the Holdco has been incorporated under the laws of
the Province of Ontario on or after December 30,
2002;
(iv) the conditions to the Offer shall have been satisfied
or waived;
(v) the Holdco shall have been the legal and beneficial
owner of the Shares on or before April 1, 2003, or
such later date as the Offeror may determine, in its
sole discretion;
(vi) the Shareholder must advise the Depositary of its
intention to participate in the Holdco Alternative,
in writing, no later than 10 business days prior to
the initial Expiry Time, and must enter into a share
purchase agreement (a "SHARE PURCHASE AGREEMENT") no
later than 5 business days prior to the initial
Expiry Time in a form satisfactory to the Offeror
pursuant to which such Shareholder shall provide the
Offeror with representations, warranties and
covenants providing comprehensive protection to the
Offeror in respect of the period prior to closing
including a representation and warranty that Holdco
has no assets other than the Shares and has no
liabilities whatsoever (other than immaterial
liabilities not in excess of $5,000 for which full
cash provision has been made), and containing the
requirement for the seller of the Holdco Shares (the
"Holdco Seller") to arrange for the provision of a
legal opinion satisfactory to the Offeror, acting
reasonably, in connection with the purchase and sale
of such Holdco Shares. The Share Purchase Agreement
will also include a comprehensive indemnity in favour
of the Offeror from the Holdco Seller and the
ultimate principal investor of the Holdco Seller in
respect of breaches of representations and warranties
and any liabilities of Holdco relating to any matter
occurring on or before, or relating to a time before,
the Expiry Time and will require the Holdco Seller to
pay the Offeror's out-of-pocket expenses incurred in
connection with its diligence and any other costs in
relation to the election of the Holdco Alternative by
the Holdco Seller to a maximum of $25,000. Failure of
a Shareholder to properly notify the Depository of
its intention to participate in the Holdco
Alternative or to properly enter into a Share
Purchase Agreement within the time deadlines set
forth above will disentitle such Shareholder to
participate in the Holdco Alternative;
(vii) access to all of the Books and Records of Holdco have
been provided on or before 8 business days prior to
the initial Expiry Time and the Offeror and its
counsel shall have completed due diligence regarding
the business and affairs of Holdco to ensure that
Holdco is capable of providing the representations
and warranties and performing the covenants to be
contained in the Share Purchase Agreement above with
results satisfactory to the Offeror, acting
reasonably;
(viii) where there is more than one shareholder of Holdco,
all such shareholders shall have elected to avail
themselves of the Holdco Alternative with respect to
all of their Holdco Shares; and
(ix) the Offeror determines, in its sole discretion, that
the purchase of the Holdco Shares would not have a
material adverse consequence (whether tax or
otherwise) to the Offeror.
The purchase and sale of the Holdco Shares will be executed in escrow no more
than two business days prior to the Expiry Time and become effective at the time
at which the Offeror takes up and pays for all of the Shares deposited under the
Offer. Offeror will pay for the Holdco Shares as soon as practicable, and in any
event, no more than three business days following the take-up of the Shares.
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SCHEDULE D
DEFINITIONS
(a) "ACQUISITION PROPOSAL" has the meaning ascribed thereto in
subsection 5.2(a);
(b) "AGREEMENT" and "SUPPORT AGREEMENT" means this support
agreement and all the Schedules hereto;
(c) "BID CIRCULAR" has the meaning ascribed thereto in subsection
1.1(c);
(d) "BOARD OF DIRECTORS" has the meaning ascribed thereto in
Recital 2;
(e) "BUSINESS DAY" means any day, other than a Saturday or Sunday,
on which banks are open for business in Xxxxxxx, Xxxxxxx, and
Santa Ana, California;
(f) "COMPANY" has the meaning ascribed thereto in the preamble;
(g) "COMPANY BENEFIT PLANS" means all employee benefit plans, all
loans to employees, all stock option, stock purchase, phantom
stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care,
disability, employee relocation, life insurance or accident
insurance, bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements,
other fringe or employee benefit plans that apply to employees
of the Company or any of the Subsidiaries and executive
compensation or severance agreements for the benefit of, or
relating to, any present or former employee, consultant,
officer or director of the Company and "COMPANY BENEFIT PLAN"
means any such plan;
(h) "COMPANY'S PUBLIC DOCUMENTS" has the meaning ascribed thereto
in paragraph 9 of Schedule B;
(i) "COMPULSORY ACQUISITION" has the meaning ascribed thereto in
Section 1.4;
(j) "CONFIDENTIAL INFORMATION" has the meaning ascribed thereto in
paragraph 13(e) of Schedule B;
(k) "CONFIDENTIALITY AGREEMENT" means the confidentiality
agreement dated January 10, 2003 entered into between the
Company and Parent and any and all amendments thereto;
(l) "CONVERTIBLE DEBENTURE" means, collectively, (i) the Series 1
Convertible Debentures issued December 12, 2002; and (ii) the
$4 million Subordinated Convertible Debenture issued December
12, 2002 to RoyNat Capital Inc.;
(m) "CURRENT PREMIUM" has the meaning ascribed thereto in Section
5.8;
(n) "CURRICULUM" means the curriculum used in the educational
programs offered by the Company in the form of computer
programs, slide shows, texts, films, videos or any other form
or media, including, without limitation, the following items:
(i)
course objectives, (ii) lesson plans, (iii) exams, (iv) class
materials (including interactive or computer-aided placement
materials), (v) faculty notes, (vi) course handouts, (vii)
diagrams, (viii) syllabi, (viiii) sample externship and
placement materials, (x) clinical checklists, (xi) course and
faculty evaluation materials, (xii) policy limitation, (a) all
copyrights, copyright applications, copyright registrations
and trade secrets relating to the above-listed items and (b)
Revisions;
(o) "DEPOSITARY" means Computershare Trust Company of Canada,
unless otherwise determined by the Offeror;
(p) "DIRECTORS CIRCULAR" has the meaning ascribed thereto in
clause 1.1(g)(iii);
(q) "DISCLOSURE SCHEDULE" means the written disclosure letter
addressed to the Offeror and Parent dated the date hereof and
delivered to Parent (i) in draft form three days prior to the
date hereof; and (ii) in final form contemporaneously with the
delivery of this Agreement;
(r) "EFFECTIVE TIME" has the meaning ascribed thereto in Section
4.1;
(s) "EMPLOYEE STOCK PURCHASE PLAN" means the Palmtree employee
stock purchase plan effective July 1, 2000;
(t) "ENVIRONMENTAL LAWS" means all Laws relating to the protection
of the environment, occupational health and safety, or the
use, storage, disposal, discharge, packaging, transport,
handling, containment, clean-up or other remediation or
corrective action of any Hazardous Substances, in each case,
as in effect on the date hereof;
(u) "EQUIVALENT INSURANCE" has the meaning ascribed thereto in
Section 5.8;
(v) "EXCLUSIVITY AGREEMENT" means the exclusivity agreement dated
as of April 1, 2003 entered into among the Company, the Parent
and Xxxxx XxXxxxxx, and any and all amendments thereto;
(w) "EXPIRY TIME" has the meaning ascribed thereto in subsection
1.1(e);
(x) "GAAP" has the meaning ascribed thereto in paragraph 10 of
Schedule B;
(y) "GOVERNMENTAL AUTHORITY" means any government, regulatory
authority, governmental department, agency, commission,
bureau, official, minister, Crown corporation, court, board,
tribunal, dispute settlement panel or body or other Law, rule
or regulation-making entity:
(i) having or purporting to have jurisdiction on behalf
of any nation, province, state or other geographic or
political subdivision thereof; or
(ii) exercising, or entitled or purporting to exercise any
administrative, executive, judicial, legislative,
policy, regulatory or taxing authority or power;
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(z) "HAZARDOUS SUBSTANCES" means all pollutants, contaminants,
wastes of any nature, chemicals, deleterious substances,
hazardous material, toxic or hazardous wastes or any other
substance, (including asbestos, asbestos containing materials,
mould, microbial organisms or substances related thereto),
matter or material regulated by or under Environmental Laws;
(aa) "HOLDCO" has the meaning ascribed thereto in subsection
1.1(a);
(bb) "HOLDCO ALTERNATIVE" has the meaning ascribed thereto in
subsection 1.1(a);
(cc) "HOLDCO SHARES" has the meaning ascribed thereto in subsection
1.1(a);
(dd) "HOLDCO SELLER" has the meaning ascribed thereto in Schedule
C;
(ee) "INTELLECTUAL PROPERTY" means all:
(i) copyrights in any original works and all rights in
any works not subject to copyright, including,
without limitation, so-called "look and feel", design
elements, ordering of content, graphic user
interface, ideas or concepts, computer software
programs or applications (in both source code and
object form code), database rights and tangible or
intangible proprietary information or material;
(ii) trade-marks, including both registered and
unregistered trade-marks and service marks, designs,
logos, indicia, distinguishing guises, trade dress,
trade names, business names, any other source or
business identifiers including domain names, and all
goodwill associated with the foregoing;
(iii) trade secrets, confidential information and know-how,
innovations, processes, technology, reports and
studies, data, research designs, research results and
notes, prototypes, drawings, design and construction
specifications, maskworks, net lists, schematics; and
(iv) patents and utility models and applications therefor
and all provisionals, re-issuances, continuations,
continuations-in-part, divisions, revisions,
extensions, and re-examinations thereof and all
equivalent or similar rights anywhere in the world in
inventions and discoveries including invention
disclosures;
(ff) "LATEST MAILING DATE" has the meaning ascribed thereto in
subsection 1.1(c);
(gg) "LAWS" means applicable Laws (including common law), statutes,
by-laws, rules, regulations, directives, instructions, orders,
ordinances, protocols, codes, guidelines, treaties, policies,
notices, directions, decrees, judgments, awards or
requirements, in each case of any Governmental Authority;
(hh) "LEASED REAL PROPERTY" has the meaning ascribed thereto in
paragraph 30 of Schedule B;
(ii) "LOCK-UP AGREEMENT" has the meaning ascribed thereto in
Recital 2;
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(jj) "LOCKED-UP SHAREHOLDER" has the meaning ascribed thereto in
Recital 2;
(kk) "MAILING DATE" has the meaning ascribed thereto in subsection
1.1(e);
(ll) "MATCH PERIOD" has the meaning ascribed thereto in Section
5.3(a);
(mm) "MATERIAL ADVERSE EFFECT" means any change, effect, event,
occurrence or state of facts that is, or would reasonably be
expected to be (individually or in the aggregate), material
and adverse to the assets, properties, prospects, condition
(financial or otherwise), results of operations or liabilities
of the Company and its Subsidiaries taken as a whole other
than any change, effect, event, occurrence or state of facts
relating to (i) the United States, Canadian or international
economies generally; or (ii) securities markets in general;
(nn) "MINIMUM TENDER CONDITION" has the meaning ascribed thereto in
paragraph (a) of Schedule A;
(oo) "OBCA" has the meaning ascribed thereto in Section 1.4;
(pp) "OFFER" has the meaning ascribed thereto in subsection 1.1(a);
(qq) "OFFEROR" has the meaning ascribed thereto in the preamble;
(rr) "OPTIONS" has the meaning ascribed thereto in subsection
1.1(a);
(ss) "PARENT" has the meaning ascribed thereto in the preamble;
(tt) "PERSON" means any individual, sole proprietorship,
partnership, firm, entity, unincorporated association,
unincorporated syndicate, unincorporated organization, trust,
body corporate, Government Authority, and where the context
requires any of the foregoing when they are acting as trustee,
executor, administrator or other legal representative;
(uu) "POLICY GUIDELINES" means all material policy manuals and
other statements of procedures or instruction relating to
recruitment of students for the Schools, including, if
applicable, (i) procedures for assisting in the application by
prospective students for direct or indirect provincial or
federal financial assistance; (ii) admissions procedures,
including any descriptions of procedures for insuring
compliance with provincial or federal or other appropriate
standards or tests of eligibility; and (iii) procedures for
encouraging and verifying attendance, minimum required
attendance policies, and other relevant criteria relating to
course completion and certification;
(vv) "PRE-ACQUISITION REORGANIZATION" has the meaning ascribed
thereto in Section 5.9;
(ww) "REAL PROPERTY" means the immoveable property now or formerly
owned or leased by the Company and/or the Subsidiaries;
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(xx) "REAL PROPERTY LEASE" has the meaning ascribed thereto in
paragraph 30 of Schedule B;
(yy) "REAL PROPERTY LEASES" has the meaning ascribed thereto in
paragraph 30 of Schedule B;
(zz) "REGISTERED INTELLECTUAL PROPERTY" has the meaning ascribed
thereto in paragraph 13(a) of Schedule B;
(aaa) "REVISIONS" means all periodic updates or revisions to the
Curriculum as developed or used by the Company through the
date that the Offeror takes up and pays for the Shares;
(bbb) "SCHOOLS" means (i) those certain post-secondary, vocational
or career training schools and (ii) the corporate education
division owned, operated and administered by the Company and
its Subsidiaries;
(ccc) "SECTION 5.3 NOTICE" has the meaning ascribed thereto in
subsection 5.3(a);
(ddd) "SHAREHOLDERS" has the meaning ascribed hereto in Recital 2;
(eee) "SHARE PURCHASE AGREEMENT" has the meaning ascribed thereto in
Schedule C;
(fff) "SHARES" has the meaning ascribed thereto in Recital 1;
(ggg) "STOCK OPTION PLAN" means the Palmtree Fixed Stock Option Plan
adopted on June 15, 1999 pursuant to which options are granted
to directors, officers, employees or consultants of Palmtree;
(hhh) "SUBSEQUENT ACQUISITION TRANSACTION" has the meaning ascribed
thereto in Section 1.4;
(iii) "SUBSIDIARIES" has the meaning ascribed thereto in paragraph 2
of Schedule B;
(jjj) "SUPERIOR PROPOSAL" has the meaning ascribed thereto in
subsection 5.2(a);
(kkk) "TAXES" means any taxes, charges, fees, levies or other
assessments, including all net income, gross income, capital
taxes, gross receipt taxes, premiums, sales and use, goods and
services, harmonized sales, employer health, ad valorem,
transfer, gains, profits, windfall profits, excise, franchise,
real and personal property, gross receipts, capital stock,
production, business and occupation, license, stamp, custom
duties, alternative or add-on minimum taxes, employment,
disability, payroll, Canada or Quebec Pension Plan premiums,
severance or withholding taxes, or other withholding
obligations, social security premiums, workers' compensation
premiums, employment insurance or compensation premiums, other
taxes or similar charges of any kind whatsoever imposed by any
governmental entity or taxing authority (domestic or foreign)
or for which such entity is responsible and includes
instalments of Taxes and any interest, fines and penalties on
or additions to any such taxes or in respect of a failure to
comply with any requirement relating to any Tax return;
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(lll) "THIRD PARTY BENEFICIARY" has the meaning ascribed thereto in
Section 7.10; and
(mmm) "TSX" has the meaning ascribed thereto in subsection 4.1(h).
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