PREFERRED SHARE PURCHASE AGREEMENT
by and among
WORLDWIDE FIBER INC.,
DWF SRL,
GSCP3 WWF (BARBADOS) SRL,
WWF (BARBADOS) SRL,
PROVIDENCE EQUITY FIBER L.P.,
and
TYCO GROUP S.A.R.L.
dated as of
September 7, 1999
Table of Contents
Page
SECTION 1. Issuance and Sale of Preferred Shares...........................1
1.1. The Purchase....................................................1
1.2. The Closing.....................................................1
1.3. Deliveries at the Closing.......................................2
1.4. Purchase Price Adjustment.......................................2
SECTION 2. Representations and Warranties of the Corporation...............5
2.1. Organization and Good Standing; Power and Authority;
Qualifications.............................................5
2.2. Authorization of the Documents..................................6
2.3. Capitalization..................................................6
2.4. Authorization and Issuance of Share Capital.....................8
2.5. Reservation of Shares...........................................8
2.6. Financial Statements............................................8
2.7. Absence of Undisclosed Liabilities..............................9
2.8. Absence of Changes..............................................9
2.9. No Conflict....................................................11
2.10. Agreements.....................................................11
2.11. Intellectual Property Rights...................................12
2.12. Equity Investments; Subsidiaries...............................14
2.13. Corporate Minute Books.........................................14
2.14. Suitability....................................................14
2.15. Assets.........................................................15
2.16. Employee Benefit Plans.........................................15
2.17. Labor Relations; Employees.....................................17
2.18. Litigation; Orders.............................................18
2.19. Compliance with Laws...........................................18
2.20. Compliance with Telecommunications Laws........................19
2.21. Telecommunications Licenses....................................21
2.22. Licenses, Permits and Rights-of-Way............................21
2.23. Offering Exemption.............................................22
2.24. Related Transactions...........................................22
2.25. Boycott........................................................23
2.26. Taxes..........................................................23
2.27. Environmental Protection.......................................26
2.28. Consents.......................................................27
2.29. Insurance......................................................27
2.30. Brokers........................................................28
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Page
2.31. Suppliers and Customers........................................28
2.32. Real Property..................................................28
2.33. Investment Banking Services....................................28
2.34. Year 2000 Compliant............................................29
2.35. Previous Issuances Exempt......................................29
2.36. Investment Company Act.........................................29
2.37. Disclosure.....................................................29
SECTION 3. Representations, Warranties and Acknowledgments of the
Investors.................................................29
SECTION 4. Covenants Prior to Closing.....................................32
4.1. Cooperation by Parties; Satisfaction of Closing Conditions.....32
4.2. Conduct of Business............................................32
4.3. Required Notices...............................................33
4.4. No Shop........................................................33
SECTION 5. Other Covenants................................................34
5.1. Use of Proceeds................................................34
5.2. Shareholders Agreement.........................................34
5.3. HSR Filing.....................................................34
5.4. Tax Indemnity..................................................34
5.5. Roll-Up Transactions...........................................36
SECTION 6. Conditions to the Purchase.....................................36
6.1. Conditions to Obligations of Each Party........................36
6.2. Conditions to Obligations of the Investors.....................36
6.3. Conditions to the Obligations of the Corporation...............38
6.4. Default by an Investor.........................................39
SECTION 7. Termination....................................................39
SECTION 8. Transfer Taxes.................................................39
SECTION 10. Expenses.......................................................39
SECTION 11. Indemnification................................................40
11.1. General Indemnification........................................40
11.2. Indemnification Principles.....................................41
11.3. Claim Notice...................................................42
11.4. Claim Procedure................................................42
SECTION 12. Remedies.......................................................43
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Page
SECTION 13. Further Assurances.............................................44
SECTION 14. Successors and Assigns.........................................44
SECTION 15. Entire Agreement...............................................44
SECTION 16. Notices........................................................44
SECTION 17. Amendments.....................................................47
SECTION 18. Counterparts...................................................47
SECTION 19. Headings.......................................................47
SECTION 20. Nouns and Pronouns.............................................48
SECTION 21. Governing Law; Waiver of Jury Trial............................48
SECTION 22. Severability...................................................48
SECTION 23. Currency.......................................................48
SECTION 24. No Partnership.................................................48
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Schedules
---------
Schedule A Articles of Amendment
Schedule 1.1 List of Investors
Schedule 2.1(a) WFI Entities, Organization and Good Standing
Schedule 2.3(a) Capitalization
Schedule 2.3(b)(i) List of Shareholders
Schedule 2.3(b)(ii) Common Share Equivalents
Schedule 2.3(b)(iv) WFI Share Encumbrances or Restrictions
Schedule 2.3(b)(v) Nomination or Election of Director Rights
Schedule 2.7 Undisclosed Liabilities
Schedule 2.8 Changes
Schedule 2.10(a) Agreements
Schedule 2.10(c) Fiber Sales Agreements
Schedule 2.10(d) Changes in Network Description
Schedule 2.11(d) Trademarks
Schedule 2.11(e)(f) Third Party Intellectual Property
Schedule 2.15(a) Encumbrances
Schedule 2.15(c) Condemnation Proceedings
Schedule 2.16 Employee Benefit Plans
Schedule 2.17 Labor Relations; Employees
Schedule 2.18 Litigation; Orders
Schedule 2.19 Non-Compliance with Laws; Licenses
Schedule 2.20(a) Compliance with Telecommunications Laws
Schedule 2.20(e) Compliance with Communications Act
Schedule 2.21(a) Telecommunications Licenses
Schedule 2.22 Local Licenses, Permits and Rights-of-Way
Schedule 2.24(a) Related Transactions
Schedule 2.26 Taxes
Schedule 2.29 Insurance
Schedule 2.32 Real Property
Schedule 3 U.S. Representations and Warranties
Schedule 4.2 Conduct of Business
Schedule 5.1 Use of Proceeds
Schedule 5.2 Form of Shareholders Agreement
Schedule 6.2(f) Form of Registration Rights Agreement
Schedule 6.2(i) Form of Opinions
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Index of Defined Terms
----------------------
1933 Act. Section 2.6(b)
Access Rights. Section 2.22(b)
Additional Issuance Ratio. Section 1.4(b)
Affiliate. Section 1.4(b)
Agreement. recitals
Arrangement. Section 2.27
Articles of Amendment. recitals
Balance Sheet. Section 2.6(a)
Benefit Plan. Section 2.16(a)
Board of Directors. Section 6.2(d)
Business Day. Section 1.2
Canadian Securities Laws. Section 3(i)
CFC. Section 2.26(d)
Claim Notice. Section 11.3
Closing. Section 1.2
Closing Date. Section 1.2
Code. Section 2.16(a)
Common Share Equivalents. Section 2.3(b)(ii)
Common Shares. Section 2.3(a)(ii)
Communications Act. Section 2.20(e)
Communications statutes. Section 2.20(a)
Competition Act. Section 2.18
Contract. Section 2.10
Conversion Shares. Section 2.5
Corporation. recitals
CRTC. Section 2.18
Deductible. Section 11.1
Deemed Outstanding Shares. Section 1.4(b)
Defaulted Shares. Section 6.4
Defined Benefit Plan. Section 2.16(a)
DLJ. recitals
Documents. Section 6.2(d)
Employee. Section 2.16(a)
Employee Agreement. Section 2.16(a)
Employee Shares. Section 1.4(b)
Encumbrances. Section 2.15(a)
Environmental Laws. Section 2.27
ERISA. Section 2.16(a)
ERISA Affiliate. Section 11.1
FCC. Section 2.18
FPHC. Section 2.26(d)
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GAAP. Section 2.6(a)
Governmental Authority. Section 2.26(n)
GSCP Parties. recitals
Hazardous Substances. Section 2.27
Hibernia Commitment. Section 6.2(l)
Hibernia Project. Section 2.10(e)
Hibernia Supply Contract. Section 2.10(e)
HSR. Section 5.3
Industry Canada. Section 2.18
Intellectual Property. Section 2.11
Investor. recitals
Investor Entity. Section 11.1
Lapsed Options. Section 2.3(c)
Leased Real Properties. Section 2.32
Ledcor Roll-Up Agreement. Section 2.3(c)
Licenses. Section 2.19(a)
Limit. Section 11.1
Litigation. Section 21
Losses. Section 11.2
Material Adverse Effect. Section 2.1
Minority Roll-Up Agreement. Section 1.4(b)
Minority Roll-Up Shares. Section 1.4(b)
Minority Roll-Up Transaction. Section 1.4(b)
Multiemployer Plans. Section 2.16(a)
Network. Section 2.10(d)
Offering Memorandum. Section 2.10(d)
Other Shareholders. Section 1.4(b)
Owned Real Properties. Section 2.32
Ownership Regulations. Section 2.20(b)
Permits. Section 2.22
Permitted Assigns. Section 14
Permitted Encumbrances. Section 1.4(e)
Permitted Lapsed Option Reissuance. Section 1.4(b)
Person. Section 2.26(n)
PFIC. Section 2.26(d)
PFIC Annual Information Statement. Section 2.26(e)
PHC. Section 2.26(d)
Preferred Shares. Section 2.3(a)(i)
Prohibited Transaction. Section 4.4
Project Subsidiary. Section 4.2(b
Providence. recitals
Purchase. Section 1.1
Purchase Price. Section 1.1
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Purchase Price Adjustment. Section 1.4(a)
Real Properties. Section 2.32
Registration Rights Agreement. Section 6.2(f)
Release. Section 2.27
Retired Welfare Plan. Section 2.16(a)
Securities Act. Section 2.6(b)
Securities Laws. Section 2.35
Series A Non-Voting Preferred Shares. recitals
Shareholders Agreement. Section 5.2
Subsidiary. Section 2.12
Tax Return. Section 2.26
Taxes. Section 2.26
Telecommunications Licenses. Section 2.21(a)
Transaction Securities. Section 2.5
Transfer Taxes. Section 8
Tyco. recitals
WFI Entities. Section 2.1
WFI Subsidiary. Section 2.12
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WORLDWIDE FIBER INC.
PREFERRED SHARE PURCHASE AGREEMENT
AGREEMENT, dated as of September 7, 1999 (as amended from time to time,
this "Agreement"), by and among WORLDWIDE FIBER INC., a Canadian corporation
(the "Corporation"), DWF SRL a Barbados company ("DLJ"), GSCP3 WWF (BARBADOS)
SRL, a Barbados company, WWF (BARBADOS) SRL, a Barbados company (collectively,
the "GSCP Parties"), PROVIDENCE EQUITY FIBER L.P., a Delaware limited
partnership ("Providence"), and TYCO GROUP S.A.R.L., a Luxembourg corporation
("Tyco") (each individually an "Investor" and collectively with DLJ, the GS
Parties, and Providence, the "Investors").
W I T N E S S E T H :
WHEREAS, the Corporation wishes to sell to the Investors, and the Investors
wish to purchase from the Corporation, shares of a newly created series of
Preferred Shares, the Series A Non-Voting Preferred Shares (the "Series A
Non-Voting Preferred Shares") with the terms set forth in the Articles of
Amendment of the Corporation in the form included in Schedule A hereto (the
"Articles of Amendment").
ACCORDINGLY, the parties hereto hereby agree as follows:
SECTION 1. Issuance and Sale of Preferred Shares.
1.1. The Purchase. (a) Subject to the terms and conditions set forth in
this Agreement, at the Closing, each Investor shall, severally and not jointly,
purchase from the Corporation and the Corporation shall issue to each Investor,
the number of Series A Non-Voting Preferred Shares set forth opposite such
Investor's name on Schedule 1.1 (the "Purchase"), subject to adjustment as set
forth in Section 1.4, at the purchase price set forth opposite such Investor's
name on Schedule 1.1. The aggregate purchase price to be paid by the Investors
to the Corporation for the Series A Non-Voting Preferred Shares purchased by
them hereunder is U.S. $345,000,000 (the "Purchase Price").
1.2. The Closing. (a) Subject to the terms and conditions set forth in this
Agreement, the closing of the Purchase (the "Closing") shall take place at the
offices of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ on the first Business Day after the day on which the last of the
conditions set forth in Section 6 hereof shall have been fulfilled or waived
(or, if contemplated to be satisfied simultaneously with the Closing, are
capable of being satisfied) or such other date as may be agreed to in writing by
each of the parties hereto (the "Closing Date"). For purposes of this
Agreement, "Business Day" means any day other than a Saturday, a Sunday or a day
when commercial banks in New York City or Barbados are required to be closed.
1.3. Deliveries at the Closing. (a) At the Closing, the Corporation shall
deliver to each Investor a certificate or certificates representing the Series A
Non-Voting Preferred Shares purchased by such Investor, registered in the name
of such Investor or its nominee. Delivery of such certificates to an Investor
shall be made against receipt at the Closing by the Corporation from such
Investor of the Purchase Price, which shall be paid by wire transfer to an
account designated at least one Business Day prior to the Closing by the
Corporation.
(b) At the Closing, the Corporation will deliver to the Investors, and the
Investors will deliver to the Corporation, the various certificates, instruments
and documents referred to in Section 6 below.
1.4. Purchase Price Adjustment. (a) In addition to, and without limitation
of all other indemnities in this Agreement, as a protection to the Investors
against the existence of issued shares or other securities of the Corporation
not disclosed in Section 2.3, in the event that, at any time, the representation
and warranty set forth in Section 2.3(c) is determined to have been incorrect as
of the Closing, the Corporation shall issue to the Investors (on a pro rata
basis, based upon the amount of each Investor's original investment), at no
additional cost to the Investors, and as an adjustment to the purchase price
(whether under this paragraph (a) or paragraphs (b) or (c) of this Section 1.4,
a "Purchase Price Adjustment") paid by the Investors per Series A Non-Voting
Preferred Share, an additional amount of Series A Non-Voting Preferred Shares
such that, if such issuance of additional Series A Non-Voting Preferred Shares
had been made at Closing, such representation and warranty would have been true
and accurate in all respects.
(b) If at any time after the Closing, the Corporation shall either: (i)
subject to paragraph (f) of this Section 1.4, issue any Employee Shares (other
than (x) Common Shares issued upon the exercise of stock options listed as
Common Share Equivalents on Schedule 2.3(b)(ii) (i.e., [ ]* options granted
pursuant to the Worldwide Fiber Inc. 1998 Long Term Incentive and Share Award
Plan (Amended) (the "1998 Plan") (the "Existing 10% Option Pool")) or (y) Common
Shares issued upon the exercise of stock options granted under the New 5% Option
Pool (as defined below) to the extent the grant of such stock options as
Employee Shares previously resulted in an adjustment under this Section 1.4(b)),
Deemed Outstanding Shares, Permitted Reissued Options or Common Shares issued
upon the exercise of Permitted Reissued Options) or (ii) issue any Minority
Roll-Up Shares (except Minority Roll-Up shares issued after September 7, 2000),
then the Corporation shall (in the case of clause (i), at the end of each
calendar quarter (unless otherwise requested by any Investor), and in the case
of clause (ii) immediately) issue to the Investors (on a pro rata basis, based
upon the amount of each Investor's original investment), at no additional cost
to the Investors, and as a Purchase Price Adjustment, a number of Series A
Non-Voting Preferred Shares per each Series A Non-Voting Preferred Share equal
to
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----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
[
]*
For purposes of this Agreement:
"Affiliate" means any partnership, corporation, trust, or other
organization which is controlled by or under common control of the Corporation
or its Subsidiaries.
"Deemed Outstanding Shares" means (i) any Common Shares or Common Share
Equivalents issuable pursuant to any Contract (as defined in Section 2.10)
entered into by the Corporation prior to the date hereof, or any preemptive
right granted by the Corporation prior to the date hereof, and (ii) 4,500,000
Common Shares issued, or to be issued, in consideration for the acquisition by
the Corporation of fiber assets and related rights and obligations from Ledcor
Industries Limited or Ledcor Industries Inc. under the amended and restated
Share Purchase Agreement entered into on September 7, 1999 between Ledcor
Industries Limited, Ledcor Industries Inc. and the Corporation (the "Ledcor
Roll-Up Agreement"). For greater certainty, Deemed Outstanding Shares do not
include Common Shares issuable pursuant to the Minority Roll-Up Transactions.
"Employee Shares" means any Common Shares (as defined in Section 2.3(a)) or
Common Share Equivalents (as defined in Section 2.3(b)) issued to directors,
officers, employees or consultants of the Corporation, its Subsidiaries or the
entities permitted under the terms of the 1998 Plan.
"Lapsed Options" means any stock options listed as Common Share Equivalents
on Schedule 2.3(b)(ii) (options granted pursuant to the Existing Option Pool) or
up to [ ]* options issued by the Corporation pursuant to the 1998 Plan
after the date hereof (the "New 5% Option Pool"), in either case which after the
Closing Date lapses or terminates without being converted or exercised.
"Minority Roll-Up Shares" means any Common Shares or Common Share
Equivalents issued pursuant to any Minority Roll-Up Transaction.
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----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
"Minority Roll-Up Transaction" means the issuance by the Corporation of
Common Shares or Common Share Equivalents pursuant to any of the Minority
Roll-Up Agreements (or any transactions or series of related transactions with
similar effect).
"Minority Roll-Up Agreement" means (a) the unanimous shareholder agreement
dated as of May 28, 1999 between Worldwide Fiber Networks Ltd., Canadian
National Railway Company and WFI-CN Fibre Inc., (b) the limited liability
company agreement of Worldwide Fiber IC LLC effective as of May 28, 1999 between
Worldwide Fiber IC Holdings, Inc. and IC Fiber Holdings Inc., and (c) the
shareholders agreement dated December 31, 1998 between the Corporation,
Worldwide Fiber Networks Ltd., Ledcor Industries Inc., Worldwide Fiber (USA),
Inc. (formerly known as Pacific Fiber Link, Inc.), Mi-Tech Communications, LLC,
Ledcor and ▇▇▇▇▇▇▇ Pipeline Construction, Inc.
"Permitted Reissued Option" means any Common Share Equivalent issued in
accordance with the Corporation's stock option plan then in effect to replace
any Lapsed Option with a conversion or exercise price equal to or greater than
the conversion or exercise price of the Lapsed Option (as adjusted to reflect
any stock split, stock dividend, combination, reorganization, reclassification
or other similar event involving Common Shares) and a term no longer than the
original term of the Lapsed Option.
(c) If, at the time of any Purchase Price Adjustment pursuant to Section
1.4(a) or (b), all Series A Non-Voting Preferred Shares have been converted into
Common Shares, in lieu of issuing Series A Non-Voting Preferred Shares pursuant
to Section 1.4(a) or Section 1.4(b), the Corporation shall promptly issue to the
Investors (on a pro rata basis), at no additional cost to the Investors and as a
Purchase Price Adjustment, an additional amount and kind of Common Shares equal
to the amount and kind of Common Shares issuable upon the conversion (based on
the conversion ratio that would have been in effect if the Series A Non-Voting
Preferred Shares were outstanding and had not been converted into Common Shares)
of the amount of Series A Non-Voting Preferred Shares which would have been
issued with respect to such Purchase Price Adjustment pursuant to Section 1.4(a)
or Section 1.4(b) treating for purposes of such Purchase Price Adjustment the
Series A Non-Voting Preferred Shares as not having been converted into Common
Shares.
(d) Any additional Series A Non-Voting Preferred Shares and Common Shares
issued to the Investors pursuant to this Section 1.4 shall be treated as if they
were issued on the date hereof and shall reflect any dividends or other
distributions which would have accrued or have been payable with respect to and
the application of any anti-dilution, ratable treatment or similar provisions as
set forth in the Articles of Amendment, applicable law or otherwise which would
have been applicable to such Series A Non-Voting Preferred Shares and Common
Shares had they been issued on the date hereof.
(e) In connection with any issuance of Series A Non-Voting Preferred Shares
pursuant to this Section 1.4, the Corporation shall reserve a sufficient number
of shares of Class A Non-Voting Common Shares for issuance to the Investors upon
the conversion of
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the Series A Non-Voting Preferred Shares so issued. Any Series A Non-Voting
Preferred Shares or Common Shares issued to the Investors pursuant to this
Section 1.4 shall, when issued, be validly issued and fully paid and
nonassessable with no personal liability attaching to the ownership thereof
(other than any Encumbrances, as defined in Section 2.15, that exist as a result
of any act, or failure to act, by any current or former holder, whether
beneficial or of record, of such shares, referred to as "Permitted
Encumbrances").
(f) Section 1.4(b) shall not apply to the issuance of Employee Shares after
the sum of all Employee Shares issued for which adjustment has been made in
accordance with Section 1.4(b)(i) equals 1,982,653 Common Shares or Common Share
Equivalents on an as converted basis (as equitably adjusted to reflect any stock
split, stock dividend, combination, reorganization, reclassification or other
similar event involving Common Shares).
SECTION 2. Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to the Investors as of the date
hereof and as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date hereof throughout this Agreement) as follows:
2.1. Organization and Good Standing; Power and Authority; Qualifications.
The Corporation and each of its subsidiaries (all of which are set forth in
Schedule 2.1(a)) (collectively with the Corporation, the "WFI Entities") (a) is
a corporation, limited liability company, general or limited partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, organization, amalgamation or continuance, (b)
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted and as proposed
to be conducted, and (c) has all requisite corporate power and authority to
enter into and carry out the transactions contemplated by each of the Documents
(as defined in Section 6.2(d)) to which it is a party. Each WFI Entity is
qualified to transact business as an extra-provincial corporation or foreign
corporation in, and is in good standing under the laws of, those jurisdictions
listed on Schedule 2.1(a) in square brackets opposite its name, which
jurisdictions constitute all of the jurisdictions wherein the character of the
property owned or leased or the nature of the activities conducted by it makes
such qualification necessary except where the failure to be so qualified would
not have a material adverse effect on the business, prospects, condition
(financial or otherwise), operations, properties, assets or liabilities of the
WFI Entities taken as a whole (a "Material Adverse Effect"). For all purposes of
this Agreement, the business, prospects, conditions (financial or otherwise),
operations, properties, assets or liabilities of the WFI Entities shall be
deemed to include the business, prospects, condition (financial or otherwise),
operations, properties, assets and liabilities associated with the Fiber Assets
(and the rights, liabilities and obligations associated with the Fiber Assets)
as defined in the Ledcor Roll-Up Agreement.
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2.2. Authorization of the Documents. The execution and delivery by the
Corporation of each of the Documents and the performance by the Corporation of
its obligations thereunder has been duly authorized by all requisite corporate
action on the part of the Corporation. As of the date hereof, this Agreement
constitutes, and as of the Closing Date, each of the Documents will constitute,
a legal, valid and binding obligation of the Corporation, enforceable against
the Corporation in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and by equitable principles generally,
whether enforced in a court of law or at equity.
2.3. Capitalization. (a) The authorized capital of the Corporation
immediately following the Closing will consist of:
(i) Preferred Shares. An unlimited number of Preferred Shares (the
"Preferred Shares") of which 8,866,808 Series A Non-Voting Preferred Shares are
issued and outstanding, no Series B Subordinate Voting Preferred Shares (the
"Series B Voting Preferred Shares") are issued and outstanding and no Series C
Redeemable Preferred Shares are issued and outstanding, and all such shares are
validly issued, fully paid and nonassessable with no personal liability
attaching to the ownership thereof when so issued and delivered and free and
clear of all Encumbrances other than Permitted Encumbrances; and
(ii) Common Shares. An unlimited number of Class A Non-Voting Shares, an
unlimited number of Class B Subordinate Voting Shares and an unlimited number of
Class C Multiple Voting Shares (together with any common shares of the
Corporation of any other class or series hereafter authorized, the "Common
Shares"), of which no Class A Non-Voting Shares are issued and outstanding,
23,843,500 of Class B Subordinate Voting Shares are issued and outstanding, and
no Class C Multiple Voting Shares are issued and outstanding. All such
outstanding shares are validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof and free and clear of all
Encumbrances other than Permitted Encumbrances.
(b) Except as set forth in clause (a) above, there will be no share capital
of the Corporation outstanding immediately following the Closing.
(i) Schedule 2.3(b)(i) Part I hereto contains a complete and correct list
of each holder of record of share capital of each WFI Entity immediately
preceding the Closing, including (A) whether, for purposes of the foreign
ownership and control requirements under the Telecommunications Act and the
rules and regulations promulgated thereunder, such holder is a "Canadian" or a
"non-Canadian," and (B) the number of shares of capital held by each such holder
and the percentage represented by such shares of (1) the outstanding Common
Shares, on a fully diluted basis (assuming the conversion, exchange or exercise
of all outstanding Common Share Equivalents), and (2) the total number of votes
able to be cast on any matter by all voting securities of the Corporation.
Schedule 2.3(b)(i) Part II hereto
-6-
contains a complete and correct list of each holder of record of share capital
of the Corporation immediately following the Closing.
(ii) Schedule 2.3(b)(ii) hereto contains a complete and correct list of all
outstanding warrants, options, agreements, convertible securities or other
commitments or outstanding securities convertible into, or exchangeable or
exercisable for, Common Shares (collectively, "Common Share Equivalents"), or
pursuant to which any WFI Entity is or may become obligated to issue any shares
of its capital or other securities, which (A) names the holder of record of such
Common Share Equivalents, (B) and specifies which of the Common Share
Equivalents are, to the knowledge of the Corporation, "Canadian" for purposes of
the foreign ownership and control requirements under the Telecommunications Act
and the rules and regulations promulgated thereunder, and (C) the shares of
capital or other securities required to be issued thereunder as of the date
hereof and as of the Closing Date and the price per share, if any, payable with
respect to the issuance of any share of capital issuable thereunder. Schedule
2.3(b)(ii) also sets forth a true and accurate calculation of the number of the
Deemed Outstanding Shares (as defined in Section 1.4(b)). For greater certainty,
Common Share Equivalents do not include the agreements and commitments related
to the Minority Roll-Up Transactions or the Ledcor Roll-Up Agreement (as defined
in Section 1.4(b)).
(iii) Except as set forth on Schedule 2.3(b)(i), the Corporation has no
knowledge of the names of any beneficial owners of shares of capital of any WFI
Entity who are not otherwise holders of record. Except as set forth on Schedule
2.3(b)(ii) or as contemplated by the Documents there are, and immediately after
the Closing, there will be, no Common Share Equivalents and no rights, including
preemptive or similar rights, to purchase or otherwise acquire shares or sell or
otherwise transfer shares in the capital (or in the case of non-corporate
entities, other ownership interests) of any WFI Entity pursuant to any provision
of law, the articles of incorporation or the by-laws or similar constituent
documents of such WFI Entity, any agreement to which such WFI Entity is a party
or otherwise.
(iv) Except as set forth on Schedule 2.3(b)(iv) or as contemplated by the
Documents, none of the WFI Entities is a party to, and, to the Corporation's
knowledge, there are, and immediately after the Closing, there will be, no
agreement, restriction or encumbrance (such as a preemptive or similar right of
first refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, shareholders' agreement, etc., whether or not the
Corporation is a party thereto) with respect to the purchase, sale or voting of
any shares of capital of any WFI Entities (whether outstanding or issuable upon
conversion, exchange or exercise of outstanding securities) or other securities
of any WFI Entities pursuant to any provision of law, the Articles of
Incorporation or By-Laws, any agreement or otherwise.
(v) Except (i) as set forth on Schedule 2.3(b)(v), (ii) as contemplated by
the Documents and (iii) for each shareholder's right to vote its Common Shares
for the election of directors, no person has the right to nominate or elect one
or more directors of any WFI Entities.
-7-
(c) The Series A Non-Voting Preferred Shares issued to the Investors on the
Closing Date under this Agreement would, if converted into Common Shares, as of
the Closing Date represent, in the aggregate, [ ]* of the outstanding Common
Shares of the Corporation (treating for purposes of these calculations (i) all
Common Shares outstanding on the Closing Date as outstanding, (ii) all Deemed
Outstanding Shares (and any Common Shares or Common Share Equivalents issuable
pursuant to Deemed Outstanding Shares) as outstanding, (iii) all Common Shares
Equivalents outstanding on the Closing Date (or issuable pursuant to Deemed
Outstanding Shares) as having been converted, exchanged, exercised, issued,
and/or outstanding, as the case may be, and the resulting Common Shares as
outstanding, and (iv) all Series A Non-Voting Preferred Shares as having been
converted into outstanding Common Shares).
2.4. Authorization and Issuance of Share Capital. (a) The authorization,
issuance, sale and delivery of the Series A Non-Voting Preferred Shares pursuant
to this Agreement, and (b) the authorization, reservation, issuance, sale and
delivery of the Conversion Shares, in each case, have been duly authorized by
all requisite corporate action on the part of the Corporation, and when issued,
sold and delivered in accordance with this Agreement, the Transaction Securities
will be validly issued and outstanding, fully paid and nonassessable with no
personal liability attaching to the ownership thereof, free and clear of any
Encumbrances (other than any Permitted Encumbrances) and not subject to
preemptive or similar rights of the shareholders of the Corporation or others.
The terms, designations, powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, of any series of Common Shares, or any series of Preferred Shares
of the Corporation are as stated in the Articles of Amendment and the By-Laws.
2.5. Reservation of Shares. The Corporation has reserved a sufficient
number of shares of (a) Class A Non-Voting Shares and Series B Voting Preferred
Shares for issuance to the Investors upon the conversion of any Series A
Non-Voting Preferred Shares issued to the Investors in accordance with this
Agreement (including pursuant to the provisions of Sections 1.4(a) and (b)), (b)
Series A Non-Voting Preferred Shares for issuance to the Investors pursuant to
the provisions of Sections 1.4(a) and 1.4(b), (c) Series A Non-Voting Preferred
Shares and Class B Subordinate Voting Shares for issuance to the Investors upon
conversion of the Series B Voting Preferred Shares, and (d) Common Shares for
issuance upon the exercise of all other Common Share Equivalents outstanding on
the date hereof. The Common Shares, Series B Voting Preferred Shares and Series
A Non-Voting Preferred Shares issuable upon conversion of the Series A
Non-Voting Preferred Shares or the Series B Voting Preferred Shares, as the case
may be, shall be referred to collectively as the "Conversion Shares," and the
Conversion Shares, together with the Series A Non-Voting Preferred Shares issued
pursuant to Sections 1.1 and 1.4, shall be referred to collectively as the
"Transaction Securities."
2.6. Financial Statements. (a) The Corporation has made available to the
Investors the audited divisional statements of operations
-8-
----------
* Material omitted and filed separately with the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 406.
and retained earnings and cash flows of the predecessor of the Corporation for
the fiscal years ended March 31, 1996 and August 31, 1997 and the nine months
ended May 31, 1998 and the audited divisional balance sheets of the predecessor
of the Corporation as of August 31, 1996, August 31, 1997 and May 31, 1998. The
Corporation has made available to the Investors the audited consolidated
statements of income, changes in shareholders' equity and cash flows of the
Corporation and its subsidiaries for the period ended December 31, 1998 and the
audited balance sheet of the Corporation and its subsidiaries as of December 31,
1998, and the unaudited consolidated balance sheet of the Corporation and its
subsidiaries as of June 30, 1999 (the "Balance Sheet") and the related unaudited
consolidated statements of income, changes in shareholders' equity and cash
flows of the Corporation and its subsidiaries for the six months ended June 30,
1999. All such financial statements (i) are in accordance with the books and
records of the predecessor of the Corporation, the Corporation and its
subsidiaries, (ii) have been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") consistently applied (except
that such unaudited financial statements do not contain all of the footnotes
required under GAAP) and (iii) fairly present the financial position of the
predecessor of the Corporation, or the Corporation and its subsidiaries as of
August 31, 1996, August 31, 1997, May 31, 1998, December 31, 1998 and June 30,
1999, respectively, and the results of their operations and cash flows for the
fiscal years ended March 31, 1996 and August 31, 1997 and the nine months ended
May 31, 1998, the fiscal year ended December 31, 1998 and the six months ended
June 30, 1999, respectively.
(b) The Corporation has made available to the Investors the pro forma
consolidated statements of income of the Corporation and its subsidiaries for
the fiscal year ended December 31, 1998. All such pro forma financial data was
prepared on a basis consistent with the historical financial statements of the
Corporation and its subsidiaries and the predecessor of the Corporation and its
subsidiaries, and give effect to the assumptions used in the preparation thereof
on a reasonable basis in accordance with Regulation S-X under the United States
Securities Act of 1933, as amended (the "1933 Act" or the "Securities Act") and
present fairly the data for the periods presented.
2.7. Absence of Undisclosed Liabilities. Except as disclosed on Schedule
2.7, no WFI Entity has any liabilities or obligations (whether known or unknown,
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due) other than (a) liabilities or obligations reserved against or
otherwise disclosed in the Balance Sheet or the footnotes thereto, (b) other
liabilities or obligations which were incurred after June 30, 1999 in the
ordinary course of business consistent (in amount and kind) with past practice
(none of which is a liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit) and which, individually or in
the aggregate, do not exceed US$10,000,000 and (c) liabilities or obligations
under Contracts (but not liabilities for breaches thereof) (x) identified in
Schedule 2.10 or (y) that are not required to be identified on Schedule 2.10
which arise in the ordinary course of business.
2.8. Absence of Changes. Except as set forth on Schedule 2.8, since
December 31, 1998, each WFI Entity has conducted its business
-9-
in the ordinary course, consistent with past practice and there has not been:
(a) any material adverse change in the condition (financial or otherwise),
operations, properties, prospects, results of operations, business, assets, or
liabilities of any WFI Entity or any event or condition which could reasonably
be expected to, individually or in the aggregate, have such a material adverse
change, (b) any waiver or cancellation of any material right of any WFI Entity,
or the cancellation of any material debt or claim held by any WFI Entity, (c)
any payment, discharge or satisfaction of any claim, liability or obligation of
any WFI Entity other than in the ordinary course of business, (d) any
Encumbrance upon the assets of any WFI Entity other than an Encumbrance which
arises in the ordinary course of business and which does not materially impair
such WFI Entity's ownership, or use of such asset or ability to obtain financing
by using such asset as collateral, (e) any declaration or payment of dividends
on, or other distribution with respect to, or any direct or indirect redemption
or acquisition of, any securities of any WFI Entity other than as specifically
contemplated in this Agreement, (f) any issuance of any shares, bonds or other
securities of any WFI Entity, (g) any sale, assignment or transfer of any
tangible or intangible assets of any WFI Entity except in the ordinary course of
business, (h) any loan by any WFI Entity to any officer, director, employee,
consultant or shareholder of such WFI Entity (other than advances to such
persons in the ordinary course of business in connection with travel and travel
related expenses), (i) any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the assets, property, financial
condition or results of operations of any WFI Entity, (j) other than salary
increases in the ordinary course of business which would not constitute a Major
Transaction (as defined in the Shareholders Agreement) if the Shareholders
Agreement had been in effect, any increase, direct or indirect, in the
compensation (including bonuses and other benefits) paid or payable to any
officer or director of any WFI Entity or, other than in the ordinary course of
business, to any other employee, consultant or agent of any WFI Entity, (k) any
change in the accounting or tax methods, practices or policies, or any material
tax election, of any WFI Entity, (l) any indebtedness incurred for borrowed
money by any WFI Entity other than (1) in the ordinary course of business or (2)
pursuant to the Hibernia Commitment (as defined in Section 6.2(l)), (m) any
amendment to or termination of any material Contract to which any WFI Entity is
a party, (n) to the best knowledge of the Corporation, any material adverse
change with respect to the regulation of the Corporation and the WFI Entities
taken as a whole or its activities by any administrative agency or governmental
body, (o) any material change in the manner of business or operations of the
Corporation and the WFI Entities taken as a whole (including, without
limitation, any accelerations or deferral of the payment of accounts payable or
other current liabilities or deferral of the collection of accounts or notes
receivable), (p) any capital expenditures with respect to tangible assets or
commitments therefor by any WFI Entity that aggregate (with respect to all WFI
Entities) in excess of US$10,000,000, (q) any amendment of the articles of
incorporation, by-laws or other organizational documents of any WFI Entity other
than as specifically contemplated by this Agreement, (r) any transaction entered
into by a WFI Entity other than in the ordinary course of business or any other
transaction entered into by a WFI Entity material to the Corporation and the WFI
Entities taken as a whole whether or not in the ordinary course of business
other than as specifically contemplated by this Agree-
-10-
ment, or (s) any agreement or commitment (contingent or otherwise) by any WFI
Entity to do any of the foregoing.
2.9. No Conflict. The execution, delivery and performance by the
Corporation of the Documents and the consummation by the Corporation of the
transactions contemplated hereby and thereby and the compliance by each WFI
Entity with the provisions hereof and thereof (including, without limitation,
the issuance, sale and delivery by the Corporation of the Transaction
Securities) will not (a) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to any WFI
Entity, or any of their respective properties or assets, (b) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, or result in
the creation of any Encumbrance upon any of its properties or assets under, any
Contract, license or permit to which any WFI Entity is a party or (c) violate
the Articles of Continuance, as amended or By-Laws of the Corporation or the
Articles of Incorporation or By-Laws or other organizational documents of any
other WFI Entity.
2.10. Agreements. (a) Except as set forth on Schedule 2.10(a), no WFI
Entity is a party to any indenture, mortgage, guaranty, lease, license or other
contract, agreement or understanding, written or oral (a "Contract"), including
all construction agreements, asset swap agreements, co-development agreements,
right of way agreements and joint ventures, other than any Contract which (i)
pursuant to its terms, has expired, been terminated or fully performed by the
parties, and in each case, under which no WFI Entity has any liability,
contingent or otherwise, or (ii) involves payments to or from such WFI Entity
(as opposed to an indemnity agreement or similar contract under which a WFI
Entity has any contingent liability) which payments do not aggregate
US$10,000,000, and in each case, is not material to the business or financial
condition of the Corporation and the WFI Entities taken as a whole.
(b) Complete copies (or, if oral, full and accurate written descriptions)
of all Contracts required to be listed on Schedule 2.10(a), including all
amendments thereto, have been made available to the Investors. Each such
Contract is, as of the date hereof, and will continue to be after the Closing, a
legal, valid and binding obligation, enforceable against, and in full force and
effect against, all the parties thereto on identical terms following the
Closing. There is no breach, violation or default by any WFI Entity and no event
(including, without limitation, the consummation of the transactions
contemplated by the Documents or any pending or threatened (in writing)
termination, cancellation or material modification) which, with notice or lapse
of time or both, would (A) constitute a breach, violation or default by such WFI
Entity under any such Contract or (B) give rise to any lien or right of (or
result in any) termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration against such WFI Entity under, any such
Contract except where such breach, violation or default would not have a
Material Adverse Effect. To the knowledge of the Corporation, no other party to
any of such Contracts is in arrears in respect of the performance or
-11-
satisfaction of the terms and conditions on its part to be performed or
satisfied under any of such Contracts, no waiver or indulgence has been granted
by any of the parties thereto and no party to any of such Contracts has
repudiated any provision thereof.
(c) Schedule 2.10(c) is a materially accurate and complete list of fiber
sales agreements, including the parties thereto, and the total revenue and the
booked portions thereof as of June 30, 1999.
(d) The disclosure contained in the Corporation's final offering memorandum
for $US500,000,000 of 12% Senior Notes due 2009 dated July 23, 1999 (the
"Offering Memorandum"), under the caption "Business--The Network" is accurate
and complete as at the date thereof and there has been no material change in the
facts disclosed therein since July 23, 1999, except as set forth on Schedule
2.10(d) (such disclosure amended as described in Schedule 2.10(d) referred to
herein as the "Network".
(e) The agreement dated June 18, 1999 with Tyco Submarine Systems Ltd. (the
"Hibernia Supply Contract") (a copy of which agreement has been previously
provided to the Investors and is described in Schedule 2.10(a)) contains an
accurate and complete summary of the current proposed completion schedule for
the Hibernia Project. "Hibernia Project" means the installation of a submarine
cable system connecting cable landing stations located in Lynn, Massachusetts to
Halifax, Nova Scotia to Dublin, Ireland to Southport (Liverpool), U.K. connected
to London, U.K. (vicinity) and connecting to Lynn, Massachusetts, with four
repeated segments of 4 fiber pairs capable of carrying thirty-two 10Gb/s
channels, including the cable landing stations.
2.11. Intellectual Property Rights. (a) Each WFI Entity owns or has the
right to use pursuant to license, sublicense, agreement or permission all
Intellectual Property (as defined below), individually or in the aggregate,
material to the operation of its business as currently conducted. Each item of
Intellectual Property owned or used by such WFI Entity immediately prior to the
Closing will be owned or available for use by such WFI Entity on identical terms
and conditions immediately subsequent to the Closing. Each WFI Entity has taken
all necessary action, and continues to do so, to maintain and protect their
interest in each item of Intellectual Property that is material to the conduct
of its business.
(b) To the knowledge of the Corporation, no WFI Entity has interfered with,
infringed upon or misappropriated any Intellectual Property rights of third
parties, and no WFI Entity has received any charge, complaint, claim, demand or
notice alleging any such interference, infringement or misappropriation
(including any claim that it must license or refrain from using any Intellectual
Property rights of any third party). To the knowledge of the Corporation, no
third party has interfered with, infringed upon or misappropriated any
Intellectual Property rights of any WFI Entity.
(c) No WFI Entity owns any patent or has any pending patent application.
-12-
(d) Schedule 2.11(d) identifies all registered or unregistered trademarks
of each WFI Entity. No WFI Entity has granted any license or other permission to
any third party with respect to any of its Intellectual Property with a value of
US$100,000 or greater.
(e) The Corporation has made available to the Investors a correct and
complete copy of all licenses held by the Corporation and material to the
conduct of its business as presently conducted with respect to its Intellectual
Property, which licenses are identified in Schedule 2.11(e). With respect to
each item of Intellectual Property required to be identified in Schedule 2.11(d)
and Schedule 2.11(e) and except as set forth in Schedule 2.11(e):
(i) the relevant WFI Entity possesses all right, title and interest in and
to the item, free and clear of any encumbrance, license or other restriction;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling or charge; and
(iii) such WFI Entity has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to the item.
(f) Schedule 2.11(f) identifies each item of Intellectual Property that is
material to the conduct of its business as presently conducted. No WFI Entity
has granted any sublicense or similar right with respect to any such agreements
or Intellectual Property, and, to the knowledge of the Corporation, (i) each
such item of Intellectual Property is not subject to any outstanding injunction,
judgment, order, decree, ruling or change and (ii) no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or to the
knowledge of the Corporation is threatened which challenges the legality,
validity, or enforceability of any such item of Intellectual Property.
(g) To the knowledge of the Corporation, neither it nor any other WFI
Entity interferes with, infringes upon or misappropriates any Intellectual
Property rights of third parties as a result of the operation of its business
except which interference, infringement or misappropriation would not have a
Material Adverse Effect.
For purposes of this Agreement, "Intellectual Property" means all worldwide
(a) inventions and discoveries (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c)
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) mask works and all applications,
registrations and renewals in connection therewith, (e) know-how, trade secrets
and confidential business in-
-13-
formation, whether patentable or unpatentable and whether or not reduced to
practice (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production process and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (f)
computer software (including data and related documentation), (g) other
proprietary rights, (h) copies and tangible embodiments thereof (in whatever
form or medium) and (i) licenses and agreements in connection therewith.
2.12. Equity Investments; Subsidiaries. (a) Schedule 2.1(a) sets forth a
complete and accurate list of each Subsidiary of the Corporation (each a "WFI
Subsidiary"). Except as set forth on Schedule 2.1(a), the Corporation has never
had, nor does it presently have, any Subsidiaries, nor has it owned, nor does it
presently own, whether directly or indirectly owned, any share capital or other
proprietary interest, directly or indirectly, in any corporation, association,
trust, partnership, joint venture or other entity. For purposes of this
Agreement, the term "Subsidiary" means, with respect to any person, any company,
limited liability company, general or limited partnership or other entity (i) of
which at least a majority of the shares of capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other similar managing body of such company, partnership or other
entity are at the time owned or controlled, directly or indirectly, by such
person or (ii) the management of which is otherwise controlled, directly or
indirectly, through one or more intermediaries by such person.
(b) The capital stock of each WFI Subsidiary held by a WFI Entity is
validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, and is free of any Encumbrances,
except as set forth on Schedule 2.15(a).
2.13. Corporate Minute Books. The corporate, partnership or limited
liability company records of each WFI Entity are correct and complete in all
material respects. True and complete copies of all minutes of meetings or other
actions by the directors, members, partners, shareholders or incorporators of
each WFI Entity since their respective inceptions to the Closing Date have been
made available to the Investors.
2.14. Suitability. (a) To the knowledge of the Corporation, none of the
following events has occurred during the last five years with respect to any
director or officer of the Corporation: (i) a petition under Canadian federal
bankruptcy or insolvency laws was filed by or against, or a receiver, fiscal
agent or similar officer was appointed for the business or property of such
person; (ii) such person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding; (iii) such person is subject to an
order, judgment or decree enjoining him from engaging in any kind of business
practice or any other activity in connection with the purchase or sale of
securities, or to be associated with persons engaging in such activities; (iv)
such person was found by a court of competent jurisdiction in a civil action or
by a government agency to have violated any secu-
-14-
rities laws, regulation or policy; or (v) such person has been the subject of
any investigation in respect of the breach or contravention of any securities
law, regulation or policy whether in Canada or any other jurisdiction.
(b) To the knowledge of the Corporation, none of the events described in
Item 401(f) of Regulation S-K under the 1933 Act, has occurred during the last
five years with respect to any director or officer of the Corporation.
2.15. Assets. (a) Each WFI Entity has good and marketable title to, or a
valid leasehold interest in or contractual right to use, all of its assets and
properties, free and clear of any mortgages, judgments, claims, liens, security
interests, pledges, escrows, charges or other encumbrances of any kind or
character whatsoever ("Encumbrances") except (i) as disclosed in Schedule
2.15(a), (ii) Encumbrances for taxes not yet due and payable, or (iii)
Encumbrances set forth on Schedule 2.15(a) for taxes and charges and other
claims, the validity of which it is contesting in good faith. The assets and
property owned by, or leased to, any WFI Entity are sufficient for the conduct
of the business and operation of such WFI Entity as presently conducted.
(b) All buildings, facilities, machinery, equipment, furniture, leasehold
and other improvements, fixtures, vehicles, structures, any related capitalized
items and other tangible property owned by, or leased to any WFI Entity, as of
the date hereof, (i) are in good operating condition and repair (normal wear and
tear excepted), free (in the case of buildings or structures located on the Real
Properties) of any material structural or engineering defects, (ii) are subject
to continued repair and replacement in accordance with past practice and all
material applicable regulations, and (iii) are suitable for their current use in
all material respects.
(c) Except as set forth on Schedule 2.15(c), no WFI Entity has received
written notice of, or has knowledge of, any pending, threatened or contemplated
condemnation proceeding or similar taking affecting the assets (including,
without limitation, any assets comprising or relating to the Corporation's fiber
optic network of such WFI Entity (including the Real Properties, as defined in
Section 2.32) which, if condemned or taken, would constitute a Material Adverse
Effect.
2.16. Employee Benefit Plans. (a) Schedule 2.16 hereto sets forth all
Benefit Plans and Employee Agreements. For purposes of this Agreement (i)
"Benefit Plan" means each plan, program, policy, payroll practice, contract,
agreement or other arrangement, or commitment therefor, providing for
compensation, severance, termination pay, pension, retirement or any other
post-termination benefit, performance awards, share or share-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral, which is now or previously has
been sponsored, maintained, contributed to or required to be contributed to by
any WFI Entity or pursuant to which any WFI Entity has any liability, contingent
or otherwise; (ii) "Employee Agreement" means each management, employment,
bonus, option, equity (or equity related), severance, consulting, noncompete,
confidentiality or similar agreement or con-
-15-
tract between any WFI Entity and any current, former or retired employee,
officer, consultant, independent contractor, agent or director of such WFI
Entity (an "Employee") who receives or received annual salary from such WFI
Entity in excess of US$150,000 (excluding written offers of employment at will
that do not include any severance benefits other than those to which the
Employee may be entitled under applicable law); and (iii) "Defined Benefit Plan"
means any "registered pension plans" (as defined in the Income Tax Act (Canada))
or any "defined benefit plan" (as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") Section 3(35)); (iv) "Multiemployer
Plans" means any "multiemployer plan" (as defined in ERISA Section 3(37)) as to
which any WFI Entity or ERISA Affiliates (as defined below) is required to
contribute; and (v) "Retired Welfare Plan" means any Benefit Plan which
provides, or has any liability to provide, life insurance or medical, severance
or other employee welfare benefits to any Employee beyond his or her retirement
or termination of employment, except as required by Section 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"). No WFI Entity or ERISA
Affiliate currently sponsors, maintains, contributes to, or is required to
contribute to, and no WFI Entity or ERISA Affiliate has any material liability
contingent or otherwise with respect to any Defined Benefit Plan, Retired
Welfare Plan or Multiemployer Plan.
(b) The Corporation has made available to the Investors current, accurate
and complete copies of all documents embodying or relating to each Benefit Plan
and each Employee Agreement, including all amendments thereto, trust or funding
agreements relating thereto (if any), the most recent annual report (Series 5500
and related schedules) required under ERISA (if any), summary annual reports,
the most recent determination letter (if any) received from Revenue Canada or
the IRS, the most recent summary plan description (with all material
modifications) (if any), if the Benefit Plan is funded, the most recent annual
and periodic accounting of Benefit Plan assets, the most recent actuarial
report, if any, prepared for each Benefit Plan, and all material communications
to any Employee or Employees relating to any Benefit Plan or Employee Agreement
which could materially increase the liability under any such plan or agreement.
(c) To the knowledge of the Corporation, no Employee has been hired in
violation of any restrictive covenant or any non-compete agreement with any
other person or entity.
(d) With respect to each Benefit Plan and/or Employee Agreement, as the
case may be, (i) each WFI Entity has performed all obligations (including
contribution obligations) required to be performed by it under or in respect of
each Benefit Plan and Employee Agreement and no WFI Entity is in default under
or in violation of, any Benefit Plan or Employee Agreement except where such
default or violation would not have a Material Adverse Effect, (ii) each Benefit
Plan has been established and maintained in accordance with its terms and in
material compliance with all applicable Canadian and non-Canadian laws,
statutes, orders, rules and regulations, including without limiting the
foregoing, the timely filing of all required reports, documents and notices,
where applicable, with any governmental agency (Canadian or non-Canadian), (iii)
each WFI Entity has complied with all of its obligations un-
-16-
der each Employee Agreement and each Employee Agreement is presently, and has at
all times in the past been, in compliance with all statutes, orders, rules and
regulations applicable to it, (iv) to the knowledge of the Corporation, each
Employee Agreement that is a confidentiality or other similar agreement is fully
enforceable in accordance with its terms and, to the knowledge of the
Corporation, no person or entity is presently, or has at any time in the past
been, in violation of any of the terms of any such Employee Agreement, (v) each
Benefit Plan intended to qualify under Section 401 of the Code has received or
has timely applied for a determination letter by the IRS to the effect that each
such Benefit Plan is so qualified and that each trust forming a part of any such
Benefit Plan is exempt from tax pursuant to Section 501(a) of the Code and, to
the knowledge of the Corporation, no circumstances exist which could adversely
affect this qualification or exemption; (vi) no material "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Benefit Plan; (vii) no action or failure
to act and no transaction or holding of any asset by, or with respect to, any
Benefit Plan has or may subject any WFI Entity or any fiduciary to any material
tax, penalty or other liability, whether by way of indemnity or otherwise,
(viii) there are no actions, proceedings, arbitrations, suits, claims or other
similar proceedings pending, or to the knowledge of the WFI Entities, threatened
or anticipated (other than routine claims for benefits) against any WFI Entity
or any administrator, trustee or other fiduciary of any Benefit Plan with
respect to any Benefit Plan or Employee Agreement, or against any Benefit Plan
or against the assets of any Benefit Plan, and (ix) no Benefit Plan is under
audit or investigation by any governmental agency (Canadian or non-Canadian),
and to the knowledge of the WFI Entities, no such audit or investigation is
pending or threatened.
(e) The execution of, and performance of the transactions contemplated in,
this Agreement or the other Documents will not (either alone or upon the
occurrence of any additional or subsequent events) (i) constitute an event under
any Benefit Plan or Employee Agreement that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligations to fund
benefits with respect to any Employee or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of any WFI Entity to
amend or terminate any Benefit Plan or (iii) result in any payment made or to be
made by any WFI Entity constituting an "excess parachute payment" within the
meaning of Section 280G of the Code.
2.17. Labor Relations; Employees. Schedule 2.17 hereto lists all employees
of any WFI Entity with either (i) an annual base salary in excess of US$150,000
or (ii) employed under terms of written employment agreements that are not
terminable upon giving reasonable notice in accordance with applicable law that
provide for severance, change of control or other similar compensation
materially in excess of the amounts that would otherwise be payable to such
employee under applicable statutes or at common law. Except as listed on
Schedule 2.17, no WFI Entity is bound by a change of control provision or change
of control agreement in respect of any employee of a WFI Entity. Except as set
forth on Schedule 2.17 hereto, (a) no WFI Entity is delinquent in payments to
any of its employees, for any wages, salaries, commissions, bonuses or other
-17-
compensation for any services performed through the date hereof or amounts
required to be reimbursed by them through the date hereof, (b) each WFI Entity
is in material compliance with all applicable Canadian and non-Canadian federal,
provincial, state and local laws, rules and regulations respecting employment,
employment practices, occupational health and safety, workers' compensation, pay
equity, labor, terms and conditions of employment and wages and hours, (c)
except as listed on Schedule 2.17, no WFI Entity is bound by or subject to (and
none of its assets or properties is bound by or subject to) any written or oral,
express or implied, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the WFI Entities, has sought to
represent any of the employees, representatives or agents of any WFI Entity, or
has bargaining rights in respect of any of the employees, representatives or
agents of the WFI Entities, (d) there is no labor strike, dispute, slowdown or
stoppage actually pending, or, to the knowledge of the WFI Entities, threatened
against or involving any WFI Entity, and (e) other than as set forth on Schedule
2.17, to the knowledge of the Corporation, no salaried key employee has any
plans to terminate his or her employment with any WFI Entity.
2.18. Litigation; Orders. Except as set forth on Schedule 2.18, there is no
civil, criminal or administrative action, suit, claim, notice, hearing, inquiry,
proceeding or investigation at law or in equity by or before any court,
arbitrator or similar panel, governmental instrumentality or other agency
Canadian or non-Canadian (including, without limitation, proceedings, inquiries
or investigations of the Canadian Federal Department of Industry ("Industry
Canada"), the Canadian Radio-television and Telecommunications Commission (the
"CRTC"), the U.S. Federal Communication Commission (the "FCC") or arising under
the Competition Act (Canada) (the "Competition Act")) now pending or, to the
knowledge of the Corporation, threatened in writing against any WFI Entity or
the assets or the business of any WFI Entity. No WFI Entity is subject to any
order, writ, injunction or decree of any court of any Canadian or non-Canadian
federal, provincial, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which could reasonably be
expected to have a Material Adverse Effect.
2.19. Compliance with Laws. (a) Except as provided in Schedule 2.19, each
WFI Entity (i) has complied in all material respects with all Canadian and
non-Canadian federal, provincial, state, local and foreign laws, rules,
ordinances, codes, consents, authorizations, registrations, regulations,
decrees, directives, judgments and orders materially applicable to it and its
business, and (ii) has all Canadian and non-Canadian federal, provincial, state,
local and foreign governmental licenses, permits, authorizations, consents,
waivers, franchises, certificates and approvals material to and necessary in the
conduct of its business as currently conducted (collectively, "Licenses"), such
Licenses are in full force and effect, and no violations have been recorded in
respect of any such Licenses and no proceeding is pending or, to the best
knowledge of the Corporation, threatened to revoke or limit any such License,
except violations or proceedings which, if determined adversely to the WFI
Entity holding such License, would not have a Material Adverse Effect. The
provisions of this Section 2.19 shall not apply to the matters covered by
Section 2.22 (Licenses, Permits and Rights of Way).
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(b) To the Corporation's knowledge, each WFI Entity is in compliance with
the U.S. Foreign Corrupt Practices Act of 1977, as amended, and no present or
former stockholder, officer, director, employee or agent of the Corporation or
any WFI Entity, as the case may be, has in order to assist the Corporation or
any WFI Entity in obtaining or retaining any Telecommunications License (as
defined in Section 2.21) or any business for or with, authorized the payment of
any money, or offered, given, or promised to pay or authorized the payment of
any money, or offered, given, promised to give, or authorized the giving of
anything of value to (i) any officer or employee or any government or any
department, agency, instrumentality thereof, or any person acting in an official
capacity for or on behalf of any such government or department, agency or
instrumentality, any foreign political party or any official thereof or any
candidate for foreign political office, or (ii) any person, while knowing that
all or a portion of such money or thing of value will be offered, given, or
promised, directly or indirectly, to any foreign official, to any foreign
political party or official thereof, or to any candidate for political office,
in each case, for purposes of the following:
(A) (x) illegally or corruptly influencing any act or decision of any
foreign official, political party or official thereof, or candidate in such
person's official capacity, or (y) inducing such foreign official, political
party or official thereof, or candidate to do or omit to do any act in violation
of the lawful duty of such person; or
(B) illegally or corruptly inducing such foreign official, political party
or official thereof, or candidate to use such person's influence with a foreign
government or instrumentality thereof to affect or influence any act or decision
of such government or instrumentality.
2.20. Compliance with Telecommunications Laws. (a) No WFI Entity is in
violation of any judgment, decree, order, writ, law, statute, rule or regulation
rendered or enacted in Canada or any non-Canadian jurisdiction respecting
telecommunications and the regulation within Canada of "telecommunications
common carriers" (as defined in the Telecommunications Act) or in any
non-Canadian jurisdiction respecting telecommunications applicable to any of the
WFI Entities, or, to the knowledge of the Corporation, any published
interpretation or policy relating thereto applicable to any WFI Entity. Except
as set forth on Schedule 2.20(a), no notices, reports or other filings are
required to be made by any WFI Entity, either prior to or immediately after the
consummation of the transactions contemplated hereby, with, nor are any
consents, registrations, applications and Permits required to be obtained by any
WFI Entity from, any court or governmental agency or other regulatory body or
tribunal or similar entity pursuant to Canadian or non-Canadian
telecommunications and radio communication regulatory law in connection with the
consummation of the transactions contemplated hereby. The current development,
implementation, construction and operation of the Corporation's
telecommunications networks do not and, to the knowledge of the Corporation, the
proposed conduct of the foregoing, will not conflict with or result in a breach
or violation of any of the Communications statutes or existing regulations
thereunder except breaches or violations which may be remedied by the
Corporation at immaterial expense and which would not otherwise have a
-19-
Material Adverse Effect. For the purposes of this Agreement, "Communications
statutes" means the Telecommunications Act, the Canadian Radio-television and
Telecommunications Commission Act, or other statutes of Canada or any
non-Canadian jurisdiction specifically relating to the regulation of the
telecommunications industry within Canada or any non-Canadian jurisdiction
(including for this purpose the orders, rules, regulations, directives,
decisions, notices and policies promulgated pursuant to such statutes, and
applicable statutes or regulations, if any, of any province of Canada or State
of the U.S. specifically relating to the regulation of the Canadian or U.S.
telecommunications industry and the orders, rules, regulations, directives,
decisions, notices and policies promulgated thereunder).
(b) Both prior to and immediately after the Closing, (i) Worldwide Fiber
(F.O.T.S.) Ltd. is and will be eligible to operate as a telecommunications
common carrier in Canada, as defined under and in accordance with the
Telecommunications Act and the Canadian Telecommunications Common Carrier
Ownership and Control Regulations (the "Ownership Regulations"); (ii) Worldwide
Fiber (F.O.T.S.) Ltd. does not and will not violate the prohibition contained in
subsection 16(4) of the Telecommunications Act against operating in Canada as a
telecommunications common carrier when ineligible to do so; (iii) the
Corporation has taken all reasonable steps such that control of Worldwide Fiber
(F.O.T.S.) Ltd. is not and will not be exercised by any person(s) that is (are)
not or will not be Canadian, in accordance with the meanings ascribed to the
term "control" under the Telecommunications Act and the term "Canadian" under
the Ownership Regulations.
(c) Both prior to and immediately after the Closing, (i) not less than
eighty percent of the members of the board of directors of Worldwide Fiber
(F.O.T.S.) Ltd. are or will be individual Canadians, as defined under the
Ownership Regulations; (ii) Canadians, as defined under the Ownership
Regulations, beneficially own, and will beneficially own directly or indirectly,
in the aggregate and otherwise than by way of security only, not less than
eighty percent of the issued and outstanding voting shares, as defined under the
Ownership Regulations, of Worldwide Fiber (F.O.T.S.) Ltd.; (iii) Worldwide Fiber
Networks Ltd., in respect of its ownership and control over Worldwide Fiber
(F.O.T.S.) Ltd., is a carrier holding corporation, as defined under the
Ownership Regulations; (iv) Worldwide Fiber Networks Ltd. is and will be a
carrier holding corporation that is a qualified corporation, as defined under
the Ownership Regulations; and (v) the Corporation has taken all reasonable
steps such that Worldwide Fiber (F.O.T.S.) Ltd. is not and will not be
controlled in fact by non-Canadians.
(d) With the exception of Worldwide Fiber (F.O.T.S.) Ltd., no other
subsidiary of the Corporation operates in Canada as a telecommunications common
carrier as that term is defined in the Telecommunications Act.
(e) Except as disclosed in Schedule 2.20(e), no WFI Entity is currently,
nor will the conduct of its business as presently proposed to be conducted cause
it to be in the future, subject to the provisions of the Communications Act of
1934, as amended by the Telecommunications Act of 1996 (the "Communications
Act") or to any rules, regulations and policies of the FCC related hereto. All
WFI Entities are in compliance with all federal, state
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and local telecommunications laws, rules, regulations and policies in the United
States to which they are subject, including the Communications Act and the
related rules, regulations and policies of the FCC except where failure to
comply would not have a Material Adverse Effect.
2.21. Telecommunications Licenses. (a) Except as set forth on Schedule
2.20(a), the Corporation holds all licenses, permits, certificates, waivers,
consents, franchises, orders, approvals and authorizations issuable under the
Telecommunications Act or other similar Canadian or U.S. statutes which are
required for the development, implementation and operation of the Corporation's
business as it is currently being conducted (collectively, the
"Telecommunications Licenses"). The WFI Entities are in material compliance with
each Telecommunications License held by them. The Telecommunications Licenses
held by each WFI Entity contain no restrictions or conditions attaching to the
Telecommunications Licenses that are (or would be) materially burdensome to the
WFI Entities.
(b) All of the WFI Entities have timely filed all renewal applications with
respect to all Telecommunications Licenses held by any of them and no protests
or competing applications have been filed that are either available to the
Corporation or of which the Corporation has knowledge with respect to such
renewal applications and nothing has come to the Corporation's attention that
would lead it to conclude that such renewal applications will not be granted by
the appropriate regulatory agency or body in the ordinary course and the WFI
Entities are authorized under the Communications statutes and the rules and
regulations promulgated thereunder to continue to provide the services which are
the subject of such renewal applications during the pendency thereof.
(c) The business of the WFI Entities as it is presently being conducted and
proposed to be conducted in Canada is not regulated by any federal, state or
provincial utility or rate-regulating commission, other than the CRTC and
Industry Canada, in the areas in which any WFI Entity conducts or proposes to
conduct such business, and the WFI Entities are not, and based on existing
regulations will not be, required to obtain any Telecommunications License from
any such utility or rate-regulating commission, other than the CRTC and Industry
Canada, in any such state or province.
2.22. Licenses, Permits and Rights-of-Way. (a) The WFI Entities currently
hold, have the right to or enjoy the use of all licenses, permits,
authorizations, consents, and franchises (the "Permits) as are required for the
construction, installation, maintenance and continued operation of the business
of the WFI Entities as it is presently conducted (including the Network and the
Hibernia Project). The WFI Entities have filed or intend to timely file for all
licenses, permits, authorizations, consents and franchises as are required to
operate the business as presently proposed to be conducted (including the
Network and the Hibernia Project), except where the failure to have such Permits
would not have a Material Adverse Effect. Each respective WFI Entity (or other
contractor acting on its behalf) maintains adequate and accurate records with
respect to
-21-
the timely renewal or application for renewal of any such Permits. The Permits
described in Part 1 of Schedule 2.22(a) are currently held by or on behalf of
the appropriate WFI Entity or its contractor(s) and are all the Permits
necessary to operate the Network as it presently is operated except where the
failure to have such Permits would not have a Material Adverse Effect. The
Permits identified in Schedule 2.20(a) and Part 1 and Part 2 of Schedule 2.22(a)
together with licenses and permits which will be required in connection with the
Corporation's business plan to sell telecommunications services are all of the
material Permits that must be obtained by or on behalf of any WFI Entity or its
contractor(s) to operate the business of the WFI Entities as presently proposed
to be conducted (including the Network and the Hibernia Project) but are not
presently required. To the knowledge of the Corporation, no other party to any
Permit has repudiated any Permit or any provision thereof, and the Corporation
has no knowledge of any termination, cancellation or threatened termination or
cancellation or limitation of, or any material modification or change in, any
Permit.
(b) Except as set forth in Schedule 2.22(b), the WFI Entities currently
hold, have the right to use or enjoy the use of all access rights, rights of way
and leases (the "Access Rights") as are required for the construction,
installation, maintenance and operation of the business of the WFI Entities with
respect to the Network except where the failure to have such Access Rights would
not have a Material Adverse Effect. With respect to (i) the matters set forth on
Schedule 2.22(b) and (ii) the Hibernia Project, the WFI Entities have obtained
or intend to timely file for or obtain the right to use or to enjoy the use of
all Access Rights as may be required for the construction, installation,
maintenance and operation of the Network as presently proposed to be conducted.
To the knowledge of the Corporation, no other party to any Access Right has
repudiated any Access Right or any provision thereof, and the Corporation has no
knowledge of any termination, cancellation or threatened termination or
cancellation or limitation of, or any material modification or change in any
Access Right.
2.23. Offering Exemption. Assuming the accuracy of the representations and
warranties contained in Section 3 hereof, the offer, sale and/or the issuance
and delivery of the Transaction Securities are each exempt from the prospectus
and registration requirements under applicable Canadian and U.S. securities
laws.
2.24. Related Transactions. (a) Except as set forth in the Offering
Memorandum or Schedule 2.24(a), there have been no transactions, agreements,
arrangements or understandings between the Corporation or any of its
Subsidiaries that would be required to be disclosed under Item 404 of Regulation
S-K under the 1933 Act, if the Offering Memorandum were a prospectus included in
a registration statement on Form S-1 filed with the Commission. For the
avoidance of doubt, Schedule 2.24(a) also lists and describes any assets,
licenses, etc. the use of which are shared between any WFI Entity on the one
hand, and Ledcor or its Subsidiaries (other than the WFI Entities), on the other
hand.
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(b) Each ongoing intercorporation transaction set forth on Schedule 2.24(a)
is on terms that are no less favorable to the WFI Entities than those that would
have been obtained in a comparable transaction by the WFI Entities with a person
that is not an affiliate.
2.25. Boycott. Neither the Corporation nor any WFI Entity has at any time
participated in, and is not currently participating in, an anti-Israel boycott
within the scope of Chapter 7 of Part 2 of Division 4 of Title 2 of the
California Government Code.
2.26. Taxes.
(a) Except as set forth on Schedule 2.26, each of the WFI Entities has duly
and timely filed its Tax Returns with the appropriate Governmental Authority and
has duly, completely and correctly reported all income and all other amounts and
information required to be reported thereon except where any such failure would
not have a Material Adverse Effect. Except as set forth in Schedule 2.26,
complete copies of Tax Returns of each of the WFI Entities that have been filed
through the date hereof have been made available to the Investors prior to the
date hereof. Prior to the date hereof, copies of all revenue agents' reports and
other written assertions of deficiencies or other liabilities for Taxes of any
of the WFI Entities with respect to past periods for which the limitations
period has not run have been made available to the Investors.
(b) Except as disclosed in Schedule 2.26, each of the WFI Entities has duly
and timely paid all Taxes except where any such failure would not have a
Material Adverse Effect, including all installments on account of Taxes for the
year, that are due and payable by it that relate to periods ending on or prior
to the Closing Date, whether or not assessed by the appropriate Governmental
Authority. The WFI Entities have established reserves that are reflected on the
Balance Sheet that are at least equal to the amount of all Taxes payable by the
WFI Entities as disclosed in Schedule 2.26 and all Taxes that are not yet due
and payable and related to periods ending on or prior to the Closing Date.
(c) Except as set forth on Schedule 2.26, none of the WFI Entities has
requested, or entered into any agreement or other arrangement or executed any
waiver providing for, any extension of time within which (i) to file any Tax
Return covering any Taxes for which such WFI Entity is or may be liable; (ii) to
file any elections, designations or similar filings relating to Taxes for which
such WFI Entity is or may be liable; (iii) such WFI Entity is required to pay or
remit any Taxes or amounts on account of Taxes; or (iv) any Governmental
Authority may assess or collect Taxes for which such WFI Entity is or may be
liable.
(d) Except as set forth on Schedule 2.26, (i) there are no actions, suits,
proceedings, investigations, audits or claims now pending or, to the knowledge
of the WFI Entities, threatened, against any one of the WFI Entities in respect
of any Taxes, (ii) there are no matters under discussion, audit or appeal with
any Governmental Authority relating to Taxes, (iii) there are no Tax rulings,
requests for rulings or closing agreements relating to any of the
-23-
WFI Entities which could affect their liability for Taxes for any period after
the Closing, (iv) none of the WFI Entities is a party to, nor is it bound by,
any Tax allocation or Tax sharing agreement or arrangement and have no current
contractual obligation to indemnify any other person or entity with respect to
Taxes, (v) to the knowledge of the WFI Entities no taxing authority in a
jurisdiction where any of the WFI Entities does not file Returns has made a
claim, assertion or threat that any of the WFI Entities is or may be subject to
taxation by such jurisdiction, (vi) none of the WFI Entities has agreed in
writing to, nor is it required to include in income, any adjustment by reason of
a change in accounting method or otherwise, nor do any of the WFI Entities have
any knowledge that any taxing authority has proposed, or is considering, any
such change in accounting method, (vii) none of the WFI Entities is a passive
foreign investment corporation ("PFIC") within the meaning of Section 1297 of
the Code, (viii) none of the WFI Entities is a controlled foreign corporation
("CFC") within the meaning of Section 957 of the Code, and (ix) none of the WFI
Entities is a (A) personal holding corporation ("PHC") within the meaning of
Section 542 of the Code or (B) foreign personal holding corporation ("FPHC")
within the meaning of Section 552 of the Code. None of the WFI Entities will
become PFIC, CFC, PHC or FPHC as a result of the transactions contemplated by
the Agreement.
(e) The Corporation agrees to make reasonably available to the Investors
books and records and personnel of the Corporation, and to provide information
to the Investors, as may be reasonably requested by the Investors with respect
to matters relating to its status as a PFIC, CFC or FPHC. The Corporation will
provide each Investor with all information reasonably available to the
Corporation or any of its subsidiaries as is reasonably requested by such
Investor to enable the Investor to determine whether the Corporation or any of
its subsidiaries are, have been, or are likely to become a PFIC, a CFC or a FPHC
during the period (or any portion thereof) in which the Investors own Series A
Non-Voting Preferred Shares or Common Shares. The Corporation will provide, or
make available to, each Investor information reasonably available to the
Corporation or any of its subsidiaries as is reasonably requested by such
Investor to (i) prepare accurately all Returns and comply with any reporting
requirement imposed as a result of its investment in the Corporation, including
as a result of the Investor determining, in its reasonable discretion, that the
Corporation or any of its subsidiaries is a PFIC, FPHC or CFC or (ii) make any
election (including, without limitation, a Qualified Electing Fund election
under Section 1295 of the Code), with respect to the Corporation or any of its
subsidiaries, and comply with any reporting or other requirements incident to
such election. In the event that, on the basis of such information, any Investor
determines that the Corporation is a PFIC for a particular year, then for such
year and for each year thereafter the Corporation shall also provide such
Investor a completed "PFIC Annual Information Statement" as required by U.S.
Treasury Regulation section ▇.▇▇▇▇.▇▇(g). As further required by such Treasury
Regulation, the Corporation shall permit each Investor or its representative to
inspect and copy the Corporation's permanent books of account, records, and such
other documents as may be maintained by the Corporation that are necessary to
establish that the financial information included on such PFIC Annual
Information Statement is computed in accordance with U.S. income tax principles.
In addition, the Corporation shall promptly no-
-24-
tify the Investors of any written assertion by the U.S. Internal Revenue Service
that the Corporation or any of its subsidiaries is or is likely to be a PFIC,
FPHC or CFC.
(f) The Canadian federal and provincial income and capital tax liabilities
of the WFI Entities have not been assessed by the relevant taxing authorities.
(g) For purposes of the Income Tax Act (Canada) or any applicable
provincial or municipal taxing statute, no Person or group of Persons has ever
acquired or had the right to acquire control of any of the WFI Entities.
(h) There are no circumstances existing which could result in the
application of any of Sections 78 or 80 to 80.4 of the Income Tax Act (Canada)
or any equivalent provision under provincial tax legislation in relation to the
WFI Entities.
(i) None of the WFI Entities has acquired property from a non-arm's length
person, within the meaning of the Income Tax Act (Canada), for consideration the
value of which is less than the fair market value of the property acquired in
circumstances which could subject it to a liability under Section 160 of the
Income Tax Act (Canada).
(j) Schedule 2.26 discloses each of the WFI Entities which are duly
registered under subdivision (d) of Division V of Part IX of the Excise Tax Act
(Canada) with respect to the goods and services tax and harmonized sales tax and
under Division I of Chapter VIII of the Title I of the Quebec Sales Tax Act with
respect to the Quebec sales tax. The Corporation's registration number under the
Excise Tax Act (Canada) is 983197424 RT0001.
(k) Each of the WFI Entities has duly and timely withheld from any amount
paid or credited by it to or for the account or benefit of any Person,
including, without limitation, any of its employees, officers and directors and
any non-resident Person, the amount of all Taxes and other deductions required
by any applicable law, rule or regulation to be withheld from any such amount
and has duly and timely remitted the same to the appropriate Governmental
Authority.
(l) None of the WFI Entities has filed any elections or designations which
will be applicable for any period ending after the Closing Date.
(m) For all transactions between any WFI Entity and any non-resident person
with whom the WFI Entity was not dealing at arm's length during a taxation year
commencing after 1998 and ending on or before the Closing Date, the WFI Entity
has made or obtained records or documents that meet the requirements of
paragraphs 247(4)(a) to (c) of the Income Tax Act (Canada).
(n) For purposes of this Agreement:
"Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, crown corporation,
or court or
-25-
other law, rule or regulating-making entity having or purporting to have
jurisdiction on behalf of any nation, or province or state or other subdivision
thereof or any municipality, district or other subdivision thereof;
"Person" means any individual, sole proprietorship, general, limited or any
other partnership, limited liability company, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate, or
other entity, Governmental Authority, and a natural person in such person's
capacity as trustee, executor, administrator or other legal representative;
"Taxes" includes all taxes, duties, fees, assessments, imposts, levies and
other charges of any kind whatsoever imposed by any Governmental Authority,
together with all interest, penalties, fines, additions to tax or other
additional amounts imposed in respect thereof, including those levied on, or
measured by, or referred to as income, gross receipts, profits, capital,
transfer, land transfer, sales, goods and services, use value-added, excise,
stamp, withholding, business, franchising, property, payroll, employment,
health, social services, education and social security taxes, all surtaxes, all
customs duties and import and export taxes, all license, franchise and
registration fees and all employment insurance, health insurance and Canada,
Quebec and other governmental pension plan premiums or contributions; and
"Tax Return" includes all returns, reports, declarations, elections,
notices, filings, information returns and statements filed or required to be
filed with any Governmental Authority in respect of Taxes.
2.27. Environmental Protection. The WFI Entities are conducting, and have
conducted their business in compliance with all applicable Environmental Laws,
except for such noncompliance which would not be reasonably expected to have a
Material Adverse Effect. No WFI Entity has caused, arranged or allowed, or
contracted with any party for, the transportation, treatment, storage or
disposal of any Hazardous Substance in connection with the operation of its
business or otherwise (collectively, an "Arrangement"), except for such
Arrangements which would not be reasonably expected to have a Material Adverse
Effect. To the knowledge of the Corporation, no Hazardous Substance has been
Released into the environment on or from the Real Properties or, to the
knowledge of the Corporation, any other property now or formerly owned, leased,
or controlled by the WFI Entities which Release is required or may be required
under applicable Environmental Laws to be abated or remediated by the
Corporation, except for such Releases which would not be reasonably expected to
have a Material Adverse Effect. Except as would not reasonably be expected to
have a Material Adverse Effect, there are no past or present Releases,
conditions, events, circumstances, facts, activities, practices, incidents,
actions, omissions, or plans that would reasonably be expected to form the basis
of any claim, action, suit, proceeding, order, administrative sanction, or
inquiry against or involving any WFI Entity allegedly or actually based on or
related to any violation of any Environmental Law or that is reasonably likely
to require such WFI Entity to incur any Losses in connection therewith.
-26-
For purposes of this Agreement, the term "Environmental Laws" shall mean all
laws, rules, regulations, orders, ordinances, codes and judgments of any
Governmental Authority having jurisdiction relating in full or in part to the
protection of the environment, and employee and public health and safety, and
includes those relating to the storage, generation, use, handling, manufacture,
processing, labeling, transportation, treatment and Release of Hazardous
Substances in effect and as amended as of the date of this Agreement. For
purposes of this Agreement, the term "Hazardous Substances" shall mean any
pollutant, contaminant, waste of any nature, hazardous substance, hazardous
material or toxic substance as defined, judicially interpreted or identified in
any Environmental Law including any asbestos, asbestos containing materials,
petroleum and/or other hydrocarbons or petroleum by-products. For the purposes
of this Agreement, the term "Release" shall have the meaning prescribed in any
Environmental Law and includes any release, spill, leak, pumping, pouring,
emission, emptying, discharge, injection, escape, leaching, disposal, dumping,
deposit, spraying, burial, abandonment, incineration, seepage, or placement.
2.28. Consents. No permit, authorization, consent or approval of or by, or
any notification of or filing with, any Person (governmental or private) is
required in connection with the execution, delivery and performance by the
Corporation of the Documents, the consummation by the Corporation of the
transactions contemplated thereby, or the issuance, sale or delivery of the
Transaction Securities (other than such notifications or filings required under
applicable provincial securities laws, if any, which shall be made by the
Corporation on a timely basis).
2.29. Insurance. All of the material assets of each WFI Entity that is of
insurable character (including all material assets of such WFI Entity that are
of insurable character) are covered by insurance with reputable insurers against
risks of liability, casualty and fire and other losses and liabilities
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practice. Schedule 2.29
sets forth a list of all insurance coverage carried by the WFI Entities, the
carrier and the terms and amount of coverage. No WFI Entity is in default with
respect to its obligations under any material insurance policy maintained by it.
All such policies are in full force and effect and all premiums due with respect
thereto have been paid. No WFI Entity has failed to give any notice or present
any material claim under any such insurance policy in due and timely fashion or
as required by any of such insurance policies or has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
material claim under such policies, and there are no material claims by any WFI
Entity under any of such policies to which any insurance corporation is denying
liability or defending under a reservation of rights or similar clause. No WFI
Entity has received written notice of any pending or threatened termination of
any of such policies or any premium increases for the current policy period with
respect to any of such policies and the consummation of the transactions
contemplated by this Agreement will not result in any such termination or
premium increase.
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2.30. Brokers. Neither the Corporation nor any of its officers, directors,
employees or shareholders has employed any broker, finder or placement agent in
connection with the transactions contemplated by this Agreement.
2.31. Suppliers and Customers. No supplier or proposed supplier of
materials or services (including, but not limited to, telecommunications
equipment, fiber, conduit and related electronics used to build the network) to
any WFI Entity in an amount in excess of US$10,000,000 per year has during the
last twelve months on such supplier's initiative decreased materially or, to the
best knowledge of the Corporation, threatened to decrease or limit materially
its provision of services or supplies to such WFI Entity, nor expressed material
dissatisfaction with the business relationship between such WFI Entity and the
supplier.
2.32. Real Property. Schedule 2.32 lists all real property owned or leased
by each WFI Entity. Each WFI Entity has unencumbered title to its owned real
properties (collectively, the "Owned Real Properties") and unencumbered
leasehold title to its leased real properties (the "Leased Real Properties,"
together with the Owned Real Properties, the "Real Properties"), in each case,
free and clear of all imperfections of title and all Encumbrances, except for
(a) those consisting of zoning or planning restrictions, easements, permits and
other restrictions or limitations on the use of such property or irregularities
in title thereto which, individually and in the aggregate, do not materially
impair the use of such property, (b) warehousemen's, mechanics', carriers',
landlords', repairmen's or other similar Encumbrances arising in the ordinary
course of business and securing obligations not yet due and payable, (c) other
Encumbrances which individually and in the aggregate do not materially impair
its use of such property or its ability to obtain financing by using such assets
as collateral, and (d) Encumbrances listed on Schedule 2.32. To the knowledge of
the Corporation, there are no intended public improvements which will result in
any material charge being levied against, or in the creation of any Encumbrances
upon, the Real Properties or any portion thereof. There are no options, rights
of first refusal, rights of first offer or other similar rights with respect to
any of the Real Properties that is material to the business of the WFI Entities
as currently conducted or proposed to be conducted. With respect to each lease
of Real Property to which any WFI Entity is a party, so long as the applicable
WFI Entity performs all of its obligations under such lease for Real Property
within applicable notice and grace periods, (a) the rights of such WFI Entity
under such lease shall not be terminated and (b) such WFI Entity's possession of
such Real Property and the use and enjoyment thereof shall not be disturbed by
any landlord, overlandlord, mortgagee or other superior party. No WFI Entity is
obligated to purchase any Leased Real Property and no Leased Real Property is
required to be accounted for under GAAP as a capitalized lease. No WFI Entity is
a real property holding company.
2.33. Investment Banking Services. The Corporation is not a party to any
Contract which grants rights to any third party with respect to the performance
of investment banking services for it, including, without
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limitation, with respect to its sale or a public offering, including an initial
public offering, of its securities.
2.34. Year 2000 Compliant. The disclosure contained in the Offering
Memorandum under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations, -- Impact of Year 2000, -- Risks of Year
2000 Issues, -- Description of Our Year 2000 Program, -- State of Readiness, and
-- Contingency Plans and Costs to Address Year 2000 Issues" is accurate and
complete as at the date thereof and there has been no adverse change in the
facts disclosed therein since July 23, 1999.
2.35. Previous Issuances Exempt. All shares and other securities issued by
the Corporation prior to the date hereof have been issued in transactions exempt
from the prospectus requirements or registration, as the case may be, under
applicable Canadian securities laws and the 1933 Act, and all applicable
provincial and state securities or "blue sky" laws or have been distributed or
registered, as the case may be, in compliance with all such laws (collectively,
"Securities Laws"). The Corporation has not violated the Securities Laws in
connection with the issuance of any shares or other securities prior to the date
hereof. The Corporation has not offered any of its shares, or any other
securities, for sale to, or solicited any offers to buy any of the foregoing
from the Corporation, or otherwise approached or negotiated with any other
person in respect thereof, in such a manner as to require distribution by
prospectus or registration under applicable Securities Laws.
2.36. Investment Company Act. Neither the Corporation nor any WFI Entity is
a "holding company", or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company", as such terms are defined in the United
States Public Utility Holding Company Act of 1935, as amended; nor is the
Corporation or any WFI Entity an "investment company", or an "affiliated person"
or a "principal underwriter" of an "investment company", as such terms are
defined in the United States Investment Company Act of 1940, as amended. Neither
the Corporation nor any WFI Entity is now, nor has it been within the past five
years, a "United States real property holding corporation" as defined in Section
897 of the Code.
2.37. Disclosure. Neither this Agreement nor any certificate, or written
statement made to the Investors by or on behalf of the Corporation delivered at
the Closing, together with the Offering Memorandum, taken as a whole, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading.
SECTION 3. Representations, Warranties and Acknowledgments of the
Investors. Each of the Investors represents, warrants and acknowledges to the
Corporation as of the date hereof as follows:
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(a) Such Investor is acquiring Series A Non-Voting Preferred Shares as
principal with an aggregate acquisition cost to the Investor of not less than
the amount set forth opposite such Investor's name on Schedule 1.1 and:
(i) if a corporation, it was not incorporated solely, nor is it used
primarily, to permit the purchase without a prospectus of the Series A
Non-Voting Preferred Shares, or, if the corporation was incorporated solely for
such purpose, each shareholder of the corporation has contributed at least
C$97,000 to the corporation for the purpose of investment by the corporation in
the Series A Non-Voting Preferred Shares; or
(ii) if not a corporation, is a partnership, trust, fund, syndicate,
association or other form of unincorporated organization, such partnership,
trust, fund, syndicate, association or other form of unincorporated organization
was not formed or established solely, nor is used primarily, to permit the
purchase of the Series A Non-Voting Preferred Shares without a prospectus, or if
formed or established or used primarily for such purpose, each member of such
partnership, trust, fund, syndicate, association or other form of unincorporated
organization, would have an aggregate acquisition cost of not less than C$97,000
for the Series A Non-Voting Preferred Shares if the participant were acquiring
its proportionate interest in the Series A Non-Voting Preferred Shares; and
(iii) is purchasing the Series A Non-Voting Preferred Shares for investment
only and not with a view to resale or distribution in violation of applicable
securities laws.
(b) Such Investor, if a "U.S. Person" (as defined in Regulation S under the
1933 Act), is an "Accredited Investor" (as defined in Rule 501(a)(1), (2), (3)
(7) or (8) under the 1933 Act), and such Investor makes the additional
representations and warranties contained in Schedule 3 of this Agreement.
(c) Such Investor acknowledges that no offering memorandum, prospectus or
registration statement has been prepared or filed by the Corporation with any
securities commission or similar authority in any jurisdiction in connection
with the Purchase and the issue and sale of Series A Non-Voting Preferred Shares
to such Investor is subject to such sale being exempt from the requirements of
applicable securities laws as to the filing of an offering memorandum,
prospectus or registration statement.
(d) Such Investor has not received or been provided with a prospectus,
offering memorandum or other similar document, nor has it requested, nor does it
have any need to receive, a prospectus, offering memorandum (other than the
Offering Memorandum (as defined in Section 2.10(d)) or any other similar
document describing the business and affairs of the Corporation.
(e) To such Investor's knowledge, the Series A Non-Voting Preferred Shares
were not advertised in printed media of general and regular paid circulation,
radio or
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television and such Investor has not purchased the Series A Non-Voting Preferred
Shares as a result of any form of general solicitation or general advertising,
including advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio, or television,
or any seminar or meeting whose attendees have been invited by general
solicitation or general advertising.
(f) Such Investor has such knowledge and experience in financial and
business affairs as to be capable of evaluating the merits and risks of the
investment hereunder and is able to bear the economic risk of loss of such
investment.
(g) Such Investor understands that the Series A Non-Voting Preferred Shares
have not been and will not be registered under the 1933 Act, as amended, or the
securities laws of any state of the United States and that the sale contemplated
hereby is being made in reliance on an exemption from such registration
requirements and such Investor understands and agrees that the Series A
Non-Voting Preferred Shares may not be traded in the United States or by or on
behalf of a U.S. Person or a person in the United States unless permitted by the
terms of the Shareholders Agreement and either (x) registered under the 1933 Act
and any applicable state securities laws or (y) an exemption from such
registration requirements is available and that certificates representing the
Series A Non-Voting Preferred Shares will bear a legend to such effect.
(h) Such Investor understands that no prospectus has been or will be filed
in accordance with the securities laws, and the regulations thereunder, of, and
the applicable published rules, policy statements, blanket orders and notices of
the securities regulatory authorities in the provinces and territories of Canada
(the "Canadian Securities Laws") qualifying the distribution of the Series A
Non-Voting Preferred Shares in any province or territory of Canada and that the
Series A Non-Voting Preferred Shares may not be offered or sold by such Investor
in any province or territory of Canada except pursuant to an applicable
exemption from the prospectus requirements of the applicable Canadian Securities
Laws and from a dealer appropriately registered under the applicable Canadian
Securities Laws or, other than in Ontario, in accordance with an exemption from
the registration requirements of such laws.
(i) Such Investor has not employed any broker or finder in connection with
the transactions contemplated by this Agreement.
(j) Such Investor is duly organized and validly existing under the laws of
the jurisdiction of its organization and has all partnership, corporate or
company power, as applicable, and authority to enter into and perform the
Documents. Each of the Documents to which such Investor is a party has been duly
authorized by all necessary action on the part of such Investor. Each of the
Documents to which such Investor is a party constitutes a valid and binding
agreement of such Investor enforceable against such Investor in accordance with
its terms except to the extent that enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally.
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(k) The execution, delivery and performance by such Investor of each of the
Documents to which such Investor is a party and the consummation by such
Investor of the transactions contemplated thereby will not (i) violate any
provision of law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body applicable to it, or any of its properties or assets; (ii)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under any contract which such Investor is a party that would materially
adversely affect the Investor's ability to consummate the transactions
contemplated by this Agreement or perform its obligations under the Shareholders
Agreement; or (iii) violate its organizational documents (if any).
(l) No permit, authorization, consent or approval of or by, or any
notification of or filing with, any person (governmental or private) is required
in connection with the execution, delivery and performance by such Investor of
the Documents to which it is a party or any documentation relating thereto, or
the consummation by such Investor of the transactions contemplated thereby
(other than such notifications or filings required under applicable Canadian
Securities Laws, if any, which shall be made on a timely basis).
(m) Each Investor acknowledges and agrees that the foregoing
representations, warranties and covenants set out herein are made by such
Investor with the intent that they be relied upon in determining its suitability
as a purchaser of Series A Non-Voting Preferred Shares. Each Investor further
agrees that by accepting the Series A Non-Voting Preferred Shares, such Investor
shall be representing and warranting that the foregoing representations and
warranties are true as at the Closing Date with the same force and effect as if
they had been made by such Investor at the Closing Date and shall continue in
full force and effect notwithstanding any subsequent disposition by it of the
Series A Non-Voting Preferred Shares. Each Investor undertakes to notify the
Corporation in writing of any change in any representation, warranty or other
information relating to such Investor set forth herein which takes place prior
to the Closing Date.
SECTION 4. Covenants Prior to Closing.
4.1. Cooperation by Parties; Satisfaction of Closing Conditions. From the
date hereof and prior to the Closing, (i) each party shall use its commercially
reasonable efforts, and will cooperate with each other, to secure as promptly as
practicable all necessary consents, approvals, authorizations, exemptions and
waivers from third parties as shall be required in order to enable the parties
hereto to effect the transactions contemplated hereby, and (ii) the Corporation
shall use its commercially reasonable efforts to cause (but not waive) any
Closing Condition in Section 6.2 to be satisfied.
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4.2. Conduct of Business. (a) Except as may be otherwise contemplated by
the Documents or as described in Schedule 4.2, or except as the Investors may
otherwise consent to in writing (which consent shall not be unreasonably
withheld or delayed), from the date hereof and prior to the Closing, the
Corporation shall not, and shall cause each WFI Subsidiary not to, do any thing
or take any action or omit to do anything or to take any action which (i) would
cause any representation or warranty of the Corporation in this Agreement to be
untrue as of the Closing Date or (ii) would be a Major Transaction under the
Shareholders Agreement if the Shareholders Agreement were in effect.
(b) From the date hereof to the Closing Date, the Corporation shall cause
Worldwide Telecom (Bermuda) Limited (the "Project Subsidiary") to engage solely
in activities related or incidental to the Hibernia Project. Unless the Hibernia
Supply Contract (as defined in Section 2.10(e)) otherwise requires, the
Corporation shall cause the Project Subsidiary to diligently enforce all of its
rights under the Hibernia Supply Contract.
4.3. Required Notices. At all times prior to the Closing Date, the
Corporation shall promptly give written notice to the Investors of (a) any facts
or circumstances or the occurrence of any event or the failure of any event to
occur, which has or is reasonably likely to have, (i) a Material Adverse Effect
on the Corporation and/or any WFI Entity or (ii) a Material Adverse Effect on
the ability of the Corporation to consummate the transactions contemplated
hereby or to satisfy its obligations hereunder, (b) any complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any authority with respect to the Corporation and/or any WFI
Entity or the transactions contemplated hereby, (c) the institution or the
threat of institution of any litigation or similar action with respect to the
Corporation and/or any WFI Entity or the consummation of the transactions
contemplated hereby and (d) the occurrence of any event, or the discovery of any
facts or circumstances which will or is reasonably likely to result in the
failure (x) of any representation or warranty set forth herein to continue being
true or (y) to satisfy any condition set forth in Section 6. The Corporation
shall keep the Investors apprised of material changes with respect to such
events promptly upon the occurrence of such events.
4.4. No Shop. For the period between the date hereof and the earlier of the
Closing Date and October 4, 1999, the Corporation will not, and will not
authorize any of its officers or directors or any other person on its behalf,
to, solicit, encourage, negotiate or accept any offer from any party concerning
(i) the sale or disposition of all or any portion of the Corporation's business,
assets (other than in the ordinary course of business), subsidiaries or share
capital by merger, amalgamation, share issuance, sale or any other means, or
(ii) any other agreement or arrangement that would be inconsistent with the
consummation of the transactions contemplated hereby (clauses (i) and (ii)
together, each a "Prohibited Transaction"), nor will they participate in any
discussions or negotiations regarding, or furnish any information with respect
to, or facilitate in any other manner, any Prohibited Transaction. On or before
the date hereof, the Corporation will immediately terminate any existing
discussion with a third party regarding a possible Prohibited Transaction. The
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Corporation will promptly notify the Investors in writing of any inquiries or
proposals from any third party regarding a possible Prohibited Transaction.
SECTION 5. Other Covenants.
5.1. Use of Proceeds. The Corporation shall use the proceeds from the sale
of Series A Non-Voting Preferred Shares hereunder as set forth on Schedule 5.1.
5.2. Shareholders Agreement. The Corporation shall use its best efforts to
cause each shareholder of the Corporation holding Common Shares or Common Share
Equivalents and listed on Schedule I to the shareholders agreement in the form
annexed hereto as Schedule 5.2 (the "Shareholders Agreement") to execute and
deliver the Shareholders Agreement on the Closing Date.
5.3. HSR Filing. The Corporation shall file its notification of the
transactions contemplated by this Agreement under the United States
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended ("HSR"),
promptly upon request by any of the Investors and shall pay all costs and
expenses, including filing fees of the Investors, in connection therewith.
5.4. Tax Indemnity. (a) The Corporation shall indemnify and hold each
Investor, or the partners of the Investor where the Investor is a partnership,
(each referred to in this Section 5.4(a) as an "Investor") harmless from and
against any Canadian federal or provincial withholding tax liability (including
any such withholding tax liability on any payment made under this Section 5.4)
arising from or as a result of the holding, receipt of distributions on,
conversion, sale, redemption or other disposition of, the Preferred Shares or
the Common Shares (other than the receipt of any distributions of cash dividends
on the Common Shares), provided that the maximum withholding tax liability in
respect of which the Corporation shall indemnify and hold each Investor harmless
shall not exceed the amount of withholding tax payable under paragraph 2(b) of
Article X of the Canada-US Tax Convention (the "Convention") if the Investor
were a resident of the United States for purposes of the Convention. In the case
of a distribution, redemption or any similar payment by the Corporation with
respect to any Preferred Shares or Common Shares (other than a distribution of
cash dividends on Common Shares), if any Canadian federal or provincial
withholding tax is imposed on such distribution, redemption or other payment,
the indemnity provided for in the preceding sentence shall be satisfied by the
payment by the Corporation, at the same time as the making of such distribution,
redemption or other payment, of additional amounts as necessary so that the net
amount received by each Investor is the same as it would have received had no
such withholding tax been imposed. In any other case, the indemnity shall be
satisfied by payment in cash no later than three business days following demand
therefor (which demand shall be accompanied by a statement setting forth the
basis for indemnification). The Corporation shall not be obligated to indemnify
and hold an Investor harmless pursuant to this Section 5.4 in respect of (i) any
deemed dividend arising by virtue of
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the application of subsection 212.1(1) of the Income Tax Act (Canada), (ii) any
deemed dividend arising solely by virtue of the application of 84(3) of the
Income Tax Act (Canada) in respect of a sale to or a redemption by the
Corporation of Common Shares pursuant to an offer made by the Corporation to
purchase through the facilities of The Toronto Stock Exchange in a particular
twelve-month period not more than 5% of a particular class of Common Shares
issued and outstanding at the commencement of such twelve-month period, which
offer is completed in compliance with applicable Canadian Securities Laws and
the rules of The Toronto Stock Exchange, (iii) any income tax liability arising
from a capital gain; or (iv) any tax arising if any Investor holds or is deemed
to hold the Preferred Shares or Common Shares in carrying on a business in
Canada. The Corporation shall indemnify and hold each Investor harmless from and
against any income tax liability imposed by the jurisdiction in which such
Investor is organized or otherwise resident, which income tax liability is
imposed on or in respect of any payment made under this Section 5.4.
(b) In the event that any Investor shall be entitled to receive a refund of
tax or a credit against or relief or remission for, or repayment of, any tax
paid or payable by it (collectively, a "Tax Credit") in respect of or calculated
with reference to the withholding tax liability giving rise to the requirement
of the Corporation to make an indemnity payment under this Section 5.4, such
Investor shall use reasonable efforts to obtain the Tax Credit, and upon receipt
of such Tax Credit, to the extent that it can do so without prejudice to the
retention of the amount of such Tax Credit, pay or cause to be paid to the
Company such amount as such Investor shall have concluded, acting reasonably, to
be the after-tax value to it of the Tax Credit which is attributable to the
relevant withholding tax liability. Nothing herein contained shall interfere
with the right of each Investor to arrange its tax affairs in whatever manner it
thinks fit or require any Investor to disclose to the Company any information
regarding its tax affairs or tax calculations. Such payments shall be made
promptly upon the relevant Investor certifying that the amount of such credit,
relief, remission or repayment has been received by it and each Investor
undertake so to certify or cause to be certified promptly upon such receipt.
Notwithstanding anything to the contrary in this Agreement, the term "Investor"
as used in this Section 5.4(b) shall refer only to the direct holder of the
shares or other property in respect of which the indemnity payment was made and
not to any holder of an interest in such direct holder or any other Person.
(c) Notwithstanding anything to the contrary in Section 5.4(a), the
Corporation shall indemnify and hold each Investor harmless from and against all
loss incurred or suffered, directly or indirectly, by an Investor in respect of
or otherwise attributable to any additional liability for Taxes arising to the
Corporation or to an Investor as a result of the reorganization of capital
undertaken by the Corporation prior to or at Closing (the "Reorganization"). For
greater certainty, the Reorganization includes the following transactions
contemplated by the Corporation: the issuance of Series C Redeemable Preferred
Shares by the Corporation to Worldwide Fiber Holdings Ltd. ("WFH") as a stock
dividend, the disposition by WFH of all of its common shares to the Corporation
for additional Series C Redeemable Preferred Shares and for Class B Subordinate
Voting Shares, the joint election to be made by the Corporation and WFH pursuant
to subsection 85(1) of the Income Tax Act
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(Canada) in respect of such disposition, and the redemption by the Corporation
of the Series C Redeemable Preferred Shares held by WFH.
5.5. Roll-Up Transactions. The Corporation agrees that each of the Minority
Roll-Up Transactions (as defined in Section 1.4(b)) shall be consummated in
consideration solely for the issuance of Common Shares (and not cash or any
other assets or obligations of the Corporation or any of its Subsidiaries or
affiliates). The Corporation also agrees that the Ledcor Roll-Up Agreement (as
defined in Section 1.4(b)) shall be consummated in consideration solely for the
issuance of 4,500,000 Common Shares (and not cash or any other assets or
obligations of the Corporation or any of its Subsidiaries or affiliates) and in
accordance with the terms of the Ledcor Roll-Up Agreement in effect on the date
hereof.
SECTION 6. Conditions to the Purchase.
6.1. Conditions to Obligations of Each Party. The respective obligations of
each party hereto to consummate the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived in writing, in whole or in part,
by the Corporation or all the Investors, to the extent permitted by applicable
law:
(a) No federal, state or provincial governmental or regulatory body or
court of competent jurisdiction shall have enacted, issued, promulgated or
enforced any statute, rule, regulation, executive order, decree, judgment,
preliminary or permanent injunction or other order which is in effect and which
prohibits, enjoins or otherwise restrains the consummation of the transactions
contemplated hereby; provided, that the parties shall use commercially
reasonable efforts to cause any such decree, judgment, injunction or order to be
vacated or lifted.
(b) Each governmental or third party consent, approval or filing required
to be obtained or made and any waiting period required to have expired in order
to consummate the transactions contemplated by this Agreement at the Closing
shall have been obtained, or made, as the case may be, and any such waiting
period shall have expired.
6.2. Conditions to Obligations of the Investors. The obligations of each
Investor to consummate the Purchase shall be subject to the satisfaction (or
waiver, which shall not be effective against any Investor who does not consent
in writing thereto), on or prior to the Closing Date, of the following
conditions:
(a) Each representation and warranty made by the Corporation herein shall
be true and correct, in all material respects (except for such representations
and warranties that are qualified by their terms by reference to Material
Adverse Effect or materiality, which representations and warranties as so
qualified shall be true in all respects), on and as of the Clos-
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ing Date, with the same force and effect as though such representation and
warranty had been made on and as of the Closing Date, except for changes
permitted or contemplated by this Agreement and except for each representation
and warranty that is made as of a specific date or time, which shall be true and
correct in all material respects, only as of such specific date or time.
(b) The Corporation shall have complied in all material respects with all
its agreements and covenants contained herein or the Shareholders Agreement
required to be performed at or prior to the Closing to the extent such
agreements and covenants relate to the Closing.
(c) The Corporation shall have delivered to the Investors a certificate
executed by a senior executive officer of the Corporation, which shall be
satisfactory in form and substance to the Investors, certifying that the
conditions set forth in paragraphs (a) and (b) have been met.
(d) The Corporation shall have delivered to the Investors a certificate of
the Corporate Secretary of the Corporation, in form and substance satisfactory
to the Investors, certifying (i) a copy of the Articles of Continuance of the
Corporation and all amendments thereto, certified by the Director under the
Canada Business Corporations Act, (ii) the By-Laws of the Corporation, (iii) a
Certificate of Status for the Corporation issued by the Director under the
Canada Business Corporations Act and similar certificates for other WFI Entities
issued by the relevant Governmental Authority, (iv) resolutions of the board of
directors of the Corporation (the "Board of Directors") authorizing the
execution, delivery and performance by the Corporation of this Agreement, the
Shareholders Agreement, the Registration Rights Agreements, the Articles of
Incorporation, any other agreement entered into or instrument delivered by the
Corporation in connection herewith, and any letters entered into simultaneously
with this Agreement (collectively, the "Documents") and the transactions
contemplated thereby, (v) copies of each governmental or third party consent,
approval or filing required to be obtained or made in order to consummate the
transactions contemplated by this Agreement at the Closing, and (vi) incumbency
matters. (e) The Shareholders Agreement shall be executed and delivered by the
Corporation and each of the shareholders listed on Schedule I thereto.
(f) A registration rights agreement (the "Registration Rights Agreement")
among the Corporation and the Investors in the form annexed hereto as Schedule
6.2(f) shall be duly executed and delivered by the Corporation.
(g) The Articles of Amendment shall be in the form annexed hereto as
Schedule A.
(h) No Material Adverse Effect shall have occurred in respect of the
Corporation or any of the other WFI Entities, and no event or change shall have
occurred which,
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individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Corporation or any of the other WFI Entities.
(i) The Investors shall receive from each of ▇▇▇▇▇▇▇▇ ▇▇▇▇; Farris,
Vaughan, ▇▇▇▇▇ & ▇▇▇▇▇▇; and ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the
Corporation, an opinion addressed to the Investors, dated as of the Closing, in
the forms annexed hereto as Schedule 6.2(i).
(j) The composition of the Board of Directors shall be as provided in
Section 8.1 of the Shareholders Agreement.
(k) The Corporation shall have obtained, with financially sound and
reputable insurers, directors' and officers' liability insurance in the amount
of at least US$5,000,000, or a binder with respect to such insurance in form and
substance satisfactory to each Investor.
(l) The Corporation shall have obtained signed commitment letters for a
$550 million credit facility the proceeds of which will be used to finance the
Hibernia Project, in form and substance satisfactory to each Investor (the
"Hibernia Commitment").
(m) Each other Investor shall concurrently purchase and pay for the number
of Class A Preferred Shares set forth opposite its name in Schedule 1.1.
(n) There shall not have occurred any disruption or material adverse change
or development affecting financial, banking, currency or capital markets in
general in the United States in the reasonable opinion of the Investors.
(o) With the proceeds of the Purchase Price, at Closing the Corporation
shall concurrently repurchase from WFH 45,000,000 Series C Redeemable Preferred
Shares for an aggregate amount of US$45,000,000 in cash.
6.3. Conditions to the Obligations of the Corporation. The obligations of
the Corporation to consummate the Purchase shall be subject to the satisfaction
(or waiver), on or before the Closing Date, of the following conditions:
(a) Each representation and warranty made by the Investors herein shall be
true and correct in all material respects, with the same force and effect as
though such representation and warranty had been made on and as of the Closing
Date, except for changes permitted or contemplated by this Agreement and except
for each representation and warranty that is made as of a specific date or time,
which shall be true and correct, in all material respects, only as of such
specific date or time.
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(b) The Investors shall have complied in all material respects with all
their agreements and covenants contained herein required to be performed at or
prior to the Closing to the extent such agreements and covenants relate to the
Closing.
(c) Each Investor shall concurrently purchase and pay for the number of
Series A Non-Voting Preferred Shares set forth opposite such Investor's name on
Schedule 1.1.
(d) The Shareholders Agreement shall be executed and delivered by each of
the Investors.
6.4. Default by an Investor. If one or more of the Investors shall fail at
the Closing to purchase the Series A Non-Voting Preferred Shares set forth
opposite its name on Schedule 1.1 (the "Defaulted Shares"), each of the other
Investors shall have the right, but not any obligation, exercisable within 15
Business Days thereafter, to purchase its ratable share of the Defaulted Shares
and any additional Defaulted Shares that any other non-defaulting Investor shall
elect not to purchase pursuant to this Section 6.4.
SECTION 7. Termination. The obligation of the parties to effect the
Purchase may be terminated (i) by the mutual written consent of the Corporation
and each of the Investors or (ii) by any party in writing, without liability to
such party on account of such termination (provided the terminating party is not
otherwise in material breach and/or default of this Agreement), if the Closing
shall not have occurred on or before October 4, 1999.
SECTION 8. Transfer Taxes. The Corporation agrees that it will pay, and
will hold each Investor harmless from any and all liability with respect to, any
transfer, documentary or stamp taxes ("Transfer Taxes") which may be determined
to be payable in connection with the execution and delivery of this Agreement or
any modification, amendment or alteration of the terms or provisions of this
Agreement, and that it will similarly pay and hold each Investor harmless from
all such Transfer Taxes in respect of the issuance of any of the Transaction
Securities to such Investor.
SECTION 9. Survival of Representations, Warranties, Agreements and
Covenants, etc. All representations and warranties in the Documents shall
survive the Closing until the second anniversary of the date hereof and shall in
no way be affected by any investigation of the subject matter thereof made by or
on behalf of any Investor; provided, however, (x) the representations and
warranties set forth in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.11, 2.15, 2.19,
2.20, 2.21, 2.22, and 2.36 shall survive the Closing indefinitely and (y) the
representations and warranties set forth in Sections 2.9(a), 2.23, 2.26 and 2.27
shall survive the Closing until the expiration of all applicable statutes of
limitations. All statements contained in any certificate or other instrument
delivered by the Corporation pursuant to this Agreement shall constitute
representations and warranties by the Corporation under this Agreement. All
agreements and
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covenants contained herein or any other Document shall survive indefinitely
until, by their respective terms, they are no longer operative.
SECTION 10. Expenses. (a) Except as set forth in Section 10(b) and (c), the
Corporation and each Investor shall pay all the costs and expenses incurred by
it or on its behalf in connection with this Agreement and the consummation of
the transactions contemplated hereby.
(b) The Corporation shall promptly pay or reimburse the Investors for (and,
to the extent requested by the Investors, for expenses incurred prior to the
Closing, pay at the Closing): (i) the Investors' reasonable out-of-pocket
expenses (including, without limitation, all reasonable fees and expenses of
counsel of each of the Investors) arising in connection with the preparation,
negotiation and execution of the Documents and the other agreements or
instruments contemplated thereby, and the consummation of the transactions
contemplated thereby, (ii) the reasonable fees and expenses incurred by each
such Investor with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of the Documents and the agreements
contemplated thereby (including, without limitation, in connection with any
proposed merger, sale or recapitalization of the Corporation), and (iii) the
fees and expenses incurred by the Investors in any filing with any governmental
agency with respect to its investment in the Corporation or in any other filing
with any governmental agency with respect to the Corporation that mentions any
Investor.
(c) Notwithstanding anything herein to the contrary, no Investor will
receive or is entitled to receive any broker's fee, finder's fee, placement fee
or other similar fee or commission in connection with the Purchase or the
consummation of the transactions contemplated by this Agreement and the
Documents.
SECTION 11. Indemnification.
11.1. General Indemnification. The Corporation shall indemnify, defend and
hold each Investor, its affiliates, and each of their respective officers,
directors, partners, managing directors, affiliates, employees, agents,
consultants, representatives, successors and assigns (each an "Investor Entity")
harmless from and against all Losses (as defined below) incurred or suffered by
an Investor Entity (whether incurred or suffered directly or indirectly through
ownership of Series A Non-Voting Preferred Shares or Conversion Shares) arising
out of, relating to, or resulting from (a) any breach of any of the
representations, warranties, covenants or agreements made by it in this
Agreement or in any agreement, certificate or other instrument delivered
pursuant hereto including, without limitation, the Documents, and (b) any third
party claim made against an Investor Entity relating to any transaction by the
Corporation financed in whole or in part, directly or indirectly, with proceeds
from the sale of any of the Series A Non-Voting Preferred Shares or Common
Shares hereunder. Each Investor, severally and not jointly, shall indemnify,
defend and hold the Corporation, its affiliates, and each of their respective
officers, directors, employees, agents, consultants, representatives, successors
and assigns harmless against all
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Losses arising from the breach of any of its representations, warranties,
covenants or agreements in this Agreement or in any certificate or other
instrument delivered pursuant hereto, including, without limitation, the
Documents. Notwithstanding anything to the contrary in this Agreement, no
indemnification payment by the Corporation pursuant to this Section 11 with
respect to any Losses otherwise payable hereunder as a result of a breach of its
representations and warranties (other than any Losses resulting from breaches of
the representations and warranties in Section 2.7, as they relate to Taxes,
Sections 2.26 and 2.27, to any covenants contained in this Agreement or any
other Document and to willful misrepresentation, fraud or deceit, which shall
not be subject to the Deductible or Limit) shall be payable (a) until the time
as such Losses shall aggregate (on a cumulative basis and not on a per item
basis) for all Investor Entities more than US$5,000,000 (the "Deductible"), and
then only to the extent that such Losses, in the aggregate for all Investors,
exceed the Deductible; or (b) with respect to the Investor Entities associated
with each Investor, in an aggregate amount in excess of the Purchase Price of
the shares issued to such Investor or its predecessors in interest as shown on
Schedule 1.1 hereto (as increased by the amounts by which the Series A
Non-Voting Liquidation Value, as defined in the Terms of the Series A Non-Voting
Preferred Shares, Series A in the Articles of Amendment, would increase from the
Closing Date to the date of determination) (the "Limit"). The Corporation shall
also indemnify, defend and hold harmless each Investor Entity against any and
all Losses (as defined in Section 11.2 and not subject to any Deductible or
Limit) arising under Title IV of ERISA, Section 302 of ERISA and Sections 412
and 4971 of the Code which may be incurred by any of them arising out of or
relating to any WFI Entity being or having been an ERISA Affiliate with any
other Person (other than another WFI Entity), whether such Losses arise out of
or relate to any event or state of facts occurring or existing before, on or
after the Closing Date.
An "ERISA Affiliate" is defined as any entity that is (i) a member of a
"controlled group of corporations," under "common control" or a member of an
"affiliated service group" within the meaning of Section 414(b), (c) or (m) of
the Code, (ii) required to be aggregated under Section 414(o) of the Code, or
(iii) under "common control," within the meaning of Section 4001(a)(14) of
ERISA, or any regulations promulgated or proposed under any of the foregoing
Sections, in each case with any WFI Entity.
11.2. Indemnification Principles. For purposes of this Section 11, "Losses"
shall mean each and all of the following items: claims, losses (including,
without limitation, losses of earnings), liabilities, obligations, payments,
damages (actual, punitive or consequential), charges, judgments, fines,
penalties, amounts paid in settlement, costs and expenses (including, without
limitation, interest which may be imposed in connection therewith), costs and
expenses of investigation, actions, suits, proceedings, demands, assessments and
fees, expenses and disbursements of counsel, consultants and other experts. For
purposes of Section 11.1(a) the Corporation shall not be obligated to indemnify,
defend or hold harmless any Investor Entity for any (i) punitive damages or (ii)
damages arising out of such Investor Entity's lost use of such Investor Entity's
share of the Purchase Price (as shown on Schedule 1.1 hereto) for an alternative
investment, except in any case where such damages are the result of the willful
misrepresentation, fraud or deceit of the
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Corporation. Any indemnification payment by the Corporation to any Investor
pursuant to this Section 11 shall include an additional amount so that the
Investor does not, directly or indirectly, bear any portion of such payment made
by the Corporation with respect to such payment on account of the Investor's
direct or indirect investment in the Corporation as contemplated by the
Purchase. Any payment by the Corporation to an Investor pursuant to this Section
11, shall be treated for federal income tax purposes as a Purchase Price
Adjustment.
11.3. Claim Notice. A party seeking indemnification under this Section 11
shall, promptly upon becoming aware of the facts indicating that a claim for
indemnification may be warranted, give to the party from whom indemnification is
being sought a claim notice relating to such Loss (a "Claim Notice"). Each Claim
Notice shall specify the nature of the claim, the applicable provision(s) of
this Agreement or other instrument under which the claim for indemnity arises,
and, if possible, the amount or the estimated amount thereof. No failure or
delay in giving a Claim Notice (so long as the same is given prior to expiration
of the representation or warranty upon which the claim is based) and no failure
to include any specific information relating to the claim (such as the amount or
estimated amount thereof) or any reference to any provision of this Agreement or
other instrument under which the claim arises shall affect the obligation of the
party from whom indemnity is sought except to the extent such party is
materially prejudiced thereby.
11.4. Claim Procedure.
(a) Procedure for Indemnification with Respect to Third-Party Claims. If
any indemnified party hereunder determines to seek indemnification under this
Section 11 with respect to Losses resulting from the assertion of liability by
third parties, such indemnified party shall give notice to the indemnifying
party hereunder within 30 days of such indemnified party becoming aware of any
such Losses or of facts upon which any claim for such Losses will be based; the
notice shall set forth such material information with respect thereto as is then
reasonably available to such indemnified party. In case any such liability is
asserted against such indemnified party, and such indemnified party notifies the
indemnifying party thereof, the indemnifying party will be entitled, if it so
elects by written notice delivered to such indemnified party within 10 days
after receiving such indemnified party's notice, to assume the defense thereof
with counsel satisfactory to such indemnified party, in which case, the
indemnifying party will not be liable to the indemnified party under this
Section 11.4 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
following sentence or (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party. Notwithstanding the foregoing, (i) such indemnified party
shall also have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless such indemnified party shall reasonably determine that there is a
conflict of interest between or among such indemnified party and the
indemnifying party with re-
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spect to such claim, in which case the fees and expenses of such counsel will be
borne by the indemnifying party, (ii) such indemnified party shall not have any
obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing, (iii) the rights of such indemnified party
to be indemnified hereunder in respect of any Losses that may or do result from
the assertion of liability by third parties shall not be adversely affected by
its failure to give notice pursuant to the foregoing unless, and, if so, only to
the extent that, the indemnifying party is materially prejudiced thereby, and
(iv) the indemnifying party's obligations to such indemnified party under this
Section 11 shall not terminate until such indemnified party's claims have been
finally satisfied to such indemnified party's sole satisfaction. In the event
that the indemnifying party, within 10 days after receipt of the aforesaid
notice of a claim hereunder, fails to assume the defense of such indemnified
party against such claim, such indemnified party shall have the right to
undertake the defense, compromise, or settlement of such action on behalf of and
for the account, expense, and risk of the indemnifying party.
Notwithstanding anything in this Section 11 to the contrary, (i) if there
is a reasonable probability that a claim may materially adversely affect such
indemnified party, such indemnified party shall have the right to participate in
such defense, compromise, or settlement and the indemnifying party shall not,
without such indemnified party's written consent (which consent shall not be
unreasonably withheld), settle or compromise any of such claims, or consent to
entry of any judgment in respect thereof unless such settlement, compromise, or
consent includes as an unconditional term thereof the giving by the claimant or
the plaintiff to such indemnified party a release from all liability in respect
of such claim. With respect to any assertion of liability by a third party that
results in any claim for indemnification hereunder, the parties hereto shall
make available to each other all relevant information in their possession
material to any such assertion.
(b) Procedure For Indemnification with Respect to Non-Third Party Claims.
In the event that an indemnified party asserts the existence of a claim with
respect to Losses (but excluding claims resulting from the assertion of
liability by third parties), it shall give written notice to the indemnifying
party. Such written notice shall state that it is being given pursuant to this
Section 11.4(b), specify the nature and amount of the claim asserted, and
indicate the date on which such assertion shall be deemed accepted and the
amount of the claim deemed a valid claim (such date to be established in
accordance with the next sentence). If the indemnifying party, within 30 days
after the mailing of notice by such indemnified party, shall not give written
notice to such indemnified party announcing its intent to contest such assertion
of such indemnified party, such assertion shall be deemed accepted and the
amount of claim shall be deemed a valid claim. In the event, however, that the
indemnifying party contests the assertion of a claim by giving such written
notice to such indemnified party within said period, then the parties shall act
in good faith to reach agreement regarding such claim. In the event that
litigation shall arise with respect to any such claim, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in connection
with such litigation including attorney fees, if the parties hereto, acting in
good faith, cannot reach agreement with respect to such claim within ten days
after such notice.
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SECTION 12. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Corporation, each Investor may proceed to protect and enforce its rights either
by suit in equity and/or by action at law, including, but not limited to, an
action for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement, and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that each party may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
SECTION 13. Further Assurances. At any time or from time to time after the
Closing, the Corporation, on the one hand, and each Investor, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the Purchase and to otherwise carry out the intent of the parties hereunder.
SECTION 14. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the Corporation and the Investors and the respective successors,
Permitted Assigns, heirs and personal representatives of the Corporation and the
Investors. In addition, and whether or not any express assignment has been made,
except as otherwise expressly stated in this Agreement, the provisions of this
Agreement which are for each of the Investor's benefit as a purchaser or holder
of Transaction Securities are also for the benefit of, and enforceable by, any
permitted subsequent holder of such Transaction Securities. The parties
acknowledge that, subject to compliance with applicable securities laws, each
Investor may transfer and assign all or a part of its rights and obligations
under this Agreement to one or more other partnerships, corporations, trusts or
other organizations which have been created by, or are controlled by, control or
are under common control with such Investor or one or more of the current
partners, members or other equity holders of such Investor, without the consent
of the Corporation (collectively, "Permitted Assigns"). This Agreement shall not
be assignable by the Corporation, without the consent of each of the Investors.
SECTION 15. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto including, but not limited to, that certain letter of intent,
dated August 5, 1999, between the Corporation and the Investors.
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SECTION 16. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by fax, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
(i) if to the Corporation, to:
Worldwide Fiber Inc.
#▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
Farris, Vaughan, ▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇-▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Eighty ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
(ii) if to DLJ, to:
DWF SRL
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ Indies
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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and
DWF SRL
c/o DLJ Merchant Banking Partners II, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
(iii) if to any of the GSCP Parties, to:
c/o Ernst & Young Services, Ltd.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇-▇▇▇ ▇▇▇▇▇
and
c/o GS Capital Partners III, L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with copies to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
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and
GS Capital Partners III, L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
(iv) if to Providence, to:
Providence Equity Fiber, L.P.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(v) if to Tyco, to:
c/o Tyco Group s.a.r.l.
▇▇▇ ▇▇▇▇▇
▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fax: (352) 464-350
Attention: Managing Director
with a copy to:
Tyco Submarine System Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
All such notices, requests, consents and other communications shall be
deemed to have been given when received.
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SECTION 17. Amendments. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, pursuant to the written consent of the Corporation and each of the
Investors.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 19. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 20. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
SECTION 21. Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority ("Litigation") arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any Litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by registered mail to its respective
address set forth in this Agreement shall be effective service of process for
any Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such Litigation brought in any such court has been brought
in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO
TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 22. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
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effective and valid, but if any provision of this Agreement is held to be
invalid or unenforceable in any respect, such invalidity or unenforceability
shall not render invalid or unenforceable any other provision of this Agreement.
SECTION 23. Currency. Unless otherwise indicated, references to "dollars",
"$" or U.S. dollars and references to "C$" are to Canadian dollars.
SECTION 24. No Partnership. The obligations of each of the parties to this
Agreement are several and not joint. Nothing in this Agreement shall imply or be
deemed to imply a partnership, joint venture or other relationship between the
parties.
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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
of the date first above written.
CORPORATION:
WORLDWIDE FIBER INC.
By:________________________
Name:
Title:
DWF SRL
By:_______________________
Name:
Title:
GSCP3 WWF (BARBADOS) SRL
By:_______________________
Name:
Title:
(Signature Page to Preferred
Share Purchase Agreement)
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WWF (BARBADOS) SRL
By:_______________________
Name:
Title:
PROVIDENCE EQUITY FIBER L.P.
by its General Partner,
Providence Equity Partners III L.P.
by its General Partner,
Providence Equity Partners III L.L.C.
By:_______________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Member and Managing Director
TYCO GROUP S.A.R.L.
By:_______________________
Name:
Title:
(Signature Page to Preferred
Share Purchase Agreement)
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