EXHIBIT 2.1
MERGER AGREEMENT
TABLE OF CONTENTS
Page
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ARTICLE I INTERPRETATION...................................................................... 1
1.1 Definitions................................................................. 1
1.2 Interpretation Not Affected by Headings, etc................................ 7
1.3 Currency.................................................................... 8
1.4 Number, etc................................................................. 8
1.5 Date For Any Action......................................................... 8
ARTICLE II THE ARRANGEMENT.................................................................... 8
2.1 Implementation Steps by VERSUS.............................................. 8
2.2 Implementation Steps by EGI Parties......................................... 9
2.3 Interim Order............................................................... 9
2.4 The Arrangement............................................................. 9
2.5 Tax Elections............................................................... 10
2.6 Reorganization of VERSUS, VBSI and VBSUSI................................... 10
2.7 VERSUS Information Circular................................................. 11
2.8 Securities Compliance....................................................... 11
2.9 Preparation of Filings...................................................... 11
2.10 Exchange Ratio.............................................................. 12
ARTICLE III REPRESENTATIONS AND WARRANTIES.................................................... 13
3.1 Representations and Warranties of the VERSUS Parties........................ 13
3.2 Representations and Warranties of the EGI Parties........................... 30
3.3 Survival.................................................................... 34
ARTICLE IV REGULATORY APPROVALS............................................................... 34
4.1 Applications................................................................ 34
4.2 Obtaining of Appropriate Regulatory Approvals............................... 34
ARTICLE V COVENANTS........................................................................... 34
5.1 Retention of Goodwill....................................................... 34
5.2 Material Commitments........................................................ 35
5.3 Conduct of Business of VERSUS............................................... 35
5.4 Covenants Regarding Non-Solicitation........................................ 38
5.5 Notice by VERSUS of Superior Proposal Determination......................... 40
ARTICLE VI ADDITIONAL AGREEMENTS.............................................................. 40
6.1 Fairness Hearing; Registration Statement.................................... 40
6.2 Meeting of Shareholders..................................................... 41
6.3 Access to Information....................................................... 41
6.4 Confidentiality............................................................. 41
6.5 Public Disclosure........................................................... 41
6.6 Consents; Cooperation....................................................... 41
6.7 Reasonable Best Efforts and Further Assurances.............................. 42
6.8 Securities and Blue Sky Laws................................................ 42
6.9 Listing of Additional Shares................................................ 42
6.10 Pooling Accounting.......................................................... 42
6.11 Affiliate Agreements........................................................ 43
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6.12 Tax Treatment............................................................... 43
6.13 VERSUS Options.............................................................. 43
6.14 Form S-8.................................................................... 44
6.15 Employees................................................................... 44
6.16 Director and Officer Indemnification........................................ 44
6.17 Comfort Letters............................................................. 45
6.18 Stockholder Litigation...................................................... 45
ARTICLE VII CONDITIONS........................................................................ 46
7.1 Mutual Conditions Precedent................................................. 46
7.2 Additional Conditions Precedent to the Obligations of the EGI Parties....... 47
7.3 Additional Conditions Precedent to the Obligations of the VERSUS Parties.... 48
7.4 Satisfaction of Conditions.................................................. 49
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................................ 49
8.1 Termination................................................................. 49
8.2 Effect of Termination....................................................... 50
8.3 Expenses and Termination Fees............................................... 50
8.4 Amendment................................................................... 51
8.5 Extension; Waiver........................................................... 51
ARTICLE IX GENERAL............................................................................ 51
9.1 Notices..................................................................... 51
9.2 Entire Agreement; Nonassignability; Parties in Interest..................... 52
9.3 Severability................................................................ 52
9.4 Remedies Cumulative......................................................... 53
9.5 Binding Effect.............................................................. 53
9.6 Governing Laws.............................................................. 53
9.7 Counterparts................................................................ 53
SCHEDULES
VERSUS Disclosure Schedule
EGI Disclosure Schedule
I Appropriate Regulatory Approvals
II Persons Executing Shareholders Agreements
3.1(c) VERSUS' Officers and Directors
3.1(k) Real Property
3.1(l) Intellectual Property
3.1(n) Taxation Periods
3.1(o)(ii) Plans
3.1(p)(vi) Employees and Compensation
3.1(s) Governmental Proceedings
3.1(t)(ii) Requested Material Contracts
3.2(b) EGI Stock Option Plans
6.11(a) VERSUS Affiliates
6.11(b) EGI Affiliates
6.13 VERSUS Options
6.15 Individuals Executing Management Continuity Agreements
6.19(a) Non-Employee Service Providers and Compensation
6.19(b) Governmental Permits
6.19(c) Unregistered Intellectual Property
7.2(n) Change of Control Agreements
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EXHIBIT 2.1
MERGER AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 14th day of June, 2000.
B E T W E E N :
E*TRADE GROUP, INC.,
a corporation existing under the laws of the
State of Delaware
(hereinafter referred to as "EGI")
- and -
3045175 NOVA SCOTIA COMPANY,
a Nova Scotia unlimited liability company
(hereinafter referred to as "EGI Newco")
- and -
EGI CANADA CORPORATION
a corporation existing under the laws of Ontario and a
wholly-owned subsidiary of EGI Newco
(hereinafter referred to as "ECC")
- and -
VERSUS TECHNOLOGIES INC.,
a corporation existing under the laws of Canada
(hereinafter referred to as "VERSUS")
- and -
VERSUS BROKERAGE SERVICES INC.,
a corporation existing under the laws of Ontario and a
wholly-owned subsidiary of VERSUS
(hereinafter referred to as "VBSI")
- and -
VERSUS BROKERAGE SERVICES (U.S.) INC.,
a corporation existing under the laws of Ontario and a
wholly-owned subsidiary of VERSUS
(hereinafter referred to as "VBSUSI")
- and -
FAIRVEST SECURITIES CORPORATION,
a corporation existing under the laws of Canada and a
wholly-owned subsidiary of VERSUS
(hereinafter referred to as "Fairvest")
THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants
and agreements herein contained, the parties hereto covenant and agree as
follows:
ARTICLE I
INTERPRETATION
1.1 Definitions
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings respectively:
"1933 Act" means the United States Securities Act of 1933, as now in effect
and as it may be amended from time to time prior to the Effective Date;
"1934 Act" means the United States Securities Exchange Act of 1934, as now
in effect and as it may be amended from time to time prior to the Effective
Date;
"Acquisition Proposal" means any merger, amalgamation, take-over bid (as
defined in the Securities Act), sale of material assets (or any lease,
long-term supply agreement or other arrangement having the same economic
effect as a sale), any material sale of shares or rights or interests
therein or thereto or similar transactions involving VERSUS, VBSI or
VBSUSI, or any offer or proposal or indication of interest to do so,
excluding the Arrangement;
"Adjustment Event" shall have the meaning ascribed thereto in Section
2.11(a).
"Advisers" shall have the meaning ascribed thereto in Section 3.1(s)(iv).
"Advisers Act" shall have the meaning ascribed thereto in Section
3.1(s)(iv).
"affiliate" has the meaning ascribed thereto in the CBCA;
"Affiliate" means any person and/or entity deemed an affiliate of an entity
within the meaning of Rule 144 of the Rules and Regulations of the SEC
promulgated under the 1933 Act for purposes of Accounting Series, Releases
130 and 135, as amended, of the SEC.
"Appropriate Regulatory Approvals" means those sanctions, rulings,
consents, orders, exemptions, permits and other approvals (including the
lapse, without objection, of a prescribed time under a statute or
regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an objection
being made) of Governmental Entities, regulatory agencies or self-
regulatory organizations, as set out on Schedule I hereto;
"Arrangement" means an arrangement under Section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with
Section 8.4 hereof or Article 6 of the Plan of Arrangement or made at the
direction of the Court in the Final Order;
"Arrangement Resolution" means the special resolution of the holders of
VERSUS Shares, VERSUS Options and Compensation Option, voting together as a
single class, to approve the Arrangement;
"Articles of Arrangement" means the articles of arrangement of VERSUS in
respect of the Arrangement, required by the CBCA to be sent to the Director
after the Final Order is made;
"associate" has the meaning ascribed thereto in the Securities Act;
"Associated Rights" mean the rights in connection with VERSUS Shares
pursuant to the VERSUS Rights Plan;
"Assumed Option" has the meaning ascribed thereto in Section 2.4(d);
"Business Day" means any day other than Saturday, Sunday or any day on
which commercial banks located in either the State of California or
Toronto, Canada are authorized or obligated to close;
"Canadian Securities Regulators" has the meaning set forth in Section
3.1(d);
"Canadian Stock Exchanges" means the TSE, the Montreal Exchange and the
Canadian Ventures Exchange;
"CBCA" means the Canada Business Corporations Act as now in effect and as
it may be amended from time to time prior to the Effective Date;
"CIPF" means the Canadian Investor Protection Fund;
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"Circular" means the notice of the VERSUS Meeting and accompanying
management proxy circular to be sent to holders of VERSUS Shares in
connection with the VERSUS Meeting;
"Code" means the United States Internal Revenue Code of 1986, as now in
effect and as it may be amended from time to time prior to the Effective
Date;
"Collective Agreement" means any collective agreement, letters of
understanding, letters of intent or other written communication with any
trade union or association which may qualify as a trade union, which would
cover any employees;
"Compensation Options" mean the rights, expiring March 12, 2001, held by
certain underwriters to purchase an aggregate of 156,950 VERSUS Shares at
an exercise price of Cdn$11.50 per share;
"Confidentiality Agreement" has the meaning ascribed thereto in Section
6.4;
"Confidential Information" has the meaning ascribed thereto in Section
3.1(l);
"Court" means the Ontario Superior Court of Justice;
"Depositary" means a Canadian trust company to be chosen by EGI and VERSUS,
acting reasonably, to act, among other things, as depositary in respect of
the exchange of certificates for VERSUS Shares for certificates evidencing
Exchangeable Shares or EGI Common Shares, as the case may be;
"Director" means the Director appointed pursuant to Section 260 of the
CBCA;
"Dissent Rights" means the rights of dissent in respect of the Arrangement
described in Section 3.1 of the Plan of Arrangement;
"Effective Date" means the date shown on the certificate of arrangement to
be issued by the Director under the CBCA giving effect to the Arrangement;
"Effective EGI Price" has the meaning ascribed thereto in Section 2.10(b);
"Effective Time" has the meaning ascribed thereto in the Plan of
Arrangement;
"EGI Affiliate Agreement" means a letter, to be substantially in the form
and content of Exhibit G annexed hereto, delivered to EGI by each signatory
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thereto;
"EGI Common Shares" means the shares of common stock, par value $.01, of
EGI;
"EGI Disclosure Schedule" means that certain letter dated as of even date
herewith and delivered by the EGI Parties to the VERSUS Parties, referring
to the representations and warranties of the EGI Parties in this Agreement;
"EGI Parties" means EGI, EGI Newco and ECC, collectively;
"EGI Preferred Shares" means the shares of preferred stock, par value $.01,
of EGI;
"EGI Stock Option Plans" have the meaning ascribed thereto in Section
3.2(b);
"Election Deadline" means 5:00 p.m. (local time) at the place of deposit on
the date which is two Business Days prior to the date of the VERSUS
Meeting;
"Employment Legislation" has the meaning ascribed thereto in Section
3.1(p)(ii);
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"Environmental and Safety Laws" has the meaning ascribed thereto in Section
3.1(m);
"Exchange Ratio" has the meaning ascribed thereto in Section 2.10;
"Exchangeable Shares" means exchangeable shares in the capital of ECC,
having substantially the rights, privileges, restrictions and conditions
set out in Appendix 1 to the Plan of Arrangement;
"Facilities" has the meaning ascribed thereto in Section 3.1(m);
"Final Order" means the final order of the Court approving the Arrangement
as such order may be amended at any time prior to the Effective Date or, if
appealed, then, unless such appeal is withdrawn or denied, as affirmed;
"First Preferred Shares" means the preferred shares in the capital of
VERSUS;
"GAAP" means generally accepted accounting principles;
"Governmental Entity" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or
public department, central bank, court, tribunal, arbitral body,
commission, board, bureau or agency, domestic or foreign, (b) any
subdivision, agent, commission, board, or authority of any of the foregoing
or (c) any quasi-governmental or private body or self-regulatory
organization or instrumentality exercising any regulatory, expropriation or
taxing authority under or for the account of any of the foregoing,
including the Canadian Securities Regulators, Canadian Stock Exchanges and
▇▇▇;
"Governmental Permits" shall have the meaning ascribed thereto in Section
3.1(s)(i);
"Hazardous Materials" shall have the meaning ascribed thereto in Section
3.1(m);
"including" means including without limitation;
"Interim Order" means the interim order of the Court in respect of the
Arrangement, as contemplated by Section 2.3;
"▇▇▇" means the Investment Dealers Association of Canada;
"Intellectual Property" has the meaning ascribed thereto in Section
3.1(l)(i);
"ITA" means the Income Tax Act (Canada), as the same may be amended from
time to time;
"Laws" means all statutes, ordinances, rules, regulations, statutory rules,
principles of law, common law, orders, published policies and guidelines,
and terms and conditions of any grant of approval, permission, authority or
license of any court, Governmental Entity, statutory body or self-
regulatory authority, and the term "applicable" with respect to such Laws
and in the context that refers to one or more Persons, means that such Laws
apply to such Person or Persons or its or their business, undertaking,
property or securities and emanate from a Person having jurisdiction over
the Person or Persons or its or their business, undertaking, property or
securities;
"Letter of Transmittal and Election Form" means the letter of transmittal
and election form for use by holders of VERSUS Shares, in the form
accompanying the Circular;
"Material Adverse Change", when used in connection with EGI or VERSUS,
means any change, effect, event or occurrence that is, or could reasonably
be expected to be, material and adverse in the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations or prospects of such party
and its subsidiaries taken as a whole, other than any change,
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effect, event or occurrence relating to (i) the Canadian or United States'
economy or securities markets in general, (ii) the North American
securities brokerage, investment banking or financial services industry in
general (including commodity prices) but not specifically relating to EGI
or VERSUS or their respective subsidiaries, or (iii) any change in the
trading price, in and of itself, of the VERSUS Shares or EGI Common Shares,
respectively;
"Material Adverse Effect", when used in connection with EGI or VERSUS,
means any event, change, condition or effect that is, or could be
reasonably expected to be, materially adverse to the condition (financial
or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations or prospects of
such person or entity and its subsidiaries, taken as a whole; provided,
however, that in no event shall a decrease in such person's or entity's
stock price in and of itself be considered a "Material Adverse Effect";
"Material Contracts" shall have the meaning ascribed thereto in Section
3.1(t);
"Material Securities Offense" means any action within the 36 months
preceding the date of this Agreement that, when it occurred, constituted a
material breach of the Securities Act or comparable Laws of any other
province of Canada or any other jurisdiction in which VERSUS or any
subsidiary thereof carries on business, or regulations thereunder;
"NASD" means National Association of Securities Dealers, Inc.;
"Nasdaq" means the National Stock Market's National Market;
"Option Agreement, means that certain option, dated as of the date hereof,
pursuant to which VERSUS has granted to EGI the right to acquire up to
1,927,859 VERSUS Shares under the circumstances set forth therein;
"OSC" means the Ontario Securities Commission;
"Person" includes any individual, firm, partnership, limited liability
company, unlimited liability company, joint venture, venture capital fund,
association, trust, trustee, executor, administrator, legal personal
representative, estate, group, body corporate, corporation, unincorporated
association or organization, Governmental Entity, syndicate or other
entity, whether or not having legal status;
"Plan of Arrangement" means the plan of arrangement substantially in the
form and content of Exhibit A annexed hereto and any amendments or
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variations thereto made in accordance with Section 8.4 hereof or Article 6
of the Plan of Arrangement or made at the direction of the Court in the
Final Order;
"Pre-Effective Date Period" shall mean the period from and including the
date hereof to and including the Effective Time on the Effective Date;
"Property" has the meaning ascribed thereto in Section 3.1(m);
"Registrants" shall have the meaning ascribed thereto in Section
3.1(s)(iii);
"Registration Statement" has the meaning ascribed thereto in Section
2.8(b);
"Representatives" has the meaning ascribed thereto in Section 5.4(a);
"Repurchase Options" have the meaning ascribed thereto in Section 6.13(b);
"Retraction Call Right" has the meaning set forth in Section 6.1(c) of the
provisions attaching to the Exchangeable Shares;
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"SEC" means the United States Securities and Exchange Commission;
"Securities Act" means the Securities Act (Ontario), as now in effect and
as it may be amended from time to time prior to the Effective Date;
"Shareholders Agreements" mean agreements to be made between EGI and
certain shareholders of VERSUS listed on Schedule II hereto substantially
-----------
in the form and content of Exhibit D annexed hereto, to be executed and
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delivered as of the date hereof;
"SIPC" means the Securities Industry Protection Corporation;
"Special Voting Share" means the share of Special Voting Stock of EGI
having substantially the rights, privileges, restrictions and conditions
described in the Voting and Exchange Trust Agreement;
"SRO" means self-regulatory organization;
"subsidiary" has the meaning ascribed thereto in the Securities Act;
"Superior Proposal" has the meaning ascribed thereto in Section 5.4(a);
"Support Agreement" means an agreement to be made between EGI, EGI Newco
and ECC substantially in the form and content of Exhibit C annexed hereto,
---------
with such changes thereto as the parties hereto, acting reasonably, may
agree;
"Tax" and "Taxes" have the respective meanings ascribed thereto in Section
3.1(n);
"Tax Returns" has the meaning ascribed thereto in Section 3.1(n);
"Third Party Intellectual Property Rights" has the meaning ascribed thereto
in Section 3.1(l)(i);
"Transaction Agreements" shall mean this Agreement, the Voting and Exchange
Agreement, the Support Agreement, the Shareholders Agreements, the Option
Agreement, the VERSUS Affiliate Agreements and the EGI Affiliate
Agreements;
"Trigger Event" shall occur if any Person acquires securities representing
twenty percent (20%) or more, or commences a take-over bid, tender or
exchange offer, open market purchase program or other publicly announced
initiative following the successful consummation of which the offeror and
its affiliates would beneficially own securities representing twenty
percent (20%) or more, of the votes attaching to all voting securities of
VERSUS; provided that a Trigger Event shall also occur if a Person who,
together with its affiliates and associates, at the date hereof
beneficially owns (or as of June 9, 2000 beneficially owned) securities of
VERSUS representing ten percent (10%) or more of the votes attaching to all
voting securities of VERSUS shall acquire or control additional securities
of VERSUS so as to beneficially own, together with its affiliates and
associates, securities of VERSUS representing twelve percent (12%) or more
of the votes attaching to all voting securities of VERSUS, unless the
VERSUS Meeting is held, such Person together with its affiliates and
associates vote all of their beneficially owned securities in favor of the
Arrangement Resolution and have, as necessary, executed and delivered a
VERSUS Affiliate Agreement;
"Trustee" means a Canadian trust company to be chosen by EGI and VERSUS,
acting reasonably, to act as trustee under the Voting and Exchange Trust
Agreement;
"TSE" means the Toronto Stock Exchange;
"VERSUS Affiliate Agreement" means a letter, to be substantially in the
form and content of Exhibit F annexed hereto, delivered to EGI by each
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signatory thereto;
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"VERSUS Balance Sheet" has the meaning ascribed thereto in Section 3.1(g);
"VERSUS Balance Sheet Date" has the meaning ascribed thereto in Section
3.1(f);
"VERSUS Disclosure Schedule" means that certain letter dated as of even
date herewith and delivered by the VERSUS Parties to the EGI Parties,
referring to the representations and warranties of the VERSUS Parties in
this Agreement;
"VERSUS Employee Plans" means all employee benefit plans, all loans to
employees, all stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria
benefit, dependent care, life insurance or accident insurance, bonus,
pension, profit sharing, savings, deferred compensation or incentive plans,
programs or arrangements, other fringe or employee benefit plans that apply
to senior management of VERSUS or any of its subsidiaries and that do not
generally apply to all employees, and executive compensation or severance
agreements for the benefit of, or relating to, any present or former
employee, consultant, officer or director of VERSUS;
"VERSUS Financial Statements" has the meaning ascribed thereto in Section
3.1(e);
"VERSUS Meeting" means the special meeting of holders of VERSUS Shares,
including any adjournment thereof, to be called to consider the Arrangement
Resolution;
"VERSUS Options" means the options to purchase VERSUS Shares granted under
the VERSUS Stock Option Plans;
"VERSUS Parties" means VERSUS, VBSI, VBSUSI and Fairvest, collectively;
"VERSUS Public Documents" has the meaning ascribed thereto in Section
3.1(d);
"VERSUS Rights Plan" means the shareholder rights plan of VERSUS
established pursuant to the shareholder rights plan agreement of January
11, 2000, as amended, between VERSUS and Montreal Trust Company of Canada,
as rights agent;
"VERSUS Shares" means the common shares in the capital of VERSUS;
"VERSUS Stock Option Plans" means the VERSUS Employee Stock Option Plan and
the Restated VERSUS Employee Stock Option Plan, as amended;
"VERSUS Transfer Restrictions" mean the restrictions on transfer of equity
securities of VERSUS in certain circumstances in order to comply with
regulatory requirements which are described in Schedule 2 of VERSUS'
Articles.
"VERSUS Warrants" mean the issued and outstanding warrants to acquire
VERSUS Shares;
"Voting and Exchange Trust Agreement" means an agreement to be made between
EGI, ECC and the Trustee substantially in the form and content of Exhibit B
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annexed hereto, with such changes thereto as the parties hereto, acting
reasonably, may agree.
"Year 2000 Problem" shall have the meaning ascribed thereto in Section
3.1(ee);
1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into Articles, sections, and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
and/or a letter refer to the specified
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Article or section of this Agreement. The terms "this Agreement", "hereof",
"herein" and "hereunder" and similar expressions refer to this Agreement
(including the Exhibits hereto) and not to any particular Article, section or
other portion hereof and include any agreement or instrument supplementary or
ancillary hereto. The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date set forth in the first
paragraph of this Agreement.
1.3 Currency
Except as expressly set forth otherwise, all sums of money referred to in
this Agreement are expressed in lawful money of the United States of America.
1.4 Number, etc.
Unless the context otherwise requires, words importing the singular shall
include the plural and vice versa and words importing any gender shall include
all genders.
1.5 Date For Any Action
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day which is a Business Day.
1.6 Knowledge
Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the knowledge of a party, such knowledge
shall be deemed to refer to the knowledge of the officers of such party after
reasonable inquiry.
ARTICLE II
THE ARRANGEMENT
2.1 Implementation Steps by VERSUS
VERSUS shall as soon as reasonably practicable:
(a) apply in a manner acceptable to EGI, acting reasonably, under Section
192 of the CBCA for an order approving the Arrangement and for the
Interim Order, and thereafter proceed with and diligently pursue the
obtaining of the Interim Order;
(b) convene and hold the VERSUS Meeting for the purpose of considering the
Arrangement Resolution and for any other proper purpose as may be set
out in the notice for such meeting and approved by EGI, acting
reasonably, provided that VERSUS shall not be required to call the
VERSUS Meeting to be held on a date which is any earlier than the
Business Day immediately following the earliest date upon which VERSUS
reasonably expects that all Appropriate Regulatory Approvals in
respect of the Arrangement shall have been obtained;
(c) subject to obtaining such shareholder approval as is required by the
Interim Order, proceed with and diligently pursue the application to
the Court for the Final Order; and
(d) subject to obtaining the Final Order and the satisfaction or waiver of
the other conditions herein contained in favor of each party, send to
the Director, for endorsement and filing by the Director, the Articles
of Arrangement and such other documents as may be required in
connection therewith under the CBCA to give effect to the Arrangement.
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2.2 Implementation Steps by EGI Parties
On the Effective Date and subject to the satisfaction or waiver of the
conditions herein contained in favor of each such party:
(a) EGI, EGI Newco and ECC shall execute and deliver the Support
Agreement;
(b) EGI, ECC and the Trustee shall execute and deliver the Voting and
Exchange Trust Agreement; and
(c) EGI shall issue to the Trustee the Special Voting Share.
2.3 Interim Order
The notice of motion for the application referred to in Section 2.1(a)
shall request that the Interim Order provide:
(a) for the class of Persons to whom notice is to be provided in respect
of the Arrangement and the VERSUS Meeting and for the manner in which
such notice is to be provided;
(b) that the requisite approval for the Arrangement Resolution shall be 66
2/3% of the votes cast on the Arrangement Resolution by holders of
VERSUS Shares, holders of the VERSUS Options and holders of the
Compensation Options, voting together as a single class, present in
person or by proxy at the VERSUS Meeting;
(c) that, in all other respects, the terms, restrictions and conditions of
the bylaws and articles of VERSUS, including quorum requirements and
all other matters, shall apply in respect of the VERSUS Meeting,
provided that, if the record date for the VERSUS Meeting is on or
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before June 24, 2000, the Interim Order shall stipulate that the
initial holders of VERSUS Shares issued upon exercise of the VERSUS
Warrants after such record date shall be entitled to vote such VERSUS
Shares on the Arrangement Resolution, and provided further that the
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Interim Order shall provide that VERSUS' board of directors shall be
entitled, in the event that VERSUS and EGI, each acting reasonably,
shall agree that all Appropriate Regulatory Approvals will not have
been obtained prior to the then scheduled date of the VERSUS Meeting,
to adjourn the VERSUS Meeting to the Business Day immediately
following the earliest date upon which VERSUS and EGI reasonably agree
that all Appropriate Regulatory Approvals in respect of the
Arrangement are expected to be obtained; and
(d) for the grant of the Dissent Rights.
2.4 The Arrangement
The Arrangement shall provide in substance that, and the parties covenant
to take such steps as are necessary to ensure that, commencing at the Effective
Time, the following shall occur and be deemed to occur in the following order
and without any further act or formality:
(a) each outstanding VERSUS Share and the Associated Rights (other than
(i) VERSUS Shares and Associated Rights held by a holder who has
exercised Dissent Rights and is ultimately entitled to be paid the
fair value of his VERSUS Shares, (ii) VERSUS Shares and Associated
Rights held by ECC or any subsidiary or affiliate thereof, which shall
not be exchanged under the Arrangement and shall remain outstanding,
and (iii) VERSUS Shares and Associated Rights held by a holder that
duly elects to receive EGI Common Shares) will be transferred by the
holder thereof to ECC in exchange for that number of issued, fully
paid and non-assessable Exchangeable Shares which is equal to the
Exchange Ratio and ECC will become the registered and beneficial owner
of the VERSUS Shares and Associated Rights exchanged as aforesaid;
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(b) each outstanding VERSUS Share and Associated Rights held by a holder
of VERSUS Shares who so elects pursuant to the Letter of Transmittal
and Election Form (other than (i) VERSUS Shares and Associated Rights
held by a holder who has exercised Dissent Rights and (ii) VERSUS
Shares and Associated Rights held by ECC or any subsidiary or
affiliate thereof, which shall not be exchanged under the Arrangement
and shall remain outstanding) will be transferred by the holder
thereof to EGI Newco in exchange for that number of issued, fully paid
and non-assessable EGI Common Shares which is equal to the Exchange
Ratio and EGI Newco will become the registered and beneficial owner of
the VERSUS Shares and Associated Rights exchanged as aforesaid;
(c) in lieu of fractional Exchangeable Shares or fractional EGI Common
Shares, each holder of VERSUS Shares who would otherwise be entitled
to receive a fraction of an Exchangeable Share or of an EGI Common
Share shall be paid an amount in cash equal to such holder's pro rata
share of the net proceeds received from aggregating all such
fractional interests and selling them in the open market;
(d) each VERSUS Option outstanding at the Effective Time shall be assumed
by EGI (an "Assumed Option") on the terms set forth in Section 6.13;
and
(e) each Compensation Option shall be assumed by ECC on the terms set
forth herein and VERSUS shall cease to have any liability in respect
thereof. Each such Compensation Option so assumed by ECC shall
continue to have, and be subject to, the same terms and conditions as
are set forth in the Compensation Option immediately prior to the
Effective Time, except that (i) such option will be exercisable for
that number of whole Exchangeable Shares equal to the product of the
number of VERSUS Shares that were issuable upon exercise of such
Compensation Option immediately prior to the Effective Time multiplied
by the Exchange Ratio and rounded down to the nearest whole number of
Exchangeable Shares, and (ii) the per share exercise price for the
Exchangeable Shares issuable upon exercise of such assumed
Compensation Option will be equal to the quotient determined by
dividing the exercise price per share of VERSUS Shares at which such
option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent. Within thirty
(30) Business Days after the Effective Time, ECC will issue to each
person who, immediately prior to the Effective Time was a holder of an
outstanding Compensation Option a document evidencing the foregoing
assumption of such option by ECC.
2.5 Tax Elections
(a) Holders of VERSUS Shares shall be entitled to make an income tax
election pursuant to subsection 85(1) or 85(2) of the ITA (or the
analogous provisions of provincial income tax law) with respect to the
transfer of their VERSUS Shares and Associated Rights to ECC by
providing two signed copies of the necessary prescribed election forms
to the Depositary within 90 days following the Effective Date, duly
completed with the details of the number of VERSUS Shares and
Associated Rights transferred and the applicable agreed upon amounts
for the purposes of such elections. Thereafter, subject to the
election forms complying with the provisions of the ITA (or applicable
provincial income tax law), the form shall be signed by ECC and
promptly returned to such holders of VERSUS Shares by ordinary mail
for filing with the Canada Customs and Revenue Agency (or the
applicable provincial taxing authority).
(b) EGI and ECC shall ensure that ECC elects, pursuant to the ITA, to be
deemed to be a "public corporation" as defined in subsection 89(1) of
the ITA throughout its taxation year that includes the Effective Time.
2.6 Continuance of VBSI
VERSUS will, on or prior to the Effective Date, cause VBSI to be continued
as a corporation to which the CBCA applies in accordance with Section 181 of the
Business Corporations Act (Ontario) and Section 187 of the CBCA.
10
2.7 VERSUS Information Circular
As promptly as practicable after the execution and delivery of this
Agreement, and in any event so as to permit the mailing thereof to
securityholders of VERSUS not less than twenty-five (25) days prior the date of
the VERSUS Meeting and to permit the insertion of the Circular, in substantially
final form as is proposed to be sent to the Director, in the Registration
Statement no later than June 27, 2000 (provided that neither EGI nor VERSUS
takes responsibility for the timely effectiveness of the Registration Statement
based on this date), and subject to obtaining all required information from EGI,
VERSUS shall prepare the Circular together with any other documents required by
the Securities Act or other applicable Laws in connection with the Arrangement
(each of which shall be in form and content acceptable to EGI acting reasonably)
and, subject to obtaining the Interim Order, VERSUS shall cause the Circular and
other documentation required in connection with the VERSUS Meeting to be sent to
each holder of VERSUS Shares, VERSUS Options and Compensation Options and filed
as required by the Interim Order and applicable Laws.
2.8 Securities Compliance
(a) EGI and VERSUS shall use all reasonable efforts to obtain all orders
required from the applicable Canadian securities authorities to permit
the issuance and first resale of (a) the Exchangeable Shares and EGI
Common Shares issued pursuant to the Arrangement, (b) the EGI Common
Shares issued upon exchange of the Exchangeable Shares from time to
time, (c) the Assumed Options and the EGI Common Shares issued from
time to time upon the exercise of the Assumed Options, and (d)
securities issued on exercise of Compensation Options, in each case
without qualification with or approval of or the filing of any
document, including any prospectus or similar document, or the taking
of any proceeding with, or the obtaining of any further order, ruling
or consent from, any Canadian Governmental Entity or regulatory
authority under any Canadian federal, provincial or territorial
securities or other Laws or pursuant to the rules and regulations of
any regulatory authority administering such Laws, or the fulfillment
of any other legal requirement in any such jurisdiction (other than,
with respect to such first resales, any restrictions on transfer by
reason of, among other things, a holder being a "control person" of
EGI or VERSUS for purposes of Canadian federal, provincial or
territorial securities Laws).
(b) EGI shall file with the SEC pursuant to the 1933 Act a registration
statement on Form S-4 or on an appropriate form covering the public
resale of the EGI Common Shares issued or issuable upon exchange of
the Exchangeable Shares (the "Registration Statement") in accordance
with Section 6.1.
2.9 Preparation of Filings
(a) EGI and VERSUS shall cooperate in:
(i) the preparation of any application for the orders and the
preparation of any required registration statements and any other
documents reasonably deemed by EGI or VERSUS to be necessary to
discharge their respective obligations and those of their
respective subsidiaries under United States and Canadian federal,
provincial, territorial or state securities Laws in connection
with the Arrangement and the other transactions contemplated
hereby;
(ii) the taking of all such action as may be required under any
applicable United States and Canadian federal, provincial,
territorial or state securities Laws (including "blue sky laws")
in connection with the issuance of the Exchangeable Shares and
the EGI Common Shares in connection with the Arrangement, the
Assumed Options, the exercise of the Assumed Options and the
exercise of the Compensation Options; provided, however, that
with respect to the United States "blue sky" and Canadian
provincial qualifications neither EGI nor VERSUS shall be
required to register or qualify as a foreign corporation or to
take any action that would subject it to service of process in
any jurisdiction where
11
such entity is not now so subject, except as to matters and
transactions arising solely from the offer and sale of the
Exchangeable Shares and the EGI Common Shares; and
(iii) the taking of all such action as may be required under the CBCA
in connection with the transactions contemplated by this
Agreement and the Plan of Arrangement.
(b) Each of EGI and VERSUS shall furnish to the other all such information
concerning it and its shareholders as may be required for the
effectuation of the actions described in Sections 2.7, 2.8 and 6.1 and
the foregoing provisions of this Section 2.9, and each covenants that
no information furnished by it in connection with such actions or
otherwise in connection with the consummation of the Arrangement and
the other transactions contemplated by this Agreement will contain any
untrue statement of a material fact or omit to state a material fact
required to be stated in any such document or necessary in order to
make any information so furnished for use in any such document not
misleading in the light of the circumstances in which it is furnished
or to be used.
(c) EGI and VERSUS shall each promptly notify the other if at any time
before or after the Effective Time it becomes aware that the Circular
or an application for an order or a registration statement described
in Section 2.8 contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading in
light of the circumstances in which they are made, or that otherwise
requires an amendment or supplement to the Circular or such
application or registration statement. In any such event, EGI and
VERSUS shall cooperate in the preparation of a supplement or amendment
to the Circular or such other document, as required and as the case
may be, and, if required shall cause the same to be distributed to
shareholders of EGI or VERSUS and/or filed with the relevant
securities regulatory authorities.
(d) VERSUS shall ensure that the Circular complies with all applicable
Laws and, without limiting the generality of the foregoing, that the
Circular does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading in
light of the circumstances in which they are made (other than with
respect to any information relating to and provided by the EGI
Parties). Without limiting the generality of the foregoing, VERSUS
shall ensure that the Circular provides holders of VERSUS Shares with
information in sufficient detail to permit them to form a reasoned
judgment concerning the matters to be placed before them at the VERSUS
Meeting.
(e) The Circular shall contain the unanimous (other than ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
who, as a former representative of EGI, has abstained) recommendation
of the Board of Directors of VERSUS that the VERSUS shareholders
approve this Agreement and the Arrangement and the conclusion of the
Board of Directors that the terms and conditions of the Arrangement
are fair to, and in the best interests of, the shareholders of VERSUS;
provided that no such recommendation need be included, and any such
--------
recommendation may be withdrawn if previously included, if a Superior
Proposal has been made and VERSUS and VERSUS' Board of Directors
withdraw or modify such recommendation in compliance with, and
otherwise have complied in all respects with, Section 5.4.
Notwithstanding anything to the contrary contained herein, VERSUS
shall not include in the Circular any information with respect to EGI
or its affiliates or associates, the form and content of which
information shall not have been approved by EGI prior to such
inclusion; provided that VERSUS shall not be in breach of this Section
--------
or the corresponding portions of Section 2.7 and 6.1 if and to the
extent that EGI fails to timely provide and approve for inclusion in
the Circular information required to ensure that the Circular complies
with the requirements of Section 2.9(d).
2.10 Exchange Ratio
(a) The "Exchange Ratio", subject to adjustment in accordance with Section
2.11, shall equal the ratio of (x) a quotient, the numerator of which
is One Hundred Seventy Three Million Nine Hundred Thousand dollars
($173,900,000) and the denominator of which is the Effective EGI
12
Price and (y) the total number of VERSUS Shares issued and outstanding
on a fully diluted basis at the Effective Time (after giving effect to
the conversion, exchange or exercise, as the case may be, of all
securities convertible into, or exercisable or exchangeable for,
VERSUS Shares, including all unexpired and unexercised outstanding
options, warrants or other rights (other than the Associated Rights to
the extent that the Associated Rights have not become exercisable) to
acquire VERSUS Shares assumed by the EGI Parties).
(b) The "Effective EGI Price" shall equal the average of the closing
prices of EGI Common Shares as quoted on Nasdaq for the ten (10)
consecutive trading days ending on the third trading day prior to the
Effective Date; provided that:
(i) If the Effective EGI Price is equal to or greater than $22.80,
then the Effective EGI Price shall be deemed to equal $22.80; and
(ii) If the Effective EGI Price is equal to or less than $15.20, then
the Effective EGI Price shall be deemed to equal $15.20.
2.11 Anti-Dilution Provisions
(a) If, between the date of this Agreement and the Effective Time, the
outstanding EGI Common Shares shall have been changed into or
exchanged for a different number of shares or kind of shares and/or
other securities and/or property of EGI or another corporation or
entity by reason of any reclassification, split-up, stock dividend or
stock combination or any arrangement, amalgamation or similar
statutory procedure (an "Adjustment Event"), then the Exchange Ratio
shall be appropriately adjusted so that each holder of VERSUS Shares
shall be entitled to receive at the Effective Time, in lieu of the
consideration in EGI Common Shares or Exchangeable Shares provided for
in Section 2.4 hereof, either (i) Exchangeable Shares exchangeable for
such number and kind of shares and/or other securities and/or property
as such holder would have received on exchange of his Exchangeable
Shares if the record date and payment date for such Adjustment Event
had been immediately after the Effective Time or (ii) if such holder
has duly elected to receive EGI Common Shares pursuant to a Letter of
Transmittal and Election Form, such number and kind of shares and/or
other securities and/or property as such holder would have received if
the record date and payment date for such Adjustment Event had been
immediately after the Effective Time. For greater certainty, upon the
occurrence of an Adjustment Event and without limiting other
appropriate adjustment, appropriate corresponding adjustments shall be
made to the dollar amounts specified in Sections 2.10(b)(i) and (ii)
and Sections 8.1(g) and (h).
(b) If the record date for such Adjustment Event shall be prior to the
Effective Time but the payment date therefor shall be subsequent to
the Effective Time, EGI shall take such action as shall be required so
that on such payment date any former holder of VERSUS Shares who shall
have received or become entitled to receive Exchangeable Shares or EGI
Common Shares pursuant to the Arrangement shall be entitled to receive
either Exchangeable Shares exchangeable for or, if such holder has
duly elected to receive EGI Common Shares pursuant to a Letter of
Transmittal and Election Form, such number of kind of shares and/or
other securities and/or property as such holder would have received as
a result of such event if the record date therefor had been
immediately after the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the VERSUS Parties
Except as set forth in the VERSUS Disclosure Schedule, which exceptions
specifically identify the section, subsection or clause of this Agreement to
which such exception relates, the VERSUS Parties jointly and severally
13
represent and warrant to and in favor of the EGI Parties as follows and
acknowledge that the EGI Parties are relying upon such representations and
warranties in connection with the matters contemplated by this Agreement:
(a) Organization, Standing and Power. Each of VERSUS and its subsidiaries
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. Each of VERSUS and
its subsidiaries has the corporate power to own its properties and to
carry on its business as now being conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which it
currently conducts business and in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on
VERSUS. VERSUS has delivered or made available to EGI a true and
correct copy of the certificate or articles of incorporation, as
amended, and bylaws, as amended, and any other charter or
organizational documents, each as amended, of VERSUS and each of its
subsidiaries. Neither VERSUS nor any of its subsidiaries is in
violation of any of the provisions of its certificate or articles of
incorporation or bylaws or other charter or organizational documents,
each as amended. VERSUS is the owner of all outstanding shares of
capital stock or voting securities of each of its subsidiaries and all
such shares and voting securities are duly authorized, validly issued,
fully paid and nonassessable. All of the outstanding shares of capital
stock and voting securities of each such subsidiary are owned by
VERSUS free and clear of all liens, charges, claims or encumbrances or
rights of others. Except as disclosed in the VERSUS Public Documents,
there are no outstanding subscriptions, options, warrants, puts,
calls, rights, exchangeable or convertible securities or other
commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such subsidiary, or
otherwise obligating VERSUS or any such subsidiary to issue, transfer,
sell, purchase, redeem or otherwise acquire any such securities.
Except as disclosed in the VERSUS Public Documents, VERSUS does not
directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, limited liability
company, unlimited liability company, joint venture or other business
association or entity.
(b) Capitalization. The authorized capital stock of VERSUS consists of an
unlimited number of VERSUS Shares, and an unlimited number of First
Preferred Shares, of which there were issued and outstanding as of the
close of business on June 9, 2000, 12,279,243 VERSUS Shares and no
First Preferred Shares. There are no other outstanding shares of
capital stock or voting securities and no outstanding commitments to
issue any shares of capital stock or voting securities after June 9,
2000 other than (i) pursuant to the exercise of options outstanding as
of such date under the VERSUS Stock Option Plans, (ii) 586,907 VERSUS
Shares reserved for issuance pursuant to the VERSUS Warrants, (iii)
156,950 VERSUS Shares reserved for issuance pursuant to the
Compensation Options, and (iv) share purchase rights issuable in
connection with VERSUS Rights Plan. Each of the VERSUS Warrants
expires on June 24, 2000, and may not be exercised thereafter. All
outstanding VERSUS Shares are duly authorized, validly issued, fully
paid and non-assessable and are free and clear of any liens or
encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive
rights or rights of first refusal created by statute, the articles,
bylaws or other organizational documents, each as amended, of VERSUS
or any agreement to which VERSUS is a party or by which it is bound
other than the VERSUS Transfer Restrictions. As of the close of
business on June 9, 2000, VERSUS has reserved an aggregate of
2,403,365 VERSUS Shares for issuance to employees, consultants and
directors pursuant to the VERSUS Stock Option Plans, of which 52,000
shares have been issued pursuant to option exercises or direct stock
purchases or awards, 1,662,500 shares are subject to outstanding,
unexercised options, and no shares are subject to outstanding stock
purchase rights. Since June 9, 2000, VERSUS has not issued or granted
additional options under the VERSUS Stock Option Plans or otherwise.
VERSUS has not issued or granted any stock appreciation rights or
performance units under the VERSUS Stock Option Plans or otherwise.
Except for the rights created pursuant to this Agreement, the VERSUS
Stock Option Plans, the Compensation Options, the Option Agreement,
the VERSUS Warrants, the VERSUS Transfer Restrictions and the VERSUS
Rights Plan, there are no other options, warrants, calls, rights,
commitments or agreements of any character to which VERSUS is a party
or by which it is bound obligating VERSUS to issue, deliver, sell,
repurchase or redeem, or cause to be
14
issued, delivered, sold, repurchased or redeemed, any shares of
capital stock of VERSUS or obligating VERSUS to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or
agreement. Except for this Agreement, the Shareholders Agreements the
VERSUS Transfer Restrictions and as provided by Section 6.11, there
are no contracts, commitments or agreements relating to voting,
purchase or sale of VERSUS' capital stock (i) between or among VERSUS
and any of its shareholders and (ii) to VERSUS' knowledge, between or
among any of VERSUS' shareholders. The terms of the VERSUS Stock
Option Plans permit assumption of options to purchase VERSUS Shares as
provided in this Agreement, without individual consent or approval of
the holders of such securities. True and complete copies of the VERSUS
Stock Option Plans, the form of the option agreements under the VERSUS
Stock Option Plans and names of all current holders of VERSUS Options
and the associated substantive terms of such VERSUS Options have been
provided to EGI and neither the VERSUS Stock Option Plans nor such
agreements or instruments have been amended, modified or supplemented,
and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the forms provided to EGI.
All outstanding VERSUS Shares and all VERSUS Options were issued in
compliance with all applicable federal, state and provincial
securities laws.
(c) Authority and No Violation. Each of the VERSUS Parties has all
requisite corporate power and authority to enter into this Agreement
and each other Transaction Agreement to which it is a party and to
consummate the transactions contemplated hereby and thereby. Neither
VERSUS nor any of its subsidiaries is insolvent within the meaning of
Section 192 of the CBCA The execution and delivery of this Agreement
and each other Transaction Agreement to which it is a party and the
consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of
each of the VERSUS Parties, as applicable, subject only to the
approval of the Arrangement by VERSUS' shareholders as contemplated by
Sections 2.1(b) and 6.2. The Board of Directors of VERSUS has (i)
unanimously (other than ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ who, as a former representative
of EGI, has abstained) determined as of the date hereof that the
Arrangement is fair to the holders of the VERSUS Shares and is in the
best interests of VERSUS, (ii) received an opinion from BMO ▇▇▇▇▇▇▇
▇▇▇▇▇, Inc. to the effect that, as of the date of this Agreement, the
consideration offered to VERSUS shareholders pursuant to the
Arrangement is fair from a financial point of view to the VERSUS
shareholders, and (iii) determined as of the date hereof to
unanimously (other than ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ who, as a former representative
of EGI, will abstain) recommend that the VERSUS shareholders vote in
favor of the Arrangement. All of VERSUS' directors and senior officers
as of the date hereof (such list being set forth on Schedule 3.1(c)
---------------
annexed hereto) have executed and delivered a Shareholders Agreement
to vote any VERSUS Shares, VERSUS Options and Compensation Options
held by them in favor of the Arrangement and will represent in the
Circular that each of them intends to vote all VERSUS Shares, VERSUS
Options and Compensation Options held by them in favor of the
Arrangement. Each of this Agreement, the Support Agreement (as of the
Effective Date), the Voting and Exchange Agreement (as of the
Effective Date) and the Option Agreement has been duly executed and
delivered by each of the VERSUS Parties which is a party to such
agreement and constitutes the legal, valid and binding obligation of
each of the VERSUS Parties which is a party to such agreement,
enforceable against each of the VERSUS Parties which is a party to
such agreement in accordance with its terms, except as such
enforcement may be limited by (i) the effect of bankruptcy,
insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium or other laws affecting or relating to the
rights of creditors generally, or (ii) the rules governing the
availability of specific performance, injunctive relief or other
equitable remedies and general principles of equity, regardless of
whether considered in a proceeding in equity or at law. The execution
and delivery of this Agreement, the Support Agreement (as of the
Effective Date), the Voting and Exchange Agreement (as of the
Effective Date) and the Option Agreement by the VERSUS Parties, as
applicable, do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in
any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any benefit under (i) any
provision of the certificate or articles of incorporation, bylaws, or
other charter or organizational documents, each
15
as amended, of any of the VERSUS Parties or any of their subsidiaries,
or (ii) any material mortgage, material indenture, material lease,
material contract or other material agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to any of the VERSUS Parties
or any of their subsidiaries or any of their properties or assets. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or
with respect to any of the VERSUS Parties or any of their subsidiaries
in connection with the execution and delivery of this Agreement or the
other Transaction Agreements, the performance of the obligations of
any of the VERSUS Parties hereunder or thereunder or the consummation
of the transactions contemplated hereby or thereby, except for (i) the
filing of the Plan of Arrangement as provided in Section 2.1(a), (ii)
any approvals required by (A) the Interim Order, (B) the Final Order,
(C) filings with the Director under the CBCA and (D) the Appropriate
Regulatory Approvals relating to any of the VERSUS Parties, (iii) such
notices, applications, consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable federal, state or provincial securities laws or the
securities laws of any foreign country in connection with the
Arrangement, and (iv) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on any of the VERSUS Parties and would
not prevent, or materially alter or delay, any of the transactions
contemplated by this Agreement or any of the other Transaction
Agreements. None of the VERSUS Parties is aware of any reason why the
approvals of all Governmental Entities necessary to permit
consummation of the Arrangement or the other transactions contemplated
by this Agreement will not be received without the imposition of a
condition or requirement described in Section 4.2.
(d) Public Documents. VERSUS has furnished or made available to EGI a true
and complete copy of each statement, report, material change report,
prospectus, definitive proxy circular, annual and interim reports to
shareholders, annual information form, financial statements, and any
other material filing filed with the OSC or other provincial
securities regulators having jurisdiction (collectively, "Canadian
Securities Regulators") by VERSUS since its initial filing relating to
its initial public offering, and, prior to the Effective Time, VERSUS
will have furnished EGI with true and complete copies of any
additional material documents filed or required to be filed with
Canadian Securities Regulators by VERSUS prior to the Effective Time
(collectively, the "VERSUS Public Documents"). All material documents
required to be filed with Canadian Securities Regulators have been
filed. As of their respective filing dates, the VERSUS Public
Documents complied in all material respects with the requirements
applicable Laws and none of the VERSUS Public Documents contained any
misrepresentation (as defined in the Securities Act) or contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed
VERSUS Public Document. VERSUS has not filed any confidential material
change report or other confidential report with any Canadian
Securities Regulators or other Governmental Entity which at the date
hereof remains confidential. Neither VERSUS nor any of its
subsidiaries is required to file any statements, reports, proxies or
other filings with the SEC pursuant to the 1934 Act.
(e) Financial Statements. The audited consolidated financial statements
for VERSUS and its subsidiaries, including the notes thereto, included
in the VERSUS Public Documents (the "VERSUS Financial Statements"),
and the audited Joint Regulatory Financial Questionnaires and Reports
of VBSI, VBSUSI and Fairvest as at and for each of the 12-month
periods ended September 30, 1999 and the unaudited consolidated
financial statements for the six-month period ended March 31, 2000 and
the Joint Regulatory Financial Questionnaires and Reports, if any were
required, and other regulatory financial reports of VBSI, VBSUSI and
Fairvest for the six-month period ended March 31, 2000 were complete
and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations
of applicable securities Laws with respect thereto as of their
respective dates, and the VERSUS Financial Statements and the
unaudited consolidated financial statements for the six-month period
ended March 31, 2000 of
16
VERSUS and its subsidiaries have been prepared in accordance with
Canadian GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated
in the notes thereto). The VERSUS Financial Statements and the
unaudited consolidated financial statements for the six-month period
ended March 31, 2000 of VERSUS and its subsidiaries fairly present the
consolidated financial condition and operating results of VERSUS and
its subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal and recurring
year-end adjustments), and reflect appropriate and adequate reserves
in respect of contingent liabilities, if any, of VERSUS, VBSI, VBSUSI,
Fairvest and their respective subsidiaries on a consolidated basis.
(f) Absence of Certain Changes. Since September 30, 1999 (the "VERSUS
Balance Sheet Date"), each of the VERSUS and its subsidiaries has
conducted its business in the ordinary course consistent with past
practice and there has not occurred: (i) any change, event or
condition (whether or not covered by insurance) that has resulted in,
or might reasonably be expected to result in, a Material Adverse
Effect on VERSUS; (ii) any acquisition, sale or transfer of any
material asset of VERSUS or any of its subsidiaries other than in the
ordinary course of business and consistent with past practice; (iii)
any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by VERSUS or any
revaluation by VERSUS of any of its or any of its subsidiaries'
assets; (iv) any declaration, setting aside, or payment of a dividend
or other distribution with respect to the shares of VERSUS, or any
direct or indirect redemption, purchase or other acquisition by VERSUS
of any of its shares of capital stock; (v) any material contract
entered into by VERSUS or any of its subsidiaries, other than in the
ordinary course of business and as provided or made available to EGI,
or any material amendment or termination of, or default under, any
material contract to which VERSUS or any of its subsidiaries is a
party or by which it is bound, other than in the ordinary course of
business and as provided or made available to EGI; (vi) any amendment
or change to the articles, bylaws or other organizational documents of
VERSUS; (vii) any increase in or modification of the compensation or
benefits, including bonus, pension or insurance, payable or to become
payable by VERSUS or any of its subsidiaries to any of its directors,
officers or employees or any commitment or agreement to do the same,
other than in the ordinary course of business and as provided to EGI;
(viii) any incurrence, assumption or guarantee of any debt for
borrowed money other than in the ordinary and regular course of
business consistent with past practice, any issuance or sale of any
securities convertible into or exchangeable for debt securities, or
any issuance or sale of options or other rights to acquire debt
securities or any securities convertible into or exchangeable for any
such debt securities by VERSUS or any of its subsidiaries; (ix) any
creation or assumption of any mortgage, pledge, security interest or
lien or other encumbrance on any asset by VERSUS or any of its
subsidiaries other than in the ordinary and regular course of business
consistent with past practice; (x) any making of any loan, advance or
capital contribution to or material investment in any person by VERSUS
or any of its subsidiaries other than in the ordinary and regular
course of business consistent with past practice or purchases on the
open market of liquid, publicly traded securities in the ordinary
course of business consistent with past practice (xi) any resolution
to approve a split, combination or reclassification of any of VERSUS'
outstanding shares; or (xii) any negotiation or agreement by VERSUS or
any of its subsidiaries to do any of the things described in the
preceding clauses (i) through (xi) (other than negotiations with EGI
and its representatives regarding the transactions contemplated by
this Agreement).
(g) Absence of Undisclosed Liabilities. None of VERSUS or any of its
subsidiaries has any material obligations or material liabilities of
any nature (matured or unmatured, fixed or contingent) other than (i)
those set forth or adequately provided for in the consolidated balance
sheet of VERSUS and its subsidiaries included in the VERSUS Financial
Statements for the fiscal year ended September 30, 1999 (the "VERSUS
Balance Sheet"), (ii) those incurred in the ordinary course of
business consistent with past practice since the VERSUS Balance Sheet
Date and which have not had and are not reasonably likely to have a
Material Adverse Effect on VERSUS, and (iii) those incurred in
connection with the execution of this Agreement.
17
(h) Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration, inquiry, examination, inspection or
investigation pending by or before any Governmental Entity, agency,
court or tribunal, foreign or domestic or, to the knowledge of any of
the VERSUS Parties, threatened against VERSUS or any of its
subsidiaries or any of their respective properties or any of their
respective officers or directors (in their capacities as such) that,
individually or in the aggregate, could reasonably be expected to
prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby or could reasonably be expected to have a Material
Adverse Effect on VERSUS. There is no judgment, decree or order
against VERSUS or any of its subsidiaries, or, to the knowledge of any
of the VERSUS Parties, any of their respective directors or officers
(in their capacities as such), that, individually or in the aggregate,
could reasonably be expected to prevent, enjoin, alter or materially
delay any of the transactions contemplated by this Agreement or could
reasonably be expected to have a Material Adverse Effect on VERSUS.
(i) Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon VERSUS or any of its
subsidiaries which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any current or currently
proposed business practice of VERSUS or any of the its subsidiaries,
any acquisition of property by VERSUS or any of its subsidiaries or
the conduct of business by VERSUS or any of its subsidiaries as
currently conducted or as currently proposed to be conducted by VERSUS
or any of its subsidiaries.
(j) Compliance With Laws. Each of VERSUS and its subsidiaries has complied
in all material respects with all applicable Laws, and is not in
violation in any material respect of, and have not received any
notices of violation with respect to, its respective certificate or
articles of incorporation or bylaws or other charter or organizational
documents, or any Law applicable to the conduct of its business or the
ownership or operation of its business. Without limiting the
generality of the foregoing, all securities of VERSUS and its
subsidiaries (including all options, rights or other convertible or
exchangeable securities) have been issued in compliance with
applicable securities Laws and all securities to be issued upon
exercise or conversion of any such options, rights or other
convertible or exchangeable securities will be issued in compliance
with all applicable securities Laws.
(k) Title to Property. VERSUS and its subsidiaries have good, valid and
marketable title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the VERSUS
Balance Sheet or acquired after the VERSUS Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise
disposed of since the VERSUS Balance Sheet Date in the ordinary course
of business), or in the case of leased properties and assets, valid
leasehold interests in, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except (i)
the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties
subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing
debt which is reflected on the VERSUS Balance Sheet. The plants,
property and equipment of VERSUS and its subsidiaries that are used in
the operations of their businesses are in good operating condition and
repair, subject to ordinary wear and tear. All properties used in the
operations of VERSUS and its subsidiaries are reflected in the VERSUS
Balance Sheet to the extent generally accepted accounting principles
require the same to be reflected. Schedule 3.1(k) identifies each
parcel of real property owned or leased by VERSUS or any of its
subsidiaries.
(l) Intellectual Property.
(i) VERSUS and its subsidiaries own, or are licensed or otherwise
possess legally enforceable and unencumbered rights to use, all
patents, trademarks, trade names, service marks, domain names,
database rights, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, trade
secrets, inventory, ideas, algorithms, processes, computer
software programs or applications (in both source code and object
code form), and tangible or intangible proprietary information or
material that
18
are used in and are material to the business of VERSUS and its
subsidiaries as currently conducted by VERSUS and its
subsidiaries ("Intellectual Property"). Neither VERSUS nor any
of its subsidiaries has (A) licensed any of its Intellectual
Property in source code form to any party or (B) entered into
any exclusive agreements relating to its Intellectual Property.
(ii) Schedule 3.1(l) lists (i) all patents and patent applications,
---------------
all registered trademarks, trade names and service marks, all
registered copyrights, and all maskworks included in the
Intellectual Property owned by, assigned to or developed for
VERSUS or any of its subsidiaries, including the jurisdictions
in which each such Intellectual Property right has been issued
or registered or in which any application for such issuance and
registration has been filed, (ii) all material licenses,
material sublicenses and other material agreements as to which
VERSUS is a party and pursuant to which any person is
authorized to use any Intellectual Property, and (iii) all
material licenses, material sublicenses and other material
agreements as to which VERSUS is a party and pursuant to which
VERSUS is authorized to use any third party patents, trademarks
or copyrights, including software ("Third Party Intellectual
Property Rights"), which are incorporated in, are, or form a
part of any VERSUS product or service (excluding commercially
available, off-the-shelf software). No royalties or other
similar continuing payment obligations are due in respect of
Third Party Intellectual Property Rights.
(iii) To the knowledge of any of the VERSUS Parties, there is no
unauthorized use, disclosure, infringement or misappropriation
of any Intellectual Property rights of VERSUS or any of its
subsidiaries, or any Intellectual Property right of any third
party to the extent licensed by or through VERSUS or any of its
subsidiaries, by any third party, including any employee or
former employee of VERSUS or any of its subsidiaries. Neither
VERSUS nor any of its subsidiaries has entered into any
agreement to indemnify any other person against any charge of
infringement of any patents, trademarks, trade names, service
marks, domain names, database rights, copyrights, and any
applications therefor, maskworks, net lists, schematics,
technology, know-how, trade secrets, inventory, ideas,
algorithms, processes, computer software programs or
applications (in both source code and object code form), and
tangible or intangible proprietary information or material.
(iv) None of VERSUS or its subsidiaries is, nor will any of them be
as a result of the execution and delivery of this Agreement or
the performance of its obligations under this Agreement, in
breach of any material license, material sublicense or other
material agreement relating to any Intellectual Property or
Third Party Intellectual Property Rights.
(v) To the knowledge of any of the VERSUS Parties, all patents,
registered trademarks, registered service marks and registered
copyrights held by VERSUS or its subsidiaries are valid and
subsisting and, to the knowledge of any of the VERSUS Parties,
there are no outstanding challenges to the validity of any such
registrations. Neither VERSUS nor any of its subsidiaries (i)
has been sued in any suit, action or proceeding which involves
a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other
proprietary right of any third party or (ii) has brought any
action, suit or proceeding for infringement of Intellectual
Property or breach of any license or agreement involving
Intellectual Property against any third party. To the knowledge
of any of VERSUS Parties, the marketing, licensing or sale of
the products or services of VERSUS and its subsidiaries does
not infringe any patent, trademark, service ▇▇▇▇, copyright,
trade secret or other proprietary right of any third party.
(vi) VERSUS has secured valid written assignments from all
consultants and employees who contributed to the creation or
development of Intellectual Property owned by, assigned to
19
or developed for VERSUS or any of its subsidiaries of the
rights to such contributions that VERSUS does not already
own by operation of law.
(vii) The VERSUS Parties have taken reasonable steps consistent
with prevailing industry practice to protect and preserve
the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or
copyright ("Confidential Information"). All use,
disclosure or appropriation by VERSUS and its subsidiaries
of Confidential Information not owned by VERSUS or any
such subsidiary has been pursuant to the terms of a
written agreement between VERSUS and the owner of such
Confidential Information, or is otherwise lawful.
(m) Environmental and Safety Matters.
(i) The following terms shall be defined as follows:
(A) "Environmental and Safety Laws" shall mean any
federal, state, provincial or local laws, ordinances,
codes, regulations, rules, policies and orders that
are intended to assure the protection of the
environment, or that classify, regulate, call for the
remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste,
hazardous or toxic substances, materials, wastes,
pollutants or contaminants, or which are intended to
assure the safety of employees, workers or other
persons, including the public.
(B) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any
pollutant or contaminant, or infectious or
radioactive substance or material, including those
substances, materials and wastes defined in or
regulated under any Environmental and Safety Laws.
(C) "Property" shall mean all real property leased or
owned by VERSUS or its subsidiaries either currently
or in the past.
(D) "Facilities" shall mean all buildings and
improvements on the Property of VERSUS or its
subsidiaries.
(ii) The VERSUS Parties represent and warrant as follows, in
each case (except clauses (iii) and (iv) below) to their
knowledge: (i) no methylene chloride or asbestos is
contained in or has been used at or released from the
Facilities; (ii) all Hazardous Materials have been
disposed of in accordance with all Environmental and
Safety Laws; (iii) VERSUS and its subsidiaries have
received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present
operations with Environmental and Safety Laws; (iv) no
notices, administrative actions or suits are pending or
threatened relating to a violation of any Environmental
and Safety Laws; (v) neither VERSUS nor any of its
subsidiaries are a potentially responsible party under the
Environmental and Safety Laws, arising out of events
occurring prior to the Effective Time; (vi) there have not
been in the past, and are not now, any Hazardous Materials
on, under or migrating to or from the Facilities or any
Property; (vii) there have not been in the past, and are
not now, any underground tanks or underground improvements
at, on or under any Property, including treatment or
storage tanks, sumps, or water, gas or oil ▇▇▇▇▇; (viii)
there are no polychlorinated biphenyls (PCBs) deposited,
stored, disposed of or located on the Property or
Facilities or any equipment on the Property containing
PCBs at levels in excess of 50 parts per million; (ix)
there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea
formaldehyde in the Facilities; (x) the Facilities and
VERSUS' and its subsidiaries' uses and activities therein
have at all times complied with all Environmental and
Safety Laws; and (xi) VERSUS and its subsidiaries have all
the permits and licenses required to be issued under
Environmental and Safety Laws and are in full compliance
with the terms and conditions of those permits.
20
(n) Taxes. VERSUS and each of its subsidiaries have properly completed and
timely filed all Tax Returns required to be filed by them and have
paid all Taxes shown thereon to be due. Any unpaid Taxes of VERSUS and
any of its subsidiaries accruing in periods or portions of periods
through the VERSUS Balance Sheet Date are reflected on the VERSUS
Balance Sheet. Neither VERSUS nor any of its subsidiaries has any
material liability for unpaid Taxes accruing after the VERSUS Balance
Sheet Date other than Taxes arising in the ordinary course of its
business. Except as disclosed in the VERSUS Public Documents, (i)
there is no material claim for Taxes that is a lien against the
property of VERSUS or any of its subsidiaries or is being asserted
against VERSUS or any of its subsidiaries other than liens for Taxes
not yet due and payable, (ii) VERSUS has not been notified and has no
other knowledge that any audit of any Tax Return of VERSUS or any of
its subsidiaries is being conducted by a Tax authority, and (iii)
there are no waivers or other arrangements providing for an extension
of time with respect to the filing of any Tax Return by, the payment
of any Tax by, or the issuance of an assessment or reassessment
against, VERSUS or any of its subsidiaries. Neither VERSUS nor any of
its subsidiaries is a party to any Tax sharing or Tax allocation
agreement nor does VERSUS or any of its subsidiaries owe any amount
under any such agreement. Neither VERSUS nor any of its subsidiaries
has ever been a member of a consolidated, combined or unitary group of
which VERSUS was not the ultimate parent corporation. VERSUS and each
of its subsidiaries have in their possession receipts for any Taxes
paid to foreign Tax authorities. To the knowledge of any of the VERSUS
Parties, there has been no change in ownership of VERSUS or any of its
subsidiaries that has caused the utilization of any losses of such
entities to be limited pursuant to subsections 111(4) or 111(5) of the
ITA or any similar provincial provision. VERSUS and each of its
subsidiaries have withheld or collected all amounts required to be
withheld or collected by them on account of Taxes and have remitted
all such amounts to the appropriate Tax authority when required by law
to do so. The Tax liability of VERSUS and each of its subsidiaries has
been assessed by the appropriate Tax authority for all taxation
periods ending on or prior to the dates set out in Schedule 3.1(n).
---------------
None of VERSUS or any of its subsidiaries has entered into an
agreement contemplated by Section 191.3 of the ITA. None of VERSUS or
any of its subsidiaries is subject to any liability for Taxes of any
other Person. For all transactions between VERSUS or any of its
subsidiaries, on the one hand, and any non-resident Person with whom
VERSUS or such subsidiary was not dealing at arm's length, for the
purposes of the ITA, on the other hand, during a taxation year
commencing after 1998 and ending before the Effective Date, VERSUS or
such subsidiary has made or obtained records or documents that satisfy
the requirements of paragraphs 247(4)(a) to (c) of the ITA. To the
knowledge of any of the VERSUS Parties, no claim has ever been made by
a Tax authority in a jurisdiction where VERSUS or any of its
subsidiaries does not file Tax returns that VERSUS or any of its
subsidiaries is or may be subject to taxation by that jurisdiction.
For purposes of this Agreement, the following terms have the following
meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any income, net income, alternative or add-on minimum tax,
gross income, capital, gross receipts, sales, use, ad valorem, goods
and service, transfer, franchise, profits, license, withholding,
payroll, employment, employee health, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax,
customs duty, Canada or Quebec Pension Plan contributions or other
tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition to tax
or additional amount imposed by any Governmental Entity (a "Tax
authority") responsible for the imposition of any such tax (domestic
or foreign), (ii) any liability for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period and
(iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of any express or implied
obligation to indemnify any other person or as a result of being a
transferee or successor in interest to any party. As used herein, "Tax
Return" shall mean any return, statement, report or form (including,
without limitation, estimated Tax returns and reports, withholding Tax
returns and reports and information reports and returns) required to
be filed with respect to Taxes. VERSUS and each of its subsidiaries
are in full compliance with all terms and conditions of any Tax
exemptions or other Tax-sparing agreement or order of a foreign
government and the consummation of the transactions contemplated
hereby shall not have any adverse effect on the continued validity and
effectiveness of any such Tax exemptions or other Tax-sparing
agreement or order.
21
(o) Employee Benefit Plans.
(i) Neither VERSUS nor any of its subsidiaries has any employees
resident in the United States or has any Employee Benefit Plan
as defined under the Employee Retirement Income Security Act of
1974, as amended.
(ii) Except as set forth in Schedule 3.1(o)(ii), neither VERSUS nor
-------------------
any of its subsidiaries is a party to or bound by, nor do any
of them have any liability or contingent liability with respect
to, any VERSUS Employee Plan that imposes any binding legal
obligation on VERSUS or any of its subsidiaries. Schedule
--------
3.1(o)(ii) contains a true, accurate and complete list of each
----------
VERSUS Employee Plan.
(iii) With respect to each of the VERSUS Employee Plans, VERSUS has
provided or made available to EGI true, accurate and complete
copies of each of the following documents:
(A) the VERSUS Employee Plan, including all amendments
thereto;
(B) all material written employee communications relating to
the VERSUS Employee Plan;
(C) if the VERSUS Employee Plan is funded through a trust or
any third party funding arrangement, the trust or other
funding agreement, including all amendments thereto, and
the latest financial statements thereof; and
(D) all contracts relating to the VERSUS Employee Plan with
respect to which VERSUS or any of its subsidiaries may
have any liability, including insurance contracts and
investment management agreements.
(iv) None of the VERSUS Employee Plans is or is required to be a
registered pension plan as defined under the provisions of any
applicable Law.
(v) No VERSUS Employee Plan provides benefits, including death or
medical benefits, with respect to employees or former employees
of VERSUS or any of its subsidiaries beyond retirement or other
termination of service, other than:
(A) coverage required by applicable Law;
(B) deferred compensation benefits accrued as liabilities in
the VERSUS Financial Statements; or
(C) benefits the full cost of which is borne by the employee
or former employee or his or her beneficiary.
(vi) There are no pending, anticipated or, to the knowledge of any
of the VERSUS Parties, threatened claims by or on behalf of any
of the VERSUS Employee Plans against any Person, other than
routine claims for benefits.
(vii) With respect to each VERSUS Employee Plan that is funded wholly
or partially through an insurance policy, there will be no
liability of VERSUS or any of its subsidiaries as of the
Effective Time under any such insurance policy or ancillary
agreement with respect to such insurance policy in the nature
of a retroactive rate adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or
partially out of events occurring prior to the Effective Time.
With respect to each VERSUS Employee Plan not funded through an
insurance policy, VERSUS and its subsidiaries have either
22
fully funded such VERSUS Employee Plan through a trust or have
made appropriate provision for all of their liability
thereunder in the VERSUS Financial Statements.
(viii) There has been no amendment to, or interpretation or
announcement (whether or not written) by VERSUS or any of its
subsidiaries relating to, or change in participation or
coverage under, any VERSUS Employee Plan which would materially
increase the expense of maintaining such plan about the level
of expense incurred with respect to that plan for the most
recent fiscal year included in the VERSUS Financial Statements.
(p) Employee Matters.
(i) Other than in connection with the vesting of options granted
under the VERSUS Stock Option Plans, neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby or thereby will (A) result in
any liability or payment (including, without limitation,
termination, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director,
officer, employee or other service provider of VERSUS or any of
its subsidiaries under any VERSUS Employee Plan or otherwise,
(B) materially increase any compensation or benefits otherwise
payable by VERSUS or any of its subsidiaries to any director,
officer, employee or other service provider or (C) result in
the acceleration of the time of payment or vesting of any such
compensation or benefits.
(ii) VERSUS and each of its subsidiaries are in compliance in all
material respects with all currently applicable Laws respecting
employment, discrimination in employment, terms and conditions
of employment, wages, hours and occupational safety and health
and employment practices (including any applicable Laws
regarding employment standards, pay equity, labor relations,
workers' compensation or workplace safety and insurance,
occupational health and safety or human rights or any similar
legislation in any of the jurisdictions in which the business
is conducted) (collectively, the "Employment Legislation"), and
is not engaged in any unfair labor practice. VERSUS and each of
its subsidiaries has withheld all material amounts required by
law or by agreement to be withheld from the wages, salaries,
and other payments to employees, and is not liable for any
material arrears of wages or any material taxes or any material
penalty for failure to comply with any of the foregoing.
Neither VERSUS nor any of its subsidiaries is liable for any
material payment to any trust or other fund or to any
governmental or administrative authority, with respect to
unemployment insurance or compensation benefits, or other
benefits or obligations for employees (other than routine
payments to be made in the normal course of business and
consistent with past practice). There are no material
controversies pending or, to the knowledge of any of the VERSUS
Parties, threatened between VERSUS or any of its subsidiaries,
on the one hand, and any of their respective employees or
former employees, on the other hand, which controversies have
or could reasonably be expected to result in an action, suit,
proceeding, complaint, claim, grievance, arbitration, charge,
prosecution or investigation before any Governmental Entity in
respect of any Employment Legislation or pursuant to the common
law. To the knowledge of any of the VERSUS Parties, no
employees of VERSUS are in violation in any material respect of
any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive
covenant to a former employer relating to the right of any such
employee to be employed by VERSUS because of the nature of the
business conducted by VERSUS or to the use of trade secrets or
proprietary information of others. VERSUS does not have any
employment agreement with any of its officers or other
employees, except as listed on Schedule 3.1(p)(vi). No
-------------------
employees of VERSUS or any of its subsidiaries have given
notice to any of the VERSUS Parties, nor are any of the VERSUS
Parties otherwise aware, that any such employee intends to
terminate his or her employment with VERSUS or any of its
subsidiaries.
23
(iii) All employees of VERSUS or any of its subsidiaries engaged in
the business of, acting as, or performing the duties of a
registered representative, registered principal or similar
registered personnel or agent (under the definition of such
terms in the rules of the NASD, the Canadian Stock Exchanges,
Canadian Securities Regulators, ▇▇▇, any other SRO or any state
or province which has jurisdiction over VERSUS or any of its
subsidiaries (if applicable)) are properly registered to act in
the capacity of a registered representative, registered
principal or similar registered personnel or agent under the
rules of the NASD, the Canadian Stock Exchanges, the Canadian
Securities Regulators, ▇▇▇, any other SRO or any state or
province which has jurisdiction over VERSUS or any of its
subsidiaries (if applicable).
(iv) There are no outstanding or pending material claims against or
in respect of VERSUS or any of its subsidiaries under long-term
disability, workers' compensation or workplace safety and
insurance plan, policy or Laws. There are no notices of
assessment, provisional assessment, reassessment, supplementary
assessment, penalty assessment or increased assessment
(collectively, "assessments") or any other communications
related thereto which VERSUS or any of its subsidiaries has
received from any workers' compensation or workplace safety and
insurance board or similar authority in any jurisdiction where
the business is conducted, there are no assessments which are
unpaid on the date hereof or which will be unpaid at the
Effective Date and there are no existing facts or circumstances
which may result in a material increase in liability under any
applicable Laws relating to workers' compensation or workplace
safety and insurance after the Effective Date. Neither VERSUS
nor any of its subsidiaries is registered or required to be
registered under the Workplace Safety and Insurance Act
(Ontario) or comparable legislation of any other applicable
jurisdiction.
(v) Neither VERSUS nor any of its subsidiaries is a party, either
directly or by operation of law, to any Collective Agreement.
No trade union, council of trade unions, employee association,
employee bargaining agency or affiliated bargaining agent holds
bargaining rights with respect to any of the Employees by way
of certification, interim certification, voluntary recognition,
or successor rights, or has applied or threatened to apply to
be certified as the bargaining agent of any of the Employees.
To the knowledge of any of the VERSUS Parties, there are no
threatened or pending union organizing activities involving the
Employees. Neither VERSUS nor any of its subsidiaries has any
labor problems that might adversely affect the operations of
the business or lead to an interruption of operations and there
have been no actual or threatened labor strikes, work
stoppages, slowdowns or other interruptions of work.
(vi) Schedule 3.1(p)(vi) contains a true, complete and accurate list
-------------------
(and, as indicated below, description) of:
(A) the names and titles of all full-time, part-time or casual
employees employed by VERSUS or any of its subsidiaries
(collectively, "Employees"), together with their status
and location of their employment;
(B) the date each Employee was hired or retained;
(C) a list of all written employment, consulting or service
contracts between VERSUS or any of its subsidiaries and
the Employees;
(D) the rate of annual remuneration of each Employee at the
date hereof, any bonuses paid since the end of the last
completed financial year and all other bonuses, incentive
schemes and benefits to which such Employee is entitled;
(E) the amount of vacation pay to which such Employee is
entitled on the date hereof;
24
(F) the names of all inactive Employees, the reason they are
inactive Employees, whether they are expected to return to
work, and if so when, and the nature of any benefits to
which such inactive Employees are entitled from VERSUS or
any of its subsidiaries; and
(G) particulars of all other material terms and conditions of
employment or engagement of the Employees and the
positions, title or classification held by them.
Except as disclosed in Schedule 3.1(p)(vi), no Employee is
-------------------
employed under a contract which cannot be terminated by
VERSUS or any of its subsidiaries with or without notice,
except for those Employees who are employed on indefinite
hirings requiring reasonable notice of termination. Neither
VERSUS nor any of its subsidiaries has obtained or been
required to obtain any permits under employment standards
legislation. VERSUS and each of its subsidiaries have been
operated in compliance in all respects with such permits.
(vii) VERSUS and each of its subsidiaries have provided or made
available copies of all inspection reports issued under
occupational health and safety or other similar Laws relating
to their respective businesses. There are no outstanding
inspection orders nor any pending or threatened charges made
under any occupational health and safety or other similar Laws
relating to the business. VERSUS and each of its subsidiaries
have complied in all respects with any orders issued under
occupational health and safety or other similar Laws, and there
are no appeals of any orders which are currently outstanding.
(q) Interested Party Transactions. Except as disclosed in the VERSUS
Public Documents filed prior to the date of this Agreement, neither
VERSUS nor any of its subsidiaries is indebted to any director,
officer, employee or agent of VERSUS or any of its subsidiaries
(except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), no such person is indebted to
VERSUS or any of its subsidiaries (except as retail customers of VBSI
pursuant to margin loans on terms available to ordinary customers),
and there have been no other transactions of the type required to be
disclosed pursuant to applicable securities Laws.
(r) Insurance. VERSUS and each of its subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by
persons conducting businesses or owning assets similar to those of
VERSUS and its subsidiaries. There is no material claim pending under
any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds
have been paid and VERSUS and its subsidiaries are otherwise in
compliance in all material respects with the terms of such policies
and bonds. The VERSUS Parties have no knowledge of any threatened
termination of, or material premium increase with respect to, any of
such policies.
(s) Regulatory Matters.
(i) VERSUS and each of its subsidiaries have complied, and are in
compliance, in all material respects with all applicable Laws.
Each of VERSUS and its subsidiaries has, and is in compliance
with, all authorizations, consents, licenses, permits
(temporary or otherwise), orders, approvals, waivers, grants,
franchises and other rights ("Governmental Permits") necessary
to conduct their businesses, including, but not limited to,
Governmental Permits of the SEC, the NASD, Canadian Securities
Regulators, Canadian Stock Exchanges, ▇▇▇, CIPF or any other
Governmental Entity required to operate their respective
businesses and maintain their respective assets. Each of VERSUS
and its subsidiaries has obtained all Governmental Permits of
any and all Governmental Entities required for the carrying on
of its business and the maintenance of its assets and such
Governmental Permits are in full force and effect, and there
are no
25
circumstances of which any of the VERSUS Parties is aware which
indicate that any of such Governmental Permits may be revoked
or not renewed or withdrawn or (except to an immaterial or
beneficial extent) amended, in whole or in part. Neither VERSUS
nor any of its subsidiaries has received any notice from any
Governmental Entity (i) asserting that the VERSUS or any of its
Subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances that such Governmental Entity
enforces or (ii) threatening to revoke cancel or not renew any
Governmental Permit (nor, to any of the VERSUS Parties'
knowledge, do grounds for any of the foregoing exist), or (iii)
restricting or disqualifying their activities (except for
restrictions imposed by the terms of registration of the
brokerage subsidiaries of VERSUS, Law, bylaw, administrative
policy or similar instrument on brokerage organizations or
public companies generally). After giving effect to the
Arrangement all Governmental Permits of VERSUS and its
subsidiaries shall continue to be valid and in full force and
effect to the same extent as they presently are for VERSUS and
its subsidiaries. There is no order issued, investigation or
proceeding pending or (to the knowledge of any of the VERSUS
Parties) threatened, or notice served, with respect to any
violation of any law, statute, ordinance, order, writ, decree,
rule, or regulation issued by any Governmental Entity
applicable to either VERSUS or any of its subsidiaries or any
of their respective directors, officers, employees or agents.
(ii) Neither VERSUS nor any of its subsidiaries is a party or
subject to, any agreement, consent decree or order, or other
understanding or arrangement with, or any directive of any
Governmental Entity which imposes any material restrictions on,
or otherwise affects in any material respect, the conduct of
the business of VERSUS or any of its subsidiaries (except for
restrictions imposed by the terms of registration of the
brokerage subsidiaries of VERSUS, Law, bylaw, administrative
policy or similar instrument on brokerage organizations or
public companies generally). Schedule 3.1(s) sets forth all
---------------
compliance or enforcement proceedings or, to the knowledge of
any of the VERSUS Parties, examinations, inspections,
investigations or inquiries convened, and all fines, sanctions
and other measures imposed by any Governmental Entity or body
against, concerning or relating to VERSUS, any of its
subsidiaries, any of their respective predecessor entities, or
any of their respective directors, officers, employees or
agents, except for ordinary course regulatory audits and
ordinary course inquiries pursuant to complaints filed by
brokerage customers.
(iii) Each of VERSUS and its subsidiaries, to the extent required to
so register (the "Registrants"), is duly registered with the
Canadian Securities Regulators and the SEC (including as a
broker-dealer) and under all applicable Laws and, to the extent
required to be a member, is a member of the NASD, ▇▇▇, CIPF and
SIPC and is a participating organization of the Canadian Stock
Exchanges. None of the Registrants has exceeded in any material
respect the business activities enumerated in any applicable
restriction or membership agreements or other limitations
imposed in connection with its registrations, forms (including
Form BDs or the equivalent and reports filed with the any
Governmental Entity. The information contained in such
registrations, forms and reports was or will be true and
complete in all material respects as of the date hereof and,
except as indicated on a subsequent registration form or report
filed before the Effective Time, will continue to be true and
complete in all material respects. Each such registration is in
full force and effect, except where the failure to be so would
not have a Material Adverse Effect on VERSUS.
(iv) Each of VERSUS and its subsidiaries, to the extent required to
so register (the "Advisers"), is duly registered as an
investment adviser under the Investment Advisers Act of 1940,
as amended (the "Advisers Act"), and under all state,
provincial, federal and other investment adviser or related
Laws pursuant to which it is required to be so registered. The
information contained in forms and reports filed by any
Advisors (including Form ADVs) was or will be true and complete
in all material respects as of the time of filing and, except
as indicated an a subsequent form or report filed before the
26
Effective Date, will continue to be true and complete an all
material respects. Each such registration is in full force and
effect, except where the failure to be so would not have a
Material Adverse Effect on VERSUS.
(v) None of VERSUS, its subsidiaries or their respective operations
are required to be registered as an investment company under
the Investment Company Act of 1940, as amended.
(t) Material Contracts.
(i) Except for the contracts described in the VERSUS Public
Documents, neither VERSUS nor any of its subsidiaries is a
party to or bound by any of the following (collectively with
the contracts described in the VERSUS Public Documents, the
"Material Contracts"):
(A) any contract of participation with any bank in any loan in
excess of two hundred fifty thousand Canadian dollars
(Cdn$250,000) or any sales of assets of VERSUS or its
subsidiaries with recourse of any kind to VERSUS or any of
its subsidiaries except the sale of mortgage loans,
servicing rights, repurchase or reverse repurchase
agreements, securities or other financial transactions in
the ordinary course of business;
(B) any agreement providing for the sale or servicing of any
loan or other asset which constitutes a "recourse
arrangement" under applicable regulation or policy
promulgated by a Governmental Entity (except for
agreements for the sale of guaranteed portions of loans
guaranteed in part by the U.S. Small Business
Administration and related servicing agreements);
(C) any contract or agreement for the acquisition of the
securities or any material portion of the assets of any
other person or entity outside the ordinary course of
business;
(D) any continuing contract or agreement for the purchase of
materials, supplies, equipment or services involving in
the case of any such contract or agreement more than two
hundred fifty thousand Canadian dollars (Cdn$250,000) over
the life of the contract;
(E) any trust indenture, mortgage, promissory note, loan
agreement or other contract, agreement or instrument for
the borrowing of money, any currency exchange, commodities
or other hedging arrangement or any leasing transaction of
the type required to be capitalized in accordance with
Canadian GAAP in each case in excess of two hundred fifty
thousand Canadian dollars (Cdn$250,000);
(F) any contract or agreement for capital expenditures in
excess of two hundred fifty thousand Canadian dollars
(Cdn$250,000) in the aggregate;
(G) any contract or agreement limiting the freedom of VERSUS
or any of its subsidiaries to engage in any line of
business or to compete with any other Person or under the
constitution, laws, rules or regulations of any SRO
(except for restrictions imposed by the terms of
registration of the brokerage subsidiaries, Law, bylaw or
similar instrument on brokerage organizations or public
companies generally), or any confidentiality, secrecy or
non-disclosure contract or agreement;
27
(H) any contract or agreement involving payments during any
twelve-month period of two hundred fifty thousand Canadian
dollars (Cdn$250,000) or more, pursuant to which VERSUS or
any of its subsidiaries is a lessor of any machinery,
equipment, motor vehicles, office furniture, fixtures or
other personal property;
(I) any contract or agreement with any person with whom VERSUS
or any of its subsidiaries does not deal at arm's length
within the meaning of the ITA;
(J) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment
with respect to, the obligations, liabilities (whether
accrued, absolute, contingent or otherwise) or
indebtedness of any other Person; or
(K) any material agreement which would be terminable other
than by VERSUS or its subsidiaries as a result of the
consummation of the transactions contemplated by this
Agreement.
(ii) Each of VERSUS and its subsidiaries has performed all of the
material obligations required to be performed by it and is
entitled to all accrued benefits under, and is not alleged to
be in default in respect of, each Material Contract to which it
is a party or by which it is bound. Each of the Material
Contracts is in full force and effect, unamended, and there
exists no default or event of default or event, occurrence,
condition or act, with respect to VERSUS or any of its
subsidiaries or, to the knowledge of any of the VERSUS Parties,
with respect to any other contracting party, which, with the
giving of notice, the lapse of the time or the happening of any
other event or condition, would become a default or event of
default under any Material Contract. True, correct and complete
copies of all Material Contracts requested by EGI and listed in
Schedule 3.1(t)(ii) have been delivered to EGI or filed as an
-------------------
exhibit to the VERSUS Public Documents.
(u) Circular; Registration Statement; Proxy Solicitation. The information
supplied by VERSUS or any of its subsidiaries for inclusion in the
Circular and the Registration Statement will be accurate and complete
in all material respects as at the date thereof, will not contain a
misrepresentation (as such term is defined in the Securities Act) and
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. If at any time prior to
the Effective Time any event or information should be discovered by
VERSUS which should be set forth in an amendment to the Circular or
Registration Statement or a supplement to the Circular or Registration
Statement, VERSUS shall promptly inform EGI of such event or
information. Notwithstanding the foregoing, VERSUS makes no
representation, warranty or covenant with respect to any information
supplied by any of the EGI Parties which is contained in the Circular
or Registration Statement. VERSUS is not required to comply with the
proxy solicitation requirements under the 1934 Act or the related
regulations of the SEC.
(v) Books and Records. The books, records and accounts of VERSUS and its
subsidiaries, in all material respects, (i) have been maintained in
accordance with good business practices on a basis consistent with
prior years, (ii) are stated in reasonable detail and accurately and
fairly reflect the transactions and dispositions of the assets of
VERSUS and its subsidiaries and (iii) accurately and fairly reflect
the basis for the VERSUS Financial Statements and VERSUS' subsequent
interim consolidated financial statements. VERSUS has devised and
maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; and
(ii) transactions are recorded as necessary (A) to permit preparation
of financial statements in conformity with Canadian GAAP and (B) to
maintain accountability for assets.
28
(w) Accounts Receivable and Amounts Due from Clients. All accounts
receivable and amounts due from clients of VERSUS or any of its
subsidiaries, whether reflected in the VERSUS Financial Statements or
otherwise, represent transactions actually made in the ordinary course
of business pursuant to Canadian GAAP and are current and collectible,
net of any reserves reflected in the VERSUS Balance Sheet (which
reserves are adequate and were calculated consistently with past
practices and Canadian GAAP.
(x) VERSUS Affiliate Agreements. Each Affiliate of VERSUS that is an
officer or director of any of the VERSUS Parties has entered into a
VERSUS Affiliate Agreement as of the date of this Agreement. VERSUS
shall use its commercially reasonable best efforts to obtain such a
written agreement from any other person as soon as practicable after
the date on which such person becomes an Affiliate of VERSUS prior to
the Effective Time.
(y) Takeover Statutes. No Canadian provincial or other takeover statute is
applicable to the Arrangement, this Agreement or the other Transaction
Agreements or the transactions contemplated hereby or thereby.
(z) Tax and Accounting Treatment. None of the VERSUS Parties or any of
their directors or officers (with respect to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, this
representation and warranty is made solely in his capacity as a
director of VERSUS) has taken any action that would interfere with
EGI's or ECC's ability to account for the Arrangement as a pooling of
interests. Neither any of the VERSUS Parties nor, to the knowledge of
any of the VERSUS Parties, any of their respective affiliates or
agents is aware of any agreement, plan or other circumstance that
would interfere with EGI's or ECC's ability to account for the
Arrangement as a pooling of interests. None of the VERSUS Parties is
aware of any agreement, plan or other circumstance that would prevent
the transfer of VERSUS Shares and Associated Rights under the
Arrangement to ECC for Exchangeable Shares by a holder who holds such
VERSUS Shares as capital property from occurring on a tax-deferred
basis under the ITA provided that an appropriate election is filed
under subsection 85(1) or subsection 85(2) of the ITA within
prescribed time and disregarding any cash received in lieu of a
fractional Exchangeable Share. The VERSUS Parties acknowledge that the
Arrangement is intended to be a taxable transaction to those
shareholders of VERSUS who are liable to United States federal income
tax.
(aa) Brokers' and Finders' Fees. None of the VERSUS Parties has incurred,
nor will any of them incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement
or any transaction contemplated hereby, other than under VERSUS'
engagement letter with BMO ▇▇▇▇▇▇▇ ▇▇▇▇▇, Inc. (a true and complete
copy of which has been furnished to EGI).
(bb) Securities Matters. There is no Material Securities Offence on the
part of VERSUS or any of its subsidiaries or, to the knowledge of any
of the VERSUS Parties, on the part of any of their respective
employees or independent contractors or former employees or
independent contractors (committed while such current or former
employee or independent contractor was an employee or independent
contractor of VERSUS or one of its subsidiaries).
(cc) Absence of Questionable Payments. Neither VERSUS nor any of its
subsidiaries, nor, to the knowledge of any of the VERSUS Parties, any
director, officer, agent, employee or other person acting on behalf of
VERSUS or any of its subsidiaries, has used any corporate or other
funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to
government officials or others or established or maintained any
unlawful or unrecorded funds in connection with VERSUS' or any of its
subsidiaries' business. Neither VERSUS nor any of its subsidiaries,
nor, to the knowledge of any of the VERSUS Parties, any director,
officer, agent, employee or other person acting on behalf of VERSUS or
any of its subsidiaries, has accepted or received any unlawful
contributions, payments, gifts or expenditures in connection with
VERSUS' or any of its subsidiaries' business.
29
(dd) Registration Rights. No holder of securities issued by VERSUS has any
right to compel VERSUS to register or otherwise qualify such
securities for public sale in Canada or the United States.
(ee) Year 2000 Problems. VERSUS has reviewed its operations and the
operations of its subsidiaries, and has inquired of third parties with
which VERSUS and its subsidiaries have a material relationship, to
evaluate the extent to which the business or operations of VERSUS or
any of its subsidiaries will be affected by the Year 2000 Problem. As
a result of such review and inquiries, VERSUS has no reason to
believe, and does not believe, that the Year 2000 Problem will have a
Material Adverse Effect on VERSUS or result in any material loss or
interference with any of the business or operations of VERSUS or any
of its subsidiaries. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000.
(ff) Representations Complete. None of the representations or warranties
made by any of the VERSUS Parties herein or in any schedule hereto,
including the VERSUS Disclosure Schedule, or certificate furnished by
any of the VERSUS Parties pursuant to this Agreement, or the VERSUS
Public Documents, when all such documents are read together in their
entirety, contains or will contain at the Effective Time any untrue
statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
3.2 Representations and Warranties of the EGI Parties
Except as set forth in the EGI Disclosure Schedule, which exceptions
specifically identify the section, subsection or clause of this Agreement to
which such exception relates, the EGI Parties jointly and severally represent
and warrant to and in favor of the VERSUS Parties as follows and acknowledge
that the VERSUS Parties are relying upon such representations and warranties in
connection with the matters contemplated by this Agreement:
(a) Organization. Each of the EGI Parties has been duly incorporated or
formed under all applicable Laws, is validly subsisting and in good
standing and has full corporate or legal power and authority to own
its properties and conduct its businesses as currently owned and
conducted. EGI has delivered or made available to VERSUS a true and
correct copy of its Certificate of Incorporation, as amended, and
Bylaws, as amended.
(b) Capitalization. The authorized capital stock of EGI consists of
600,000,000 EGI Common Shares and 1,000,000 EGI Preferred Shares, of
which there were issued and outstanding as of the close of business on
June 9, 2000, 297,657,571 EGI Common Shares and no EGI Preferred
Shares. There are no other outstanding shares of capital stock or
voting securities and no outstanding commitments to issue any shares
of capital stock or voting securities after June 9, 2000 other than
pursuant to the exercise of vested options outstanding as of such date
under EGI's stock option plans set forth on Schedule 3.2(b)
(collectively, the "EGI Stock Option Plans") and the non-plan options
and warrants set forth below. All outstanding EGI Common Shares are
duly authorized, validly issued, fully paid and non-assessable and are
free and clear of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof, and are
not subject to preemptive rights or rights of first refusal created by
statute, the Certificate of Incorporation or Bylaws, each as amended,
of EGI or any agreement to which EGI is a party or by which it is
bound. As of the close of business on June 9, 2000, EGI has reserved
an aggregate of 85,793,164 Common Shares for issuance to employees,
consultants and directors pursuant to the EGI Stock Option Plans, of
which 33,144,660 shares have been issued pursuant to option exercises
or direct stock purchases or awards, 38,124,054 shares are subject to
outstanding, unexercised options, and, as of June 5, 2000, 1,248,556
shares are subject to outstanding stock purchase rights. As of the
close of business on June 9, 2000, EGI has reserved an additional
30
aggregate of 27,542,373 shares for issuance upon conversion of its 6%
Convertible Debt, an additional aggregate of 334,090 shares are
subject to non-plan options and, as of May 31, 2000, an additional
aggregate of 975,240 shares are subject to outstanding warrants
assumed by EGI. EGI has not issued or granted any stock appreciation
rights or performance units under the EGI Stock Option Plans or
otherwise. Except for (i) the rights created pursuant to this
Agreement and the EGI Stock Option Plans and (ii) EGI's right to
repurchase any unvested shares under the EGI Stock Option Plans, there
are no other options, warrants, calls, rights, commitments or
agreements of any character to which EGI is a party or by which it is
bound obligating EGI to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of EGI or obligating EGI to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or
agreement. There are no contracts, commitments or agreements relating
to voting, purchase or sale of EGI's capital stock (i) between or
among EGI and any of its stockholders and (ii) to the best of EGI's
knowledge, between or among any of EGI's stockholders. True and
complete copies of all agreements and instruments relating to or
issued under the EGI Stock Option Plans have been provided or made
available to VERSUS and such agreements and instruments have not been
amended, modified or supplemented, and there are no agreements to
amend, modify or supplement such agreements or instruments in any case
from the form provided or made available to VERSUS. All outstanding
Common Shares and all options to purchase EGI Common Shares were
issued in compliance with all applicable federal and state securities
laws.
(c) Authority and No Violation. Each of the EGI Parties has all requisite
corporate power and authority to enter into this Agreement and each
other Transaction Agreement to which it is a party and to consummate
the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement, the Support Agreement, the Voting and
Exchange Agreement and the Option Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the EGI
Parties, as applicable. This Agreement, the Support Agreement (as of
the Effective Date), the Voting and Exchange Agreement (as of the
Effective Date) and the Option Agreement have each been duly executed
and delivered by the EGI Parties, as applicable, and constitutes the
legal, valid and binding obligations of the EGI Parties, as
applicable, enforceable against them (as applicable) in accordance
with its terms, except as such enforcement may be limited by (i) the
effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium or other laws affecting or
relating to the rights of creditors generally, or (ii) the rules
governing the availability of specific performance, injunctive relief
or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
The execution and delivery of this Agreement, the Support Agreement
(as of the Effective Date), the Voting and Exchange Agreement (as of
the Effective Date) and the Option Agreement do not, and the
consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right
of termination, cancellation or acceleration of any obligation or loss
of a benefit under (i) any provision of the Certificate of
Incorporation or Bylaws of EGI, as amended, or (ii) any material
mortgage, material indenture, material lease, material contract or
other material agreement or material instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to EGI or its properties or assets. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or
with respect to EGI in connection with the execution and delivery of
this Agreement, the Support Agreement, the Voting and Exchange
Agreement or the Option Agreement by EGI or by the performance of the
obligations of any of the EGI Parties hereunder or thereunder or the
consummation by EGI of the transactions contemplated hereby or
thereby, except for (i) the filing of the Plan of Arrangement as
provided in Section 2.1, (ii) the filing of applications and notices
with and the receipt of requisite approvals from, as applicable, the
Office of Thrift Supervision and the Federal Deposit Insurance
Corporation with respect to the Arrangement, (iii) any applicable
filing with the SEC and the NASD, including the filing with the SEC
and the NASD of the Registration Statement, as required pursuant to
Section 6.1, (iv) the filing of a Form 8-K with the SEC and the NASD
within fifteen (15) days after the Effective Date, (v) any filings or
31
applications as may be required under applicable federal, SRO or state
securities laws or the securities laws of any foreign country, (vi)
the filing with Nasdaq of a Notification Form for Listing of
Additional Shares with respect to the EGI Common Shares issuable upon
conversion of the VERSUS Shares in the Arrangement and upon exercise
of the options under the VERSUS Stock Option Plans assumed by EGI,
(vii) the filing of a registration statement on Form S-8 with the SEC,
or other applicable form covering the EGI Common Shares issuable
pursuant to outstanding options under the VERSUS Stock Option Plans
assumed by EGI, (viii) any approvals required by (A) the Interim
Order, (B) the Final Order, (C) filings with the Director under the
CBCA and (D) the Appropriate Regulatory Approvals relating to any of
the EGI Parties, (ix) such notices, applications, consents, approvals,
orders, authorizations, registrations, declarations and filings as may
be required under applicable federal, state or provincial securities
laws or the securities laws of any foreign country in connection with
the Arrangement, and (x) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on EGI and would not prevent or
materially alter or delay any of the transactions contemplated by this
Agreement, the Support Agreement, the Voting and Exchange Agreement.
EGI is not aware of any reason why the approvals of all Governmental
Entities necessary to permit consummation of the Arrangement or the
other transactions contemplated by this Agreement will not be received
without the imposition of a condition or requirement described in
Section 4.2.
(d) SEC Documents; Financial Statements. EGI has made available to VERSUS
each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement, and any other material filing filed with
the SEC by EGI since December 31, 1996, (collectively, the "EGI SEC
Documents"). In addition, EGI has made available to VERSUS all
exhibits to the EGI SEC Documents filed prior to the date hereof, and
will promptly make available to VERSUS all exhibits to any additional
EGI SEC Documents filed prior to the Effective Time. All material
documents required to be filed with the SEC have been filed. As of
their respective filing dates, the EGI SEC Documents complied in all
material respects with the requirements of the Exchange Act and the
Securities Act, and none of the EGI SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading, except to the extent corrected by a subsequently filed EGI
SEC Document. EGI has not filed any confidential report with the SEC
or other Governmental Entity which at the date hereof remains
confidential. The financial statements of EGI, including the notes
thereto, included in the EGI SEC Documents (the "EGI Financial
Statements") were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects
with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with United States GAAP
applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes
thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The EGI
Financial Statements fairly present the consolidated financial
condition and operating results of EGI and its subsidiaries at the
dates and during the periods indicated therein (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments)
and reflect appropriate and adequate reserves in respect of contingent
liabilities, if any, of EGI and its subsidiaries on a consolidated
basis.
(e) Absence of Undisclosed Liabilities. EGI has no material obligations or
material liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for
in the consolidated balance sheet of EGI and its subsidiaries or in
the related notes to the consolidated financial statements included in
EGI's Annual Report on Form 10-K for the period ended September 30,
1999 (the "EGI Balance Sheet"), (ii) those disclosed in EGI SEC
Documents filed subsequent to the EGI Balance Sheet Date, and (iii)
those incurred in the ordinary course of business consistent with past
practice since the EGI Balance Sheet Date and which have not had and
are not reasonably likely to have a Material Adverse Effect on EGI.
32
(f) Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration, inquiry, examination, inspection or
investigation pending by or before any Governmental Entity, agency,
court or tribunal, foreign or domestic, or, to the knowledge of EGI,
threatened against EGI or any of its subsidiaries or any of their
respective officers or directors (in their capacities as such) that,
individually or in the aggregate, could reasonably be expected to
prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby or could reasonably be expected to have a Material
Adverse Effect on EGI. There is no judgment, decree or order against
EGI or any of its subsidiaries or, to the knowledge of EGI, any of
their respective directors or officers (in their capacities as such)
that, individually or in the aggregate, could reasonably be expected
to prevent, enjoin, alter or materially delay any of the transactions
contemplated by this Agreement or could reasonably be expected to have
a Material Adverse Effect on EGI.
(g) Circular. The information supplied by the EGI Parties for inclusion in
the Circular shall not at the time of mailing of the Circular
(including any amendments or supplements thereto) contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. If at any time prior to the Effective Time
any event or information should be discovered by EGI which should be
set forth an amendment to Circular or in a supplement to the Circular,
EGI will promptly inform VERSUS of such event or information.
Notwithstanding the foregoing, none of the EGI Parties makes any
representation, warranty or covenant with respect to any information
supplied by or on behalf of VERSUS or any of its affiliates which is
contained in any of the foregoing documents.
(h) Tax Treatment. Neither EGI nor any of its directors or officers has
taken any action that would prevent the transfer of VERSUS Shares
under the Arrangement to ECC for Exchangeable Shares by a holder who
holds such VERSUS Shares as capital property from occurring on a tax-
deferred basis under the ITA provided that an appropriate election is
filed under subsection 85(1) or subsection 85(2) of the ITA within
prescribed time and disregarding any cash received in lieu of a
fractional Exchangeable Share. Neither EGI nor, to EGI's knowledge,
any of its affiliates or agents is aware of any agreement, plan or
other circumstance that would prevent the transfer of VERSUS Shares
under the Arrangement to ECC for Exchangeable Shares by a holder who
holds such VERSUS Shares as capital property from occurring on a tax-
deferred basis under the ITA provided that an appropriate election is
filed under subsection 85(1) or subsection 85(2) of the ITA within
prescribed time and disregarding any cash received in lieu of a
fractional Exchangeable Share.
(i) Broker's and Finders' Fees. EGI has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction
contemplated hereby, other than the fees and expenses of EGI's
investment bankers and other financial advisors (which will be borne
by EGI).
(j) Year 2000 Problems. EGI has reviewed its operations and the operations
of its material subsidiaries, and has inquired of third parties with
which the EGI Parties have a material relationship, to evaluate the
extent to which the business or operations of EGI or any of its
material subsidiaries will be affected by the Year 2000 Problem. As a
result of such review and inquiries, EGI has no reason to believe, and
does not believe, that the Year 2000 Problem will have a Material
Adverse Effect on EGI or result in any material loss or interference
with any of the business or operations of EGI.
(k) Representations Complete. None of the representations or warranties
made by EGI herein or in any Schedule hereto, including the EGI
Disclosure Schedule, or certificate furnished by EGI pursuant to this
Agreement, or the EGI SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in
33
order to make the statements contained herein or therein, in the light
of the circumstances under which made, not misleading.
3.3 Survival
For greater certainty, the representations and warranties of each VERSUS
Party and each EGI Party contained herein shall survive the execution and
delivery of this Agreement and shall terminate on the earlier of the termination
of this Agreement in accordance with its terms and the day after the Effective
Date.
ARTICLE IV
REGULATORY APPROVALS
4.1 Applications
The VERSUS Parties and the EGI Parties covenant and agree to proceed
diligently, in a coordinated fashion, to apply for and seek to obtain the
Appropriate Regulatory Approvals. In addition, VERSUS and VBSI covenant and
agree to proceed forthwith to make application to the Canadian Securities
Regulators for relief from the "suitability obligations" contained in Canadian
securities legislation, as contemplated in the news release dated April 10, 2000
issued by the Canadian Securities Administrators, to cooperate with EGI in the
preparation and pursuit of such application and to keep EGI fully informed with
respect thereto.
4.2 Obtaining of Appropriate Regulatory Approvals
For purposes of this Agreement, no Appropriate Regulatory Approval shall be
considered to have been obtained if it contains any condition that:
(a) would put EGI at a material competitive disadvantage by comparison
with its competitors in any jurisdiction in which EGI has significant
operations, if the competitive disadvantage is greater than any
competitive disadvantage which may reasonably be expected in
consequence of regulatory requirements that result from the operations
of a securities firm in multiple jurisdictions;
(b) would put the combined operations of EGI and VERSUS at a material
competitive disadvantage by comparison with its competitors in any
jurisdiction in which EGI, VERSUS or their respective subsidiaries
have significant operations, if the competitive disadvantage is
greater than any competitive disadvantage which may reasonably be
expected in consequence of regulatory requirements that result from
the operations of a securities firm in multiple jurisdictions; or
(c) would impose a non-customary condition or restriction that EGI
reasonably determines in good faith could reasonably be expected to
result in a Material Adverse Change or Material Adverse Effect on EGI
and/or VERSUS.
In addition, no Appropriate Regulatory Approval shall be considered to have
been obtained if an appeal has been instituted from the granting of any
Appropriate Regulatory Approval and remains outstanding.
ARTICLE V
COVENANTS
5.1 Retention of Goodwill
During the Pre-Effective Date Period, the VERSUS Parties will continue to
carry on the businesses of VERSUS, VBSI, VBSUSI and Fairvest and their
respective subsidiaries in a manner consistent with prior practice, working to
preserve the attendant goodwill of such entities and to contribute to retention
of that goodwill to and after
34
the Effective Date, but subject to the following provisions of this Article V.
The following provisions of this Article V are intended to be in furtherance of
this general commitment.
5.2 Material Commitments
During the Pre-Effective Date Period, VERSUS and its subsidiaries will
consult on an ongoing basis with senior officers of EGI in order that the
representatives of EGI will become more familiar with the philosophy and
techniques of VERSUS and its subsidiaries, as well as with their business and
financial affairs and in order to provide experience as a basis for ongoing
relationships in connection with the operations of the VERSUS Parties and the
EGI Parties after the Effective Date. These consultations will include any
commitments, arrangements or transactions proposed to be entered into by VERSUS
or its subsidiaries that would give rise to a material liability or material
commitment of any kind where such liability or commitment is unusual or is of
such a nature as to be inconsistent with the historical conduct by VERSUS and
its subsidiaries of its business, with materiality being determined for the
purposes of this Section 5.2 by reference to the shareholders' equity of VERSUS
(as defined by Canadian GAAP) on a consolidated basis. VERSUS and EGI will
develop procedures such that these consultations will be carried out quickly and
effectively without detracting from the ability of VERSUS to arrive at decisions
in a timely manner.
5.3 Conduct of Business of VERSUS
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective
Time, VERSUS agrees (except to the extent expressly contemplated by
this Agreement or as consented to in writing by EGI), to carry on its
and its subsidiaries' business in the ordinary course in substantially
the same manner as heretofore conducted and in compliance with
applicable Laws, to pay and to cause its subsidiaries to pay debts and
Taxes when due subject to good faith disputes over such debts or
Taxes, to pay or perform other obligations when due, and to use all
reasonable best efforts consistent with past practice and policies to
preserve intact its and its subsidiaries' present business
organizations, keep available the services of its and its
subsidiaries' present officers and key employees and preserve its and
its subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business
dealings with it or its subsidiaries, to the end that its and its
subsidiaries' goodwill and ongoing businesses shall be unimpaired at
the Effective Time. VERSUS agrees to promptly notify EGI of any event
or occurrence not in the ordinary course of VERSUS' or its
subsidiaries' business, and of any event which could have a Material
Adverse Effect on VERSUS or any of its subsidiaries.
(b) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective
Time, except as expressly contemplated by this Agreement, VERSUS shall
not do, cause or permit any of the following, or allow, cause or
permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of EGI (which shall not
be unreasonably withheld):
(i) Charter Documents. Cause or permit any amendment,
-----------------
modification, alteration or rescission of its certificate or
articles, bylaws or other charter or organizational documents;
(ii) Dividends; Changes in Capital Stock. Declare or pay any
-----------------------------------
dividends on or make any other distributions (whether in cash,
stock or property) in respect of any of its outstanding shares
or split, combine or reclassify any of its outstanding shares
or issue (except as contemplated by Section 5.3(b)(v) below) or
authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock,
or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees,
directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any
termination of service to it or its subsidiaries;
35
(iii) Options. Grant any options, stock appreciation rights or other
-------
rights to acquire securities other than as permitted in Section
5.3(b)(v) below or accelerate, amend or change the period of
exercisability or vesting of options or other rights granted
under its stock plans (except as required pursuant to such
stock plans prior to the date hereof and not implemented in
contemplation of the transactions contemplated hereby) or
authorize cash payments in exchange for any options or other
rights granted under any of such plans;
(iv) Material Contracts. Enter into any contract or commitment, or
------------------
violate, amend or otherwise modify or waive any of the terms of
any of its contracts, other than in the ordinary course of
business consistent with past practice and in no event shall
such contract, commitment, amendment, modification or waiver
involve payments by VERSUS or any of its subsidiaries of
amounts in excess of two hundred fifty thousand Canadian
dollars (Cdn$250,000) during any twelve month period;
(v) Issuance of Securities. Issue, deliver, allot, reserve, set
----------------------
aside or sell or authorize or propose the issuance, delivery,
allotment, reservation, setting aside or sale of, or purchase
or propose the purchase or redemption of, any shares of its
capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such
shares or other convertible securities, other than (i) grants
in the ordinary course of business consistent with past
practice of options to new hires for the purchase of VERSUS
Shares (not to exceed 10,000 VERSUS Shares to any one person or
50,000 VERSUS Shares in the aggregate) at an exercise price
equal to the fair market value of the VERSUS Shares on the date
of grant (as defined in the VERSUS Option Plans), (ii) the
issuance of VERSUS Shares pursuant to the exercise of VERSUS
Options outstanding under the VERSUS Stock Option Plans as of
the date of this Agreement or granted upon the approval of EGI,
and (iii) the issuance of VERSUS Shares pursuant to the
exercise of VERSUS Warrants or Compensation Options outstanding
as of the date of this Agreement and disclosed in the VERSUS
Public Documents;
(vi) Intellectual Property. Transfer to any person or entity any
---------------------
rights to its Intellectual Property other than the transfer or
license of non-exclusive rights to its Intellectual Property in
the ordinary course of business consistent with past practice;
(vii) Exclusive Rights. Enter into or amend any agreements pursuant
----------------
to which any other party is granted exclusive marketing or
other exclusive rights of any type or scope with respect to any
of its products or technology;
(viii) Dispositions. Sell, lease, license or otherwise dispose of or
------------
encumber any of its material properties or material assets,
except in the ordinary course of business consistent with past
practice;
(ix) Indebtedness. Other than in the ordinary course of business
------------
consistent with past practice (A) incur any indebtedness for
borrowed money in excess of two hundred fifty thousand Canadian
dollars (Cdn$250,000), (B) assume, guarantee, endorse or
otherwise as an accommodation become responsible for the
obligations of any other Person in excess of two hundred fifty
thousand Canadian dollars (Cdn$250,000) or (C) cancel, release,
assign or modify any material amount of indebtedness of any
other person or entity;
(x) Leases. Enter into any operating lease providing for aggregate
------
payments in excess of two hundred fifty thousand Canadian
dollars (Cdn$250,000);
(xi) Payment of Obligations. Pay, discharge or satisfy in an amount
----------------------
in excess of one hundred twenty-five thousand Canadian dollars
(Cdn$125,000) in any one case or two hundred fifty thousand
Canadian dollars (Cdn$250,000) in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise) arising
36
other than in the ordinary course of business, other than the
payment, discharge or satisfaction of liabilities reflected or
reserved against in the VERSUS Financial Statements or
reasonably incurred for financial advisor, legal, accounting,
printing or regulatory approval expenses in connection with the
transactions contemplated by this Agreement (which expenses
shall not exceed Cdn$2,600,000 in the aggregate); for greater
certainty, the settlement of client complaints or claims or
litigation with respect to client complaints or claims are
considered to be in the ordinary course of business;
(xii) Capital Expenditures. Make any capital expenditures, capital
--------------------
additions or capital improvements except in the ordinary course
of business and consistent with past practice that do not
exceed one hundred twenty-five thousand Canadian dollars
(Cdn$125,000) in any one case or two hundred fifty thousand
Canadian dollars (Cdn$250,000) in the aggregate;
(xiii) Insurance. Materially reduce the amount of any material
---------
insurance coverage provided by existing insurance policies;
(xiv) Termination or Waiver. Terminate or waive any right of
---------------------
substantial value, other than in the ordinary course of
business;
(xv) Employee Benefit Plans; New Hires; Pay Increases. Adopt or
------------------------------------------------
amend, or commit to adopt or amend, any VERSUS Employee Plan or
stock purchase or option plan (other than to insure its
continued registration under and compliance with applicable
Laws), or hire any new officer level employee, pay any special
bonus or special remuneration to any employee or director, or,
other than in the ordinary course of business consistent with
past practice, increase the salaries or wage rates of its
employees;
(xvi) Severance Arrangements. Grant any severance or termination
----------------------
pay (i) to any director or officer or (ii) to any other
employee, except payments made pursuant to standard written
agreements outstanding on the date hereof or as required by
applicable Law;
(xvii) Lawsuits. Commence any action, suit or proceeding other than
--------
(i) for the routine collection of amounts owing to VERSUS or
any of its subsidiaries, (ii) in such cases where it in good
faith determines that failure to commence suit would result in
the material impairment of a valuable aspect of its business,
provided that it consults with EGI prior to the filing of such
a suit, or (iii) in respect of a breach of this Agreement;
(xviii) Acquisitions. Acquire or agree to acquire by amalgamating,
------------
merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business
or any corporation, limited liability company, unlimited
liability company, partnership, association or other business
organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in
the aggregate, to VERSUS, or acquire or agree to acquire any
equity securities of any corporation, partnership, limited or
unlimited liability company, association or business
organization;
(xix) Taxes. Other than in the ordinary course of business, make or
-----
change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any
material Tax Return or any amendment to a material Tax Return,
enter into any closing agreement, settle any claim or
assessment in respect of Taxes (except to the extent that the
liability therefor has been accrued and reflected in the VERSUS
Financial Statements), or consent to any extension or waiver of
the limitation period applicable to any claim or assessment in
respect of Taxes;
(xx) Notices. Fail to give all notices and other information
-------
required to be given to the employees of VERSUS, any collective
bargaining unit representing any group of
37
employees of VERSUS, and any applicable government authority
under applicable Laws in connection with the transactions
provided for in this Agreement;
(xxi) Revaluation. Except as required by any Governmental Authority
-----------
or as required by Canadian GAAP, revalue any of its assets,
including writing down the value of inventory or writing off
notes or accounts receivable, other than in the ordinary course
of business;
(xxii) Intercompany Transfers. Transfer any material assets, material
----------------------
liabilities or material business between VERSUS and any of its
subsidiaries or affiliates or between any of its subsidiaries
or affiliates, other than in the ordinary course of business
consistent with past practice;
(xxiii) Accounting Policies and Procedures. Make any material change
----------------------------------
to its accounting methods, principles, policies, procedures or
practices, except as may be required by GAAP or Canadian GAAP,
as applicable, or other accounting principles under applicable
Laws;
(xxiv) Loans. Make any loan or advance or purchase any whole loan or
-----
interest in an pool of loans other than margin loans, advances
and other loans in the ordinary course of business consistent
with lending policies as are in effect on the date hereof;
(xxv) Affiliate Credit. Grant or commit to grant any extension of
----------------
credit or amend the terms of any such credit outstanding on the
date hereof to any executive officer, director or holder of 10%
or more of the outstanding capital stock of VERSUS, or any
Affiliate of such person, if such credit would exceed seventy-
five thousand Canadian dollars (Cdn$75,000);
(xxvi) Domain Name. Change domain names or fail to renew existing
-----------
domain name registrations on a timely basis, other than in the
ordinary course of business consistent with past practice; or
(xxvii) Other. Take or agree in writing or otherwise to take, any of
-----
the actions described in Sections 5.3(a)(i) through (xxvi)
above, or any action which would make any of its
representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it
not to perform its covenants hereunder.
(c) In the event that VERSUS requires the consent of EGI pursuant to
Section 5.3(b) above to do or cause or permit any of its subsidiaries
to do any thing, then VERSUS shall provide EGI with prior written
notice of the particular matter requiring EGI's prior written consent
(the "Notice"), setting forth in reasonable detail a description of the
particular matter. If VERSUS has not received from EGI, within ten (10)
days (forty-eight (48) hours in the cases of Section 5.3(b)(x) and,
with respect to the VERSUS Bonus Plan, Section 5.3(b)(xv)) following
receipt of the Notice by EGI, EGI's disapproval of the action proposed
by VERSUS, VERSUS may proceed to implement the matter described in the
Notice, without any further consent or approval from EGI.
5.4 Covenants Regarding Non-Solicitation
(a) VERSUS shall not, directly or indirectly, through any officer,
director, employee, representative or agent of VERSUS or any of its
subsidiaries ("Representatives"), (i) solicit, initiate or knowingly
encourage (including by way of furnishing information or entering into
any form of agreement, arrangement or understanding) or take any other
action designed to facilitate the initiation of any inquiries or
proposals regarding an Acquisition Proposal, (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal, (iii)
disclose any nonpublic information relating to VERSUS or any of its
subsidiaries to, or afford access to the properties, books or records
of VERSUS or any of its subsidiaries to any person that has advised
VERSUS or any of
38
its Representatives that it may be considering making, or that has
made, an Acquisition Proposal, or whose efforts to formulate an
Acquisition Proposal would be assisted thereby, (iv) withdraw or modify
in a manner adverse to EGI the approval of the Board of Directors of
VERSUS of the transactions contemplated hereby, (v) approve or
recommend any Acquisition Proposal or (vi) cause VERSUS to enter into
any agreement related to any Acquisition Proposal; provided, however,
-------- -------
that, subject to Section 5.5 and Article VIII, but notwithstanding the
preceding part of this Section 5.4(a) and any other provision of this
Agreement, nothing shall prevent the Board of Directors of VERSUS from
considering, negotiating, approving, recommending to the VERSUS
shareholders or entering into an agreement in respect of an unsolicited
bona fide written Acquisition Proposal that the Board of Directors of
VERSUS determines in good faith, after consultation with and written
advice from financial advisors and after receiving an opinion of
outside counsel to the effect that it is necessary and appropriate that
the Board of Directors of VERSUS take such action in order to discharge
properly its fiduciary duties, (A) is reasonably capable of being
completed (taking into account all legal, financial, regulatory and
other aspects of such proposal and the third party making such
proposal) and (B) would, if consummated in accordance with its terms,
result in a transaction (x) more favorable to VERSUS' shareholders than
the transaction contemplated by this Agreement from a financial point
of view and (y) having a value per VERSUS Share greater than the per
share value attributable thereto under the transaction contemplated by
this Agreement (any such Acquisition Proposal being referred to herein
as a "Superior Proposal"); provided further that VERSUS provides EGI
-------- -------
with a true and complete copy of the Superior Proposal received from
the third party, provides (or has provided) EGI with all documents
containing or referring to non-public information of VERSUS or any of
its subsidiaries that are supplied to the third party and complies in
all respects with Section 5.5 below. Nothing in this Section 5.4 shall
prevent VERSUS' Board of Directors from complying with its obligations
to distribute a circular with respect to an unsolicited take-over bid
pursuant to Section 99 of the Securities Act and corresponding
provisions of other applicable Canadian securities Laws.
(b) VERSUS shall promptly notify EGI, at first orally and then in writing,
of all current Acquisition Proposals, and of all future Acquisition
Proposals, of which VERSUS' directors or senior officers are or become
aware, or any amendments to the foregoing, or any request for non-
public information relating to VERSUS or any of its subsidiaries in
connection with an Acquisition Proposal or for access to the
properties, books or records of VERSUS or any of its subsidiaries by
any Person that informs VERSUS or such subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such notice
shall include a description of the material terms and conditions of any
proposal and provide such details of the proposal, inquiry or contact
as EGI may reasonably request including the identity of the Person
making such proposal, inquiry or contact.
(c) If VERSUS receives a request for material non-public information from a
Person who proposes a bona fide Acquisition Proposal in respect of
VERSUS (the existence and content of which have been disclosed to EGI),
and the Board of Directors of VERSUS determines that such proposal
would be likely to be a Superior Proposal pursuant to Section 5.4(a)
having received the advice referred to therein, then, and only in such
case, the Board of Directors of VERSUS may, subject to the execution by
such Person of a confidentiality agreement containing a standstill
provision substantially similar to that contained in the
Confidentiality Agreement, provide such Person with access to
information regarding VERSUS; provided, however, that the Person making
the Acquisition Proposal shall not be precluded under such
confidentiality agreement from making the Acquisition Proposal, and
provided further that VERSUS sends a copy of any such confidentiality
agreement to EGI immediately upon its execution and EGI is provided
with a list of or copies of the information provided to such Person and
immediately provided with access to similar information to which such
Person was provided.
(d) VERSUS shall ensure that its officers, directors and employees and its
subsidiaries and their officers, directors and employees and any
financial advisors or other advisors or representatives retained by it
are aware of the provisions of this Section 5.4, and it shall be
responsible for any breach of this Section 5.4 by its financial
advisors or other advisors or representatives.
39
(e) The VERSUS Parties shall immediately cease and cause to be terminated
all existing discussion or negotiations with any persons conducted
heretofore with respect to an Acquisition Proposal.
5.5 Notice by VERSUS of Superior Proposal Determination
VERSUS shall not accept, approve, recommend or enter into any agreement in
respect of an Acquisition Proposal (other than a confidentiality agreement
contemplated by Section 5.4(c)) on the basis that it would constitute a Superior
Proposal unless (i) it has provided EGI with a copy of the Acquisition Proposal
document which the Board of Directors of VERSUS has determined would be a
Superior Proposal, and (ii) three (3) Business Days shall have elapsed from the
later of the date EGI received notice of VERSUS' proposed determination to
accept, approve, recommend or enter into an agreement in respect of such
Acquisition Proposal, and the date EGI received a copy of the Acquisition
Proposal.
During such three (3) Business Day period, VERSUS acknowledges that EGI
shall have the opportunity, but not the obligation, to offer to amend the terms
of this Agreement and the Arrangement. The Board of Directors of VERSUS will
review any offer by EGI to amend the terms of this Agreement in good faith in
order to determine, in its discretion in the exercise of its fiduciary duties,
whether EGI's offer upon acceptance by VERSUS would result in the Acquisition
Proposal not being a Superior Proposal. If the Board of Directors of VERSUS so
determines, it will enter into an amended agreement with EGI reflecting EGI's
amended proposal. If the Board of Directors of VERSUS continues to believe, in
good faith and after consultation with and written advice from financial
advisors and outside counsel, that the Acquisition Proposal is nonetheless a
Superior Proposal and therefore rejects EGI's amended proposal, VERSUS will pay
to EGI the Termination Fee payable to EGI under Section 8.3(b) as required
thereunder.
VERSUS also acknowledges and agrees that each successive modification of
any Acquisition Proposal shall constitute a new Acquisition Proposal for
purposes of the requirement under clause (ii) of this Section 5.5 to initiate an
additional three (3) Business Day notice period.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Fairness Hearing; Registration Statement
(a) VERSUS shall prepare, and VERSUS shall send and file the Circular in
accordance with Sections 2.7, 2.8 and 2.9.
(b) As soon as practicable after the date of this Agreement, provided that
EGI has obtained the Circular and all required information from
VERSUS, EGI shall file with the SEC the Registration Statement, which
shall include a prospectus substantially in the form of the Circular
to the extent required in accordance with the rules applicable to the
Registration Statement, in connection with the registration under the
Securities Act of the EGI Common Shares to be distributed to holders
of VERSUS Shares or Exchangeable Shares pursuant to the Arrangement
and, as applicable, upon exchanges of the Exchangeable Shares. Each of
EGI and VERSUS shall use its reasonable efforts to have or cause the
Registration Statement to become effective as promptly as practicable
(and in any event by the Effective Time). EGI shall use its reasonable
efforts to cause the Registration Statement to remain effective until
the earlier of the date which is five (5) years after the Effective
Date or the date on which no Exchangeable Shares remain outstanding.
EGI shall, to the extent necessary, cause the Registration Statement
to be effected pursuant to a shelf registration providing for a
delayed or continuous offering. EGI shall bear the fees and expenses
incurred in connection with such registration, except for any fees and
expenses of counsel to selling securityholders, if any, and taxes
applicable to the sale of any shares covered thereby.
40
6.2 Meeting of Shareholders
VERSUS shall consult with EGI regarding the date of the VERSUS Meeting and
use all reasonable best efforts and shall not postpone or adjourn (other than
for the absence of a quorum or in the circumstances described in Section 2.3(c))
the VERSUS Meeting without the consent of EGI. VERSUS shall use its reasonable
best efforts to solicit from shareholders of VERSUS proxies in favor of the
Arrangement and shall take all other action necessary or advisable to secure the
vote or consent of securityholders required to effect the Arrangement; provided
--------
that such solicitation efforts need not be made (although all efforts required
to hold the VERSUS Meeting will continue to be required), if VERSUS' Board of
Directors has withdrawn or modified its recommendation of the Arrangement in
compliance with this Agreement.
6.3 Access to Information
(a) At all times prior to the Effective Time, the VERSUS Parties shall
afford EGI and its accountants, counsel and other representatives,
reasonable access during normal business hours to (i) all of VERSUS'
and its subsidiaries' properties, books, contracts, commitments and
records, (ii) all Tax Returns and work papers and all other
information relating to Taxes of VERSUS and its subsidiaries, and
(iii) all other information concerning the business, properties and
personnel of VERSUS and its subsidiaries as EGI may reasonably
request. VERSUS agrees to provide to EGI and its accountants, counsel
and other representatives copies of internal financial statements,
budgets, operating plans and projections promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof until
the Effective Time, each of EGI and VERSUS shall confer on a regular
and frequent basis with one or more representatives of the other party
to report material operational matters and the general status of
ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant to
this Section 6.3 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Arrangement.
6.4 Confidentiality
The parties acknowledge that each of EGI and VERSUS have previously
executed a non-disclosure agreement dated March 22, 2000 (the "Confidentiality
Agreement"), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms, except to the extent necessary to comply
with the terms of this Agreement.
6.5 Public Disclosure
Unless otherwise permitted by this Agreement, the EGI Parties and the
VERSUS Parties shall consult with each other before issuing any press release or
otherwise making any public statement or making any other public (or non-
confidential) disclosure (whether or not in response to an inquiry) regarding
the terms of this Agreement or any of the transactions contemplated hereby, and
neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld or delayed), except as may be required by applicable Law
or the requirements of the Canadian Stock Exchanges or by obligations pursuant
to any listing agreement with any national securities exchange or with the NASD,
in which case the party proposing to issue such press release or make such
public statement or disclosure shall use commercially reasonable efforts to
consult with the other party before issuing such press release or making such
public statement or disclosure, provided that in any case VERSUS shall be
--------
permitted to make an announcement of the Effective EGI Price and of the Exchange
Ratio once determined.
6.6 Consents; Cooperation
Each of the EGI Parties and the VERSUS Parties will, and will cause their
respective subsidiaries to, take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them
41
with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement. In
the event an injunction or other order shall have been issued which prevents,
alters or delays the Arrangement or any other transaction contemplated hereby,
each party agrees to use its reasonable best efforts to have such injunction or
other order lifted. Without limiting the foregoing, each of the EGI Parties and
the VERSUS Parties shall use its reasonable best efforts to obtain, the
Appropriate Regulatory Approvals and all necessary consents, waivers and
approvals under any of its material contracts in connection with the Arrangement
for the assignment thereof or otherwise. As soon as practicable following the
execution hereof, the EGI Parties and the VERSUS Parties shall file all
necessary forms and take all necessary actions, and thereafter shall use its
reasonable best efforts, to file any required notice or application and to
obtain prior to the Effective Date approval of the change of control or
ownership of VERSUS and its subsidiaries from all applicable Governmental
Entities and all other notices, licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and parties
to contracts, agreements, licenses or other instruments relating to the business
as may be required in order to enable each of the EGI Parties and the VERSUS
Parties, respectively, to perform its obligations hereunder and so as to permit
the Arrangement to become effective at the earliest date reasonably practicable.
6.7 Reasonable Best Efforts and Further Assurances
Each of the parties to this Agreement shall use its reasonable best efforts
to effect the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions under this Agreement to complete the transactions
contemplated by this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
6.8 Securities and Blue Sky Laws
EGI shall take such steps as may be necessary to comply with the securities
and blue sky laws of all jurisdictions which are applicable to the issuance of
the EGI Common Shares in connection with the Arrangement. VERSUS shall use its
best efforts to assist EGI as may be necessary to comply with the securities and
blue sky laws of all jurisdictions which are applicable in connection with the
issuance of the EGI Common Shares in connection with the Arrangement.
6.9 Listing of Additional Shares
Prior to the Effective Time, EGI shall file with Nasdaq a Notification Form
for Listing of Additional Shares with respect to the EGI Common Shares issuable
pursuant to the Arrangement and upon exchange of the Exchangeable Shares from
time to time. VERSUS and EGI agree to make application for listing of and to use
their reasonable best efforts effect the listing of the Exchangeable Shares on
the TSE.
6.10 Pooling Accounting
The EGI Parties and the VERSUS Parties shall each use its best efforts to
cause the business combination to be effected by the Arrangement to be accounted
for as a pooling of interests under U.S. GAAP and applicable SEC rules and
regulations. Each of EGI and VERSUS shall use its reasonable best efforts to
cause its Affiliates not to take any action that would adversely affect the
ability of EGI or ECC to account for the business combination to be effected by
the Arrangement as a pooling of interests. At all times at and following the
Effective Time, EGI may impose stop transfer instructions or elect to not permit
the transfer of EGI Common Shares, or the issuance of a new certificate
representing such shares, by Affiliates who have executed Affiliate Letters
unless and until such a transfer can be made without adversely affecting the
ability of EGI or ECC to account for the business combination to be effected by
the Arrangement as a pooling of interests.
42
6.11 Affiliate Agreements.
(a) Schedule 6.11(a) sets forth those Persons who may be deemed Affiliates
----------------
of VERSUS at the date hereof, and VERSUS agrees to update Schedule
6.11(a) for any changes in the Persons who may be deemed Affiliates of
VERSUS after the date of this Agreement and promptly notify EGI of any
such update. VERSUS shall provide EGI with such information and
documents as EGI shall reasonably request for purposes of reviewing
such list. VERSUS shall use its best efforts to deliver or cause to be
delivered to EGI, concurrently with or as soon as practicable after
the execution of this Agreement, from each of the Affiliates of VERSUS
an executed VERSUS Affiliate Agreement, provided that VERSUS shall
--------
deliver or cause to be delivered to EGI concurrently with this
Agreement Affiliate Agreements from each of its officer and director
Affiliates. Each Affiliate of VERSUS shall enter into a VERSUS
Affiliate Agreement on or prior to the date thirty (30) days prior to
the Effective Date, and any Person that becomes an Affiliate of VERSUS
after such date shall enter into a VERSUS Affiliate Agreement as soon
as possible thereafter. EGI shall be entitled to place appropriate
legends on the certificates evidencing EGI Common Shares to be
received by such Affiliates of VERSUS pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for EGI Common Shares, in each of the foregoing cases
in accordance with the terms of such VERSUS Affiliate Agreement.
(b) Schedule 6.11(b) sets forth those Persons who may be deemed Affiliates
----------------
of EGI at the date hereof, and EGI agrees to update Schedule 6.11(b)
for any changes in the Persons who may be deemed Affiliates of EGI
after the date of this Agreement. EGI shall provide VERSUS with such
information and documents as VERSUS shall reasonably request for
purposes of reviewing such list. EGI shall use its reasonable best
efforts to deliver or cause to be delivered to VERSUS, concurrently
with or as soon as practicable after the execution of this Agreement,
from each of the Affiliates of EGI an executed EGI Affiliate
Agreement.
6.12 Tax Treatment
The parties shall use their reasonable best efforts to cause the transfer
of VERSUS Shares under the Arrangement to ECC for Exchangeable Shares by a
holder who holds such VERSUS Shares as capital property to occur on a tax-
deferred basis under the ITA (disregarding any cash received in lieu of a
fractional Exchangeable Share) provided that an appropriate election is filed
under subsection 85(1) or subsection 85(2) of the ITA within prescribed time
provided, however, that ECC shall not be required to execute any such election
form provided to it more than 90 days after the Effective Date.
6.13 VERSUS Options
(a) At the Effective Time, the VERSUS Stock Option Plans and each
outstanding VERSUS Option will be assumed by EGI. VERSUS represents
and warrants to EGI that Schedule 6.13 hereto sets forth a true and
-------------
complete list as of the date hereof of all holders of outstanding
options under the VERSUS Stock Option Plans, including the number of
shares of VERSUS capital stock subject to each such option, the
exercise price per share and the term of each such option. On the
Effective Date, VERSUS shall deliver to EGI an updated Schedule 6.13
-------------
hereto current as of such date. Each such option so assumed by EGI
under this Agreement shall continue to have, and be subject to, the
same terms and conditions set forth in the VERSUS Stock Option Plans
and the applicable stock option agreements, immediately prior to the
Effective Time, except that (i) such option will be exercisable for
that number of whole EGI Common Shares equal to the product of the
number of VERSUS Shares that were issuable upon exercise of such
option immediately prior to the Effective Time multiplied by the
Exchange Ratio and rounded down to the nearest whole number of EGI
Common Shares, and (ii) the per share exercise price for the EGI
Common Shares issuable upon exercise of such assumed option will be
equal to the quotient determined by dividing the exercise price per
VERSUS Share at which such option was exercisable immediately prior to
the Effective Time (adjusted for the U.S. Dollar/Canadian Dollar
exchange rate effective as of the close of business on the Effective
Date) by the Exchange Ratio, rounded up to the nearest whole
43
cent. As soon as reasonably practicable and in any event within thirty
(30) Business Days after the Effective Time, EGI will issue, to each
person who immediately prior to the Effective Time was a holder of an
outstanding option under the VERSUS Stock Option Plans a document
evidencing the foregoing assumption of such option by EGI. VERSUS
agrees to provide to EGI, prior to the Effective Date, true and
complete copies of all agreements and instruments relating to or
issued under the VERSUS Stock Option Plans and further agrees to
assist and cooperate with EGI in finalizing the assumption of options
pursuant to this Section.
(b) All outstanding rights of VERSUS which it may hold immediately prior
to the Effective Time to repurchase unvested VERSUS Shares (the
"Repurchase Options") shall be assigned to EGI in the Arrangement and
shall thereafter be exercisable by EGI upon the same terms and
conditions in effect immediately prior to the Effective Time, except
that the shares purchasable pursuant to the Repurchase Options and the
purchase price per share shall be adjusted to reflect the Exchange
Ratio and the U.S. Dollar/Canadian Dollar exchange rate effective as
of the close of business on the Effective Date.
(c) Holders of VERSUS Options will either: (i) have their VERSUS Options
assumed by EGI in connection with EGI's assumption of all duties and
obligations of VERSUS under the terms of the VERSUS Stock Option
Plans, or (ii) exercise their options prior to the Effective Date and
deliver their VERSUS Shares to ECC in connection with this Agreement.
6.14 Form S-8
EGI agrees to file as soon as practicable after the Effective Time (and in
any event no later than thirty (30) Business Days after the Effective Time,
provided that EGI has received an accurate, audited and certified spreadsheet
containing all information necessary to effect the filing at least five (5)
Business Days prior to such deadline), a registration statement on Form S-8
covering the EGI Common Shares issuable pursuant to outstanding options under
the VERSUS Stock Option Plans assumed by EGI. VERSUS shall cooperate with and
assist EGI in the preparation of such registration statement.
6.15 Employees
Concurrently with the execution of this Agreement, each of the individuals
set forth on Schedule 6.15 shall have delivered to EGI an executed Management
-------------
Continuity Agreement, including a non-competition agreement, in the form of
Exhibit H attached hereto.
---------
6.16 Director and Officer Indemnification
(a) EGI agrees not to cause or allow ECC, VERSUS (after the Effective
Time) or its subsidiaries (after the Effective Time) or any successor
entity of ECC, VERSUS or its subsidiaries to modify any rights to
indemnification or exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of
current and former officers and directors of VERSUS as provided in its
articles or by-laws and any indemnification agreements of VERSUS as of
the date of this Agreement. Except as disclosed in Section 6.16(a) of
the VERSUS Disclosure Schedule, to the knowledge of VERSUS or any of
its subsidiaries or any of their respective officers and directors so
indemnified, there are no current circumstances or circumstances
reasonably likely to occur in respect of which indemnification would
be sought pursuant to this Section 6.16.
(b) For six (6) years after the Effective Time, EGI will or will cause ECC
or any successor of ECC to provide or procure an officers' and
directors' liability insurance "runoff" policy in respect of acts or
omissions occurring at or prior to the Effective Time covering each
such person currently covered by VERSUS' and its subsidiaries'
officers' and directors' liability insurance policy on terms
reasonably comparable to those of such policy in effect on the date
hereof, provided that in satisfying its obligation under this
paragraph, EGI shall not be obligated to pay or cause ECC (or
44
any successor of ECC) to pay premiums in excess of 200% of the amount
per annum VERSUS paid for the current year, which amount has been
disclosed in writing to EGI, and if EGI or ECC (or any successor of
ECC) is unable to obtain the insurance required by this paragraph, it
shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount; provided further that the
officers and directors so covered may be required to make application
and provide customary representations and warranties to EGI's, ECC's
or ECC's successor's insurance carrier for the purpose of obtaining
such insurance. EGI or ECC (or any successor of ECC), as applicable,
will provide suitable evidence of such coverage on request by any such
covered officer or director at the Effective Time or at any time
thereafter.
(c) If EGI or any of its successors or assigns shall consolidate with or
merge into any other entity and shall not be the continuing or
surviving entity of such consolidation or merger or shall transfer all
or substantially all of its assets to any entity, then in such case
proper provision shall be made so that the successors and assigns of
EGI shall assume the obligations set forth in this Section 6.16.
(d) Any officer or director indemnified under Section 6.16(a), upon
learning of any claim, action, suit, proceeding or investigation
described in Section 6.16(a), shall promptly notify EGI thereof;
provided that the failure so to notify shall not relieve the
obligations of ECC, VERSUS or its subsidiaries or any successor entity
of ECC, VERSUS or its subsidiaries under Section 6.16(a) to the extent
it is not prejudiced as a proximate result of such failure.
6.17 Comfort Letters
(a) EGI shall use its reasonable best efforts to cause to be delivered to
VERSUS a procedures letter of EGI's independent auditors, dated a date
within two (2) Business Days before the date on which the Registration
Statement shall become effective and addressed to EGI and VERSUS, in
form reasonably satisfactory to VERSUS and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement.
(b) VERSUS shall use its reasonable best efforts to cause to be delivered
to EGI a procedures letter of VERSUS' independent auditors, dated a
date within two (2) Business Days before the date on which the
Registration Statement shall become effective and addressed to EGI and
VERSUS, in form reasonably satisfactory to EGI and customary in scope
and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement.
6.18 Stockholder Litigation
Unless and until VERSUS has withdrawn its recommendation of the Arrangement
in compliance with Section 5.4, VERSUS shall give EGI the opportunity to
participate at its own expense in the defense of any stockholder litigation
against the VERSUS and/or its directors relating to the transactions
contemplated by this Agreement and the Option Agreement.
6.19 Additional Information
(a) Within thirty (30) days after the date of this Agreement, VERSUS
agrees to provide a true, complete and accurate list (and, as
indicated in Section 3.1(p)(vi), description) of the information set
forth in Section 3.1(p)(vi) with respect to consultants or independent
contractors, sales or other agents or representatives of VERSUS or any
of its subsidiaries as if such consultants or independent contractors,
sales or other agents or representatives were Employees for purposes
of Section 3.1(p)(vi), which list shall become Schedule 6.19(a).
----------------
45
(b) Within thirty (30) days after the date of this Agreement, VERSUS
agrees to provide a true, complete and accurate list of all material
Governmental Permits held by VERSUS or any of its subsidiaries, which
list shall become Schedule 6.19(b).
----------------
(c) Within thirty (30) days after the date of this Agreement, VERSUS
agrees to provide a true, complete and accurate list of all
unregistered trademarks, trade names and service marks and all
unregistered copyrights included in the Intellectual Property owned
by, assigned to or developed for VERSUS or any of its subsidiaries,
which list shall become Schedule 3.19(c).
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ARTICLE VII
CONDITIONS
7.1 Mutual Conditions Precedent
The respective obligations of the parties hereto to complete the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Effective Date, of the following conditions
precedent, each of which may only be waived by the mutual consent of EGI on
behalf of the EGI Parties and VERSUS on behalf of the VERSUS Parties:
(a) the Arrangement shall have been approved at the VERSUS Meeting by not
less than two-thirds of the votes cast by the holders of VERSUS
Shares, VERSUS Options and Compensation Options who are represented at
the VERSUS Meeting, voting together as a single class;
(b) the Arrangement shall have been approved at the VERSUS Meeting in
accordance with any conditions in addition to those set out in Section
7.1(a) which may be imposed by the Interim Order and which are
satisfactory to each of VERSUS and EGI, acting reasonably;
(c) the Interim Order and the Final Order shall each have been obtained in
form and terms satisfactory to each of VERSUS and EGI, acting
reasonably, and shall not have been set aside or modified in a manner
unacceptable to such parties on appeal or otherwise;
(d) there shall not be in force any order or decree restraining or
enjoining the consummation of the transactions contemplated by this
Agreement and there shall be no proceeding (other than an appeal made
in connection with the Arrangement), of a judicial or administrative
nature or otherwise, in progress or threatened that relates to or
results from the transactions contemplated by this Agreement that
would, if successful, result in an order or ruling that would preclude
completion of the transactions contemplated by this Agreement in
accordance with the terms hereof or would otherwise be inconsistent
with the terms, conditions or effectiveness of the Appropriate
Regulatory Approvals which have been obtained; nor shall there be any
action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the transactions
contemplated by this Agreement, which prevents or prohibits the
consummation of the transactions contemplated by this Agreement; in
the event an injunction or other order shall have been issued, each
party agrees to use its commercially reasonable efforts to have such
injunction or other order lifted;
(e) this Agreement shall not have been terminated pursuant to Article
VIII;
(f) the Exchangeable Shares issuable pursuant to the Arrangement shall
have been listed on the TSE;
(g) the filing with Nasdaq of a Notification Form for Listing of
Additional Shares with respect to the EGI Common Shares issuable
pursuant to the Arrangement, upon exchange of the Exchangeable Shares
and upon exercise of the options under the VERSUS Stock Option Plans
assumed by EGI, shall have been made; and
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7.2 Additional Conditions Precedent to the Obligations of the EGI Parties
The obligations of the EGI Parties to complete the transactions
contemplated by this Agreement shall also be subject to the fulfillment of each
of the following conditions precedent (each of which is for the EGI Parties'
exclusive benefit and may be waived by EGI on behalf of the EGI Parties and any
one or more of which, if not satisfied or waived, will relieve the EGI Parties
of any obligation under this Agreement):
(a) all covenants of the VERSUS Parties under this Agreement to be
performed on or before the Effective Date shall have been duly
performed by the VERSUS Parties in all material respects;
(b) the representations and warranties of the VERSUS Parties shall be true
and correct in all material respects (except that those
representations and warranties that are qualified by their terms by a
reference to materiality or Material Adverse Effect, shall be true and
correct in all respects) when made on and as of the Effective Time as
though such representations and warranties were made on and as of such
time (other than representations and warranties expressly made as of
an earlier date which shall have been true and correct as of such
earlier date);
(c) the EGI Parties shall have received a certificate of each of the
VERSUS Parties addressed to the EGI Parties and dated the Effective
Date, signed on behalf of each of the VERSUS Parties by two senior
executive officers of the relevant VERSUS Party, certifying that the
conditions set forth in Sections 7.2(a) and (b) have been fulfilled as
at the Effective Date;
(d) between the date hereof and the Effective Date, there shall not have
occurred a Material Adverse Change to VERSUS;
(e) the Boards of Directors of VERSUS, VBSI, VBSUSI and Fairvest shall
have adopted all necessary resolutions, and all other necessary
corporate action shall have been taken by VERSUS and its subsidiaries
to permit the consummation of the Arrangement;
(f) the Board of Directors of VERSUS shall have made and, unless the
requisite approval of the Arrangement Resolution by VERSUS
securityholders shall have been obtained at the VERSUS Meeting and
remains effective at the Effective Time, shall not have modified or
amended, in any material respect, prior to the VERSUS Meeting, an
affirmative recommendation that the holders of the VERSUS Shares
approve the Arrangement;
(g) the Appropriate Regulatory Approvals shall have been obtained in
accordance with Article IV and shall be in full force and effect and
shall not be the subject of any stop-order or proceedings seeking a
stop-order or any revocation proceedings;
(h) holders of no more than 5% of the issued and outstanding VERSUS Shares
shall have exercised their Dissent Rights (and not withdrawn such
exercise) in respect of the Arrangement;
(i) EGI shall have received from each Affiliate of VERSUS an executed
VERSUS Affiliate Agreement;
(j) Each of the employees of VERSUS or its subsidiaries set forth on
Schedule 6.15 shall have entered into a Management Continuity
-------------
Agreement substantially in the form attached hereto as Exhibit H, and
---------
each such agreement shall be in full force and effect in the form
executed;
(k) EGI shall have received letters, each dated the Effective Date, from
(i) Deloitte & Touche, L.L.P., EGI's independent auditors, to the
effect that the Arrangement qualifies for pooling of interests
accounting treatment if consummated in accordance with this Agreement
and (ii) from Deloitte & Touche, L.L.P., VERSUS' independent auditors,
to the effect that no conditions exist that would preclude VERSUS'
ability to be a party to a business combination to be accounted for as
a pooling of interests;
47
(l) the board of directors of VERSUS shall have waived the application of
Section 3.1 of the VERSUS Rights Plan to the transactions provided for
in the Arrangement and extended the Separation Time (as defined in the
VERSUS Rights Plan) to a date at least ten (10) Business Days
subsequent to the date of the VERSUS Meeting and the holders of VERSUS
Shares shall have consented to such waiver at the VERSUS Meeting, all
in accordance with the provisions of Section 5.1(2) of the VERSUS
Rights Plan;
(m) the IPO Escrow shall have been released or all necessary consents and
approvals in connection with the IPO Escrow to effect the Arrangement
and the other transactions contemplated hereby shall have been
obtained;
(n) VERSUS shall have offered to enter into with each of the employees
listed in Schedule 7.2(n) a change of control agreement in the form
---------------
attached to Schedule 7.2(n); and
---------------
(o) VBSI shall have been continued as a corporation to which the CBCA
applies in accordance with Section 181 of the Business Corporations
Act (Ontario) and Section 187 of the CBCA.
The EGI Parties may not rely on the failure to satisfy any of the above
conditions precedent as a basis for a non-compliance by the EGI Parties, or
their Affiliates (for the purpose of Rule 145 under the ▇▇▇▇ ▇▇▇) in the case of
Section 7.2(i), with their obligations under this Agreement if the condition
precedent would have been satisfied but for a material default by the EGI
Parties, or their Affiliates (for the purpose of Rule 145 under the ▇▇▇▇ ▇▇▇) in
the case of Section 7.2(i), in complying with its obligations hereunder.
7.3 Additional Conditions Precedent to the Obligations of the VERSUS Parties
The obligations of the VERSUS Parties to complete the transactions
contemplated by this Agreement shall also be subject to the following conditions
precedent (each of which is for the exclusive benefit of the VERSUS Parties and
may be waived by the VERSUS Parties and any one or more of which, if not
satisfied or waived, will relieve the VERSUS Parties of any obligation under
this Agreement):
(a) all covenants of the EGI Parties under this Agreement to be performed
on or before the Effective Date shall have been duly performed by the
EGI Parties in all material respects;
(b) all representations and warranties of the EGI Parties under this
Agreement shall be true and correct in all material respects (except
that those representations and warranties that are qualified by their
terms by a reference to materiality or Material Adverse Effect, shall
be true and correct in all respects) when made on and as of the
Effective Time as though such representations and warranties were made
on and as of such time (other than representations and warranties
expressly made as of an earlier date which shall have been true and
correct as of such earlier date);
(c) VERSUS shall have received a certificate of each of the EGI Parties
addressed to the VERSUS Parties and dated the Effective Date, signed
on behalf of each of the EGI Parties by two senior executive officers
of the relevant EGI Party, certifying that the conditions set forth in
Sections 7.3(a) and (b) have been fulfilled as at the Effective Date;
and
(d) the Appropriate Regulatory Approvals (other than with respect to the
Option Agreement) shall have been obtained in accordance with Article
IV and shall be in full force and effect and shall not be the subject
of any stop-order or proceedings seeking a stop-order or any
revocation proceedings.
The VERSUS Parties may not rely on the failure to satisfy any of the above
conditions precedent as a basis for noncompliance by the VERSUS Parties with
their obligations under this Agreement if the condition precedent would have
been satisfied but for a material default by the VERSUS Parties in complying
with their obligations hereunder.
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7.4 Satisfaction of Conditions
The conditions precedent set out in Sections 7.1, 7.2 and 7.3 shall be
conclusively deemed to have been satisfied, waived or released when, with the
agreement of EGI and VERSUS, a certificate of arrangement in respect of the
Arrangement is issued by the Director.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination
At any time prior to the Effective Time, whether before or after approval
of the matters presented in connection with the transactions contemplated hereby
by the shareholders of VERSUS, this Agreement may be terminated:
(a) by mutual consent of EGI and VERSUS;
(b) by either EGI or VERSUS, if, the Effective Date shall not have
occurred on or before October 31, 2000 (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has been the
cause of or resulted in the failure of the Arrangement to occur on or
before such date and such action or failure to act constitutes a
breach of this Agreement);
(c) by EGI, if (i) any of the VERSUS Parties shall breach any of its
representations, warranties or obligations hereunder to an extent that
would cause the condition set forth in Section 7.2(a) or (b) not to be
satisfied and such breach shall not have been cured within fifteen
(15) Business Days of receipt by VERSUS of written notice of such
breach (provided that the right to terminate this Agreement by EGI
shall not be available to EGI if EGI is at that time in material
breach of this Agreement), (ii) the Board of Directors of VERSUS shall
have withdrawn or modified its recommendation of this Agreement or the
Arrangement or any transaction contemplated hereby in a manner adverse
to EGI or shall have resolved to do any of the foregoing, (iii) VERSUS
shall have failed to comply with the Option Agreement or with Section
5.4 or Sections 2.1(b) and 6.2 of this Agreement, or (iv) the Board of
Directors of VERSUS shall have recommended, endorsed, accepted or
agreed to an Acquisition Proposal or shall have resolved to do so;
(d) by VERSUS, if EGI shall breach any of its representations, warranties
or obligations hereunder to an extent that would cause the condition
set forth in Section 7.3(a) or (b) not to be satisfied and such breach
shall not have been cured within fifteen (15) Business Days following
receipt by EGI of written notice of such breach (provided that the
right to terminate this Agreement by VERSUS shall not be available to
VERSUS where VERSUS is at that time in material breach of this
Agreement);
(e) by EGI, if a Trigger Event or Acquisition Proposal shall have occurred
and the Board of Directors of VERSUS, in connection therewith, does
not within five (5) Business Days of such occurrence (i) reconfirm its
approval and recommendation of this Agreement and the transactions
contemplated hereby and (ii) reject (to the extent that such
Acquisition Proposal or Trigger Event can be rejected) such
Acquisition Proposal or Trigger Event;
(f) by either EGI or VERSUS, if (i) any permanent injunction or other
order of a court or other competent authority preventing the
consummation of the transactions contemplated hereby shall have become
final and nonappealable or (ii) if any required approval of the
securityholders of VERSUS shall not have been obtained by reason of
the failure to obtain the required vote upon a vote held at a duly
held meeting of shareholders of VERSUS or at any adjournment thereof;
49
(g) by EGI, if the Effective EGI Price is greater than or equal to $28.00;
or
(h) by VERSUS, if the Effective EGI Price is less than or equal to $10.00.
8.2 Effect of Termination
In the event of termination of this Agreement as provided in Section 8.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of the EGI Parties or the VERSUS Parties or their
respective officers, directors, shareholders or affiliates, except to the extent
that such termination results from the breach by a party hereto of any of its
representations, warranties or covenants set forth in this Agreement; provided
that (a) the provisions of Section 6.4 (Confidentiality), Section 8.3 (Expenses
and Termination Fees) and this Section 8.2 shall remain in full force and effect
and survive any termination of this Agreement and (b) nothing herein shall
relieve any party from liability for fraud or willful breach in connection with
this Agreement or the transactions contemplated hereby. Notwithstanding the
foregoing and for greater certainty, in the event VERSUS pays to EGI the
Termination Fee, the EGI Parties shall have no other remedy, other than the
Option Agreement, for any breach of any representation, warranty, covenant or
other provision of this Agreement on the part of any of the VERSUS Parties or on
the part of anyone for whom the VERSUS Parties are responsible. The parties
agree that the Termination Fee shall be treated as liquidated damages. The
parties acknowledge that EGI's actual damages in any of the events described in
Section 8.3(b) would be extremely difficult or impracticable to determine.
Therefore, by placing their signatures below, the parties acknowledge that the
Termination Fee, together with the Option Agreement, have been agreed on, after
negotiation as the parties' reasonable estimate of EGI's damages and as EGI's
exclusive remedy against the VERSUS Parties in any of the events described in
Section 8.3(b) as resulting in payment of the Termination Fee. In the event any
of the VERSUS Parties or any other Person shall successfully challenge the
applicability or efficacy of this provision or if this provision shall be held
to be void or unenforceable for any reason, EGI shall be entitled to any and all
other damages and remedies otherwise provided at law or in equity.
8.3 Expenses and Termination Fees.
(a) Subject to subsections (b) and (c) of this Section 8.3, whether or
not the Arrangement is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its
advisers, brokers, finders, agents, accountants and legal counsel)
shall be paid by the party incurring such expense, except that
expenses incurred in connection with printing the Circular,
registration and filing fees incurred in connection with the Circular
and the listing of additional shares pursuant to Section 6.9 shall be
shared equally by VERSUS and EGI.
(b) In the event that (i) EGI shall terminate this Agreement pursuant to
Section 8.1(e), (ii) EGI shall terminate this Agreement pursuant to
Section 8.1(c)(ii), (iii) or (iv), or (iii) either EGI or VERSUS shall
terminate this Agreement pursuant to Section 8.1(b), or Section
8.1(f)(ii) following a failure of the securityholders of VERSUS to
approve the Arrangement Resolution, and (in either case), prior to the
time of the VERSUS Meeting, there shall have been a Trigger Event or
an Acquisition Proposal with respect to VERSUS, then in the case of
each of (i) through (iii) VERSUS shall, in addition to any other
remedies EGI may have (subject to Section 8.2), promptly pay to EGI
cash in an amount equal to Five Million Two Hundred Seventeen Thousand
dollars ($5,217,000) (the "Termination Fee") (which Termination Fee
includes a reasonable estimate of the out-of-pocket costs and expenses
incurred by EGI in connection with this Agreement and the transactions
contemplated hereby).
(c) In the event that (i) EGI or VERSUS shall terminate this Agreement
pursuant to Section 8.1(b) under circumstances not described in
Section 8.3(b), (ii) EGI shall terminate this Agreement pursuant to
Section 8.1(c)(i) or (iii) EGI shall terminate this Agreement pursuant
to Section 8.1(f)(ii) under circumstances not described in Section
8.3(b), VERSUS shall promptly reimburse EGI for all of the out-of-
pocket costs and expenses incurred by EGI in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and
legal counsel) (the "Expenses") (provided that, in the
50
case of clauses (i) or (iii) of this paragraph or in the case of
clause (ii) of this paragraph with respect to breaches of
representations and warranties) or twelve months (in the case of
clause (ii) of this paragraph with respect to breaches of obligations
or covenants) of the later of (x) such termination of this Agreement
and (y) the payment of the Expenses, VERSUS shall also promptly pay to
EGI the Termination Fee less the amount of the Expenses previously
reimbursed; provided that VERSUS shall not be obligated to pay the
Termination Fee less the amount of the Expenses previously reimbursed
with respect to clause (i) of this paragraph if on or prior to October
31, 2000, the securityholders of VERSUS shall approve the Arrangement
Resolution, on or after October 31, 2000 EGI shall terminate this
Agreement pursuant to Section 8.1(b) under circumstances not described
in Section 8.3(b) and such securityholder approval shall not have been
withdrawn prior to such termination.
8.4 Amendment
The boards of directors of the parties hereto may cause this Agreement to
be amended at any time by execution of an instrument in writing signed on behalf
of each of the parties hereto; provided that an amendment made subsequent to
adoption of the Arrangement Resolution by the shareholders of VERSUS shall not
(i) alter or change the amount or kind of consideration to be received on change
of the VERSUS Shares, or (ii) alter or change any of the terms and conditions of
the Agreement if such alteration or change would materially adversely affect the
holders of VERSUS Shares or any of the EGI Parties.
8.5 Extension; Waiver
At any time prior to the Effective Time any party hereto may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
VERSUS, on behalf of any of the VERSUS Parties as applicable, or EGI, on behalf
of any of the EGI Parties as applicable.
ARTICLE IX
GENERAL
9.1 Notices
All notices and other communications which may or are required to be given
pursuant to any provision of this Agreement shall be deemed given if delivered
personally or by commercial delivery service, mailed by registered or certified
mail (return receipt requested), sent by reputable overnight courier or sent via
facsimile (with confirmation of receipt), in each case addressed to the
particular party at:
(a) If to a VERSUS Party, at:
VERSUS Technologies Inc.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Chairman, with an extra copy addressed to the President
51
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Stikeman Elliott
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to an EGI Party:
E*TRADE Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Mo, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing. The
date of receipt of any such notice shall be deemed to be the date of delivery or
facsimile (with confirmation) thereof.
9.2 Entire Agreement; Nonassignability; Parties in Interest
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the VERSUS Disclosure Schedule and the EGI
Disclosure Schedule, (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidentiality Agreement, which shall
continue in full force and effect, and shall survive any termination of this
Agreement or the Effective Time, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically set forth in Article II and Sections 6.15 and 6.16; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
9.3 Severability
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void, invalid or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such
illegal, void, invalid or unenforceable provision of this Agreement with a
legal, valid and enforceable provision that will
52
achieve, to the extent possible, the economic, business and other purposes of
such illegal, void, invalid or unenforceable provision.
9.4 Remedies Cumulative
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy.
9.5 Binding Effect
This Agreement and the Arrangement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
9.6 Governing Laws
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein and
shall be treated in all respects as an Ontario contract.
9.7 Counterparts
This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
53
IN WITNESS WHEREOF the parties hereto have caused this Merger Agreement to
be executed and delivered by their respective officers thereunto duly
authorized, all as of the date first written above.
E*TRADE GROUP, INC.
By: ___________________________________
Name:
Title:
3045175 NOVA SCOTIA COMPANY
By: ___________________________________
Name:
Title:
EGI CANADA CORPORATION
By: ___________________________________
Name:
Title:
VERSUS TECHNOLOGIES INC.
By: ___________________________________
Name:
Title:
VERSUS BROKERAGE SERVICES INC.
By: ___________________________________
Name:
Title:
VERSUS BROKERAGE SERVICES (U.S.) INC.
By: ___________________________________
Name:
Title:
FAIRVEST SECURITIES CORPORATION
By: ___________________________________
Name:
Title:
54
SCHEDULE I
APPROPRIATE REGULATORY APPROVALS
Canada
. consent of the Governor in Council pursuant to the Bank Act (Canada)
. approval of the Canadian Securities Regulators regarding the indirect
acquisition of securities of VBSI
. approval of the Canadian stock exchanges regarding the indirect
acquisition of securities of VBSI
. exemption orders from the provincial securities regulators from the
registration and prospectus requirements with respect to the
Exchangeable Share structure
. approval of the Investment Dealers Association of Canada regarding the
indirect acquisition of securities of VBSI and the grant of the Option
Agreement
. approval of the TSE pursuant to Section 19.09 of the TSE By-Laws
. approval of the TSE of the grant of the Option Agreement and the
issuance of the VERSUS Option Shares (as defined in the Option
Agreement)
. approval of the relevant Canadian stock exchange(s) regarding the
listing of the Exchangeable Shares
United States and Other
. expiration or earlier termination of the waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976
. approval of the Securities and Exchange Commission regarding the
indirect acquisition of securities of VBSUSI
. effectiveness of the Registration Statement regarding the EGI Common
Shares
. approval of Nasdaq regarding the listing of EGI Common Shares
. approval of the SEC and NASD regarding the indirect acquisition of
securities of VBSUSI
Such other authorizations, orders or consents of or, registration,
declaration or filing with, any Governmental Entities as required by or with
respect to the EGI Parties or the VERSUS Parties in connection with the
execution and delivery by the EGI Parties and the VERSUS Parties of this
Agreement or the Arrangement or any other documents and agreements to be
delivered under this Agreement, or consummation by the EGI Parties and the
VERSUS Parties of the transactions contemplated by this Agreement or the
Arrangement.
55
SCHEDULE 3.2(b)
EGI STOCK OPTION PLANS
E*TRADE Group, Inc. 1998 Special Nonstatutory Stock Option Plan
E*TRADE Group, Inc. 1996 Stock Incentive Plan
Card Capture Services, Inc. 1996 Incentive Stock Option Plan
Card Capture Services, Inc. 1997 Incentive Stock Option Plan
Card Capture Services, Inc. 1998 Stock Incentive Compensation Plan
Telebanc Financial Corporation Stock Option Plan
Telebanc Financial Corporation 1997 Stock Option Plan
Telebanc Financial Corporation 1998 Stock Incentive Plan
E*TRADE UK (Holdings) Limited 1999 Executive Share Option Scheme
ShareData, Inc. Amended and Restated 1984 Stock Option Plan
ShareData, Inc. Officer and Director Stock Option Plan
Confluent, Inc. 1997 Equity Incentive Plan
56
SCHEDULE 6.11(b)
EGI AFFILIATES
▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇.
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
Gramalgia, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, R. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Son, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
57
SCHEDULE 6.15
MANAGEMENT CONTINUITY AGREEMENTS
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
58
EGI DISCLOSURE SCHEDULE
The following are exceptions to the representations and warranties set forth in
the Merger Agreement, dated June __, 2000 (the "Merger Agreement"), and should
be considered an integral part of the Merger Agreement. Any terms defined in
the Merger Agreement shall have the same meaning when used in this Schedule as
when used in the Merger Agreement, unless the context indicates otherwise. The
section numbers of this Schedule correspond to the first, or principal, section
of the Merger Agreement to which the disclosures relate; however, all
information disclosed herein shall be deemed disclosed under and incorporated
into any other section of the Agreement where it is reasonably apparent on the
face of such disclosure that it would be applicable. Nothing in this Schedule
of Exceptions constitutes an admission of any liability or obligation of EGI to
any third party, nor an admission against EGI's interest.
General: EGI understands VERSUS is of the view that the board of
directors of VERSUS would be required, in order to meet its
fiduciary duty to securityholders of VERSUS under Canadian
law, to cause VERSUS to not consummate the Arrangement in
the event that (i) EGI or an executive officer of EGI
(acting in its capacity as such) commits an intentional
felonious crime of moral turpitude (a "Specified Felony")
prior to the Effective Time or (ii) EGI is unable, as a
result of regulatory or operational shutdown, to operate its
primary brokerage business for a continuous and
uninterrupted period of three (3) weeks (a "Sustained EGI
Shutdown") during the Pre-Effective Date Period. EGI hereby
advises VERSUS that it is unaware of any such Specified
Felony by EGI or an executive officer of EGI, and confirms
that in the event that (x) a Governmental Entity of
competent jurisdiction with prosecutorial powers institutes
a formal criminal proceeding against EGI or an executive
officer of EGI for the purpose of prosecuting EGI or such
EGI executive officer for a Specified Felony, and such
proceeding is not withdrawn or dismissed prior to the time
at which all other conditions under this Agreement to
complete the transactions contemplated by this Agreement are
satisfied or waived or (ii) a Sustained EGI Shutdown has
occurred and is continuing to occur at the time at which all
other conditions under this Agreement to complete the
transactions contemplated by this Agreement are satisfied or
waived, such criminal proceeding or Sustained EGI Shutdown
would render it impossible to satisfy the conditions set
forth in Section 7.3(b) and (c) of the Merger Agreement to
complete the transactions contemplated by this Agreement,
thereby permitting VERSUS' board of directors to modify or
withdraw its recommendation of the Arrangement or terminate
this Agreement without incurring the Termination Fee
pursuant to Section 8.1(c)(ii) and 8.3(b)(ii) of the Merger
Agreement.
59
EXHIBITS
A Plan of Arrangement
B Voting and Exchange Agreement
C Support Agreement
D Shareholders Agreement
E Option Agreement
F Versus Affiliate Agreement
G EGI Affiliate Agreement
H Management Continuity Agreement