EXHIBIT 5
INVESTMENT AGREEMENT
BETWEEN
LIVENT INC.
AND
▇▇▇ ▇. ▇▇▇▇▇▇
JUNE 12, 1998
TABLE OF CONTENTS
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. PURCHASE AND SALE OF COMMON SHARES . . . . . . . . . . . . . 6
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization, Good Standing and Qualification . . . . 7
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . 7
4.3 Options, Warrants and Reserved Shares . . . . . . . . 7
4.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 8
4.5 Due Authorization . . . . . . . . . . . . . . . . . . 8
4.6 Valid Issuance of Stock . . . . . . . . . . . . . . . 9
4.7 No Conflicts . . . . . . . . . . . . . . . . . . . . . 9
4.8 Compliance . . . . . . . . . . . . . . . . . . . . . . 9
4.9 No Orders . . . . . . . . . . . . . . . . . . . . . . 10
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . 10
4.11 Financial Information . . . . . . . . . . . . . . . . 10
4.12 Absence of Undisclosed Liabilities . . . . . . . . . . 11
4.13 Material Adverse Effect . . . . . . . . . . . . . . . 11
4.14 Securities Laws . . . . . . . . . . . . . . . . . . . 11
4.15 Title and Interest . . . . . . . . . . . . . . . . . . 12
4.16 Real Property . . . . . . . . . . . . . . . . . . . . 12
4.17 Environmental Matters . . . . . . . . . . . . . . . . 13
4.18 Property and Assets . . . . . . . . . . . . . . . . . 14
4.19 Material Contracts . . . . . . . . . . . . . . . . . . 14
4.20 Intellectual Property . . . . . . . . . . . . . . . . 14
4.21 Labor Relations . . . . . . . . . . . . . . . . . . . 16
4.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 17
4.23 Consents and Approvals . . . . . . . . . . . . . . . . 18
4.24 Information . . . . . . . . . . . . . . . . . . . . . 18
4.25 Common Shares Listing . . . . . . . . . . . . . . . . 19
4.26 Board Recommendations . . . . . . . . . . . . . . . . 19
4.27 Shareholder Approval . . . . . . . . . . . . . . . . . 19
5. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
5.1 Due Authorization . . . . . . . . . . . . . . . . . . 19
5.2 No Conflicts . . . . . . . . . . . . . . . . . . . . . 20
5.3 Investor Status . . . . . . . . . . . . . . . . . . . 20
5.4 Accredited Investor . . . . . . . . . . . . . . . . . 20
5.5 No General Solicitation . . . . . . . . . . . . . . . 20
6. COVENANTS OF THE COMPANY
6.1 Affirmative Covenants. . . . . . . . . . . . . . . . 20
6.2 Restrictions . . . . . . . . . . . . . . . . . . . . . 23
6.3 No Solicitation . . . . . . . . . . . . . . . . . . . 25
6.4 Shareholders' Meeting . . . . . . . . . . . . . . . . 26
7. CONDITIONS TO ▇▇▇▇▇▇'▇ OBLIGATIONS AT CLOSING
7.1 Representations and Warranties . . . . . . . . . . . . 28
7.2 Performance . . . . . . . . . . . . . . . . . . . . . 28
7.3 Compliance Certificate . . . . . . . . . . . . . . . . 28
7.4 No Litigation . . . . . . . . . . . . . . . . . . . . 28
7.5 Proceedings and Documents . . . . . . . . . . . . . . 28
7.6 Transaction Documents . . . . . . . . . . . . . . . . 29
7.8 Board of Directors . . . . . . . . . . . . . . . . . . 29
7.9 Listing . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Opinion of Counsel . . . . . . . . . . . . . . . . . . 30
7.11 Closing of Other Investment . . . . . . . . . . . . . 30
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING
8.1 Representations and Warranties . . . . . . . . . . . . 30
8.2 Payment of Purchase Price . . . . . . . . . . . . . . 30
8.3 Proceedings and Documents . . . . . . . . . . . . . . 30
8.4 Shareholder Approvals . . . . . . . . . . . . . . . . 30
8.5 Listing . . . . . . . . . . . . . . . . . . . . . . . 30
8.6 Fairness Opinion . . . . . . . . . . . . . . . . . . . 31
8.7 Private Placement Questionnaire. . . . . . . . . . . . 31
9. TERMINATION
9.1 Termination . . . . . . . . . . . . . . . . . . . . . 31
9.2 Effect of Termination . . . . . . . . . . . . . . . . 31
10. MISCELLANEOUS
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Successors and Assigns . . . . . . . . . . . . . . . . 32
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . 32
10.4 Currency . . . . . . . . . . . . . . . . . . . . . . . 32
10.5 Public Announcements; Confidentiality . . . . . . . . 32
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 32
10.7 Time of Essence . . . . . . . . . . . . . . . . . . . 32
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . 32
10.9 Notices . . . . . . . . . . . . . . . . . . . . . . . 32
10.10 No Finder's Fees . . . . . . . . . . . . . . . . . . . 34
10.11 Costs and Expenses . . . . . . . . . . . . . . . . . . 34
10.12 Amendments and Waivers . . . . . . . . . . . . . . . . 35
10.13 Severability . . . . . . . . . . . . . . . . . . . . . 35
10.14 Entire Agreement . . . . . . . . . . . . . . . . . . . 35
10.15 Further Assurances . . . . . . . . . . . . . . . . . . 35
SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
4.3 Options, Warrants and Reserved Shares
4.4(b) Organizational Chart
4.4(c) Stock Ownership
4.7 Conflicts
4.8 Compliance
4.12 Liabilities
4.13 Material Adverse Effect
4.16(a) Real Property
4.16(b) Permitted Encumbrances
4.19 Material Contracts
4.23 Consents and Approvals
4.27 Shareholder Approval
6.1(a) Writedowns
6.1(e) Insurance
7.10 Form of Company Legal Opinion
10.10 Finder's Fees
Exhibit Description
------- -----------
A Employment Agreement Term Sheet
B Stock Option Term Sheet
INVESTMENT AGREEMENT
This INVESTMENT AGREEMENT (this "Agreement") is made and entered
into as of the 12th day of June, 1998 by and among Livent Inc., an Ontario
corporation (the "Company") and ▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to ▇▇▇▇▇▇, and ▇▇▇▇▇▇
desires to purchase from the Company, Common Shares of the Company on the
terms and conditions set forth in this Agreement;
WHEREAS, in order to induce ▇▇▇▇▇▇ to make the investment, join
the Board of Directors and become Chairman and Chief Executive Officer of
the Company, the Company desires to issue warrants to ▇▇▇▇▇▇ and the
Company and ▇▇▇▇▇▇ agree to enter into a Warrant Agreement concurrently
herewith providing for the issuance of such warrants to ▇▇▇▇▇▇ to purchase
Common Shares (the "Warrant Agreement");
WHEREAS, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the
"Executives"), Lynx Ventures L.P., a Delaware limited partnership ("LV"),
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇▇▇ have entered into a Voting Trust
Agreement, dated as of the date hereof, establishing certain terms and
conditions concerning the voting of Common Shares held by the parties (the
"Voting Trust Agreement");
WHEREAS, the Executives, LV, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ have entered into
a Voting Agreement, dated as of the date hereof, establishing certain terms
and conditions concerning the voting of certain Common Shares held by the
parties which are not subject to the Voting Trust Agreement (the "Voting
Agreement").
WHEREAS, the Executives and LV have entered into an Assignment
and Assumption Agreement, dated as of the date hereof (the "Assignment and
Assumption Agreement"), that assigns all of the Executives' assignable
rights under the voting trust agreement by and among the Company,
Executives, certain management holders of Common Shares and the Depositary
(as defined therein) dated May 19, 1993 (the "Management Voting Trust
Agreement");
WHEREAS, the Executives intend to resign as Voting Trustees ( as
defined in the Management Voting Trust Agreement) under the Management
Voting Trust Agreement and to appoint LV as the sole Voting Trustee under
such agreement;
WHEREAS, the Company, the Executives, ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇ and the
THL Entities (as defined below), have entered into a Shareholders
Agreement, dated as of the date hereof, providing for certain rights and
restrictions with respect to the Common Shares held by such parties and
establishing certain terms and conditions concerning the voting of Common
Shares held by the parties thereto (the "Shareholders Agreement");
WHEREAS, LV, ▇▇▇▇▇▇ ▇. ▇▇▇ Equity Partners, L.P., a Delaware
limited partnership and THL-CCI Limited Partnership, a Massachusetts
limited partnership (the "THL Entities") have entered into a Voting, Right
of First Offer and Waiver Agreement, dated as of the date hereof,
establishing, among other things, certain terms and conditions concerning
the voting of Common Shares held by the parties thereto (the "THL Voting
Agreement");
WHEREAS, the Company and each of the Executives, ▇▇▇▇▇▇ and
▇▇▇▇▇▇ desire to enter into individual Employment Agreements providing for
certain employment responsibilities of each of the Executives, ▇▇▇▇▇▇ and
▇▇▇▇▇▇ (the "Employment Agreements");
WHEREAS, the Company and CKE Associates LLC have entered into an
Advisory Agreement, dated as of the date hereof, providing for certain
advisory services of LV to the Company (the "Advisory Agreement"); and
WHEREAS, the Company, LV, the Executives, ▇▇▇▇▇▇, ▇▇▇▇▇▇ and the
THL Entities have entered into, an Omnibus Agreement, dated as of April 13,
1998 (the "Omnibus Agreement"), which evidences the intention of such
parties to be legally bound to the terms of the term sheets attached
thereto and to enter into the expanded agreements and documents referred to
above, each of which is addressed in the term sheets attached to the
Omnibus Agreement .
NOW, THEREFORE, in consideration of valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by each of the
parties hereto) and the mutual agreements, covenants, representations and
warranties set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. DEFINITIONS.
"Advisory Agreement" has the meaning ascribed thereto in the recitals;
"Agreement" has the meaning ascribed thereto in the preamble;
"Assignment and Assumption Agreement" has the meaning ascribed thereto
in the recitals;
"Board of Directors" means the Board of Directors of the Company;
"Board Recommendation" has the meaning ascribed thereto in Section
6.1(d);
"Business Day" means a day on which both the TSE and NASDAQ are open
for trading;
"Closing" and "Closing Date" have the meanings ascribed thereto
respectively in Section 3;
"Commission" shall mean the United States Securities and Exchange
Commission;
"Common Shares" means the common shares of the Company, any shares
resulting from the change of the designation of the common shares, and
any shares into which the common shares may be changed, converted,
exchanged or reclassified;
"Company" has the meaning ascribed thereto in the preamble;
"EEOC" has the meaning ascribed thereto in Section 4.21;
"Employment Agreement Term Sheet" shall mean the term sheets attached
hereto as Exhibit A;
"Employment Agreements" has the meaning ascribed thereto in the
recitals;
"Executives" has the meaning ascribed thereto in the recitals;
"First Preferred Shares" means the preferred shares of the Company
designated as First Preferred Shares;
"▇▇▇▇▇▇" has the meaning ascribed thereto in the preamble;
"GAAP" has the meaning ascribed thereto in Section 4.11;
"Hazardous Materials" has the meaning ascribed thereto in Section
4.17;
"Intellectual Property" has the meaning ascribed thereto in Section
4.20;
"License Agreements" has the meaning ascribed thereto in Section
4.20(a);
"Liens" has the meaning ascribed thereto in Section 4.15;
"Management Voting Trust Agreement" has the meaning ascribed thereto
in the recitals;
"Material Adverse Effect" shall mean a material adverse effect on the
business, results of operations, prospects, assets, liabilities or
condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole;
"1933 Act" means the United States Securities Act of 1933, as amended;
"1934 Act" means the United States Securities Exchange Act of 1934, as
amended;
"1998 Annual Meeting" means the annual meeting of holders of Common
Shares to be held on June 4, 1998 or at such other date as may be
determined hereafter;
"NASDAQ" has the meaning ascribed thereto in Section 4.25;
"New Stock Option Plan" has the meaning ascribed thereto in Section
6.1(d);
"NLRB" has the meaning ascribed thereto in Section 4.21;
"Organizational Documents" shall mean the articles of incorporation,
certificate of incorporation, by-laws, certificates of formation, or
other constitutional documents;
"Permitted Encumbrances" has the meaning ascribed thereto in Section
4.16(b);
"Person" shall mean any natural person, company, corporation,
association, partnership, organization, business, firm, joint venture,
trust, unincorporated organization or any other entity or
organization, including a government, or any political subdivision,
department or agency of any government;
"Purchase Price" has the meaning as ascribed thereto in Section 2;
"Purchased Shares" has the meaning ascribed thereto in Section 2;
"Real Property" means all of the Company's and its Subsidiaries'
right, title and interest in and to all real property, including,
without limitation, all fee titles, leaseholds, easements, rights of
way and licenses and real property subject to operating or management
agreements and the structures, improvements, buildings and fixtures
located thereon;
"Realty Use Rights" has the meaning ascribed thereto in Section
4.16(c);
"Representative" shall mean a representative officer, director,
employee, agent or other representative (including, without
limitation, any investment banker, attorney or accountant);
"Shareholder Approval" means the approval by shareholders of the
Company as required by and in accordance with applicable rules,
regulations, statutes or any other pronouncements of the TSE, NASDAQ
or any federal, state, provincial or local governmental authority;
"Shareholders Agreement" has the meaning ascribed thereto in the
recitals;
"Securities Act (Ontario)" means the Securities Act, R.S.O. 1990,
c. S.5, as the same may be amended, re-enacted or replaced from time
to time;
"Software" has the meaning ascribed thereto in Section 4.20;
"Subsidiary" shall mean any Person of which the Company (either alone
or through or together with any other Subsidiary) owns, directly or
indirectly, 50% or more of the capital stock or other equity interest,
the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such Person;
"THL Voting Agreement" has the meaning ascribed thereto in the
recitals;
"Trade Secrets" has the meaning ascribed thereto in Section 4.20;
"Transaction Documents" means, collectively, each of the agreements
referenced in Section 7.6;
"Stock Option Term Sheet" means the term sheet attached hereto as
Exhibit B;
"TSE" means the Toronto Stock Exchange;
"Updates" has the meaning ascribed thereto in Section 6.1(j);
"Voting Agreement" has the meaning ascribed thereto in the recitals;
"Voting Trust Agreement" has the meaning ascribed thereto in the
recitals;
"Warrant Agreement" has the meaning ascribed thereto in the recitals;
"Writedown" has the meaning ascribed thereto in Section 6.1(a).
2. PURCHASE AND SALE OF COMMON SHARES. Upon the terms and subject
to the conditions hereof, at the Closing and taking place simultaneously
therewith, the Company shall issue, sell and deliver to ▇▇▇▇▇▇, and ▇▇▇▇▇▇
shall subscribe for and purchase from the Company, free and clear of all
Liens, 250,000 Common Shares (the "Purchased Shares") for an aggregate
purchase price of U.S.$2,000,000 (the "Purchase Price").
3. CLOSING. The closing of the purchase and sale of the Purchased
Shares (the "Closing") shall occur as soon as practicable after the
satisfaction or waiver of the conditions set forth in Sections 7 and 8
hereto, at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, New
York, New York, or at such other place as the Company and ▇▇▇▇▇▇ may agree.
The time and date upon which the Closing occurs is herein called the
"Closing Date." The Company shall deliver to ▇▇▇▇▇▇ at the Closing a duly
executed certificate evidencing the Purchased Shares registered in the name
of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ shall deliver to the Company at the Closing the
Purchase Price, payable by interbank transfer of immediately available
funds to accounts designated by the Company in writing at least two
Business Days prior to the Closing Date. In addition, each party to this
Agreement shall execute and deliver each of the Transaction Documents and
such other documents as may be required by this Agreement or that are
reasonable and customary and are requested by the other party.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to ▇▇▇▇▇▇ that the statements in the
following paragraphs of this Section 4 are, as of the date of this
Agreement, and will be, as of the Closing Date, true and correct:
4.1 Organization, Good Standing and Qualification. The Company
is a corporation duly incorporated and organized and is validly subsisting
under the laws of the Province of Ontario. The Company has all requisite
power and authority to own, lease and operate the property and assets it
now owns, leases and operates and to conduct its business as presently
conducted and as proposed to be conducted and to execute and deliver this
Agreement and the Purchased Shares. The Company is duly qualified and
licensed as a corporation to conduct its business and is in good standing
in each jurisdiction in which the nature of the business conducted by it or
the property owned, leased or operated by it makes such qualification or
licensing necessary, except for such failures to be so duly qualified and
licensed and in good standing which will not in the aggregate have a
Material Adverse Effect.
4.2 Capitalization. The authorized capital of the Company
consists of (i) an unlimited number of Common Shares of which on the date
hereof there are 18,071,235 outstanding, all of which are duly authorized,
validly issued, fully paid and non-assessable and free of pre-emptive
rights, other than those contemplated by the Shareholders Agreement and the
THL Voting Agreement, and (ii) an unlimited number of First Preferred
Shares, of which on the date hereof there are none outstanding.
4.3 Options, Warrants and Reserved Shares. Except as set forth
in Schedule 4.3 hereto, there are no outstanding agreements, warrants,
options, rights or privileges, pre-emptive or contractual, including
convertible or exchangeable securities, to subscribe for, purchase or
otherwise acquire any Common Shares or other equity securities of the
Company or securities convertible into or exchangeable for Common Shares or
other equity securities of the Company. All Common Shares issuable as set
forth in Schedule 4.3, shall be duly authorized, validly issued, fully paid
and non-assessable and free of preemptive rights, other than those
contemplated by the Shareholders Agreement and the THL Voting Agreement,
upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable.
4.4 Subsidiaries.
(a) Each Subsidiary of the Company is duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the
Subsidiaries of the Company has the requisite power and authority to
own, lease and operate the properties and assets it now owns, leases
and operates and to conduct its business as presently conducted and as
proposed to be conducted. Each Subsidiary is duly qualified and
licensed and is in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of
the business conducted by it makes such qualification or licensing
necessary, except for such failures to be so duly qualified and
licensed and in good standing which will not in the aggregate have a
Material Adverse Effect.
(b) Attached hereto as Schedule 4.4(b) is an organizational
chart of the Company and its Subsidiaries. All of the capital stock,
share capital, securities convertible or exercisable into capital
stock, or other equity interests of each Subsidiary are owned by the
Company or its Subsidiaries, free and clear of all Liens, other than
pledges in favor of Canadian Imperial Bank of Commerce ("CIBC").
(c) Except for its Subsidiaries and as otherwise set forth on
Schedule 4.4(c), the Company owns no stock, securities or equity
interests in any Person.
4.5 Due Authorization. Subject to a requirement to obtain
shareholder approval of this Agreement, the Company has taken all necessary
corporate action to authorize the execution, delivery and performance of
this Agreement and the Transaction Documents to which the Company is and is
to be a party and to issue the Purchased Shares and to consummate the
transactions contemplated hereby and thereby; this Agreement has been, and
upon execution and delivery thereof to ▇▇▇▇▇▇ will be, duly executed and
delivered on behalf of the Company and will constitute the legal valid and
binding obligation of the Company enforceable against the Company by ▇▇▇▇▇▇
in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency or other laws of general application
affecting the enforcement of creditors' rights and subject to the
qualification that specific performance and injunction, being equitable
remedies, may only be granted in the discretion of a court of competent
jurisdiction.
4.6 Valid Issuance of Stock. The Purchased Shares, when issued,
paid for and delivered in accordance with the terms of this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable and free
of preemptive rights, other than those contemplated by the Shareholders
Agreement and the THL Voting Agreement.
4.7 No Conflicts. Except as set forth in Schedule 4.7 attached
hereto, none of: (i) the authorization, execution, delivery and
performance by the Company of this Agreement and the Transaction Documents
to which the Company is a party; (ii) the issuance and sale of the
Securities as provided herein or in the Transaction Documents; or (iii) any
further acquisitions of shares of capital stock of the Company by ▇▇▇▇▇▇
(including shares that would be issued by the Company to ▇▇▇▇▇▇) results or
would result in the creation or imposition of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries or is in
conflict with or does or will result in a breach by the Company of or does
or will create a state of facts which after notice or lapse of time or both
will result in a breach by the Company of any of the terms or provisions of
(a) the Organizational Documents of the Company or any of its Subsidiaries,
(b) the resolutions of the directors or shareholders of the Company, (c)
other than with respect to clause (iii) above, any statute, law,
regulation, court order or decision to which the Company is subject or (d)
any material indenture, instrument, agreement or undertaking to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries or the properties or assets of the Company or any
of its Subsidiaries are or may become bound, excluding from such clauses
(c) and (d), such breaches or violations that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
4.8 Compliance. Except as set forth in Schedule 4.8, neither
the Company nor any of the Subsidiaries is in violation of any term or
provision of (a) their respective Organizational Documents, (b) any
agreement or instrument to which any of them is a party or by which any of
them or their respective assets are bound, including any existing license
to conduct business, note, bond, mortgage, indenture, contract, lease,
permit, franchise or other instrument, or (c) any applicable law, excluding
from such clauses (b) and (c), such violations that, in the aggregate, have
not had, or could not reasonably be expected to have, a Material Adverse
Effect.
4.9 No Orders. No order suspending the sale or ceasing the
trading of the Common Shares has been issued by any court, securities
commission or regulatory authority in Canada or the United States, and no
proceedings for such purpose are pending or, to the knowledge of the
Company, after reasonable inquiry, threatened.
4.10 Litigation. There is not now pending against the Company
or any of its Subsidiaries or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, nor has the Company
received notice in respect of, any claim or potential claim which could
lead to any litigation, action, suit or other proceeding by or before any
court, tribunal, governmental agency or authority, securities commission or
regulatory body in Canada or the United States that may seek to enjoin the
transactions contemplated herein or that, if successful, would have in the
aggregate a Material Adverse Effect.
4.11 Financial Information.
(a) The audited consolidated balance sheets of the Company and
its Subsidiaries as of December 31,1996 and the related statements of
income, retained earnings and changes in financial position for the
year then ended, including footnotes thereto, certified by Deloitte &
Touche, independent certified public accountants, all of which have
been delivered to ▇▇▇▇▇▇, fairly present the consolidated financial
condition and consolidated results of operations of the Company and
its Subsidiaries as of such dates and for such respective periods in
accordance with generally accepted accounting principles and practices
in Canada applied consistently ("GAAP"). ▇▇▇▇▇▇ has been provided
true and complete copies of such financial statements.
(b) The audited consolidated balance sheets of the Company and
the Subsidiaries as of December 31, 1997 and the related statements of
income, retained earnings and changes in financial position for the
year then ended, including footnotes thereto, certified by Deloitte &
Touche, independent certified public accountants, all of which were
delivered to ▇▇▇▇▇▇ on April 13, 1998, fairly present the consolidated
financial condition and consolidated results of operations of the
Company and its Subsidiaries as of such dates and for such respective
periods in accordance with GAAP applied in a manner consistent with
the financial statements described in paragraph (a) above.
(c) The unaudited consolidated balance sheets of the Company and
the Subsidiaries as of September 30, 1997, and the related statements
of income, retained earnings and changes in financial position for the
nine months then ended, including footnotes thereto, which have been
delivered to ▇▇▇▇▇▇, fairly present the consolidated financial
condition and consolidated results of operations of the Company and
the Subsidiaries as of such date and for such period in accordance
with GAAP applied in a manner consistent with the financial statements
described in paragraphs (a) & (b) above.
4.12 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 4.12 hereto, neither the Company nor any of its Subsidiaries has
incurred any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) subsequent to December 31, 1996, except
for liabilities or obligations that were incurred in the ordinary course of
business consistent with past practice, which would not, in the aggregate,
have, or be reasonably expected to have, a Material Adverse Effect.
4.13 Material Adverse Effect. Except as set forth in Schedule
4.13 hereto, since December 31, 1996 there has been no change in the
business, results of operations, prospects, assets, liabilities and
condition (financial or otherwise) of the Company and its Subsidiaries,
individually or taken as a whole, which would have or be reasonably
expected to have a Material Adverse Effect.
4.14 Securities Laws. The Company has made all filings required
of it under all applicable securities laws, regulations and rules and none
of such filings contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Neither the
issuance nor the sale of the Purchased Shares will result in any
contravention by the Company of any securities laws, regulations or rules
applicable to the Company.
4.15 Title and Interest. Each of the Company and its
Subsidiaries has good title to, or a valid leasehold interest in, all of
the property and assets used by it, located on its premises, or shown on
its financial books and records, free and clear of all claims, liens,
charges, restrictions, reservations and agreements, mortgages, pledges,
security interests, guarantees, easements, rights of way and encumbrances
of any kind or character ("Liens") other than the security interests and
other collateral security granted in connection with the credit agreement
made as of December 4, 1996, as amended, between the Company and the
Canadian Imperial Bank of Commerce and the Permitted Encumbrances (as
defined below), and except for properties and assets disposed of in the
ordinary course of business.
4.16 Real Property.
(a) All of the Company's and its Subsidiaries' material Real
Property is described on Schedule 4.16(a). The Company and its
Subsidiaries own or have the right to occupy and use all the Real
Property, whether owned or leased by the Company and its Subsidiaries.
(b) The Company and its Subsidiaries have good title to all the
owned Real Property and to all buildings, structures and other
improvements thereon and all fixtures thereto subject only to Liens
which, individually or taken as a whole, do not materially interfere
with the current use, occupancy or operation of the particular assets
or properties, subject to such Liens, or to the matters described with
respect to each parcel of Real Property on Schedule 4.16(b)
(collectively, the "Permitted Encumbrances").
(c) The Company and its Subsidiaries have sufficient right,
title and interest in and to agreements which relate to or provide
leases, easements, rights of way, licenses, management agreements,
operating agreements and other non-ownership interests to use the Real
Property in the manner in which it has been used in the past
(collectively, the "Realty Use Rights"). The Realty Use Rights are
valid and in full force and effect in accordance with their terms.
There is not under any Realty Use Right (i) any default (or, to the
knowledge of the Company, any claimed default) by the Company or its
Subsidiaries, or any event of default or event which with notice or
lapse of time, or both, would constitute a default by the Company or
its Subsidiaries which remains uncured, or (ii) to the knowledge of
the Company, any existing default by any other party to any Realty Use
Right, or any event of default or event which with notice or lapse of
time, or both, would constitute a default by any other party to any
Realty Use Right.
(d) The Company and its Subsidiaries are lawfully in possession
of all leased Real Property; and are presently occupying the entirety
of each parcel of the leased Real Property for the purposes set forth
in each lease agreement with respect thereto.
(e) All of the Real Property is free from any material use or
occupancy restrictions which would prevent the Company from using or
operating in accordance with past practice, except those imposed by
applicable zoning laws, ordinances and regulations, and from all
special taxes or assessments. No assessment for public improvement or
otherwise which is due and remains unpaid has been made against the
Real Property and the Company is not aware of any currently proposed
or pending assessment for public improvements or otherwise. No options
have been granted to others to purchase, lease or otherwise acquire
any interest in the Real Property.
(f) To the Company's knowledge, the present use of and enjoyment
of material buildings, structures and improvements on the Real
Property are in conformity with all applicable laws, rules,
regulations and ordinances.
(g) The Company and its Subsidiaries have not received any
notice that the owner of any leased Real Property has made any
assignment, pledge or hypothecation of the lease agreement with
respect thereto or the rents or use fees due thereunder.
4.17 Environmental Matters.
(a) As used herein, the term "Environmental Laws" means all
applicable U.S. or Canadian federal, state, provincial, local or any
foreign laws relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes ( collectively, "Hazardous
Materials") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
applicable authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder to the extent applicable to the specific operations or Real
Property of the Company and its Subsidiaries.
(b) There are, with respect to the Company, its Subsidiaries or
any predecessors of the foregoing, no past or present violations of
Environmental Laws, releases of any materials into the environment,
actions, activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar U.S. or Canadian federal, state, provincial, local or any
foreign laws, other than those which, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect, and none of
the Company and its Subsidiaries has received any notice with respect
to any of the foregoing, nor is any action pending or threatened in
connection with any of the foregoing that, if adversely determined,
could reasonably be expected to have a Material Adverse Effect.
4.18 Property and Assets. Each of the Company and its
Subsidiaries owns or leases all real, personal, tangible and intangible
property and assets (including, without limitation, all production rights)
necessary for the conduct of their respective businesses as such businesses
are presently conducted and are proposed to be conducted. To the knowledge
of the Company, all tangible properties and assets owned or leased by the
Company or any of its Subsidiaries are in good operating condition and
repair, ordinary wear and tear excepted, have been well maintained, and
conform with all applicable laws, statutes, ordinances, rules and
regulations.
4.19 Material Contracts. Except for those agreements listed on
Schedule 4.19, neither the Company nor any of the Subsidiaries is a party
to any agreement not in the ordinary course of business or not made at
arm's length. All of the Company's material agreements, arrangements,
understandings and contracts are valid and binding obligations, in full
force and effect in all respects and are being performed in accordance with
their terms in all material respects and to the knowledge of the Company
the parties to such agreements, arrangements, understandings and contracts
are in compliance in all material respects with the terms thereof.
4.20 Intellectual Property. The Company and its Subsidiaries own
or have the valid right to use all material patents and patent
applications; trademarks, service marks, and trademark or service ▇▇▇▇
registrations and applications, trade names, Internet domain names, logos,
designs, slogans, and general intangibles of like nature, together with all
goodwill related to the foregoing; copyrights, copyright and mask works (as
defined in 17 U.S.C. 901, et seq.) registrations, renewals and applications
for copyrights and mask works; computer software, computer programs, and
computer hardware (collectively, "Software"); rights of publicity
(including but not limited to names, images, and biographical materials
concerning individuals) and rights of privacy; technology, trade secrets
and other confidential information, know-how, proprietary processes,
formulae, algorithms, models and methodologies (collectively, "Trade
Secrets"); and license agreements relating to any of the foregoing (all of
the foregoing, collectively, the "Intellectual Property") used in or
necessary to the conduct of the Company and its Subsidiaries' businesses as
currently conducted or planned to be conducted.
(a) All agreements pertaining to the use of or granting any
right to use or practice any rights under any Intellectual Property,
whether the Company or its Subsidiaries is the licensee or licensor
thereunder, and any written settlements relating to any Intellectual
Property, indicating for each the title, the parties, date executed,
and the Intellectual Property covered thereby (collectively, the
"License Agreements") are valid and binding obligations of the Company
or its Subsidiaries, enforceable in accordance with their terms, and
there exists no event or condition which will result in a violation or
breach of, or constitute (with or without due notice or lapse of time
or both) a default by the Company or its Subsidiaries under any such
License Agreement.
(b) The Intellectual Property owned by the Company and its
Subsidiaries is free and clear of all Liens.
(c) There are no settlements, forebearances to ▇▇▇, consents,
judgments, or orders or similar obligations which (i) restrict the
Company or its Subsidiaries' rights to use any Intellectual Property,
(ii) restrict the Company or its Subsidiaries' business in order to
accommodate a third party's Intellectual Property rights or (iii)
permit third parties to use any Intellectual Property which would
otherwise infringe the Company or its Subsidiaries' Intellectual
Property.
(d) To the best of the Company 's and its Subsidiaries'
knowledge, the conduct of the Company 's and its Subsidiaries'
business as currently conducted or planned to be conducted does not
infringe upon any Intellectual Property owned or controlled by any
third party (either directly or indirectly such as through
contributory infringement or inducement to infringe). There are no
claims or suits pending or, to the Company 's or its Subsidiaries'
knowledge, threatened, and the Company and its Subsidiaries have not
received any notice of a third party claim or suit (i) alleging that
the Company 's or its Subsidiaries' activities or the conduct of its
businesses infringes upon or constitutes the unauthorized use of the
Intellectual Property rights of any third party, (ii) alleging that
the Company 's or its Subsidiaries' activities or the conduct of its
businesses is libelous, slanderous, or otherwise defamatory, (iii)
challenging the ownership, use, validity or enforceability of any
Intellectual Property, or (iv) challenging any Intellectual Property
licensed to the Company or its Subsidiaries.
(e) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of the Company 's or its
Subsidiaries' right to own or use any of the Intellectual Property nor
require the consent of any governmental authority or third party in
respect of any such Intellectual Property.
(f) To the knowledge of the Company, none of the material
Software used or relied on by the Company or by any of its
Subsidiaries in the conduct of their respective businesses will
malfunction, will cease to function, will generate incorrect data or
will provide incorrect results when processing, providing, and/or
receiving (i) date-related data into and between the twentieth and
twenty-first centuries and (ii) date-related data in connection with
any valid date in the twentieth and twenty-first centuries.
4.21 Labor Relations. (i) The Company and its Subsidiaries
are in compliance in all material respects with all federal, state and
provincial laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not engaged in any
unfair labor or unfair employment practice, (ii) there is no unlawful
employment practice discrimination charge relating to the Company or any of
its Subsidiaries pending before the Equal Employment Opportunity Commission
("EEOC") or any EEOC recognized state "referral agency" or any comparable
authority in any jurisdiction, (iii) there is no unfair labor practice
charge or complaint against the Company or any of its Subsidiaries pending
before the National Labor Relations Board ("NLRB") or any comparable
authority in any jurisdiction, (iv) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to the knowledge of the Company,
threatened against or involving or affecting the Company or any of its
Subsidiaries, (v) no labor organization or group of employees of the
Company or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or
certification proceedings presently pending or, to the knowledge of the
Company, threatened to be brought or filed with the NRLB or any other labor
relations tribunal or authority, (vi) no grievance or arbitration
proceeding relating to the Company or any of its Subsidiaries is pending
and no written claim therefor exists, (vii) there is no claim, charge or
complaint relating to the Company or any of its Subsidiaries relating to
violations of applicable human rights laws or regulations, (vii) the
Company and each of its Subsidiaries have complied with all applicable laws
relating to payroll and wage deductions for unemployment insurance, and
(ix) there is no collective bargaining agreement which is binding on the
Company or any of its Subsidiaries.
4.22 Taxes. Each of the Company and its Subsidiaries has filed
all tax returns that it was required to file. All such tax returns were
correct and complete in all material respects. All taxes due and owed by
any of the Company and its Subsidiaries have been paid, except where a
delinquency in payment would not, individually or in the aggregate, have a
Material Adverse Effect. There are no Liens on any of the assets of any of
the Company and its Subsidiaries that arose in connection with any failure
(or alleged failure) to pay any tax, including, without limitation, goods
and services taxes and provincial sales taxes.
Each of the Company and its Subsidiaries have withheld and paid
all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, consultant, independent contractor,
creditor, shareholder, or other third party.
The Company does not expect any authority to assess any
additional taxes for any period for which tax returns have been filed. The
Company is not aware of any dispute or claim concerning any liability for
taxes of the Company or any of its Subsidiaries. None of the U.S. or
Canadian federal, state, provincial, local, and foreign income tax returns
filed with respect to any of the Company and its Subsidiaries for taxable
periods or taxation years ended on or after December 31, 1993, have been
audited or currently are the subject of audit. The Company has delivered
to ▇▇▇▇▇▇ correct and complete copies of all U.S. and Canadian federal
income tax returns, letters from Revenue Canada and the U.S. Internal
Revenue Service, and notices of assessment or reassessment in respect of
assessments or reassessments against or agreed to by any of the Company and
its Subsidiaries since December 31, 1993.
None of the Company and its Subsidiaries have waived any statute
of limitations in respect of taxes or agreed to any extension of time with
respect to a tax assessment, reassessment or deficiency other than in
respect of Ontario Provincial sales tax relating to preproduction costs.
The provisions and reserves on the books of the Company and each
Subsidiary in respect of taxes are adequate to cover all accrued and unpaid
taxes of the Company and the Subsidiaries (whether or not disputed). No
reserve has been taken in respect of Ontario Provincial sales tax relating
to preproduction costs.
4.23 Consents and Approvals.
(a) Except as set forth in Schedule 4.23 hereto, the execution,
delivery and performance of this Agreement and the Transaction
Documents, and the consummation of the transactions contemplated
hereby and thereby, the Company does not and will not, require any
consent, approval, authorization, registration, qualification,
declaration, filing, governmental approval or other action by, or
filing with or notification to, any third party or any governmental
authority.
(b) Except as set forth on Schedule 4.23, the execution,
delivery and performance of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby
and thereby shall not trigger any change of control or ownership
provisions or clauses in any agreement, arrangement, understanding or
contract, whether formal or informal, written or oral, or subject the
Company or its Subsidiaries to any predetermined adverse alteration or
modification in any ongoing relationship (without consideration of the
change of control or ownership provision or the provision for the
predetermined adverse alteration or modification as part of the
ongoing relationship).
4.24 Information. The Company has provided to ▇▇▇▇▇▇ all
information which a reasonable investor would consider material in
connection with making an informed decision regarding an investment in the
Company of the size, and in the circumstances contemplated by ▇▇▇▇▇▇
(including with respect to share ownership, voting rights and governance).
The information supplied by the Company does 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 made
therein, in light of the circumstances under which they were made, not
misleading.
4.25 Common Shares Listing. The Common Shares are registered
pursuant to Section 12(g) of the 1934 Act and are listed on the NASDAQ
National Market ("NASDAQ") and the TSE. The Company is a reporting issuer
under the Securities Act (Ontario). The Company has taken no action
designed to cause, or likely to result in, the termination of the
registration of the Common Shares under the 1934 Act or the Company's
reporting issuer status under the Securities Act (Ontario) or the delisting
of the Common Shares from NASDAQ or the TSE, nor has the Company received
any notification that the Commission or its Canadian equivalent or the
National Association of Securities Dealers, Inc. or the TSE is
contemplating the termination of such registration or listing. Prior to
Closing, the Purchased Shares will have been approved for trading on the
TSE, subject to notice of issuance.
4.26 Board Recommendations. The Company has taken all actions
necessary to procure the Board Recommendation for Shareholder Approval with
respect to the transactions contemplated by this Agreement and the
Transaction Documents.
4.27 Shareholder Approval. In order for shareholder approval
to be obtained for any of the matters contemplated by this Agreement to be
submitted to shareholders of the Company, the vote required is a majority
of the votes present, either in person or by proxy, at a duly constituted
meeting of shareholders of the Company and all shareholders other than the
parties identified on Schedule 4.27 are entitled to vote on such matters.
5. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇. ▇▇▇▇▇▇ hereby
represents and warrants to the Company that the statements in the following
paragraphs of this Section 5 are, as of the date of this Agreement, and
will be, as of the Closing Date, true and correct:
5.1 Due Authorization. ▇▇▇▇▇▇ has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
Transaction Documents to which ▇▇▇▇▇▇ is a party and to consummate the
transactions contemplated hereby. This Agreement has been, and upon
execution and delivery thereof to the Company will be, duly executed and
delivered on behalf of ▇▇▇▇▇▇ and will constitute legal valid and binding
obligations of ▇▇▇▇▇▇ enforceable against ▇▇▇▇▇▇ by the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency or other laws of general application affecting
the enforcement of creditors' rights and subject to the qualification that
specific performance and injunction, being equitable remedies, may only be
granted in the discretion of a court of competent jurisdiction.
5.2 No Conflicts. The authorization, execution, delivery and
performance by ▇▇▇▇▇▇ of this Agreement and the Transaction Documents is
not in conflict with and does not and will not result in a breach of and
does not and will not create a state of facts which after notice or lapse
of time or both will result in a breach of any statute, law, regulation,
court order or decision to which ▇▇▇▇▇▇ is subject, or any material
indenture, instrument, agreement or undertaking to which ▇▇▇▇▇▇ is a party
or by which ▇▇▇▇▇▇ or the properties and assets of ▇▇▇▇▇▇ are or may become
bound or results or would result in the creation or imposition of any Lien
upon any of the properties or assets of ▇▇▇▇▇▇.
5.3 Investor Status. ▇▇▇▇▇▇ has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of its investment in the Purchased Shares and is able to bear the
economic risks of such investment.
5.4 Accredited Investor. ▇▇▇▇▇▇ is an "accredited investor" as
defined in Rule 501(a) under the 1933 Act. ▇▇▇▇▇▇ is acquiring the
Purchased Shares for his own account and not with a view to any resale,
distribution or other disposition of the Purchased Shares in violation of
the United States securities laws.
5.5 No General Solicitation. ▇▇▇▇▇▇ acknowledges that he has
not acquired the Purchased Shares as a result of any general solicitation
or general advertising (as those terms are used in Regulation D under the
1933 Act), including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting whose
attendees have been invited by general solicitation or general advertising.
6. COVENANTS OF THE COMPANY.
6.1 Affirmative Covenants. The Company covenants and agrees
with ▇▇▇▇▇▇ that it will do or cause to be done the following:
(a) write off the items and in the amounts as set forth in
Schedule 6.1(a) attached hereto (the "Writedown") in the 1997 Audited
Financial Statements;
(b) upon the request of ▇▇▇▇▇▇, take all such action as is
required under applicable law to cause ▇▇▇▇▇▇ to be elected Chairman
of the Board of Directors at the 1998 Annual Meeting;
(c) appoint ▇▇▇▇▇▇ to the office of Chief Executive Officer of
the Company effective as of the Closing Date;
(d) upon the request of ▇▇▇▇▇▇, take all such action as is
required under applicable law to obtain Shareholder Approval of the
transactions contemplated hereby, including a new Company employee
stock option plan with terms and conditions substantially similar to
those set forth on the Stock Option Term Sheet (the "New Stock Option
Plan") at the 1998 Annual Meeting, including making a recommendation
that the holders of shares of capital stock of the Company approve (a
"Board Recommendation") the adoption of the transactions contemplated
hereby, including the New Stock Option Plan;
(e) will maintain appropriate insurance on its assets and
business, including "key man" life insurance policies on the lives of
the employees of the Company set forth in Schedule 6.1(e) attached
hereto of not less than $12,000,000 per policy that may not be pledged
or assigned to any person other than a senior institutional lender to
the Company;
(f) use its best efforts to consummate the transactions
contemplated by this Agreement and the Transaction Documents, subject
to the terms and conditions set forth herein and therein;
(g) use its best efforts to obtain shareholder approval of this
Agreement and, the Transaction Documents to which the Company is a
party and the consummation of the transactions contemplated hereby and
thereby, to the extent applicable, including, if necessary,
determining at a meeting duly called and held that this Agreement, the
Transaction Documents and the transactions contemplated hereby and
thereby, taken together, are advisable and in the best interests of
the Company and its shareholders and making a Board Recommendation
with respect to the approval of this Agreement, the Transaction
Documents and the transactions contemplated hereby and thereby;
(h) use its best efforts to obtain all consents, approvals and
authorizations set forth in Schedule 4.23, including without
limitation, the Required Consents and to consult with ▇▇▇▇▇▇ and keep
▇▇▇▇▇▇ appraised of the progress with respect to such consents,
approvals and authorizations;
(i) from the date of this Agreement to the Closing Date, permit
▇▇▇▇▇▇ to attend all meetings of the Board of Directors, provided,
that ▇▇▇▇▇▇ shall excuse himself from the meeting of the Board of
Directors in the event that matters presented at a meeting of the
Board of Directors relating to the transactions contemplated by this
Agreement would create a conflict of interest;
(j) promptly provide ▇▇▇▇▇▇ with written notification of any
event, occurrence or other information of any kind whatsoever which in
any way affects the continued truth, correctness or completeness of
any representation or warranty made by the Company in this Agreement
or would cause any of the conditions to any party's obligations to
consummate the transactions contemplated by this Agreement not to be
fulfilled ("Updates"). All such written notifications shall
specifically identify any and all of the representations or warranties
affected by the event, occurrence or information that necessitated the
giving of such notice. Notwithstanding the foregoing, the Updates
shall not be given effect for the purposes of (i) determining the
accuracy of the representations and warranties contained in this
Agreement, (ii) determining the satisfaction of the conditions
precedent to the obligations of ▇▇▇▇▇▇ contained in Section 7 of this
Agreement, or (iii) limiting ▇▇▇▇▇▇'▇ ability to seek indemnification
from the Company pursuant to the terms of this Agreement;
(k) will, and will cause its Subsidiaries and each of their
Representatives to, give ▇▇▇▇▇▇ and his respective Representatives
reasonable access, upon reasonable notice and during normal business
hours, to the offices and other facilities and to the books and
records of the Company and its Subsidiaries and will cause the
Representatives of the Company and the Company's Subsidiaries to
furnish Furman and Representatives of ▇▇▇▇▇▇ with such financial and
operating data and such other information with respect to the business
and operations of the Company and its Subsidiaries as ▇▇▇▇▇▇ may from
time to time reasonably request;
(l) use its best efforts to cause the Purchased Shares to be
listed on the TSE and NASDAQ, including filing notice of the
transactions contemplated herein with the TSE forthwith and seeking
conditional approval of the TSE and NASDAQ to such listing prior to
the Closing Date;
(m) use its best efforts to maintain its status as a registrant
under the 1934 Act and a "reporting issuer" under the Securities Act
(Ontario) that is not in default or contravention of any requirement
of the 1934 Act and Securities Act (Ontario);
(n) use its best efforts to maintain the listing and posting for
trading of the Common Shares (including the Purchased Shares) on the
TSE and NASDAQ;
(o) shall, at the request of ▇▇▇▇▇▇, provide such information
and otherwise cooperate with ▇▇▇▇▇▇ in such consultations with ▇▇▇▇▇▇
and Investment Canada as ▇▇▇▇▇▇ may choose to have in connection with
the transaction contemplated hereunder, or for purposes of any
subsequent acquisition of securities of the Company; and
(p) use its best efforts to obtain the CIBC Opinion prior to
April 24, 1998.
6.2 Restrictions. Except as contemplated by this Agreement or
as expressly agreed to in writing by ▇▇▇▇▇▇, during the period from the
date of this Agreement to the Closing Date, the Company will, and will
cause each of its Subsidiaries to, conduct its operations according to its
ordinary and usual course of business and consistent with past practice and
use its and their respective reasonable best efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, advertisers, distributors and
others having business dealings with them and to preserve goodwill.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement or required by law prior to the
Closing Date, the Company will not, and will cause its Subsidiaries not to,
without the consent of ▇▇▇▇▇▇ and LV:
(a) adopt or amend in any material respect any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, pension, retirement, employment or other employee
benefit agreement, trust, plan or other arrangement for the benefit or
welfare of any director, officer or employee of the Company or any of
its Subsidiaries or increase in any manner the compensation or fringe
benefits of any director, officer or employee of the Company or any of
its Subsidiaries or pay any benefit not required by any existing
agreement or place any assets in any trust for the benefit of any
director, officer or employee of the Company or any of its
Subsidiaries (in each case, except with respect to employees and
directors in the ordinary course of business consistent with past
practice);
(b) incur any indebtedness for borrowed money in excess of
$300,000 in a single transaction (including involving a series of
related incurrences);
(c) expend funds, or commit to expend funds, in excess of
$300,000 in a single transaction (including a series of related
expenditures or commitments) other than preexisting preproduction
commitments or any budgeted expenditures for advertising in place at
January 1, 1998;
(d) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets other than immaterial properties or assets (or immaterial
portions of properties or assets), except in the ordinary course of
business consistent with past practice;
(e) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii)
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(f) authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber any shares of its
capital stock or the capital stock of any of its Subsidiaries, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights);
provided, however, that this covenant shall not restrict the Company
from issuing up to 75,000 stock options pursuant to a resolution of
the Board of Directors at the April 12, 1998 meeting of the Board of
Directors;
(g) propose, authorize or effect any change or amendment to its
articles, by-laws or equivalent Organizational Documents or alter
through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any material
Subsidiary of the Company;
(h) make or agree to make any acquisition of assets which is
material to the Company and its Subsidiaries, taken as a whole, except
for (x) purchases of inventory in the ordinary course of business or
(y) pursuant to purchase orders entered into in the ordinary course of
business which do not call for payments in a single transaction
(including in a series of related payments) in excess of $300,000 per
annum, which purchase orders are not preexisting preproduction
commitments or any budgeted expenditures for advertising in place at
January 1, 1998; or
(i) settle, pay or compromise any litigation (whether or not
commenced prior to the date of this Agreement) outside of the ordinary
course of business other than with the prior written consent of
▇▇▇▇▇▇.
6.3 No Solicitation.
(a) From and after the date hereof until the termination of this
Agreement, the Company and its affiliates shall not, and shall
instruct their representative officers, directors, employees, agents
or other representatives (including, without limitation, any
investment banker, attorney or accountant) (each, a "Representative")
not to,
(i) directly or indirectly solicit, initiate, or encourage
(including by way of furnishing non-public information or assistance),
or take any other action to facilitate, any inquiries or proposals
from any person that constitute, or may reasonably be expected to lead
to, an acquisition, purchase, merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction
involving 10% or more of the assets or any securities of, any merger
consolidation or business combination with, or any public announcement
of a proposal, plan, or intention to do any of the foregoing by, the
Company or any of its Subsidiaries (such transactions being referred
to herein as "Significant Transactions"),
(ii) enter into, maintain, or continue discussions or
negotiations with any person in furtherance of such inquiries or to
obtain a proposal for an Significant Transaction,
(iii) agree to or endorse any proposal for an Significant
Transaction, or
(iv) authorize or permit the Company's or any of its
affiliates' Representatives to take any such action.
(b) The Company will promptly notify ▇▇▇▇▇▇ of the receipt of
any proposal for a Significant Transaction, the terms and conditions
of such proposal and the identity of the person making it. The
Company also will promptly notify ▇▇▇▇▇▇ of any change to or
modification of such proposal for a Significant Transaction and the
terms and conditions thereof.
(c) The Company shall immediately cease and cause its affiliates
and its and their Representatives to cease any and all existing
activities, discussions or negotiations with any parties (other than
LV and ▇▇▇▇▇▇) conducted heretofore with respect to any of the
foregoing, and shall use its reasonable best efforts to cause any such
parties in possession of confidential information about the Company
that was furnished by or on behalf of the Company to return or destroy
all such information in the possession of any such party (other than
Investor) or in the possession of any Representative of any such
party.
6.4 Shareholders' Meeting.
(a) The Company, acting through the Board, shall, in accordance
with applicable law:
(i) duly call, give notice of, convene and hold the 1998
Annual Meeting and cause to be presented for consideration and
approval this Agreement and, if required, the Transaction Documents
and the transactions contemplated hereby and thereby, to the extent
applicable;
(ii) prepare and file with the appropriate regulatory
authorities such disclosure statements relating to this Agreement as
may be required by applicable law, and use its reasonable efforts (A)
to obtain and furnish the information required to be included by such
regulatory authorities in any such disclosure statement and, after
consultation with ▇▇▇▇▇▇, to respond promptly to any comments made by
such regulatory authorities with respect to any such disclosure
statement and cause all disclosure statements relating to this
Agreement required to be distributed to its shareholders to be mailed
to its shareholders in accordance with applicable law and (B) to
obtain the necessary approvals, if any, of this Agreement by its
shareholders; and
(iii) include in the disclosure statements to regulatory
authorities and its shareholders the Board Recommendation..
(b) The Company represents that the disclosure statements
required to be delivered to regulatory authorities and its
Shareholders in connection with the consummation of the transactions
contemplated by this Agreement will comply in all material respects
with the provisions of applicable securities laws and, on the date
filed with any such regulatory authority and on the date first
published, sent or given to the Company's shareholders, shall 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 made therein, in light of the circumstances under
which they were made, not misleading. Each of the Company, on the one
hand, and ▇▇▇▇▇▇, on the other hand, agree promptly to correct any
information provided by either of them for use in any such disclosure
statement if and to the extent that it shall have become false or
misleading, and the Company further agrees to take all steps
necessary, to the extent required by law, to cause a revised
disclosure statement to be filed with the appropriate regulatory
authority and to be disseminated to the holders of Common Shares, in
each case, as and to the extent required by applicable securities
laws.
7. CONDITIONS TO ▇▇▇▇▇▇'▇ OBLIGATIONS AT CLOSING.
The obligations of ▇▇▇▇▇▇ to effect the transactions to be
effected by it at the Closing shall be subject to the satisfaction, or
waiver, on or prior to the Closing Date of the following conditions:
7.1 Representations and Warranties. Each of the representations
and warranties of the Company contained in Section 4 shall be true and
correct in all material respects (except that they shall be true and
correct in all respects to the extent specifically qualified by materiality
or Material Adverse Effect) on and as of the Closing with the same effect
as though such representations and warranties had been made on and as of
the date of the Closing.
7.2 Performance. The Company shall have performed and complied
in all material respects (except that such performance and compliance shall
be in all respects to the extent such performance and compliance is
specifically qualified by materiality or Material Adverse Effect) with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing
and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
7.3 Compliance Certificate. The Company shall have delivered to
▇▇▇▇▇▇ at the Closing a certificate signed on its behalf by its Chief
Executive Officer certifying that the conditions specified in Sections 7.1
and 7.2 have been fulfilled.
7.4 No Litigation. There is no action, suit, investigation or
proceeding by any governmental authority or third party before any court,
arbitrator, administrative agency or other governmental authority pending
or threatened against or affecting the Company or any of its Subsidiaries,
any of their properties, revenues or assets, or this Agreement or any
Transaction Document, which could reasonably be expected to have a Material
Adverse Effect or which could reasonably be expected to materially affect
(i) in the opinion of ▇▇▇▇▇▇ the value of the Common Shares or (ii) the
Company's ability to perform its obligations under the Agreement or the
Transaction Documents.
7.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents incident thereto shall be reasonably satisfactory in form
and substance to ▇▇▇▇▇▇ (and its counsel), and they shall each have
received all such counterpart originals and certified or other copies of
such documents as they may reasonably request. Such documents shall
include (but not be limited to) the following:
(a) Certified Charter Documents. A copy of the articles and by-
laws of the Company (as amended through the Closing Date), certified
by the Secretary of the Company as true and correct copies thereof as
of the Closing.
(b) Corporate Actions. A copy of the resolutions of the Board
of Directors of the Company evidencing the approval of this Agreement
and, the Transaction Documents and all transactions contemplated
thereby and, the issuance of the Purchased Shares.
7.6 Transaction Documents.
(a) The Voting Trust Agreement, the Voting Agreement, the
Shareholders Agreement and the Warrant Agreement, shall continue to be
in full force and effect.
(b) Each of the agreements described below, shall have been
adopted or executed and delivered by the Persons party thereto, as the
case may be, on or before the Closing:
(i) the New Stock Option Plan and the stock option
agreements between the Company and CKE Associates LLC, ▇▇▇▇▇▇ and
▇▇▇▇▇▇, which are the definitive documents and agreements which
memorialize the terms set forth on the Stock Option Term Sheet; and
(ii) the Employment Agreement between ▇▇▇▇▇▇ and the
Company which is one of the definitive agreements that memorialize the
terms set forth on the Employment Agreement Term Sheet.
7.7 Shareholder Approvals. Shareholder approval of this
Agreement and, if required, the Transaction Documents and the transactions
contemplated hereby and thereby, to the extent required shall have been
obtained and, if requested by Investor, Shareholder Approvals for the New
Stock Option Plan shall have been received.
7.8 Board of Directors. ▇▇▇▇▇▇ shall have been elected Chairman
of the Board of Directors.
7.9 Listing. The Purchased Shares shall have been approved for
listing on the TSE, subject to notice of issuance.
7.10 Opinion of Counsel. ▇▇▇▇▇▇ shall have received from outside
legal counsel for the Company an opinion, dated as of the date of Closing,
in the form and substance acceptable to ▇▇▇▇▇▇ and the substantive
provisions of which are set forth on Schedule 7.10.
7.11 Closing of Other Investment. The closing of the
transactions contemplated by the Investment Agreement between the Company
and LV, dated April 13, 1998 (the "LV Investment Agreement"), shall occur
simultaneously with the Closing under this Agreement.
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to effect the transactions to be
effected by it at the Closing shall be subject to the satisfaction, or
waiver, on or prior to the Closing Date of the following conditions:
8.1 Representations and Warranties. The representations and
warranties of ▇▇▇▇▇▇ contained in Section 5 shall be true and correct in
all material respects on the date of the Closing with the same effect as
though such representations and warranties had been made on and as of the
Closing.
8.2 Payment of Purchase Price. ▇▇▇▇▇▇ shall have delivered to
the Company the Purchase Price for the Purchased Shares specified for
▇▇▇▇▇▇ in Section 2 hereof in accordance with the provisions of Section 3.
8.3 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents incident thereto shall be reasonably satisfactory in form
and substance to the Company and to the Company's legal counsel, and the
Company shall have received all such counterpart originals and certified or
other copies of such documents as it may reasonably request.
8.4 Shareholder Approvals. Shareholder approval of this
agreement and the Transaction Documents to which the Company is a party and
the transactions contemplated hereby and thereby, to the extent required
shall have been obtained.
8.5 Listing. The Purchased Shares shall have been approved for
listing on the TSE, subject to notice of issuance.
8.6 Fairness Opinion. The Company shall have received the CIBC
Opinion.
8.7 Private Placement Questionnaire. ▇▇▇▇▇▇ shall have
delivered a private placement questionnaire to the Toronto Stock Exchange.
9. TERMINATION.
9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) by either the Company or ▇▇▇▇▇▇, if the Closing shall not
have occurred prior to September 30, 1998;
(b) by either the Company or Investor, if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction; or
(c) by ▇▇▇▇▇▇ if either the Company or LV terminates this
Agreement pursuant to the LV Investment Agreement.
9.2 Effect of Termination. In the event of a termination of
this Agreement pursuant to Section 9.1, this Agreement will become void and
of no further force and effect, except for the provisions of Sections 10.1,
10.3, 10.5, 10.9, 10.11, 10.12, 10.13, 10.14 and this Section 9.2;
provided, however, nothing in this Section 9.2 will be deemed to release
any party from any liability for breach by any such party of the terms and
provisions of this Agreement or from the right to seek specific performance
by or seek equitable relief or similar remedies from the other party of its
obligations under this Agreement or any Transaction Document.
10. MISCELLANEOUS
10.1 Survival. Except for the covenants and agreements contained
in Section 10.11 hereof, which shall survive through the date prescribed in
the applicable statute of limitations, the representations, warranties,
covenants and agreements of the parties set forth in this Agreement shall
not survive the Closing.
10.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Neither party may assign this
Agreement without the prior written consent of the other party, except that
▇▇▇▇▇▇ may assign his rights under this Agreement to trusts and other
entities for bona fide estate planning purposes without the Company's
consent.
10.3 Governing Law. This Agreement shall be governed by and
construed under the internal laws of the State of New York, without
reference to principles of conflict of laws or choice of laws.
10.4 Currency. Unless otherwise indicated, all dollar amounts
referred to in this Agreement are expressed in U.S. funds.
10.5 Public Announcements; Confidentiality. This Agreement, the
Transaction Documents and any other related documents and the transactions
contemplated hereby and thereby shall be kept confidential by the parties
hereto until the Closing Date and no public announcement, press release or
public filing concerning this Agreement, the Transaction Documents or any
related documents or the transactions contemplated hereby and thereby shall
be made by either party except with the consent of the other party or
except as may be required by law and applicable stock exchange and NASDAQ
regulations.
10.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.7 Time of Essence. Time shall be of the essence of this
Agreement.
10.8 Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer
to sections and paragraphs hereof and exhibits and schedules attached
hereto, all of which exhibits and schedules are incorporated herein by this
reference.
10.9 Notices. All notices, requests, demands and other
communications shall be in writing and shall be deemed to have been duly
given if personally delivered or sent by United States or Canadian mails or
by telegram or telex confirmed by letter, or by facsimile transmission,
receipt confirmed, to the address set forth below. All notices requiring
timely attention shall be sent by facsimile transmission, telex or
overnight mail. Any notice shall be deemed received, unless earlier
received, (a) if sent by certified or registered mail, return receipt
requested, when actually received, (b) if sent by overnight mail, on the
next Business Day, (c) if sent by telegram or telex, on the date sent, and
(d) if sent by facsimile transmission or delivered by hand, on the date of
receipt.
Notices to the Company shall be addressed as follows:
Livent Inc.
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
P.O. Box 247, Suite 4405
Toronto, Ontario
Canada ▇▇▇ ▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Notices to ▇▇▇▇▇▇ shall be addressed as follows:
▇/▇ ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇.▇.▇.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a courtesy copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇.▇.▇.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
10.10 No Finder's Fees. Each party represents that it
neither is nor will be obligated for any finder's or broker's fee or
commission in connection with this transaction, other than the anticipated
payments by the Company to the persons and in the amounts as set forth in
Schedule 10.10 attached hereto. ▇▇▇▇▇▇ agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation
in the nature of a finders' or broker's fee (and any asserted liability)
for which ▇▇▇▇▇▇ or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless ▇▇▇▇▇▇ from any liability for any commission or compensation in
the nature of a finder's or broker's fee (and any asserted liability) for
which the Company or any of its officers, employees or representatives is
responsible.
10.11 Costs and Expenses. All costs in connection with the
preparation, execution, delivery and performance of this Agreement and the
transactions contemplated hereby (including, irrespective of whether the
Closing shall have occurred, costs incurred by ▇▇▇▇▇▇, which include,
without limitation, reasonable solicitor and attorney fees) shall be borne
by the Company, including in the event that the transactions contemplated
by this Agreement fail to be consummated for any reason.
10.12 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and ▇▇▇▇▇▇.
Any amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any Purchased Shares at the time outstanding,
each future holder of such securities, and the Company.
10.13 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provisions shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provisions were so excluded and
shall be enforceable in accordance with its terms.
10.14 Entire Agreement. This Agreement, together with any
exhibits or schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to
the subject matter hereof.
10.15 Further Assurances. From and after the date of this
Agreement, upon the request of ▇▇▇▇▇▇ or the Company, the Company and
▇▇▇▇▇▇ shall execute and deliver such instruments, documents or other
writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the
intent and purposes of this A
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
LIVENT INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and
Chief Executive Officer
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇ ▇. ▇▇▇▇▇▇