1
EXHIBIT 99.7
ARRANGEMENT AGREEMENT
THIS ARRANGEMENT AGREEMENT made this 10th day of September, 2001
AMONG:
DIEBOLD, INCORPORATED, a corporation incorporated under the
Laws of Ohio ("Buyer")
AND:
DIEBOLD ACQUISITION LTD., a company incorporated under the
Laws of British Columbia and a wholly owned subsidiary of Buyer ("Sub")
AND:
GLOBAL ELECTION SYSTEMS INC., a company amalgamated under the
Laws of British Columbia ("Target").
WHEREAS:
A. The respective Boards of Directors of Buyer, Sub and Target have
approved this Agreement and the Arrangement, upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
Target Common Share, other than any Subject Shares, will be exchanged for Buyer
Common Stock at the Exchange Ratio and the Cash Consideration in accordance with
the Plan of Arrangement;
B. Buyer and Target desire to make certain representations, warranties,
covenants and agreements in connection with the Arrangement and also to
prescribe various conditions to the Arrangement; and
C. The Board of Directors of Target, after receiving advice from the
Financial Advisor and legal advice and after considering other factors, has
determined that it would be advisable and in the best interests of Target and
the Target Common Shareholders for Target to enter into this Agreement and to
effect the Arrangement.
NOW THEREFORE in consideration of the mutual representations,
warranties, covenants and agreements set out in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Parties agree that:
1. THE ARRANGEMENT
1.1 Process. Subject to the terms and conditions of this Agreement:
(a) As soon as reasonably practicable after the execution of this
Agreement, and in any event before September 14, 2001, Target
shall file, proceed with and diligently prosecute an
application to the Court pursuant to subsection 252(2) of the
Company Act for the Interim Order;
2
(b) Target shall call and hold the Extraordinary General Meeting
as soon as reasonably practicable after obtaining the Interim
Order, and in any event shall hold the Extraordinary General
Meeting before October 19, 2001;
(c) In connection with the Extraordinary General Meeting, Target,
in consultation with Buyer, shall prepare, file and
distribute, in accordance with the applicable Legislation, to
the Target Common Shareholders, in a timely manner, the
Circular (and any amendments or supplements thereto) and such
other documents as may be necessary or desirable to permit the
Target Common Shareholders to vote on whether to approve (i)
the Arrangement and (ii) the issuance of Target Common Shares
pursuant to the Loan Documents and the Contract Manufacturing
Agreement, dated June 21, 2001 (the "Contract Manufacturing
Agreement"), between Buyer and Target, as amended by Amendment
No. 1 on August 3, 2001 (together, the "Share Issuance"), and
Buyer and Target jointly shall prepare the form of Letter of
Transmittal and such other documents as may be necessary or
desirable to effect the Arrangement;
(d) Target shall solicit proxies to be voted at the Extraordinary
General Meeting in favour of the resolution approving the
Arrangement and the Share Issuance;
(e) Target shall conduct the Extraordinary General Meeting in
accordance with the Interim Order, the Constituent Documents
of Target and as otherwise required by the Legislation;
(f) If the Arrangement is approved at the Extraordinary General
Meeting as set out in the Interim Order, as soon as reasonably
practicable thereafter, Target shall take the necessary steps
to submit the Arrangement to the Court and proceed with and
diligently prosecute an application for the Final Order; and
(g) If the Final Order is obtained, as soon as reasonably
practicable thereafter and subject to the fulfillment or the
waiver of each of the conditions referred to in Article 2 of
this Agreement, (i) Buyer shall provide the Transfer Agent (as
defined in the Plan of Arrangement) with sufficient funds and
shares of Buyer Common Stock to complete the transactions
contemplated by the Plan of Arrangement and (ii) Target shall
file a certified copy of the Final Order with the Plan of
Arrangement and such other documents as are required to be
filed under the Company Act to give effect to the Arrangement
pursuant to the Company Act and forthwith carry out the terms
of the Plan of Arrangement.
1.2 Arrangement Circular. Buyer shall in a timely and expeditious
manner furnish to Target all information regarding itself and Sub as may
reasonably be required to be included in the Circular pursuant to the
Legislation and any other filings required to be made under the Legislation in
connection with the transactions contemplated herein. Each of Target and Buyer
shall ensure that the information relating to it (and its respective
Subsidiaries) that is contained in the Circular does not contain any
"misrepresentation", as that term is construed under the applicable Legislation.
2
3
2. CONDITIONS TO THE ARRANGEMENT
2.1 Conditions in Favour of Buyer. The obligations of Buyer to complete
the transactions contemplated by the Arrangement shall be subject to the
fulfillment, or the waiver by Buyer, of the conditions set out in Schedule C,
each of which is for the exclusive benefit of Buyer and may be waived by Buyer
at any time, in whole or in part, in its sole discretion without prejudice to
any other rights that it may have.
2.2 Conditions in Favour of Target. The obligations of Target to
complete the transactions contemplated by the Arrangement shall be subject to
the fulfillment, or the waiver by Target, of the conditions set out in Schedule
D, each of which is for the exclusive benefit of Target and may be waived by
Target at any time, in whole or in part, in its sole discretion without
prejudice to any other rights that it may have.
2.3 Conditions in Favour of Buyer and Target. The respective
obligations of Buyer and Target to complete the transactions contemplated by the
Arrangement shall be subject to the fulfillment, or the waiver on the part of
each of Buyer and Target, of the conditions set out in Schedule E, each of which
may be waived by Buyer or Target at any time, in whole or in part, in its sole
discretion without prejudice to any other rights that it may have.
2.4 Satisfaction, Waiver and Release of Conditions. The conditions
provided for in this Section shall be deemed conclusively to have been
satisfied, waived or released when a certified copy of the Final Order with the
Plan of Arrangement and such other documents as are required to be filed under
the Company Act to give effect to the Arrangement are filed in compliance with
Section 1.1(g) hereof.
3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Target. Except as expressly
disclosed in the section of the Target Disclosure Letter corresponding to the
paragraph to which such disclosure relates, Target represents and warrants to
Buyer as to those matters set forth in Schedule F.
3.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Target as to those matters set forth in Schedule G.
3.3 Survival of Representations, Warranties and Covenants. No
investigation by or on behalf of any Party shall mitigate, diminish or affect
the representations and warranties made by any other Party. The representations
and warranties of the Parties contained in this Agreement shall terminate upon,
and shall not survive, the Effective Time. This Section 3.3 shall not limit any
covenant or agreement of the Parties which by its terms contemplates performance
after the Effective Time.
4. COVENANTS
4.1 General. Each of Buyer and Target shall use its reasonable best
efforts to satisfy each of the conditions precedent to be satisfied by it and to
take, or cause to be taken, all other action and to do, or cause to be done, all
other things necessary, proper or advisable to permit the
3
4
completion of the Arrangement in accordance with this Agreement and the
Legislation and to cooperate with each other in connection therewith.
4.2 General Covenant of Target. Target shall use its reasonable best
efforts to:
(a) Provide notice to, and obtain all Required Consents from,
other parties to each Material Contract to which it is a party
or by which it or its Properties is bound or affected
(including, without limitation, loan agreements, leases,
pledges, guarantees and security) and any applicable
Governmental Authority; provided that in connection therewith,
neither Target nor its Subsidiaries shall make any expenditure
and no Material Contract shall be amended to increase the
amount payable thereunder or otherwise be more burdensome to
Target or its Subsidiaries, as the case may be, than the terms
existing at the date of this Agreement, without the prior
written approval of Buyer;
(b) Obtain the Interim Order, the Final Order and the approval of
the Arrangement and the Share Issuance at the Extraordinary
General Meeting of the Target Common Shareholders in
accordance with the Interim Order; and
(c) If any state or provincial takeover statute or securities or
similar statute becomes applicable to this Agreement, the
Share Issuance or the Arrangement, take all action reasonably
necessary to ensure that the Arrangement may be consummated as
promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation
on this Agreement, the Share Issuance or the Arrangement.
4.3 Defence of Proceedings. Target shall use its reasonable best
efforts to vigorously defend, or cause to be defended, any lawsuit or other
legal proceeding brought against it or any of its Affiliates challenging this
Agreement or the completion of the Arrangement. Target shall not settle or
compromise any claim brought in connection with the Arrangement or this
Agreement prior to the Effective Date without the prior written consent of
Buyer.
4.4 Transfer Agent. Target shall permit its registrar and transfer
agent to act as depositary or Transfer Agent (as defined in the Plan of
Arrangement) in connection with the Arrangement. Buyer shall make arrangements
for all payments required to be made by it as contemplated pursuant to Section
2.1(b) of the Plan of Arrangement to be made at the time of completion of the
transactions contemplated in the Plan of Arrangement.
4.5 Business in the Ordinary Course. During the period from the date of
this Agreement to the Effective Time, Target shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and, to the extent consistent therewith, use all
commercially reasonable 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, distributors and others having business dealings with them to the end
that its goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, except as
4
5
otherwise consented to or approved by Buyer in writing or as expressly
contemplated or permitted by this Agreement, Target shall not, and shall not
permit any of its Subsidiaries to:
(a) Alter any of the provisions of the Constituent Documents of
Target or any of its Subsidiaries;
(b) Split, combine or reclassify any shares of its or its
Subsidiaries' capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in
substitution for, its or its Subsidiaries' shares of capital
stock;
(c) Purchase, redeem or otherwise acquire any shares of its
capital or any shares of capital stock of its Subsidiaries or
any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(d) Issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Encumbrance any of its or its Subsidiaries'
shares of capital stock or other securities or any securities
convertible into, or any rights, warrants or options to
acquire, any such shares, securities or convertible
securities;
(e) Authorize or make any capital expenditures other than as set
forth in Target's capital expenditures budget for 2001
previously delivered to Buyer;
(f) Purchase, sell or transfer any assets or Properties, other
than in the ordinary course of business consistent with past
practice;
(g) Acquire or sell any business;
(h) Enter into or amend any agreement with respect to any Target
Stock Option;
(i) Enter into, modify or amend any Material Contract of which
Target or any of its Subsidiaries has the benefit, other than
in the ordinary course of business consistent with past
practice;
(j) Incur or become liable for any indebtedness for or in respect
of borrowed money or guarantee or become liable in respect of
any indebtedness of any other Person for or in respect of
borrowed money;
(k) Enter into any swap or other derivative transaction;
(l) Make any loans, advances or capital contributions to, or
investments in, any other Person, other than to the Company or
any wholly owned Subsidiary of the Company or to officers and
employees of the Company or any of its Subsidiaries for
travel, business or relocation expenses in the ordinary course
of business;
(m) Lease, license, mortgage, charge or otherwise encumber or
subject to any Encumbrance any of its Property or assets,
including, without limitation, any Intellectual Property of
Target;
5
6
(n) Declare, set aside or pay any dividends, including for the
purpose of effecting a share subdivision, or make any payment
or distribution to its shareholders;
(o) Establish, adopt, enter into, make or amend any collective
bargaining, bonus, profit sharing, compensation, stock option,
stock ownership, stock compensation, pension, retirement,
deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee of Target or
any of its Subsidiaries;
(p) Except (i) as required by Law or (ii) by the terms of any
collective bargaining agreement or other agreement currently
in effect to which Target or any of its Subsidiaries is a
party (A) increase the amount of compensation or benefits of,
or pay any severance to, or grant or agree to grant any
further compensation, additional benefits or pay any severance
to, any (x) director, (y) officer or (z) employee of Target or
any of its Subsidiaries with a base annual salary in excess of
$100,000 or (B) increase the amount of compensation or
benefits of, or pay severance to, any other employee of Target
or any of its Subsidiaries, other than in the case of this
clause (B) in the ordinary course of business consistent with
past practice;
(q) Cause the current insurance (or re-insurance) policies of
Target and its Subsidiaries to be cancelled or terminated or
any other coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement
policies underwritten by insurance and re-insurance companies
of nationally recognized standing providing coverage equal to
or greater than the coverage under the cancelled, terminated
or lapsed policies for substantially similar premiums are in
full force and effect;
(r) Pay, discharge or settle any claim or litigation that would
result in a liability to Target or its Subsidiaries in excess
of $25,000;
(s) Implement any material change in the present business,
affairs, capitalization or financial condition of Target and
its Subsidiaries, taken as a whole;
(t) Make any change to its accounting methods, principles or
practices, except as may be required by GAAP, or make or
change any Tax election or settle or compromise any material
tax liability or refund;
(u) Make any Tax election or take any action that, individually or
in the aggregate, is reasonably likely to increase its Tax
liability or adversely effect its Tax attributes;
(v) Resolve that it be wound up;
(w) Appoint or permit the appointment of a liquidator, receiver or
trustee in bankruptcy for Target or any of its Subsidiaries or
in respect of the Properties or assets of Target or any of its
Subsidiaries;
6
7
(x) Permit the making of an Order for the winding-up or
dissolution of Target or any of its Subsidiaries;
(y) Enter into or modify any Contractual Obligation with respect
to any of the matters set forth in this Section 4.5; or
(z) Take any action that would, or could reasonably be expected
to, render any representation or warranty made by Target in
this Agreement untrue.
4.6 Advice of Changes. Target and Buyer shall promptly advise the other
orally and in writing to the extent it has Knowledge of (i) any representation
or warranty made by it contained in this Agreement or the Option Agreement
becoming untrue or inaccurate in any respect, (ii) the failure of it (and, in
the case of Buyer, by Sub) to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, the Option Agreement or any other Transaction Document, and
(iii) any change or event having, or which is reasonably likely to have, a
Material Adverse Effect on such Party or on the truth of their respective
representations and warranties or the ability of the conditions set forth herein
to be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the Parties (or remedies
with respect thereto) or the conditions to the obligations of the Parties under
this Agreement.
4.7 Access to Information. Target shall, and shall cause its
Subsidiaries and the officers, directors, employees and agents of it and its
Subsidiaries to, afford to Buyer and its representatives and their officers,
employees and agents access at all reasonable times to Target's and its
Subsidiaries' businesses, Properties, assets, officers, employees, agents, books
and records (including all financial, operating, personnel, compensation, tax
and other data and information as Buyer through its officers, employees or
agents may reasonably request), subject, however, to such access not materially
interfering with the ordinary conduct of the businesses of Target and its
Subsidiaries.
4.8 Disclosure. The Parties shall consult with each other in good faith
with respect to any press release or similar public announcement (i) with
respect to this Agreement or any Transaction Document or the transactions
contemplated hereby or thereby or (ii) that names another Party or relates to a
business or commercial opportunity involving Target or its Subsidiaries;
provided, however, that nothing herein will prohibit any Party from issuing or
causing publication of any such press release or public announcement to the
extent that such Party determines such action to be required by Law or the rules
of any stock exchange on which its securities are listed for trading.
4.9 Target Directors' and Officers' Indemnification, Exculpation and
Insurance. (a) Buyer and Sub agree that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time (and rights for advancement of expenses) now existing in favor of
the current or former directors or officers of Target and its Subsidiaries as
provided in their respective Constituent Documents and any indemnification or
other agreements of Target as in effect on the date hereof shall survive the
Arrangement and shall continue in full force and effect in accordance with their
terms.
7
8
(b) For three years after the Effective Time, Buyer shall
maintain in effect Target's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time covering each
Person currently covered by Target's directors' and officers' liability
insurance policy on terms with respect to such coverage and amounts no less
favorable than those of such policy in effect on the date hereof; provided that
Buyer may substitute therefor policies of Buyer with respect to coverage and
amount no less favorable to such directors and officers; provided however, that
in no event shall Buyer be required to pay aggregate premiums for insurance
under this Section 4.9(b) in excess of the amount of the aggregate premiums paid
by Target in 2001 on an annualized basis for such purpose plus ten percent.
(c) The provisions of this Section 4.9 (i) are intended to be
for the benefit of, and will be enforceable by, the indemnified party and (ii)
are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or
otherwise.
4.10 Sub. Buyer shall take all necessary action to cause Sub to perform
its obligations under this Agreement and to consummate the Arrangement on the
terms and conditions set forth in this Agreement.
4.11 New York Stock Exchange Listing. Buyer shall use all commercially
reasonable efforts to cause the shares of Buyer Common Stock to be issued in the
Arrangement to be approved for listing (subject to official notice of issuance)
on the New York Stock Exchange prior to the Effective Time. To the Knowledge of
Buyer, there are no facts and circumstances that could reasonably be expected to
preclude the Buyer Common Stock to be issued in the Arrangement from being
approved for listing on the New York Stock Exchange.
4.12 Registration Statement. Unless an exemption from the registration
requirements of the Securities Act is available, as promptly as practicable
after the execution of this Agreement, Buyer shall prepare and file with the SEC
the Form S-4 in connection with the registration under the Securities Act of the
offer, sale and delivery of Buyer Common Stock to be issued in the Arrangement
pursuant to this Agreement. Buyer will use all commercially reasonable efforts
to have or cause the Form S-4 to become effective as promptly as practicable and
shall take any action required to be taken under any applicable federal or state
securities Laws in connection with the issuance of shares of Buyer Common Stock
in the Arrangement.
4.13 Affiliates. Not less than 45 days prior to the date of the
Extraordinary General Meeting, Target shall deliver to Buyer a letter
identifying all persons who, in the judgment of Target, may be deemed at the
time this Agreement is submitted for adoption by the Target Common Shareholders,
"affiliates" of Target for purposes of Rule 145 under the Securities Act and
applicable SEC rules and regulations, and such list shall be updated as
necessary to reflect changes from the date thereof. Target shall use reasonable
best efforts to cause each person identified on such list to deliver to Buyer
not later than ten days prior to the Effective Time, a written agreement in the
form attached as Schedule 4.13 hereto.
8
9
4.14 Fairness Opinion. No later than five business days following the
execution of this Agreement, Target shall deliver to Buyer a fully executed copy
of the Fairness Opinion delivered to the Board of Directors of Target .
5. OTHER ACQUISITION PROPOSALS
5.1 No Fettering of Discretion. Nothing in Section 5.2 shall be
interpreted to extend to the acts or omissions of any Person acting in his
capacity as a director of Target or otherwise to ▇▇▇▇▇▇ the proper exercise of
discretion by such Person.
5.2 Non-Solicitation. (a) Target agrees with Buyer that (except to the
extent Buyer has otherwise consented in writing) until this Agreement is
terminated:
(i) Target shall immediately cease and cause to be terminated
and shall cause its Subsidiaries to immediately cease and cause to be
terminated any existing discussions or negotiations with any Person
(other than Buyer) with respect to any Alternative Proposal;
(ii) Target shall not waive or vary any terms or conditions of
any confidentiality or standstill agreements that it entered into with
any Persons that were considering any Alternative Proposal;
(iii) Target shall close all data or information rooms
previously maintained regarding Target in order to solicit bids or
expressions of interest in relation to Target or its Properties or
assets and request the return or destruction of all confidential
information from such parties; and
(iv) None of Target or its Subsidiaries shall (directly or
indirectly, through investment bankers or otherwise) solicit, initiate
or encourage submission of proposals or offers from any Person relating
to, or that could reasonably be expected to lead to, or facilitating or
encouraging any effort or attempt with respect to, any Alternative
Proposal or participate in any negotiations regarding, or furnish to
any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in or enter into
any agreement relating to, any Alternative Proposal; provided, however,
that, prior to the Extraordinary General Meeting, Target may, in
response to an unsolicited written proposal with respect to an
Alternative Proposal from a third party that did not result from a
breach of this Section 5.2 and that the Board of Directors of Target
determines, in its good faith and reasonable judgment, and after
consultation with and the receipt of a written opinion of the Financial
Advisor, that such proposal is a Superior Proposal, enter into a
customary confidentiality agreement, furnish information to, and
negotiate, explore or otherwise engage in substantive discussions with,
such third party, but only if the Board of Directors of Target
determines, in its good faith and reasonable judgment after
consultation with and the receipt of a written opinion from its outside
legal counsel, that taking such action is required to comply with the
fiduciary duties of the Board of Directors of Target under applicable
Law.
(b) Except as expressly permitted by this Section 5.2, neither
the Board of Directors of Target nor any committee thereof shall (i) withdraw or
modify, or propose publicly
9
10
to withdraw or modify, in a manner adverse to Buyer, the approval or
recommendation by such Board of Directors or such committee of the Arrangement
or this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Alternative Proposal, or (iii) cause Target to enter into any
Acquisition Agreement. Notwithstanding the foregoing, prior to the Extraordinary
General Meeting, in response to an unsolicited written proposal with respect to
an Alternative Proposal from a third party that did not result from a breach of
this Section 5.2 and that the Board of Directors of Target determines, in its
good faith and reasonable judgment, (1) after consultation with and the receipt
of a written opinion of the Financial Advisor, that such proposal is a Superior
Proposal, and (2) after consultation with and the receipt of a written legal
opinion from its outside legal counsel, that taking any of the actions set forth
in clauses (i) or (ii) above is required to comply with the fiduciary duties of
the Board of Directors of Target under applicable Law, the Board of Directors of
Target may withdraw or modify its approval or recommendation of the Arrangement
or this Agreement or approve or recommend such Superior Proposal; provided,
however, that Target gives Buyer at least ten business days' prior written
notice of its Board of Directors' intention to take such action so that Buyer
can make a counterproposal as contemplated by Section 6.1(h) (provided, further,
that the foregoing will in no way limit or otherwise affect Buyer's right to
terminate this Agreement pursuant to Section 6.1(g) or Section 6.1(h) at such
time as the requirements of such subsection have been met). Any such withdrawal
or modification of the recommendation of the Board of Directors of Target of the
Arrangement or this Agreement or any such approval or recommendation of such
Superior Proposal will not change the approval of the Board of Directors of
Target for purposes of causing any antitakeover statute or other Law to be
inapplicable to the Arrangement. Nothing in this Section 5.2(b) shall be
construed to (i) permit Target to terminate this Agreement (except as provided
in Section 6.1 of this Agreement), (ii) permit Target to enter into any
agreement with respect to any Alternative Proposal, or (iii) affect any other
obligation of Target under this Agreement.
(c) Target shall (i) immediately (and in any event, no later
than one business day after receipt) advise Buyer orally and in writing of any
request for information or any inquiries or proposals relating to an Alternative
Proposal, the material terms and conditions of such request or Alternative
Proposal and the identity of the Person making such request or Alternative
Proposal and (ii) promptly deliver to Buyer a copy of such written inquiry or
proposal and copies of information provided to or by any third party relating
thereto. Target will keep Buyer informed of the status and material details
(including amendments or proposed amendments) of any such request or Alternative
Proposal.
5.3 Notice to Representatives. Target shall ensure that its respective
officers and directors (and those of its Subsidiaries) and any investment
bankers or other advisors that it has retained are aware of the provisions of
this Agreement, and Target shall be responsible for any breach of those
provisions by any such Person.
6. TERMINATION AND AMENDMENT OF AGREEMENT
6.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time (or, in the case of Section 6.1(g) or Section 6.1(h), at any
time prior to the Extraordinary General Meeting), by action taken or authorized
by the Board of Directors of the terminating party or parties:
10
11
(a) By mutual written consent of Buyer and Target; or
(b) By either Buyer or Target, if the Effective Time shall not
have occurred on or before the Termination Date; provided,
however, that the right to terminate this Agreement under this
Section 6.1(b) shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has
been the primary cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date; or
(c) By either Buyer or Target, if any Governmental Authority shall
have issued an Order, or taken any other action (which the
Parties shall have used their reasonable best efforts to
resist, resolve or lift, as applicable) permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such Order or
other action shall have become final and nonappealable; or
(d) By either Buyer or Target, if the Target Shareholder Approval
has not been obtained by reason of the failure to obtain such
approval at the Extraordinary General Meeting; or
(e) By Target, if Buyer shall have breached or failed to perform
any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the
conditions set forth on Schedule D have not been satisfied on
the Termination Date or are not capable of being satisfied on
or before the Termination Date; or
(f) By Buyer, if Target shall have breached or failed to perform
any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the
conditions set forth on Schedule C have not been satisfied on
the Termination Date or are not capable of being satisfied on
or before the Termination Date; or
(g) By Buyer, if (i) the Board of Directors of Target shall have
withdrawn, modified or changed its recommendation or approval
in respect of the Arrangement or the Share Issuance in a
manner adverse to Buyer; (ii) the Board of Directors of Target
shall have recommended any proposal other than by Buyer in
respect of an Alternative Proposal; or (iii) in the case of
clauses (i) and (ii), the Board of Directors of Target shall
have resolved to take any such action; or
(h) By Target, if the Board of Directors of Target has provided
written notice to Buyer that Target intends to terminate the
Agreement and enter into an Acquisition Agreement with respect
to a Superior Proposal pursuant to Section 5.2(b) (with such
termination becoming effective, if Buyer does not make the
offer contemplated by clause (iii) below, on the Business Day
immediately following the ten Business Day period contemplated
thereby, or, if later, upon Target thereafter entering into
such Acquisition Agreement); provided, however, that (i)
Target shall have complied with Section 5.2 hereof in all
material respects;
11
12
(ii) Target shall have attached the most current written
version of such Superior Proposal (or a summary containing all
material terms and conditions of such Superior Proposal) to
such notice; (iii) Buyer does not make, within ten Business
Days after receipt of Target's written notice pursuant to this
Section 6.1(h), an offer that the Board of Directors of Target
shall have reasonably concluded in good faith (following
consultation with its Financial Advisor and outside counsel)
is as favorable to the Target Common Shareholders as such
Superior Proposal; and (iv) Target pays the Buyer Termination
Fee in accordance with Section 6.2(b) concurrently with such
termination; or
(i) By Buyer, if Target shall have materially breached its
obligations under Section 1.1 or Section 5.2 of this
Agreement; or
(j) By Buyer, if the Effective Time shall not have occurred on or
before the Termination Date because any of the conditions for
the benefit of Buyer set forth in Schedule C shall not have
been satisfied on or before the Termination Date; or
(k) By Buyer, if Buyer determines in its reasonable judgment that
(i) Target does not own or have licenses to use all of the
Intellectual Property necessary to conduct Target's business
as it has been conducted, (ii) Target cannot remedy any
environmental problem within 30 days at a cost not to exceed
$250,000 in the aggregate, or (iii) there has occurred any
material adverse change in the business or assets of Target
since December 31, 2000 that has not been disclosed by Target
to Buyer in writing on or prior to June 19, 2001 or any other
material adverse change in the business or assets of Target
prior to the Effective Time.
6.2 Effect of Termination. (a) In the event of termination of this
Agreement by either Buyer or Target as provided in Section 6.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of any Party to this Agreement or their respective officers, directors or
Affiliates, except with respect to Article 7 and this Section 6.2, which
provisions shall survive such termination; provided that, notwithstanding
anything to the contrary contained in this Agreement, neither Target nor Buyer
shall be relieved or released from any liabilities or damages arising out of any
breach of this Agreement prior to such termination.
(b) Target will pay to Buyer an amount equal to the Buyer
Termination Fee if this Agreement is terminated pursuant to Section 6.1(d),
6.1(f), 6.1(g), 6.1(h), 6.1(i), 6.1(j) or 6.1(k).
(c) The Parties hereto acknowledge that the agreements
contained in this Section 6.2 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, no Party
would enter into this Agreement; accordingly, if any Party fails promptly to pay
any amount due (or if Target fails to execute any documents in relation to the
Buyer Termination Fee) pursuant to this Section 6.2, and, in order to obtain
such payment, a Party commences a suit which results in a judgment against
another Party for any amounts set forth in this Section 6.2, such Party shall
pay to the other Party its costs and expenses (including attorney's fees and
expenses) in connection with such suit, together with interest on any amounts
adjudged to be due and owing at the prime rate of Citibank, N.A. in effect on
the date such payment was required to be made. The Parties hereto agree that any
remedy or amount payable
12
13
pursuant to this Section 6.2 shall not preclude any other remedy or amount
payable hereunder, and shall not be an exclusive remedy for any breach of any
representation, warranty, covenant or agreement contained in this Agreement.
7. GENERAL
7.1 Time. Time shall be of the essence of this Agreement in each and
every matter or thing herein provided.
7.2 Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) (if so delivered or dispatched prior to 5:00 p.m.,
local time, on a Business Day in the place of receipt; otherwise such notice
will be deemed delivered or dispatched on the next Business Day) or one Business
Day after having been dispatched by a nationally recognized overnight courier
service to the appropriate party at the address specified below or to such other
address or addresses as any Party may from time to time designate as to itself
by like notice:
If to Target to:
c/o Global Election Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with copies to (which shall not constitute notice):
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
5400 Renaissance Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
Gowling ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP
▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
13
14
If to Buyer or Sub to:
Diebold, Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Senior Vice President and
Chief Financial Officer
and
Diebold, Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Vice President and General Counsel
with copies to (which shall not constitute notice):
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Bark
and
Fasken ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
7.3 Expenses. Except as otherwise expressly provided herein, each of
the Parties hereto will pay its own expenses relating to the transactions
contemplated by this Agreement and the Transaction Documents, including, without
limitation, the fees and expenses of its respective counsel, financial advisors
and accountants.
7.4 Assignment Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns, but will not be assignable or delegable by any
Party (including an assignment by operation of Law) without the prior written
consent of Buyer and Target; provided that Buyer and Sub may assign its and/or
their rights and obligations under this Agreement to Buyer or any Affiliate of
14
15
Buyer provided that no such assignment will relieve Buyer of any of its
obligations under this Agreement.
7.5 Waiver. Either Buyer (on behalf of itself and Sub) or Target, by
written notice to the other may (a) extend the time for performance of any of
the obligations or other actions of the other under this Agreement, (b) waive
any inaccuracies in the representations or warranties of the other contained in
this Agreement, (c) waive compliance with any of the conditions or covenants of
the other contained in this Agreement, or (d) waive or modify performance of any
of the obligations of the other under this Agreement. Except as provided in the
immediately preceding sentence, no action taken pursuant to this Agreement will
be deemed to constitute a waiver of compliance with any representations,
warranties or covenants contained in this Agreement. Any waiver of any term or
condition will not be construed as a subsequent waiver of the same term or
condition, or a waiver of any other term or condition of this Agreement. No
failure or delay of any Party in asserting any of its rights hereunder will
constitute a waiver of any such rights.
7.6 Entire Agreement. This Agreement (including the Schedules hereto)
and the Transaction Documents supersede any other agreement, whether written or
oral, that may have been made or entered into by any Party or any of their
respective Affiliates (or by any director, officer or representative thereof)
prior to the date hereof relating to the subject matter of this Agreement,
including, without limitation, the letter agreement between Buyer and Target
dated June 19, 2001 and the amendment thereof dated as of August 3, 2001. This
Agreement (together with the Schedules hereto) and the Transaction Documents
constitute the entire agreement with respect to the subject matter of this
Agreement by and among the Parties hereto and there are no agreements or
commitments by or among such Parties or their Affiliates with respect to the
subject matter of this Agreement except as expressly set forth herein and
therein.
7.7 Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by Buyer (without the joinder of Sub) and Target to be necessary,
desirable or expedient to further the purposes of this Agreement or to clarify
the intention of the parties hereto.
7.8 Rights of the Parties. Except as provided in Section 4.9, nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any Person other than the Parties hereto and their
respective Affiliates any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
7.9 Governing Law; Jurisdiction; Consent to Service of Process. (a)
This Agreement and the legal relations among the Parties hereto will be governed
by and construed in accordance with the substantive Laws of the State of
Delaware applicable thereto, without giving effect to the principles of conflict
of Laws thereof; except that, any application made in respect of the Interim
Order, the Final Order and any appeals related thereto are subject to the Laws
of the Province of British Columbia and the Laws of Canada.
(b) Except as otherwise set forth in this Agreement, each
Party hereby irrevocably and unconditionally submits, for itself and its
Property, to the exclusive jurisdiction of any state or federal court located in
the State of Delaware (each, a "Delaware Court"), and any
15
16
appellate court from any such court, in any suit, action or proceeding arising
out of or relating to this Agreement, the Option Agreement or any other
Transaction Document, or for recognition or enforcement of any judgment
resulting from any such suit, action or proceeding, and each Party hereby
irrevocably and unconditionally agrees that all claims in respect of any such
suit, action or proceeding may be heard and determined in a Delaware Court.
(c) It will be a condition precedent to each Party's right to
bring any such suit, action or proceeding that such suit, action or proceeding,
in the first instance, be brought in a Delaware Court (unless such suit, action
or proceeding is brought solely to obtain discovery or to enforce a judgment),
and if each such court refuses to accept jurisdiction with respect thereto, such
suit, action or proceeding may be brought in any other court with jurisdiction.
(d) No Party may move to (i) transfer any such suit, action or
proceeding from a Delaware Court to another jurisdiction, (ii) consolidate any
such suit, action or proceeding brought in a Delaware Court with a suit, action
or proceeding in another jurisdiction unless such motion seeks solely and
exclusively to consolidate such suit, action or proceeding in a Delaware Court,
or (iii) dismiss any such suit, action or proceeding brought in a Delaware Court
for the purpose of bringing or defending the same in another jurisdiction.
(e) Each Party hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, (i) any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in a Delaware Court,
(ii) the defense of an inconvenient forum to the maintenance of such suit,
action or proceeding in a Delaware Court, and (iii) the right to object, with
respect to such suit, action or proceeding, that such court does not have
jurisdiction over such party. Each Party irrevocably consents to service of
process in any manner permitted by Law. Notwithstanding the foregoing, this
Section 7.9 will not apply to (x) any suit, action or proceeding by a Party
seeking indemnification or contribution pursuant to this Agreement or otherwise
in respect of a suit, action or proceeding against such Party by a third party
if such suit, action or proceeding by such Party seeking indemnification or
contribution is brought in the same court as the suit, action or proceeding
against such Party or (y) any suit, action or proceeding to enforce a judgment
of a Delaware Court.
7.10 Titles and Headings. Titles and headings to Articles and Sections
herein are inserted for convenience of reference only, and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
7.11 Certain Interpretive Matters and Definitions. (a) Unless the
context otherwise requires, (i) all references to Articles, Sections or
Schedules are to Articles, Sections or Schedules of or to this Agreement, (ii)
each term defined in this Agreement has the meaning assigned to it, (iii) each
accounting term not otherwise defined in this Agreement has the meaning assigned
to it in accordance with generally accepted accounting principles, (iv) "or" is
disjunctive but not necessarily exclusive, (v) words in the singular include the
plural and vice versa, (vi) all references to "$" or dollar amounts will be to
lawful currency of the United States of America, and (vii) the use in this
Agreement of the masculine pronoun in reference to a Party hereto shall be
deemed to include the feminine or neuter, and vice versa, as the context may
require.
16
17
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the Parties hereto by reason of the extent to which
any such Party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof.
7.12 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by Buyer, Target and Sub to express their
mutual intent, and no rule of strict construction will be applied against any
Party hereto.
7.13 Counterparts. This document may be executed in one or more
separate counterparts, each of which, when so executed, will be deemed to be an
original. Such counterparts will together constitute one and the same
instrument. This Agreement may be executed by facsimile signatures.
7.14 Remedies; Severability. It is specifically understood and agreed
that any breach of the provisions of this Agreement by any Person subject hereto
will result in irreparable injury to the other Parties hereto, that the remedy
at Law alone will be an inadequate remedy for such breach and that, in addition
to any other remedies which they may have, such other Parties may enforce their
respective rights by actions for specific performance (to the extent permitted
by Law). Whenever possible, each provision of this Agreement will be interpreted
in such a manner as to be effective and valid under applicable Law, but if any
provision of this Agreement is deemed prohibited or invalid under such
applicable Law, such provision will be ineffective to the extent of such
prohibition or invalidity, and such prohibition or invalidity will not
invalidate the remainder of such provision or the other provisions of this
Agreement.
7.15 Definitions. For the purposes of this Agreement, those terms
defined in Schedule A shall have the meanings attributed to them in that
Schedule.
7.16 Date for any Action. If the date on which any action is required
to be taken hereunder is not a Business Day in the place where the action is
required to be taken, such action shall be required to be taken on the next
succeeding day which is a Business Day in such place.
7.17 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF
OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.18 Schedules. The following are the Schedules to this Agreement,
which form an integral part hereof.
Schedule A - Definitions
Schedule B - Plan of Arrangement
Schedule C - Conditions for the Benefit of Buyer
Schedule C-7 - Form of Gowlings Opinion
Schedule C-9 - Intellectual Property Agreements
Schedule D - Conditions for the Benefit of Target
Schedule D-4 - Form of ▇▇▇▇▇, Day Opinion
17
18
Schedule E - Conditions for the Benefit of Buyer, Target and Sub
Schedule F - Representations and Warranties of Target
Schedule G - Representations and Warranties of Buyer
Schedule 2(c) - Form of Agreement with Optionholders
18
19
IN WITNESS WHEREOF the Parties hereto have signed this Agreement as of
the date first set out above.
DIEBOLD, INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President and
Chief Financial Officer
DIEBOLD ACQUISITION LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
GLOBAL ELECTION SYSTEMS INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Executive Officer
19
20
SCHEDULE A
DEFINITIONS
"ACCOUNTING RULES" means all applicable accounting requirements and the
published rules and regulations of the SEC with respect to the preparation of
financial statements contained in any report, form or filing with the SEC.
"ACQUISITION AGREEMENT" means any letter of intent, agreement in principle,
plan, arrangement or agreement relating to an Alternative Proposal.
"AFFILIATE" shall have the meaning attributed to it under the Exchange Act.
"AGREEMENT" means the Arrangement Agreement, together with the Schedules
attached thereto.
"ALTERNATIVE PROPOSAL" means any inquiry, proposal or offer from any Person
relating to any (i) direct or indirect acquisition or purchase of a business
that constitutes 15% or more of the net revenues, net income, Properties or
assets of Target and its Subsidiaries, taken as a whole, or 15% or more of any
class of equity securities of Target or any of its Subsidiaries, (ii) tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 15% or more of any class of equity securities of Target or
any of its Subsidiaries, or (iii) merger, consolidation, business combination,
share exchange, recapitalization, liquidation, dissolution or similar
transaction involving Target or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"ARRANGEMENT" means the arrangement to be undertaken in accordance with the Plan
of Arrangement set forth on Schedule B, subject to any amendment or variation
made in accordance with that Schedule.
"BUSINESS DAY" means any day other than a Saturday, Sunday or Canadian or U.S.
federal or British Columbia provincial holiday or a day on which banks are not
open for business in Vancouver, British Columbia or New York, New York.
"BUYER COMMON STOCK" means the common stock, par value US$.01 per share, of the
Buyer.
"BUYER DISCLOSURE LETTER" means the disclosure letter delivered by Buyer to
Target prior to the execution by Target of the Agreement.
"BUYER EXPENSES" means an amount equal to all out-of-pocket costs and expenses
of Buyer incurred in connection with this Agreement, the Option Agreement and
the transactions contemplated hereby and thereby and any litigation associated
therewith (including, without limitation, all SEC filing fees and all fees and
expenses payable to accountants, counsel, consultants and due diligence
expenses).
"BUYER SEC DOCUMENTS" means, collectively, all required reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) filed by the Buyer with the SEC since January
1, 2000 and prior to the date hereof.
A-1
21
"BUYER TERMINATION FEE" means an amount in cash equal to the sum of $1,000,000
and the Buyer Expenses.
"CIRCULAR" means the information circular of Target to be sent by Target to the
Target Common Shareholders in connection with the Extraordinary General Meeting.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended.
"COMPANY ACT" means the Company Act (British Columbia), as the same may be
amended or re-enacted or any successor legislation thereto.
"CONSTITUENT DOCUMENTS" of a Person means the certificate of incorporation,
by-laws, memorandum and articles of incorporation, or other similar governing
documents of such Person.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any security
issued by such Person or any agreement, contract, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"COURT" means the Supreme Court of British Columbia.
"EFFECTIVE DATE" means the date on which a certified copy of the Final Order
with the Plan of Arrangement and such other documents as are required to be
filed under the Company Act to give effect to the Arrangement have been accepted
for filing under Section 252 of the Company Act by the Registrar appointed under
the Company Act, which shall, at Buyer's option, be following the expiration of
any appeal period with respect to the Final Order or the Interim Order under the
Company Act.
"EFFECTIVE TIME" means the time on the Effective Date when the Arrangement will
become effective according to its terms.
"ENCUMBRANCE" means any lien, charge, encumbrance, title retention right,
security interest, pledge, hypothecation or right of others of any nature or
kind whatsoever.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and its Canadian equivalent.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"EXCHANGE RATIO" means the ratio of a share of Buyer Common Stock to be
exchanged for each whole Target Common Share equal to the quotient (rounded to
the nearest 1/100,000) determined by dividing (x) 0.908 by (y) the average of
the daily volume weighted average prices (based on a trading day from 9:30 a.m.
to 4:00 p.m. (New York City time)) of the Buyer Common Stock on the New York
Stock Exchange as reported by Bloomberg Financial LP using the AQR function for
the ten consecutive trading days ending with the trading day immediately
preceding the Effective Time; provided, that the Exchange Ratio shall not be
less than 0.02421 or greater than 0.03027.
A-2
22
"EXTRAORDINARY GENERAL MEETING" means the meeting (including any adjournment
thereof) of the Target Common Shareholders to approve the Arrangement.
"FAIRNESS OPINION" means the opinion of the Financial Advisor to the effect that
the consideration to be received under the Arrangement is fair to the Target
Common Shareholders from a financial point of view.
"FINAL ORDER" means the order of the Court approving the Arrangement.
"FINANCIAL ADVISOR" means J.J.B. ▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Inc.
"FORM S-4" means, if required, the registration statement filed by Buyer with
the SEC to register the Buyer Common Stock to be issued as part of the Exchange
Consideration (as defined in the Plan of Arrangement).
"GAAP" means Canadian generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state, provincial
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or pertaining
to government, including, without limitation, any quasi-governmental,
supranational, statutory, environmental or securities regulatory entity and any
stock exchange, court or arbitral body.
"HAZARDOUS SUBSTANCES" means: (A) those materials, pollutants and/or substances
defined in or regulated under any environmental Law, including the following
national Canadian statutes and their provincial counterparts, as each may be
amended from time to time, and all rules regulations and policies promulgated
thereunder: Canadian Environmental Protection Act, 1999, the Fisheries Act, the
Transportation of Dangerous Goods Act, 1992, the British Columbia Drinking Water
Protection Act, the British Columbia Health Act, the British Columbia Pesticide
Control Act and the British Columbia Waste Management Act; (B) those materials,
pollutants and/or substances defined in or regulated under the following United
States federal statutes and their state counterparts, as each may be amended
from time to time, and all rules, regulations and policies promulgated
thereunder: the Hazardous Materials Transportation Act of 1980, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Toxic Substances Control Act and the Clean Air Act; (C) petroleum and
petroleum products including crude oil and any fractions thereof; (D) natural
gas, synthetic gas and any mixtures thereof; (E) radon; (F) asbestos; (G) any
other contaminant; and (H) any materials, pollutants and/or substance with
respect to which any Governmental Authority requires environmental
investigation, monitoring, reporting or remediation.
"INTELLECTUAL PROPERTY" means without limitation any or all of the following and
all rights associated therewith: (A) all domestic and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
continuations and continuations-in-part thereof; (B) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data, customer lists,
rights of privacy and publicity, and all documentation relating to any of the
foregoing; (C) all copyrights,
A-3
23
copyright registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (D) all mask works, mask work
registrations and applications therefor; (E) all industrial designs and any
registrations and applications therefor; (F) all trade names, logos, common law
trademarks and service marks, trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith; and (G) all
computer software including all source code, object code, firmware, development
tools, files, records and data, all media on which any of the foregoing is
recorded, and all documentation related to any of the foregoing.
"INTELLECTUAL PROPERTY OF TARGET" means any Intellectual Property that: (A) is
owned by or licensed to Target or any Subsidiary; (B) is used in the operation
of the businesses of Target or any Subsidiary; (C) is currently included in or
provided with products of Target or any Subsidiary which Target or any
Subsidiary makes available for use by others, including the design and use of
the products of Target or any Subsidiary; (D) was in the past included in, or
provided with, products of Target or any Subsidiary which were made available
for use by others, and for which any product recipients still hold an
unterminated license.
"INTERIM ORDER" means an order of the Court providing for, among other things,
the calling and holding of the Extraordinary General Meeting.
"ITA" means Income Tax Act (Canada), as the same may be amended or re-enacted,
or any successor legislation thereto.
"KNOWLEDGE" means the actual Knowledge of any director or officer of Target, any
of Target's Subsidiaries or Buyer, as the case may be, in each case after due
inquiry.
"LAW" means any federal, foreign, state, provincial or local statute, law, rule,
regulation, ordinance, code, permit, bylaw, license, policy or rule of common
law or any rules, regulations and policies promulgated by a Governmental
Authority having jurisdiction.
"LEASED PROPERTIES" of any Person means all real properties (collectively with
all buildings, structures and other improvements thereon) leased by such Person.
"LEGISLATION" means the Company Act, the securities legislation of each province
and territory of Canada, the rules, regulations and forms made or promulgated
under that legislation, and the policies, bulletins and notices of the
regulatory authorities administering that legislation and the rules,
regulations, bylaws and policies of The Toronto Stock Exchange, as any of the
foregoing may be amended from time to time.
"LETTER OF TRANSMITTAL" means the letter of acceptance and transmittal to be
forwarded by Target to the Target Common Shareholders, together with the
Circular, in form and substance acceptable to Buyer.
"LOAN DOCUMENTS" means, collectively, the Bridge Loan Agreement, dated as of
June 29, 2001, as amended by Amendment No. 1 dated August 3, 2001, the
Collateral and Guarantee Agreement, dated as of June 29, 2001 and the Warrant to
Purchase Common Shares dated as of August 3, 2001, each executed by Buyer and
Target.
A-4
24
"MATERIAL ADVERSE EFFECT" means any change, effect, violation, inaccuracy, event
or condition (other than a change in general economic conditions) that,
individually or together with all such changes, effects, violations,
inaccuracies, events or conditions, has had or could reasonably be expected to
(a) have a material adverse effect on the business, prospects, operations,
Properties, assets or condition (financial or otherwise) of a Party and its
Subsidiaries, taken as a whole, (b) have a material adverse effect on the
validity or enforceability of this Agreement, the Option Agreement or any of the
other Transaction Documents or the rights or remedies, taken as a whole, of a
Party hereunder or thereunder, or (c) prevent or materially delay any Party's
ability to consummate the transactions contemplated by this Agreement, the
Option Agreement or in any other Transaction Document.
"MATERIAL CONTRACT" means any material contract, commitment or understanding
(including any lease, license, loan agreement, note, guarantee, indemnity,
indenture, security agreement, reseller or distribution or other instrument),
whether written or oral, including without limitation, the agreements described
in paragraph 14(a) on Schedule F.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" within the meaning of Section
3(37) of ERISA or a "multiple employer plan" within the meaning of Section 3(40)
of ERISA or their Canadian equivalents.
"OPTION AGREEMENT" means the Common Share Option Agreement between Target and
Buyer, dated as of the date hereof.
"ORDER" means any judgment, injunction, judicial or administrative order or
decree.
"PARTIES" or "PARTY" means, collectively, Buyer, Sub and Target or individually,
Buyer, Sub or Target, as applicable.
"PERMITS" means licenses, permits, orders, registrations and other
authorizations.
"PERMITTED ENCUMBRANCES" means (a) mechanics', workmen's, carriers', repairmen's
or other like Encumbrances incurred in the ordinary course of business in
respect of obligations that are not overdue, (b) statutory liens for Taxes,
assessments and other similar Governmental Authority charges that are not
overdue, (c) Encumbrances that arise under zoning, land use and other similar
imperfections of title that arise in the ordinary course of business and that,
individually and in the aggregate, do not materially affect the value, use or
marketability of the property subject thereto, (d) Encumbrances arising out of
indebtedness to Hibernia National Bank, Compass Bank and ▇▇▇▇▇, ▇▇▇▇▇ & Company
existing as of the date of execution of the Agreement, or (e) Encumbrances
arising out of capital lease obligations identified in the Target Disclosure
Letter.
"PERMITTED RIGHTS" means (A) non-exclusive rights granted for a limited period
of time by Target or a Subsidiary to a licensee or sublicensee to use
Intellectual Property of Target as part of, or with, a product Target or such
Subsidiary has sold or licensed to such licensee or sublicensee; or (B) rights
retained by the joint owner of Intellectual Property of Target, who was
identified as a joint owner in the Target Disclosure Letter, and such retained
rights do not interfere with Target or any Subsidiary using, sublicensing or
transferring its rights to or ownership of the Intellectual Property of Target.
A-5
25
"PERSON" includes an individual, corporation, incorporated or unincorporated
association, syndicate or organization, partnership, limited liability company,
joint venture, association, joint stock company, trust, trustee, executor,
administrator or other legal representative or other entity.
"PLAN OF ARRANGEMENT" means the Plan of Arrangement set forth as Schedule B,
subject to any amendment or variation made in accordance with that Schedule.
"PROPERTY" means any right or interest in or to property, of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including, without limitation, equity interests.
"REQUIRED CONSENTS" means (i) all required waivers, consents and approvals or
releases from other parties to each Material Contract and (ii) all licenses,
registrations, consents, approvals, authorizations and orders of each applicable
Governmental Authority necessary or appropriate for the consummation of the
Arrangement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEDAR" means the System for the Electronic Document Analysis and Retrieval of
the Canadian Securities Administration.
"SEC" means the United States Securities and Exchange Commission.
"SUBJECT SHARES" means Target Common Shares which, at the date of this
Agreement, are held, directly or indirectly, by Target or Buyer, and which,
immediately prior to the implementation of the Arrangement, will be held,
directly or indirectly, by Target or Buyer.
"SUBSIDIARY" means with respect to any Person, (i) any corporation, association
or other business entity of which more than 50% of the total voting power of
shares of capital stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person and
(ii) any partnership, one or more of the general partners or managing general
partners of which is such Person or an entity described in clause (i) and
related to such Person.
"SUPERIOR PROPOSAL" means any Alternative Proposal in respect of all or
substantially all of the Target Common Shares not solicited by Target and which
did not otherwise result from a breach of Section 5.2 that meets each of the
following conditions: (i) any required financing in connection with such
Alternative Proposal shall have been demonstrated to the satisfaction of the
Board of Directors of Target, acting in good faith, to be reasonably likely to
be obtained, (ii) such Alternative Proposal is not subject to a due diligence
condition following execution of the Acquisition Agreement, (iii) such
Alternative Proposal includes take-out financing that would permit the Company
to satisfy all of its obligations under the Loan Documents immediately following
the execution of the Acquisition Agreement related thereto, and (iv) such
Alternative Proposal, if consummated in accordance with its terms, would result
in a transaction (a) more favorable to the Target Common Shareholders than the
Plan of Arrangement and the transactions contemplated by the Loan Documents and
the Contract Manufacturing Agreement, taken as a whole, and (b) having a value
per Target Common Share greater than the value per Common
A-6
26
Share provided by the Plan of Arrangement as determined in good faith by the
Board of Directors of Target.
"TARGET BALANCE SHEET" means the most recent balance sheet contained in the
Target SEC Documents.
"TARGET BENEFIT PLANS" means any compensation, bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option or other stock related rights, fringe benefit, retirement,
vacation, disability, death benefit, supplemental unemployment benefits,
hospitalization, medical, dental, life, severance, post-employment benefits or
other plan, agreement, arrangement, policies or understanding, or employment
severance, retention, consulting, change of control or similar agreement,
whether formal or informal, oral or written, providing benefits to any current
or former employee, officer, director or shareholder of Target or any of its
Subsidiaries or to which Target or any of its Subsidiaries contributes or is or
was obligated to contribute, which will include each "employee benefit plan"
(within the meaning of Section 3(3) of ERISA or its Canadian equivalent),
whether or not subject to ERISA, but shall not include any Multiemployer Plan).
"TARGET COMMON SHARES" means the common shares, without par value, of Target.
"TARGET COMMON SHAREHOLDERS" means registered holders of Target Common Shares.
"TARGET DISCLOSURE LETTER" means the disclosure letter delivered by Target to
Buyer prior to the execution by Buyer of this Agreement.
"TARGET SEC DOCUMENTS" means, collectively, all required reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) filed by Target with the SEC and on SEDAR
since January 1, 2000 and prior to the date hereof.
"TARGET SHAREHOLDER APPROVAL" means an affirmative vote for the Arrangement of
not less than 75% of the votes cast by the holders of Target Common Shares,
being entitled to do so in person or by proxy, at the Extraordinary General
Meeting and, if required under the Company Act, the approval of Target Common
Shares in accordance with Section 252(8) of the Company Act.
"TARGET STOCK OPTIONS" means any options, warrants or other rights to acquire
equity interests of Target, including, without limitation, pursuant to the
agreements listed in paragraph 2 of the Target Disclosure Letter.
"TAX AUTHORITY" means the Internal Revenue Service, the Canada Customs and
Revenue Governmental Authority and any other domestic or foreign bureau,
department, entity or other Governmental Authority responsible for the
administration of any Tax.
"TAX RETURN" means any return, report, information return or other document
(including any related or supporting information and, where applicable, profit
and loss accounts and balance sheets) with respect to Taxes.
A-7
27
"TAXES" means all taxes, charges, fees, levies or other assessments imposed by
any federal, state, provincial or local taxing authority, including, but not
limited to, income, gross receipts, excise, property, sales, use, transfer,
payroll, license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments), franchise,
estimated, severance, stamp, and other taxes (including any interest, fines,
penalties or additions attributable to or imposed on or with respect to any such
taxes, charges, fees, levies or other assessments).
"TERMINATION DATE" means March 31, 2002.
"TRANSACTION DOCUMENTS" means, collectively, the Agreement, the Option Agreement
and each other agreement, consent or certificate delivered or obtained in
connection with the transactions contemplated by this Agreement or the Option
Agreement.
A-8
28
SCHEDULE B
PLAN OF ARRANGEMENT UNDER SECTION 252
OF THE COMPANY ACT (BRITISH COLUMBIA)
1. INTERPRETATION
1.1 Definitions. In this Plan of Arrangement defined terms used but not
defined have the meanings ascribed to those terms in the Arrangement Agreement:
"ARRANGEMENT" means the arrangement undertaken in accordance with of Section 252
of the Company Act and following the expiration of any appeal period in
accordance with the Company Act, on the terms and conditions set forth in this
Plan of Arrangement and any amendment or variation thereto made in accordance
with Section 5 hereof.
"ARRANGEMENT AGREEMENT" means the agreement made August 30, 2001 among Buyer,
Sub and Target.
"CASH CONSIDERATION" means for each Target Common Share, US$0.227, payable in
accordance with Section 4.1.
"CERTIFICATES" means certificates which immediately prior to the Effective Time
represented outstanding Target Common Shares.
"DISSENTING SHAREHOLDER" means a Registered Holder who properly gives a Notice
of Dissent in accordance with Section 207 of the Company Act as modified by the
Interim Order.
"EXCHANGE CONSIDERATION" means, for each Target Common Share, a number of fully
paid and nonassessable shares of Buyer Common Stock equal to the Exchange Ratio
and the Cash Consideration.
"NOTICE OF DISSENT" means a notice of dissent contemplated by Section 207(l)(a)
of the Company Act which is given in the manner set forth in Section 207 of the
Company Act as modified by the Interim Order.
"PLAN OF ARRANGEMENT", "HEREOF", "HEREIN", "HEREUNDER" and similar expressions
refer to this Plan of Arrangement, and not to any particular article, section or
other portion hereof.
"REGISTERED HOLDERS" means registered holders of Target Common Shares, other
than the Subject Shares.
"REGISTRAR" means the Registrar appointed under the Company Act;
"SUB COMMON SHARES" means the common shares, without par value, of Sub; and
"TRANSFER AGENT" means Pacific Corporate Trust Company.
1.2 Headings and References. The division of this Plan of Arrangement
into sections and the insertion of headings are for convenience of reference
only and do not affect the
B-1
29
construction or interpretation of this Plan of Arrangement. Unless otherwise
specified, references to sections are to sections of this Plan of Arrangement
1.3 Currency. Except as expressly indicated otherwise, all sums of
money referred to in this Plan of Arrangement are expressed and shall be payable
in United States dollars.
1.4 Time. Time shall be of the essence in each and every matter or
thing herein provided. Unless otherwise indicated, all times expressed herein
are local time, Vancouver, British Columbia.
1.5 Number, Gender and Persons. In this Plan of Arrangement, unless the
contrary intention appears, words importing the singular include the plural and
vice versa; words importing gender shall include all genders; and words
importing Persons shall include a natural Person, firm, trust, partnership,
association, corporation, joint venture or government (including any
governmental board, Governmental Authority or instrumentality thereof).
1.6 Date for any Action. If the date on which any action is required to
be taken hereunder is not a Business Day in the place where the action is
required to be taken, such action shall be required to be taken on the next
succeeding day which is a Business Day in such place.
1.7 Objectives of the Arrangement. Subject to the terms and conditions
set forth herein, Buyer, acting directly or through Sub, shall acquire all of
the outstanding Target Common Shares such that at the Effective Time, Target
will be a direct or indirect wholly-owned subsidiary of Buyer in such a manner
that achieves the following objectives: (i) Registered Holders at the Effective
Time (other than holders of Subject Shares) shall receive the Exchange
Consideration in exchange for their Common Shares; (ii) all Target Common Shares
shall be owned by Buyer or Sub at the Effective Time; (iii) receipt of the
Exchange Consideration shall be a taxable transaction to those Registered
Holders who are liable for Taxes under the ITA and to those Registered Holders
who are liable for Taxes under United States federal income Tax; and (iv) the
Arrangement shall not constitute a reorganization within the meaning of Section
368 of the Code.
2. EFFECT AND MECHANICS OF THE ARRANGEMENT
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Arrangement and without any action on the part of the Registered Holder or
Buyer:
(a) Sub Common Shares. Each issued and outstanding Sub Common
Share shall remain issued, outstanding and unchanged as a validly issued, fully
paid and nonassessable common share of Sub.
(b) Exchange of Target Common Shares. On the Effective Date
the following shall occur and shall be deemed to occur in the following order
without any further act or formality, except as otherwise provided:
(i) Each issued and outstanding Target Common Share
other than:
(A) the Subject Shares; and
B-2
30
(B) Target Common Shares in respect of which
a Notice of Dissent has been given in accordance with
Section 3 hereof;
shall be and shall deemed to be transferred to Buyer or Sub in exchange for the
Exchange Consideration;
(ii) Each issued and outstanding Target Common Share
in respect of which a Notice of Dissent has been given shall
be and shall be deemed to be transferred to Target with Target
being obligated to pay therefor the amount determined in
accordance with Section 3 of this Plan of Arrangement;
(iii) With respect to each Target Common Share
transferred in accordance with paragraph (i) above:
(A) The holder thereof shall cease to be the
holder of such Target Common Shares, the name of the
Registered Holder thereof shall be removed from the
register of members of Target, and such holder shall
cease to have any rights with respect to such Target
Common Shares other than the payments contemplated
under Sections 2.2(b) and 3, as applicable;
(B) The certificate representing such Target
Common Shares shall be deemed to have been cancelled
as of the Effective Date;
(C) The Registered Holder thereof shall be
deemed to have executed and delivered all consents,
releases, assignments and waivers, statutory or
otherwise, required to transfer such share in
accordance with paragraph (i) or (ii) above;
(D) Buyer or Sub shall be and shall be
deemed to be the transferee of such Target Common
Shares if transferred in accordance with paragraph
(i) or (ii) and shall be entered in the register of
members of Target as the holder of such shares; and
(E) Buyer shall be entitled to make such
deductions, withholdings and remittances of Taxes in
respect of the Exchange Consideration as and when
required under the ITA or under the Code.
(c) Treatment of Target Stock Options.
(i) Target shall take all actions necessary to provide that,
at the Effective Time, each then-outstanding Target Stock Option will be
canceled by Target in exchange for payment to the holders of such Options
of an amount in respect thereof (x) in cash equal to the product of (1) the
Cash Consideration and (2) the number of Target Common Shares subject to
such Target Stock Option and (y) in shares of Buyer Common Stock equal to
the product of (1) the Exchange Ratio and (2) the number of Target Common
Shares subject to such Target Stock Option (such payment to be made net of
applicable withholding Taxes and the aggregate exercise price payable upon
exercise of
B-3
31
such Target Stock Option or, if the aggregate exercise price of such Target
Stock Options exceeds the aggregate Cash Consideration payable in respect
thereof, subject to the payment by the holder of such Target Stock Options
to Target of such positive difference). Any Target Stock Options not
canceled, exercised or converted prior to the Effective Time will, by
reason of the Arrangement, thereafter represent the right to receive during
the term of such Target Stock Option only the consideration described in
the immediately preceding sentence.
(ii) Target shall use its reasonable best efforts to obtain
consents from holders of Target Stock Options in the form attached hereto
as Schedule 2(c) so that following the Effective Time, all Target Stock
Options not exercised or converted prior to the Effective Time will
terminate.
(iii) Prior to the Effective Time, Target shall, at the
request of Buyer, (A) obtain any consents from holders of Target Stock
Options and (B) make any amendments to the terms of the agreements
evidencing Target Stock Options that Buyer deems necessary to give effect
to the actions contemplated by subsections (i) and (ii) of this Section
2.1(c). Notwithstanding any other provision of this Section 2.1(c), payment
may be withheld in respect of any Target Stock Option until the necessary
consents and amendments are obtained.
(d) Anti-Dilution Provisions. In the event Buyer changes (or
establishes a record date for changing) the number of shares of Buyer Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, recapitalization, subdivision, reclassification,
combination, exchange of shares or similar transaction with respect to the
outstanding Buyer Common Stock and the record date therefor shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted to
reflect such stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction. In
addition, in the event Buyer pays (or establishes a record date for payment) an
extraordinary dividend on, or makes any other extraordinary distribution in
respect of, Buyer Common Stock, the Exchange Ratio shall be appropriately
adjusted to reflect such dividend or distribution.
2.2 Exchange of Certificates. (a) Transfer Agent. Prior to the
Effective Time, Buyer shall deposit with the Transfer Agent, for the benefit of
the Registered Holders, for exchange in accordance with this Article 2, cash in
an amount equal to the aggregate Cash Consideration and certificates
representing the shares of Buyer Common Stock issuable pursuant to Section 2.1
in exchange for outstanding Target Common Shares other than Subject Shares.
(b) Exchange Procedures. Promptly after the Effective Time,
the Transfer Agent shall mail to each Registered Holder of a Certificate whose
shares were exchanged for the right to receive the Exchange Consideration
pursuant to Section 2.1, (i) the Letter of Transmittal and (ii) instructions for
use in surrendering the Certificates in exchange for the Exchange Consideration.
The Letter of Transmittal will specify that (i) delivery of the Certificates and
risk of loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Transfer Agent and (ii) upon return of the Letter of
Transmittal and Certificates, the Registered Holder waives his rights of dissent
under Section 3.1 hereof in respect of the Target Common Shares to
B-4
32
which the Letter of Transmittal relates. Upon surrender of a Certificate for
cancellation to the Transfer Agent, together with the Letter of Transmittal,
duly executed, and such other documents as may reasonably be required by the
Transfer Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Cash Consideration, a certificate representing that number
of whole shares of Buyer Common Stock that such Registered Holder has the right
to receive pursuant to the provisions of this Article 2 in respect of all of
such Registered Holder's Target Common Shares, certain dividends or other
distributions in accordance with Section 2.2(c), and cash in lieu of any
fractional share of Buyer Common Stock in accordance with Section 2.2(e), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Target Common Shares that is not registered in the
transfer records of Target, a certificate representing the proper number of
shares of Buyer Common Stock may be issued to a Person other than the Registered
Holder in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer, satisfactory evidence is provided that such Person is the beneficial
owner of such Target Common Shares and the Person requesting such issuance shall
pay any transfer or other taxes required by reason of the issuance of shares of
Buyer Common Stock to a Person other than the Registered Holder of such
Certificate or establish to the satisfaction of Buyer that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.2(b), each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Exchange
Consideration that the Registered Holder thereof has the right to receive
pursuant to the provisions of this Article 2, certain dividends or other
distributions in accordance with Section 2.2(c), and cash in lieu of any
fractional share of Buyer Common Stock in accordance with Section 2.2(e). No
interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article 2.
(c) Distributions with Respect to Unsurrendered Certificates.
No dividends or other distributions with respect to Buyer Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Buyer Common Stock
represented thereby, and no cash payment in lieu of fractional shares of Common
Stock shall be paid to any such holder pursuant to Section 2.2(e) until the
holder of record of such Certificate shall surrender such Certificate in
accordance with this Article 2. Subject to the effect of applicable escheat or
similar Laws, following surrender of any such Certificate there shall be paid to
the holder of the certificate representing whole shares of Buyer Common Stock,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Buyer Common Stock and the amount of any
cash payable in lieu of a fractional share of Buyer Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Buyer
Common Stock.
(d) No Further Ownership Rights in Target Common Shares. All
shares of Buyer Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article 2 (including any cash
paid pursuant to this Article 2) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the Target Common Shares,
subject, however, to the Target's obligation to pay any dividends or make any
other
B-5
33
distributions with a record date prior to the Effective Time which may have been
declared or made by Target on such Target Common Shares which remain unpaid at
the Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Target of the Target Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Buyer or the Transfer Agent for any
reason, they shall be canceled and exchanged as provided in this Article 2.
(e) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates formerly representing Target Common Shares,
no dividend or distribution of Buyer shall relate to such fractional
share interests and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Buyer.
(ii) Notwithstanding any other provision of this Plan
of Arrangement, each Registered Holder of Target Common Shares
exchanged pursuant to the Arrangement who would otherwise have been
entitled to receive a fraction of a share of Buyer Common Stock (after
taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount, less
the amount of any withholding taxes that may be required thereon,
equal to such fractional part of a share of Buyer Common Stock
multiplied by the closing trading price of the Buyer Common Stock on
the New York Stock Exchange on the trading day immediately preceding
the Effective Time.
(f) No Liability. None of Buyer, Sub, Target or the Transfer
Agent shall be liable to any Person in respect of any Exchange Consideration,
any dividends or distributions with respect thereto, or any cash in lieu of
fractional shares of Buyer Common Stock, in each case delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
If any Certificate shall not have been surrendered prior to three years after
the Effective Time (or immediately prior to such earlier date on which any
Exchange Consideration, any dividends or distributions payable to the holder of
such Certificate or any cash payable in lieu of fractional shares of Buyer
Common Stock pursuant to this Article 2, would otherwise escheat to or become
the property of any Governmental Authority), any such Exchange Consideration,
dividends or distributions in respect thereof or such cash shall, to the extent
permitted by applicable Law, become the property of the applicable Governmental
Authority, free and clear of all claims or interest of any Person previously
entitled thereto.
(g) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by Buyer, the posting by such Person of a bond in such reasonable
amount as Buyer may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Transfer Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the Exchange
Consideration and any unpaid dividends and distributions in respect thereof and
any cash in lieu of fractional shares of Buyer Common Stock, in each case
pursuant to the Agreement.
B-6
34
3. RIGHTS OF DISSENT
3.1 Rights of Dissent. Any Registered Holder (other than holders of
Subject Shares) may exercise rights of dissent conferred by the Interim Order in
connection with the Arrangement in the manner set out in Section 207 of the
Company Act, as modified by the Interim Order within the time limits imposed
under Section 207 of the Company Act. Without limiting the generality of the
foregoing or Section 207(7)(a) of the Company Act, any Registered Holder which
has given a Notice of Dissent shall cease to be entitled to the rights of a
Dissenting Shareholder in respect of Target Common Shares in respect of which
the Notice of Dissent was given if such Registered Holder completes and delivers
to the Transfer Agent his surrendered Certificate together with the Letter of
Transmittal, duly executed, and such other documents as reasonably required by
the Transfer Agent in accordance with Section 2.2(b) in respect of such Target
Common Shares. The rights of dissent granted hereunder are governed by, and
subject to, the restrictions contained in Section 207 of the Company Act.
3.2 Rights of Dissenting Shareholders. In the event a Registered Holder
gives a Notice of Dissent but is not entitled, for any reason, to be paid the
fair value of the Target Common Shares in respect of which the Notice of Dissent
was given pursuant to Section 207 of the Company Act, such Registered Holder
will be entitled to receive only the Exchange Consideration contemplated by
Section 2.1(b) which such Registered Holder would have received if such
Registered Holder had not given a Notice of Dissent.
4. PAYMENT OF EXCHANGE CONSIDERATION
4.1 Right to Payment.
(a) Subject to Section 2.2(b), promptly after the Effective
Time, where a Registered Holder has delivered to the Transfer Agent a duly
executed Letter of Transmittal, the Certificates representing such Registered
Holder's Target Common Shares and any other documents in accordance with Section
2.2(b), Buyer shall cause the Transfer Agent either:
(i) to forward or cause to be forwarded by first
class mail to the Registered Holder at the address specified in the
Letter of Transmittal;
(ii) if requested by the Registered Holder in the
Letter of Transmittal, to make available at the offices of the Transfer
Agent for pick-up by the Registered Holder; or
(iii) if the Letter of Transmittal neither specifies
an address nor contains a request as described in (ii), to forward or
cause to be forwarded to the Registered Holder at the address of the
holder as shown on the share register maintained by Target or its
Transfer Agent a cheque in United States currency representing the Cash
Consideration required to be made to such Registered Holder pursuant to
the provisions hereof and in respect of fractional shares and a
certificate representing that number of whole shares of Buyer Common
Stock that such Registered Holder has the right to receive pursuant to
the provisions of Article 2 of this Agreement in respect of all of such
Registered Holder's Target Common Shares.
B-7
35
(b) (i) Promptly following the Effective Time, where
a Registered Holder whose Target Common Shares have been transferred to
Sub pursuant to Article 2 has not delivered the Letter of Transmittal
and Certificates contemplated by Section 4.1(a) and has not exercised
his or her rights of dissent in accordance with Section 3.1, Buyer
shall cause the Transfer Agent to make available at the principal
office of the Transfer Agent a cheque in United States currency
representing the Cash Consideration to such Registered Holder pursuant
to the provisions hereof upon presentation of a duly executed Letter of
Transmittal and the Certificates evidencing such Target Common Shares
and any other documents in accordance with Section 2.2(b).
(ii) Buyer shall have provided the Transfer Agent
with sufficient funds for this purpose, prior to the filing of the
Final Order with the Registrar, with funds to be provided in accordance
with Buyer's agreement with the Transfer Agent.
(c) Payment Registration. Unless otherwise directed by the
Letter of Transmittal, the payment referred to in Sections 2.2(b) and 4.1(a)
shall be issued in the name of the Registered Holder of the Target Common Shares
acquired.
(d) Payments held in Trust. All amounts payable to a
Registered Holder shall be paid or made to the Transfer Agent to be held in
trust for such Registered Holder. All monies so held in trust by the Transfer
Agent shall be invested by it in interest bearing trust accounts (which may be
in deposits at, or other interest-bearing obligations of, the Transfer Agent)
upon such terms as Buyer may deem appropriate.
(e) Unclaimed Payments. If any Registered Holder fails for any
reason to deliver to the Transfer Agent for cancellation the Certificates
formerly representing Target Common Shares, together with all other required
documents in accordance with Section 2.2(b) on or before the third anniversary
of the Effective Time, such Registered Holder shall be deemed to acknowledge
that the Transfer Agent shall hold and disburse the Exchange Consideration in
respect thereof in accordance with applicable Law.
5. AMENDMENT
5.1 Amendment. This Plan of Arrangement may be amended, modified and/or
supplemented at any time and from time to time, if consented to in writing by
Buyer and Target and filed with the Court and, if such amendment is made
following the Extraordinary General Meeting, as approved by the Court and
communicated to Registered Holders in the manner required by the Court (if so
required).
B-8
36
SCHEDULE C
CONDITIONS FOR THE BENEFIT OF BUYER
The obligations of Buyer to complete the transactions contemplated by
the Arrangement shall be subject to the fulfillment, or the waiver by Buyer, of
the following conditions at or prior to the Effective Time, each of which is for
the exclusive benefit of Buyer and may be waived by Buyer at any time, in whole
or in part, in its sole discretion without prejudice to any other rights that it
may have:
1. The Arrangement shall not have been amended, modified and/or
supplemented by direction of the Court or any other Governmental
Authority in a manner unacceptable to Buyer;
2. Target shall have performed in all material respects the obligations to
be performed by it under this Agreement on or before the Effective
Time;
3. The representations and warranties of Target set forth in Schedule F
shall be true and correct in all material respects at and as of the
Effective Time (as if made at and as of that time), except to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall
have been true and correct in all material respects as of such date;
4. No action, suit or proceeding shall have been commenced or threatened
in writing by or before any court or other Governmental Authority
against Buyer, Target or any of their respective Affiliates with
respect to the transactions contemplated by this Agreement, the Option
Agreement or any of the other Transaction Documents that could
reasonably be expected to have a Material Adverse Effect on either
Buyer or Target;
5. No Order shall have been issued by any Governmental Authority, no
action, suit or proceeding shall have been threatened or taken by any
Governmental Authority, and no Law, regulation or policy shall have
been proposed, enacted, or promulgated or applied which directly or
indirectly imposes material limitations or conditions on the
acquisition by, or the disposition to, Buyer of the Target Common
Shares or the completion of the Arrangement or the right of Buyer to
own or exercise full rights of ownership of the Target Common Shares,
including the right to vote or dispose of any such Target Common
Shares, or compels Buyer to dispose of or hold separately such Target
Common Shares or any material assets of Target or its Subsidiaries;
6. No more than 10% of the issued and outstanding Target Common Shares
shall be the subject of the exercise of any rights of dissent by
Registered Holders (as defined in the Plan of Arrangement) in relation
to the Plan of Arrangement;
7. Gowling ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ LLP shall have delivered a legal opinion to
Buyer in substantially the form attached hereto as Schedule C-7;
8. The period during which the Interim Order or the Final Order shall be
subject to appeal shall have expired; and
C-1
37
9. The persons identified on Schedule C-9 shall have entered into the
intellectual property agreements in the form attached hereto as
Schedule C-9.
C-2
38
SCHEDULE D
CONDITIONS FOR THE BENEFIT OF TARGET
The obligations of Target to complete the transactions contemplated by
the Arrangement shall be subject to the fulfillment, or the waiver by Target, of
the following conditions at or prior to the Effective Time, each of which is for
the exclusive benefit of Target and may be waived by Target at any time, in
whole or in part, in its sole discretion without prejudice to any other rights
that it may have:
1. Buyer shall have performed in all material respects the obligations to
be performed by it under this Agreement on or before the Effective
Time;
2. The representations and warranties of Buyer set forth in Schedule G
shall be true and correct in all material respects at and as of the
Effective Time (as if made at and as of such time), except to the
extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall
have been true and correct in all material respects as of such date;
3. The shares of Buyer Common Stock to be issued pursuant to the
Arrangement shall have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange; and
4. ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ shall have delivered a legal opinion to
Target in substantially the form attached hereto as Schedule D-4.
D-1
39
SCHEDULE E
CONDITIONS FOR THE BENEFIT OF EACH OF THE PARTIES
The respective obligations of each of the parties hereto to complete
the transactions contemplated by the Arrangement shall be subject to the
fulfillment, or the waiver by each of them, of each of the following conditions
at or prior to the Effective Time:
1. The Interim Order shall have been obtained in form and substance
reasonably satisfactory to Buyer and shall not have been set aside or
modified in a manner unacceptable to Buyer, on appeal or otherwise;
2. The Arrangement, with or without amendment, shall have been approved at
the Extraordinary General Meeting in accordance with the Interim Order
and all requirements of the Legislation;
3. The Final Order shall have been obtained in form and substance
reasonably satisfactory to Buyer and shall not have been set aside or
modified in a manner unacceptable to Buyer, on appeal or otherwise;
4. No Order shall have been issued by any Governmental Authority, no
action, suit or proceeding shall have been threatened or taken by any
Governmental Authority, and no Law, regulation or policy shall have
been proposed, enacted, or promulgated or applied which makes illegal
or otherwise directly or indirectly enjoins or prohibits the ownership
by Buyer of the Target Common Shares or the completion of the
Arrangement; and
5. (a) The Form S-4 shall have been declared effective by the SEC under
the Securities Act and no stop order suspending the effectiveness of
the Form S-4 shall have been issued by the SEC and no proceedings for
that purpose shall have been initiated or threatened by the SEC; or (b)
the Buyer Common Stock shall have been issued pursuant to an exemption
from the registration requirements of the Securities Act and such
shares shall be freely tradable in the United States on the New York
Stock Exchange, subject to the requirements of Rule 145 of the
Securities Act.
▇-▇
▇▇
▇▇▇▇▇▇▇▇ ▇
REPRESENTATIONS AND WARRANTIES OF TARGET
1. Organization, Standing and Corporate Power. Each of Target and its
Subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing under the Laws of the
jurisdiction in which it is organized and has the requisite corporate
or other power, as the case may be, and authority to carry on its
business as now being conducted. Each of Target and its Subsidiaries is
duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions in which the
failure to be so qualified or licensed or to be in good standing could
not reasonably be expected to have a Material Adverse Effect on Target.
Target has made available to Buyer prior to the execution of this
Agreement complete and correct copies of the Constituent Document of
Target and each of its Subsidiaries.
2. Capitalization. The authorized and issued share capital of Target is
described in the Target Disclosure Letter. Except as described in the
Target Disclosure Letter, and except for the rights of Buyer under this
Agreement and the Option Agreement, there are no Target Stock Options,
conversion privileges, calls or other rights, agreements, arrangements,
commitments or obligations of Target to issue, sell or acquire any
securities of Target or securities or obligations of any kind
convertible into or exchangeable for any securities of Target or any
other Person, nor are there outstanding any stock appreciation rights,
phantom equity or similar rights, agreements, arrangements or
commitments based upon the share price, book value, income or any other
attribute of Target. All of the outstanding shares of capital stock of
Target are validly issued, fully paid and non-assessable and were
issued in material compliance with all applicable securities Laws and
free of preemptive rights.
3. Subsidiaries. Global Election Systems, Inc., a Delaware corporation,
Spectrum Print & Mail Services, Ltd., a Delaware corporation, and
Global Systems Caribbean, Inc., a Puerto Rico corporation, are the only
Subsidiaries of Target. All of the outstanding shares of capital stock
and other ownership interests of Target's Subsidiaries are owned by
Target, free and clear of all Encumbrances, and are validly issued,
fully paid and non-assessable and were issued in material compliance
with all applicable securities Laws and free of preemptive rights. All
securities and other ownership interests owned directly or indirectly
by Target are owned free and clear of all Encumbrances. There are no
options, warrants, conversion privileges or other rights, agreements,
arrangements, commitments or obligations of Target or any of its
Subsidiaries to issue, sell or acquire any securities of any of those
Subsidiaries or securities or obligations of any kind convertible into
or exchangeable for securities or other ownership interests of any of
those Subsidiaries. There are no outstanding stock appreciation rights,
equity or similar rights, agreements, arrangements or commitments based
on the book value, income or any other attribute of any of the
Subsidiaries of Target.
F-1
41
4. Authority Relative to this Agreement. Target has the requisite
corporate power and authority to enter into this Agreement, the Option
Agreement and each other Transaction Document to which it is or will be
a party and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement, the Option
Agreement and each such Transaction Document by Target have been duly
authorized by the board of directors of Target and no other corporate
proceedings on the part of Target are necessary, other than the Target
Shareholder Approval. This Agreement and the Option Agreement have been
duly executed and delivered by Target and constitute the legal, valid
and binding obligation of Target, enforceable by Buyer against Target
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar Laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at Law or in equity). The execution and delivery by Target
of this Agreement and each Transaction Document to which Buyer is or
will be a party and performance by it of its obligations hereunder and
thereunder will not result in:
(a) a violation or breach of any provision of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of or
under,
(i) its Constituent Documents or any resolution of
its directors or the Target Common Shareholders or the
stockholders of any of its Subsidiaries,
(ii) any applicable Law, any Order of any
Governmental Authority (subject to obtaining the
authorizations, consents and approvals referred to in
paragraph (5)), or
(iii) any agreement, arrangement or understanding to
which it or any of its Subsidiaries is a party or by which any
of them or their Properties is bound or affected that could
reasonably be expected to have a Material Adverse Effect on
Target, or
(b) the imposition of any Encumbrance upon any of its Properties
or assets or the Properties or assets of any of its
Subsidiaries.
5. Approval. Other than in connection with or in compliance with the
provisions of the Competition Act (Canada), the Investment Canada Act
(Canada), no authorization, consent, license or approval of, or
registration or filing with, any Governmental Authority is necessary
for the consummation by Target of its obligations under this Agreement,
the Option Agreement or any of the Transaction Documents to which it is
or will be a party, except for such authorizations, consents, licenses,
approvals, registrations and filings the failure by Target to obtain or
make could not, individually or in the aggregate, prevent or materially
delay the consummation of the Arrangement.
6. Target SEC Documents; No Undisclosed Liabilities. (a) Target has filed
all Target SEC Documents. As of their respective dates, the Target SEC
Documents complied in all
F-2
42
material respects with the requirements of the Securities Act, the
Exchange Act and the Legislation, as the case may be, and none of the
Target SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a 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. Except
to the extent that information contained in any Target SEC Document has
been revised or superseded by a later filed Target SEC Document, none
of the Target SEC Documents contains any untrue statement of a material
fact or omits 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. The financial
statements of Target included in the Target SEC Documents (i) comply as
to form as of their respective filing dates with the SEC in all
material respects with the Accounting Rules, (ii) have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as
permitted by the Accounting Rules) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto),
and (iii) fairly and accurately present in all material respects the
consolidated financial position of Target and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal recurring year-end audit
adjustments).
(b) Except (i) as reflected in the Target Balance Sheet, (ii)
for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, or (iii) liabilities disclosed in the
Target Disclosure Letter, neither Target nor any of its Subsidiaries
has any liabilities or obligations of any nature which, individually or
in the aggregate, could reasonably be likely to have a Material Adverse
Effect on Target.
7. Absence of Certain Changes or Events. Since January 1, 2001, (a) Target
and its Subsidiaries have conducted their business only in the ordinary
course consistent with past practice, (b) there has not been any fact,
circumstance, event, change or condition that could reasonably be
expected to have a Material Adverse Effect on Target that has not been
previously disclosed to Buyer in writing, and (c) Target has not taken
any action that, if taken after the date hereof, would require the
approval of Buyer pursuant to Section 4.5.
8. Litigation. There is no suit, action, proceeding, claim, grievance or
investigation pending or, to the Knowledge of Target, threatened
against or affecting Target or any of its Subsidiaries, nor is there
any judgment, decree, injunction, rule or Order of any Governmental
Authority outstanding against Target or any of its Subsidiaries.
9. Compliance. Neither Target nor any of its Subsidiaries is in conflict
with, or in default or violation of, in any material respect, (a) any
Law (including, without limitation, the U.S. Foreign Corrupt Practices
Act of 1977, as amended, irrespective of whether any such Person is
subject thereto) or Order applicable to Target or any of its
Subsidiaries or by which any Property or asset of Target or any of its
Subsidiaries is bound or affected or (b) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or Contractual Obligation to which Target or any of
its Subsidiaries is a party or by which Target or any of its
Subsidiaries or any property or
F-3
43
asset of Target or any of its Subsidiaries is bound or affected. To the
Knowledge of Target, neither Target nor any of its Subsidiaries is
under review or investigation with respect to, or has been threatened
to be charged with or given notice of, any violation of any Law or
Order. Target and its Subsidiaries hold all material Permits and have
taken all actions required by applicable Law or regulations of any
Governmental Authority in connection with their respective business as
now conducted.
10. Property. (a) Each of Target and its Subsidiaries has good and
marketable title to or is entitled to the benefits of all of its real
and personal Property and assets reflected in the Target Balance Sheet,
together with all additions thereto and less all dispositions thereof
in the ordinary course of business, and such Properties and assets are
not subject to any Encumbrance of any kind, other than Permitted
Encumbrances.
(b) Neither Target nor any of its Subsidiaries owns any real
property. Target or one of its Subsidiaries has a valid leasehold
interest in the Leased Properties, which are all of the real properties
that are leased by Target and its Subsidiaries as of the date hereof.
None of the Leased Properties is subject to any rights of way, written
agreements, Laws, ordinances or regulations affecting building use or
occupancy or reservations of an interest in title that could,
individually or in the aggregate, materially interfere with the present
use of any of the Leased Properties subject thereto or affected thereby
or otherwise materially impair business operations conducted by Target
and its Subsidiaries. Neither Target nor any of its Subsidiaries has
received written notice of any violation of any Law with respect to any
of the Leased Properties. Neither Target nor any of its Subsidiaries
has received any written notice with respect to any the Leased
Properties to the effect that any condemnation or rezoning proceedings
are pending or threatened.
11. Related Party Transactions. Except as described in the Target SEC
Documents, there are no arrangements, agreements and contracts entered
into by Target or any of its Subsidiaries with any Person who is an
officer, director or Affiliate of Target, or any lineal descendent of
any of the foregoing, or any entity in which any of the foregoing has
an economic interest (excluding ownership of stock of publicly owned
companies), except those of a type described in paragraph 15 of this
Schedule F.
12. Tax Matters. Each of Target and its Subsidiaries and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Target
or any Subsidiary of Target is or has been a member has timely filed
all Tax Returns required to be filed by it (after giving effect to any
extension properly granted by a Tax Authority having authority to do
so) and has timely paid (or Target has timely paid on its behalf) all
Taxes required to be paid by it (whether or not shown on such Tax
Returns), except Taxes that are being contested in good faith by
appropriate proceedings and for which Target or the applicable
Subsidiary of Target have set aside adequate reserves on the Target
Balance Sheet. Each such Tax Return is complete and accurate in all
material respects. The Target Balance Sheet reflects an adequate
reserve for all material Taxes payable by Target and its Subsidiaries
for all taxable periods and portions thereof through the date of such
balance sheet. Neither Target nor any of its Subsidiaries has incurred
any material liability for Taxes other than in the ordinary course of
business. No event has occurred, and no
F-4
44
condition or circumstance exists, which would present a risk that any
material Tax described in the preceding sentence will be imposed upon
Target or any Subsidiary of Target. No material deficiencies for any
Taxes have been proposed, asserted or assessed against Target or any
Subsidiary of Target, and no requests for waivers of the time to assess
any such Taxes are pending and no extensions of time to assess any such
Taxes are in effect and no Tax Returns of Target or any of its
Subsidiaries are currently being audited by any applicable Tax
Authority or are threatened with any such audit. All material Taxes
required to be withheld, collected and paid over to any Tax Authority
by Target and any Subsidiary of Target have been timely withheld,
collected and paid over to the proper Tax Authority. No Tax Authority
has imposed an Encumbrance against Target or any of its Subsidiaries or
any of their respective properties for any Taxes payable pending
actions or proceedings by any Tax Authority for assessment or
collection of any Tax. No written claim has been made by a Tax
Authority in a jurisdiction where Target or any Subsidiary of Target
does not file Tax Returns that it is or may be subject to taxation by
the jurisdiction. Neither Target nor any Subsidiary of Target is party
to, nor has any liability under (including liability with respect to
any predecessor entity), any indemnification, allocation or sharing
agreement with respect to Taxes. No shareholder of Target, acting alone
or as part of a group, currently owns, or owned at any time in the last
five years, 25% or more of the issued shares of any class of capital
stock of Target.
13. Environmental Matters. To the Knowledge of Target, there are no
Hazardous Substances on any of the Leased Properties that could result
in any material liability to Target or any of its Subsidiaries. Target
and its Subsidiaries have complied in all material respects with all
applicable Environmental Laws, including all regulations, ordinances
and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of
any Hazardous Substances. Target and its Subsidiaries have obtained,
currently maintain and, as currently operating are in compliance in all
material respects with, all Environmental Permits for the conduct of
the business and operations of Target and its Subsidiaries in the
manner now conducted. Target is not responsible for the remediation of
any Hazardous Substances for a cost exceeding $250,000 in the
aggregate. To the Knowledge of Target, there are no actions or
proceedings pending or threatened to revoke or materially modify such
Environmental Permits. No Hazardous Substances have been used, stored,
manufactured, treated, processed or transported to or from any such
Leased Property by Target and its Subsidiaries or released, discharged
or disposed of, on or from the Leased Property by Target or its
Subsidiaries, except in compliance in all material respects with
Environmental Laws and in a manner that does not result in material
liability under applicable Environmental Laws. None of Target or any of
its Subsidiaries has received any written notice of potential
responsibility, letter of inquiry or written notice of alleged
liability from any Person regarding such Leased Property or the
business conducted thereon. No investigation, action or review is
pending or, to the Knowledge of Target, threatened by any Governmental
Authority or other Person against Target or any of its Subsidiaries
under any Environmental Law. For the purposes of this paragraph 13
only, "Leased Properties" shall be deemed to include all real property
formerly owned, operated or leased by Target or its current or former
Subsidiaries, solely, however, as to the period of time when such
property was so owned, operated or leased by Target or its
F-5
45
current or former Subsidiaries. Target has previously delivered to
Buyer complete copies of all final versions of environmental
investigations and testing or analysis that are in the possession,
custody or control of any of Target or any of its Subsidiaries with
respect to the environmental condition of the Leased Properties.
14. Contracts; Debt Instruments. (a) There have been delivered to Buyer
true, correct and complete copies of all of the following Material
Contracts to which Target or any of its Subsidiaries is a party or by
which any of them or their respective Properties is bound: (i)
agreements pursuant to which Target or its Subsidiaries holds or grants
a leasehold interest in or otherwise has an economic interest in any
real property; (ii) contracts with any current or former officer or
director of Target or any of its Subsidiaries; (iii) contracts (A) for
the sale of any of the material Properties or assets of Target or any
of its Subsidiaries or the acquisition of any material amount of assets
by Target or any of its Subsidiaries or (B) for the grant to any Person
of any rights to purchase any of its material assets; (iv) contracts
which restrict Target or any of its Subsidiaries from competing in any
line of business or with any Person in any geographical area in any
material manner or which restrict any other Person from competing with
Target or any of its Subsidiaries in any line of business or in any
geographical area in any material manner; (v) loan commitments,
indentures, credit agreements, security agreements, guarantees,
promissory notes, letters of credit, hedging obligations, capitalized
lease obligations, take or pay contracts and other contracts relating
to Indebtedness (whether owed by or held by Target or any Subsidiary);
(vi) joint venture agreements; (vii) sales agreements with any
Governmental Authority; (viii) reseller agreements; and (ix) any
contract not made in the ordinary course of business.
(b) All of the Material Contracts are in full force and effect
and are the legal, valid and binding obligations of Target and/or its
Subsidiaries, enforceable against them in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Laws affecting creditors' rights
and remedies generally and to general principles of equity (regardless
of whether enforcement is sought in a proceeding at Law or in equity).
Neither Target nor any of its Subsidiaries is in material breach or
default under any Material Contract nor, to the Knowledge of Target, is
any other party to any Material Contract in material breach or default
thereunder.
15. Target Benefit Plans; ERISA Compliance. (a) Except for Target's
mandatory participation in the Canada Pension Plan or Quebec Pension
Plan, Employment Insurance Program and applicable provincial workers'
compensation programs, there are no Target Benefit Plans. The Target
Disclosure Letter contains a true and complete list of all agreements
or plans providing for termination or severance pay to any officer,
director or employee of Target.
(b) Each Target Benefit Plan has been administered in all
material respects in accordance with its terms and all applicable Laws,
including ERISA, the Code, and their respective Canadian equivalents.
Each Target Benefit Plan is in compliance with all applicable Laws,
including the applicable provisions of ERISA, the Code and any similar
Canadian statute. Each Target Benefit Plan that is intended to be
qualified under Section 401(a) or 401(k), of the Code (or its Canadian
equivalent) is so qualified and each trust
F-6
46
established in connection with any Target Benefit Plan that is intended
to be exempt from federal income taxation under Section 501(a) of the
Code (or its Canadian counterpart) is so exempt. No fact or event has
occurred which is reasonably likely to affect adversely the qualified
status of any such Target Benefit Plan or the exempt status of any such
trust. All contributions to, and payments from, each Target Benefit
Plan and Multiemployer Plan that are required to be made in accordance
with such Plans and applicable Laws (including ERISA, the Code and
their respective Canadian equivalents) have been timely made.
(c) No Target Benefit Plan is or at any time was (i) subject
to Title IV of ERISA (or its Canadian equivalent) or (ii) subject to
the minimum funding standards of Section 302 of ERISA or Section 412 of
the Code (or their respective Canadian equivalents). Neither Buyer nor
any of its Subsidiaries contributes to any Multiemployer Plan.
(d) No Target Benefit Plan provides medical benefits (whether
or not insured) with respect to current or former employees, officers
or directors after retirement or other termination of service.
(e) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee, officer or director of
Target to severance pay, unemployment compensation or any other payment
or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation, equity rights or benefits due any such
employee, officer or director.
(f) With respect to each Target Benefit Plan, Target has
delivered to Buyer a true and complete copy of: (A) each writing
constituting a part of such Target Benefit Plan, including without
limitation all Target Benefit Plan documents and trust agreements; (B)
the most recent Annual Report (Form 5500 Series) and accompanying
schedule (and Canadian equivalents), if any; (C) the most recent annual
financial report, if any; (D) the most recent actuarial report, if any;
(E) the most recent determination letter from the IRS (and Canadian
equivalent), if any.
(g) With respect to each Target Benefit Plan, there have been
no prohibited transactions or breaches of any of the duties imposed on
"fiduciaries" (within the meaning of Section 3(21) of ERISA or its
Canadian equivalent) by ERISA (or its Canadian equivalent) with respect
to Target Benefit Plans that would result in any liability or excise
tax under ERISA, the Code or their respective Canadian equivalents.
(h) There has been no amendment to, written interpretation of
or announcement (whether or not written) by Target or any of its
Subsidiaries relating to, or change in employee participation or
coverage under, any Target Benefit Plan which would increase materially
the expense of maintaining such Target Benefit Plan above the level of
the expense incurred in respect thereof for the 12 months ended on the
date of the most recent balance sheet for Target and its Subsidiaries.
F-7
47
(i) All contributions and payments due under each Target
Benefit Plan have either been discharged and paid or are adequately
reflected as a liability on the Target Balance Sheet in accordance with
GAAP.
(j) Neither Target nor any of its Subsidiaries is a party to
or subject to any organizing drive, certification, union contract or
collective bargaining agreement, (ii) Target and its Subsidiaries are
in compliance in all material respects with all currently applicable
U.S. or Canadian national or provincial Laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice that would
affect Target in any material respect, and (iii) there is no unfair
labor practice complaint pending or, to the Knowledge of Target,
threatened against Target or any of its Subsidiaries before the
National Labor Relations Board (or its Canadian national or provincial
counterpart) that would affect Target in any material respect.
16. Intellectual Property.
(a) The Target Disclosure Letter lists all grants and/or
registrations of Intellectual Property of Target with any Governmental
Authority and all applications for registration of Intellectual
Property of Target. Such grants and/or registrations, to the extent
completed and fully granted and/or registered, are subsisting, all
necessary registration and renewal fees in connection with such grants
and/or registrations have been made and all necessary documents and
certificates in connection with such grants and/or registrations have
been filed with the relevant patent, copyrights and trademark
authorities in the United States or other foreign jurisdiction for the
purposes of maintaining such Intellectual Property grants and/or
registrations. Target is diligently pursuing any applications for grant
and/or registration pending before the relevant patent, copyrights and
trademark Governmental Authorities in the United States or other
foreign jurisdictions.
(b) Target has good and exclusive title to each item of
Intellectual Property of Target which it owns, free and clear of any
Encumbrance, with the exception of Intellectual Property of Target
which the Target Disclosure Letter describes as jointly owned. As to
jointly owned Intellectual Property of Target, Target has the right to
use, license, and transfer ownership of such Intellectual Property of
Target without restriction, including but not limited to, without any
obligation to make payment or give notice to any co-owner. Target has
the right pursuant to a valid contract or license agreement to use or
operate all other Intellectual Property of Target in which it has no
ownership interest, and to sublicense the use of such Intellectual
Property of Target to others, where such Intellectual Property of
Target is provided to others as part of, or with, a product of Target
or any Subsidiary.
(c) The operation of the businesses of Target or any
Subsidiary as they currently are conducted does not infringe the
Intellectual Property rights of any other Person, and neither Target
nor any Subsidiary has received notice from any Person that the
operation of its respective businesses infringes the Intellectual
Property rights of any Person. There are no contracts between Target or
any other Subsidiary and any other Person with respect to the
Intellectual Property of Target in respect of which there is any
dispute known to Target or any Subsidiary regarding the scope of such
agreement, or
F-8
48
performance under such contract, including with respect to any payments
to be made or received by Target or any Subsidiary.
(d) Neither Target nor any Subsidiary has granted to any
Person, nor authorized any Person to retain, any rights in the
Intellectual Property of Target, other than Permitted Rights. To the
Knowledge of Target, no Person is infringing or misappropriating any of
the Intellectual Property of Target.
17. Determinations by the Board. The Board of Directors of Target (after
receiving advice from its legal advisors and the Financial Advisor) has
determined at it meeting held on August 30, 2001:
that the consideration to be received in exchange for the Target Common
Shares pursuant to the Arrangement is fair to the Target Common
Shareholders, from a financial point of view,
(a) that the Arrangement and the performance by Target of its
obligations under the Arrangement are in the best interests of
Target and the Target Common Shareholders; and
(b) to authorize the execution and delivery of this Agreement, the
Option Agreement and each of the other Transaction Documents
to which Target is or will be a party.
18. Opinion of Financial Advisor. Target has received the opinion of the
Financial Advisor to the effect that the Exchange Consideration to be
received by the Target Common Shareholders is fair to such Persons from
a financial point of view.
19. Brokers. Target and its Subsidiaries will not be liable, directly or
indirectly for the fees, commissions or expenses of any broker, finder,
investment banker or other agent or intermediary in connection with the
Arrangement, other than to (A) the Financial Advisor solely in respect
of the Arrangement pursuant to agreements in effect on the date hereof,
complete copies of which have been provided to Buyer prior to the date
of this Agreement, and (B) soliciting dealers that may be engaged by
Target in connection with the Arrangement on usual commercial terms.
F-9
49
SCHEDULE G
REPRESENTATIONS AND WARRANTIES OF BUYER
1. Organization, Standing and Corporate Power. Each of Buyer and Sub is a
corporation or other legal entity duly organized, validly existing and
in good standing under the Laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case
may be, and authority to carry on its business as now being conducted.
Each of Buyer and Sub is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes
such qualification or licensing necessary, except for those
jurisdictions in which the failure to be so qualified or licensed or to
be in good standing could not reasonably be expected to have a Material
Adverse Effect on Buyer.
2. Authority Relative to this Agreement. Buyer has the requisite corporate
power and authority to enter into this Agreement, the Option Agreement
and each Transaction Document to which it is or will be a party and to
perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement, the Option Agreement and
each such Transaction Document by Buyer have been duly authorized by
the board of directors of Buyer and no other corporate proceedings on
the part of Buyer are necessary. This Agreement and the Option
Agreement have been duly executed and delivered by Buyer and constitute
the legal, valid and binding obligation of Buyer, enforceable by Target
against Buyer in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at Law or in equity). The execution and delivery
by Buyer of this Agreement and each Transaction Document to which Buyer
is or will be a party and performance by it of its obligations
hereunder and thereunder will not result in:
(a) a violation or breach of any provision of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of or
under,
(i) its Constituent Documents or any resolution of
its directors or shareholders or those of any of its
Subsidiaries,
(ii) any applicable Law, any regulation, order,
judgment or decree of any Governmental Authority (subject to
obtaining the authorizations, consents and approvals referred
to in paragraph (3)), or
(iii) any agreement, arrangement or understanding to
which it or any of its Subsidiaries is a party or by which any
of them or their properties is bound or affected that could
reasonably be expected to have a Material Adverse Effect on
Buyer, or
G-1
50
(b) the imposition of any Encumbrance upon any of its assets or
the assets of any of its Subsidiaries.
3. Approval. Other than in connection with or in compliance with the
provisions of the Competition Act (Canada), the Investment Canada Act
(Canada), the Legislation, the Securities Act and the Exchange Act, no
authorization, consent or approval of, or filing with, any Governmental
Authority is necessary for the consummation by Buyer of its obligations
under this Agreement, the Option Agreement or any of the Transaction
Documents to which it is or will be a party, except for such
authorizations, consents, approvals and filings the failure by Target
to obtain or make could not, individually or in the aggregate, prevent
or materially delay the consummation of the Arrangement.
4. Buyer SEC Documents. Buyer has filed all Buyer SEC Documents. As of
their respective dates, the Buyer SEC Documents complied in all
material respects with the requirements of the Securities Act and the
Exchange Act, as the case may be, and none of the Buyer SEC Documents
when filed contained any untrue statement of a material fact or omitted
to state a 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. Except to the extent that
information contained in any Buyer SEC Document has been revised or
superseded by a later filed Buyer SEC Document, none of the Buyer SEC
Documents contains any untrue statement of a material fact or omits 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. The financial statements of
Buyer included in the Buyer SEC Documents as of and for the period
ended December 31, 2000 and June 30, 2001 (i) comply as to form, as of
their respective dates of filing with the SEC, in all material respects
with the Accounting Rules, (ii) have been prepared in accordance with
United States generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by the Accounting Rules)
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto), and (iii) fairly present in all
material respects the consolidated financial position of Buyer and its
consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments).
5. No Acquisition Proposal. As of the date of this Agreement, there is not
pending any bonafide proposal received by Buyer regarding any merger,
consolidation or reorganization of Buyer with any other Person as a
result of which less than a majority of the combined voting power of
the securities of the Person surviving such transaction would be held
immediately after such transaction by all the holders of Buyer Common
Stock immediately prior to such transaction and for which transaction
financing, to the extent required, is then committed.
6. Litigation. Except as set forth in the Buyer SEC Documents, there is no
suit, action, proceeding, claim, grievance or investigation pending or,
to the Knowledge of Buyer, threatened against or affecting Buyer or any
of its Subsidiaries, nor is there any judgment, decree, injunction,
rule or Order of any Governmental Authority outstanding against
G-2
51
Buyer or any of its Subsidiaries that, in any such case, could
reasonably be expected to have a Material Adverse Effect on Buyer.
7. Compliance. Except as set forth in the Buyer SEC Documents, neither
Buyer nor any of its Subsidiaries is in conflict with, or in default or
violation of, in any material respect, (a) any Law (including, without
limitation, the Foreign Corrupt Practices Act of 1977, as amended) or
Order applicable to Buyer or any of its Subsidiaries or by which any
Property or asset of Buyer or any of its Subsidiaries is bound or
affected or (b) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
Contractual Obligation to which Buyer or any of its Subsidiaries is a
party or by which Buyer or any of its Subsidiaries or any property or
asset of Buyer or any of its Subsidiaries is bound or affected that,
with respect to any of the matters described in clauses (a) or (b),
could reasonably be expected to have a Material Adverse Effect on
Buyer.
8. No Material Adverse Change. Since June 30, 2001, there has not been any
fact, circumstance, event or condition (other than general economic and
stock market conditions) that could reasonably be expected to have a
material adverse effect on the financial condition or results of
operations of Buyer that has not previously been disclosed in the Buyer
SEC Documents.
G-3