EXHIBIT 4.11
SHARE PURCHASE AGREEMENT
BETWEEN
CARLYLE VTL HOLDINGS, L.P.
AND
CARLYLE PARTNERS III (VIDEOTRON), L.P.
AND
QUEBECOR MEDIA INC.
AND
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ INC.
MADE AS OF
DECEMBER 22, 2003
SHARE PURCHASE AGREEMENT
Share Purchase Agreement dated December 22, 2003, between Carlyle
VTL Holdings, L.P. ("CVTL") and Carlyle Partners III (Videotron), L.P. ("CPIII"
and collectively with CVTL, the "VENDORS"), ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ Inc. (the
"PURCHASER") and Quebecor Media Inc. ("QMI").
WHEREAS CVTL is the beneficial and registered owner of 304.97 Class C
Preferred Shares and CPIII is the beneficial and registered owner of 4,695.03
Class C Preferred Shares in the capital of 3662527 Canada Inc.;
AND WHEREAS the Vendors desire to sell and the Purchaser desires to
purchase such shares upon and subject to the terms and conditions hereinafter
set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements herein contained the parties hereto
agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS.
As used in this Agreement, the following terms have the
following meanings:
"ADDITIONAL AMOUNT" has the meaning set forth in Section
2.3(b).
"ADJUSTMENT RATIO" has the meaning set forth in Section 4.1.
"AGREEMENT" means this share purchase agreement and all
schedules and instruments in amendment or confirmation of it; and the
expressions "ARTICLE" and "SECTION" followed by a number mean and refer to the
specified Article or Section of this Agreement.
"APPLICABLE VALUATION DATE" means (i) the date on which the
Vendor's Notice or the Purchaser's Notice, as the case may be, is given, in the
event the Value of the Additional Amount is paid pursuant to Section 3.3 or
Section 3.5, (ii) the date of the closing of the QMI IPO in the event the
Vendors' IPO Right is exercised, or (iii) the date of the closing of the
Liquidity Event in the event the Vendors' Liquidity Option is exercised.
"BA RATE" means, on any day, the one-month Bankers' Acceptance
rate quoted on Reuters Service, page CDOR, as at approximately 10:00 a.m. on
any such day.
"BUSINESS DAY" means any day of the year, other than a
Saturday, Sunday or any day on which banks are required or authorized to close
in Montreal, Quebec.
"CAPITAL REORGANIZATION" has the meaning set forth in Section
4.1.
"CLOSING" means the completion of the transaction of purchase
and sale contemplated in this Agreement.
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"CLOSING DATE" means December 22, 2003, or such other date as
the Parties may agree in writing.
"COMPENSATING AMOUNT" means an amount equal to the cumulative
amount of cash dividends that would have been paid in respect of the Notional
Number of QMI Shares had such shares participated in each and every cash
dividend paid or declared in respect of QMI Shares to all or substantially all
the holders of the QMI Shares after September 30, 2003, through the Applicable
Valuation Date. For purposes of the foregoing, the Notional Number shall be
determined as of the record date of each such cash dividend and the amount
included in the Compensating Amount shall be such Notional Number multiplied by
the cash dividend per share paid to holders of QMI Shares.
"CORPORATION" means 3662527 Canada Inc.
"CURRENT MARKET PRICE" means (i) if QMI Shares are on the
relevant date listed on a Recognized Exchange, the 10-day volume weighted
average trading price of a QMI Share (on the Recognized Exchange on which the
greatest number of QMI Shares were traded in the immediately preceding six
months or such shorter period if the QMI Shares had not been listed for trading
on a Recognized Exchange for six months) immediately prior to the date of the
applicable Vendors' Notice or Purchaser's Notice or the applicable record date
or public announcement date of a Rights Offering or the applicable record date
of a Special Distribution; or (ii) if QMI Shares are not on the relevant date
listed on a Recognized Exchange, then calculated as the value of a QMI Share in
accordance with Schedule A of this Agreement as of the last day of the most
recently completed fiscal quarter immediately prior to the date of the
applicable Vendors' Notice or Purchaser's Notice or the applicable record date
or public announcement date of a Rights Offering or the applicable record date
of a Special Distribution.
"DAMAGES" has the meaning set forth in Section 9.1.
"DISPUTE" has the meaning set forth in Section 10.1.
"ESCROW AGENT" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, acting as escrow agent
pursuant to the terms of the Escrow Agreement.
"ESCROW AGREEMENT" has the meaning set forth in Section
8.2(c).
"FAIR MARKET VALUE", as at any date, means:
(a) for a security listed and posted on a stock exchange, the
average of the last sale price or, failing any sale, the
average of the closing bid and ask prices, on each of the
three trading days next preceding such date, according to the
official price quotations of the stock exchange, provided
that, for a security listed and posted on more than one stock
exchange, the price quotations used shall be those of the
stock exchange on which the greatest volume of trading in the
security occurred in the immediately preceding six months or
such shorter period if such securities had not been listed for
trading for six months; or
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(b) for any security (other than a security described in clause
(a) above) or property that is not cash, the fair market value
thereof at such date as determined by an independent and
qualified investment dealer or an independent and qualified
appraiser selected by the audit committee of QMI for that
purpose and approved by the Vendors, acting reasonably; or
(c) for any property that is cash, the amount thereof;
and in all such cases Fair Market Value shall be expressed in Canadian
dollars based on the Bank of Canada noon spot rate of exchange on the
date of determination of the Fair Market Value.
"FMV OFFERING" has the meaning set forth in Section 4.1.
"IPO EXERCISE DATE" has the meaning set forth in Section
3.6(b).
"LAWS" means any and all applicable laws including all
statutes, codes, ordinances, decrees, rules, regulations, judicial or arbitral
or administrative or ministerial or departmental or regulatory judgments,
orders, decisions, rulings or awards, and general principles of common and civil
law and equity, binding on or affecting the Person referred to in the context in
which the word is used.
"LIEN" means any mortgage, charge, pledge, hypothecation,
security interest, assignment, lien (statutory or otherwise), title retention
agreement or arrangement, restrictive covenant or other encumbrance of any
nature or any other arrangement or condition which, in substance, secures
payment or performance of an obligation.
"LIQUIDITY EVENT" has the meaning set forth in Section 4.4.
"MATURITY DATE" means December 15, 2008.
"NOTIONAL NUMBER" means 3,740,682 QMI Shares, as may be
adjusted from time to time in the manner described in Article 4 of this
Agreement.
"PARTIES" means the Vendors, the Purchaser and QMI and any
other Person who may become a party to this Agreement.
"PAYMENT DATE" has the meaning set forth in Section 3.2.
"PERSON" means a natural person, partnership, limited
liability partnership, corporation, joint stock company, trust, unincorporated
association, joint venture or other entity, and pronouns have a similarly
extended meaning.
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"PURCHASED SHARES" has the meaning set forth in Section 2.1.
"PURCHASER'S EXERCISE PERIOD" has the meaning set forth in
Section 3.4.
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"PURCHASER'S INDEMNIFIED PERSONS" has the meaning set forth in
Section 9.1.
"PURCHASER'S NOTICE" has the meaning set forth in Section 3.5.
"PURCHASER'S RIGHT" has the meaning set forth in Section 3.4.
"QMI IPO" has the meaning set forth in Section 3.6(a).
"QMI IPO NOTICE" has the meaning set forth in Section 3.6(b).
"QMI SHARE REORGANIZATION" has the meaning set forth in
Section 4.1.
"QMI SHARES" means common shares in the share capital of QMI
or such other class or classes of shares in the share capital of QMI into which
QMI common shares may be subsequently changed.
"QMI SHARE NOTICE" has the meaning set forth in Section 3.3.
"RECOGNIZED EXCHANGE" means any one of the Toronto Stock
Exchange, the New York Stock Exchange or the Nasdaq National Market.
"REORGANIZATION RATIO" has the meaning set forth in Section
4.1.
"RIGHTS OFFERING" has the meaning set forth in Section 4.1.
"SHAREHOLDERS' AGREEMENT" means the Shareholders' Agreement
entered into as of December 8, 1999, between each of the Vendors and Videotron
Communications Inc. (a predecessor of QMI) and to which each of the Corporation
and Le Groupe Videotron ltee, a predecessor of QMI, intervened, as amended.
"SPECIAL DISTRIBUTION" has the meaning set forth in Section
4.1.
"SPIN-OUT AMOUNT" has the meaning set forth in Section 4.1.
"SPIN-OUT DISTRIBUTION" has the meaning set forth in Section
4.1.
"TRANSACTION VALUE" has the meaning set forth in Section 4.4.
"VALUE OF THE ADDITIONAL AMOUNT" means, as at any particular
date, the dollar amount established in accordance with the following formula:
[(a x b) + c], where
"a" represents the Notional Number;
"b" represents the Current Market Price;
"c" represents the Compensating Amount.
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"VENDORS' RIGHT" has the meaning set forth in Section 3.1.
"VENDORS' NOTICE" has the meaning set forth in Section 3.2.
"VENDORS' IPO RIGHT" has the meaning set forth in Section
3.6(a).
"VENDORS' INDEMNIFIED PERSONS" has the meaning set forth in
Section 9.2.
"VENDORS' LIQUIDITY OPTION" has the meaning set forth in
Section 4.4.
"VOTING EQUITY SECURITIES" means securities carrying a voting
right under all circumstances (other than where separate class votes are
applicable) and the right to participate in earnings to an unlimited degree.
1.2 GENDER AND NUMBER.
Any reference in this Agreement to gender includes all genders
and words importing the singular number only shall include the plural and vice
versa.
1.3 HEADINGS, ETC.
The division of this Agreement into Articles and Sections and
the insertion of headings are for convenient reference only and are not to
affect its interpretation.
1.4 CURRENCY.
All references in this Agreement to dollars, unless otherwise
specifically indicated, are expressed in Canadian currency.
1.5 INCORPORATION OF SCHEDULES.
The schedules attached to this Agreement shall, for all
purposes of this Agreement, form an integral part of it.
ARTICLE 2
PURCHASED SHARES AND PURCHASE PRICE
2.1 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, the
Vendors agree to sell, assign and transfer to the Purchaser and the Purchaser
agrees to purchase from the Vendors on the Closing Date, all (but not less than
all) of the 5,000 issued and outstanding Class C Preferred Shares in the capital
of the Corporation held by the Vendors representing all of the securities of any
class held by the Vendors in the capital of the Corporation (the "PURCHASED
SHARES").
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2.2 PURCHASE PRICE.
The purchase price (the "PURCHASE PRICE") payable by the
Purchaser (or by QMI or an affiliate of QMI for the account of the Purchaser) to
the Vendors for the Purchased Shares shall be $55 million plus the Additional
Amount, payable as set forth in Section 2.3.
2.3 PAYMENT OF THE PURCHASE PRICE.
Subject to Section 2.4, the Purchaser (or QMI or an affiliate
of QMI for the account of the Purchaser) shall pay the Purchase Price as
follows:
(a) an amount in cash of $55 million payable by
wire transfer at Closing; and
(b) an additional amount (the "ADDITIONAL
AMOUNT") equal to the sum of the Value of the
Additional Amount payable as set forth in
Article 3 or Section 4.4, if applicable, and
the Spin-out Amount payable as set forth in
Section 4.1(d).
2.4 WITHHOLDING WHERE VENDOR IS NON-RESIDENT.
FEDERAL WITHHOLDING AND FEDERAL TAX CERTIFICATES
(a) The Vendors represent and warrant that they
have complied and will continue to comply
with the provisions and requirements of
section 116 of the Income Tax Act (the
"ITA");
(b) At the Closing, the Purchaser shall be
entitled to and will withhold from the
Purchase Price payable to or on behalf of
each of the Vendors, through the Escrow
Agent, an amount equal to 25% of the
consideration payable to the Vendors at
Closing I.E. an amount of $12,911,332.50 to
be withheld in respect of CPIII and an
amount of $838,667.50 to be withheld in
respect of CVTL. The amount so withheld
shall be immediately credited to the
Purchaser as payment on account of the
portion of the Purchase Price payable to the
Vendors.
(c) At the time the Additional Amount becomes
payable, the Purchaser is entitled to
withhold from the Purchase Price payable to
or on behalf of each of the Vendors, through
the Escrow Agent, an amount equal to 25% (or
such withholding rate which may then be
applicable at that time pursuant to the ITA)
of the Additional Amount allocable to each
Vendor. The amount so withheld shall be
immediately credited to the Purchaser as
payment on account of the portion of the
Purchase Price payable to the Vendors.
(d) If, prior to January 29, 2004, a Vendor
delivers to the Purchaser a compliance
certificate issued by the Canada Customs and
Revenue
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Agency ("CCRA") under subsection
116(4) of the ITA in respect of the
Purchased Shares sold by such Vendor, which
is acceptable to the Purchaser acting
reasonably (an "ITA 116(4) CERTIFICATE"),
then the Purchaser shall instruct the Escrow
Agent to pay forthwith to the Vendor the
amount withheld in accordance with Section
2.4(b) above in respect of the Vendor.
(e) If, prior to twenty-eight (28) days
following the month in which the Additional
Amount becomes payable, a Vendor delivers to
the Purchaser an ITA 116(4) Certificate,
then the Purchaser shall instruct the Escrow
Agent to pay forthwith to the Vendor the
amount withheld in accordance with Section
2.4(c) above in respect of the Vendor.
(f) If, prior to January 29, 2004, a Vendor
delivers to the Purchaser a compliance
certificate issued by the CCRA under
subsection 116(2) of the ITA in respect of
the Purchased Shares sold by such Vendor
which is acceptable to the Purchaser acting
reasonably (an "ITA 116(2) CERTIFICATE"),
then the Purchaser shall instruct the Escrow
Agent to (i) pay, from the amount withheld
in accordance with Section 2.4(b) above, to
the Receiver General of Canada 25% of the
amount, if any, by which the cost to the
Purchaser of the Purchased Shares at the
appropriate time prior to January 29, 2004
exceeds the amount of the certificate limit
set out in the applicable ITA 116(2)
Certificate received prior to that date; and
(ii) pay to or to the order of the Vendor
the balance, if any, of the amount withheld
in accordance with Section 2.4(b); provided
that, in such circumstances, the
instructions of the Purchaser to the Escrow
Agent shall specify the exact amounts to
be paid under clauses (i) and (ii) and the
Escrow Agent may rely on and shall be under
no obligation whatsoever to verify the
accuracy of such amounts.
(g) If, prior to twenty-eight (28) days
following the month in which the Additional
Amount becomes payable, a Vendor delivers to
the Purchaser an ITA 116(2) Certificate,
then the Purchaser shall pay or, if funds
have been remitted in trust to the Escrow
Agent in accordance with Section 2.4(c)
above, shall instruct the Escrow Agent to
pay from the amount withheld in accordance
with Section 2.4(c) above (i) to the
Receiver General of Canada 25% (or such
withholding rate which may then be
applicable at that time pursuant to the ITA)
of the amount, if any, by which the cost to
the Purchaser of the Purchased Shares at the
appropriate time prior to twenty-eight (28)
days following the month in which the
Additional Amount becomes payable exceeds
the amount of the certificate limit set out
in the applicable ITA 116(2) Certificate
received prior to that date; and (ii) to or
to the order of the Vendor the balance, if
any, of the amount withheld in accordance
with
8
Section 2.4(c) above; provided that, in
such circumstances, the instructions of the
Purchaser to the Escrow Agent shall specify
the exact amounts to be paid under clauses
(i) and (ii) and the Escrow Agent may rely
on and shall be under no obligation
whatsoever to verify the accuracy of such
amounts.
(h) If neither an ITA 116(4) Certificate nor an
ITA 116(2) Certificate (together a "FEDERAL
CERTIFICATE") has been delivered to the
Purchaser by a Vendor in conformity with and
within the applicable periods set forth in
Sections 2.4(d) to 2.4(g) above, then the
Purchaser shall (subject to Section 2.4(i))
instruct the Escrow Agent to remit the
amount withheld in accordance with Section
2.4(b) or 2.4(c) above, as the case may be,
to the Receiver General of Canada on account
of the Purchaser's liability for tax within
the period provided for pursuant to
subsection 116(5) of the ITA.
(i) If neither an ITA 116(4) Certificate nor an
ITA 116(2) Certificate has been delivered to
the Purchaser by a Vendor in conformity with
and within the applicable periods set forth
in Sections 2.4(d) to 2.4(g) above but CCRA
delivers an abeyance letter to the Purchaser
prior to the expiry of such applicable
period in a form and substance acceptable
to the Purchaser acting reasonably, stating
that no interest or penalty will be levied
on the amount withheld by the Purchaser
pending the issuance of either Federal
Certificate (the "FEDERAL ABEYANCE LETTER"),
then in such circumstances the Purchaser
shall continue to hold, through the
Escrow Agent acting in trust, the amount
withheld in accordance with Sections 2.4(b)
or 2.4(c) above, as the case may be, until
the earlier of (i) the issuance of a
Federal Certificate, in which case the
provisions of Sections 2.4(d) to 2.4(h) will
apply immediately; and (ii) such time as
CCRA revokes or adversely modifies the
Federal Abeyance Letter (or otherwise gives
a notice indicating that the Purchaser may
no longer be fully protected from penalties
and interest), in which case the provisions
of Sections 2.4(d) to 2.4(h) will apply
immediately.
QUEBEC WITHHOLDING AND QUEBEC TAX CERTIFICATES
(j) The Vendors represent and warrant that they
have complied and will continue to comply
with the provisions and requirements of
section 1097 of the Taxation Act (Quebec)
(the "QTA");
(k) At the time the Additional Amount becomes
payable, the Purchaser is entitled to
withhold from the Purchase Price payable to
or on behalf of each of the Vendors, through
the Escrow Agent, an amount equal to 12% (or
such withholding rate which may then be
9
applicable at that time pursuant to the QTA)
of the Additional Amount allocable to each
Vendor. The amount so withheld shall be
immediately credited to the Purchaser as
payment on account of the portion of the
Purchase Price payable to the Vendor
(l) If, prior to twenty-eight (28) days
following the month in which the Additional
Amount becomes payable, a Vendor delivers to
the Purchaser a compliance certificate
issued by the Minister of Revenue (Quebec)
("QMR") under section 1100 of the QTA in
respect of the Purchased Shares sold by such
Vendor which is acceptable to the Purchaser
acting reasonably (a "QTA 1100
CERTIFICATE"), then the Purchaser shall
instruct the Escrow Agent to pay forthwith
to the Vendor the amount withheld in
accordance with Section 2.4(k) above in
respect of the Vendor.
(m) If, prior to twenty-eight (28) days
following the month in which the Additional
Amount becomes payable, a Vendor delivers to
the Purchaser a compliance certificate
issued by the QMR under section 1098 of the
QTA in respect of the Purchased Shares sold
by such Vendor, which is acceptable to the
Purchaser acting reasonably (a "QTA 1098
CERTIFICATE"), then the Purchaser shall pay
or, if funds have been remitted in trust to
the Escrow Agent in accordance with Section
2.4(k) above, shall instruct the Escrow
Agent to pay from the amount withheld in
accordance with Section 2.4(k) above (i) to
the QMR 12% (or such withholding rate which
may then be applicable at that time pursuant
to the QTA) of the amount, if any, by which
the cost to the Purchaser of the Purchased
Shares at that time exceeds the amount of
the certificate limit set out in the
applicable QTA 1098 Certificate received
prior to that date; and (ii) to or to the
order of the Vendor the balance, if any, of
the amount withheld in accordance with
Section 2.4(k) above; provided that, in such
circumstances, the instructions of the
Purchaser to the Escrow Agent shall specify
the exact amounts to be paid under clauses
(i) and (ii) and the Escrow Agent may rely
on and shall be under no obligation
whatsoever to verify the accuracy of such
amounts.
(n) If neither a QTA 1100 Certificate nor a QTA
1098 Certificate (together a "PROVINCIAL
CERTIFICATE") has been delivered to the
Purchaser by a Vendor in conformity with and
within the applicable period set forth in
Sections 2.4(l) and 2.4(m) above, then the
Purchaser shall (subject to Section 2.4(o))
instruct the Escrow Agent to remit the
amount withheld in accordance with Section
2.4(k) to the QMR on account of the
Purchaser's liability for tax and on the
date pursuant to section 1101 of the QTA.
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(o) If neither a QTA 1100 Certificate nor a QTA
1098 Certificate, acceptable to the
Purchaser acting reasonably, has been
delivered to the Purchaser by a Vendor in
conformity with and within the applicable
period set forth in Sections 2.4(l) and
2.4(m) above but QMR delivers an abeyance
letter to the Purchaser prior to the expiry
of such applicable period in a form and
substance acceptable to the Purchaser acting
reasonably, and stating that no interest or
penalty will be levied on the amount
withheld by the Purchaser pending the
issuance of either Provincial Certificate
(the "QUEBEC ABEYANCE LETTER"), then in such
circumstances the Purchaser shall continue
to hold, through the Escrow Agent acting in
trust, the amount withheld in accordance
with Section 2.4(k) above until the earlier
of (i) the issuance of a Provincial
Certificate, in which case the provisions of
Sections 2.4(l) to 2.4(n) will apply
immediately; and (ii) such time as QMR
revokes or adversely modifies the Quebec
Abeyance Letter (or otherwise gives a notice
indicating that the Purchaser may no longer
be fully protected from penalties and
interest), in which case the provisions of
Sections 2.4(l) to 2.4(n) will apply
immediately.
TAX INDEMNIFICATION
(p) The relevant Vendor shall indemnify and save
the Purchaser's Indemnified Persons (as
defined in Section 9.1) harmless of and from
any Damages (as defined in Section 9.1)
suffered by, imposed upon or asserted
against any of the Purchaser's Indemnified
Persons as a result of, in respect of,
connected with, or arising out of, under or
pursuant to the CCRA, the QMR or any similar
tax authority taking the position that (i)
any amount withheld by the Purchaser in
accordance with Section 2 hereof from an
amount payable to such Vendor is less than
the amount that should have been withheld by
the Purchaser, (ii) any amount remitted to
such tax authority in accordance with
Section 2 hereof in connection with an
amount payable by the Purchaser to the
Vendor is less than the amount that should
have been remitted to such tax authority,
(iii) any amount withheld by the Purchaser
from an amount payable to the Vendor and
remitted to such tax authority in accordance
with Section 2 hereof should have been
remitted to such tax authority at an earlier
time, (iv) part of an amount paid by the
Purchaser to the Vendor under this Agreement
should have been withheld by the Purchaser
under applicable law but Section 2 hereof
did not provide for such withholding, (v)
such tax authority is not bound by the
Federal Abeyance Letter or the Quebec
Abeyance Letter, as the case may be, or (vi)
a Federal Certificate or a Provincial
Certificate is incomplete or invalid or is
only partly valid because, in the case where
the Vendor is a partnership (including a
limited partnership), the Vendor did not
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provide a complete list of all the partners
with the application for such certificate
or such complete list is not attached to the
certificate, and as a result assess or
re-assess the Purchaser for any tax,
penalties or interest or levies any fine
against the Purchaser.
(q) The indemnification contemplated by Section
2.4(p) of this Agreement shall survive the
Closing and, notwithstanding the Closing or
any other provision of this Agreement or any
investigation made by or for the account of
the Purchaser or QMI or an affiliate of QMI,
as the case may be, shall continue for a
period equal to the applicable limitation
periods imposed by law plus 90 days and any
claim in respect thereof shall be made in
writing during such time period.
PAYMENT TO TAX AUTHORITIES UPON REQUEST OF VENDORS
(r) The Escrow Agent shall upon written request
from the Vendors, with the consent of the
Purchaser acting reasonably, such consent to
be evidenced by the signature of the
Purchaser of an acknowledgement of such
written request of the Vendor, pay out of
the Escrowed Funds to the Receiver General
of Canada or the QMR, as the case may be,
the amount so specified in the written
request and required to obtain the Federal
Certificate or the Provincial Certificate,
as the case may be.
ARTICLE 3
PAYMENT OF THE VALUE OF THE ADDITIONAL AMOUNT
3.1 VENDORS' RIGHT TO REQUIRE PAYMENT OF THE VALUE OF THE
ADDITIONAL AMOUNT.
Except if the Purchaser has given the Purchaser's Notice to
the Vendors in accordance with Section 3.5, the Vendors shall have the right,
exercisable at any time and from time to time after December 15, 2004 to and
including the Business Day prior to the Maturity Date to require QMI to pay the
Value of the Additional Amount (in whole and not in part) (the "VENDORS' RIGHT")
in the manner set forth in this Article 3.
3.2 EXERCISE OF VENDORS' RIGHT.
The Vendors may exercise the Vendors' Right by giving written
notice to QMI (the "VENDORS' NOTICE") stating that the Vendors have elected to
exercise the Vendors' Right. The Value of the Additional Amount shall be paid in
accordance with Section 3.3, on the date that is the later of (i) the first
Business Day following the 30th day after the date on which the Vendors' Notice
has been given to QMI and (ii) in the case of an exercise of the Vendor's Right
which occurs within the first 15 days of a fiscal quarter, the first Business
Day following the 45th day after the end of the immediately preceding quarter
(the "PAYMENT DATE").
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3.3 SETTLEMENT ON PAYMENT DATE.
On the Payment Date, the Purchaser (or QMI or an affiliate of
QMI) shall pay the Vendors an amount in cash equal to the Value of the
Additional Amount by certified cheque or wire transfer payable to the order of
the Vendors or as indicated in the Vendors' Notice. In the event that on the
Payment Date, the QMI Shares are listed on a Recognized Exchange, the Purchaser
(or QMI or an affiliate of QMI) may, at its option, elect to deliver, in lieu of
the cash payment referred to above, that number of QMI Shares of the same class
and designation offered to the public in connection with the QMI IPO equal to
(i) the Notional Number plus (ii) the number of shares determined by dividing
the Compensating Amount by the Current Market Price (with appropriate
adjustments to the number of shares calculated pursuant to this clause (ii) if
events requiring adjustment, in accordance with Article 4, to the Notional
Number occur after the date as of which the Current Market Price is established
up to and including the Payment Date), by providing written notice (the "QMI
SHARE NOTICE") to the Vendors no later than 20 days after the Vendors' Notice
has been given to QMI. In such a case, the Purchaser (or QMI or an affiliate of
QMI) is authorized to deliver to the Escrow Agent, in accordance with Section
2.4(c) and/or 2.4(k), as the case may be, an amount in cash in lieu of QMI
Shares (and reduce the number of QMI Shares to be delivered to the Vendors
accordingly) unless the Vendors provide the Purchaser with a guarantee or letter
of credit acceptable to the Purchaser acting reasonably.
If QMI Shares are issued and delivered in payment of the Value
of the Additional Amount, such shares shall be listed on a Recognized Exchange
and issued and delivered pursuant to such prospectus qualifications or
registrations as are necessary to ensure such shares are freely tradeable upon
receipt or accompanied by registration rights in favour of the Vendors pursuant
to the terms of a registration rights agreement reasonably acceptable by the
Vendors to be entered into at such time. For greater certainty, such
registration rights agreement shall provide that QMI shall bear all expenses
incurred for the preparation of the registration statement or prospectus
including professional fees, listing fees, printing expenses but excluding the
underwriters fees or commissions.
3.4 PURCHASER'S RIGHT TO PAY THE VALUE OF THE ADDITIONAL
AMOUNT.
On any Business Day during a 30 day period following each of
June 15, 2007 and June 15, 2008 (each, a "PURCHASER'S EXERCISE PERIOD"), the
Purchaser (or QMI or an affiliate of QMI) shall have the right to elect to pay
the Value of the Additional Amount (in whole and not in part) to the Vendors in
accordance with Section 3.5 (the "PURCHASER'S RIGHT").
3.5 EXERCISE OF THE PURCHASER'S RIGHT.
Except if the Vendors have given a Vendors' Notice in
accordance with Section 3.2, the Purchaser (or QMI or an affiliate of QMI) may
exercise the Purchaser's Right by giving written notice to the Vendors (the
"PURCHASER'S NOTICE") during a Purchaser's Exercise Period stating that the
Purchaser (or QMI or an affiliate of QMI) has elected to exercise the
Purchaser's Right. The Value of the Additional Amount shall be paid on the first
Business Day following the 10th day after the date on which the Purchaser's
Notice has been given to the Vendors. On such payment date, the Purchaser (or
QMI or an affiliate of QMI) shall pay the Vendors an amount in
13
cash equal to the Value of the Additional Amount by certified cheque or
wire transfer payable to the order of the Vendors or as otherwise directed by
the Vendors.
The Purchaser and QMI hereby covenant and agree that they will
not and will not permit any affiliate to exercise the Purchaser's Right if any
one of them is aware of any material non-public information regarding QMI that
could have a material impact on the value of QMI Shares (including (a) the
decision by the Board of Directors of QMI or a committee thereof to proceed with
a QMI IPO (defined below) or (b) the decision by the Board of Directors of QMI
or a committee thereof to proceed with a transaction which may result in a
Liquidity Event (defined below)) provided, however, that in such circumstances,
the period during which the Purchaser's Right may be exercised shall be
suspended as provided below. In circumstances where the Purchaser's Right is
suspended for the foregoing reason, the Purchaser shall give, during the
applicable Purchaser's Exercise Period, written notice to the Vendors to the
effect that (i) the Purchaser or QMI is in possession of undisclosed material
information regarding QMI and (ii) that the Purchaser's Right is suspended. The
Purchaser shall give further written notice to the Vendors every 30 days for so
long as the material undisclosed information regarding QMI has not been
disclosed and remains material. If the Purchaser does not give such written
notice on the 30th day following the date of the previous written notice given
pursuant to this paragraph or if there occurs public disclosure of the material
information or if QMI determines that the undisclosed information is no longer
material, the suspension of the exercise of the Purchaser's Right shall then
terminate and the Purchaser's Right shall be reinstated for a 15 day period. The
Purchaser or QMI shall give prompt written notice to the Vendors of the
termination of the suspension of the Purchaser's Right stating the date upon
which such suspension terminated and the reasons therefor.
3.6 VENDORS' IPO OPTION.
(A) EXERCISE OF VENDORS' IPO OPTION. Except if either the Vendors'
Right or the Purchaser's Right has been exercised, the Vendors
shall have the right ("VENDORS' IPO RIGHT"), exercisable at any
time after QMI has filed with the appropriate securities
regulatory authorities in Canada or the United States a
preliminary prospectus relating to a proposed initial public
offering of equity securities (including income trust units) of
QMI (the "QMI IPO") but before the IPO Exercise Date (as defined
in Section 3.6(b)) (the "IPO EXERCISE PERIOD"), to require the
Purchaser (or, at the Purchaser's option, QMI or an affiliate of
QMI) to pay the Value of the Additional Amount by the delivery,
concurrently with the closing of the QMI IPO, of that number of
freely tradable equity securities, of the class and designation
offered to the public in connection with the QMI IPO, listed on a
stock exchange or other organized trading market equal to (i) the
Notional Number plus (ii) the number of shares determined by
dividing the Compensating Amount by the offering price per share
at which the equity securities are offered to the public in
connection with the QMI IPO. In such a case, the Purchaser (or
QMI or an affiliate of QMI) is authorized to deliver to the
Escrow Agent, in accordance with Section 2.4(c) and/or 2.4(k), as
the case may be, an amount in cash in lieu of QMI Shares (and
reduce the number of QMI
14
Shares to be delivered to the Vendors accordingly) unless the
Vendors provide the Purchaser with a guarantee or letter of
credit acceptable to the Purchaser acting reasonably.
The Vendors' IPO Right may be exercised by giving notice in
writing to QMI during the IPO Exercise Period. Once given by the
Vendors to QMI, the notice of exercise cannot be rescinded or
revoked without the consent of QMI.
(B) NOTICE OF QMI. Concurrently with the filing of a preliminary
prospectus as contemplated by Section 3.6(a), QMI shall give a
written notice ("QMI'S IPO NOTICE") to the Vendors informing the
Vendors that a preliminary prospectus relating to a proposed QMI
IPO has been filed and that the Vendors have the right to
exercise the Vendors' IPO Right by giving written notice to QMI,
as described in Section 3.6(a), no later than a date to be
specified in the QMI IPO Notice, which date shall be QMI's
reasonable estimate as to the date (the "IPO EXERCISE DATE")
which is 3 Business Days prior to the date on which a final
prospectus relating to a QMI IPO is scheduled to be filed by QMI
with the appropriate securities regulatory authorities.
(c) QMI shall have the right to amend the IPO Exercise Date at its
discretion by providing written notice to that effect to the
Vendors provided that no such amendment shall have the effect of
providing the Vendors with less than 3 Business Days to elect to
exercise the Vendors' IPO Right.
(d) QMI shall, upon the request of the Vendors acting reasonably,
provide the Vendors with information regarding the progress of
the QMI IPO and other information relating to the QMI IPO.
(e) If QMI delivers or has an obligation to deliver a QMI IPO Notice,
the Purchaser's Right may not be exercised until after the
closing or abandonment of the QMI IPO (and provided the Vendors
have not exercised the Vendors' IPO Right or the Vendors' Right).
If the QMI IPO has closed or been abandoned and the Purchaser's
Right otherwise exercisable during a particular Purchaser's
Exercise Period has expired after the QMI IPO Notice has been
given and before the Purchaser has had a 30 day period to
exercise Purchaser's Right, the period of permitted exercise of
Purchaser's Right shall be extended by such number of days as is
required to provide Purchaser with a 30 day period to exercise
Purchaser's Right (provided that Vendors have not exercised the
Vendors' IPO Right or the Vendors' Right).
(f) VENDORS' STANDSTILL UNDERTAKING. The Vendors covenant and agree
that in circumstances where the Vendors' IPO Right has been
exercised, if requested by the underwriters of the QMI IPO, the
Vendors shall deliver to such underwriters, at such time as may
be requested by such
15
underwriters, an undertaking of the Vendors not to sell or
otherwise dispose of QMI Shares to be delivered to it as payment
for the Value of the Additional Amount as contemplated by this
Section 3.6 for a period of up to 180 days (but in no event
longer than the shortest period required from a current
shareholder of QMI), such undertaking to be in such form as may
be requested by the underwriters of any of the shareholders of
QMI which are required to deliver such an undertaking. QMI
undertakes to use its reasonable efforts to minimize the length
of any such standstill requirement.
(g) FAILURE TO COMPLETE IPO. If following delivery by the Vendors of
a notice of exercise of the Vendors' IPO Right, the QMI IPO is
not completed for any reason whatsoever (including an election by
QMI not to proceed with the QMI IPO), the notice of exercise of
the Vendors' IPO Right shall be deemed to be rescinded and of no
force or effect. In such circumstances, if the Vendor's Right has
expired or would otherwise expire within 30 days, the period to
exercise the Vendor's Right shall be extended to allow the
Vendors a 30 day period to exercise the Vendors' Right.
3.7 FRACTIONAL SHARES.
No fractional shares of QMI shall be delivered in the event the
Purchaser (or QMI or an affiliate of QMI) elect to satisfy the payment of
the Value of the Additional Amount in QMI Shares as contemplated by Section 3.3
or the Vendors elect to receive payment of the Value of the Additional Amount by
the delivery of QMI Shares in conjunction with a QMI IPO as contemplated by
Section 3.6, and the cash equivalent therefor shall be payable to the Vendors.
3.8 PAYMENT ON MATURITY DATE.
If none of (a) the Vendors' Notice, (ii) the Purchaser's
Notice, (iii) the notice of the Vendors contemplated by Section 3.6(a), (iv) the
notice of the Vendors contemplated by Section 4.4 or (v) the notice of the
Vendors contemplated by Section 11.2 is delivered in the manner contemplated by
this Agreement, on the Maturity Date, the Purchaser (or QMI or an affiliate of
QMI) shall pay the Additional Amount by payment to the Vendors of an amount in
cash equal to $70,000,000 by certified cheque or wire transfer payable to the
order of the Vendors or as otherwise directed by the Vendors.
ARTICLE 4
ADJUSTMENTS
4.1 ADJUSTMENT UPON CONSOLIDATION, SUBDIVISION OR DISTRIBUTIONS.
(a) If QMI shall, after the date hereof, (i) fix a record date for
the payment of a stock dividend on QMI Shares or the making of a
distribution of QMI Shares or securities convertible into or
exchangeable for QMI Shares to all or substantially all of the
holders of QMI Shares (other than the issue of QMI Shares or
securities convertible into or exchangeable for QMI
16
Shares by way of dividend payable to shareholders which at their
option can take cash or shares in lieu of a cash dividend, which
shall be treated as a cash dividend for the purposes of
determining the Compensating Amount), (ii) subdivide or redivide
the QMI Shares into a greater number of shares, or (iii) reduce,
combine or consolidate the QMI Shares into a smaller number of
shares (any of such events in clauses (i), (ii) and (iii) being
herein called a "QMI SHARE REORGANIZATION"), then, in any such
event, the Notional Number shall be adjusted, effective
immediately after the effective date of any such QMI Share
Reorganization, so that it will equal the number of QMI Shares
which the Vendors would have owned or been entitled to receive
immediately following any QMI Share Reorganization had the
Vendors owned QMI Shares equal in number to the Notional Number
immediately prior to the effective date of the QMI Share
Reorganization, such adjustment to be made by multiplying the
Notional Number in effect immediately prior to the effective
date, by a fraction (the "REORGANIZATION RATIO"), the numerator
of which shall be the number of QMI Shares outstanding
immediately after giving effect to such QMI Share Reorganization
(including, where securities exchangeable for or convertible into
QMI Shares are distributed, the number of QMI Shares that would
have been outstanding had all such securities been exchanged for
or converted into QMI Shares on such record date or effective
date) and the denominator of which shall be the number of QMI
Shares outstanding immediately prior to the effective date.
(b) If QMI shall, after the date hereof, fix a record date for the
issue of options, rights or warrants to all or substantially all
of the holders of QMI Shares entitling them, within a period of
45 days after the date of issue thereof, to subscribe for or
purchase QMI Shares or securities convertible or exchangeable
into QMI Shares (other than rights to purchase QMI Shares
pursuant to a plan for the reinvestment of cash dividends) at a
price per share (or having a conversion or exchange price per
share) less than 95% of the Current Market Price on the earlier
of such record date and the date on which QMI publicly announces
its intention to make such issuance (any such issue being herein
called a "RIGHTS OFFERING"), then in each such case the Notional
Number shall be adjusted effective immediately after such record
date so that it will equal the number determined by multiplying
the Notional Number in effect immediately prior to such record
date by a fraction (the "ADJUSTMENT RATIO"), the numerator of
which shall be the number of QMI Shares outstanding immediately
prior to such record date, PLUS such number of additional QMI
Shares offered for subscription or purchase pursuant to such
options, rights or warrants (or into which the convertible or
exchangeable securities so offered are convertible or
exchangeable) LESS the number of QMI Shares which could be
purchased with the aggregate offering proceeds of the total
number of QMI Shares so offered for subscription or purchase
pursuant to such options, rights or warrants (or with the
aggregate conversion or exchange price of the convertible or
exchangeable securities so offered) at the
17
Current Market Price ("FMV OFFERING") and the denominator of
which shall be the number of QMI Shares outstanding immediately
prior to such record date. The FMV Offering shall be calculated
by multiplying the number of additional QMI shares offered for
subscription or purchase pursuant to such options, rights or
warrants (or the number of additional QMI Shares into which the
convertible or exchangeable securities so offered are convertible
or exchangeable) by the exercise price of such options, rights or
warrants (or of such convertible or exchangeable securities) and
dividing the product so obtained by such Current Market Price. To
the extent that such options, rights or warrants are either (i)
not exercised (or such convertible or exchangeable securities are
not converted or exchanged) at the time they expire or (ii) out
of the money at the time the Additional Amount is payable, the
Notional Number shall be readjusted to the number which would
then be in effect had such adjustments for the issuance of such
options, rights or warrants been made upon the basis of only the
number of QMI Shares actually delivered pursuant to such Rights
Offering. Each such adjustment shall be made successively.
(c) If there is any reclassification of QMI Shares at any time
outstanding or any change of the QMI Shares, in either case, into
other Voting Equity Securities of QMI or a successor to QMI
(including as a result of an amalgamation, arrangement, merger or
similar transaction) (any such reclassification or change being
called a "CAPITAL REORGANIZATION"), then the Notional Number
following the effective date of such Capital Reorganization will
be adjusted so that it will refer to the kind and number of
Voting Equity Securities which the Vendors would have been
entitled to receive immediately following such Capital
Reorganization had the Vendors been the registered holder of QMI
Shares equal in number to the Notional Number of QMI Shares
immediately prior to such Capital Reorganization.
(d) If QMI shall, after the date hereof, fix a record date for the
distribution to all or substantially all the holders of QMI
Shares of securities, rights, options or warrants of a
corporation or other entity in which QMI has a direct or indirect
interest, and if such distribution does not constitute a QMI
Share Reorganization, a Rights Offering or a Capital
Reorganization (any of such non-excluded events being herein
called a "SPIN-OUT DISTRIBUTION"), the Vendors shall be entitled
to receive, as part of the Additional Amount (and in addition to
the Value of the Additional Amount), an amount in cash (the
"SPIN-OUT AMOUNT") equal to the value of such securities, rights,
options or warrants as of the Applicable Valuation Date, as
determined in accordance with the valuation principles set forth
in Schedule A, or if such securities, rights, options or warrants
are then listed on a stock exchange or other organized trading
market, determined pursuant to clause "a" of the definition of
Fair Market Value,
18
such Spin-out Amount to be paid on the date the Value of the
Additional Amount is payable hereunder.
(e) If QMI shall, after the date hereof, fix a record date for the
distribution to all or substantially all the holders of QMI
Shares of:
i. shares of QMI of any class other than QMI Shares; or
ii. rights, options or warrants to acquire securities,
property or other assets of QMI; or
iii. evidences of indebtedness; or
iv. any property or other assets (other than cash
dividends),
and if such distribution does not constitute a QMI Share
Reorganization, a Rights Offering, a Capital Reorganization or a
Spin-out Distribution (any of such non-excluded events being
herein called a "SPECIAL DISTRIBUTION"), the Notional Number
shall be adjusted, effective immediately after the record date
for the Special Distribution, by multiplying the Notional Number
in effect on such record date by a fraction:
- the numerator of which shall be the number of QMI Shares
outstanding on such record date multiplied by the Current
Market Price of the QMI Shares on such record date, and
- the denominator of which shall be:
- the product of the number of QMI Shares outstanding on
such record date and the Current Market Price on such
record date, less
- the Fair Market Value of the shares, rights, options,
warrants, evidences or indebtedness or property or
other assets distributed in the Special Distribution,
provided that no such adjustment shall be made if the result of
such adjustment would be to decrease the Notional Number in
effect immediately before such record date.
(f) Any QMI Shares distributed in payment of a dividend shall be
deemed to have been distributed immediately prior to the close of
business on the record date for such dividend for purposes of
calculating the number of outstanding QMI Shares.
19
(g) All adjustments to the Notional Number shall be calculated to the
nearest 1/10,000th of a QMI Share (or if there is not a nearest
1/10,000th of a share, to the next lower 1/10,000th of a share).
4.2 OTHER ACTIONS.
In the event that QMI takes any action affecting or relating
to the structure of its share capital, other than any action contemplated by
Section 4.1, which would reasonably be considered to affect prejudicially the
rights or obligations of the Vendors to receive QMI Shares as contemplated
herein or the calculation of the Additional Amount or the Current Market Price,
then the Notional Number or, as the case may be, the appropriate elements of the
definition of the Additional Amount or the Current Market Price shall be
adjusted in such a manner and at such time, by action of the Directors of QMI is
fair and equitable in the circumstances to the Vendors and the Purchaser.
4.3 NOTICE OF ADJUSTMENTS AND CERTAIN OTHER EVENTS.
Whenever the Notional Number or the Value of the Additional
Amount is adjusted as herein provided or the Compensating Amount is increased as
herein provided, the Purchaser shall as soon as practicable compute the new
Notional Number (or the Value of the Additional Amount or the Compensating
Amount) and prepare and deliver to the Vendors an Officers' Certificate of the
Purchaser setting forth the adjusted Notional Number (or the new Value of the
Additional Amount or Compensating Amount), the method of calculation thereof in
reasonable detail, and the facts requiring such adjustment and upon which such
adjustment is based.
4.4 LIQUIDITY EVENTS.
In the event of (i) any amalgamation, arrangement, merger or
similar transaction of QMI, or of a successor to QMI, which does not result in
holders of QMI Shares receiving Voting Equity Securities of QMI or a successor
to QMI representing more than 50% of the voting rights attached to all
outstanding Voting Equity Securities of such entity, (ii) a take-over bid,
acquisition or similar transaction which results in more than 50% of the voting
rights attached to the outstanding QMI Shares being owned by a single Person or
group of Persons (other than the current shareholders of QMI or any of their
affiliates (as such term is defined under the CANADA BUSINESS CORPORATIONS ACT))
acting jointly or in concert, or (iii) any sale, lease or other disposition
involving all or substantially all of the assets of QMI, all or substantially
all of the proceeds of which are distributed to holders of QMI Shares (any such
event being herein referred to as a "LIQUIDITY EVENT"), the Vendors shall have
the option (the "VENDORS' LIQUIDITY OPTION"), exercisable by giving written
notice to QMI within 30 days following the public announcement of the Liquidity
Event (which shall describe in reasonable detail the terms of the Liquidity
Event), to elect to receive, in satisfaction of the Value of the Additional
Amount, on the date of completion or closing of such Liquidity Event, cash in an
amount equal to the sum of (i) the product of the Notional Number and the
Transaction Value (as defined below) plus (ii) the Compensating Amount. For this
purpose, "TRANSACTION VALUE" means (x) for any cash received in any such
Liquidity Event, the amount of cash received per QMI Share, (y) for any property
other than cash or securities received in any such Liquidity Event an amount
equal to the Fair
20
Market Value of such property received per QMI Share, and (z) for any
securities received in any such Liquidity Event, an amount equal to the Fair
Market Value of such securities received per QMI Share, determined, in the
case of each of clauses (y) and (z) as of the closing date of such Liquidity
Event.
If a Liquidity Event has been announced, the Purchaser's Right
may not be exercised until after the closing or abandonment of the Liquidity
Event (and provided the Vendor has not exercised the Vendors' Right or the
Vendors' Liquidity Option). If the Liquidity Event has closed or been abandoned
and the Purchaser's Right otherwise exercisable during a particular Purchaser's
Exercise Period has expired following the public announcement of the Liquidity
Event and before the Purchaser has had a 30 day period to exercise Purchaser's
Right, the period of permitted exercise of Purchaser's Right shall be extended
by such number of days as is required to provide Purchaser with a 30 day period
to exercise Purchaser's Right (provided that Vendors have not exercised the
Vendors' Right or the Vendors' Liquidity Option).
If following delivery by the Vendors of a notice of exercise
of the Vendors' Liquidity Option, the Liquidity Event is not completed for any
reason whatsoever, the notice of exercise of the Vendors' Liquidity Option shall
be deemed to be rescinded and of no force or effect. In such circumstances, if
the Vendor's Right has expired or would otherwise expire within 30 days, the
period to exercise the Vendor's Right shall be extended to allow the Vendors a
30 day period to exercise the Vendors' Right.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
5.1 REPRESENTATIONS AND WARRANTIES OF THE VENDORS.
The Vendors represent and warrant as follows to the Purchaser
and acknowledges and confirms that the Purchaser is relying upon the
representations and warranties in connection with the purchase by the Purchaser
of the Purchased Shares:
(a) INCORPORATION AND QUALIFICATION. Each of CVTL and CPIII is a
limited liability partnership validly existing under the laws of
the State of Delaware and has the power, authority and right to
own and operate its property, carry on its business and enter
into and perform its obligations under this Agreement.
(b) VALIDITY OF AGREEMENT. The execution, delivery and performance by
each of CVTL and CPIII, as the case may be, of this Agreement:
i. have been duly authorized by all necessary action on the
part of or on behalf of CVTL and CPIII, as the case may be;
ii. do not (or would not with the giving of notice, the lapse of
time or the happening of any other event or condition)
result in a breach or a violation of, or conflict with, any
of the terms or provisions of its
21
constating documents or by-laws or any contracts or
instruments to which it is a party or pursuant to which any
of its assets or property may be affected; and
iii. will not result in the violation of any Law.
(c) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly
executed and delivered by each of CVTL and CPIII, and constitutes
a legal, valid and binding obligation of each of CVTL and CPIII,
enforceable in accordance with its terms subject only to any
limitation under applicable laws relating to (i) bankruptcy,
winding-up, insolvency, arrangement and other laws of general
application affecting the enforcement of creditors' rights, and
(ii) the discretion that a court may exercise in the granting of
equitable remedies such as specific performance and injunction.
(d) TITLE TO PURCHASED SHARES. The Purchased Shares are owned by the
Vendors (304.97 of the Purchased Shares being held by CVTL and
4,695.03 of the Purchased Shares being held by CPIII) as the
registered and beneficial owner with a good title, free and clear
of all Liens other than those restrictions on transfer, if any,
contained in the articles of the Corporation or the Shareholders'
Agreement. Upon completion of the transaction contemplated by
this Agreement, the Purchaser will have good and valid title to
Purchased Shares, free and clear of all Liens other than (i)
those restrictions on transfer, if any, contained in the articles
of the Corporation or in the Shareholders' Agreement, and (ii)
Liens granted by the Purchaser.
(e) NO OTHER AGREEMENTS TO PURCHASE. There is no contract, option or
any other right of another binding upon or which at any time in
the future may become binding upon the Vendors to sell, transfer,
assign, pledge, charge, mortgage or in any other way dispose of
or encumber any of the Purchased Shares other than pursuant to
the provisions of this Agreement.
(f) RESIDENCE OF THE VENDORS. Each Vendor is a non-resident of Canada
within the meaning of the INCOME TAX ACT (Canada).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants as follows to the
Vendors and acknowledges and confirms that the Vendors are relying on such
representations and warranties in connection with the sale by the Vendors of the
Purchased Shares:
(a) INCORPORATION AND CORPORATE POWER. The Purchaser is a corporation
incorporated and existing under the laws of Quebec and has the
corporate power and authority to enter into and perform its
obligations under this Agreement.
22
(b) VALIDITY OF AGREEMENT. The execution, delivery and performance by
the Purchaser of this Agreement:
i. have been duly authorized by all necessary corporate
action on the part of the Purchaser;
ii. do not (or would not with the giving of notice, the
lapse of time or the happening of any other event or
condition) result in a breach or a violation of, or
conflict with, any of the terms or provisions of its
constating documents or by-laws or any contracts or
instruments to which it is a party or pursuant to which
any of its assets or property may be affected; and
iii. will not result in the violation of any Law.
(c) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly
executed and delivered by the Purchaser and constitute legal,
valid and binding obligations of the Purchaser, enforceable
against it in accordance with their respective terms subject only
to any limitation under applicable laws relating to (i)
bankruptcy, insolvency, arrangement or other similar laws of
general application affecting creditors' rights, and (ii) the
discretion that a court may exercise in the granting of equitable
remedies.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF QMI
7.1 REPRESENTATIONS AND WARRANTIES OF QMI.
QMI represents and warrants as follows to the Vendors and
acknowledges and confirms that the Vendors are relying on such representations
and warranties in connection with the sale by the Vendors of the Purchased
Shares:
(a) INCORPORATION AND CORPORATE POWER. QMI is a corporation
incorporated and existing under the laws of Quebec and has the
corporate power and authority to enter into and perform its
obligations under this Agreement.
(b) VALIDITY OF AGREEMENT. The execution, delivery and performance by
QMI of this Agreement:
(i) have been duly authorized by all necessary corporate action
on the part of QMI;
(ii) do not (or would not with the giving of notice, the lapse of
time or the happening of any other event or condition)
result in a breach or a violation of, or conflict with, any
of the terms or provisions of its constating documents or
by-laws or any contracts or instruments to which it is a
party or pursuant to which any of its assets or property may
be affected; and
23
(iii) will not result in the violation of any Law.
(c) EXECUTION AND BINDING OBLIGATION. This Agreement has been duly
executed and delivered by the Purchaser and constitute legal,
valid and binding obligations of the Purchaser, enforceable
against it in accordance with its terms subject only to any
limitation under applicable laws relating to (i) bankruptcy,
insolvency, arrangement or other similar laws of general
application affecting creditors' rights, and (ii) the discretion
that a court may exercise in the granting of equitable remedies.
(d) AUTHORIZED AND ISSUED CAPITAL. The authorized capital of QMI
consists of an unlimited number of preferred shares issuable in
series and an unlimited number of Common Shares, of which
1,590,000 Cumulative First Preferred Shares Series A (all of
which are owned beneficially and of record by direct or indirect
wholly-owned subsidiaries of QMI) and 123,602,807 Common Shares
(and no more) have been duly issued and are outstanding as fully
paid and non-assessable at the date hereof.
(e) FINANCIAL STATEMENTS. The financial statements of QMI for the
period ended September 30, 2003, have been prepared in accordance
with Canadian generally accepted accounting principles applied on
a basis consistent with those of previous fiscal years and
present fairly the assets, liabilities, (whether accrued,
absolute, contingent or otherwise) and financial position of QMI
as at September 30, 2003; and the sales and earnings of QMI
during the period covered by such financial statements.
(f) SCHEDULE A. The information set forth in Schedule A regarding
EBITDA, debt and cash of QMI's various business segments as of
September 30, 2003, shares of public corporations held by QMI and
trading prices of such shares as of September 30, 2003, and other
matters relevant to the calculation of the value of a QMI Share
as of September 30, 2003 in accordance with the principles of
Schedule A is true and accurate in all material respects.
(g) TITLE TO SHARES OF THE PURCHASER. QMI is the registered and
beneficial owner of all of the issued and outstanding shares in
the capital of the Purchaser.
(h) OPTIONS. Except for options granted under the QMI Stock Option
Plan (of which options to acquire 2,505,629 QMI Shares were
outstanding as of September 30, 2003), there are no outstanding
options, rights or other securities convertible into or
exchangeable for any shares or other securities of QMI.
(i) SUBSIDIARIES. Other than the corporations and entities whose
EBITDA is reflected in the EBITDA amounts of each business
segment set forth in Schedule A, QMI has no material subsidiaries
and holds directly or indirectly no shares or other ownership,
equity or proprietary interests in any other person material to
QMI taken as a whole.
24
(j) NO BREACH OF MATERIAL CONTRACTS. There exists no default or event
of default or event, occurrence, condition or act (including the
transactions contemplated herein) which, with the giving of
notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default under any
material contract to which QMI or any of its subsidiaries is a
party or by which any of them is bound and which default or event
of default would adversely impact the completion of the
transactions contemplated herein or have a material adverse
effect on the financial condition of QMI and its subsidiaries
taken as a whole.
ARTICLE 8
CLOSING
8.1 DATE, TIME AND PLACE OF CLOSING.
The completion of the transaction of purchase and sale
contemplated by this Agreement shall take place at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, on the
Closing Date or at such other place, on such other date and at such other time
as may be agreed upon in writing between the Vendors and the Purchaser.
8.2 CLOSING PROCEDURES.
(a) At the Closing, the Vendors shall deliver or cause to be
delivered to the Purchaser the following in form and substance
satisfactory to the Purchaser acting reasonably:
(i) resignations of each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as directors of the
Corporation effective as of the Closing Date;
(ii) share certificates representing the Purchased Shares duly
endorsed in blank for transfer, or accompanied by
irrevocable security transfer powers of attorney duly
executed in blank, in either case by the holders of record;
(iii) an original of the QTA 1098 Certificate issued by the QMR
in respect of the portion of the Purchase Price to be paid
to or on behalf of each of the Vendors on the Closing; and
(iv) an opinion of counsel to the Vendors dealing with such
matters as the Purchaser may reasonably request.
(b) At the Closing, the Purchaser and/or QMI shall deliver or cause
to be delivered to the Vendors the following in form and
substance satisfactory to the Vendors acting reasonably:
(i) A certified cheque or wire transfer payable (A) as to
$13,750,000 payable to the Escrow Agent as contemplated by
Section 2.4(b) of this Agreement and the Escrow Agreement
and (B) as to $41,250,000 payable to the order
25
of the Vendors, representing in the aggregate the portion of
the Purchase Price to be paid at Closing;
(ii) an opinion of counsel to the Purchaser and QMI dealing with
such matters as the Vendors may reasonably request.
(c) Concurrently with the Closing of the transactions contemplated by
this Agreement, the Parties hereto, together with the Escrow
Agent, shall execute and deliver an escrow agreement dated the
date hereof in such form as may be agreed upon by the parties
thereto (the "ESCROW AGREEMENT ").
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION IN FAVOUR OF THE PURCHASER.
Subject to Section 9.3, the Vendors shall indemnify and save
each of the Purchaser and QMI and their respective shareholders, directors,
officers, employees, agents and representatives (collectively, the "PURCHASER'S
INDEMNIFIED PERSONS") harmless of and from any loss, liability, claim, damage
(including incidental and consequential damage) or expense (whether or not
involving a third-party claim) including legal expenses (collectively,
"DAMAGES") suffered by, imposed upon or asserted against any of the Purchaser's
Indemnified Persons as a result of, in respect of, connected with, or arising
out of, under, or pursuant to:
(a) any failure of the Vendors to perform or fulfill any covenant of
the Vendors under this Agreement;
(b) any breach or inaccuracy of any representation or warranty given
by the Vendors contained in this Agreement;
9.2 INDEMNIFICATION IN FAVOUR OF THE VENDORS.
The Purchaser and QMI shall solidarily indemnify and save the
Vendors and its shareholders, partners, directors, officers, employees, agents
and representatives (collectively, the "VENDORS' INDEMNIFIED PERSONS") harmless
of and from any Damages suffered by, imposed upon or asserted against any of the
Vendors' Indemnified Persons as a result of, in respect of, connected with, or
arising out of, under or pursuant to:
(a) any failure of the Purchaser or QMI to perform or fulfil any
their respective covenants under this Agreement; and
(b) any breach or inaccuracy of any representation or warranty given
respectively by the Purchaser or QMI contained in this Agreement.
9.3 TIME LIMITATIONS.
The representations and warranties of the Vendors, the
Purchaser and QMI contained in this Agreement shall survive the Closing and,
notwithstanding the Closing or any
26
investigation made by or on behalf of the Vendors, the Purchaser or QMI, as the
case may be, shall continue for a period of 3 years after the Closing Date and
any claim in respect thereof shall be made in writing during such time period,
except that the representations and warranties of the Vendors set out in Section
5.1(d) shall survive and continue in full force and effect without limitation of
time and the Representations and Warranties of QMI set out in Sections 7.1(f)
and 7.1(i) shall survive and continue in full force and effect until such time
as the Additional Amount is paid in full.
ARTICLE 10
ARBITRATION
10.1 BEST EFFORTS TO SETTLE DISPUTES.
If any controversy, dispute, claim, question or difference (a
"DISPUTE") arises under this Agreement, the Parties shall use their best efforts
to settle the Dispute. To this end, they shall consult and negotiate with each
other, in good faith and understanding of their mutual interests, to reach a
just and equitable solution satisfactory to all Parties.
If a Dispute relates to an amount payable or a number of
securities to be delivered, then that portion of such amount payable or such
number of securities to be delivered not in dispute will be paid or delivered
when due.
10.2 ARBITRATION.
In respect only of Disputes which involve the determination of
the value of a QMI Share, if the Parties do not reach a solution pursuant to
Section 10.1 within a period of 15 Business Days following the first notice of
the Dispute by any Party to the other, then upon written notice by any Party to
the other, the Dispute shall be finally settled by arbitration in accordance
with the applicable provisions of the CODE OF CIVIL PROCEDURE (Quebec), except
to the extent modified by the following provisions:
(a) The arbitration tribunal shall consist of one arbitrator
appointed by mutual agreement of the Parties, which arbitrator
shall be independent and a senior representative of one of the
leading Canadian or United States investment banking firms or
other independent valuation expert qualified by education and
training to pass upon the particular matter to be decided. In the
event of failure to agree within 10 Business Days following
delivery of the written notice to arbitrate, any Party may apply
to a judge of the Superior Court (Quebec) to appoint an
arbitrator.
(b) The arbitrator shall be instructed that time is of the essence in
the arbitration proceeding and, in any event, the arbitration
award must be made within 30 days of the submission of the
Dispute to arbitration;
(c) After written notice is given to refer any Dispute to
arbitration, the Parties will meet within 15 Business Days of
delivery of the notice and will negotiate in good faith any
changes in these arbitration provisions or the rules of
arbitration which are herein adopted, in an effort to expedite
the
27
process and otherwise ensure that the process is appropriate
given the nature of the Dispute and the values at risk;
(d) If the Dispute relates to the appropriate multiple to use in
order to determine the impact on the value of a QMI Share of the
establishment by QMI or the acquisition by QMI of a business
operating in a different segment than those included on Schedule
A, each of the Vendors, on the one hand, and the Purchaser (or
QMI or an affiliate of QMI), on the other hand, shall be entitled
to present to the Arbitrator a figure representing the most
appropriate multiple to be used according to each such Party
(based on public comparables used by financial analysts covering
the relevant industry sector) and the arbitrator shall be
empowered solely to choose the more appropriate of the two
multiples (based on the supporting submissions of the two
Parties);
(e) The arbitration shall take place in Montreal, Quebec and shall be
in the English language;
(f) In any Dispute involving the interpretation or application of
accounting principles, the arbitrator shall be required to apply
Canadian generally accepted accounting principles as they exist
at the time of the Dispute.
(g) The arbitration award shall be given in writing and shall be
final and binding on the Parties, not subject to any appeal, and
shall deal with the question of costs of arbitration and all
related matters;
(h) Judgment upon any award may be entered in any Court having
jurisdiction or application may be made to the Court for a
judicial recognition of the award or an order of enforcement, as
the case may be;
(i) All Disputes referred to arbitration shall be governed by the
substantive law of Quebec; and
(j) The Parties agree that the arbitration shall be kept confidential
and that the existence of the proceeding and any element of it
(including any pleadings, briefs or other documents submitted or
exchanged, any testimony or other oral submissions and any
awards) shall not be disclosed beyond the arbitrator, the
Parties, their counsel and any person necessary to the conduct of
the proceeding, except as may lawfully be required in judicial
proceedings relating to the arbitration or otherwise as required
by applicable law.
28
ARTICLE 11
MISCELLANEOUS
11.1 ADDITIONAL COVENANTS OF QMI.
(a) QMI hereby fully and unconditionally guarantees solidarily with
the Purchaser the payment to the Vendors by the Purchaser of the
Additional Amount and the performance by the Purchaser of all of
the Purchaser's other obligations under this Agreement.
(b) QMI hereby covenants and agrees that in circumstances where QMI
Shares are to be issued and delivered to the Vendors under the
terms of this Agreement, it will take such corporate action as
may be required to cause the issuance and delivery of such QMI
Shares as fully paid and non-assessable shares.
(c) QMI hereby covenants and agrees that until such time as the
Additional Amount is paid to the Vendors, it will deliver to the
Vendors certified copies of its unaudited interim financial
statements (certified by its Chief Financial Officer as being
prepared in accordance with Canadian generally accepted
accounting principles as in force from time to time) and audited
annual financial statements promptly after such financial
statements are made available to the public.
(d) QMI hereby covenants and agrees that until such time as the QMI
Shares are listed on a Recognized Exchange, the value of a QMI
Share shall be determined in accordance with Schedule A and shall
be established and approved by the audit committee of the Board
of Directors of QMI within 45 days after the end of each fiscal
quarter on the basis of the financial statements of QMI for the
most recently completed fiscal quarter and that within 4 Business
Days following the establishment and approval by the audit
committee of the Board of Directors of QMI of such value of a QMI
Share (and in any event, no later than the 45th day following the
end of such fiscal quarter), QMI shall prepare and deliver to the
Vendors an Officers' Certificate of QMI setting forth the revised
value of a QMI Share, the method of calculation thereof in
reasonable detail, and the facts requiring such adjustment and
upon which such adjustment is based. QMI shall respond to
inquiries and provide in a timely fashion such additional
information regarding the determination of the value of a QMI
Share as may be reasonably requested by the Vendors.
11.2 SALE OF THE CORPORATION.
In the event that prior to December 15, 2005, the Purchaser
sells or otherwise disposes of a majority of the outstanding voting shares of
the Corporation or all or substantially
29
all of the assets of the Corporation to a Person not "affiliated" with QMI (as
defined in the CANADA BUSINESS CORPORATION'S ACT), the Vendors shall have the
right to require the Purchaser to pay the Vendors, in satisfaction of the
Additional Amount, an amount in cash equal to the sum of (a) $70 million and (b)
50% of the amount by which the net proceeds of such sale or other disposition
(or the implied net proceeds reflecting a sale of all of the shares or assets of
the Corporation in circumstances where less than all of such shares or assets
are sold) exceed $70 million, subject to Section 2.4. Such right may be
exercised by the Vendors in circumstances where neither the Vendors' Notice nor
the Purchaser's Notice have been delivered by providing written notice to QMI in
accordance with Section 3.2, MUTATIS MUTANDIS, provided that the Payment Date
shall be deemed to be the date of the closing of such sale or other disposition.
11.3 INTEREST ON UNPAID AMOUNTS
In the event any amount payable hereunder is not paid when due
in accordance with the terms of this Agreement, such amount shall bear interest
at the BA Rate plus 3% for the period from the due date until the date payment
is actually made and such interest shall be due and payable, subject to any
applicable withholding taxes, at the time the amount payable is actually paid.
11.4 SET-OFF
In the event any amount which may become payable by either of
the Vendors to the Purchaser under the terms of this Agreement (including any
amounts determined due and payable as a result of the indemnification provided
at Section 2.4(p) or Section 9.1), the Purchaser shall be entitled to set-off
any such amounts against its obligations under this Agreement.
11.5 TERMINATION OF CERTAIN AGREEMENTS
The Parties acknowledge and agree that all agreements between
the Parties involving the Corporation, including the Shareholders' Agreement,
are hereby terminated and that each Party is hereby released and discharged from
any obligations arising thereunder.
11.6 NOTICES.
Any notice, direction or other communication given under this
Agreement shall be in writing, in the English language, and given by delivering
it or sending it by facsimile or other similar form of recorded communication
addressed:
to the Purchaser at:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Secretary
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
30
to the Vendors at:
The Carlyle Group
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
STIKEMAN ELLIOTT LLP
▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇ West, 40th Floor
Montreal, Quebec H3B 3V2
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
to QMI at:
▇▇▇ ▇▇▇▇▇- ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Chief Financial Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any such communication shall be deemed to have been validly and effectively
given (i) if delivered, on the date of such delivery if such date is a Business
Day and such delivery was made prior to 4:00 p.m. (Montreal time) and otherwise
on the next Business Day, or (ii) if transmitted by facsimile or similar means
of recorded communication on the Business Day following the date of
transmission. Any Party may change its address for notice from time to time by
notice given in accordance with the foregoing and any subsequent notice shall be
sent to such Party at its changed address. In addition to notification in
accordance with the foregoing, any notice to be given to a Party under this
Agreement shall, where possible, also be given by e-mail.
31
Where in this agreement any notice is to be given or any
election is to be made by the Vendors, such notice or election shall be deemed
to have been given or made by the Vendors if it is given or made by either one
of CVTL or CPIII.
11.7 TIME OF THE ESSENCE.
Time shall be of the essence of this Agreement.
11.8 BROKERS.
The Vendors shall indemnify and save harmless the Purchaser
and the Corporation from and against any and all claims, losses and costs
whatsoever for any commission or other remuneration payable or alleged to be
payable to any broker, agent or other intermediary who purports to act or have
acted for the Vendors. The Purchaser shall indemnify and save harmless the
Vendors from and against any and all claims, losses and costs whatsoever for any
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for the Purchaser
or QMI.
11.9 CONFIDENTIALITY.
The Vendors acknowledge and agree that certain of the
non-public information which may be furnished to them under this Agreement may
be confidential and agrees that it shall hold all non-public information
relating to QMI provided under this Agreement in strict confidence, except as
agreed in writing by the Parties or as required or prosecute or defend any claim
hereunder. The Parties agree that all financing, corporate or other data and
information provided by the Purchaser relating to QMI which is not in the public
domain, shall be regarded as confidential and proprietary to the Purchaser,
unless otherwise indicated.
11.10 ANNOUNCEMENTS.
Any press release or public statement or announcement (a
"PUBLIC STATEMENT") with respect to the transaction contemplated in this
Agreement shall be made only with the prior written consent and joint approval
of the Vendors and the Purchaser unless such Public Statement is required by Law
or by any stock exchange, in which case the Party required to make the Public
Statement shall use its best efforts to obtain the approval of the other Party
as to the form, nature and extent of the disclosure.
11.11 THIRD PARTY BENEFICIARIES.
Except as otherwise provided in Section 9.1 and Section 9.2,
the Vendors and the Purchaser intend that this Agreement shall not benefit or
create any right or cause of action in, or on behalf of, any Person other than
the Parties to this Agreement and no Person, other than the Parties to this
Agreement shall be entitled to rely on the provisions of this Agreement in any
action, suit, proceeding, hearing or other forum.
32
11.12 EXPENSES.
Except as otherwise expressly provided in this Agreement, all
costs and expenses (including the fees and disbursements of legal counsel,
investment advisers and accountants) incurred in connection with this Agreement
and the transactions contemplated therein shall be paid by the Party incurring
such expenses.
11.13 AMENDMENTS.
This Agreement may only be amended, supplemented or otherwise
modified by written agreement signed by the Vendors, the Purchaser and QMI.
11.14 WAIVER.
(1) No waiver of any of the provisions of this Agreement shall be
deemed to constitute a waiver of any other provision (whether or not similar);
nor shall such waiver be binding unless executed in writing by the Party to be
bound by the waiver.
(2) No failure on the part of the Vendors, the Purchaser or QMI to
exercise, and no delay in exercising any right under this Agreement shall
operate as a waiver of such right; nor shall any single or partial exercise of
any such right preclude any other or further exercise of such right or the
exercise of any other right.
11.15 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the
Parties and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties. There are no
representations, warranties, covenants, conditions or other agreements, express
or implied, collateral, statutory or otherwise, between the Parties in
connection with the subject matter of this Agreement or the Corporation except
as specifically set forth herein and therein and neither the Vendors nor the
Purchaser nor QMI has relied or is relying on any other information, discussion
or understanding in entering into and completing the transactions contemplated
in this Agreement.
11.16 SUCCESSORS AND ASSIGNS.
(1) This Agreement shall become effective when executed by the
Vendors, the Purchaser and QMI and after that time shall be binding upon and
enure to the benefit of the Vendors, the Purchaser and QMI and their respective
successors and permitted assigns.
(2) The Vendors may assign or transfer their rights to receive the
Additional Amount under this Agreement to their partners with the consent of the
Purchaser, which consent shall not be unreasonably withheld, provided however,
that (a) such partners agree in writing to be bound by the provisions of this
Agreement (including under Section 2.4 which shall apply to such partners
MUTATIS MUTANDIS) and (b) notwithstanding any such assignment or transfer, the
Vendors or their controlling affiliates will continue to administer the
performance by the Vendors of this Agreement.
33
(3) Except as provided in this Section 11.16, neither this Agreement
nor any of the rights or obligations under this Agreement shall be assignable or
transferable by any Party without the prior written consent of the other
Parties.
11.17 SEVERABILITY.
If any provision of this Agreement shall be determined by an
arbitrator or any court of competent jurisdiction to be illegal, invalid or
unenforceable, that provision shall be severed from this Agreement and the
remaining provisions shall continue in full force and effect.
11.18 GOVERNING LAW.
This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Quebec and the federal
laws of Canada applicable therein
11.19 COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and all such counterparts taken together shall be deemed to constitute one and
the same instrument.
34
IN WITNESS WHEREOF the Parties have executed this Share
Purchase Agreement.
CARLYLE VTL HOLDINGS, L.P.,
represented by TC GROUP III, LLC, its
general partner
By: ________________________________
Authorized Signing Officer
CARLYLE PARTNERS III
(VIDEOTRON), L.P., represented
by TC Group III, LLC, its general partner
By: ________________________________
Authorized Signing Officer
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ INC.
By: ________________________________
Authorized Signing Officer
QUEBECOR MEDIA INC.
By: ________________________________
Authorized Signing Officer
35
SCHEDULE A
This Schedule A (i) illustrates the methodology used by the parties to
set the value of a QMI Share as of September 30, 2003 and (ii) establishes the
methodology to be used for future valuations of a QMI Share for purposes of
determining the Value of the Additional Amount, if QMI Shares are not listed.
In general, the following principles were followed in establishing the
value of a QMI Share as of September 30, 2003 and for purposes of closing, and
will be used for future calculations:
1. If shares of a QMI subsidiary (or other entity in which QMI holds
an investment) are publicly traded (such entities, "Public
Companies"), the value of QMI's shares in such subsidiary (or
other investment) will be determined based on the trading price
of the publicly-traded shares multiplied by the number of shares
(or share equivalents) held directly or indirectly if held
through Private Operations (and if held through partially owned
Private Operations, on a proportionate basis) by QMI. As of
September 30, 2003, there were three Public Companies -TVA Group,
Netgraphe, and Nurun. For purposes of future calculations, the
trading price will be determined as the volume weighted average
trading price during the 10-day trading period ending on the
applicable quarter end. Cash and debt of these entities will not
be included in the calculation of the value of a QMI Share.
2. All operations wholly or partially owned by QMI, other than those
conducted by Public Companies, ("Private Operations") will be
valued, in the case of operations in the business segments
currently operated by QMI (and reasonable extensions thereof),
based on (i) the multiple of EBITDA assigned to the applicable
segment (i.e. cable (including SuperClub), newspaper publishing,
leisure and entertainment and telecom) in this Schedule A, (ii)
QMI's proportionate interest therein and (iii) EBITDA for the
12-month period ended on the last day of the most recently
completed fiscal quarter (the "LTM EBITDA") .
In the event that QMI establishes or acquires a business
operating in a different segment than those included on Schedule
A, the parties will consult in good faith to set a reasonable
multiple for such business based on public comparables. If the
parties are unable to agree on a multiple, the matter will be
settled by arbitration (in accordance with Article 10 of this
Agreement).
3. Debt and cash/cash equivalents (pro forma, without duplication,
for the payment to the Vendors of any Compensating Amount), all
in accordance with Canadian GAAP, associated with Private
Operations will be included in the calculations on a basis
consistent with the calculations as of September 30, 2003, it
being understood that: (i) debt and cash of partially owned
operations will be included only on a proportionate basis, (ii)
debt will include associated
36
currency hedging gains and obligations and (iii) cash/cash
equivalents will include temporary investments.
4. Any investments held by QMI which do not constitute shares of
Public Companies, Private Operations or cash/cash equivalents
("Other Investments") will be included in the calculation based
on the fair market value thereof. However, the fair market value
of the convertible debentures of Netgraphe ("Convertible
Debentures") held by QMI as of September 30, 2003 will be
excluded from the firm value. For greater certainty, if QMI
disposes of the Convertible Debentures, the proceeds from
disposition will be excluded from the calculation of the firm
value. If QMI converts the Convertible Debentures in common
shares of Netgraphe, the shares received from the conversion will
be excluded from QMI's share interest in Netgraphe.
5. For purposes of Schedule A, EBITDA means, for any period, the
consolidated net income of the corporation or entity before the
effect of (i) the payment of any dividends in respect of
preferred stock and (ii) minority interest, determined in
accordance with Canadian GAAP PLUS (a) without duplication and to
the extent deducted in calculating such consolidated net
income, the sum of (i) consolidated financial charges (including,
without limitation, interest expense), (ii) consolidated income
taxes, (iii) consolidated depreciation and amortization expenses,
(iv) reserves for restructuring of operations and special
charges, (v) write-downs of goodwill, (vi) other non-operating
expenses or charges and (vii) any extraordinary, unusual or
non-cash expenses or charges, (it being understood that
provisions for future cash expenses do not constitute non-cash
expenses and the reversal of any such prior period provisions in
future periods shall serve to reduce either the provisions or
cash expenses in such future periods) MINUS (b) without
duplication and to the extent added in calculating such
consolidated net income, the sum of (i) consolidated
interest income, (ii) other non-operating gains or income and
(iii) any extraordinary, unusual or non-cash gains or income (it
being understood that provisions for future cash gains or income
do not constitute non-cash gains or income and the reversal of
any such prior period provisions in future periods shall serve to
reduce either the provisions or cash gains or income in such
future periods).
6. Set forth below is (i) a calculation of the value of a QMI Share
as of September 30, 2003 based on the foregoing principles and
(ii) a reconciliation of the EBITDA, debt and cash figures used
in such calculation as compared to QMI's financial statements
filed with the SEC. [Aforementioned schedule omitted; to be
furnished to the Securities and Exchange Commission upon
request.]