Exhibit 10(ii)(15)
SHARE PURCHASE AGREEMENT
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MEMORANDUM OF AGREEMENT made on the 5th day of February, 1999,
BY AND BETWEEN: The persons listed in Exhibit "A" hereto, each of
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whom herein represented by ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, its,
his or her lawful mandatary, duly authorized for
all of the purposes hereof, other than ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇ who is also herein acting on his own behalf
(each, a "Vendor");
AND: IT Holdings Canada, Inc., a corporation
incorporated under the Laws of the Province of New
Brunswick, with its registered office at ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇, herein acting and represented by ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Assistant-Secretary (the
"Purchaser");
AND INTERVENED TO BY: The IT Group, Inc., a corporation incorporated
under the Laws of the State of Delaware, herein
acting and represented by ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Senior Corporate Counsel and Assistant-Secretary,
Corporate Development ("ITX").
WHEREAS, prior to the Reorganization, Vendors and certain other Persons own
all of the issued and outstanding shares of Corporoche Canada Inc. (the
"Corporation") and the Corporation owns all of the issued and outstanding shares
of Roche Ltee, Groupe Conseil/Roche Ltd., Consulting Group ("Roche");
WHEREAS, pursuant to the Reorganization, Roche will amalgamate with 3559076
Canada Inc. ("NewCo 1") to form Roche Ltee, Groupe Conseil / Roche Ltd.,
Consulting Group ("New Roche"), all of the issued and outstanding shares of
which to be owned by Vendors;
AND WHEREAS Purchaser, a wholly-owned subsidiary of ITX, wishes to
purchase, and Vendors wish to sell, all of the issued and outstanding shares of
New Roche.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT, in consideration of the
mutual covenants herein contained, it is agreed by and between the Parties as
follows:
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ARTICLE I
INTERPRETATION
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1.1 Definitions. Where used herein or in any amendments hereto or in any
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communication required or permitted to be given hereunder, the following terms
shall have the following meanings, respectively, unless the context otherwise
requires:
1.1.1 "Accounts Receivable" shall mean all accounts receivable, trade accounts,
notes receivable, book debts, holdbacks receivable, deposits and other
debts due or accruing due to Roche or any Subsidiary.
1.1.2 "Affiliate" shall have the meaning ascribed thereto in the Canada Business
Corporations Act.
1.1.3 "Agreement" shall mean this Share Purchase Agreement and all instruments
supplemental hereto or in amendment or confirmation hereof; "herein",
"hereof", "hereto", "hereunder" and similar expressions mean and refer to
this Agreement and not to any particular Article, Section or other
subdivision; "Article", "Section or other subdivision of this Agreement
means and refers to the specified Article, Section or other subdivision of
this Agreement.
1.1.4 "Ancillary Agreements" shall mean the Non-Competition Agreements and any
other agreements executed by the Parties in connection with the
transactions contemplated herein.
1.1.5 "Associated Companies" shall mean the corporations, companies,
partnerships, joint ventures and other Persons in which the Corporation
owns, directly or indirectly, fifty percent (50%) or less of the shares,
voting interests, partnership interests or economic interests and which do
not form part of the Excluded Assets, which Persons are listed in
Schedule 1.1.5.
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1.1.6 "Assumed Debt" shall mean the US dollar equivalent of the bank debt of
Roche relating to its continuing operations based on the reciprocal of the
exchange rate outstanding on January 31, 1999 as published in the Wall
Street Journal on February 1, 1999 (being the reciprocal of Cdn $1.5110,
or US $0.6618), the whole net of actual cash deposits provided they are
fully owned by Roche and unrestricted (cash collateral to guarantee
letters of credit not being considered restricted).
1.1.7 "Benefit Plans" shall mean all pension, retirement, bonus, profit sharing,
compensation, incentive, stock purchase, stock option, stock appreciation,
severance, change-of-control, savings, thrift, insurance, medical,
hospitalization, disability, death or other similar plan, program,
arrangement or practice of the Corporation, Roche or any Subsidiary
providing directors, officers, shareholders or employee benefits.
1.1.8 "Bid" shall mean any quotation, bid, tender or proposal which, if accepted
or awarded, would lead to a contract with a Governmental Body, including a
prime
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contractor or a higher tier subcontractor to a Governmental Body, for the
design, manufacture or sale of products or the provision of services.
1.1.9 "Books and Records" shall mean all books, records, files and documentation
(in whatever medium and wherever situated) of the Corporation, Roche
(including NewCo 1), the Subsidiaries other than those which deal
exclusively with the Excluded Assets; for greater certainty, the phrase
"Books and Records" shall include, without limitation, all statements,
books, ledgers, records, financial records, accounting records, consents,
approvals, authorizations, written Contracts, Tax returns, Employee files,
retiree files, insurance policies, Benefit Plans, documentation, evidence
or indication of ownership of the Corporation, Roche or the Subsidiaries
in and to any assets (other than those which deal exclusively with the
Excluded Assets, other than the Management Pension Plan Surplus) and the
properties of the Corporation, Roche or the Subsidiaries and all records
and correspondence which pertain to the Licenses.
1.1.10 "Business" shall mean the business of Roche or any of the Subsidiaries
as conducted by Roche or any of the Subsidiaries including, without
limitation, the fields of engineering, construction and construction
management, information management, health care consulting and operation
and maintenance services, environmental and infrastructure engineering
and management, wood processing and forestry, transportation, water
management, municipal finances, real estate appraisals, and consulting
with respect to the foregoing.
1.1.11 "Capital Contributions" shall mean the capital contributions made by
Purchaser pursuant to Section 2.3.
1.1.12 "Closing" shall mean the delivery to Purchaser of the certificates for
the Purchased Shares duly endorsed for transfer and the payment to or on
behalf of Vendors of the Purchase Price required to be paid on the
Closing Date pursuant to Section 2.2 and the payment of the Capital
Contributions required to be made pursuant to Section 2.3.
1.1.13 "Contamination" means the presence of any Hazardous Substance in the
environment, including the degradation of water, air or soil quality.
1.1.14 "Contracts" shall mean all written or oral contracts, agreements,
indentures, instruments, commitments and orders made by or in favour of
the Corporation, Roche, any Subsidiary or any Associated Company, as the
case may be, including Government Contracts; and "Contract" shall mean
any one of them.
1.1.15 "Dealing" means using, generating, manufacturing, refining, treating,
transporting, storing, handling, labeling, documenting, recycling,
disposing of, releasing, discharging, depositing, transferring,
producing or processing of any Hazardous Substance.
1.1.16 "Employees" shall mean all of the employees of Roche and of the
Subsidiaries, in each case immediately prior to the Closing Date; for
greater certainty, the word "Employees" shall include part-time
employees and employees on short-term or
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long-term disability, workmen's compensation, sick leave, maternity
leave, or leave of absence or laid-off employees prior to Closing Date.
1.1.17 "Environmental Laws" means all applicable Laws in existence on or before
the date hereof relating to Hazardous Substances, pollution or
protection of the environment, human health or safety, including Laws
relating to (a) on-site or off-site Contamination, (b) Releases of any
Hazardous Substance into the environment and (c) Dealing in any
Hazardous Substance.
1.1.18 "Environmental Permits" means, with respect to a Person, all Licenses
and any other approvals required for the operation of the business,
operations and assets of the Person pursuant to Environmental Laws.
1.1.19 "Equipment" shall mean (a) all machinery, spare parts, equipment, tools,
computers, furniture, fixtures, furnishings, office equipment
(including, without limitation, word processing, accounting,
communication and reproduction equipment) of Roche or any Subsidiary
wherever located, and (b) all assignable warranties of any Person
covering all or any part of the aforesaid Equipment.
1.1.20 "Excluded Assets" shall mean Metroplan, 2758-3525 Quebec Inc., ▇▇▇▇▇▇
▇▇▇▇▇▇ Ltd., the Management Pension Plan Surplus and Solutions
Technologiques Internationales STI Inc.
1.1.21 "Financial Statements" shall mean (a) the audited financial statements
for Roche as at December 31, 1997 consisting of the consolidated balance
sheet (on a non-proportional basis) as at such date and the consolidated
statement of earnings, the consolidated statement of retained earnings
and the consolidated statement of changes in financial position for the
period then ended and notes to the financial statements together with
the auditors' report thereon, and (b) the unaudited financial statements
of Roche for the eleven (11) months ended November 30, 1998 consisting
of a consolidated balance sheet (on a non-proportional basis) as at such
date, the consolidated statement of earnings, the consolidated statement
of retained earnings and the consolidated statement of changes in
financial position for the period then ended, copies of which financial
statements are annexed hereto as Schedule 1.1.21. When the financial
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statements for the (11) eleven-month period ended November 30, 1998 are
referenced in this Agreement, it is understood that such statements do
not have all of the normal year-end adjustments of audited statements.
1.1.22 "GAAP" shall mean generally accepted accounting principles from time to
time approved by the Canadian Institute of Chartered Accountants
applicable as at the date on which the relevant calculation has been
made, is made or is required to be made, consistently applied in
accordance with the past practice of the Person with reference to whom
such term is used.
1.1.23 "Government Contract" means any prime contract, subcontracts, teaming
agreement or arrangement, joint venture, basic ordering agreement,
letter contract, purchase order, delivery order, Bid, change order,
arrangement or other commitment of any kind with (a) any Governmental
Body, (b) any prime contractor
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to a Governmental Body or (c) any subcontractor with respect to any
contract described in paragraph (a) or (b) of this definition.
1.1.24 "Governmental Body" means any (a) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or
public department, central bank, court, tribunal, professional body such
as the Ordre des ingenieurs du Quebec, arbitral body, commission, board,
bureau, agency, domestic or foreign, (b) any subdivision, agent,
commission, board or authority of any of the foregoing or (c) any quasi-
governmental or private body exercising any regulatory, expropriation or
taxing authority under or for the account of any of the foregoing.
1.1.25 "Hazardous Substance" means any substance or material which is or is
deemed to be, alone or in any combination, hazardous, hazardous waste,
toxic, a pollutant, a deleterious substance, a contaminant, a waste, a
source of pollution or contamination or likely to adversely affect the
environment or affect human health and safety in any way under any
Environmental Laws.
1.1.26 "Initial Payment" shall mean the Canadian dollar equivalent of Ten
Million US dollars (US $10,000,000) less the Capital Contributions
(based on the reciprocal of the exchange rate published in the Wall
Street Journal on February 1, 1999 such reciprocal being Cdn $1.5110).
1.1.27 "Intellectual Property Rights" shall mean (a) all domestic and foreign
patents, trademarks, trade names, service marks, copyrights, industrial
designs, trade secrets, processes, inventions, know-how, recipes,
manuals, technology, customer and supplier lists, formulas, franchises,
licenses, rights-to-use, drawings, specifications for products,
materials and equipment, process development, manufacturing information,
quality control information, performance data, plant service
information, computer software, operating systems and other intellectual
property, in each case whether registered or unregistered and (b) all
registrations and applications for registration of the aforesaid
Intellectual Property Rights.
1.1.28 "Inventory" shall mean all inventories, finished goods, work-in-
progress, raw materials, operating supplies, shipping supplies,
maintenance items and advertising materials, in each case on hand, in
transit, ordered but not delivered, warehoused or wherever situated, of
Roche, the Subsidiaries and the Associated Companies.
1.1.29 "Laws" shall mean (a) all laws, statutes, codes, ordinances, orders,
decrees, rules, regulations, and municipal by-laws, whether domestic,
foreign or international, (b) all judgments, orders, writs, injunctions,
rulings, decrees and awards of any Governmental Body, and (c) all
policies, practices and guidelines of any Governmental Body having the
force of law or which are considered by such Governmental Body as
requiring compliance as if having the force of law, which, in each of
the above cases, binds or affects the Party or Person referred to in the
context in which such word is used.
1.1.30 "Licenses" shall mean permits, licenses, certificates of compliance,
consents, approvals and authorizations of, or registrations with, any
Governmental Body.
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1.1.31 "Liens" shall mean all hypothecs, mortgages, pledges, privileges, prior
claims, liens, security interests, transfers of property in stock,
security granted under the Bank Act (Canada), charges, deposits,
servitudes, easements, reserves, conditional sale contracts, ownership
or title retention agreements, capital leases, occupation rights,
encroachments, homologated lines, restrictive covenants, title defects
and other encumbrances or rights of any nature whatsoever or however
arising.
1.1.32 "Management Pension Plan" means the Regime complementaire de retraite
des employes de la direction ▇▇ ▇▇▇▇▇ Ltee, Groupe-Conseil.
1.1.33 "Management Pension Plan Surplus" shall mean the amount by which the
assets of the Management Pension Plan exceed the liabilities of the
Management Pension Plan as of the date of its termination, the whole as
determined by the plan actuary and approved by the relevant authorities.
1.1.34 "Maximum First EBIT Payment" shall equal one half (1/2) of the amount by
which Twenty Million Seven Hundred Thousand US dollars (US $20,700,000)
exceeds (a) the Assumed Debt and (b) Ten Million US dollars (US
$10,000,000).
1.1.35 "Maximum Second EBIT Payment" shall be an amount equal to the Maximum
First EBIT Payment.
1.1.36 "Metroplan" shall mean Societe Metroplan, Societe en commandite, a
limited partnership formed under the Laws of the Province of Quebec.
1.1.37 "Non-Competition Agreements" shall mean the non-competition agreements
to be entered into by Purchaser, ITX and certain Vendors, which
agreements shall be substantially in the forms of Exhibit "C".
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1.1.38 "Parties" shall mean Vendors and Purchaser; and "Party" shall mean
either one of them.
1.1.39 "Pembroke Project" shall mean the engineering, procurement and
construction of a medium density fiberboard plant by RBW Group (a joint
venture of Roche and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Inc.) pursuant to a Lump Sum
Engineering, Procurement and Construction contract between MacMillan
▇▇▇▇▇▇▇ Pembroke Limited Partnership and RBW Group entered into as of
the 29th day of May, 1995, as the same may have been amended from time
to time.
1.1.40 "Permitted Encumbrances" means:
(a) unregistered Liens for Taxes, assessments or governmental charges
not yet due and payable, unregistered Liens for ▇▇▇▇▇▇▇'▇
compensation assessments and similar obligations not delinquent;
(b) any unregistered Lien vested in any lessor or licensor for rent to
become due or for other obligations or acts, the performance of
which is required under leases, subleases or licenses, so long as
the payment of such rent or the performance of such other
obligation or act is not delinquent;
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(c) unregistered Liens of any employees for salaries or wages earned
but not yet payable; and
(d) unregistered Liens of unpaid vendors of moveable or personal
property, or other similar Liens, in each case arising in the
ordinary course of business for charges which are not delinquent.
1.1.41 "Person" shall mean an individual, corporation, company, partnership,
joint venture, trust, authority or body or similar organization, and
pronouns which refer to a Person shall have a similarly extended
meaning.
1.1.42 "Purchase Price" shall mean the sum of the Initial Payment, the First
EBIT Payment and the Second EBIT Payment, as the same may be adjusted
pursuant to Section 2.4, Section 2.8, Article VI, Article VII or Article
XII.
1.1.43 "Purchased Shares" shall mean all of the issued and outstanding shares
of New Roche which will remain issued and outstanding on the Closing
Date after the Reorganization, which shares will be issued and
outstanding in the manner set forth on Exhibit "A".
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1.1.44 "Real Property Leases" shall mean the leases for immoveable and real
property made in favour of Roche or any Subsidiary, as lessee or tenant
(including the current lease between Roche and Metroplan for the
premises located at ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇-
▇▇▇, ▇▇▇▇▇▇), and all leasehold improvements on, in, over or under such
leased immoveables and real property, all of which leases are listed in
Schedule 1.1.44.
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1.1.45 "Release", when used as a verb, includes release, pump, pour, empty,
eject, issue, seep, exhaust, abandon, bury, incinerate, spill, leak,
emit, deposit, discharge, disseminate, ▇▇▇▇▇, migrate, dispose, inject,
dump or place into the environment.
1.1.46 "Reorganization" shall mean the transfer of the Excluded Assets (other
than with respect to the Management Pension Plan Surplus which shall be
dealt with in the manner set forth in Article VII) and the other
transactions of Vendors, the other shareholders of the Corporation, the
Corporation, Roche, NewCo 1, certain subsidiaries and the Excluded
Assets to occur on or prior to the Closing Date, the whole as set forth
on Schedule 1.1.46.
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1.1.47 "Subsidiaries" shall mean the corporations, companies, partnerships,
joint ventures and other Persons in which Roche owns, directly or
indirectly, more than fifty percent (50%) of the shares, voting
interests, partnership interests or economic interests and which do not
form part of the Excluded Assets, which Persons are listed in
Schedule 1.1.47.
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1.1.48 "Tax" and "Taxes" shall mean all taxes, including, without limitation,
income tax, provincial health insurance plan premiums, Canada and Quebec
pension plan contributions, employment insurance premiums, ▇▇▇▇▇▇▇'▇
compensation and other payroll taxes, deductions at source, non-resident
withholding, immoveable or real property, municipal, corporation,
capital, sales, retail, excise, profits, gross
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receipts, customs duties, transfer, business, provincial sales and goods
and services taxes, including any related penalties, interest and fines.
1.2 Other Defined Terms. In addition to the defined terms in Section 1.1,
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each of the following capitalized terms shall have the meaning ascribed
thereto in the corresponding Section:
Term Section
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1998 Year............................ 6.1
Audit Date........................... 2.7.1
Auditors............................. 2.7
Closing Date......................... 13.1
Closing Balance Sheet................ 2.7.1
Collection Account................... 2.2
Contracted Backlog................... 3.1.38
Corporation.......................... Preamble
EBIT................................. 2.5
EBIT Statement....................... 2.7.2
Excess First EBIT.................... 2.6
Excess Second EBIT................... 2.6
First EBIT Payment................... 2.5
Immoveables.......................... 3.1.15
Income Taxes......................... 6.1
Indemnified Party.................... 12.3
Indemnifying Party................... 12.3
ITX.................................. Preamble
▇▇▇▇▇▇▇▇▇▇▇.......................... 2.3.1
Losses............................... 12.1
NBV Target........................... 2.4
Net Uncollected Receivables.......... 2.8
New Roche............................ Preamble
NewCo 1.............................. Preamble
Notice of Dispute.................... 2.7
Offer................................ 8.2
Offer Period......................... 8.2
Offeror.............................. 8.2
Optioned Assets...................... 8.2
Original Offer....................... 8.2
Pembroke Losses...................... 6.1
Prior Year Offset.................... 6.5
Purchase Price Increase.............. 2.4
Purchase Price Reduction............. 2.4
Purchaser............................ Preamble
Roche................................ Preamble
Second EBIT Payment.................. 2.6
Statements........................... 2.7
Third-Party Auditors................. 2.7
Third-Party Claim.................... 12.5
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Term Section
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Uncollected Receivables.............. 2.8
VendorCo............................. 8.2
Vendors.............................. Preamble
1.3 Schedules and Exhibits. The following is a list of the Schedules and
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Exhibits attached hereto and incorporated herein by reference:
Schedule 1.1.5 ........... Associated Companies
Schedule 1.1.21 ........... Financial Statements
Schedule 1.1.44 ........... Real Property Leases
Schedule 1.1.46 ........... Reorganization
Schedule 1.1.47 ........... Subsidiaries
Schedule 2.4 .............. Principles used to Prepare Closing
Balance Sheet for NBV Target
Schedule 2.5 .............. Principles used to Calculate EBIT
Schedule 3.1.6 ............ Defaults
Schedule 3.1.7 ............ Authorized and Issued Capital and Title
Schedule 3.1.9 ............ Shareholders' and Other Agreements
Schedule 3.1.13 ........... Operations of the Corporation
Schedule 3.1.14 ........... Liens
Schedule 3.1.15 ........... Immoveables
Schedule 3.1.17 ........... Places of Business
Schedule 3.1.18 ........... Intellectual Property Rights
Schedule 3.1.20 ........... Material Contracts
Schedule 3.1.22 ........... Guarantees
Schedule 3.1.23 ........... Government Contract Exceptions
Schedule 3.1.24 ........... Insurance
Schedule 3.1.25 ........... Bank Accounts; Powers of Attorney
Schedule 3.1.26 ........... Litigation
Schedule 3.1.27 ........... Tax Matters
Schedule 3.1.28 ........... Licenses; Environmental Permits
Schedule 3.1.29 ........... Employment Agreements
Schedule 3.1.31 ........... Benefit Plans
Schedule 3.1.35 ........... Unusual Transactions
Schedule 3.1.38 ........... Contracted Backlog of the Business
Schedule 3.1.41 ........... Stand Alone
Schedule 4.4.12 ........... Liens on Purchased Shares
Exhibit "A" ............... Vendors, Purchased Shares, Share of
Purchase Price and Indemnification Cap
Exhibit "B" ............... Forms of Non-Competition Agreements
Exhibit "C" ............... Form of Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Exhibit "D" ............... Form of Opinion of Stikeman, ▇▇▇▇▇▇▇
1.4 Knowledge. Whenever any fact or matter is stated to be to the knowledge
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of Vendors, or any similar reference, such reference shall mean (a) the actual
knowledge of any of Vendors without the obligation of enquiry or investigation,
(b) the knowledge that any of the directors of the Corporation or directors of
Roche can be expected to have
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acquired in the normal course of their duties as directors, officers or
employees, such directors being ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, France ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇-▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇-▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
and (c) when used in reference to the Associated Companies, shall mean the
actual knowledge only of any Vendor. For purposes of this Agreement, each of the
directors shall be deemed to have made enquiry of ▇. ▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇, ▇.
▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ with respect to the matters referred to in Article III.
1.5 References to "Roche", etc. Unless otherwise specifically set forth or
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required by the context, references to "Roche" herein shall refer to Roche
prior to the Reorganization and "New Roche" subsequent to the Reorganization.
ARTICLE II
PURCHASE AND SALE; CAPITAL CONTRIBUTIONS
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2.1 Purchase and Sale; Capital Contributions. Upon and subject to the terms
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and conditions hereof, (a) Vendors shall sell, transfer and assign to Purchaser
on the Closing Date, and Purchaser shall purchase from Vendors on the Closing
Date, the Purchased Shares held by each such Vendor as set forth in Exhibit "A",
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in consideration of the payment by Purchaser of the Purchase Price and (b)
and (b) Purchaser shall subscribe for Twelve Million Eight Hundred Twenty-Three
Thousand Three Hundred Thirty-Five (12,823,335) Class 1 preferred shares of New
Roche, and Vendors shall cause New Roche to issue such shares to Purchaser, in
consideration of the payment by Purchaser of the amount of the Capital
Contributions to, or to the order of, New Roche as set forth in Section 2.3.
2.2 Payment of the Initial Payment. Purchaser shall satisfy the Initial
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Payment by payment of the amount thereof on the Closing Date to Vendors by
certified cheque, bank draft or wire transfer made to the order of ▇▇▇▇▇▇ ▇▇▇▇▇
in trust and deposited to a collection account to be designated by Vendors (the
"Collection Account") for the purpose of distribution to Vendors as agreed among
themselves. Purchaser shall not set off or compensate the Initial Payment
against any amount owed to it but may set off or compensate the Initial Payment
against any amounts paid to ▇▇▇▇▇▇ ▇▇▇▇▇ in trust pursuant to the promissory
notes of even date issued to him to secure the Initial Payment.
2.3 Payment of Capital Contributions. Purchaser shall satisfy the Capital
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Contributions by subscribing for Twelve Million Eight Hundred Twenty-Three
Thousand Three Hundred Thirty-Five (12,823,335) Class 1 preferred shares of New
Roche at a subscription price of One dollar (Cdn $1.00) per share, for an
aggregate subscription price of Twelve Million Eight Hundred Twenty-Three
Thousand Three Hundred Thirty-Five dollars (Cdn $12,823,335), of which aggregate
subscription price:
2.3.1 an amount of Three Million Five Hundred Thousand dollars (Cdn $3,500,000)
being directed by New Roche to be paid to London Guarantee Insurance
Company and Four Million dollars (Cdn $4,000,000) being directed by New
Roche to be paid to Axa Boreal Insurance Inc. as reimbursements of
amounts paid by such bonding companies on behalf of Roche to settle
litigation instituted by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Mechanical Limited and
related parties (collectively, "▇▇▇▇▇▇▇▇▇▇▇") related to the
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Pembroke Project, in exchange for releases given by such bonding
companies to New Roche; and
2.3.2 an amount of Five Million Three Hundred and Twenty-Three Thousand Three
Hundred and Thirty-Five Million dollars (Cdn $5,323,335) being directed
by New Roche to be paid to ▇▇▇▇▇▇ ▇▇▇▇▇ in trust for the purposes of
payment of promissory notes given as consideration for the repurchase for
cancellation of various classes of shares of the Corporation and New
Roche as set forth in steps 3, 4, 12, 17 and 19 of the memorandum of Le
Group ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ set forth in Schedule 1.1.46, in exchange for full
---------------
and final releases from each such shareholder.
Purchaser shall not set off or compensate the subscription price for the
Capital Contributions against any amounts owed to it but may set off or
compensate the Capital Contributions against any amounts paid to the Persons
identified in Section 2.3 pursuant to the promissory notes of even date issued
to such Persons.
2.4 Purchase Price Adjustment. The Purchase Price shall be reduced, on a
-------------------------
dollar-for-dollar basis, (the "Purchase Price Reduction") by the amount, if
any, by which the net book value of Roche as shown on the Closing Balance Sheet
is less than Nine Million Nine Hundred Twenty-Five Thousand US dollars (US
$9,925,000) ("NBV Target"). The Purchase Price shall be increased, on a dollar-
for-dollar basis, (the "Purchase Price Increase") by the amount, if any, by
which the net book value of Roche as shown on the Closing Balance Sheet is more
than the NBV Target. For the purposes hereof, the net book value of Roche shall
be converted to US dollars based on the daily noon spot rate of the Bank of
Canada on December 31, 1998, being Cdn $1.5305, or US $0.6534.
Any Purchase Price Reduction shall be payable by Vendors to Purchaser
solely by compensation (deduction and set off) against (a) any First EBIT
Payment payable to Vendors, and (b) if the First EBIT Payment is insufficient to
cover all or any of the Purchase Price Reduction, then against any Second EBIT
Payment payable to Vendors. For greater certainty, if no First EBIT Payment and
Second EBIT Payment are payable hereunder, any Purchase Price Reduction shall
not be payable by Vendors.
Any Purchase Price Increase shall be payable by Purchaser to Vendors by
certified cheque, bank draft or wire transfer to the Collection Account on the
date the First EBIT Payment is required to be made or, if no First EBIT Payment
is made, on the date the First EBIT Payment would have been paid had it been
payable.
For the purposes hereof and the Closing Balance Sheet, net book value
shall (a) exclude the Management Pension Plan Surplus, any assets associated
with the Pembroke Project and any associated liabilities to the extent assumed
and paid by Vendors up to the date hereof, and any current and deferred income
Taxes associated with the Pembroke Project, (b) exclude the effects of the
Reorganization, (c) include the reserve for disputed Pembroke-related claims
referred to in Section 3.1.36 (if still outstanding on the date of the Closing
Balance Sheet), and an equivalent credit in recognition of Vendors' assumption
of such claims, (d) include the litigation reserves set forth in Schedule
--------
3.1.26, and (e) incorporate the principles set forth in Schedule 2.4.
------ ------------
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2.5 First EBIT Payment. Purchaser shall pay to Vendors, within three (3)
------------------
months after the closing of the 1999 financial year, the Maximum First EBIT
Payment based on New Roche achieving an earnings before interest and taxes
("EBIT") level of at least Two Million Seven Hundred Thousand US dollars (US
$2,700,000) during the twelve (12) month period ending December 1999 (the "First
EBIT Payment"). The First EBIT Payment will be reduced proportionally for any
1999 EBIT performance level less than Two Million Seven Hundred Thousand US
dollars (US $2,700,000) with fifty-six percent (56%) of the Maximum First EBIT
Payment paid if 1999 EBIT equals One Million Five Hundred Thousand US dollars
(US $1,500,000) and zero paid if 1999 EBIT is less than One Million Five Hundred
Thousand US dollars (US $1,500,000). The 1999 EBIT performance will be
determined from the EBIT Statement for the year ending December 1999.
The First EBIT Payment shall be payable by Purchaser (a) by compensation
against any Purchase Price Reduction, then, as to any balance, (b) by certified
cheque, bank draft or wire transfer in the amount of such balance to the
Collection Account, for the purpose of distribution to Vendors as agreed among
themselves, within ten (10) calendar days of the date on which the EBIT
Statement for the twelve (12) month period to end December 1999 becomes final
and binding on the Parties.
For the purposes hereof, EBIT shall (a) exclude any effect on earnings of
the Pembroke Project to the extent the same are for the benefit of or actually
assumed and paid for by Vendors pursuant to this Agreement, (b) be net of any
sums paid or accrued pursuant to any New Roche incentive compensation plan, (c)
exclude any debt, liability, expense, write-off or reserve to the extent the
same constituted Losses for which Purchaser has actually been indemnified
pursuant to Article XII (including as a result of a breach of Section 3.1.35),
or to the extent there has been any other Purchase Price reduction hereunder,
(d) include any reversal during the applicable period of reserves taken on the
Closing Balance Sheet in accordance with Section 2.9, (e) be converted to US
dollars by using the average daily noon spot rate as published by the Bank of
Canada for the calendar year in which the earnings were generated, and (f)
incorporate the principles set forth in Schedule 2.5.
------------
2.6 Second EBIT Payment. Purchaser shall pay to Vendors, within three (3)
-------------------
months after the closing of the 2000 financial year, the Maximum Second EBIT
Payment based on New Roche achieving an EBIT performance level of at least Three
Million Six Hundred Thousand US dollars (US $3,600,000) during the twelve (12)
month period ending December 2000 (the "Second EBIT Payment"). The Second EBIT
Payment will be reduced proportionally for any 2000 EBIT performance level less
than Three Million Six Hundred Thousand US dollars (US $3,600,000) with fifty-
six percent (56%) of the Maximum Second EBIT Payment paid if 2000 EBIT equals
Two Million US dollars (US $2,000,000) and zero paid if 2000 EBIT is less than
Two Million US dollars (US $2,000,000).
If, after giving effect to the preceding paragraph, (a) Vendors are
entitled to be paid less than the Maximum Second EBIT, and (b) New Roche's EBIT
for the 1999 financial year was greater than Two Million Seven Hundred Thousand
US dollars (US $2,700,000) (such difference being the "Excess First EBIT"), then
the Second EBIT Payment shall be increased by an amount, if any, equal to the
difference between (i) the amount the Second EBIT Payment would have been had
the Excess First EBIT been earned by New Roche in
-13-
the 2000 year in addition to the EBIT actually earned in the 2000 year, and (ii)
the actual amount of the Second EBIT Payment otherwise earned.
If (a) Vendors were paid less than the Maximum First EBIT Payment, and (b)
New Roche's EBIT for the 2000 financial year is greater than Three Million Six
Hundred Thousand US dollars (US $3,600,000) (such difference being the "Excess
Second EBIT"), then the Second EBIT Payment shall be increased by an amount, if
any, equal to the difference between (i) the amount the First EBIT Payment would
have been had the Excess Second EBIT been earned by New Roche in the 1999 year
in addition to the EBIT actually earned in the 1999 year, and (ii) the actual
amount of the First EBIT Payment otherwise earned.
Any Second EBIT Payment shall be payable by Purchaser first by
compensation against any Purchase Price Reduction not previously satisfied,
then: (a) by certified cheque, bank draft or wire transfer to the Collection
Account, for the purpose of distribution to Vendors as agreed between
themselves, within ten (10) calendar days of the date on which the EBIT
Statement for the twelve (12) month period to end December 2000 becomes final
and binding on the Parties; or (b) in registered, unrestricted and freely
tradable shares of common stock, One cent US (US $0.01) par value of ITX; or a
combination of both, as Purchaser may elect.
Any payment by Purchaser of the Second EBIT Payment by way of shares of
common stock of ITX shall be made no later than sixty (60) days after the EBIT
Statement for the twelve (12) month period to end December 2000 becomes final
and binding on the Parties, shall be subject to obtaining any required approvals
under applicable securities Laws and shall not exceed Four Million Six Hundred
Thousand US dollars (US $4,600,000) (with any balance payable in cash). Each
Vendor shall receive on any such payment a number of shares equal to the
quotient obtained by dividing:
(a) the amount of such payment which is composed of shares of common
stock of ITX payable to such Vendor as agreed among Vendors, by
(b) the arithmetic average of the closing price of shares of common stock
of ITX on the New York Stock Exchange for the five (5) trading days
prior to the date of payment of the Second EBIT Payment,
rounded down to the nearest whole share, plus an amount in cash equal to such
arithmetic average multiplied by any fraction of a share which was eliminated
due to rounding. For greater certainty, if Purchaser is unable to obtain all
required approvals under applicable securities Laws, all of such Second EBIT
Payment shall be paid in cash within sixty (60) days of the date on which the
EBIT Statement for the twelve (12) month period to end December 2000 becomes
final and binding on the Parties.
2.7 Closing Balance Sheet and EBIT Statements. Purchaser and Vendors shall
-----------------------------------------
jointly instruct Messrs. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Auditors") to produce and deliver
to the Parties:
2.7.1 no later than sixty (60) days after the Closing Date, a consolidated
balance sheet showing the assets and liabilities of Roche as at December
31, 1998 (the "Audit Date") based on the audited balance sheet of Roche
for the year ended
-14-
December 31, 1998, adjusted to incorporate the principles set forth in
Section 2.4 and any other adjustments specifically set forth in this
Agreement (the "Closing Balance Sheet"); and
2.7.2 by February 28 after the applicable financial year, audited consolidated
statements of earnings of New Roche for the twelve (12) month periods
ending December 1999 (notwithstanding that the 1999 taxation year will be
less than twelve (12) months) and December 2000 showing the earnings of
New Roche for such periods, including the EBIT of New Roche calculated
using the definition thereof set forth in Section 2.5 (each, an "EBIT
Statement"). For greater certainty, the 1999 year of Roche used in the
preparation of the first EBIT Statement shall be comprised of the year of
Roche from January 1, 1999 to the Closing Date and the year of New Roche
from the Closing Date to the Tax year end of New Roche in December 1999,
notwithstanding the change of control hereunder or the amalgamation to
form New Roche or any subsequent amalgamation of New Roche and Purchaser.
Such Closing Balance Sheet and EBIT Statements (collectively, the
"Statements") shall be prepared in accordance with GAAP, applied on a basis
consistent with prior periods and consistent throughout the periods involved.
The Closing Balance Sheet shall, either in the Closing Balance Sheet or in the
working papers used to prepare it, indicate the amount of all reserves taken,
including reserves for accounts receivable, for warranty or project work and
each litigation or other claim, the amount of Pembroke Losses (as a separate
item) and the amount of Assumed Debt had Assumed Debt been calculated as of such
date. The EBIT Statements shall not include charges from Purchaser or ITX for
support or other related services unless agreed to by ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ or their respective successors. Purchaser shall be permitted to
have its independent auditors and in-house accounting personnel of ITX, review
each of the Statements and working papers (which shall be made available in
English) used in the preparation thereof, and ask questions to personnel of
Vendors and the Auditors with respect to the preparation thereof.
Either Party may dispute any matter in a Statement by notice ("Notice of
Dispute") to the other Party given within thirty (30) calendar days of the
delivery of such Statement to the Parties. ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or another
senior officer of ITX on behalf of Purchaser and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ or another
senior representative of Vendors on behalf of Vendors, shall promptly meet
within ten (10) calendar days of the date of the Notice of Dispute to use their
best efforts to amicably resolve any matters identified in a Notice of Dispute.
If any such dispute shall not have been resolved by such individuals within
thirty (30) calendar days following the date on which the Notice of Dispute is
given, then such unresolved matter shall be referred to Messrs. Deloitte &
Touche (Montreal) (the "Third-Party Auditors"). The Parties shall use their
reasonable efforts to ensure that the determination of the Third-Party Auditors
shall be made within thirty (30) calendar days after the matter has been
referred to them.
If no Notice of Dispute is given within the thirty (30) day delay
prescribed above, upon the expiry of such delay the Statement shall be final and
binding on the Parties. If a Notice of Dispute is given in accordance with this
Section 2.7, then the Statement, as amended by agreement of the Parties or
decision of the Third-Party Auditors, shall be final
-15-
and binding on the Parties as of and from the date of the agreement of the
Parties or the decision of the Third-Party Auditors, as the case may be.
The fees and disbursements of the Auditors shall be paid by New Roche. The
fees and disbursements of any Third-Party Auditors will be shared equally by
Purchaser, on the one hand, and Vendors, on the other hand.
2.8 Accounts Receivable. Purchaser shall cause New Roche and each Subsidiary
-------------------
to use its reasonable efforts to collect all Accounts Receivable reflected on
the Closing Balance Sheet. Contemporaneously with the delivery of the Closing
Balance Sheet, Vendors shall deliver to Purchaser a list of all such Accounts
Receivable reflected on the Closing Balance Sheet, and details related thereto
including reserves reflected on the Closing Balance Sheet. Any amounts collected
by New Roche or any Subsidiary from any debtor of such Accounts Receivable shall
be imputed firstly to the oldest Accounts Receivable from such debtor; provided
that if a payment of any of the Accounts Receivable is contested, in whole or in
part, by the debtor thereof, then any amounts collected by New Roche or the
Subsidiary from such debtor shall be imputed to the next oldest uncontested
Account Receivable from such debtor. Purchaser shall have no obligation to cause
New Roche or any Subsidiary to institute suit to collect any such Accounts
Receivable. Purchaser shall use its reasonable efforts to ensure that New Roche
and the Subsidiaries do not compromise any Accounts Receivable without Vendors'
consent. Purchaser and Vendors may agree to compromise Accounts Receivable if
each of ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, or their respective
successors, agree that it is in the best interests of New Roche or any
Subsidiary to do so and agree on to how such compromise will require amendments
to the application of this Section or any other provision of this Agreement.
If any Accounts Receivable remain uncollected on (i) the date the First
EBIT Payment, if any, is required to be made and such Accounts Receivable are
required to be written-off under GAAP on or before such date or, in any case,
(ii) the date the Second EBIT Payment, if any, is required to be made (the
"Uncollected Receivables"), then the amount of such Uncollected Receivables,
less
(a) the amount of any unused reserves provided for Accounts Receivable on
the Closing Balance Sheet;
(b) the actual income Tax reduction available, if any, to New Roche or
the applicable Subsidiary in the year of the write-off of such
Uncollected Receivable as a result of such write-off; and
(c) the actual amount of GST, QST or other sales Tax reimbursements or
credits actually received by New Roche or the Subsidiary as a result
of the write off of such Uncollected Receivables,
(the net amount of such Uncollected Receivables being the "Net Uncollected
Receivables") shall be payable by Vendors to Purchaser solely by compensation
(deduction and set off) against the First EBIT Payment, if any, and, if the
First EBIT Payment is insufficient, the balance against the Second EBIT Payment,
if any. For greater certainty, if no First EBIT Payment and Second EBIT Payment
are payable hereunder, no Net Uncollected Receivables shall be payable by
Vendors. If, at the time of the payment of such Net Uncollected
-16-
Receivables, the amount of the actual income Tax benefit is not determinable
because the Tax position of New Roche or the applicable Subsidiary has not been
finalized, then the Parties shall in good faith estimate such benefit and, upon
finalization of such Tax position, the Parties shall settle any outstanding
balance promptly. Upon payment by Vendors to Purchaser of the full amount of the
Net Uncollected Receivables, Purchaser shall cause New Roche or the
Subsidiaries, as the case may be, to assign to such Vendors the Uncollected
Receivables for One dollar (Cdn $1.00). If, after assignment of such Uncollected
Receivables, New Roche or any Subsidiary receives any payment on account of any
such Uncollected Receivables, then Purchaser shall cause New Roche or the
Subsidiaries, as the case may be, to forthwith pay over the amount of such
payment to such Vendors into the Collection Account.
Any such Net Uncollected Receivables which are written off by New Roche or
any Subsidiary during either of the periods covered by the EBIT Statements,
shall not be deducted from the earnings of New Roche for the purposes of
calculating EBIT during such periods, notwithstanding GAAP or Section 2.7.
2.9 Reversal of Reserves. An amount equal to all reserves taken on the
--------------------
Closing Balance Sheet which are not used and which are reversed in accordance
with GAAP shall, for the purpose of calculating EBIT on the EBIT Statements, be
deemed to be added to earnings of New Roche or the appropriate Subsidiary to the
extent such reserves are reversed in accordance with GAAP in either of the 1999
year or the 2000 year. Purchaser may request an opinion from the auditors of New
Roche to the effect that such reversal was taken at the proper time and for the
proper amounts.
2.10 Breakdown of Payments. All cash amounts payable to Vendors pursuant to
---------------------
this Agreement shall be paid into the Collection Account for distribution
among Vendors as agreed among themselves.
2.11 Assumed Debt. No later than the date on which the Closing Balance Sheet
------------
is delivered to the Parties by the Auditors, Vendors shall have caused the Vice
President, Finance of New Roche to deliver to the Parties the calculation of the
Assumed Debt as of January 31, 1999. Purchaser may, within thirty (30) days of
the delivery of such calculation, require that such calculation be audited by
the Auditors. Such calculation, as revised by the Auditors, shall be final and
binding on the Parties. The Auditors' fees and disbursements incurred in the
course of such work will be paid by Purchaser.
2.12 Allocation of Purchase Price. For purposes of allocation of the Purchase
----------------------------
Price among the Purchased Shares, the US dollar equivalents of the Canadian
dollar amounts set forth in Exhibit "A" under "Purchase Price: Preferred"
----------
shall be allocated to the preferred shares, and a percentage of any balance of
the Purchase Price shall be allocated to the common shares of each Vendor in the
percentage set forth opposite such Vendor's name in the column entitled "% of
Share of Purchase Price: Common" in Exhibit "A".
-----------
-17-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties of Vendors. Vendors solidarily, without
-----------------------------------------
the benefit of division and discussion (except as set forth in Section 3.3),
represent and warrant to Purchaser as follows and acknowledge that Purchaser is
relying upon such representations and warranties in connection with the purchase
by Purchaser of the Purchased Shares and that Purchaser would not have entered
into this Agreement without such representations and warranties:
3.1.1 Due Incorporation--Each of the Corporation, Roche, the Subsidiaries,
-----------------
NewCo1 (prior to the Reorganization) and Vendors which are bodies
corporate:
(a) is duly incorporated (or amalgamated, as the case may be) or formed,
validly existing and up-to-date in its annual filings under the Laws
of its jurisdiction of incorporation; and
(b) has all necessary corporate or other power and authority to own,
lease and operate its properties and to conduct its business as and
in the places where such properties are now owned, leased or operated
or such business is now conducted.
3.1.2 Due Incorporation of the Associated Companies--Each of the Associated
---------------------------------------------
Companies:
(a) is duly incorporated or formed and validly existing under the Laws of
its jurisdiction of incorporation or formation; and
(b) to the knowledge of Vendors, has all necessary corporate or other
power and authority to own, lease and operate its properties and to
conduct its business as and in the places where such properties are
now owned, leased or operated or such business is now conducted.
3.1.3 Due Authorization--Each Vendor has the capacity to execute this Agreement
-----------------
and the Ancillary Agreements required to be executed by such Vendor and to
perform his, her or its obligations hereunder and thereunder. The
execution of this Agreement and the Ancillary Agreements by Vendors and
the performance by Vendors of their obligations hereunder and thereunder
have been duly authorized by all necessary action on their part. Such
execution and performance by Vendors do not require any action or consent
of, any registration with, or notification to, any Person on behalf of, by
or with respect to Vendors, the Corporation, Roche, any Subsidiary or, to
the knowledge of Vendors, any Associated Company other than those which
will be obtained by the Closing Date.
3.1.4 Enforceability--This Agreement constitutes, and each of the Ancillary
--------------
Agreements will constitute upon execution, a legal, valid and binding
obligation of Vendors who are parties thereto enforceable against them in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization and similar Laws
-18-
affecting the enforcement of creditors rights generally and to general
equitable principles.
3.1.5 Mandate--The mandate given by each Vendor to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ to execute
-------
this Agreement, instruments in connection with this Agreement and the
Ancillary Agreements on its, his or her behalf is valid and enforceable
and, upon the execution of this Agreement, instruments and the Ancillary
Agreements by ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, such agreements and instruments will
constitute a legal, binding and enforceable agreement of each Vendor party
thereto enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization and similar Laws affecting the
enforcement of creditors rights generally and to general equitable
principles.
3.1.6 No Conflict--Other than as set forth in Schedule 3.1.6, the execution of
----------- --------------
this Agreement and the Ancillary Agreements, the consummation of the
transactions contemplated herein and therein, the performance and
compliance by Vendors of their obligations hereunder and thereunder do not
and will not:
(a) violate, contravene or breach, or constitute a default under, the
constating instruments or by-laws of Vendors which are bodies
corporate, the Corporation, Roche, any Subsidiary or any Associated
Company;
(b) violate, contravene or breach, or constitute a default under any
Contract, whether by reason of change of control or otherwise, to
which any of the Corporation, Roche, any Subsidiary or, to the
knowledge of Vendors, any Associated Company, may be a party, or
their properties may be subject, or by which any of them is bound or
affected, other than violations, contraventions, breaches or defaults
listed in Schedule 3.1.6 and for which appropriate consents or
--------------
waivers will have been received on or before the Closing Date;
(c) result in, or give any Person the right to seek, or to cause (i) the
termination, cancellation, modification, amendment, variation or
renegotiation of any Contract (including credit agreements and
financial assistance from Governmental Bodies) to which the
Corporation, Roche, the Subsidiaries or, to the knowledge of Vendors,
the Associated Companies, or any of their properties may be a party
or subject or by which they are bound or affected other than benefits
offered only to Canadian controlled corporations under Law, or (ii)
the acceleration or forfeiture of any term of payment required to be
made by the Corporation, Roche, the Subsidiaries or, to the knowledge
of Vendors, the Associated Companies, or (iii) the loss in whole or
in part of any benefit which would otherwise accrue to the
Corporation, Roche, the Subsidiaries or, to the knowledge of Vendors,
the Associated Companies other than benefits offered only to Canadian
controlled corporations under Law;
(d) result in, or require the creation of any Lien upon any of the
Purchased Shares or any assets or property of the Corporation, Roche,
the Subsidiaries or, to the knowledge of Vendors, the Associated
Companies; or
-19-
(e) violate, contravene or breach any Laws, Licenses, permits, privileges
or entitlements.
3.1.7 Authorized and Issued Capital--Upon consummation of the Reorganization,
-----------------------------
the authorized capital of New Roche will consist of such classes of shares
described in schedule 1 to the memorandum of Le Groupe ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
which forms Schedule 1.1.46.
---------------
Upon consummation of the Reorganization, the Purchased Shares will
represent, prior to the issuance of the Twelve Million Eight Hundred
Twenty-Three Thousand Three Hundred Thirty-Five (12,823,335) Class 1
preferred shares pursuant to the Capital Contributions, all of the issued
and outstanding shares in the share capital of New Roche and will be
registered and beneficially owned by Vendors in the manner set forth in
Exhibit "A", and Vendors will transfer good and valid title thereto to
-----------
Purchaser, free and clear of all Liens (including the Liens set forth in
Schedule 4.4.12), other than any Liens created by or consented to by
---------------
Purchaser. The Twelve Million Eight Hundred Twenty-Three Thousand Three
Hundred Thirty-Five (12,823,335) Class 1 preferred shares of New Roche to
be issued to Purchaser pursuant to the Capital Contributions in Section
2.3 shall, upon payment of the Capital Contributions to the bonding
companies identified in Section 2.3.1 and to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ in trust
pursuant to Section 2.3.2, be duly authorized, validly issued in the name
of Purchaser and fully paid and non-assessable.
The authorized capital of Roche consists of six (6) classes of shares
designated categories "A" to "F", inclusively, each with no par value, of
which nine thousand two hundred ninety (9,290) categories "A" shares (and
no more) have been validly subscribed and are issued and outstanding as
fully paid and non-assessable and are registered and beneficially owned by
the Corporation, free and clear of all Liens.
The authorized capital or other ownership interests of the Subsidiaries
and Associated Companies consists of the classes of shares or other
interests set forth in Schedule 3.1.7, each authorized to be issued up to
--------------
the number and with the par value (if any) set forth in Schedule 3.1.7, of
--------------
which the number and classes of shares or other ownership interests (and
no more) set out therein have been validly subscribed and are issued and
outstanding as fully paid and non-assessable and are registered and
beneficially owned, free and clear of all Liens by Roche, a Subsidiary or
an Associated Company as set forth in Schedule 3.1.7 or, to the knowledge
--------------
of Vendors, are registered, free and clear of all Liens and beneficially
owned by the other Persons as set forth therein.
3.1.8 Subsidiaries and Associated Companies--The Corporation and Roche do not
-------------------------------------
own, directly or indirectly, more than fifty percent (50%) of the shares,
voting interests, partnership interests or economic interests in any
Person other than the Subsidiaries and, prior to the Reorganization,
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ Inc., 174878 Canada Ltd. and Solutions Technologiques
Internationales STI Inc.
The Corporation and Roche do not own, directly or indirectly, fifty
percent (50%) or less of the shares, voting interests, partnership
interests or economic interests
-20-
in any Person other than the Associated Companies and, prior to the
Reorganization, Metroplan.
3.1.9 No Options--Except as set forth in Schedule 3.1.9, there is no:
---------- --------------
(a) outstanding security of the Corporation, Roche, any Subsidiary or, to
the knowledge of Vendors, any Associated Company, convertible or
exchangeable into any share or shares in the capital of, or other
ownership interest in, the Corporation, Roche, any Subsidiary or any
Associated Company;
(b) outstanding subscription, option, warrant, call, commitment or
agreement obligating the Corporation, Roche, any Subsidiary or, to
the knowledge of Vendors, any Associated Company, to issue any share
or shares of their capital, any security or securities of any class
or kind or any other ownership interests which in any way relate to
the authorized or issued capital of, or other ownership interests in,
the Corporation, Roche, any Subsidiary or any Associated Company;
(c) agreement (other than this Agreement) which grants to any Person the
right to purchase or otherwise acquire any Purchased Shares, any of
the assets or properties of the Corporation, Roche, the Subsidiaries
or, to the knowledge of Vendors, any of the Associated Companies,
other than rights of first refusal, piggy-back rights and put and
call options for shares, voting interests, partnership interests or
economic interests in the capital of the Subsidiaries and the
Associated Companies pursuant to the agreements described in
Schedule 3.1.9, none of which rights will become enforceable as a
--------------
result of the execution of this Agreement or the consummation of the
transactions herein; or
(d) shareholders agreement, partnership agreement, joint venture
agreement, voting trust, voting agreement, pooling agreement or proxy
with respect to any shares in the capital of, or other ownership
interests in, the Corporation, Roche, the Subsidiaries or, to the
knowledge of Vendors, the Associated Companies, other than the
agreements set forth in Schedule 3.1.9.
--------------
3.1.10 Books and Records--All of the minute books of the Corporation, Roche and
-----------------
the Subsidiaries have been made available to legal counsel to Purchaser.
All of such minute books and, to the knowledge of Vendors, all of the
minute books and books of partners' proceedings of the Associated
Companies, are complete and accurate in all material respects, and
contain copies of all by-laws and resolutions passed by the
shareholders, directors, partners or joint ventures since the date of
their respective incorporations or formations, all of which by-laws and
resolutions have been duly passed.
The share certificate books, registers of shareholders, registers of
partners, registers of transfers and registers of directors of the
Corporation, Roche, the Subsidiaries and, to the knowledge of Vendors,
the Associated Companies, are complete and accurate.
-21-
The Books and Records of the Corporation, Roche and the Subsidiaries
have been maintained in accordance with sound business practices and
fairly, accurately and completely present and disclose in accordance
with GAAP, the financial position and all material transactions of the
Corporation, Roche and the Subsidiaries.
3.1.11 Financial Statements--The Financial Statements fairly, accurately and
--------------------
completely present and disclose in all material respects and in
accordance with GAAP, (a) the assets, liabilities and obligations
(whether accrued, contingent, absolute or otherwise), income, losses,
retained earnings, reserves and financial position of Roche and the
Subsidiaries, and (b) the results of operations of Roche and the
Subsidiaries, all as at the dates and for the periods therein specified.
The Closing Balance Sheet shall fairly, accurately and completely
present and disclose in all material respects and in accordance with
GAAP, the assets, liabilities and obligations (whether accrued,
contingent, absolute or otherwise) of Roche and the Subsidiaries as of
the Audit Date.
3.1.12 Liabilities--None of the Corporation, Roche or the Subsidiaries has any
-----------
liabilities or obligations of any nature whatsoever, whether direct,
indirect, absolute, contingent or otherwise which relate to the period
ending on or before the date hereof, regardless of when manifested or
asserted, ("Liabilities") except for:
(a) those Liabilities to be reflected on the Closing Balance Sheet and
which had a net impact on the calculation of net book value,
(b) those Liabilities incurred during the period between the Audit Date
and the date hereof in the usual and ordinary course, and
(c) ongoing contractual obligations (other than for breaches or events
of default) in the ordinary course.
None of the Corporation, Roche or any Subsidiary has any Liabilities of
any nature whatsoever whether direct, indirect, absolute, contingent or
otherwise, regardless of when manifested or asserted, to or on behalf of
any Vendor, or any Person not dealing at arm's length with any Vendors
within the meaning of the Income Tax Act (Canada) (including in
connection with the Excluded Assets), other than the lease between Roche
and Metroplan for the premises located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇-
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇-▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇.
3.1.13 Corporation; NewCo 1--Except as set forth in Schedule 3.1.13, the
-------------------- ---------------
Corporation (a) has no assets and has never had any assets other than
shares of Roche, (b) is not, and has never been, bound by any Contracts
or guarantees, and does not have, and has never had, any employees, and
(c) does not have, and has never had, any operations other than the
holding of shares of Roche.
NewCo 1 (a) has no assets and never had any assets other than as
specifically identified in Schedule 1.1.46, (b) has never been bound by
---------------
any Contracts or guarantees, and never had any employees, and (c) never
had any operations.
-22-
3.1.14 Property--Roche and each of the Subsidiaries, as the case may be, is the
--------
sole and unconditional owner of, and has a good and marketable title to,
all of the assets reflected on the Financial Statements for the period
ended November 30, 1998 (including the Immoveables described in
Schedule 3.1.15), or which have been acquired after November 30, 1998
---------------
(other than the Excluded Assets and such assets consumed or disposed of
on or after November 30, 1998 in the ordinary course of business and in
a manner consistent with past practice), in each case free and clear of
all Liens, other than Permitted Encumbrances and other than the Liens
set forth in Schedule 3.1.14.
---------------
3.1.15 Immoveables--Schedule 3.1.15 is a true and complete description of all
----------- ---------------
immoveable and real property owned by Roche or any Subsidiary (including
the immoveable for the centre commercial St-Nicolas owned through La
societe en commandite Place du Commerce St-Nicolas) and a brief
description of all principal structures thereon and uses thereof (the
"Immoveables").
Such Immoveables and all immoveable and real property used by or leased
to or from Roche or any Subsidiary and, to the knowledge of Vendors, the
immoveable and real property owned by, used by or leased to or from the
Associated Companies, does not violate, contravene or breach, and is
used in compliance with, any and all Laws. None of Roche, any Subsidiary
or, to the knowledge of Vendors, any Associated Company, has received
any notice that any of the Immoveables or any of the aforesaid
immoveable or real property (a) is not in compliance with any Laws, (b)
is not used in compliance with any Laws, and/or (c) requires work to be
done in connection therewith.
All real estate Taxes and assessments, and all mutation Taxes, which are
due in respect of all such Immoveables and all such immoveable and real
property have been paid by Roche, the Subsidiaries and, to the knowledge
of Vendors, the Associated Companies, to the extent required to be paid
by Roche, the Subsidiaries or the Associated Companies, without
subrogation or reserve unless contested pursuant to the procedures under
applicable Law.
No Immoveable is situated in an agricultural zone or zoned for uses
other than those carried out thereon.
3.1.16 Condition and Sufficiency of Assets; Inventory--All of the tangible
----------------------------------------------
assets (including the Equipment) of Roche (other than the Excluded
Assets), any Subsidiary and, to the knowledge of Vendors, the Associated
Companies, are (a) in good operating condition and repair, ordinary wear
and tear and aging excepted, (b) not in need of maintenance or repairs
(except ordinary or routine maintenance or repairs that are not material
in nature or costs, individually or collectively), and (c) adequate and
sufficient for the continuing conduct of the Business as now conducted.
All Inventory of Roche (other than the Excluded Assets), the
Subsidiaries and, to the knowledge of Vendors, the Associated Companies,
is of a quality and quantity usable in the ordinary course of business.
-23-
3.1.17 Location; Place of Business--None of Roche or any Subsidiary holds,
---------------------------
directly or indirectly, any of their property (other than the Excluded
Assets prior to the Reorganization) anywhere other than in the locations
set forth in Schedule 3.1.17. Roche, the Subsidiaries and, to the
---------------
knowledge of Vendors, the Associated Companies, are validly registered
to do business in all locations where they are doing business in a
manner which requires them to be licensed and, in the case of Roche and
the Subsidiaries, all of such locations are listed in Schedule 3.1.17.
---------------
3.1.18 Intellectual Property Rights--Schedule 3.1.18 contains a true and
---------------------------- ---------------
complete list of (a) all registered Intellectual Property Rights used by
Roche and the Subsidiaries, and (b) all pending applications for
Intellectual Property Rights used by Roche (other than those used
exclusively in connection with the Excluded Assets) and the Subsidiaries
in connection with their business, none of which has been expunged,
opposed or held unenforceable. Each of the aforesaid Intellectual
Property Rights and, to the knowledge of Vendors, each of the
Intellectual Property Rights used by the Associated Companies, is valid,
subsisting and enforceable and each of the registrations and
applications included in such Intellectual Property Rights is duly
recorded in the name of Roche, the Subsidiaries or the Associated
Companies, as the case may be. Other than Intellectual Property Rights
licensed by way of the purchase of "off the shelf" standard products and
other than as disclosed in Schedule 3.1.18, each of Roche, each
---------------
Subsidiary and, to the knowledge of Vendors, each Associated Company is
the absolute owner and has the sole and exclusive right to hold and use
such Intellectual Property Rights, including the right to transfer the
same, without making any payment to others or granting rights to others
in exchange. None of the Intellectual Property Rights of Roche, any
Subsidiary or, to the knowledge of Vendors, any Associated Company, has
been licensed to a third Person except for those license arrangements
disclosed in Schedule 3.1.18. The title of Roche, each Subsidiary and,
---------------
to the knowledge of Vendors, each Associated Company, to such
Intellectual Property Rights is free and clear of any Lien and is not
the subject of any conditional sale agreement.
To the knowledge of Vendors, there are no assertions or claims
challenging the validity of the Intellectual Property Rights of Roche,
any Subsidiary or any Associated Company and no Person has requested
that any of the foregoing execute a license in favour of such third
Person to enable Roche, any Subsidiary or any Associated Company to use
such Intellectual Property Rights. To the knowledge of Vendors, no
Person is infringing the Intellectual Property Rights of Roche, any
Subsidiary or any Associated Company.
Roche, the Subsidiaries and, to the knowledge of Vendors, the Associated
Companies, do not use or infringe the Intellectual Property Rights of
any third Person without such Person's consent.
Roche has the right to use the name "Roche" in connection with the
Business.
3.1.19 Year 2000 Compliance--Roche has established a policy to ensure that the
--------------------
information technology systems of Roche and each of the Subsidiaries,
including, without limitation, hardware, software and data used, in
whole or in part in, or required for, the carrying on of the business of
Roche and the Subsidiaries in the
-24-
manner heretofore carried on, will be designed in a timely fashion to be
used prior to, during and after the calendar year 2000 A.D. and to
operate during each such time period without error relating to or
arising from date-related data. Personnel of Roche have already taken
measures under such policy in accordance with the terms of such policy.
3.1.20 Material Contracts--Schedule 3.1.20 contains a true and complete
------------------ ---------------
description of all of the following types of written and oral Contracts
currently in force to which the Corporation, Roche or any of the
Subsidiaries is a party or by which they are bound, other than those
described in other Schedules hereto:
(a) (i) projects arising in the ordinary course of business and
providing for the payment in any twelve (12) month period of Fifty
Thousand dollars (Cdn $50,000) or more in one instance or in the
aggregate after the Closing Date, or (ii) Contracts not arising in
the ordinary course of business;
(b) all leases to which Roche or any Subsidiary is a party or its
properties are subject which (a) involve immoveable or real
property or (b) involve the expenditure or receipt of rent in the
amount of Fifty Thousand dollars (Cdn $50,000) or more in any
twelve (12) month period after the Closing Date;
(c) loan and credit Contracts, hypothecs, mortgages and other
agreements evidencing any Lien, guarantees, notes, conditional
sales, leasing agreements, sale-lease back agreements or title
retention agreements;
(d) Licenses relating to Intellectual Property Rights;
(e) Government Contracts or Bids;
(f) Contracts of non-competition, non-disclosure and/or
confidentiality, other than those in the ordinary course of
business;
(g) Contracts with Persons not dealing at arm's length with the
Corporation, Roche, any Subsidiary or any Vendor within the meaning
of the Income Tax Act (Canada); and
(h) management or service Contracts.
3.1.21 No Default Under Contracts--Each of the Corporation, Roche, each
--------------------------
Subsidiary and, to the knowledge of Vendors, each Associated Company,
(a) is in good standing and entitled to all benefits under, (b) has
performed all obligations required to be performed under, and (c) is not
in default under, or in breach of, any Contract. To the actual knowledge
of Vendors, no other party to such Contracts is in default or breach
thereof and there exists no fact, condition or circumstance which, after
notice or lapse of time or both, would result in the default or breach
thereof by any such other party.
3.1.22 No Guarantees--None of the Corporation, Roche, any Subsidiary or, to the
-------------
knowledge of Vendors, any Associated Company, is a party to or bound
either
-25-
absolutely or on a contingent basis by any comfort letter, understanding
or agreement of guarantee, warranty, indemnification, assumption,
endorsement, performance bond, letter of credit or any like commitment
with respect to the liabilities or obligations of any Person (whether
accrued, absolute or otherwise contingent) other than as set forth in
Schedule 3.1.22.
---------------
3.1.23 Government Contracts--Except as disclosed in Schedule 3.1.23, with
-------------------- ---------------
respect to each Government Contract or Bid to which Roche, any
Subsidiary or any Associated Company is a party:
(a) Roche, the Subsidiaries and, to the knowledge of Vendors, the
Associated Companies, obtained each Government Contract in
compliance with all Laws relating to procurement and ethical
business practices;
(b) Roche, the Subsidiaries and, to the knowledge of Vendors, the
Associated Companies, have fully complied with all material terms
and conditions and have complied in all material respects with all
applicable requirements of Law or agreement, whether incorporated
expressly, by reference or by operation of Law;
(c) all representations and certifications of Roche, the Subsidiaries
and, to the knowledge of Vendors, the Associated Companies, were
current, accurate and complete in all material respects when made,
and Roche, the Subsidiaries and, to the knowledge of Vendors, the
Associated Companies, have fully complied with all such
representations and certifications;
(d) no allegation has been made in writing that Roche, the Subsidiaries
or, to the knowledge of Vendors, the Associated Companies, are in
breach or violation of any statutory, regulatory or contractual
requirement or that such breach or violation will not be waived or
cannot be cured;
(e) no termination for convenience, termination for default, cure
notice or show cause notice has been issued with respect to Roche,
the Subsidiaries or, to the knowledge of Vendors, the Associated
Companies;
(f) no cost incurred by Roche, the Subsidiaries or, to the knowledge of
Vendors, the Associated Companies, or any of their subcontractors
has been questioned or disallowed; and
(g) no money in excess of Twenty-Five Thousand dollars (Cdn $25,000) in
the aggregate due to Roche, the Subsidiaries or, to the knowledge
of Vendors, the Associated Companies, has been withheld or set off
or is currently being threatened to be withheld or set off, other
than retentions held by a customer in the ordinary course of
business that will be ultimately paid.
None of Roche, the Subsidiaries or, to the knowledge of Vendors, the
Associated Companies, nor any of their directors or officers are (or for
the last two (2) years has been), nor has Roche, any Subsidiary or, to
the knowledge of Vendors, the Associated Companies, received written
notice that any employee of Roche, the
-26-
Subsidiaries or the Associated Companies is (or for the last two (2)
years has been) (i) under administrative, civil or criminal
investigation, indictment or information, audit or internal
investigation with respect to any alleged irregularity, misstatement or
omission regarding a Government Contract or Bid; or (ii) suspended or
debarred from doing business with any Governmental Body or declared non-
responsible or ineligible for government contracting. None of Roche, the
Subsidiaries nor, to the knowledge of Vendors, any of the Associated
Companies, has made a voluntary disclosure to any Governmental Body with
respect to any alleged irregularity, misstatement or omission arising
under or relating to any Government Contract or Bid. To the knowledge of
Vendors, there are no circumstances that would warrant the institution
of suspension or debarment proceedings or the finding of non-
responsibility or ineligibility on the part of Roche, any Subsidiary or
any Associated Company for Government Contracts or Bids in the future.
Other than as set forth in Schedule 3.1.23, within the last two (2)
---------------
years, no Governmental Body or any prime contractor, subcontractor or
vendor has asserted any claim or initiated any dispute proceeding which
is currently outstanding against Roche, any Subsidiary or, to the
knowledge of Vendors, any Associated Company, nor has Roche, any
Subsidiary or, to the knowledge of Vendors, any Associated Company,
asserted in writing any claim or initiated any dispute proceeding,
directly or indirectly, against any such party, concerning any
Government Contract or Bid. To the knowledge of Vendors, there are no
facts upon which such a claim or dispute proceeding may be based in the
future that would result in a liability to Roche, any Subsidiary or any
Associated Company in excess of Ten Thousand dollars (Cdn $10,000).
3.1.24 Insurance--Roche, each Subsidiary and, to the knowledge of Vendors, each
---------
Associated Company, maintains insurance with responsible and reputable
insurers in such amounts and covering such risks and with such
deductibles as are generally maintained by like businesses.
Schedule 3.1.24 is a true and complete list of all insurance policies
---------------
currently maintained by or for Roche and the Subsidiaries. The coverage
under each such policy is in full force and effect and Roche and the
Subsidiaries are in good standing under such policies. To the knowledge
of Vendors, the coverage under each insurance policy maintained by or
for the Associated Companies is in full force and effect and the
Associated Companies are in good standing under such policies.
Except as set forth in Schedule 3.1.24, none of Roche, any Subsidiary
---------------
or, to the knowledge of Vendors, any Associated Company, has received
notice of, or has any knowledge of, any fact, condition or circumstance
which might reasonably form the basis of any claim against them which
(a) is not fully covered by insurance (subject to standard deductibles)
maintained by or for them, or (b) would result in any increase in
insurance premiums payable by them.
3.1.25 Bank Accounts; Powers of Attorney--Schedule 3.1.25 sets forth (a) the
--------------------------------- ---------------
name of each Person with whom Roche or any Subsidiary maintains an
account or safety deposit box and the names of all Persons authorized to
draw thereon or to have
-27-
access thereto and (b) the name of each Person holding a general or
special power of attorney from Roche or any Subsidiary and a summary of
the terms thereof.
3.1.26 Litigation--Except as disclosed in Schedule 3.1.26 (and up to the
---------- ---------------
amounts set forth on such Schedule), there are (a) no actions, claims,
lien act type proceedings, investigations, arbitrations or other
proceedings pending, or to the knowledge of Vendors, threatened against,
with respect to, or affecting in any manner, the Corporation, Roche or
the Subsidiaries, their properties or the Purchased Shares, (b) to the
knowledge of Vendors, notices of deficiency with respect to, or in any
manner affecting any of the Corporation, Roche, the Subsidiaries or
their properties, and (c) no outstanding judgments, orders, decrees,
writs, injunctions, decisions, rulings or awards against, with respect
to, or in any manner affecting any of the Corporation, Roche, the
Subsidiaries, their properties or the Purchased Shares. The maximum
liability of the Corporation, Roche or any Subsidiary for each such
matter identified on Schedule 3.1.26, after deduction for any related
---------------
insurance coverage, shall not exceed the reserve, if any, specifically
indicated in such schedule for such matter or, in the case of the
insured litigations identified therein, the aggregate reserve set forth
in such schedule, which reserves shall be taken on the Closing Balance
Sheet.
Except as disclosed in Schedule 3.1.26 (and up to the amounts set forth
---------------
on such Schedule), to the knowledge of Vendors there are (a) no actions,
claims, lien act type proceedings, investigations, arbitrations or other
proceedings pending or threatened against, with respect to, or affecting
in any manner, the Associated Companies or their properties, (b) notices
of deficiency with respect to, or in any manner affecting any of the
Associated Companies or their properties, and (c) no outstanding
judgments, orders, decrees, writs, injunctions, decisions, rulings or
awards against, with respect to, or in any manner affecting any of the
Associated Companies or their properties. To the knowledge of Vendors,
the maximum liability of the Associated Companies, for each such matter
identified on Schedule 3.1.26, after deduction for any related insurance
---------------
coverage, shall not exceed the reserve, if any, specifically indicated
in such schedule for such matter or, in the case of the insured
litigations identified therein, the aggregate reserve set forth in such
schedule, a proportion (based on GAAP) of which reserves shall be taken
on the Closing Balance Sheet.
Schedule 3.1.26 identifies which of the actions, claims, lien act type
---------------
proceedings, investigations, arbitrations or other proceedings therein
are not covered by insurance and briefly summarizes the name of the
insurer, policy limit and deductible for those that are covered by
insurance. None of such actions, claims, lien act type proceedings,
investigations, arbitrations or other proceedings which are covered by
insurance (a) are subject to reservation of rights by the insurer, or
(b) will exhaust the policy limits.
3.1.27 Tax Matters. Other than as set forth in Schedule 3.1.27:
----------- ---------------
(a) Computation, Preparation and Payment Each of the Corporation,
Roche, each Subsidiary and, to the knowledge of Vendors, each
Associated Company, has correctly computed all Taxes, prepared and
duly and timely
-28-
filed all Tax returns, reports, elections, designations and any
other related filings required to be filed by it, has timely paid
all Taxes which are due and payable and has made provision in the
Financial Statements for the period ended November 30, 1998 for the
payment of all Taxes, based on an estimated Tax rate of forty
percent (40%), which are or may become payable for any taxation
year ending on or prior to November 30, 1998, and the Closing
Balance Sheet shall have adequate provision made as of the Audit
Date for the payment of all Taxes which are or may become payable
for any taxation year ending on or prior to the Audit Date. Each of
the Corporation, Roche, each Subsidiary and, to the knowledge of
Vendors, each Associated Company, has made adequate and timely
installments of Taxes required to be made.
(b) Accrued Taxes--With respect to any periods for which Tax returns
have not yet been required to be filed or for which Taxes are not
yet due and payable (including the period between the Audit Date
and the date hereof), each of the Corporation, Roche, each
Subsidiary and, to the knowledge of Vendors, each Associated
Company, has only incurred liabilities for Taxes in the ordinary
course of its business and in a manner and at a level consistent
with prior periods (other than as set out in the Reorganization).
All such Taxes, including for the period between November 30, 1998
and the Audit Date, will be reflected as a current liability on the
Closing Balance Sheet.
(c) Status of Assessments--All Tax returns of each of the Corporation,
Roche and each Subsidiary have been assessed through and including
each of the dates set forth in Schedule 3.1.27, and there are no
---------------
outstanding waivers of any limitation periods or agreements
providing for an extension of time for the filing of any Tax return
or the payment of any Tax by any of the Corporation, Roche and each
Subsidiary or, to the knowledge of Vendors, any of the Associated
Companies or any outstanding objections to any assessment or
reassessment of Taxes. Any deficiencies of each of the Corporation,
Roche and each Subsidiary and, to the knowledge of Vendors, each
Associated Company, proposed as a result of such assessments or
reassessments of the Tax returns through and including the dates
set forth in Schedule 3.1.27 have been paid and settled. The
---------------
maximum liability of Roche for the proposed reassessment of Revenue
Canada for the taxation years 1995, 1996 and 1997 will not exceed
the reserve therefor in the Closing Balance Sheet.
(d) Contingent Tax Liabilities--There are no contingent Tax liabilities
or any grounds that could prompt an assessment or reassessment of
any of the Corporation, Roche and each Subsidiary or, to the
knowledge of Vendors, each Associated Company, including, but
without limitation, aggressive treatment of income, expenses,
deductions, credits or other amounts in the filing of earlier or
current Tax returns, reports, elections, designations or any other
related filings, nor has any of the Corporation, Roche and each
Subsidiary or, to the knowledge of Vendors, any Associated Company,
received any indication from any taxation authorities that an
assessment or reassessment of Tax is proposed.
-29-
(e) Withholdings--Each of the Corporation, Roche and each Subsidiary
and, to the knowledge of Vendors, each Associated Company, has
withheld from each payment made to any of it past and present
shareholders, directors, officers, employees, agents or other
Persons whether or not resident in Canada rendering services to
them the amount of all Taxes and other deductions required to be
withheld and has paid such amounts when due, in the form required
under the appropriate legislation, or made adequate provision for
the payment of such amounts to the proper receiving authorities.
(f) Collection and Remittance--Each of the Corporation, Roche and each
Subsidiary and, to the knowledge of Vendors, each Associated
Company, has collected from each receipt from any of the past and
present customers (or other Persons paying amounts to them) the
amount of all Taxes required to be collected and has paid such
Taxes (including, for greater certainty, any amount to be collected
and remitted under the Excise Tax Act (Canada) and any sales Tax
under any applicable provincial legislation) when due, in the form
required under the appropriate legislation or made adequate
provision for the payment of such amounts to the proper receiving
authorities.
(g) Assessments--None of any of the Corporation, Roche and any
Subsidiary or, to the knowledge of Vendors, any Associated Company,
is or will be subject to any assessments, reassessments, levies,
penalties or interest with respect to Taxes which will result in
any liability on their part in respect of any matter arising on or
prior to the date hereof, in excess of the amount to be provided
for in the Closing Balance Sheet.
(h) Jurisdictions of Taxation--Other than as set forth in Schedule
--------
3.1.27, none of the Corporation, Roche, any Subsidiary or, to the
------
knowledge of Vendors, any Associated Company, has been and is not
currently required to file any returns, reports, elections,
designations or other filings with any taxation authority located
in any jurisdiction outside Canada or outside the province of
Quebec. There are no pending, proposed or, to the knowledge of
Vendors, threatened claim by any Governmental Body in any
jurisdiction in which the Corporation, Roche, any Subsidiary or, to
the knowledge of Vendors, any Associated Company, do not pay Taxes
or file Tax returns to the effect that any of them is required to
pay Taxes or file Tax returns in such jurisdiction.
(i) Related Party--Transactions None of the Corporation, Roche, any
Subsidiary or, to the knowledge of Vendors, any Associated Company,
has acquired or had the use of property for proceeds greater than
the fair market value thereof from, or disposed of property for
proceeds less than the fair market value thereof to, or received or
performed services for other than the fair market value from or to,
or paid or received interest or any other amount other than at a
fair market rate (including any distribution of an asset
constituting an Excluded Asset) to or from, any Person with whom it
does not deal at arm's length within the meaning of the Income Tax
Act (Canada).
(j) Research and Development--All research and development investment
tax credits ("ITCs") were claimed by each of the Corporation, Roche
and each
-30-
Subsidiary and, to the knowledge of Vendors, each Associated
Company, in accordance with the Income Tax Act (Canada) and any
applicable provincial legislation and each of the Corporation,
Roche and each Subsidiary and, to the knowledge of Vendors, each
Associated Company, satisfied, at all times, the relevant criteria
and conditions entitling it to such ITCs. All expenses claimed as
research and development expenses by each of the Corporation, Roche
and each Subsidiary and, to the knowledge of Vendors, each
Associated Company, qualified as such. All refunds of ITCs received
or receivable by each of the Corporation, Roche and each Subsidiary
and, to the knowledge of Vendors, each Associated Company, in any
financial year were claimed in accordance with the Income Tax Act
(Canada) and any applicable provincial legislation and each of the
Corporation, Roche and each Subsidiary and, to the knowledge of
Vendors, each Associated Company, satisfied at all times the
relevant criteria and conditions entitling it to claim a refund of
such ITCs.
(k) CCPC Status--Since their dates of incorporation or formation, each
of the Corporation, Roche and each Subsidiary and, to the knowledge
of Vendors, each Associated Company, have been "Canadian controlled
private corporations" within the meaning of the Income Tax Act
(Canada) (other than Subsidiaries and Associated Companies which
are not bodies corporate).
(l) Debt Forgiveness--Each of the Corporation, Roche, each Subsidiary
and, to the knowledge of Vendors, each Associated Company, has not
at any time benefited from a forgiveness of debt or entered into
any transaction or arrangement (including conversion of debt into
shares) which would have resulted in the application of sections 80
to 80.04 of the Income Tax Act (Canada).
(m) Elections--Other than as set forth on Schedule 3.1.27, each of the
---------------
Corporation, Roche, each Subsidiary and, to the knowledge of
Vendors, each Associated Company, has not during any of the last
three (3) Tax years made any elections or designations for purposes
of the Income Tax Act (Canada) including, for greater certainty,
any election under section 83 or 85 of the Income Tax Act (Canada)
or any relevant provincial taxing statute, or for purposes of any
administrative ruling or notices or administrative practices
pursuant to the Income Tax Act (Canada) or any such statute.
(n) Residence--No Vendor or other shareholder whose shares are to be
redeemed or purchased pursuant to the Reorganization, other than
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, is a non-resident of Canada within the meaning of
the Income Tax Act (Canada).
(o) GST and QST--Roche is a registrant within the meaning of Part IX of
the Excise Tax Act (Canada) and Chapter VIII of An Act Respecting
the Quebec Sales Tax and its registration numbers are as follows:
Federal -- R134915792
Provincial -- 1015403175
-31-
(p) Reorganization--Other than as set forth in Schedule 1.1.46 and as
---------------
will be reflected on the Closing Balance Sheet, the Reorganization
will not result in any present or future Tax liability, reduction
of Tax losses or other Tax attributes to the Corporation, Roche,
any Subsidiary or Associated Company.
3.1.28 Licenses--Each of Roche, each Subsidiary and, to the knowledge of
--------
Vendors, each Associated Company, has, and is in full compliance with
and entitled to all of the benefits under, all Licenses necessary or
required to conduct its business as presently conducted, and each
License has been validly issued and is in full force and effect. Roche,
each Subsidiary and, to the knowledge of Vendors, each Associated
Company, has not received notice of any event inquiry, investigation or
proceeding threatening the validity of such Licenses. Other than as set
forth in Schedule 3.1.28, there are no Licenses required to conduct
---------------
the business of Roche and the Subsidiaries as presently conducted or
the ownership of their properties.
No fact, condition or circumstance has occurred to create, and the
execution of this Agreement and the transfer of the Purchased Shares
hereunder shall not create, any right to terminate, cancel, modify,
amend, revoke or expire any such License.
3.1.29 Employee Matters--Each of Roche, each Subsidiary and, to the knowledge
----------------
of Vendors, each Associated Company, has complied with all applicable
Laws relating to employment matters, including, without limitation, any
provisions thereof relating to wages, hours and collective bargaining.
Schedule 3.1.29 is a true and complete list of all written employment,
---------------
service, union, agency, consulting, termination and severance agreements
entered into by Roche and each Subsidiary with or for any or all of its
present directors, officers, Employees and agents. Except as set out in
the agreements therein referred to, there are no directors, officers,
Employees or agents of Roche or any Subsidiary who are entitled to a
specified notice of termination or fixed term of employment or who
cannot be dismissed upon such notice as is required by Law. No
directors, officers or Employees of Roche or any Subsidiary are entitled
to any payment as a result of the transactions contemplated by this
Agreement.
Except as set out in Schedule 3.1.29, none of Roche or any Subsidiary is
---------------
and has never been a party to any collective bargaining agreement. No
application for certification of a collective bargaining unit with
respect to employees of Roche or any Subsidiary has been instituted or
is pending or, to the knowledge of Vendors, threatened.
There has not been, in the two (2) prior years to the date hereof, and
there is not presently pending or existing any strike, slowdown,
picketing, work stoppage, labour arbitration or proceeding in respect of
the grievance of any Employee or any past employee or other labour
dispute against or affecting Roche or any Subsidiary, or to the
knowledge of Vendors, threatened against Roche or any Subsidiary. To the
knowledge of Vendors, no fact, condition or circumstance exists which
could provide the basis for any work stoppage or other labour dispute.
-32-
There is no lock-out of any Employee by Roche or any Subsidiary, nor is
any such action contemplated by Roche or any Subsidiary.
3.1.30 Practice of the Engineering Profession--Except for non-material
--------------------------------------
breaches, no Employee or past employee of Roche or any of the
Subsidiaries has, in connection with his or her employment with Roche or
any of the Subsidiaries, carried on the practice of the engineering
profession in contravention of the Engineers Act, R.S.Q. Ch. I-9, the
Professional Code, R.S.Q. Ch. C-26 or any other Law of any jurisdiction.
All such Employees who perform any acts which would constitute the
practice of the engineering profession as defined in section 3 of the
Engineers Act, R.S.Q. Ch. I-9 hold a valid license, and are in good
standing, with the Quebec Ordre des ingenieurs du Quebec.
3.1.31 Benefit Plans--Except as set forth in Schedule 3.1.31, none of Roche or
------------- ---------------
any Subsidiary is a party to any Benefit Plans. True, complete and
up-to-date copies of all Benefit Plans of Roche and the Subsidiaries
have been provided to Purchaser.
There are no outstanding defaults or violations by Roche or any
Subsidiary of any obligation required to be performed by them in
connection with any Benefit Plan (which, for greater certainty, includes
the Management Pension Plan for the purposes of this Section). There are
no actions, claims, investigations, arbitrations, assessments or other
proceedings which, to the knowledge of Vendors, are pending or
threatened with respect to the Benefit Plans (other than routine claims
for benefits) against Roche or any Subsidiary, the funding agent or the
fund of such Benefit Plan. No proceeding has been initiated to terminate
any Benefit Plan.
All Benefit Plans which are required to be registered are duly
registered and in good standing with all applicable Governmental Bodies,
including Revenue Canada. All Benefit Plans which are funded plans
(including, for greater certainty, the Management Pension Plan) are
funded in accordance with their rules and all Laws and are fully funded
on both a going-concern and a termination basis in accordance with the
methods and assumptions utilized in the most recent actuarial report
therefor.
Except as set forth in Schedule 3.1.31, no Benefit Plan which is not a
---------------
pension plan provides post-retirement benefits.
3.1.32 Environmental Matters.
---------------------
(a) Compliance with Environmental Laws and Permits--Roche, the
Subsidiaries and, to the knowledge of Vendors, the Associated
Companies, and their respective business, operations and assets,
(i) are and have at all times been conducted and used in compliance
with all Environmental Laws (including any Environmental Permits)
in Quebec, Canada and in all other applicable jurisdictions with
environmental regulatory jurisdiction over them and (ii) have
obtained all Environmental Permits which are required in order to
carry on their respective businesses and operations as presently
conducted, and to own or use their respective assets, under all
Environmental Laws. No proceeding is pending or, to the knowledge
of Vendors, threatened which
-33-
will review, make subject to limitations or conditions, suspend,
revoke, terminate or limit any Environmental Permits of Roche, the
Subsidiaries or, to the knowledge of Vendors, the Associated
Companies. All Environmental Permits of Roche, the Subsidiaries
and, to the knowledge of Vendors, the Associated Companies, are
listed in Schedule 3.1.28. None of Roche, the Subsidiaries or, to
---------------
the knowledge of Vendors, the Associated Companies, or any of their
directors or officers has ever (A) been convicted of an offense for
non-compliance with any Environmental Law, (B) been fined or
otherwise penalized for non-compliance with an Environmental Law,
or (C) settled any prosecution for non-compliance with an
Environmental Law short of conviction.
(b) Environmental Liabilities--None of Roche, any Subsidiary or, to the
knowledge of Vendors, any Associated Company, has incurred or is
incurring any liability pursuant to any Environmental Law,
including liability arising as a result of Dealing in Hazardous
Substances. There is no past or present fact, condition or
circumstance relating to Roche, the Subsidiaries or, to the
knowledge of Vendors, the Associated Companies, and their
respective business, operations and assets that could result in
any liability under any Environmental Law in force on the date
hereof.
(c) Disclosure Regarding Properties--None of the immoveable and real
property (including the Immoveables) currently or formerly owned
by, used by, leased to or from, or managed, controlled or occupied
by Roche, any Subsidiary or, to the knowledge of Vendors, any
Associated Company, (i) has ever been used by any Person as a
landfill site, a waste disposal site, or as a location for the
disposal or storage of Hazardous Substances or waste (ii) has ever
had any urea formaldehyde foam insulation, asbestos, PCB waste,
CFCs, radioactive substances or above ground or underground storage
tanks or vessels, active or abandoned, located thereon or
thereunder, or (iii) has ever been subject to the Release of a
Hazardous Substance. To the knowledge of Vendors, there have been
no Releases of Hazardous Substances on property adjacent to
immoveable and real property (including the Immoveables) currently
or formerly owned by, used by, leased to or from, or managed or
controlled by Roche, any Subsidiary or any Associated Company which
have migrated or may migrate to such properties. To the knowledge
of Vendors, none of such properties is identified by any
Governmental Body for investigation pursuant to any Environmental
Laws.
(d) Disclosure Regarding Waste Disposal--All Hazardous Substances
arising from the conduct or use of the business, operations and
assets sent off site for disposal, recycling, treatment or other
handling have been done in compliance with all Environmental Laws
and no such Hazardous Substances have been sent outside of Canada.
3.1.33 Compliance with Laws--Each of the Corporation, Roche, each Subsidiary
--------------------
and, to the knowledge of Vendors, each Associated Company, has complied
and continues to comply with all Laws.
-34-
3.1.34 No Change--Since June 30, 1998, there has not been any material adverse
---------
change in the business, operations, properties, prospects or condition
of Roche, any Subsidiary or, to the knowledge of Vendors, any Associated
Company or any event, condition or contingency that is likely to result
in such a material adverse change.
3.1.35 No Unusual Transactions Except as set forth in this Agreement or in the
-----------------------
Schedules, including Schedule 3.1.35, since June 30, 1998 (except in
---------------
the case of paragraph (t) below), the Corporation, Roche, each
Subsidiary and, to the knowledge of Vendors, each Associated Company,
has conducted its business in the ordinary course and, without limiting
the generality of the foregoing, has not:
(a) made or assumed any commitment, obligation or liability which is
outside the usual and ordinary course of its business;
(b) ceased to operate its properties and to carry on its Business as
heretofore carried on or failed to maintain all of its properties,
rights and assets consistently with past practices or failed to do
any and all things reasonably necessary and within its power to
retain and preserve the goodwill of its business;
(c) sold or otherwise in any way alienated or disposed of its assets
other than in the ordinary course of business and in a manner
consistent with past practices;
(d) split, combined or reclassified any of its shares or ownership
interests, or redeemed, retired, repurchased or otherwise acquired
shares in its capital stock or other corporate security or
ownership interests, or reserved, declared, made or paid any
dividend on its shares or other ownership interests, or made any
other distributions or appropriations of profits or capital;
(e) issued, sold or otherwise disposed of any shares of its capital
stock or any warrants, rights, bonds, debentures, notes or other
corporate security;
(f) discharged any secured or unsecured obligation or liability
(whether accrued, absolute, contingent or otherwise), other than
obligations and liabilities discharged in the ordinary course of
business and in a manner consistent with past practices;
(g) waived or canceled any material claim, account receivable or right
outside the ordinary course of business, or made any gift;
(h) made any change in the rate or form of compensation or remuneration
payable or to become payable to any of the shareholders, directors,
officers, employees or agents of the Corporation, Roche or any
Subsidiary other in the ordinary course of business;
(i) made any change in its accounting principles and practices as
utilized in the preparation of
-35-
the Financial Statements or to be utilized in the preparation of
the Closing Balance Sheet (except as agreed to by Purchaser), or
granted to any customer any special allowance or discount, or
changed its pricing, credit or payment policies, other than in the
ordinary course of business;
(j) made any capital expenditure other than minor expenditures in the
ordinary course of business;
(k) made any loan or advance, or assumed, guaranteed or otherwise
became liable with respect to the liabilities or obligations of any
Person;
(l) suffered any extraordinary losses whether or not covered by
insurance;
(m) modified its constating instruments, by-laws or capital structure;
(n) suffered any material shortage or any cessation or interruption of
inventory shipments, supplies or ordinary services;
(o) removed any director, auditor or accountant or terminated any
officer;
(p) purchased or otherwise acquired any corporate security or
proprietary, participatory or profit interest in any Person;
(q) incurred any indebtedness (including off-balance sheet) other than
to trade creditors in the ordinary course of business and in a
manner consistent with past practices;
(r) modified or changed its business organization or its relationship
with its suppliers, customers and others having business relations
with it;
(s) taken any accounting write-offs or reserves outside of its normal
accounting practices and consistent with past levels and practices;
(t) allowed the Assumed Debt to exceed the Canadian dollar equivalent
of Two Million US dollars (US $2,000,000) on the Audit Date or any
time since the Audit Date and up to the date hereof had the Assumed
Debt been calculated as of any date during such period; or
(u) authorized, agreed or otherwise committed to any of the foregoing.
Without limitation to the above, during the period between the Audit
Date and the date hereof, the operations of Roche, the Subsidiaries and,
to the knowledge of Vendors, the Associated Companies, have been
conducted only in the ordinary course and no extraordinary item,
material liability or reserve has arisen, been identified or taken
during such period which would have the effect of reducing the net book
value of Roche by more than Twenty Five Thousand US dollars (US $25,000)
other than non-material liabilities or operational losses during such
period in the ordinary course.
3.1.36 Pembroke Project--Without limitation to the obligation of
----------------
indemnification in Section 12.1.3, none of the Corporation, Roche, the
Subsidiaries or the
-36-
Associated Companies have assets or liabilities associated with the
Pembroke Project, except disputed matters with Noront Steel (1981)
Limited, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Limited and Groupe Sani-Mobile Inc., the
liablity for which shall not exceed Three Hundred and Eight Thousand
dollars (Cdn $308,000) and for which an appropriate reserve will be
taken on the Closing Balance Sheet to the extent not resolved by the
date thereof. Without limitation to the foregoing, all claims of
▇▇▇▇▇▇▇▇▇▇▇ against Roche and RBW Group have been fully settled and
released.
3.1.37 Budgets, Etc.--Vendors reasonably believe that the budgets and financial
-------------
projections delivered to Purchaser were based upon assumptions that
Vendors believed at the time such budgets and financial projections were
made, and continue to believe, to be reasonable in all material respects
including with respect to forecast earnings and backlog. There is no
fact as of the date hereof (other than matters of a general economic or
political nature which do not affect Roche or the Subsidiaries uniquely)
known to Vendors which materially adversely affects or in the future may
(so far as Vendors can foresee as of the date hereof) materially
adversely affect the business, operations, affairs, condition (financial
or otherwise), properties, assets of Roche and the Subsidiaries taken as
a whole which has not been set forth in the Schedules hereto.
3.1.38 Backlog Volume and Margins--Schedule 3.1.38 is a true and correct
-------------------------- ---------------
listing of the uncompleted portion of the contracted backlog of the
Business as of June 30, 1998 (the "Contracted Backlog"). As of June 30,
1998, to the actual knowledge of Vendors (without any deemed knowledge
of Vendors otherwise set forth in Section 1.4) there is no unrecognized
negative gross margin on any of the Contracted Backlog on those jobs
where no work has been performed by Roche or the Subsidiaries. Gross
margin will be calculated using Roche's job cost projections consistent
with Roche's past practices.
3.1.39 Reorganization--Had the Reorganization and the transactions contemplated
--------------
herein occurred on the date hereof, the redemptions and purchases for
cancellation, the amalgamation of Roche and NewCo 1 and the declaration
of dividends referred to in the Reorganization would have met all
"solvency" tests in the Companies Act (Quebec) and the Canada Business
Corporations Act applicable to such transactions. Assuming such solvency
tests continue to be met on the Closing Date, each of the steps in the
Reorganization prior to step 20 will be duly and validly carried out,
and in compliance with all constating documents of the corporations who
are parties thereto, all Laws and all shareholders' agreements
applicable thereto.
3.1.40 No Broker--None of Vendors, the Corporation, Roche, any Subsidiary, or
---------
any of their respective directors, officers, employees or agents has
employed or incurred any liability to any broker, finder or agent for
any brokerage fees, finder's fees, commissions or other amounts with
respect to this Agreement or any of the transactions contemplated
hereby.
3.1.41 Stand Alone--Except as set forth in Schedule 3.1.41, no part of the
----------- ---------------
Business of Roche, the Subsidiaries or, to the knowledge of Vendors, the
Associated Companies, is conducted through any Person other than Roche,
the Subsidiaries
-37-
and the Associated Companies. Except as set forth in Schedule 3.1.41,
---------------
none of Vendors, the Corporation, Roche or Persons related thereto or
the directors, officers or managers thereof or, to the knowledge of
Vendors, any Associated Company, or Persons related thereto has any
interest in any property, immoveable or real, movable or personal,
tangible or intangible, used in or pertaining to the business of Roche,
the Subsidiaries and the Associated Companies except that Metroplan owns
the immoveable located at ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇, ▇▇▇-▇▇▇,
▇▇▇▇▇▇.
3.1.42 Full Disclosure--No covenant, agreement, obligation, representation or
---------------
warranty given by Vendors contained in this Agreement, the Schedules
prepared by them, and any certificates or other documents referred to
herein or furnished by them to Purchaser pursuant hereto contains any
untrue statement of a material fact or omits to state a material fact
necessary to make such covenant, agreement, obligation, representation,
warranty, Schedule, certificate or other document not misleading.
3.2 Representations and Warranties of Purchaser. Purchaser represents and
-------------------------------------------
warrants to Vendors as follows and acknowledges that Vendors are relying
upon such representations and warranties in connection with the sale by
Vendors of the Purchased Shares and that Vendors would not have entered
into this Agreement without such representations and warranties:
3.2.1 Due Incorporation--Each of Purchaser and ITX is duly incorporated and
-----------------
validly existing under the Laws of its jurisdiction of incorporation.
3.2.2 Due Authorization--Each of Purchaser and ITX has the necessary corporate
-----------------
power and authority to execute this Agreement and the Ancillary
Agreements to be entered into by it and to perform its obligations
hereunder and thereunder. The execution of this Agreement and the
Ancillary Agreements by Purchaser and ITX, as the case may be, and the
performance by them of their obligations hereunder and thereunder have
been duly authorized by all necessary corporate action on their part.
Such execution and performance by them do not require any action or
consent of, any registration with, or notification to, any Person, or
any action or consent under any Laws to which Purchaser or ITX are
subject, other than the filing by ITX within thirty (30) days of the
Closing Date of a Notice of Investment under the Investment Canada Act.
3.2.3 Enforceability--This Agreement, and each of the Ancillary Agreements
--------------
will, upon execution thereof, constitute a legal, valid and binding
obligation of Purchaser and ITX, as the case may be, enforceable against
them in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization and similar Laws affecting the enforcement of
creditors rights generally and to general equitable principles.
3.2.4 No Conflict--The execution of this Agreement and the Ancillary
-----------
Agreements, the consummation of the transactions contemplated herein and
therein, the performance and compliance by Purchaser and ITX of its
obligations hereunder and thereunder, as the case may be, do not:
-38-
(a) violate, contravene or breach, or constitute a default under, the
constating instruments or by-laws of Purchaser or ITX; or
(b) violate, contravene or breach any Laws.
3.2.5 No Broker--None of Purchaser, ITX or any of their directors, officers,
---------
employees or agents has employed or incurred any liability to any
broker, finder or agent for any brokerage fees, finder's fees,
commissions or other amounts with respect to this Agreement or any of
the transactions contemplated hereby.
3.2.6 Full Disclosure--No covenant, agreement, obligation, representation or
---------------
warranty given by Purchaser contained in this Agreement, the Schedules
prepared by it, and any certificates or other documents referred to
herein or furnished by it to Vendors pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary
to make such covenant, agreement, obligation, representation, warranty,
Schedule, certificate or other document not misleading.
3.3 Exceptions to Solidary Representations. Notwithstanding the introductory
--------------------------------------
paragraph of Section 3.1, the following representations and warranties are given
by each Vendor jointly and not solidarily, with respect to itself and not with
respect to any other Vendor: Section 3.1.1 with respect, only, to Vendors which
are bodies corporate; Section 3.1.3 (other than with respect to actions,
consents, registrations or notifications associated with the Corporation, Roche,
any Subsidiary or any Associated Company); Section 3.1.4; Section 3.1.6(a) with
respect to Vendors which are bodies corporate only; Section 3.1.7 with respect,
only, to the title of the Purchased Shares; and Section 3.1.27(n).
ARTICLE IV
COVENANTS OF VENDORS
--------------------
4.1 Conduct of Business. Vendors shall cause each of the Corporation,
-------------------
Roche and each of the Subsidiaries, from the date hereof up to the Closing Date
to conduct its business in the ordinary course and in a manner consistent with
past practices and, without limiting the generality of the foregoing, Vendors
shall cause the Corporation, Roche and each of the Subsidiaries, not to, without
the prior written consent of Purchaser (which consent will not be unreasonably
withheld) or unless part of the transactions in the Reorganization:
4.1.1 make, assume or discharge any commitment, obligation (capital or
otherwise) or liability which is outside the usual and ordinary course
of its business in excess of Two Hundred Fifty Thousand dollars (Cdn
$250,000) in the cumulative aggregate;
4.1.2 split, combine or reclassify any of its shares, or redeem, retire,
repurchase or otherwise acquire shares in its capital stock or other
corporate security, or reserve, declare, make or pay any dividend
(except as specifically contemplated in this Agreement), or make any
other distributions or appropriations of profits or capital;
4.1.3 issue, sell or otherwise dispose of any shares of its capital stock or
any warrants, rights, bonds, debentures, notes or other corporate
security;
-39-
4.1.4 modify its constating instruments, by-laws or capital structure;
4.1.5 purchase or otherwise acquire any corporate security or proprietary,
participatory or profit interest in any Person (other than joint
ventures pursuant to projects) and other than as disclosed in the
Schedules hereto;
4.1.6 conduct any meeting of shareholders (other than meetings considering
this Agreement) or directors of the Corporation, Roche or any of the
Subsidiaries, or any committee of any of the foregoing Persons (or
solicit or take any action by written consent in lieu of any such
meeting) without giving at least seventy-two (72) hours prior notice of
and providing an agenda or copy of any proposed action (in English) with
respect to such meeting(s) or actions, to the Persons specified in
Section 14.5.2 hereof, and without allowing a representative of
Purchaser to attend (at least telephonically) such meeting(s) and to
participate fully in all discussions at such meeting(s); and
4.1.7 authorize, agree or otherwise commit to any of the foregoing.
Vendors shall ensure that Roche does not vote its interests in the
Associated Companies in a manner inconsistent with the items set forth in this
Section 4.1, it being understood, however, that as Roche does not control the
Associated Companies, Vendors cannot guarantee that the Associated Companies
will not take such actions.
4.2 [Intentionally left blank.]
4.3 [Intentionally left blank.]
4.4 Closing. If each condition set forth at Section 11.2 is (a) performed or
-------
complied with, or (b) waived by Vendors, and if this Agreement is not terminated
in accordance with Section 11.1, then Vendors shall on the Closing Date:
4.4.1 take, and shall cause New Roche to take, all actions as may be
reasonably required by legal counsel for Purchaser to duly and validly
transfer the Purchased Shares to Purchaser, including, without
limitation, to cause New Roche (a) to make the necessary inscriptions in
the registers of New Roche in order to record the transfer of the
Purchased Shares in favour of Purchaser, and (b) to deliver to
Purchaser, upon the cancellation of the share certificates representing
the Purchased Shares, a new certificate in its name representing the
Purchased Shares;
4.4.2 deliver to Purchaser at the place of Closing certificates for the
Purchased Shares, duly endorsed for transfer to Purchaser;
4.4.3 if required by Purchaser, cause all or any of the directors, officers
and auditors of the Corporation, Roche or any Subsidiary (a) to resign
from the Corporation, Roche or the Subsidiaries, as the case may be,
effective on the Closing Date, and (b) to deliver to the Corporation,
Roche or such Subsidiaries, as the case may be, at the place of Closing,
resignations and releases;
-40-
4.4.4 deliver to Purchaser at the place of Closing certified copies of
resolutions of the shareholders and directors of the Corporation, Roche
and the Subsidiaries (in form and substance reasonably satisfactory to
Purchaser's legal counsel) (a) authorizing and approving the sale,
assignment and transfer of the Purchased Shares from Vendors to
Purchaser and their registration in the name of Purchaser, (b) accepting
the resignations effective on the Closing Date of the directors,
officers and auditors referred to in Section 4.4.3, and (c) appointing
such new directors, officers and auditors of the Corporation, Roche and
the Subsidiaries as may be nominated by Purchaser;
4.4.5 execute the Non-Competition Agreements substantially in the forms of
Exhibit "B", as applicable to each Vendor as the Parties have agreed;
-----------
4.4.6 deliver to Purchaser a favourable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
substantially in the form of Exhibit "C";
-----------
4.4.7 deliver releases of claims and radiations of Liens on assets of New
Roche and Subsidiaries identified in Schedule 3.1.14 under "Status" as
---------------
"Acquittance to be Obtained" or undertakings from the holders of such
Liens to release them promptly after Closing in form and substance
reasonably satisfactory to Purchaser;
4.4.8 deliver copies of full and final settlements between RBW and ▇▇▇▇▇▇▇▇▇▇▇
settling all matters at issue in their current litigation and with
respect to the work performed by ▇▇▇▇▇▇▇▇▇▇▇ on the Pembroke Project;
4.4.9 deliver a copy of an unsigned release of Roche by each of London
Guarantee Insurance Company and Axa Boreal Insurance Inc. with respect
to the Pembroke Project other than with respect to the outstanding claim
of Noront Steel (1981) Limited, which release shall be satisfactory in
form and substance to Purchaser and ITX in their entire discretion and
which shall be executed by such bonding companies upon receipt of the
funds referred to in Section 2.3.1;
4.4.10 deliver a copy of a mutual full and final release of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
and Roche with respect to the Pembroke Project;
4.4.11 [Intentionally left blank];
4.4.12 deliver (in trust or escrow) to Purchaser satisfactory evidence of all
releases of security on the Purchased Shares, a description of which
security being set forth in Schedule 4.4.12;
---------------
4.4.13 deliver to Purchaser a copy of the agreement between Vendors relating to
their rights and obligations between themselves after Closing and the
distribution of the Purchase Price in the form of the draft agreement
given to Purchaser on the date hereof; and
4.4.14 deliver to Purchaser an assignment and assumption agreement between
Vendors and Roche relating to the liabilities of Pembroke not reflected
on the Closing Balance Sheet.
-41-
4.5 Year 2000 Cooperation. Vendors will, in their capacities as employees
---------------------
of Roche and the Subsidiaries, continue to use their best efforts after the
Closing Date (at no expense to Vendors), and will cooperate with ITX in its
similar efforts, to ensure that all information systems owned by or used by
Roche and the Subsidiaries will be year 2000 compliant in a timely fashion.
ARTICLE V
POST-CLOSING TAX MATTERS
------------------------
5.1 Tax Periods Ending on or Before the Closing Date. Vendors shall prepare,
------------------------------------------------
or cause to be prepared, and file, or cause to be filed, all Tax returns for the
Corporation, Roche and the Subsidiaries for all periods ending on or prior to
the Audit Date which are filed after the Audit Date. Vendors shall permit
Purchaser to review and comment on each such Tax return described in the
preceding sentence prior to filing. Vendors shall reimburse Purchaser for:
5.1.1 Taxes of the Corporation, Roche and the Subsidiaries with respect to
such periods within fifteen (15) days after payment by the Corporation,
Roche and the Subsidiaries of such Taxes, and
5.1.2 the loss of Tax losses (other than Pembroke Losses) as a result of
increased income or smaller Tax losses within fifteen (15) days of such
determination,
to the extent such are not reflected in the reserve for Taxes (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Balance Sheet.
5.2 Cooperation on Tax Matters. Each Party shall cooperate fully, as and to
--------------------------
the extent reasonably requested by the other Party, in connection with the
filing of Tax returns pursuant to this Article and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party's request) the provision of Books and
Records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Purchaser shall:
5.2.1 retain all Books and Records with respect to Tax matters pertinent to
the Corporation, Roche and the Subsidiaries relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by either Party, any
extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing authority;
and
5.2.2 to give Vendors reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if Vendors so
request, Purchaser shall allow Vendors to take possession of such Books
and Records.
Upon request of a Party, the Parties shall use their best efforts to
obtain any certificate or other document from any Governmental Body or any other
Person as may be
-42-
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
5.3 Disputes. Any disputes associated with the matters referred to in this
--------
Article V shall be resolved in accordance with the procedures of the three (3)
last paragraphs of Section 2.7, mutatis mutandis.
ARTICLE VI
PEMBROKE
--------
6.1 Pembroke Carry Back Losses. Pursuant to steps 14 and 18 of the
--------------------------
Reorganization, immediately prior to the Closing, NewCo1 and New Roche will
repurchase preferred shares held by Vendors for an aggregate purchase price
equal to the amount of Federal and Provincial income taxes ("Income Taxes") to
be refunded to New Roche when the losses associated with the Pembroke Project
("Pembroke Losses") are carried-back by New Roche against Income Taxes paid by
Roche for its 1995 taxation year. For greater certainty, the Pembroke Losses
will be carried back first to the 1995 taxation year prior to the carry-back of
non-Pembroke Losses.
The promissory notes which constitute payment of such purchase prices
shall be payable within ten (10) days of the date such Income Tax refunds are
received by New Roche from the relevant Taxing authorities. In the event either
of the provincial or federal revenue authorities issues such Income Tax refund
prior to the other, the promissory notes shall be payable in part in the
aggregate amount of the refund so received, with the balance payable when the
other authority issues the refund.
In addition, if the operations of Roche in the Tax year ended December 31,
1998 (the "1998 Year") generated taxable income (excluding the effects of the
Pembroke Project), Purchaser shall pay Vendors, as an increase in the Purchase
Price, an amount equal to the amount of Income Taxes saved by Roche in the 1998
Year as a result of the application of the Pembroke Losses. Such payment shall
be made three (3) months after the Closing Date.
For the purposes hereof, the Pembroke Losses shall be calculated, and
segregated from the other losses of Roche, in accordance with GAAP. At the time
of the final delivery of the Closing Balance Sheet, Vendors shall deliver to
Purchaser a statement indicating how such Pembroke Losses were calculated.
For purposes of this Article VI, the expression "Pembroke Losses" shall
include available federal and provincial non-capital losses of BCPTA which
became available to Roche in its 1998 Year to be carried forward or backward as
a result of the wind-up of BCPTA during the taxation year of Roche ending
December 31, 1997 (the "BCPTA Losses"); provided, however, that the amount of
the Pembroke Losses available for purposes of Section 6.2 hereof including
Pembroke Losses available to reduce income generated by the Reorganization in
any taxation year shall be reduced by an amount equal to the BCPTA Losses
federally or provincially, as the case may be. Such Pembroke Losses equal to the
BCPTA Losses shall be available for the sole benefit of Purchaser and Roche.
Similarly, the expression "Pembroke Losses" shall include non-capital losses of
Roche not
-43-
otherwise considered Pembroke Losses incurred in the period between January 1,
1999 and the Closing Date, provided, however, that an identical amount of
Pembroke Losses shall not be available in Section 6.2 and shall be for the full
benefit of Purchaser and Roche.
In the event of any inconsistency between the terms hereof and the terms
of the documents executed pursuant to the Reorganization, the terms hereof shall
prevail.
6.2 Pembroke Carry Forward Losses. Notwithstanding Article II, Purchaser
-----------------------------
shall pay to Vendors, as an increase to the Purchase Price, an amount equal to
the Income Taxes saved by Roche in taxation years ending after the 1998 Year as
a result of the reduction of taxable income for such subsequent years
attributable to the use of the Pembroke Losses. For greater certainty, no amount
shall be payable by Purchaser pursuant to this Section 6.2 where the Pembroke
Losses are applied in a taxation year subsequent to the 1998 Year to reduce
income generated by the Reorganization.
For the purposes of the application of this Section, unused losses of
Roche shall be carried forward commencing with the oldest years for which losses
are available. If any year's available losses are composed both of losses
associated with the Pembroke Project and losses associated with the other
operations of Roche, the Vendors shall receive under this Section an amount
equal to that proportion of the Income Taxes saved by Roche in the subsequent
taxation year that the unused Pembroke Losses for such year are to the aggregate
of all unused losses for such year. Such Purchase Price increase shall be
payable by Purchaser to Vendors sixty (60) days after the end of the taxation
year during which Roche benefited from a reduction in Income Taxes as a result
of using the Pembroke Losses.
6.3 Disputes. Any disputes associated with the calculations to be made
--------
pursuant to Sections 6.1 and 6.2 shall be resolved in accordance with the
procedures of the three (3) last paragraphs of Section 2.7, mutatis mutandis.
6.4 Adjustments for Reassessments. In the event any of the taxation years
-----------------------------
covered by Sections 6.1 and 6.2 are, after application of either of such
Sections, reassessed by the relevant taxation authorities and it is finally
determined that the taxable income or losses are different than that used to
calculate the amount owing to Vendors thereunder, either Vendors shall pay to
New Roche (in the case of the promissory notes referred to in Section 6.1) or
Purchaser (in the other cases), or New Roche (in the case of the promissory
notes referred to in Section 6.1) or Purchaser (in the other cases) shall pay to
Vendors the difference between the amount actually paid to Vendors with respect
to such taxation year and the amount, if any, that should have been paid to
Vendors for such year had the Parties originally calculated the entitlement
therefor using the results finally determined by the relevant taxation
authorities.
Unless Purchaser is otherwise indemnified therefore pursuant to Article
XII, Vendors shall also reimburse Roche for any interest and penalties
associated with such final reassessments for taxation years ending prior to the
Closing Date, and shall pay Purchaser any interest and penalties associated with
such final reassessment for taxation years ending after the Closing Date to the
extent that such reassessments involve the disallowance of any of the losses
associated with the Pembroke Project.
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6.5 Effect of Reassessment on Pembroke Losses. Notwithstanding any other
-----------------------------------------
provisions in this Agreement, no amount shall be payable to Vendors pursuant to
this Article VI or any other provision of this Agreement for the use of all or a
portion of the Pembroke Losses by Roche or any sucescessor corporation in
circumstances where, after the Closing Date, any portion of the Pembroke Losses
are carried back or otherwise utilized by Roche or any successor, to offset,
reduce or mitigate any Income Tax liability for taxation years ending on or
prior to the Closing Date resulting from a reassessment or proposed reassessment
of Income Taxes for said years (a "Prior Year Offset"). In such circumstances,
losses being carried back or otherwise utilized by Roche or any successor to
mitigate a liability for Income Taxes for a taxation year ending on or prior to
the Closing Date shall be deemed to be Pembroke Losses to the extent of the
amount of Pembroke Losses at that time and any excess shall be deemed to be
losses other than Pembroke Losses.
If Pembroke Losses are used for a Prior Year Offset, Purchaser shall not
have any right to claim indemnification from Vendors pursuant to this Agreement,
including pursuant to Article XII, for such Income Tax liability to the extent
the Pembroke Losses are used for the Prior Year Offset.
Nothing in this Section should be construed as reducing or mitigating the
amount that can be claimed by Purchaser under this Agreement for interest and
penalties, as the case may be, payable as a result of an assessment or
reassessment for Taxes or for Taxes which are not offset by a carry back of the
Pembroke Losses in the manner set out hereinabove.
6.6 Insurance Recoveries. Purchaser shall cause Roche to pay to Vendors, as
--------------------
and when received by Roche, the net after Tax amount of any recoveries from
insurance companies providing errors and omissions insurance coverage (but not
CGL or construction wrap-up insurance) to Roche as a result of damages suffered
by Roche from the Pembroke Project to the extent that such recoveries are not
booked on the Closing Balance Sheet. Vendors will consult with Purchaser prior
to finalizing their claim on Roche's errors and omissions policies with respect
to the Pembroke Project, and will allow Purchaser to review any such claim prior
to submittal within five (5) days of receipt thereof. Vendors will accept a
settlement of such claim only to the extent it does not require Roche to pay any
deductible, expense, or similar amount on account of such claim.
ARTICLE VII
MANAGEMENT PENSION PLAN SURPLUS
-------------------------------
7.1 Termination of Plan. As soon as practicable after the Closing Date,
-------------------
Purchaser shall cause New Roche to commence the total termination, to be
effective as of the Closing Date or such other date as required by regulatory
authorities having jurisdiction, of the Management Pension Plan. As soon as
practicable after the Closing Date, Purchaser shall cause New Roche to take such
actions, deliver such documents and seek such regulatory approvals as may be
required to effect a distribution of the assets of the Management Pension Plan,
including, without limiting the generality of the foregoing, a draft agreement
(within the meaning of section 230.2 of the Quebec Supplemental Pension Plans
Act) for the distribution of the Management Pension Plan Surplus in the
proportions stipulated by
-45-
Vendors. Purchaser shall cause to be reported to Vendors all material
developments in relation to the determination and distribution of the Management
Pension Plan Surplus as soon as practicable after such developments occur and
Vendors shall be entitled to provide input with regard to all material decisions
concerning the Management Pension Plan Surplus. Following the distribution of
the Management Pension Plan Surplus, Purchaser shall pay, as an increase to the
Purchase Price, by certified cheque or wire transfer of immediately available
funds into the Collection Account, for the purpose of distribution to Vendors as
agreed among themselves, an amount equal to the net after-tax proceeds of any
such Management Pension Plan Surplus so distributed to New Roche (less any
expenses associated with the termination of the Management Pension Plan and the
distribution of assets therefrom which are borne by New Roche or Purchaser), the
whole subject to applicable Laws.
For the purposes hereof, the "net after-tax" proceeds of the Management
Pension Plan Surplus shall mean a percentage of such Surplus equal to the
percentage that New Roche would be allowed to keep after having paid Tax on the
Surplus at the federal and provincial Tax rates then applicable to New Roche,
regardless of whether New Roche was in a taxable position in the year of the
distribution.
ARTICLE VIII
COVENANTS OF PURCHASER
----------------------
8.1 Closing. If each condition set forth at Section 11.1 is (a) performed or
-------
complied with, or (b) waived by Purchaser, and if this Agreement is not
terminated in accordance with Section 11.2, then Purchaser shall on the Closing
Date:
8.1.1 deliver to Vendors' Collection Account a certified cheque, bank draft or
wire transfer in the amount determined pursuant to Section 2.2;
8.1.2 cause the Capital Contributions to be paid as set forth in Section 2.3;
8.1.3 execute, and cause ITX to execute, the Non-Competition Agreements
substantially in the forms of Exhibit "B"; and
-----------
8.1.4 deliver to Vendors a favourable opinion of Stikeman, ▇▇▇▇▇▇▇ substantially
in the form of Exhibit "D".
-----------
8.2 Right of First Refusal. If at any time after the Closing Date until the
----------------------
second anniversary of the latest date the Second EBIT Payment, if any, is to be
made, Roche or any one hundred percent (100%) owned Subsidiary (the "Offeror")
desires to sell, transfer or otherwise alienate:
(a) any assets (including all of the shares of a Subsidiary or an
Associated Company) which comprise a self-contained business segment,
or
(b) any assets with an aggregate value of One Hundred Thousand dollars
(Cdn $100,000) or more and which do not comprise a self-contained
business segment
-46-
(the "Optioned Assets"), other than sales in the normal course of business and
inter-company transfers, to any third Person acting at arm's length to the
Offeror (whether the Offeror received an offer from the Person, made an offer to
the Person or proposes to make an offer to the Person in each case the
"Original Offer") in one (1) transaction or series of related transactions, then
Purchaser shall ensure that the Offeror will first offer to sell (the "Offer")
such Optioned Assets to all Vendors in accordance with the procedures set forth
in this Section 8.2.
The Offer shall be sent to Vendors and shall be open for acceptance by any
or all Vendors for thirty (30) days (the "Offer Period") from the receipt of the
Offer by Vendors. The Offer shall specify the essential terms of the Original
Offer, including a description of the Optioned Assets and the price.
Vendors shall be obliged by delivering notice to Purchaser within, but not
after the expiry of, the Offer Period at their sole option to either (a) accept
the Offer, or (b) reject the Offer, in which case the Offer Period shall expire
upon such rejection.
If any Vendors do not accept the Offer within the Offer Period, then such
Vendors shall be deemed to have rejected the Offer.
If any Vendors have accepted the Offer, then Purchaser shall cause the
Offeror to sell to one (1) corporate vehicle designated by such Vendors
("VendorCo"), and such Vendors shall cause VendorCo to purchase from the
Offeror, the Optioned Assets upon the same terms and conditions as specified in
the Offer, and the non-competition covenants of such Vendors who own, at the
time of such purchase, VendorCo set forth in their Non-Competition Agreements
shall not apply to them with respect to the part of the Business associated with
such Optioned Assets.
If Vendors have or are deemed to have rejected the Offer, then the Offeror
shall be free for a period of six (6) months from the end of the Offer Period to
sell all or part of the Optioned Assets to any Person on terms not more
favourable than as provided in the Offer. If no sale takes place within such six
(6) months period, then the Offeror shall not sell, transfer or otherwise
alienate the Optioned Assets without again following and being subject to this
Section 8.2.
For greater certainty, the right of first refusal herein does not apply to
sales of any of the Purchased Shares or of all or substantially all of the
assets of Roche. Upon the decision of management of Purchaser or ITX to sell any
of the Purchased Shares or all or substantially all of the assets of Roche any
time prior to the second anniversary of the date the Second EBIT Payment, if
any, is required to be made, Purchaser or ITX shall notify Vendors in writing of
such decision.
Notwithstanding the foregoing, any proposed sales of Optioned Assets shall
be subject to any pre-existing rights of third Persons with respect to such
Optioned Assets, including rights of first refusal under shareholders
agreements.
8.3 Warranty Claims. Following the Closing, Purchaser shall cause Roche and
---------------
the Subsidiaries, consistent with past practices of Roche and the Subsidiaries,
to perform all required warranty work with respect to services performed by them
on or prior to the
-47-
Closing. Purchaser's agreement under this Section 8.3 to cause Roche and the
Subsidiaries to perform required warranty work may not be construed in any way
as an assumption of such liability by Purchaser or to create any claim against
Purchaser by any customer as a third-party beneficiary under this covenant.
Any warranty work so performed which is outside of normal and usual
warranty work levels and which involves aggregate expenditures of more than
Fifty Thousand dollars (Cdn $50,000) shall be (a) borne by Roche and the
Subsidiaries up to the value of the warrantee reserve reflected in the Closing
Balance Sheet, and (b) thereafter shall be at Vendors' sole cost and expense.
Vendors shall reimburse Roche or the Subsidiaries for all fully burdened costs
of such warranty work above the warranty reserve, which reimbursement shall be
made by Vendors to Roche (or the Subsidiary) within ten (10) calendar days of
receipt by Vendors of the invoice therefor by payment in cash by Vendors, by
certified cheque, bank draft or wire transfer.
ARTICLE IX
EMPLOYEES
---------
9.1 Continued Employment of the Salaried Employees. The terms and conditions
----------------------------------------------
of employment of all salaried and other non-unionized Employees employed by
Roche and the Subsidiaries on the Closing Date shall be substantially the same
as their terms and conditions of employment on the date hereof with the
exception, however, that the Management Pension Plan will be terminated in
accordance with Article VII. Nothing in this Article IX shall be construed as a
guarantee of employment.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
10.1 Survival of Representations and Warranties of Vendors. The representations
-----------------------------------------------------
and warranties of Vendors contained in this Agreement, in the Schedules or in
any certificate or other document delivered or given pursuant to this Agreement
are given and are effective as of the date hereof notwithstanding that the
Closing Date occurs after such date and shall survive the completion of the
transactions contemplated by this Agreement, and notwithstanding such completion
or any investigation made by or on behalf of Purchaser or ITX or any knowledge
by Purchaser or ITX of any incorrectness in, or breach of, such representations
or warranties, shall continue in full force and effect for the benefit of
Purchaser for a period ending one (1) year after the date the Second EBIT
Payment is actually made or, if no Second EBIT Payment is required to be made or
the Second EBIT Payment is not being made because of an unresolved dispute among
the Parties, then one (1) year after the date the Second EBIT Payment last could
have been made had it been payable or had there been no dispute among the
Parties, (a) except for any representation and warranty relating to Tax matters
which shall survive until ninety (90) days after the last date on which the
relevant Tax authority is entitled to assess or reassess with respect to such
Tax matters, (b) except for any representation and warranty in respect of which
a claim based on fraud is made, and except for the representations and
warranties contained in Section 3.1.7 with respect to number and title to the
Purchased Shares and the other shares and interests therein, which in each such
case shall be unlimited as to duration.
-48-
10.2 Survival of Representations and Warranties of Purchaser. The
-------------------------------------------------------
representations and warranties of Purchaser contained in this Agreement or in
any certificate or other document delivered or given pursuant to this Agreement
are given and are effective as of the date hereof notwithstanding that the
Closing Date occurs after such date and shall survive the completion of the
transactions contemplated by this Agreement, and notwithstanding such completion
or any investigation made by or on behalf of Vendors or any knowledge by Vendors
of any incorrectness in, or breach of, such representations or warranties, shall
continue in full force and effect for the benefit of Vendors for a period ending
one (1) year after the date the Second Payment is actually made or, if no Second
EBIT Payment is required to be made or the Second EBIT Payment is not being made
because of an unresolved dispute among the Parties, then one (1) year after the
date the Second EBIT Payment last could have been made had it been payable or
had there been no dispute among the Parties; except for any representation and
warranty in respect of which a claim based on fraud is made which shall be
unlimited as to duration.
ARTICLE XI
CONDITIONS OF CLOSING
---------------------
11.1 Conditions for the Benefit of Purchaser. The purchase and sale of the
---------------------------------------
Purchased Shares in accordance with the terms of this Agreement are subject
to the following conditions, each of which is hereby declared to be for the
exclusive benefit of Purchaser. Each condition is to be performed or complied
with in all respects at or prior to the Closing Date:
11.1.1 Truth of Representations and Warranties of Vendors--The representations
--------------------------------------------------
and warranties of Vendors contained in Sections 3.1.1 to 3.1.5, 3.1.6(a)
and 3.1.6(d), and 3.1.7 to 3.1.9 shall have been accurate in all
respects as of the date of this Agreement and shall be true and correct
in all respects as of the Closing Date as though made on such date.
11.1.2 Performance of Covenants by Vendors--All of the covenants, obligations
-----------------------------------
and agreements that Vendors are required to perform or to comply with
pursuant to Sections 4.1 and 4.4 at or prior to the Closing Date
(considered individually and collectively), shall have been performed or
complied with in all material respects in the case of Section 4.1 at or
prior to the Closing Date and in all respects in the case of Section
4.4.
11.1.3 Litigation--There shall be no actions, claims, investigations,
----------
arbitrations or other proceedings (whether or not on behalf of Vendors,
the Corporation, Roche or any Subsidiary) pending or threatened to
restrain, enjoin or invalidate any transaction contemplated by this
Agreement.
If any of the conditions of this Section 11.1 has not been satisfied as
of the Closing Date, or if Closing has not occurred by March 31, 1999 for
reasons other than Purchaser's failure to comply with its obligations under this
Agreement, Purchaser may, at its option, either (a) terminate this Agreement by
notice to Vendors at any time prior to the Closing without further formality, or
(b) proceed with the Closing, without prejudice, in either case, to Purchaser's
other rights, recourses and remedies.
-49-
11.2 Conditions for the Benefit of Vendors. The purchase and sale of the
-------------------------------------
Purchased Shares in accordance with the terms of this Agreement are subject to
the following conditions, each of which is hereby declared to be for the
exclusive benefit of Vendors. Each condition is to be performed or complied with
in all respects at or prior to the Closing Date (or as otherwise specified):
11.2.1 Truth of representations and Warranties of Purchaser--The
----------------------------------------------------
representations and warranties of Purchaser contained in this Agreement
or in any certificate or other document delivered or given pursuant to
this Agreement (considered individually and collectively), shall have
been accurate in all aspects as of the date of this Agreement, and shall
be true and correct in all respects as of the Closing Date as though
made on such date.
11.2.2 Performance of Covenants by Purchaser--All of the covenants, obligations
-------------------------------------
and agreements that Purchaser is required to perform or to comply with
pursuant to this Agreement at or prior to the Closing Date (considered
individually and collectively), shall have been performed or complied
with in all respects at or prior to the Closing Date.
11.2.3 Litigation--There shall be no actions, claims, investigations,
----------
arbitrations or other proceedings (whether or not on behalf of Purchaser
or ITX) pending or threatened to restrain, enjoin or invalidate any
transaction contemplated by this Agreement.
11.2.4 Promissory Notes--On February 5, 1999, ITX shall issue promissory notes
----------------
to the Persons and in the amounts identified in Sections 2.2 and 2.3
hereof, together with interest thereon at the rates, and otherwise on
the terms, specified therein.
If any of the conditions of this Section 11.2 has not been satisfied as
of the Closing Date or if Closing has not occurred by March 31, 1999 for reasons
other than Vendors' failure to comply with its obligations under this Agreement,
Vendors may, at their option, either (a) terminate this Agreement by notice to
Purchaser at any time prior to Closing without further formality, or (b) proceed
with the Closing, without prejudice, in either case, to Vendors' other rights,
recourses and remedies.
ARTICLE XII
INDEMNIFICATION
---------------
12.1 Indemnification by Vendors. Vendors shall solidarily, without the
--------------------------
benefit of division and discussion, (except as set forth in Section 3.3)
indemnify and hold Purchaser harmless from and against any claims, demands,
actions, causes of action, judgments, damages, losses (which shall include any
diminution in value), liabilities, costs or expenses (including, without
limitation, interest, penalties and reasonable attorneys', and experts' fees and
disbursements) (collectively, the "Losses") which may be made against Purchaser,
the Corporation, Roche, the Subsidiaries or the Associated Companies or which
any of them may suffer or incur as a result of, arising out of or relating to:
12.1.1 any violation, contravention or breach of any covenant, agreement or
obligation of Vendors under or pursuant to this Agreement;
-50-
12.1.2 any incorrectness in, or breach of, any representation or warranty made
by Vendors under or pursuant to this Agreement, the Schedules or in any
certificate or other document delivered or given pursuant to this
Agreement, whether or not Purchaser relied thereon or had knowledge
thereof;
12.1.3 any liabilities or obligations of any nature whatsoever associated with
the Pembroke Project, whether arising before, on or after the Closing
Date, to the extent not booked on the Closing Balance Sheet;
12.1.4 any liabilities or obligations of the Corporation, Roche or the
Subsidiaries as a result of the Reorganization, including for Taxes or
as a result of any transaction not being in compliance with Law,
shareholders' agreements or constating documents, and any undischarged
guarantees on behalf of the Excluded Assets (other than, in the case of
Metroplan, any liabilities or obligations solely related to Roche's
lease obligations to Metroplan);
12.1.5 the failure of the Corporation, Roche or any Subsidiary to obtain all
consents for the change of control of Roche and the Subsidiaries, or for
the consummation of the Reorganization, under the Contracts (other than
consents which could not be obtained by Law or by the terms of a
Contract as a result of the non-Canadian resident ownership of
Purchaser);
12.1.6 any amount required to be paid by Roche or Purchaser in connection with
the distribution of the Management Pension Plan Surplus pursuant to
Article VII or into the Management Pension Plan pursuant to sections
228-229 of the Quebec Supplemental Pension Plans Act; and
12.1.7 any withholding or other Taxes for which Roche, the Corporation or
Purchaser is liable as a result of redemptions or purchases of shares
from non-residents.
12.2 Indemnification by Purchaser. Purchaser shall indemnify and hold Vendors
----------------------------
harmless from and against any Losses which may be made against Vendors or which
Vendors may suffer or incur as a result of, arising out of or relating to:
12.2.1 any violation, contravention or breach of any covenant, agreement or
obligation of Purchaser under or pursuant to this Agreement; or
12.2.2 any incorrectness in, or breach of, any representation or warranty made
by Purchaser under or pursuant to this Agreement, the Schedules or in
any certificate or other document delivered or given pursuant to this
Agreement, whether or not Vendors relied thereon or had knowledge
thereof.
12.3 Obligation to Reimburse. Subject to the provisions of Section 12.4,
-----------------------
the Party providing indemnification hereunder (the "Indemnifying Party") shall
reimburse to the Party being indemnified hereunder (the "Indemnified Party") the
amount of any Losses suffered or incurred by the Indemnified Party, upon the
date the Indemnifying Party acknowledges its obligation to reimburse the
Indemnified Party the amount of such Losses or, if disputed, upon the date of
any final judgment with respect thereto of a court or arbitral body of final
jurisdiction for which no further appeal is available. For greater certainty,
nothing in this
-51-
Section 12.3 shall be construed as creating a separate cause of action in
addition to those set forth in this Article XII.
12.4 Notification. Promptly upon obtaining knowledge thereof, the
------------
Indemnified Party shall notify the Indemnifying Party of any cause which the
Indemnified Party has determined has given or could give rise to indemnification
under this Article XII. The omission so to notify the Indemnifying Party shall
not relieve the Indemnifying Party from any duty to indemnify and hold harmless
which otherwise might exist with respect to such cause unless (and only to that
extent) the omission to notify materially prejudices the ability of the
Indemnifying Party to exercise its right to defend provided in this Article XII.
12.5 Defense of Third-Party Claim. If any legal proceeding shall be
----------------------------
instituted or any claim or demand shall be asserted by a third party against the
Indemnified Party including, if the Indemnified Party is Purchaser, any legal
proceeding, claim or demand against any of the Corporation, Roche or any
Subsidiary, with respect to a matter for which an Indemnified Party is seeking
indemnification hereunder (each a "Third-Party Claim"), then the Indemnifying
Party shall have the right, after receipt of the Indemnified Party's notice
under Section 12.4 and upon giving notice to the Indemnified Party within thirty
(30) calendar days of such receipt, to defend the Third-Party Claim at its own
cost and expense with counsel of its own selection, provided that:
12.5.1 the Indemnified Party shall at all times have the right to fully
participate in the defense at its own expense;
12.5.2 the Third-Party Claim seeks only monetary damages and does not seek any
injunctive or other relief against the Indemnified Party, the
Corporation, Roche or any Subsidiary;
12.5.3 the Indemnifying Party unconditionally acknowledges in writing its
obligation to indemnify and hold the Indemnified Party harmless with
respect to the Third-Party Claim; and
12.5.4 legal counsel chosen by the Indemnifying Party is satisfactory to the
Indemnified Party, acting reasonably.
Where the Indemnifying Party is Vendors, Purchaser shall cause the
Corporation, Roche and the Subsidiaries to make available to Vendors for their
inspection the Books and Records of the Corporation, Roche or any of the
Subsidiaries and to provide to Vendors such copies of documentation as may be
under the possession or control the Corporation, Roche and any of the
Subsidiaries which may reasonably be required by Vendors in order to contest the
Third Party Claim.
Amounts payable by the Indemnifying Party pursuant to a Third-Party
Claim shall be paid in accordance with the terms of the settlement or, the
judgment, as applicable, but in any event prior to the expiry of any delay for a
judgment to become executory.
Notwithstanding the foregoing, in the event of a Third-Party Claim by
any taxation authorities which challenges the Tax treatment of any aspect of the
Reorganization, Vendors shall have the obligation to defend such Third-Party
Claim. Purchaser may
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participate in the defense of such Third-Party Claim in collaboration with
Vendors and Vendors shall fully cooperate with Purchaser in respect of such
collaboration.
12.6 No Compromise. The Indemnifying Party shall not be permitted to
-------------
compromise and settle or to cause a compromise and settlement of any Third-Party
Claim, without the prior written consent of the Indemnified Party, unless:
12.6.1 the terms of the compromise and settlement require only the payment of
money and do not require the Indemnified Party, the Corporation, Roche
or any Subsidiary to admit any wrongdoing or take or refrain from taking
any action; and
12.6.2 the Indemnified Party receives, as part of the compromise and
settlement, a legally binding and enforceable unconditional satisfaction
or release, which is in form and substance satisfactory to the
Indemnified Party, acting reasonably, from any and all obligations or
liabilities it, the Corporation, Roche or any Subsidiary, as the case
may be, may have with respect to the Third-Party Claim.
12.7 Failure to Defend. If the Indemnifying Party fails:
-----------------
12.7.1 within thirty (30) calendar days from receipt of the notice of a Third-
Party Claim to give notice of its intention to defend the Third-Party
Claim in accordance with Section 12.5; or
12.7.2 to comply at any time with any of Sections 12.5.3 to 12.5.4,
then the Indemnifying Party shall be deemed to have waived its right to defend
the Third Party Claim and the Indemnified Party shall have the right (but not
the obligation) to undertake or, as the case may be, to cause the Corporation,
Roche or any Subsidiary, as the case may be, to undertake the defense of the
Third-Party Claim and compromise and settle the Third-Party Claim on behalf, for
the account and at the risk and expense of the Indemnifying Party.
12.8 Limitation on Indemnification. The obligations of indemnification set
-----------------------------
out in Sections 12.1 and 12.2 shall:
12.8.1 survive the Closing for the period prescribed by Law, except the
obligation of indemnification arising from any incorrectness in, or
breach of, any representation or warranty made by the Indemnifying Party
which shall be subject to the limitations regarding survival of
representations and warranties set forth in Section 10.1 or 10.2, as the
case may be;
12.8.2 survive the expiry of the periods for which indemnification is available
hereunder if the notification of a claim under Section 12.4 is given
prior to the expiry of the applicable period;
12.8.3 with respect to the obligation of indemnification in Sections 12.1.2 and
12.2.2, not be applicable for a single Loss unless such Loss exceeds
Five Thousand US dollars (US $5,000), except in cases of fraud or
willful misconduct, in which cases the Indemnifying Party shall be
responsible for the full amount of the Losses;
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12.8.4 with respect to the obligation of indemnification in Sections 12.1.2 and
12.2.2, not be applicable until the Losses in the aggregate, exceed Four
Hundred Thousand US dollars (US $400,000), except in cases of fraud or
willful misconduct, in which cases the Indemnifying Party shall be
responsible for the full amount of the Losses;
12.8.5 not apply to the extent that the Losses claimed have been reimbursed
through insurance to the Indemnified Party including, if the Indemnified
Party is Purchaser, to the Corporation, Roche or any Subsidiary;
12.8.6 with respect to each Vendor, not exceed the proportion of the aggregate
Purchase Price paid or credited plus the Capital Contributions which is
equal to the proportion set forth beside such Vendor's name in Exhibit
-------
"A" under "% of Indemnification Cap", except in cases of fraud or
---
willful misconduct, in which cases the Indemnifying Party shall be
responsible for the full amount of the Losses; and
12.8.7 not apply to the extent that the Indemnified Party has received an
adjustment of the Purchase Price in accordance with Article II as a
result of such Losses or a payment pursuant to Section 5.1.
12.9 Compensation. If either Party has made a demand upon the other pursuant
------------
to this Article XII or otherwise under this Agreement, the Party making the
demand shall be entitled to have such demand satisfied in whole or in part by
compensation (deduction and set off) against amounts otherwise payable by it to
the other Party pursuant to the transactions contemplated by this Agreement,
including, without limitation, against any Purchase Price Increase, Purchase
Price Reduction, First EBIT Payment or Second EBIT Payment; provided, however,
that any Purchase Price Reduction or payment by Vendors of Net Uncollected
Receivables under Section 2.8 may only be set off against any First EBIT Payment
or Second EBIT Payment, and provided further that no compensation may be made
against any amounts payable pursuant to Articles VI or VII. The Party against
whom such compensation has operated shall be entitled to continue to contest the
validity of such demand. The Party claiming to apply such compensation shall be
entitled to withhold payment otherwise required by it hereunder until the Losses
associated with such claim have been finally resolved by agreement among the
Parties or by a court or arbiter of final jurisdiction, for which no further
appeal is available.
12.10 No Indemnification if Adjustments. For greater certainty, Purchaser
---------------------------------
shall not be entitled to seek indemnification from Vendors under this Article
XII to the extent it has actually received payment or effected compensation
under the provisions of this Agreement for the full amount of the Losses with
respect to matters which are the subject of such indemnification, except that
any Purchase Price Reduction or payments of Net Uncollected Receivables pursuant
to Section 2.8 shall be effected exclusively by compensation against any First
EBIT Payment and Second EBIT Payment.
12.11 Purchase Price Adjustment. Any indemnification actually made by a
-------------------------
Party to the other under this Article XII or under the assignment and assumption
agreement referred to in Section 4.4.14 shall be considered a reduction or an
increase to the Purchase Price, as the case may be.
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12.12 Sole Remedies. The provisions of this Article XII and any other
-------------
recourses specifically referred to in this Agreement shall be the sole remedies
of the Parties with respect to the matters herein, subject, however, to the
right of any Party to seek specific performance or any other extraordinary
remedy in a court of competent jurisdiction for breaches which give rise to such
extraordinary remedies.
12.13 Absence of Bad Faith. The Indemnified Party shall not act in bad faith
--------------------
with respect to any Losses it is claiming against the Indemnifying Party such
that the amount of the Losses is greater than it would have been absent such bad
faith.
ARTICLE XIII
CLOSING
------------
13.1 Date, Time and Place of Closing. The Closing shall take place at the
-------------------------------
offices of Roche, three (3) business days after funding of ITX's proposed
bridge loan but in any event no later than March 31, 1999 (the "Closing Date"),
at 10:00 a.m., or at such place, on such other date and/or at such other time as
may be agreed between the Parties. Funding of such bridge financing is not a
condition to Closing.
ARTICLE XIV
MISCELLANEOUS
-------------
14.1 Purchaser Free to Organize Affairs. Subject to the other provisions of
----------------------------------
this Agreement (including restrictions on ITX charges during the earn-out
periods), Purchaser shall be permitted to organize the affairs of Roche and the
Subsidiaries as it deems best, including by changing the Tax year end thereof to
match the Tax year end of ITX. Purchaser shall act at all times until the expiry
of the period covered by the Second EBIT Payment in good faith in order to avoid
any adverse effects on EBIT levels until the expiry of such period which would
not have occurred except for the Purchaser's ownership of and direction over
Roche. Vendors shall have a period of twenty (20) calendar days from the date of
their knowledge of any action of Purchaser or ITX with respect to Roche or any
Subsidiary to object to the same on the basis that such actions will adversely
affect the EBIT levels, failing which they shall be deemed to have consented to
such actions. Subject to the foregoing, any Party may, at any time, refer any
approvals which could so effect EBIT to Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇,
or their respective successors, for their prior approval.
If such individuals are unable to agree on such matters within twenty
(20) calendar days after it has been referred to them, the matter shall be
referred to an independent business valuator (who is neither an accountant nor
an attorney by principal profession) agreed to by the Parties (or, if the
Parties are unable to agree on such Person within ten (10) days of the end of
such (20) twenty-day period, a business valuator in the Montreal office of
PricewaterhouseCoopers) who shall finally determine whether and how such matter
should be acted upon, balancing the interests of both Parties to maximize EBIT
and the maximization of long-term profitability of Roche and the Subsidiaries.
The fees and expenses of any such business valuator shall be shared equally by
the Parties.
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14.2 Announcements. Any press release, public announcement or publicity with
-------------
respect to the transactions contemplated in this Agreement shall be made only
with the prior written consent of Purchaser and Vendors. The Parties shall keep
the terms of this Agreement strictly confidential and make no disclosure thereof
to any Person except (a) the Parties' counsel and advisors, (b) as required in
connection with the consummation of the transactions contemplated hereby, (c) as
determined by a court of competent jurisdiction, (d) as required to prosecute or
defend an action, (e) as required by Law including by applicable securities
authorities such as the Securities and Exchange Commission or self regulatory
organization such as a stock exchange, or (f) with the prior agreement of all
Parties.
14.3 Further Assurances. Each Party upon the request of the other,
------------------
whether at or after the Closing, shall do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged or delivered all such further acts,
deeds, documents, assignments, transfers, conveyances, powers of attorney and
assurances as may be reasonably necessary or desirable to effect complete
consummation of the transactions contemplated by this Agreement.
14.4 Successors in Interest. This Agreement and the provisions hereof
----------------------
shall enure to the benefit of and be binding upon the Parties and their
respective successors and assigns. Vendors may not assign this Agreement or any
of their rights and obligations hereunder without the prior written consent of
Purchaser. Purchaser may assign this Agreement and all of Purchaser's rights and
obligations hereunder to an Affiliate of Purchaser, provided however, that such
assignment shall not relieve Purchaser of its obligations hereunder.
14.5 Notices. Any notice, consent, authorization, direction or other
-------
communication required or permitted to be given hereunder shall be in writing
and shall be delivered either by personal delivery or by telecopier and
addressed as follows:
14.5.1 in the case of any of Vendors, to it, him or her at:
Roche Ltee, Groupe Conseil
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ Blaikie ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ East
Bureau 600
▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇ ▇▇▇▇▇▇
-------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
14.5.2 in the case of Purchaser or ITX, to it at:
The IT Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
---------------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ / (▇▇▇) ▇▇▇-▇▇▇▇
and to:
The IT Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
--------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Stikeman, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice, consent, authorization, direction or other communication
delivered as aforesaid shall be deemed to have been effectively delivered and
received, if sent by
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telecopier, on the calendar day next following receipt of such transmission or,
if delivered, to have been delivered and received on the date of such delivery,
provided, however, that if such date is not a business day in the jurisdiction
of receipt then it shall be deemed to have been delivered and received on the
business day next following such delivery. Any Party may change its address for
service by notice delivered as aforesaid.
14.6 Representative of Vendors. Without limitation to Section 14.5, Purchaser
-------------------------
and ITX shall be entitled to deal and communicate with ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ or his
replacement as the representative of all Vendors. Consents, directions to,
notices to or claims made by Purchaser or ITX to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ or his
replacement on behalf of Vendors, unless expressly indicated otherwise, shall
constitute consents, directions to, notices to or claims made against all or any
of Vendors and vice versa.
Each of the Vendors hereby grants ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, or his successor
appointed by Vendors who are holders of a majority of the Purchased Shares, his
or her respective, irrevocable power of attorney (coupled with an interest, but
limited in duration and scope as noted in this sentence) to act as each such
Vendor's attorney in fact (with full power of substitution) solely with respect
to all matters under this Agreement.
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ shall act as agent for service with respect to legal
processes served on any or all of the Vendors pursuant to this Agreement and the
transactions contemplated hereby, without prejudice, however, to the right of
Purchaser to serve a Vendor directly. Vendors may collectively notify Purchaser
from time to time as to the replacement of ▇▇▇▇▇▇ ▇▇▇▇▇ as agent for service
with another Person.
14.7 Expenses. Subject to Section 2.7, all costs, expenses and fees
--------
(including without limitation, legal counsel and accounting fees and
disbursements) in connection with the preparation, execution and consummation of
this Agreement and the transactions contemplated hereunder:
14.7.1 incurred by Vendors, the Corporation, Roche or the Subsidiaries, shall
be borne and paid by Vendors, and
14.7.2 incurred by Purchaser or ITX shall be borne and paid by Purchaser or
ITX.
14.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed an original, and
such counterparts together shall constitute one and the same instrument.
14.9 Severability. Any Article, Section or other subdivision of this
------------
Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed herefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof, which provisions
shall (a) be severed from any illegal, invalid or unenforceable Article, Section
or other subdivision of this Agreement or any other provision of this Agreement,
and (b) otherwise remain in full force and effect.
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14.10 Governing Law. This Agreement shall be governed by and interpreted and
-------------
construed in accordance with the internal Laws presently in force in the
Province of Quebec.
14.11 Arbitration. All disputes or differences arising out of or related
-----------
in any way to this Agreement except for those for which other dispute resolution
mechanisms have been specifically provided for shall be submitted to the
decision of three (3) arbitrators, one (1) each to be chosen by each Party (the
Purchaser and ITX being considered as one (1) Party for the purposes hereof),
and the third to be chosen by the two (2) previously selected arbitrators. The
arbitration proceedings shall commence by the issuance by a Party to the other
Party of a demand to arbitrate which shall include the nomination by the Party
issuing the demand of an arbitrator. The other Party shall have ten (10) days
from receipt of the demand to appoint an arbitrator, failing which such
arbitrator shall, at the request of Party issuing the demand, be appointed by
application to the courts of the Province of Ontario having competent
jurisdiction therefor.
The arbitration proceedings shall take place in Toronto, Ontario in
English. Other than as specified herein, the rules of the Arbitrations Act, 1991
of Ontario shall apply.
The applicant shall submit its case in writing within thirty (30) days
after the appointment of the arbitration panel, and the respondent shall submit
his reply in writing within thirty (30) days after receipt of such case. The
arbitrators shall apply the rules of evidence and Law applicable in courts
sitting in the Province of Ontario. The arbitration panel shall be empowered to
award provisional (including injunctive) relief upon proper application, but a
Party shall be entitled, pending the appointment of all such arbitrators and the
convening of such arbitration, to seek such relief from any court otherwise
having competent jurisdiction over such matter.
The arbitration panel shall have the discretion to order a pre-hearing
exchange of information by the Parties, including, without limitation,
production of requested documents, exchanging of summaries of testimony of
proposed witnesses and examination by deposition of Parties.
The arbitration panel shall render a written, reasoned decision on each
issue before it, in which decision it shall also state how each arbitrator
voted. Any decision by the arbitration panel shall be binding upon the Parties
and may be entered as a final judgment in any court having jurisdiction.
The cost of any arbitration proceeding shall be borne by the Parties as
the arbitration panel shall determine if the Parties have not otherwise agreed.
14.12 Entire Agreement. This Agreement, including the Schedules, constitutes
----------------
the entire Agreement between the Parties pertaining to the subject matter
hereof, and supersedes all prior agreements, understandings, negotiations and
discussions of the Parties pertaining to the subject matter hereof including,
without limitation, the Term Sheet executed by ITX and the Corporation on
September 2, 1998.
14.13 Inconsistency. This Agreement shall override the Schedules to the extent
-------------
of any inconsistency.
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14.14 Gender. Any reference in this Agreement to any gender shall include
------
both genders and the neutral, and words herein importing the singular number
only shall include the plural and vice versa.
14.15 Currency. All dollar amounts mentioned in this Agreement or in the
--------
Schedules shall be in Canadian funds except as otherwise expressly indicated.
14.16 Headings; Preamble. The headings in this Agreement and the preamble
------------------
to this Agreement are inserted for convenience of reference only and shall not
affect the interpretation hereof.
14.17 Amendment. No amendment shall be binding unless expressly provided
---------
in an instrument duly executed by the Parties.
14.18 Waiver. No waiver, whether by conduct or otherwise, of any of the
------
provisions of this Agreement shall be deemed to constitute a waiver of any other
provisions (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided in an instrument duly
executed by the Parties.
14.19 Language of Agreement. The parties acknowledge that it is their express
---------------------
wish that this Agreement and all related documents be prepared in English. Les
parties ont demande que cette convention et tous documents y afferents soient
rediges en langue anglaise.
14.20 No Third-Party Beneficiaries. This Agreement and any agreement entered
----------------------------
into pursuant to this Agreement shall not benefit or create any right or cause
of action in or on behalf of any Person (including, without limitation, any of
the Employees) other than the Parties or the parties to such other agreements,
and no Person (including, without limitation, any of the Employees), other than
the Parties or the parties to such other agreements, shall be entitled to rely
on the provisions hereof or any agreement entered into pursuant hereto in any
action, proceeding, hearing or other forum.
14.21 Waiver of Take-Over Bid Provisions. Each Party waives, and will not
----------------------------------
raise in any claim against any other Party, the application of Part XVII of the
Canada Business Corporations Act to the transactions contemplated herein.
Vendors will indemnify and hold Purchaser harmless against any claim by a third
Person based on the non-compliance by Purchaser of Part XVII of such act.
14.22 Additional Insurance. Each Party shall assume one half (1/2) of the
--------------------
premium payable for any additional E&O insurance coverage in excess of Ten
Million dollars (Cdn $10,000,000) up to Five Million dollars (Cdn $5,000,000)
additional coverage for up to three (3) years beginning with the commencement of
Roche's next policy year. Purchaser shall ensure that New Roche subsribes for
all such coverage. Such assumption of the premium by Vendors shall be made by
compensation against any First EBIT Payment or, if insufficient, against any
Second EBIT Payment. ITX shall include New Roche's directors and ofifcers in
ITX's standard D&O policies to the same extent as ITX's directors and officers
are covered thereby and ITX shall cause to be procured and paid for at its
expense a seven (7) year extended reporting period on Roche's pre-existing D&O
policies.
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14.23 Non-Ratification. Purchaser and, through its intervention, ITX
----------------
acknowledge that Roche, prior to the Closing Date was not generally subject to
various United States Laws, including the Foreign Corrupt Practices Act, the
Cuban Liberty and Democratic Solidarity Act and other anti-boycott and export
control Laws. Neither ITX nor Roche will take any action in furtherance of any
conduct undertaken by Roche prior to the Closing Date that would place either
Party in potential violation of such Laws. ITX does not, by this Agreement nor
by any future actions, intend to approve of any actions taken by Roche prior to
the acquisition that would constitute ratification of conduct potentially
violative of such Laws.
14.24 Releases. Vendors hereby fully and finally release Roche, Corporoche and
--------
NewCo 1 from any and all adjustments to the purchase prices payable pursuant to
the promissory notes related to the repurchase of shares of such companies
pursuant to the Reorganization (other than any downward adjustments related to
the purchase prices for shares based on the Pembroke Tax refund for the 1995 Tax
year pursuant to Section 6.1). Purchaser shall be released and discharged by
Vendors from and with respect to any further duty with respect to the sums
referenced in the Convention de partage upon payment of such sums to ▇▇▇▇▇▇
▇▇▇▇▇.
14.25 Inter-Company Agreements. ITX and New Roche shall promptly after the
------------------------
date hereof enter into an inter-company agreement on terms satisfactory to
the Parties governing certain aspects of the relationship between the companies.
New Roche and Roche Internationale shall enter into an inter-company agreement
promptly after Closing coverning the terms on which CIDA and related work will
be conducted by Roche International for the full economic benefit of New Roche.
14.26 Convention de partage. Vendors shall not amend Article 3 of the
---------------------
Convention de partage among them of even date without the prior written consent
of ITX. Vendors shall not amend the proportions allocated to them for receipt of
the Purchase Price as set forth in the Convention de partage without first
having notified ITX.
14.27 Interest. The payments in Sections 2.2 and 2.3 shall be made with all
--------
accrued interest at the rate referred to in the promissory notes referenced in
Section 11.2.4.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date
first above mentioned.
IT Holdings Canada, Inc.
Per: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------ -------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Assistant-Secretary
/s/ ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇
-------------------------------------
▇▇▇▇-▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇-▇▇▇▇▇▇ Fau
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▇▇▇▇-▇▇▇▇▇▇ Fau
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇-▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇-▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-62-
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ France ▇▇▇▇▇▇▇
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France ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ Denis St-▇▇▇
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Denis St-▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
-63-
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇
Gestion Pilac inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Duly authorized representative
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title: President
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-64-
Intervention of
The IT Group, Inc.
------------------
For valuable consideration, the receipt and adequacy of which is hereby
acknowledged, The IT Group, Inc. hereby unconditionally and irrevocably
guarantees to and in favour of Vendors (i) the truth of the representations and
warranties of Purchaser contained in this Agreement, in any Schedule or in any
certificate or other document delivered or given pursuant to this Agreement, and
(ii) the timely performance and fulfillment by Purchaser of its obligations and
covenants under this Agreement. The IT Group, Inc. hereby acknowledges and
agrees that there is solidarity between the undersigned and Purchaser in respect
of this guarantee. The IT Group, Inc. hereby waives any benefit of division and
discussion.
The IT Group, Inc. acknowledges that Vendors are relying on this guarantee
in connection with the sale of the Purchased Shares under the Agreement and that
Vendors would not have entered into the Agreement without such guarantee.
DATED this 5th day of February, 1999.
The IT Group, Inc.
Per: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Corporate Counsel and
Assistant Secretary