Exhibit 2.1
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
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SUPPORT AGREEMENT
STRICTLY CONFIDENTIAL
November 6, ▇▇▇▇
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
Dear Sirs:
RE: OFFER FOR COMMON SHARES OF CLARINGTON CORPORATION (THE "CORPORATION")
Industrial Alliance Insurance and Financial Services Inc., directly or
through a wholly-owned subsidiary (collectively, the "Offeror"), hereby agrees
to make an offer (the "Offer") on the terms and conditions set out in this
letter agreement (the "Agreement") for all of the common shares ("Common
Shares") of the Corporation. This Agreement sets out the terms and conditions of
the agreement by the Corporation, among other things, to (i) recommend that the
holders of the Common Shares, other than the Offeror, accept the Offer and (ii)
refrain from soliciting expressions of interest in, or assisting or encouraging
competing offers for, the Common Shares, together with the representations and
warranties to the Offeror from the Corporation and other obligations and
commitments of the Corporation in connection with the Offer.
The Corporation acknowledges that the Offeror has entered into a number of
lock-up agreements (substantially in the form attached hereto as Schedule A,
collectively the "Lock-Up Agreements") with a number of shareholders
(collectively the "Selling Shareholders") of the Corporation holding
beneficially, in the aggregate, not less than 25% of the Common Shares of the
Corporation on a fully diluted basis.
Subject as follows, the Offer is for cash consideration of $14.25 per
Common Share. The price is based on 14,798,240 fully diluted Common Shares
outstanding,
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assuming the exercise of all outstanding stock options. The price per Common
Share will be adjusted accordingly (i.e., a reduction in the value per Common
Share) if the number of outstanding fully diluted Common Shares is greater than
this amount at the time of closing, without the Offeror's prior written
approval. At the election of each shareholder of the Corporation, an equivalent
value in common shares of Industrial Alliance Insurance and Financial Services
Inc. may be elected instead of cash. The exact share exchange ratio will be
based upon the volume weighted average closing price of the common shares of
Industrial Alliance Insurance and Financial Services Inc. over the five business
days ending one business day before the expiry of the Offer. The cash option is
not subject to limitation or pro-ration. However, the non-cash share option is
subject to pro-ration based upon a maximum of 25% of the aggregate value of the
Common Shares purchased being available in the form of common shares of
Industrial Alliance Insurance and Financial Services Inc.
ARTICLE 1
THE OFFER
1.1 THE OFFER. The Offeror agrees to make the Offer in accordance with the
terms and subject to the conditions of this Agreement.
1.2 TIMING. The Offer shall be made as soon as reasonably practicable and in
any event on or before November 21, 2005.
1.3 CONDITIONS PRECEDENT. Notwithstanding any other term of this Agreement,
the Offeror shall not be required to make the Offer if:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred subsequent to the date hereof
and prior to the making of the Offer, in the business, assets,
capitalization or financial condition of the Corporation or any of its
Subsidiaries that is undisclosed on the date hereof and that, in the
sole judgment of the Offeror, was, is or may constitute a Material
Adverse Change to the Corporation and its Subsidiaries considered as a
whole, or the Offeror shall have become aware of any fact that, in the
sole judgment of the Offeror, had, has or may have a Material Adverse
Effect with respect to the Corporation and its Subsidiaries considered
as a whole;
(b) on or after the date hereof, any action, suit or proceeding shall be
taken before or by any court or tribunal or any law shall be proposed
or enacted which, in the sole judgment of the Offeror in any such
case, would constitute a significant change in circumstances such as
to make it inadvisable for the Offeror to proceed with the Offer;
(c) there exists any prohibition at law against the Offeror making the
Offer or taking up and paying for the Common Shares under the Offer;
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(d) the Offeror has not received the Lock-Up Agreements in form and
substance satisfactory to the Offeror in its sole discretion as
contemplated by section 8.9 hereof;
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have not given retention, non-solicitation and non-competition
covenants to the Offeror in form and substance satisfactory to the
Offeror, in its sole discretion.
The foregoing conditions are for the sole benefit of the Offeror and may be
waived by the Offeror and shall be deemed to have been waived by it by the
making of the Offer.
1.4 OFFER PRICE. The Offer shall be made for cash consideration of not less
than Cdn $14.25 per Common Share or, at the election of each holder of Common
Shares, an equivalent value in common shares of Industrial Alliance Insurance
and Financial Services Inc., as determined by and subject to pro-rating, as set
forth above and in the circular in respect of the Offer (collectively, the
"Offer Price").
1.5 GENERAL TERMS. The Offer shall be made by circular bid in Canada in
accordance with the securities, corporate and other laws applicable therein and
shall be on the terms and conditions provided for in this Agreement and on such
additional terms and conditions, not inconsistent with this Agreement, as the
Offeror may, in its sole discretion acting reasonably, determine.
1.6 MAXIMUM OFFER PERIOD. The Offer shall provide that not later than the
expiration of 36 days from the date of the Offer, the Offeror shall either (a)
abandon the Offer and return all Common Shares deposited thereunder, or (b)
waive any conditions that have not been satisfied and take up and pay for all
Common Shares deposited thereunder (other than the condition contained in
section 1.7(a) which the Offeror has agreed not to waive or amend to a
percentage number less than 50.1% of the then outstanding Common Shares);
provided, however, that notwithstanding (a) and (b) above, the Offer may be
extended from time to time, if the conditions of the Offer referred to in
section 1.7 herein have not been satisfied or waived, or if required by
applicable law to permit the Offeror to increase the Offer Price, at its sole
option, to meet or exceed that of a Competing Transaction (as defined in section
5.1 hereof) made before the expiry of the Offer.
1.7 CONDITIONS OF THE OFFER. The obligations of the Offeror to take up and pay
for Common Shares deposited under the Offer shall be subject only to the
satisfaction at the expiry of the Offer of each of the following conditions
only:
(a) sufficient Common Shares shall have been and shall remain validly
deposited under the Offer such that, upon take up of and payment for
such Common Shares, the Offeror will own, directly or indirectly, no
less than 66-2/3% of the then outstanding Common Shares;
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(b) (i) no act, action, suit or proceeding shall have been threatened or
taken before or by any domestic or foreign court or tribunal or
governmental agency or other regulatory authority or administrative
agency or commission or by any elected or appointed public official or
Person (as defined below) in Canada, the United States or elsewhere,
whether or not having the force of law, and (ii) no law, regulation or
policy shall have been proposed, enacted, promulgated or applied, in
either case:
(A) to cease trade, enjoin, prohibit or impose material limitations,
damages or conditions on the purchase by or the sale to the
Offeror of the Common Shares or the right of the Offeror to own
or exercise full rights of ownership of the Common Shares; or
(B) which, if the Offer were consummated, would constitute a
Materially Adversely Effect with respect to the Corporation and
its Subsidiaries considered as a whole;
(c) there shall not have occurred any change (or any condition, event or
development involving a prospective change) in the business,
operations, assets, capitalization, financial condition, licences,
permits, rights, privileges or liabilities, whether contractual or
otherwise, of the Corporation which, in the sole judgment of Offeror,
constitutes a Materially Adverse Change or may be considered to have a
Material Adverse Effect with respect to the Corporation and its
Subsidiaries considered as a whole;
(d) there exists no prohibition at law against the Offeror making the
Offer or taking up and paying for the Common Shares under the Offer;
(e) all approvals, permits, licences or similar authorizations from any
Person (as defined below) shall have been obtained on terms
satisfactory to the Offeror, in its sole discretion;
(f) without limiting the scope of the condition in paragraph (e), any
applicable statutory waiting periods under the COMPETITION ACT
(Canada) shall have expired or otherwise been terminated or satisfied
and the Commissioner of Competition shall not have communicated to the
Offeror an intention to apply to the Competition Tribunal under the
COMPETITION ACT (Canada) to prohibit the Offer from proceeding or to
require the Offeror to dispose of any Common Shares or assets acquired
pursuant to the Offer;
(g) since October 28, 2005, the Corporation and its affiliates and
associates shall not have taken any action, or disclosed any
previously undisclosed action taken by them, relating to (i) any
issuance of securities or options to purchase securities (other than
Common Shares issued on the exercise of
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previously outstanding stock options), (ii) any payments of dividends
or other distributions to the holders of Common Shares, (iii) any
agreement or understanding involving the sale, disposition of or other
dealing with the businesses or assets of the Corporation or its
Subsidiaries, or any part thereof or interest therein or relating to
the Corporation's right to manage, operate or control the conduct of
its business or any part thereof, (iv) any material change in its
capitalization (including, but not limited to, any material increase
in the amount or maturity of its consolidated borrowings) or any
conversion of short term borrowings to long term borrowings; (v) any
material capital expenditures, except in the ordinary course of its
business; (vi) any release or relinquishment not in the ordinary
course of business of any material contractual rights; or (vii)
agreeing or committing to the guarantee of payment of any material
indebtedness other than in the ordinary course of business and
consistent with past practice;
(h) there shall not exist or have occurred (or, if there does exist or
shall have previously occurred, there shall not have been disclosed,
generally or to the Offeror) any change (or any condition, event or
development involving a prospective change) in the business,
operations, assets, capitalization, financial condition, licences,
permits, rights, privileges or liabilities, whether contractual or
otherwise, of the Corporation or any of its Subsidiaries, which is or
may be considered to have a Material Adverse Effect with respect to
the Corporation and its Subsidiaries, taken as a whole;
(i) none of the following shall exist or shall have occurred (which has
not been cured or waived), or shall be threatened:
(i) any material right, franchise or licence of the Corporation or of
any of its Subsidiaries has been impaired or otherwise
constitutes a Material Adverse Effect with respect to the
Corporation and its Subsidiaries, taken as a whole; or
(ii) any covenant, term or condition in any of the instruments or
agreements to which any of the Corporation or its Subsidiaries is
a party or to which they or any of their assets are subject that
is or may constitute a Material Adverse Effect with respect to
the Corporation and its Subsidiaries, taken as a whole
(including, but not limited to, any default that might ensue as a
result of the Offeror taking up and paying for Common Shares
deposited under the Offer);
(j) there shall have not occurred, developed or come into effect or
existence any event, action, state, condition or major financial
occurrence of national or international consequence or any law,
regulation, action, inquiry or other occurrence of any nature
whatsoever which materially adversely
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affects or involves, or may materially adversely affect or involve,
the financial markets in Canada;
(k) the Offeror shall not have become aware of any untrue statement of a
material fact, or an omission to state a material fact that is
required to be stated or that is necessary to make a statement not
misleading in the light of the circumstances in which it was made and
at the date it was made (after giving effect to all subsequent filings
in relation to all matters covered in earlier filings) in any document
filed by or on behalf of any one or more of the Corporation, the
Mutual Funds, the Closed-End Funds and the Limited Partnerships (as
the foregoing terms are defined in Schedule B) with the Ontario
Securities Commission or any other regulatory authority in Canada or
elsewhere, including without limitation, any annual report, financial
statements, material change report, press release or management proxy
circular or in any document so filed or released by the Corporation to
the public; and
(l) there shall not have occurred any breach of any of the terms of this
Agreement or the material terms of the Lock-Up Agreements or any
termination of such agreements pursuant to its terms and the
representations and warranties in such agreements shall be true and
correct in all material respects.
Where referred to in the foregoing conditions, the term "Person" shall be
broadly interpreted and includes an individual, body corporate, partnership,
joint venture, trust, association, unincorporated organization, the Crown, any
governmental agency or any other entity recognized by law.
The foregoing conditions are for the exclusive benefit of the Offeror and
may be asserted by the Offeror regardless of the circumstances (including any
action or inaction by the Offeror) or may be waived by the Offeror in its sole
discretion, in whole or in part, at any time and from time to time without
prejudice to any other rights of the Offeror.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation (on its
own behalf and, as applicable, on behalf of its Subsidiaries) represents and
warrants to the Offeror, and acknowledges and agrees that the Offeror is relying
on such representations and warranties in entering into this Agreement, that:
(a) all of the additional representations and warranties set forth in
Schedule B to this Agreement are true and accurate;
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(b) the board of directors of the Corporation (the "Corporation's Board")
has determined that it would be advisable and in the best interests of
the Corporation for the Corporation's Board to recommend to the
holders of the Common Shares, other than the Offeror, in writing and
otherwise, the acceptance of the Offer and for the Corporation to
co-operate with the Offeror and take all reasonable actions to support
the Offer and to enter into this Agreement;
(c) the Corporation's Board will recommend that the holders of Common
Shares, other than the Offeror, accept the Offer; and
(d) the members of the Corporation's Board have advised the Corporation
that they intend to deposit to the Offer any Common Shares held by
them and, accordingly, will so represent in the directors' circular of
the Corporation relating to the Offer.
2.2 REPRESENTATIONS AND WARRANTIES OF THE OFFEROR. The Offeror represents and
warrants to the Corporation that:
(a) the Offeror is or will be at the date of the Offer, a corporation duly
incorporated and validly existing under the laws of its jurisdiction
of incorporation;
(b) the Offeror has all necessary power, authority, capacity and right to
enter into this Agreement and to complete the transactions
contemplated hereby;
(c) for the purposes of Securities Legislation, the Offeror has made
adequate arrangements to ensure that the required funds are available
to effect payment for all Common Shares that the Offeror has offered
to acquire pursuant to the Offer;
(d) upon the due execution and delivery of this Agreement by the
Corporation, this Agreement shall be a valid and binding agreement
enforceable by the Corporation against the Offeror in accordance with
its terms subject, however, to limitations with respect to enforcement
imposed by law in connection with bankruptcy or similar proceedings,
the equitable power of the court to stay proceedings before them and
the execution of judgements and to the extent that equitable remedies
such as specific performance and injunction are in the discretion of
the court from which they are sought;
(e) the execution and delivery of this Agreement and the completion of the
transactions contemplated herein upon and subject to the terms and
conditions hereof and the fulfilment of and compliance with the terms
and provisions hereof do not and will not: (i) violate any provision
of law or administrative regulation or any judicial or administrative
order, award, judgement or decree applicable to the Offeror or any of
its subsidiaries; (ii)
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conflict with any of the terms, conditions or provisions of the
articles or by-laws of the Offeror or any of its subsidiaries; or
(iii) conflict with, result in a breach of, constitute a default
under, or accelerate or permit the acceleration of the performance
required by, any agreement, commitment or instrument to which the
Offeror or any of its subsidiaries is a party or by which it is bound
or to which its property is subject, or result in the cancellation,
suspension or material alteration in the terms of any licence, permit
or authority held by the Offeror or any of its subsidiaries, or result
in the creation of any Encumbrance upon any of the assets of the
Offeror or any of its subsidiaries or give to others any material
interest or rights, including rights of purchase, termination,
cancellation or acceleration, under any such agreement or instrument;
(f) other than in connection with Securities Legislation, no
authorization, consent or approval of, or filing with any public body,
court or authority is necessary on the part of the Offeror for the
consummation of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals and filings as to
which the failure to obtain or make would not, individually or in the
aggregate, prevent consummation of the transactions contemplated by
this Agreement; and
(g) as at the date hereof, the Offeror is the beneficial owner of 500,000
Common Shares.
ARTICLE 3
COVENANTS OF THE CORPORATION
3.1 GENERAL. The Corporation hereby covenants that from the date hereof until
the earlier of (the "Effective Date") (i) the Offeror having taken up and paid
for Common Shares deposited under the Offer or abandoned the Offer; or (ii) this
Agreement having been terminated pursuant to Article 7 hereof, the Corporation
will:
(a) not, nor shall it permit any of its Subsidiaries, nor shall it
authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the
Corporation or any of its Subsidiaries to, directly or indirectly,
take any action of any kind which may reduce the likelihood of success
of or delay the completion of the Offer, including but not limited to
any action to continue, solicit, initiate, assist or encourage
enquiries, submissions, proposals or offers from any other person,
entity or group relating to, and, except for discussions with a party
who has made a Competing Transaction that the Offeror has elected not
to match pursuant to section 5.2(b) and allowing such party, once it
has entered into a confidentiality agreement which includes a
standstill provision that restricts such party from announcing an
intention to acquire, or acquiring, other than under the Competing
Transaction, any securities or assets of the Corporation for a period
of not less than two (2) years
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from the date of such confidentiality agreement and provided further
that the Corporation sends a copy of any such confidentiality
agreement to the Offeror promptly upon its execution and that the
Offeror is immediately provided with a list of, or in the case of
information not previously made available to the Offeror, copies of,
any information provided to such party, to do confirmatory due
diligence in the Corporation's data room for a period of two (2) days,
will not participate in any discussions or negotiations regarding or
furnish to any other person, entity or group any information with
respect to, or otherwise co operate in any way with or assist or
participate in, or facilitate or encourage any effort or attempt with
respect to:
(i) the direct or indirect acquisition or disposition of all or any
Common Shares or any other securities of the Corporation or its
Subsidiaries (except from or to the Corporation or one of its
Subsidiaries or in the ordinary course of business); or
(ii) any amalgamation, merger, sale (other than a sale in the ordinary
course of business consistent with past practice) of any part of
the Corporation's or any of its Subsidiaries' assets, take over
bid, plan of arrangement, reorganization, substantial issuer bid,
substantial dividend or distribution out of the ordinary course
of business, recapitalization, liquidation or winding up of,
reverse take-over or other business combination or similar
transaction involving the Corporation or substantially all of its
assets (except from or to the Corporation or one of its
Subsidiaries or in the ordinary course of business) (the events
in subparagraphs (i) and (ii) being a "Proposed Transaction");
(b) except as otherwise provided in section 5.1, through the
Corporation's Board, recommend that its shareholders, other than the
Offeror, tender Common Shares to the Offer and contemporaneously with,
or as promptly as practicable following mailing of the Offeror's
circular in respect of the Offer by the Offeror, the Corporation's
Board shall issue and file a directors' circular, including such
recommendation, in all jurisdictions where the issuing and filing of
a directors' circular is required in accordance with applicable law
which, if practicable, will be mailed to shareholders of the Offeror
in a joint mailing with the Offeror's circular;
(c) notify the Offeror forthwith upon becoming aware of any notice of
conversion being given in respect of the issue of any Common Shares
(including shares of any of its Subsidiaries) or exercise of any stock
options, and inform the Offeror of all information (including the
identity of the giver thereof) known to it regarding such notice of
conversion;
(d) not, directly or indirectly, bid for or purchase Common Shares or
other securities issued by the Corporation or any right to purchase
any such
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security or attempt to induce any person to purchase any such security
or right, other than pursuant to the Offer;
(e) use commercially reasonable efforts to assist the Offeror to complete
successfully the transactions contemplated by this Agreement,
including co-operating with the Offeror in making all requisite
regulatory filings, and giving evidence in relation thereto, and in
mailing or otherwise making the Offer to holders of the Common Shares;
and
(f) provide lists of shareholders of all classes and series of securities
of the Corporation prepared by the Corporation or the transfer agent
of the Corporation and a list of holders of stock options and any
other rights, warrants or convertible securities currently outstanding
(with full particulars as to the purchase, exercise or conversion
price, vesting and expiry date) as well as a security position listing
from each depositary and deliver those lists to the Offeror as
expeditiously as possible following execution of this Agreement and
agrees to forward same to the Offeror immediately as soon as it
receives such lists and upon request from the Offeror obtain as
expeditiously as possible thereafter supplemental lists setting out
any changes thereto and deliver such lists to the Offeror immediately
following receipt thereof, all such deliveries to be both in printed
form and if available in computer readable format.
3.2 ONGOING ACCESS TO INFORMATION. The Corporation shall give the Offeror and
its authorized agents reasonable ongoing access during regular business hours
during the term of this Agreement, upon reasonable prior notice to the
Corporation, to all of the Corporation's and its Subsidiaries' personnel,
assets, properties, books, records, agreements and commitments, on terms
mutually agreed by the Offeror and the Corporation and shall reasonably
co-operate with the Offeror and any such authorized persons in their review and
furnish such persons with all material information with respect to the
Corporation and its Subsidiaries and their ongoing operations and activities as
the Offeror or any person authorized by them may reasonably request, provided
that the Offeror shall designate an individual or individuals to co-ordinate
such access and further provided that the Offeror shall not unreasonably disrupt
the normal business operation of the Corporation or its Subsidiaries.
3.3 OPERATION OF BUSINESS. During the period commencing on the date hereof and
continuing until the Effective Date the Corporation agrees (except as otherwise
expressly contemplated or permitted by this Agreement, or to the extent that the
Offeror shall otherwise consent in writing) that it shall:
(a) not, and shall cause each of its Subsidiaries not to, take any action
(directly or indirectly) with respect to any of the following, except
to the extent necessary to give effect to obligations under this
Agreement or except as otherwise permitted under this Agreement:
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(i) any take over bid, merger, amalgamation, plan of arrangement,
reorganization, joint venture, strategic alliance or other
business combination or similar transaction involving the
Corporation or substantially all of its assets;
(ii) any acquisition or disposition of a material amount of assets or
securities;
(iii) any material change in its capitalization (including, but not
limited to, any increase in the amount or maturity of its
consolidated borrowings) other than in the ordinary course of
business) or any conversion of an amount of short term borrowings
into long term borrowings;
(iv) any material capital expenditures;
(v) any combination of any or all of the transactions referred to in
paragraphs (ii), (iii) and (iv) above which individually may not
be material but which in the aggregate are material;
(vi) declaring or paying any dividend or declaring, authorizing or
making any distribution of, on or in respect of any of its
securities whether payable in cash, securities or otherwise other
than any dividend or distribution by wholly-owned subsidiaries of
the Corporation to the Corporation;
(vii) any release or relinquishment out of the ordinary course of
business of any material contractual rights;
(viii) the amendment of its articles or by-laws or Stock Option Plan
(including, in the case of the Stock Option Plan, any arrangement
regarding the manner of or payment for the exercise of stock
options), or the issuance or purchase or other acquisition of any
Common Shares or of its capital stock of any class or of
securities convertible into, or rights, warrants or options to
acquire, any such shares or other convertible securities other
than pursuant to the exercise of employee stock options entitling
holders thereof to acquire Common Shares and other than the
surrender for cancellation (without any payment therefor) of
employee stock options or executive share purchase rights
currently outstanding, if any;
(ix) agreeing or committing to the guarantee of payment of any
material indebtedness other than in the ordinary course of
business and consistent with past practice; or
(x) instituting, cancelling or modifying any pension plans or other
employee benefit arrangements.
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(b) not, and will not permit any of its Subsidiaries to, grant to any
officer or employee of the Corporation or any of its Subsidiaries any
increase in compensation other than in the ordinary course of business
or in severance or termination pay, or enter into any employment
agreement with any officer or employee of the Corporation or any of
its Subsidiaries other than any existing written agreement disclosed
to the Offeror in writing or hire additional salaried personnel other
than the replacement of existing personnel in the ordinary course of
business;
(c) except as otherwise contemplated hereby or in the ordinary course of
business, not enter into or amend existing agreements, commitments or
contracts which, individually or in the aggregate, are material to the
Corporation and its Subsidiaries taken as a whole;
(d) use its commercially reasonable efforts in accordance with current
practices of the Corporation, and cause each of its Subsidiaries to
use all commercially reasonable efforts in accordance with current
practices of the Corporation, to preserve intact their respective
business organizations and goodwill, to keep available the services of
their respective officers and employees as a group and to maintain
satisfactory relationships with suppliers, distributors, customers and
others with whom they have business relationships;
(e) promptly advise the Offeror orally and in writing of any change in the
financial condition or operations of the Corporation that is likely to
result in a Material Adverse Change;
(f) not, and will cause each of its Subsidiaries not to, enter into any
transaction or perform any act which might (i) interfere or be
inconsistent with the successful completion of the transactions
contemplated by this Agreement, (ii) render inaccurate any of the
representations and warranties set forth herein if such
representations and warranties were made at a date subsequent to such
transaction or act and all references to the date hereof were to such
later date or (iii) adversely affect the Corporation's ability to
perform its covenants and agreements under this Agreement; and
(g) not make any material change to any one or more of the Mutual Funds or
to any one or more of the Closed-End Funds nor make any change
whatsoever in management fees, dealer compensation, distribution
policies or pay-out ratios.
3.4 BOARD OF DIRECTORS. The Corporation's Board shall, within 24 hours
following the acquisition by the Offeror of at least 50.1% of the Common Shares
then outstanding, be reconstituted through resignations of all those directors
of the Corporation requested by the Offeror and the appointment of nominees of
the Offeror in their stead. The Corporation shall, in accordance with the
foregoing and subject to the provisions of the
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ONTARIO BUSINESS CORPORATIONS ACT, assist the Offeror to obtain the resignations
of all those directors of the Corporation requested by the Offeror (and shall
provide such directors with releases) to be effective at such time as may be
required by the Offeror and to use its best efforts to cause the appointment of
the Offeror's nominees to fill the vacancies so created in order to effect the
foregoing reconstitution of the Corporation's Board without the necessity of a
shareholder meeting.
ARTICLE 4
COVENANTS OF THE OFFEROR
4.1 GENERAL. The Offeror hereby covenants to comply with its covenants under
the Lock-Up Agreements and to use its best efforts to complete successfully the
transactions contemplated by this Agreement including co-operating with the
Corporation in making all requisite regulatory filings, and giving all
information necessary to complete such filings, and in mailing or otherwise
making the Offer to holders of the Common Shares.
4.2 MODIFICATION OF OFFER. The Offeror agrees not to amend, modify or change
the Offer without the prior written consent of the Corporation which consent
shall not be unreasonably withheld, other than to (i) increase the consideration
payable under the Offer, (ii) waive any conditions to the Offer (other than the
condition contained in section 1.7(a) which the Offeror has agreed not to waive
or amend to a percentage number less than 50.1% of the then outstanding Common
Shares) or (iii) comply with the legal obligations of the Offeror with respect
to any amendment, modification or change of the Offer. The Offeror shall provide
a draft of any proposed amendment, modification or change to the Offer to the
Corporation and shall consult with the Corporation with respect to the terms and
conditions of such proposed amendment, modification or change of the Offer.
4.3 COMPULSORY ACQUISITION AND SECOND-STAGE TRANSACTION. The Offeror agrees
that if, as a result of the Offer, the requirements are satisfied to utilize the
compulsory acquisition provisions of the ONTARIO BUSINESS CORPORATIONS ACT, it
will take commercially reasonable steps to acquire any Common Shares not
acquired pursuant to the Offer pursuant to such compulsory acquisition
provisions. In the event that the compulsory acquisition provisions are not
available and the condition referred to in section 1.7(a) hereof has been
satisfied, the Offeror agrees to use commercially reasonable efforts to acquire
any Common Shares not acquired pursuant to the Offer in a second-stage
transaction such as an amalgamation, plan of arrangement or share consolidation.
4.4 INDEMNITIES. In the event that the Offeror acquires under the Offer at
least 50.1% of the Common Shares then outstanding, the Offeror shall cause the
Corporation to fulfill its obligations pursuant to indemnities provided or
available to past and present officers and directors of the Corporation pursuant
to the provisions of the ONTARIO BUSINESS CORPORATIONS ACT.
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4.5 DIRECTORS AND OFFICERS INSURANCE. In the event that the Offeror acquires
under the Offer at least 50.1% of the Common Shares then outstanding, the
Offeror undertakes to cause the Corporation to seek "run off" directors' and
officers' liability insurance for the Corporation's current and former directors
and officers, covering claims made prior to or within six (6) years after the
Effective Date which has a scope and coverage substantially equivalent in scope
and coverage to that provided pursuant to the Corporation's current directors'
and officers' insurance policy and the Offeror agrees to not take any action to
terminate such directors' and officers' insurance.
ARTICLE 5
COMPETING TRANSACTION
5.1 COMPETING TRANSACTION. Nothing shall prevent the Corporation's Board from
withdrawing, modifying or changing any recommendation regarding the Offer or
taking any other action in respect of a bona fide Competing Transaction in the
following circumstances:
(a) the Offeror has not exercised its rights under section 5.2(b) hereof;
(b) in the opinion of the Corporation's Board, acting in good faith and
with the advice of the Corporation's outside counsel, a failure to so
respond would be inconsistent with the fiduciary obligations of the
Corporation's Board under applicable law; and
(c) the Corporation has made, or has made arrangements for, as the case
may be, the payment of the Termination Fee in accordance with section
6.1 hereof.
The Corporation shall promptly notify the Offeror of the receipt of any proposal
or offer, or any inquiry or contact with any Person with respect thereto, which
has been or is made relating to the acquisition of the Corporation and shall
notify the Offeror forthwith upon becoming aware of a proposal which the
Corporation reasonably believes, if made in writing, would be a Competing
Transaction as defined herein (such notice to include the identify of any
prospective offeror and any documentation or correspondence received in
connection therewith).
For the purposes this Agreement, "Competing Transaction" means an offer or a
proposal made to the Corporation in writing and purporting to be authorized by
the board of directors (or similar body) of the Person making the offer (i) to
purchase or otherwise acquire all of the Common Shares for cash consideration,
(ii) that provides for a cash consideration per Common Share of at least $14.25
for each Share, (iii) is made or proposed to be made by means of a take over
bid, amalgamation, plan of arrangement or other form of transaction and
available to all holders of Common Shares, (iv) with conditions no more
beneficial, taken as a whole, to the Person making the offer than those
contained in the Offer for the benefit of the Offeror, (v) that has not been,
since October 28, 2005, solicited, initiated, assisted or encouraged in any
manner whatsoever by or on behalf of the Corporation or by any advisor to or
director, officer or
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employee of the Corporation or any associate or affiliate thereof, and (vi)
which the Corporation's Board determines to be more favourable to the holders of
Common Shares from a financial point of view than the Offer.
5.2 NOTIFICATION OF COMPETING TRANSACTION. The Corporation shall immediately
inform the Offeror upon becoming aware of a Competing Transaction and shall
promptly provide to the Offeror a copy of any and all documentation received in
connection with such Competing Transaction and:
(a) the Corporation shall provide the Offeror with notice in writing
delivered to the Offeror that there is a Competing Transaction at
least five clear business days prior to the date on which the
Corporation's Board proposes to withdraw or otherwise change its
recommendation to support the Offer, or proposes to enter into
discussions or provide access under section 3.1(a), which notice may
only be given if the Competing Transaction has been made or proposed
on or before the fifth business day prior to the expiry of the Offer;
and
(b) the Offeror, within three business days after receipt of the notice in
writing contemplated above, shall have the right to match such
Competing Transaction. If the Offeror does not publicly announce an
intention to increase the Offer and does not amend the Offer to
increase the consideration payable under the Offer to a price at least
equal to the price under the Competing Transaction within two business
days thereafter and, in any event, before the expiry of the Offer, the
Offeror shall have been deemed not to have exercised the right for the
purposes of this Section 5.2.
If there is more than one Competing Transaction, the provisions of this section
5.2 shall only apply to and in respect of the Competing Transaction that the
Corporation's Board notifies the Offeror is the superior Competing Transaction.
ARTICLE 6
TERMINATION FEE AND EXPENSES
6.1 PAYMENT TO OFFEROR. If the Offeror does not make or withdraws the Offer or
elects not to take up and pay for any Common Shares deposited to the Offer as a
result of:
(a) the Corporation breaching in any material respect any of its
obligations contained in Article 3 (other than section 3.4) of this
Agreement, which in the case of those contained in sections 3.1(f),
3.2 and 3.3(b) to (f), have not been cured to the satisfaction of the
Offeror following receipt of notice of such breach by the earlier of
three (3) business days and the day that is one clear business day
prior to the expiry of the Offer;
-16-
(b) the Corporation's Board (i) failing to recommend to the shareholders
of the Corporation, other than the Offeror, that they accept the Offer
by issuance of a Directors' Circular; or (ii) having complied with
section 3.1(b), subsequently adversely modifies or withdraws its
recommendation that shareholders, other than the Offeror, accept the
Offer, or, fails to reaffirm publicly and unconditionally its
recommendation within three days of the Offeror's written request to
do so, which public reaffirmation must also include or be followed by
the rejection of any Competing Transaction, if applicable, within five
(5) business days;
(c) the Corporation giving a notice of termination to the Offeror pursuant
to section 7.1(e) hereof;
(d) the Offeror electing not to match a Competing Transaction pursuant to
section 5.2 hereof;
(e) if at any time before the Effective Date the Corporation receives and
there is a publicly disclosed Proposed Transaction and the condition
contained in section 1.7(a) has not been satisfied; or
(f) the Offeror giving a notice of termination to the Corporation pursuant
to sections 7.2(d) and (e) hereof,
then, in any such event, in recognition of the costs and expenses of the Offeror
in making the Offer, the Corporation will pay to the Offeror a termination fee
(the "Termination Fee") in the amount arrived at pursuant to section 6.2 within
five business days after notice by the Offeror or, in the case of termination
pursuant to section 7.1(e), at the time of such termination, or, in the case of
a decision to withdraw, modify or change the recommendation of the Corporation's
Board pursuant to section 5.1, prior to such withdrawal, modification or change.
6.2 TERMINATION FEE. The Termination Fee payable pursuant to section 6.1
hereof shall be $7.0 million.
ARTICLE 7
TERMINATION
7.1 TERMINATION BY CORPORATION. The Corporation, when not in default in
performance of all of its obligations under this Agreement, may, without
prejudice to any other rights, terminate this Agreement by notice to the Offeror
if:
(a) the Offer has not been made on or before the time provided for in
section 1.2 hereof;
(b) the Offer does not substantially conform or is modified in a manner
not to conform with the description in this Agreement;
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(c) Common Shares deposited under the Offer (including the Selling
Shareholder Shares) have not, for any reason whatsoever, been taken up
and paid for on or before the expiry of ten days after the expiry of
the Offer and in any event on or before March 31, 2006, subject to
extension with the consent of the parties, such consent not to be
unreasonably withheld;
(d) the Offeror breaches this Agreement in any material respect; or
(e) the Offeror has been notified by the Corporation of a Competing
Transaction in accordance with Article 5 and the Offeror does not take
the action described in section 5.2(b) hereof within the time periods
specified therein.
7.2 TERMINATION BY OFFEROR. The Offeror, when not in default in performance
of its obligations under this Agreement, may, without prejudice to any other
rights, terminate this Agreement by notice to the Corporation:
(a) If the conditions in section 1.7 hereof are not satisfied or waived by
the Offeror on or prior to the expiry of the Offer;
(b) in the circumstances entitling the Offeror to payment under section
6.1 hereof;
(c) if the Corporation breaches this Agreement in any material respect;
(d) if the Corporation's Board or any committee thereof withdraws or
modifies in a manner adverse to the Offeror its recommendation of the
Offer or its approval of this Agreement or fails to recommend to the
Corporation's shareholders that they accept the Offer, or the
Corporation's Board or any committee thereof resolves to take any of
the foregoing actions; and
(e) if the Corporation's Board fails to reaffirm publicly and
unconditionally its recommendation to the Corporation's shareholders
that they accept the Offer within three (3) days of the Offeror's
written request to do so (which request may be made at any time),
which public reaffirmation must also include or be followed by the
rejection of any Competing Transaction, if applicable, within five (5)
business days.
7.3 EFFECT OF TERMINATION. In the case of any termination of this Agreement
pursuant to this Article 7, this Agreement shall be of no further force and
effect except for Article 6 herein and nothing herein shall relieve any party
from liability for any breach of this Agreement, provided that if the
Corporation becomes obligated to and has paid the amount provided for in section
6.1 hereof, the Corporation shall have no further liability under this
Agreement.
-18-
ARTICLE 8
GENERAL
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties shall be true at the date of this Agreement and shall continue to be
true on the date on which the Common Shares are taken up under the Offer. No
investigations made by or on behalf of the Offeror or any of its authorized
agents at any time shall have the effect of waiving, diminishing the scope of or
otherwise affecting any representation or warranty or covenant made by the
Corporation in or pursuant to this Agreement, provided the Offeror may not rely
on any representation or warranty which it knows is untrue at the time the
Common Shares are taken up under the Offer.
8.2 DISCLOSURE. Except as required by applicable laws or regulations, or as
required by any competent governmental, judicial or other authority, or in
accordance with the requirements of any stock exchange, neither the Offeror nor
the Corporation, shall make any public announcement or statement with respect to
this Agreement without the approval of the Corporation or the Offeror, as the
case may be, which approval shall not be unreasonably withheld. Moreover, the
parties agree to consult with each other prior to issuing each public
announcement or statement with respect to this Agreement.
8.3 COMMON SHARES. For greater certainty, all references to "Common Shares"
include any shares into which the Common Shares may be reclassified, subdivided,
consolidated or converted and any rights and benefits arising therefrom
including any extraordinary distributions of securities which may be declared in
respect of the Common Shares but excluding any dividend permitted to be paid
under this Agreement.
8.4 ASSIGNMENT. The Offeror may assign all or any part of its rights under
this Agreement to a direct or indirect wholly-owned subsidiary, but if such
assignment takes place, the Offeror shall continue to be liable to the
Corporation for any default in performance by the assignee. This Agreement shall
not otherwise be assignable by any party hereto without the consent of the other
party. This Agreement shall be binding upon and shall enure to the benefit of
and be enforceable by the Offeror, the Corporation and their respective
successors and permitted assigns.
8.5 TIME. Time shall be of the essence of this Agreement.
8.6 CURRENCY. All sums of money referred to in this Agreement are expressed in
Canadian dollars.
8.7 AMENDMENTS. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by all of the parties hereto.
8.8 ADDITIONAL DEFINITIONS. For the purposes of this Agreement, the following
terms have the following meaning:
(a) "affiliates" or "associates", respectively, have the meaning of such
terms under the SECURITIES ACT (Ontario);
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(b) "Law" means all published laws, statutes, codes, ordinances, decrees,
rules, regulations, by-laws, judicial or arbitral or administrative or
ministerial or departmental or regulatory judgments, orders,
decisions, rulings or awards, including general principles of common
and civil law, and conditions of any grant of approval, permission,
authority or license of any court, Governmental Entity, statutory body
(including the TSX) or self-regulatory authority, and the term
"applicable" with respect to those Laws and in the context that refers
to one or more Persons, means that those Laws apply to that person or
Persons or its or their business, undertaking, property or securities;
(c) "Governmental Entity" means any: (i) multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitrage body, commission, board, bureau, agency, domestic or
foreign, (ii) any subdivision, agent, commission, board or authority
of any of the foregoing; or (iii) any quasi-governmental or private
body exercising any regulatory, expropriation or taxing authority
under or for the account of any of the foregoing;
(d) "Material Adverse Change" means, when used in connection with a party
to this Agreement, any change, effect, event, occurrence or change in
the state of facts, that is, or would reasonably be expected to be,
material and adverse to the business, assets, liabilities,
capitalization, financial condition or results of operations of such
party, its Subsidiaries and, with respect to the Corporation and the
Mutual Funds (as defined in Schedule B), taken as a whole, other than
any change, effect, event, occurrence or change in the state of facts
relating to: (i) general political, financial or economic conditions
or the state of securities markets in general, including, without
limitation, any reduction in major market indices; (ii) any change or
changes in the trading price of the Common Shares; (iii) the mutual
fund industry in general, and not specifically relating to the
Corporation or its Subsidiaries or the Mutual Funds; and (iv) changes
in Canadian GAAP or regulatory accounting requirements applicable to
the mutual fund industry generally;
(e) "Material Adverse Effect" means the effect of a Material Adverse
Change;
(f) "material fact", "material change" and "misrepresentation",
respectively, have the meaning of such terms under the SECURITIES ACT
(Ontario);
(g) "Person" includes an individual, corporation, partnership, joint
venture, trust, unincorporated organization, the Crown or any agency
or instrumentality thereof or any other entity recognized by law;
(h) "Securities Legislation" means the SECURITIES ACT (Ontario) and the
equivalent Laws in other provinces of Canada and the published rules,
-20-
regulations, national instrument and policies of any Governmental
Authority administering those Laws, as well as rules, regulations,
by-laws and policies of the TSX;
(i) "Subsidiaries" means a subsidiary as defined under the ONTARIO
BUSINESS CORPORATIONS ACT;
(j) "TSX" means the Toronto Stock Exchange; and
(k) Schedule B sets out further definitions used in connection with the
additional representations and warranties of the Corporation.
8.9 LOCK-UP AGREEMENTS. The Offeror shall receive the Lock-Up Agreements from
the holders of not less than 25% of the issued and outstanding Common Shares (on
a fully diluted basis).
8.10 NOTICES. Any notice, request, consent, agreement or approval which may or
is required to be given pursuant to this Agreement shall be in writing and shall
be sufficiently given or made if delivered or telecopied as follows:
(a) in the case of the Offeror, to:
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
ATTENTION: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
2100 Scotia Plaza, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) in the case the Corporation, to:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
ATTENTION: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
ATTENTION: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Any notice, demand or other communication so given shall be deemed to have been
given or made and received on the day of delivery, if so delivered, and on the
day of sending by telecopier, provided such day is a business day and, if not,
on the first business day thereafter. A party to this Agreement may from time to
time change its address for notice hereunder by notice to the other party given
pursuant to this section.
8.11 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed and interpreted in accordance
with the laws of the Province of Ontario including the laws of Canada applicable
therein.
8.12 EXPENSES. Except as set forth in Article 6, each of the parties shall pay
its own legal, financial advisory and accounting costs and expenses incurred in
connection with the preparation, execution and delivery of this Agreement and
all documents and instruments executed or prepared pursuant hereto and any other
costs and expenses whatsoever and howsoever incurred.
8.13 SPECIFIC PERFORMANCE AND OTHER EQUITABLE RIGHTS. Each of the parties
recognizes and acknowledges that this Agreement is an integral part of the
transactions contemplated in the Offer, that the Offeror would not contemplate
causing the Offer to be made, and the Corporation would not agree to facilitate
the Offer, unless this Agreement was executed and that a breach by a party of
any covenants or other commitments contained in this Agreement will cause the
other party to sustain injury for which it would not have an adequate remedy at
law for money damages. Therefore, each of the parties agrees that to prevent
breaches or in the event of any such breach, the aggrieved party shall be
entitled to the remedy of specific performance of such covenants or commitments
and preliminary and permanent injunctive and other equitable relief in any court
of Canada located in the Province of Ontario in addition to any other remedy to
which it may be entitled, at law or in equity, and the parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief.
8.14 ENTIRE AGREEMENT. This Agreement, including the Schedules hereto (which
are incorporated herein and form part hereof), constitutes the entire agreement
and understanding between and among the parties hereto with respect to the
subject matter
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hereof and supersedes any prior agreement, representation or understanding with
respect thereto.
8.15 BUSINESS DAY. A business day for the purpose of this Agreement shall mean
any day, other than a Saturday or Sunday, on which chartered banks in the City
of Toronto, Ontario are open for business. If the last day of a period of days
is not a business day, the period shall be extended to the next following day
which is a business day.
8.16 COUNTERPARTS. This Agreement may be executed in one or more counterparts
which together shall be deemed to constitute one valid and binding agreement and
delivery of the counterparts may be affected by means of a telecopied
transmission.
Yours truly,
INDUSTRIAL ALLIANCE INSURANCE AND
FINANCIAL SERVICES INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Executive Vice-President
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice-President
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ACCEPTED this 6th day of November, 2005.
CLARINGTON CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chairman
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Executive Vice-President and
Chief Financial Officer
SCHEDULE A
FORM OF LOCK-UP AGREEMENT
INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
LOCK-UP AGREEMENT
STRICTLY CONFIDENTIAL
November 6, 2005
[NAME AND ADDRESS OF STELLAR SIGNIFICANT SHAREHOLDER]
Dear -:
RE: OFFER FOR COMMON SHARES OF CLARINGTON CORPORATION (THE "CORPORATION")
This letter sets out the terms and conditions upon which Industrial
Alliance Insurance and Financial Services Inc., directly or through a
wholly-owned subsidiary (collectively, and as the context requires, the
"Offeror"), is prepared to make a take-over bid (the "Offer") for any and all of
the issued and outstanding common shares ("Common Shares") in the capital of the
Corporation.
1. INDUCEMENT
1.1 As an inducement to the Offeror to make the Offer, and with the knowledge
that the making of same is a condition precedent to the Offeror's willingness to
make the Offer, the Selling Shareholder by execution of this Agreement hereby:
(a) represents and warrants to the Offeror that the Selling Shareholder
is, as of the date hereof, the beneficial owner of - Common Shares
(the "Selling Shareholder Shares") [COMPLETE IF APPLICABLE OR DELETE]
and of options to acquire - Common Shares (the "Selling Shareholder
Options");
-2-
(b) [DELETE IF THE PERSON DOES NOT HOLD OPTIONS] covenants with the
Offeror that the Selling Shareholder shall exercise the Selling
Shareholders Options to the full extent permitted by the stock
compensation plan of the Corporation adopted on November 30, 2003 and
do so prior to the expiry of the Offer; and
(c) covenants with the Offeror that the Selling Shareholder shall do such
lawful acts and things, and execute such instruments and other
documents, as may be necessary or appropriate to procure the due
acceptance of the Offer by the Selling Shareholder in respect of the
Selling Shareholder Shares, including all Common Shares acquired on
exercise of the Selling Shareholder Options and all additional Common
Shares acquired by the Selling Shareholder after the date hereof and
prior to the expiry of the Offer (collectively, the "Tender Shares").
2. THE OFFER
2.1 The Offeror agrees to make the Offer in accordance with the terms of this
Agreement.
2.2 TIMING
The Offer shall be made as soon as reasonably practicable and in any event
on or before November 21, 2005.
2.3 CONDITIONS PRECEDENT
Notwithstanding any other term of this Agreement, the Offeror shall not be
required to make the Offer if:
(a) any change (or any condition, event or development involving a
prospective change) shall have occurred subsequent to the date hereof
and prior to the making of the Offer, occur in the business, assets,
capitalization or financial condition of the Corporation or any
subsidiary that is material to the Corporation that is undisclosed on
the date hereof and that, in the sole judgment of the Offeror, was, is
or may be materially adverse to the Corporation and its subsidiaries
considered as a whole, or the Offeror shall have become aware of any
fact that, in the sole judgment of the Offeror, had, has or may have
material adverse significance with respect to the Corporation and its
subsidiaries considered as a whole;
(b) on or after the date hereof, any action, suit or proceeding shall be
taken before or by any court or tribunal or any law shall be proposed
or enacted which, in the sole judgment of the Offeror in any such
case, would
-3-
constitute a significant change in circumstances such as to make it
inadvisable for the Offeror to proceed with the Offer;
(c) there exists any prohibition at law against the Offeror making the
Offer or taking up and paying for the Common Shares under the Offer;
(d) the Corporation does not enter into a support agreement (the "Support
Agreement") in form and substance satisfactory to the Offeror in its
sole discretion whereby the Corporation agrees to support the Offer;
(e) each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ shall
not have given retention, non-solicitation and non-competition
covenants to the Offeror in form and substance satisfactory to the
Offeror, in its sole discretion.
The foregoing conditions are for the sole benefit of the Offeror and may be
waived by the Offeror and shall be deemed to have been waived by it by the
making of the Offer.
2.4 OFFER PRICE
The Offer shall be made for cash consideration of not less than Cdn $14.25
per Common Share or, at the election of each holder of Common Shares, an
equivalent value in common shares of Industrial Alliance Insurance and Financial
Services Inc., as determined by and subject to pro-rating, as set forth in the
Support Agreement and in the circular in respect of the Offer (collectively, the
"Offer Price").
2.5 GENERAL TERMS
The Offer shall be made by circular bid in Canada in accordance with the
securities, corporate and other laws applicable therein and shall be on the
terms and conditions provided for in this Agreement and on such additional terms
and conditions, not inconsistent with this Agreement, as the Offeror may, in its
sole discretion acting reasonably, determine.
2.6 MAXIMUM OFFER PERIOD
The Offer shall provide that not later than the expiration of 36 days from
the date of the Offer, the Offeror shall either (a) abandon the Offer and return
all Common Shares deposited thereunder, or (b) waive any conditions that have
not been satisfied and take up and pay for all Common Shares deposited
thereunder; provided, however, that notwithstanding (a) and (b) above, the Offer
may be extended from time to time, if the conditions of the Offer referred to in
section 2.7 herein, have not been satisfied or waived, or if required by
applicable law to permit the Offeror to increase the Offer Price, at its sole
option, to meet or exceed that of a competing offer made before the expiry of
the Offer.
-4-
2.7 CONDITIONS OF THE OFFER
The obligations of the Offeror to take up and pay for Common Shares
deposited under the Offer shall be subject only to the satisfaction at the
expiry of the Offer of each of the following conditions only:
(a) sufficient Common Shares shall have been and shall remain validly
deposited under the Offer such that, upon take up of and payment for
such Common Shares, the Offeror will own, directly or indirectly, no
less than 66-2/3% of the then outstanding Common Shares;
(b) (i) no act, action, suit or proceeding shall have been threatened or
taken before or by any domestic or foreign court or tribunal or
governmental agency or other regulatory authority or administrative
agency or commission or by any elected or appointed public official or
Person (as defined below) in Canada, the United States or elsewhere,
whether or not having the force of law, and (ii) no law, regulation or
policy shall have been proposed, enacted, promulgated or applied, in
either case:
(A) to cease trade, enjoin, prohibit or impose material limitations,
damages or conditions on the purchase by or the sale to the
Offeror of the Common Shares or the right of the Offeror to own
or exercise full rights of ownership of the Common Shares; or
(B) which, if the Offer were consummated, would constitute a
Materially Adversely Effect with respect to the Corporation and
its Subsidiaries considered as a whole;
(c) there shall not have occurred any change (or any condition, event or
development involving a prospective change) in the business,
operations, assets, capitalization, financial condition, licences,
permits, rights, privileges or liabilities, whether contractual or
otherwise, of the Corporation which, in the sole judgment of Offeror,
constitutes a Materially Adverse Change or may be considered to have a
Material Adverse Effect with respect to the Corporation and its
Subsidiaries considered as a whole;
(d) there exists no prohibition at law against the Offeror making the
Offer or taking up and paying for the Common Shares under the Offer;
(e) all approvals, permits, licences or similar authorizations from any
Person (as defined below) shall have been obtained on terms
satisfactory to the Offeror, in its sole discretion;
-5-
(f) without limiting the scope of the condition in paragraph (e), any
applicable statutory waiting periods under the COMPETITION ACT
(Canada) shall have expired or otherwise been terminated or satisfied
and the Commissioner of Competition shall not have communicated to the
Offeror an intention to apply to the Competition Tribunal under the
COMPETITION ACT (Canada) to prohibit the Offer from proceeding or to
require the Offeror to dispose of any Common Shares or assets acquired
pursuant to the Offer;
(g) since October 28, 2005, the Corporation and its affiliates and
associates shall not have taken any action, or disclosed any
previously undisclosed action taken by them, relating to (i) any
issuance of securities or options to purchase securities (other than
Common Shares issued on the exercise of previously outstanding stock
options), (ii) any payments of dividends or other distributions to the
holders of Common Shares, (iii) any agreement or understanding
involving the sale, disposition of or other dealing with the
businesses or assets of the Corporation or its Subsidiaries, or any
part thereof or interest therein or relating to the Corporation's
right to manage, operate or control the conduct of its business or any
part thereof, (iv) any material change in its capitalization
(including, but not limited to, any material increase in the amount or
maturity of its consolidated borrowings) or any conversion of short
term borrowings to long term borrowings; (v) any material capital
expenditures, except in the ordinary course of its business; (vi) any
release or relinquishment not in the ordinary course of business of
any material contractual rights; or (vii) agreeing or committing to
the guarantee of payment of any material indebtedness other than in
the ordinary course of business and consistent with past practice;
(h) there shall not exist or have occurred (or, if there does exist or
shall have previously occurred, there shall not have been disclosed,
generally or to the Offeror) any change (or any condition, event or
development involving a prospective change) in the business,
operations, assets, capitalization, financial condition, licences,
permits, rights, privileges or liabilities, whether contractual or
otherwise, of the Corporation or any of its Subsidiaries, which is or
may be considered to have a Material Adverse Effect with respect to
the Corporation and its Subsidiaries, taken as a whole;
(i) none of the following shall exist or shall have occurred (which has
not been cured or waived), or shall be threatened:
(i) any material right, franchise or licence of the Corporation or of
any of its Subsidiaries has been impaired or otherwise
constitutes a Material Adverse Effect with respect to the
Corporation and its Subsidiaries, taken as a whole; or
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(ii) any covenant, term or condition in any of the instruments or
agreements to which any of the Corporation or its Subsidiaries is
a party or to which they or any of their assets are subject that
is or may constitute a Material Adverse Effect with respect to
the Corporation and its Subsidiaries, taken as a whole
(including, but not limited to, any default that might ensue as a
result of the Offeror taking up and paying for Common Shares
deposited under the Offer);
(j) there shall have not occurred, developed or come into effect or
existence any event, action, state, condition or major financial
occurrence of national or international consequence or any law,
regulation, action, inquiry or other occurrence of any nature
whatsoever which materially adversely affects or involves, or may
materially adversely affect or involve, the financial markets in
Canada;
(k) the Offeror shall not have become aware of any untrue statement of a
material fact, or an omission to state a material fact that is
required to be stated or that is necessary to make a statement not
misleading in the light of the circumstances in which it was made and
at the date it was made (after giving effect to all subsequent filings
in relation to all matters covered in earlier filings) in any document
filed by or on behalf of any one or more of the Corporation, the
Mutual Funds, the Closed-End Funds and the Limited Partnerships (as
the foregoing terms are defined in Schedule B) with the Ontario
Securities Commission or any other regulatory authority in Canada or
elsewhere, including without limitation, any annual report, financial
statements, material change report, press release or management proxy
circular or in any document so filed or released by the Corporation to
the public;
(l) there shall not have occurred any breach of any of the terms of the
Support Agreement or the material terms of the Lock-Up Agreements or
any termination of such agreements pursuant to its terms and the
representations and warranties in such agreements shall be true and
correct in all material respects.
Where referred to in the foregoing conditions, the term "Person" shall be
broadly interpreted and includes an individual, body corporate, partnership,
joint venture, trust, association, unincorporated organization, the Crown, any
governmental agency or any other entity recognized by law.
The foregoing conditions are for the exclusive benefit of the Offeror and
may be asserted by the Offeror regardless of the circumstances (including any
action or inaction by the Offeror) or may be waived by the Offeror in its sole
discretion, in whole or in part, at any time and from time to time without
prejudice to any other rights of the Offeror.
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3. AGREEMENTS TO DEPOSIT AND NOT WITHDRAW
3.1 AGREEMENT TO DEPOSIT
Subject to the terms and conditions hereof, the Selling Shareholder hereby
agrees to do such lawful acts, things and to execute such instruments and other
documents as may be necessary or appropriate to cause all the Tender Shares to
be deposited under the Offer as soon as practicable after the Offer has been
made in accordance with the terms hereof and in any event on or before the fifth
business day (the "Tender Date") after the date of the Offer, including, if
applicable, the due exercise of any options to acquire such shares. In the case
of shares acquired subsequent to the Tender Date, such shares shall be deposited
under the Offer immediately.
3.2 AGREEMENT NOT TO WITHDRAW
Subject to the other terms and conditions hereof, the Selling Shareholder
agrees not to withdraw or take any action to withdraw any Tender Shares
deposited under the Offer notwithstanding any statutory rights or rights under
the terms of the Offer which it might otherwise have unless:
(a) the Offer is not extended in accordance with Section 2.6 and the
Offeror does not take up the Tender Shares under the Offer on or
before 11:59 p.m. (Toronto time) on or before the 50th day after the
date of the Offer;
(b) the Offer is extended in accordance with section 2.6 and the Offeror
does not take up the Tender Shares under the Offer on or before 5:00
p.m. (Toronto time) on the business day next following the expiration
of the Offer; or
(c) the Offeror does not take up the Tender Shares under the Offer on or
before 11:59 p.m. (Toronto time) on March 31, 2006, subject to
extension with the consent of the parties hereto.
3.3 ESCROW
In this section 3.3, "Lock-up Price" means an amount equal to the product
of $14.25 multiplied by the number of Tender Shares.
At any time prior to the termination of this Agreement, the Offeror or the
Selling Shareholder may request that the Tender Shares be placed in escrow with
an independent third party escrow agent approved by both parties, acting
reasonably (the "Escrow Agent"). The terms of the escrow shall be as follows:
(a) The Tender Shares shall be deposited in certificated form together
with the letter of transmittal relating to the Offer, duly completed
by the Selling Shareholder and specifying the Escrow Agent as payee of
any cash
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consideration payable and/or as the party to whom the share
certificate (which shall be in the name of the Selling Shareholder or
its nominee and, if practicable, in the name of the Offeror or its
nominee with respect to any consideration in excess of the Lock-Up
Price) representing any share consideration deliverable, as may apply,
in exchange for the Tender Shares under the Offer. If there is a
Competing Transaction, the Selling Shareholder shall complete in a
similar manner and deliver to the Escrow Agent the letter of
transmittal or equivalent document relating to such Competing
Transaction.
(b) The Escrow Agent shall deposit the Tender Shares to the Offer
forthwith following the later of the making of the Offer or the
deposit of the Tender Shares into escrow together with the related
letter of transmittal completed as provided above.
(c) If the Offeror takes up the Tender Shares under the Offer, immediately
following receipt of the consideration which the Offeror is obligated
to deliver in exchange for the Tender Shares under the Offer, the
Escrow Agent shall as promptly as practicable deliver to the Selling
Shareholder cash (by certified cheque or bank draft) and/or share
consideration (such shares to be in certificated form) having a value
under the terms of the Offer equal to the Lock-up Price, and shall
remit the balance of the cash and/or share consideration in like
manner to the Offeror, less the amount of any fees owing to the Escrow
Agent. Where the consideration receivable is part cash and part
shares, the ratio of share to cash consideration shall be as directed
by the Selling Shareholder and the Offeror, acting reasonably, to the
extent of availability of the relevant consideration.
(d) If there is a Competing Transaction, and the Offeror has not taken up
the Tender Shares under the Offer by or before the fifth business day
prior to the expiry of the Competing Transaction and the Offeror
directs the Escrow Agent to do so, the Escrow Agent shall forthwith
withdraw the Tender Shares from the Offer and deposit the Tender
Shares to the Competing Transaction, together with the completed
letter of transmittal or equivalent document as provided above. The
agreement with the Escrow Agent shall provide that the Escrow Agent
shall withdraw the Tender Shares from the Competing Transaction
forthwith upon being directed to do so by the Offeror. Immediately
following receipt of the consideration which the bidder or issuer is
obligated to deliver in exchange for the Tender Shares under the
Competing Transaction, the Escrow Agent shall as promptly as
practicable deliver to the Selling Shareholder cash (by certified
cheque or bank draft) and/or share consideration (such shares to be in
certificated form) having a value under the terms of the Competing
Transaction equal to the Lock-up Price, and shall remit the balance of
the cash and/or share consideration in like manner to the Offeror,
less the amount of any fees owing to the Escrow Agent. Where the
consideration
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receivable is part cash and part shares, the ratio of share to cash
consideration shall be as agreed upon between the Selling Shareholder
and the Offeror, acting reasonably, to the extent of availability of
the relevant consideration.
(e) If the Tender Shares have not been taken up and paid for under the
Offer or acquired pursuant to a Competing Transaction by the expiry of
the non-withdrawal period provided for under section 3.2, the Escrow
Agent shall forthwith deliver the Tender Shares to the Selling
Shareholder, and the Selling Shareholder shall have no further
obligations under this Agreement.
(f) Any fees payable and any indemnity required to be provided to the
Escrow Agent in connection with its escrow services shall be the
responsibility of the Offeror, provided that nothing in this section
3.3(f) shall derogate from the parties' rights and obligations under
this Agreement.
4. ADDITIONAL COVENANTS OF SELLING SHAREHOLDER
4.1 NON-SOLICITATION AND CO-OPERATION
Unless this Agreement is terminated prior to the making of the Offer, the
Selling Shareholder shall not, prior to the termination of the Offer, directly
or indirectly, take action of any kind which may reduce the likelihood of
success of the Offer, including, without limitation, any action or inaction to
initiate, encourage, assist or participate in proposals or offers from any
person, entity or group in connection with the acquisition or disposition of all
or any substantial part of the Corporation's issued and outstanding securities,
or any amalgamation, merger, arrangement, sale of all or any substantial part of
the assets of the Corporation or any subsidiary thereof, tender or exchange
offer, reorganization, recapitalization, liquidation or winding-up, or other
business combination, or any other transaction which interferes, by delay or
otherwise, with the transactions contemplated hereby including the Offer. The
Selling Shareholder shall notify the Offeror forthwith upon becoming aware of
any proposal or offer referred to in the preceding sentence and provide the
Offeror with full particulars (including the identity of any prospective
offeror) known to the Selling Shareholder at the time regarding such proposal or
offer.
The Selling Shareholder shall also not do indirectly that which it may not
do directly in respect of the restrictions on its rights with respect to the
Tender Shares pursuant to this Section 4.1, including, but not limited to, the
sale of any direct or indirect holding company of the Selling Shareholder or the
granting of a proxy on the Tender Shares of any direct or indirect holding
company of the Selling Shareholder which would have, indirectly, the effect
prohibited by this Section 4.1.
In addition, the Selling Shareholder shall use all commercially reasonable
efforts to assist the Offeror to successfully complete the transactions
contemplated by
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this Agreement, including using its reasonable best efforts to keep its nominees
on the board of directors of the Corporation, co-operating (and using its
reasonable best efforts to cause the Corporation to co-operate) with the Offeror
in making all requisite regulatory filings, and giving evidence in relation
thereto, and in mailing or otherwise making and successfully completing the
Offer and the acquisition of all outstanding Common Shares pursuant to the
Offer. The Selling Shareholder shall also promptly advise the Offeror orally and
in writing of any change known to the Selling Shareholder in the condition
(financial or otherwise), properties, assets, liabilities, operations or
business of the Corporation or any of its affiliates or associates that is
likely to be materially adverse to the Corporation and its affiliates or
associates considered on a consolidated basis.
The Offeror acknowledges that the Selling Shareholder may have fiduciary
obligations to the Corporation and the holders of Common Shares of the
Corporation. Notwithstanding the provisions of this Section 4.1, the Selling
Shareholder shall not be required to take any action that, with the written
advice of counsel, would constitute a breach of their fiduciary duties to the
Corporation and the holders of Common Shares of the Corporation.
5. REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
5.1 OFFEROR INFORMATION
The Offeror represents and warrants to the Selling Shareholder as follows:
(a) Industrial Alliance Insurance and Financial Services Inc. is a
corporation existing under laws of the Province of Quebec and has all
necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; and
(b) this Agreement has been duly executed and delivered by and on behalf
of the Offeror and constitutes a valid and binding obligation of the
Offeror enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and other laws relating to or affecting creditors' rights
generally and to general principles of equity.
7. TERMINATION
7.1 OBLIGATIONS OF THE SELLING SHAREHOLDER
The obligations of the Selling Shareholder hereunder shall terminate if:
(a) the Offer is not made within the time period provided in Section 2.2;
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(b) the terms of the Offer, if made, do not conform in all material
respects with the provisions of this agreement;
(c) the Offeror does not comply in all material respects with its
covenants contained herein; or
(d) the Offer having been made, and the Offeror has not, for any reason
whatsoever other than the failure of the Selling Shareholder to
deposit the Tender Shares for purchase, taken up the Common Shares
tendered under the Offer in the manner contemplated hereunder.
8. GENERAL
8.1 DISCLOSURE
No press release or other public disclosure with respect to the existence
or details of this Agreement shall be made without the prior written consent of
the Offeror except to the extent required by law. The Selling Shareholder shall
consult with the Offeror prior to issuing any press release or making other
public statements with respect to this Agreement if required to do so by law.
The Selling Shareholder acknowledges and agrees that a summary of this Agreement
and the negotiations leading to its execution and delivery must appear in the
disclosure material relating to the Offer.
8.2 ASSIGNMENT
Industrial Alliance Insurance and Financial Services Inc. may assign all or
any part of its rights under this Agreement to a direct or indirect wholly-owned
subsidiary, but if such assignment takes place, Industrial Alliance Insurance
and Financial Services Inc. shall continue to be liable to the Corporation for
any default in performance by the assignee. This Agreement shall not otherwise
be assignable by any party hereto without the consent of the other party. This
Agreement shall be binding upon and shall enure to the benefit of and be
enforceable by Industrial Alliance Insurance and Financial Services Inc., the
Offeror, the Selling Shareholder and their respective successors and permitted
assigns.
8.3 TIME
Time shall be of the essence of this Agreement.
8.4 CURRENCY
All sums of money referred to in this Agreement are expressed in Canadian
dollars.
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8.5 NOTICE
Any notice, request, consent, agreement or approval which may or is
required to be given pursuant to this Agreement shall be in writing and shall be
sufficiently given or made if delivered or telecopied as follows:
(a) in the case Industrial Alliance Insurance and Financial Services Inc.
or the Offeror, to:
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇ ▇▇▇
ATTENTION: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
2100 Scotia Plaza, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) in the case the Selling Shareholder, to:
-
ATTENTION:
Telecopier No.:
Any notice, demand or other communication so given shall be deemed to have been
given or made and received on the day of delivery, if so delivered, and on the
day of sending by telecopier, provided such day is a business day and, if not,
on the first business day thereafter. A party to this Agreement may from time to
time change its address for notice hereunder by notice to the other party given
pursuant to this section.
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8.6 GOVERNING LAW
This Agreement and the rights and obligations of the parties hereto shall
be governed by and construed and interpreted in accordance with the laws of the
Province of Ontario including the laws of Canada applicable therein.
8.7 JURISDICTION
The Selling Shareholder hereby agrees that any suit, action or proceeding
with respect to this Agreement against it or its assets may be brought in the
Courts of the Province of Ontario or the Federal Court of Canada and the Selling
Shareholder hereby generally, irrevocably and unconditionally attorns and
submits to the non-exclusive jurisdiction of such Courts over any such suit,
action, or proceeding. The Selling Shareholder hereby irrevocably waives any
objection it might now or hereafter have to the conducting of any such suit,
action or proceeding in any such Courts, including, without limitation, any
objection that any such Court is an inconvenient forum.
8.8 EXPENSES
Each of the parties shall pay its own legal, financial advisory and
accounting costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and all documents and instruments
executed or prepared pursuant hereto and any other costs and expenses whatsoever
and howsoever incurred.
8.9 SPECIFIC PERFORMANCE AND OTHER EQUITABLE RIGHTS
Each of the parties recognizes and acknowledges that this Agreement is an
integral part of the transactions contemplated in the Offer, that the Offeror
would not contemplate causing the Offer to be made and the Selling Shareholder
would not agree to refrain from seeking any offer in addition to, or in
substitution for, the Offer and to irrevocably deposit the Tender Shares to the
Offer unless this Agreement was executed and that a breach by a party of any
covenants or other commitments contained in this Agreement will cause the other
party to sustain injury for which it would not have an adequate remedy at law
for money damages. Therefore, each of the parties agrees that in the event of
any such breach, the aggrieved party shall be entitled to the remedy of specific
performance of such covenants or commitments and preliminary and permanent
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity, and the parties further agree to waive
any requirement for the securing or posting of any bond in connection with the
obtaining of any injunctive or other equitable relief.
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8.10 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and understanding between
and among the parties hereto with respect to the subject matter hereof and
supersedes any prior agreement, representation or understanding with respect
thereto.
8.11 BUSINESS DAY
For the purposes of this Agreement, a business day means any day, other
than a Saturday or Sunday, on which chartered banks in the City of Toronto,
Ontario are open for business. If the last day of a period of days is not a
business day, the period shall be extended to the next following day which is a
business day.
8.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts which together
shall be deemed to constitute one valid and binding agreement and delivery of
the counterparts may be affected by means of a telecopied transmission.
* * * * *
If you are in agreement with the foregoing, kindly signify your acceptance
by signing the copy of this letter in the place provided below and delivering it
to the undersigned prior to 11:59 p.m. (Toronto time) on the date hereof,
whereupon it shall constitute a binding agreement between us and failing which
this offer shall be null and void.
Yours very truly,
INDUSTRIAL ALLIANCE INSURANCE AND
FINANCIAL SERVICES INC.
By:
------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Executive Vice-President
By:
------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice-President
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ACCEPTED this 6th day of November, 2005.
WITNESS: )
)
)
)
------------------------------- ) --------------------------------
Signature of Witness ) Signature of Selling Shareholder
[OR, IF SIGNIFICANT SHAREHOLDER IS NOT AN INDIVIDUAL]
SIGNIFICANT SHAREHOLDER
Per:
--------------------------
Authorized Signing Officer
--------------------------
Print Name and Title of
Authorized Signing Officer
SCHEDULE B
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
1. DEFINITIONS. For the purposes of this Schedule B and of the Agreement to
which it is attached and incorporated by reference, the following terms
have the following meanings:
(a) "Canadian GAAP" means generally accepted accounting principles
consistently applied in Canada;
(b) "Clarington Target Click Funds" means the public mutual funds for
which the Corporation or one of its Subsidiaries is the manager and/or
trustee which, for greater certainty, are Clarington Target Click 2010
Fund, Clarington Target Click 2015 Fund, Clarington Target Click 2020
Fund, Clarington Target Click 2025 Fund;
(c) "Closed-End Funds" means, collectively, Clarington Diversified Income
+ Growth Fund and Focused 40 Income Fund;
(d) "Debt" means with respect to any Person, (i) the amount of all
indebtedness for borrowed money of such Person which is evidenced by
notes payable, drafts accepted representing extensions of credit
bonds, debentures or other similar instruments, or not so evidenced
but which would be considered indebtedness for borrowed money in
accordance with Canadian GAAP, (ii) the amount of the deferred
purchase price for property or services, (iii) capital lease
obligations and all other purchase money obligations of such Person,
(iv) all other debt upon which interest charges are customarily paid
by such Person, (v) shares in the capital of such Person redeemable at
the time of determination of Debt at the option of the holder, (vi)
the amount of any liability, whether or not contingent, under any
lease and leaseback transaction, sale and leaseback transaction or
similar transaction, (vii) the amount of any liability, whether or not
contingent, under any bankers' acceptance facility or, except where
the same secures payment of trade payables incurred in the ordinary
course of business, letter of credit facility or similar facility
including any liability arising under any indemnity obligation
pertaining thereto, and (viii) any guarantee by such Person in any
manner of any part or all of an obligation included in clauses (i) to
(viii) above;
(e) "Disclosure Documents" means (i) the Corporation's audited
consolidated financial statements for the fiscal year ended September
30, 2004; (ii) interim consolidated financial statements for the
Corporation for the period ended June 30, 2005; (iii) the prospectus
of the Corporation dated March 18, 2005; (iv) the amended and restated
simplified prospectus and annual information form for the Mutual Funds
dated August 26, 2005, as further
-2-
amended by amended simplified prospectus and annual information form
dated October 14, 2005; (v) the simplified prospectus and annual
information form for the Clarington Target Click Funds dated June 28,
2005; (vi) the prospectus of Clarington Diversified Income + Growth
Fund dated October 28, 2004; (vii) the prospectus of Focused 40 Income
Fund dated February 25, 2005; (viii) the prospectus of Clarington
Limited Partnership 1997 dated April 9, 1997; (ix) the private
placement offering memorandum of Clarington Limited Partnership 1996
dated December 19, 1996; and (x) any material change report and press
release filed or issued by the Corporation since September 30, 2004,
which documents have or will be filed to the extent required by
Securities Legislation;
(f) "Employee Plan" means the program of self-insured Short Term
Disability benefits/ Salary Continuance benefits, a group insurance
policy (life and health insurance), and a group RRSP established and
adopted for the benefit of the Corporation's employees;
(g) "Employees" means those individuals employed by the Corporation and
its Subsidiaries on the Effective Date;
(h) "Encumbrance" means any encumbrance including any mortgage, pledge,
assignment, charge, lien, security interest, other third party
interest of any kind whether contingent or absolute, and any
agreement, option, right or privilege capable of becoming any of the
foregoing;
(i) "Intellectual Property" means trade marks and trade ▇▇▇▇ applications,
trade names, copyrights, know-how, technical expertise, research data,
trade secrets and other similar property, whether registered or
unregistered;
(j) "ITA" means the INCOME TAX ACT (Canada), as amended;
(k) "Limited Partnerships" means, collectively, Clarington Limited
Partnership 1997 and Clarington Limited Partnership 1996;
(l) "Material Contract" means, with respect to a party to this Agreement,
a contract which is material to such party and its Subsidiaries taken
as a whole;
(m) "Mutual Funds" means the public mutual funds for which the Corporation
or one of its Subsidiaries is the manager and trustee, in the case of
mutual fund trusts, and in respect of which the Corporation or one of
its Subsidiaries is the manager, in the case of mutual fund
corporations, which, for greater certainty, are those mutual funds
listed in sub-paragraph 2(hh) below;
-3-
(n) "Returns" means all returns, reports, estimates, declarations of
estimated tax, information statements and information returns relating
to, or required to be filed in connection with, any Taxes;
(o) "SG Agreements" means, collectively, all contracts and agreements
entered into by the Corporation and/or its Subsidiaries and/or the
Mutual Funds with SG Constellation One, Inc. or SG Constellation
Canada Ltd., including without limitation, (i) the amended and
restated distribution agreement for securitized pools dated as of
December 31, 2004 between ClaringtonFunds Inc., the Mutual Funds and
SG Constellation One, Inc., as amended to date; (ii) the amended and
restated distribution agreement for non-securitized pools dated as of
December 31, 2004 between ClaringtonFunds Inc., the Mutual Funds and
SG Constellation Canada Ltd., as amended to date; (iii) the Letter
Agreement dated as of December 31, 2004 between ClaringtonFunds Inc.,
the Corporate and SG Constellation Canada Ltd., as amended to date;
and (iv) the credit agreement dated as of August 1, 2005 between SG
Constellation Canada Ltd., as lender, ClaringtonFunds Inc., as
borrower and the Corporation, as guarantor, as amended to date;
(p) "Stock Option" means an option to acquire Common Shares granted
pursuant to the Stock Option Plan;
(q) "Stock Option Plan" means the Corporation's stock compensation option
plan adopted on November 30, 2003, inclusive of amendments thereto,
and the subsequent stock option plan effective November 2003 under
which, for greater certainty, no options have been granted;
(r) "Subsidiaries" means a subsidiary as defined under the ONTARIO
BUSINESS CORPORATIONS ACT; and
(s) "Taxes" means all taxes, charges, imposts, levies, duties, charges or
withholdings, however denominated, including any instalments and any
interest, penalties or other additions that may become payable in
respect thereof, imposed by any federal, territorial, provincial,
state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and provincial
income taxes), payroll and employee withholding taxes, pension plan
payments, employment insurance, employer health taxes, social
insurance taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business licence taxes, customs
duties, capital taxes, stamp taxes, environmental taxes, transfer
taxes, workers compensation and other governmental charges, and other
obligations of the same or of a similar nature to any of the
foregoing, whether or not disputed.
-4-
Terms not specifically defined in this Schedule B have the meaning ascribed to
those terms in the Agreement.
2. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation represents and warrants to the Offeror, and acknowledges and agrees
that the Offeror is relying on such representations and warranties in entering
into this Agreement, that:
(a) The Corporation is a corporation incorporated under the laws of
Ontario, has not been dissolved, and has all requisite corporate power
and authority to execute, deliver and perform its obligations under
this Agreement and the agreements, documents and transactions
contemplated hereby;
(b) The authorized capital of the Corporation consists of an unlimited
number of Common Shares of which there are currently outstanding
13,242,690 Common Shares and, in addition, 1,555,550 Common Shares are
issuable upon the exercise of outstanding Stock Options, for a total
of 14,798,240 fully diluted Common Shares;
(c) Other than options granted pursuant to the Stock Option Plan and
outstanding on the date hereof, the Corporation does not have any
outstanding agreements, subscriptions, warrants, options or
commitments (nor has it granted any rights or privileges capable of
becoming an agreement, subscription, warrant, option or commitment)
obligating the Corporation to issue additional Common Shares or any
other securities of the Corporation;
(d) The Corporation has all requisite corporate power and authority to
lease and operate its properties and assets and to carry on its
business as now conducted by it and is duly licensed or otherwise
qualified to carry on business in each jurisdiction in which the
character of the properties and assets now owned by it or the nature
of the business now conducted by it requires it to be so licensed or
qualified except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on the Corporation;
(e) Each of the Corporation and the Mutual Funds, Closed-End Funds and
Limited Partnerships (other than Clarington Limited Partnership 1996)
is a "reporting issuer" or has equivalent status and is not in default
of any requirement under Securities Legislation of each of the
provinces of Canada; each document required by Securities Legislation
to be filed by the Corporation or the Mutual Funds, Closed-End Funds
and Limited Partnerships, as the case may be, with securities
regulatory authorities since the date on which it became a reporting
issuer or attained such equivalent status was, as of the date of
filing, in compliance in all material respects with all applicable
requirements under Securities Legislation. None of the documents, at
the time filed or as subsequently amended,
-5-
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statement made therein, in light of the circumstances under
which they were made, not misleading;
(f) This Agreement and the agreements, documents and transactions
contemplated hereby have been duly authorized by all necessary
corporate action of the Corporation and this Agreement constitutes a
valid, binding and enforceable obligation of the Corporation in
accordance with the terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other similar laws
relating to or affecting creditors' rights generally and to general
principles of equity;
(g) Except with respect to the SG Agreements and except as provided in the
contracts set out in the list of contracts dated November 6, 2005
provided to the Offeror by the Corporation, the execution and delivery
of this Agreement and the completion of the transactions contemplated
herein upon and subject to the terms and conditions hereof and the
fulfilment of and compliance with the terms and provisions hereof do
not and will not (i) subject to obtaining required regulatory and
shareholder approvals, violate any Law or Securities Legislation
applicable to the Corporation or any of its Subsidiaries or any of the
Mutual Funds, Closed-End Funds and Limited Partnerships; (ii) result
in a violation, breach or termination of any provision of the articles
or by-laws of the Corporation or any of its Subsidiaries or the
constating documents of any of the Mutual Funds, Closed-End Funds and
Limited Partnerships; or (iii) subject to obtaining the consent of SG
Constellation Canada Ltd. pursuant to the SG Agreements, conflict
with, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of the performance required by, any
material agreement, commitment or instrument to which the Corporation
or any of its Subsidiaries or any of the Mutual Funds, Closed-End
Funds and Limited Partnerships is a party or by which it is bound or
to which its property is subject, or result in the cancellation,
suspension or material alteration in the terms of any licence, permit
or authority held by the Corporation or any of its Subsidiaries, or
result in the creation of any Encumbrance upon any of the assets of
the Corporation or any of its Subsidiaries or give to others any
material interest or rights, including rights of purchase,
termination, cancellation or acceleration, under any such agreement or
instrument, other than violations, breaches, terminations, conflicts,
defaults, accelerations of performances, payments, Encumbrances,
interest or rights that will not have a Material Adverse Effect on the
Corporation;
(h) The following is true in respect of each Material Contract: (i) all
Material Contracts of the Corporation, each of its Subsidiaries and
each of the Mutual Funds, Closed-End Funds and Limited Partnerships
have been disclosed in the data room index dated November 2, 2005
provided to the Offeror by the Corporation (the "Data Index"), (ii)
each such Material
-6-
Contract is in full force and effect and is valid, binding and
enforceable against the Corporation and the Subsidiaries (as the case
may be, and in all capacities in which they may sign) in accordance
with its terms (subject to bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and other similar Laws relating to or
affecting creditors' rights generally and to general principles of
equity) and, (iii) to the knowledge of the Corporation, no material
breach or default exists in respect of a Material Contract on the part
of any party thereto and no event has occurred which, with the giving
of notice or the lapse of time or both, would, if not cured in
accordance with such Material Contract, constitute such a material
breach or default;
(i) The Corporation's audited consolidated financial statements for the
year ended September 30, 2004, including the notes thereto, as
reported on by PricewaterhouseCoopers LLP, present fairly in all
material respects the consolidated financial position of the
Corporation, the results of its operations and the changes in its
financial position as at the dates and for the periods indicated in
such statements, and have been prepared in accordance with Canadian
GAAP consistently applied, except as otherwise stated in the notes
thereto;
(j) Except for the transactions contemplated hereby or as reserved against
in the Corporation's audited consolidated financial statements for the
year ended September 30, 2004 or disclosed in the Disclosure
Documents, the Corporation and its Subsidiaries and the Mutual Funds,
Closed-End Funds and Limited Partnerships have conducted their
businesses only in the ordinary course of business and there has not
occurred:
(i) a Material Adverse Change with respect to the Corporation;
(ii) any amendments or changes in the constating documents or by-laws
of the Corporation or its Subsidiaries or the constating
documents of the Mutual Funds, Closed-End Funds or Limited
Partnerships, other than any amendments or changes in such
documents as have been filed with the applicable Governmental
Entity and are publicly available;
(iii) any damage, destruction or loss, whether covered by insurance or
not, that could reasonably be expected to have a Material Adverse
Effect on the Corporation;
(iv) with the exception of the Corporation's normal course issuer bid,
any redemption, repurchase or other acquisition of Common Shares
by the Corporation or any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or
property) with respect to Common Shares;
(v) any material increase in or material modification of the
compensation or benefits payable or to become payable by the
-7-
Corporation or its Subsidiaries to any of its directors or
employees, except in the ordinary course of business consistent
with past practice;
(vi) any material increase in or material modification of any bonus,
pension, insurance or Employee Plan (including but not limited
to, the granting of stock options, restricted stock awards or
stock appreciation rights) made to, for or with any of its
employees, other than in the ordinary course of business
consistent with past practice or as contemplated in this
Agreement;
(vii) except as provided for pursuant to the SG Agreements, any
material change in accounting methods, principles or practices;
(viii) any material writing down or writing off of the value of any
assets other than in the ordinary course of business consistent
with past practice;
(ix) except as provided for pursuant to the SG Agreements, any
acquisition or sale of property or assets of the Corporation or
its Subsidiaries, other than in the ordinary course of business
consistent with past practice;
(x) any material alteration in any term of any outstanding security
of the Corporation or its Subsidiaries, other than the
Corporation's two mutual fund corporations;
(xi) except as provided for pursuant to the SG Agreements, other than
in the ordinary course of business consistent with past practice
or other nonmaterial amounts or as contemplated in this
Agreement, (A) any incurrence, assumption or guarantee by the
Corporation or its Subsidiaries of any debt for borrowed money
other than in connection with the SG Agreements; (B) any issuance
or sale of any securities convertible into or exchangeable for
debt securities of the Corporation; or (C) any issuance or sale
of options or other rights to acquire from the Corporation,
directly or indirectly, debt securities of the Corporation or any
securities convertible into or exchangeable for any such debt
securities;
(xii) other than in connection with the SG Agreements or in the
ordinary course of business consistent with past practice or
other nonmaterial amounts or as contemplated in this Agreement,
any creation or assumption by the Corporation or its Subsidiaries
of any Encumbrance on any asset which is material to the
Corporation, its Subsidiaries and the Mutual Funds, Closed-End
Funds and Limited Partnerships, taken as a whole, other than a
credit facility in respect of each of the Closed-End Funds;
-8-
(xiii) any making of any loan, advance or capital contribution to or
investment in any Person other than: (i) demand loans and demand
advances, capital contributions and investments made in the
ordinary course of business consistent with past practice and in
nonmaterial amounts or as contemplated in this Agreement, and
(ii) in respect of the Mutual Funds, Closed-End Funds and Limited
Partnerships, purchases on the open market of securities or
otherwise in accordance with Securities Legislation and the
constating documents of the Mutual Funds, Closed-End Funds and
Limited Partnerships;
(xiv) other than pursuant to the SG Agreements, any transfer or grant
of a material right other than those transferred or granted in
the ordinary course of business consistent with past practice; or
(xv) any waiver or release of any material right or claim of the
Corporation or any of its Subsidiaries;
(k) Neither the Corporation nor any of its Subsidiaries own any real
property;
(l) Other than as reflected in the Corporation's audited consolidated
financial statements for the year ended September 30, 2004, including
the notes thereto, and other than the SG Agreements, each of the
Corporation and its Subsidiaries are the beneficial owners of all of
its assets, with good and marketable title thereto, except where the
failure to own or have such good and marketable title would not have a
Material Adverse Effect on the Corporation, free and clear of all
Encumbrances, and except for Encumbrances which in the aggregate are
not material to the Corporation and its Subsidiaries, taken as a
whole, or which are either incidental to current operations of the
Corporation or its Subsidiaries or relate to obligations not now due
and except for Encumbrances granted by the Corporation and/or its
Subsidiaries in connection with the SG Agreements;
(m) Neither of the Corporation nor any Mutual Fund, Closed-End Funds and
Limited Partnerships has filed any confidential material change
reports or other similar disclosures to any Canadian securities
regulatory authority regarding any matter which has not been publicly
disclosed, except for repayment notices to the Ontario Securities
Commission in connection with the SG Agreements;
(n) With the exception of the legal action described in the Data Index,
there are no actions, suits, proceedings, investigations or
outstanding claims or demands (whether or not purportedly on behalf of
the Corporation) instituted, pending, or, to the knowledge of the
Corporation, threatened in writing against the Corporation or any of
its Subsidiaries or in respect of any of the Mutual Funds, Closed-End
Funds and Limited Partnerships at Law or in equity or before or by any
Governmental Entity which would have a Material Adverse Effect on the
Corporation, nor is there any judgement, order, decree or award of any
court or other governmental
-9-
authority having jurisdiction, obtained, pending, or, to the knowledge
of the Corporation, anticipated against or affecting any of them which
would prevent or materially hinder the consummation of the
transactions contemplated by this Agreement or which would have a
Material Adverse Effect on the Corporation;
(o) No claims have been made or, to the knowledge of the Corporation,
threatened in writing which may be the subject of a demand for
indemnification under the Corporation's by-laws or any agreement
between the Corporation and its directors and officers or pursuant to
the Corporation's directors and officers insurance policy, and the
Corporation is not aware of any state of facts which exists or existed
which could give rise to any such claims, which would have a Material
Adverse Effect on the Corporation;
(p) Each of the Subsidiaries of the Corporation is a corporation
incorporated under the laws of its jurisdiction of incorporation or
continuance, as the case may be, has not been dissolved, and has all
requisite corporate power, and authority to carry on its business as
now carried on by it and to own or lease and operate its properties
and assets and it is duly licensed or otherwise qualified as a
corporation in each jurisdiction in which the character of the
properties and assets owned by it or the nature of the business
conducted by it requires it to be so licensed or qualified except
where the failure to be so licensed or qualified would not have a
Material Adverse Effect on the Corporation;
(q) Other than the Corporation's two mutual fund corporations, the
Corporation owns, directly or indirectly, all of the shares in the
capital of each of its Subsidiaries and has no Subsidiaries other than
as disclosed in writing to the Offeror by the Corporation;
(r) The business of the Corporation and of each of its Subsidiaries is
being conducted in all material respects in compliance with all
applicable Laws, regulations and ordinances and all authorities having
jurisdiction except where failure to do so would not have a Material
Adverse Effect on the Corporation;
(s) There are no material contracts or arrangements to which the
Corporation or any of its Subsidiaries is a party or which relate to a
Mutual Fund, Closed-End Funds and Limited Partnerships and in which
any director or officer of the Corporation has any personal or
financial interest;
(t) No person has any right to receive any commission, finder's fee or
other similar payment from the Corporation or any of its Subsidiaries
in respect of the transactions contemplated in this Agreement based on
any arrangement or agreement made by or on behalf of the Corporation
or any of its Subsidiaries, other than ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Capital Partners
Inc. and Catalyst Equity Research Inc.;
-10-
(u) Since September 30, 2004, neither the Corporation nor any of its
Subsidiaries has lost a relationship with any of its material
customers or service providers, including Persons providing
arrangements to fund selling commissions on back-end load sales of
mutual fund securities. To the knowledge of the Corporation, neither
the Corporation nor any of its Subsidiaries has been notified that it
will lose, or suffer any diminution in, a relationship with any such
customers or service provider. To the knowledge of the Corporation, no
representative of any such material customers or service provider has
notified either the Corporation or any of its Subsidiaries that, in
the event of a sale or change of control of the Corporation, either
the Corporation or any Subsidiary would lose, or suffer any diminution
in, its such relationship;
(v) The Corporation and each of its Subsidiaries have duly filed or caused
to be filed on a timely basis all Returns required to be filed by them
in all relevant jurisdictions, all of which were true, correct and
complete in all material respects, and have paid all Taxes due and
payable by them. The Corporation and each of its Subsidiaries have
made provision for Taxes payable by them for all periods for which
Returns are not yet required to be filed or payments are not yet
required to be made. To the knowledge of the Corporation, there are no
actions, suits, proceedings, investigations or claims pending or, to
the knowledge of the Corporation, threatened against the Corporation
or any other Subsidiaries in respect of Taxes and, in particular,
there are no currently outstanding assessments, reassessments or
written inquiries which have been issued or raised by any Governmental
Entity relating to Taxes. The Corporation and each of its Subsidiaries
have withheld or collected all amounts required to be withheld or
collected by them on account of Taxes and have remitted all such
amounts to the appropriate Tax authority when required by law to do
so. To the knowledge of the Corporation, there are no Encumbrances for
unpaid Taxes. The Canadian federal income and capital Tax liability of
the Corporation and each of its Subsidiaries has been assessed by
Revenue Canada, and any Canadian provincial income and capital Tax
liability of the Corporation and each of its Subsidiaries has been
assessed by the appropriate taxing authority, for all taxation periods
ending prior to September 30, 2005 and, except as disclosed in writing
to the Offeror by the Corporation, there are no agreements, waivers or
other arrangements (collectively, "waivers") providing for an
extension of time with respect to the filing of any Return by, the
payment of any Tax, governmental charge or deficiency by, or the
issuance of an assessment or reassessment against the Corporation or
any of its Subsidiaries. There are no circumstances existing other
than in the ordinary course of business which could result in the
application of section 78 of the ITA or any equivalent provincial
provision to the Corporation or any of its Subsidiaries. Except as
disclosed in writing to the Offeror by the Corporation, none of
sections 80 through to and including section 80.04 of the ITA, or any
equivalent provincial provision, have applied to the Corporation or
any of its
-11-
Subsidiaries. None of the Corporation or any of its Subsidiaries has
acquired an asset from a person with which it deals at non-arm's
length for consideration greater than the fair market value of such
asset at the time of its acquisition. None of the Corporation or any
of its Subsidiaries has entered into an agreement contemplated by
section 191.3 of the ITA. None of the Corporation or any of its
Subsidiaries is subject to any material liability for Taxes of any
other person. None of the Corporation or any of its Subsidiaries is
or has been a party to any tax sharing agreement which is binding and
in effect on the date hereof. No material claim has ever been made by
an authority in a jurisdiction where the Corporation or any of its
Subsidiaries does not file Returns that it is or may be subject to
taxation by that jurisdiction. To the knowledge of the Corporation,
none of the Corporation or any of its Subsidiaries has any liability
for Taxes other than Taxes arising in the ordinary course of its
business;
(w) The Corporation has disclosed in writing to the Offeror:
(i) the names and titles of all Employees;
(ii) a list of all written employment contracts with change in control
provisions between the Corporation or its Subsidiaries and the
Employees; and
(iii) the rate of annual remuneration of each Employee at the date
hereof, any bonuses paid since September 30, 2004 and all other
bonuses, incentive schemes and benefits to which such Employee is
entitled;
Except as disclosed in writing to the Offeror by the Corporation, all
Employees are employed on indefinite hirings requiring only reasonable
notice of termination by applicable Law;
There are no collective agreements to which the Corporation is a
party. No trade union, council of trade unions, employee bargaining
agency or affiliated bargaining agent holds bargaining rights with
respect to any of the Employees by way of certification, interim
certification, voluntary recognition, or successor rights, or has
applied or threatened to apply to be certified as the bargaining agent
of any of such employees. To the knowledge of the Corporation, no
material work stoppage or other material labour dispute is pending or
threatened;
(x) (i) the Corporation has disclosed in the Data Index a true and
complete list of each Employee Plan applicable to any of the
Employees. There is no Employee Plan applicable to any of the
Employees except as so listed by the Corporation. The Corporation
has no formal plan or commitment, whether legally binding or
not, to create any additional Employee Plan or to modify or
change any existing Employee Plan that would affect any Employee;
-12-
(ii) with respect to each Employee Plan that is funded wholly or
partially through an insurance policy, there will be no material
liability of the Corporation as of the completion of the
transactions contemplated herein under any such insurance policy
or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising
wholly or partially out of events occurring prior to the
completion of the transactions contemplated herein; and
(iii) all Employee Plans are in compliance in all material respects
with all applicable Laws and have been administered and operated
in compliance in all material respects with applicable Laws;
(y) Other than the Corporation's proprietary software entitled "EIMS", the
Corporation has disclosed in the Data Index all material Intellectual
Property which is used by the Corporation and its Subsidiaries in
their businesses and by the Mutual Funds and the applicable expiry
dates of any registrations and particulars of any licences of
Intellectual Property held by the Corporation, its Subsidiaries and
the Mutual Funds. The Intellectual Property listed therein and all
other material Intellectual Property which is used by the Corporation
and its Subsidiaries in their businesses is owned by or licensed to
the Corporation or its Subsidiaries, as the case may be, with the sole
and exclusive right to use the same, except as disclosed in writing to
the Offeror by the Corporation. To the knowledge of the Corporation,
the conduct of the business of the Corporation and its Subsidiaries
does not infringe the Intellectual Property of any Person in any
material manner;
(z) The books, records and accounts of the Corporation, its Subsidiaries,
the Mutual Funds, the Closed-End Funds and the Limited Partnerships in
all material respects (a) have been maintained in accordance with good
business practices on a basis consistent with prior years, (b) are
stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of the Corporation, its
Subsidiaries and the Mutual Funds, as the case may be, and (c)
accurately and fairly reflect the basis for the Corporation's and the
Mutual Funds' financial statements. The Corporation has devised and
maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; and
(ii) transactions are recorded as necessary (A) to permit preparation
of financial statements in conformity with Canadian GAAP, and (B) to
maintain accountability for assets;
(aa) Other than in connection with Securities Legislation, no
authorization, consent or approval of, or filing with any public body,
court or authority is necessary on the part of the Corporation or its
Subsidiaries or the Mutual Funds for the consummation of the
transactions contemplated by this
-13-
Agreement, except for such authorizations, consents, approvals and
filings as to which the failure to obtain or make would not,
individually or in the aggregate, prevent consummation of the
transactions contemplated by this Agreement;
(bb) Each of the Mutual Funds is duly formed and validly existing in good
standing under the laws of the jurisdiction in which it was formed and
is operating in material compliance with Securities Legislation;
(cc) The audited financial statements of each of the Closed-End Funds, the
Mutual Funds and Limited Partnerships for the years ended December 31,
2004 and 2003 (as applicable), including the notes thereto, reflect
fairly in all material respects their respective financial position,
the results of operations and the changes in financial position as at
the dates and for the periods indicated in such statements, and have
been prepared in accordance with Canadian GAAP consistently applied,
except as otherwise stated in the notes thereto;
(dd) The Corporation or one of its Subsidiaries is the duly appointed
manager of each of the Mutual Funds and the Closed-End Funds and is
trustee of the Closed-End Funds and the Mutual Funds that are trusts;
(ee) Each of the Closed-End Funds and Limited Partnerships is duly formed
and validly existing in good standing under the laws of the
jurisdiction in which it was formed and is operating in material
compliance with Securities Legislation;
(ff) The Corporation or one of its Subsidiaries is the duly appointed
manager and trustee of each of the Closed-End Funds;
(gg) The Corporation or one of its Subsidiaries is the duly appointed
general partner of each of the Limited Partnerships;
(hh) As at October 31, 2005, each Mutual Fund had a net asset value
(determined in accordance with Securities Legislation and its
constating documents) as stated below:
---------------------------------------------------------------------
NET ASSET VALUE
NAME OF MUTUAL FUND AT OCTOBER 31, 2005
---------------------------------------------------------------------
Clarington Canadian Balanced Fund $296,797,224
---------------------------------------------------------------------
Clarington Canadian Bond Fund 25,801,040
---------------------------------------------------------------------
Clarington Canadian Dividend Fund 995,584,263
---------------------------------------------------------------------
Clarington Canadian Equity Class 13,149,928
---------------------------------------------------------------------
Clarington Canadian Equity Fund 301,036,332
---------------------------------------------------------------------
-14-
---------------------------------------------------------------------
NET ASSET VALUE
NAME OF MUTUAL FUND AT OCTOBER 31, 2005
---------------------------------------------------------------------
Clarington Canadian Growth & Income Fund 36,095,103
---------------------------------------------------------------------
Clarington Canadian Income Fund 905,256,296
---------------------------------------------------------------------
Clarington Canadian Income Fund II 54,447,132
---------------------------------------------------------------------
Clarington Canadian Resources Class 3,720,199
---------------------------------------------------------------------
Clarington Canadian Small Cap Fund 250,974,619
---------------------------------------------------------------------
Clarington Canadian Value Fund 51,814,731
---------------------------------------------------------------------
Clarington Core Portfolio 46,538,992
---------------------------------------------------------------------
Clarington Diversified Income Fund 403,733,205
---------------------------------------------------------------------
Clarington Global Equity Class 43,571,001
---------------------------------------------------------------------
Clarington Global Equity Fund 220,476,546
---------------------------------------------------------------------
Clarington Global Income Fund 146,944,515
---------------------------------------------------------------------
Clarington Global Small Cap Fund 22,682,808
---------------------------------------------------------------------
Clarington Income Trust Fund 67,835,501
---------------------------------------------------------------------
Clarington Money Market Fund 71,830,540
---------------------------------------------------------------------
Clarington Navellier U.S. All Cap Fund 60,988,306
---------------------------------------------------------------------
Clarington Short-Term Income Class 7,361,092
---------------------------------------------------------------------
Clarington Target Click 2010 Fund 19,125,145
---------------------------------------------------------------------
Clarington Target Click 2015 Fund 36,439,026
---------------------------------------------------------------------
Clarington Target Click 2020 Fund 7,892,024
---------------------------------------------------------------------
Clarington Target Click 2025 Fund 6,325,531
---------------------------------------------------------------------
Clarington U.S. Dividend Fund 45,134,685
---------------------------------------------------------------------
---------------------------------------------------------------------
Name of Closed-End Fund NET ASSET VALUE
---------------------------------------------------------------------
---------------------------------------------------------------------
Clarington Diversified Income + Growth Fund 65,275,783
---------------------------------------------------------------------
Focused 40 Income Fund 48,219,558
---------------------------------------------------------------------
(ii) Each Mutual Fund has filed, or prior to the completion of the
transactions contemplated herein, will have filed, all Returns
required to be filed with applicable tax authorities for each taxation
year ending on or before
-15-
December 31, 2004 within the time period prescribed by applicable tax
legislation (including the ITA and the Taxation Act (Quebec)) and has
delivered, or prior to the completion of the transactions contemplated
herein, will have delivered, all information slips within the time
prescribed by applicable taxation legislation to holders of securities
of the Mutual Fund in accordance with the provisions of applicable
taxation legislation in respect of all taxation years ending on or
before December 31, 2004. Each Mutual Fund has made distributions in
such amounts to holders of securities of the Mutual Fund such that the
Mutual Fund has no liability (contingent or otherwise) to pay Taxes
for any period ending on or before December 31, 2004 other than any
such Taxes that are immediately refundable to the Mutual Funds. To the
knowledge of the Corporation, there are no actions, suits or other
proceedings or investigations or claims in progress, pending or
threatened against the Mutual Funds in respect of any Taxes, and, in
particular, there are no currently outstanding assessments,
reassessments or written inquiries which have been issued or raised by
any Governmental Entity relating to any such Taxes;
(jj) The Corporation, as manager and/or trustee of the Mutual Funds, has
delivered or caused to be delivered to purchasers of securities of the
Mutual Funds in accordance with applicable Securities Legislation and
any exemptive relief obtained therefrom (i) all confirmations of
trades, including purchases and redemptions of securities and
reinvestment of distributions by holders of securities, (ii) financial
statements of the Mutual Funds and (iii) all proxy solicitation
materials, all within the time and in the manner required by Law, and
has made the prospectuses of the Mutual Funds available for delivery
in the manner required under Securities Legislation;
(kk) Each of the Mutual Funds and the Closed-End Funds is the beneficial
owner of the portfolio securities held by it and has good and
marketable title thereto, in each case free of all Encumbrances. Each
Mutual Fund has the exclusive right to possess and dispose of the
portfolio securities held by it and the investments of each Mutual
Fund and its investment practices comply with Securities Legislation;
(ll) There are no agreements, options or other rights pursuant to which the
Corporation or one of its Subsidiaries is or may become obligated to
resign as trustee and/or manager of a Mutual Fund or a Closed-End Fund
or to appoint any successor trustee, manager or investment adviser of
an Mutual Fund upon completion of the transactions contemplated by the
Agreement;
(mm) Each registered retirement savings plan ("RRSP") or registered
retirement income fund ("RRIF") which is administered by the
Corporation or any of its Subsidiaries has been administered in
accordance with the provisions of the ITA and any other applicable Law
and to the knowledge of the Corporation no such RRSP or RRIF has
acquired any property which is a
-16-
"non-qualified investment" for such RRSP or RRIF (as that term is used
in the ITA);
(nn) Neither the Corporation nor any of its Subsidiaries is aware of any
legislation, or proposed legislation published by a legislative body,
which it anticipates will constitute a Material Adverse Effect with
respect to the business, affairs, operations, assets, liabilities
(contingent or otherwise) or prospects of the Corporation or its
Subsidiaries; and
(oo) Except as set forth in the Disclosure Documents, no insider (as such
term is defined in the Securities Act (Ontario)) (i) has any agreement
with the Corporation or any of its Subsidiaries or any interest in any
property, real or personal, tangible or intangible, including without
limitation trade names or trade marks used in or pertaining to the
business of the Corporation or its Subsidiaries, except for the normal
rights as a shareholder; or (ii) has any claim or cause of action
against the Corporation, except for accrued compensation, pension and
benefits, expenses and similar obligations incurred in the course
business (including reimbursement of medical expenses pursuant to
employee plan), except as disclosed in the Disclosure Documents.