Exhibit 10-1
THE PRE-ACQUISITION AGREEMENT entered into this 23rd day of December, 1997.
B E T W E E N:
PSINET INC., a corporation existing under the laws of New York (hereinafter
called the "Offeror")
- and -
iSTAR internet inc., a corporation existing under the laws of Canada
(hereinafter called the "Company")
RECITALS
WHEREAS:
1. by letter agreement dated November 9, 1997 (the "Original Agreement"),
PSINet and ISTAR agreed, among other things and subject to certain
conditions, that PSINet would purchase all of the shares of ISTAR for
Cdn$1.206 per share payable through the issuance of convertible preferred
shares of PSINet to shareholders of ISTAR;
2. by letter agreement dated November 12, 1997 (the "First Amending
Agreement"), the parties hereto amended the Original Agreement, among other
things, to confirm that the Transaction would be completed by way of plan of
arrangement (the "Arrangement");
3. the Company and the Offeror have agreed to terminate the Original Agreement
and the First Amending Agreement in consideration for the Offeror offering to
purchase all of the outstanding shares of the Company for cash consideration
of Cdn$0.75 per share of the Company by way of take-over bid circular;
4. the board of directors of the Company has determined that it would be in
the best interests of the Company and its shareholders to recommend
acceptance of the Offeror's offer to the shareholders of the Company, to
cooperate with the Offeror and take all reasonable action to support the
Offeror's offer;
5. the board of directors of the Company has determined that it would be in
the best interests of the Company and its shareholders to enter into this
Agreement; and
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6.the Offeror will make an offer subject to the terms and conditions of this
Agreement.
NOW THEREFORE IN CONSIDERATION of the mutual covenants hereinafter
set out, the parties hereto hereby agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER. Subject to the terms and conditions of this Agreement,
the Offeror agrees to mail on or before January 7, 1998 to all
holders of shares of the Company an offer to purchase all of the
shares of the Company ((the "Shares"), and the holders of Shares
are hereinafter called the "Shareholders") for a consideration of
Cdn$0.75 per Share, subject to the terms and conditions set out in
Schedule "A" to this Agreement (the "Offer") as the same may be
amended pursuant to the terms hereof. The Offeror further agrees
that it will not, except with the prior consent of the Company,
amend the terms of the Offer other than to increase the
consideration or to waive any conditions or to extend the expiry
thereof, provided in such case that all Shares deposited under the
Offer are taken up and paid for on or before January 30, 1998.
1.2 COMPANY APPROVAL OF THE OFFER.
(a) The Company represents that its board of directors, upon
consultation with its advisors, has determined that:
(i) the Offer is fair to the Shareholders and is in the best
interests of the Company and the Shareholders;
(ii) the board of directors will recommend that Shareholders
accept the Offer;
(iii) this Agreement is in the best interests of the
Company and the Shareholders; and
(iv) the individual members of the board of directors who
beneficially hold Shares have agreed to deposit their
Shares under the Offer.
(b) The Company represents that the board of directors has
received an opinion from the Company's
financial advisors to the effect that the Offer is fair from a
financial point of view to the Shareholders.
1.3 MUTUAL COOPERATION. The Offeror covenants to cooperate with the
Company to take all reasonable action to provide the Company, on a
confidential basis, with a draft copy of the take-over bid circular
or any amendment thereto to be issued, prior to the mailing
thereof, and to provide the Company with a reasonable opportunity
to review and provide comments thereon. The Company covenants to
cooperate
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with the Offeror to take all reasonable action to support
the Offer and to provide the Offeror, on a confidential basis, with
a draft copy of the Directors' Circular or any amendment thereto to
be issued, prior to the mailing thereof, and to provide the Offeror
with a reasonable opportunity to review and provide comments
thereon. The Company further covenants to use reasonable
commercial efforts to mail the Directors' Circular to be issued in
connection with the mailing of the Offer on the same date that the
Offeror mails the Offer to the Shareholders. If required by the
Offeror, the Company shall cause its wholly-owned subsidiary which
owns Shares to deposit such Shares under the Offer.
1.4 JOINT PRESS RELEASE AND PUBLIC DISCLOSURE. The parties agree to
jointly issue a press release as soon as practicable in a mutually
agreeable form and the Company agrees to file a copy of this
Agreement as soon as possible with the securities regulatory
authorities having jurisdiction over the Company.
1.5 POST OFFER COVENANTS. The Company agrees and represents that its
board of directors has determined to use its and their respective
reasonable efforts to enable the Offeror to elect or appoint all of
the directors of the Company as soon as possible after the Offeror
takes up and pays for at least 50% of the outstanding Shares
pursuant to the Offer.
1.6 MANAGEMENT AGREEMENT. Contemporaneously with the signing of this
Agreement, the parties hereto shall enter into a management
agreement in form satisfactory to the parties (the "Management
Agreement").
1.7 MUTUAL RELEASES. The Company and the Offeror agree that the
Original Agreement and the First Amending Agreement are each hereby
terminated. The Company and the Offeror each shall execute a form
of release to release the other from all of its respective
obligations under such agreements in form satisfactory to each
party hereto, which forms of releases shall be held in escrow until
the date on which the letter of credit described in section 3.3
hereof is presented to the Company. In the
event that such letter of credit is not presented to the Company on
or before December 31, 1997, the releases shall be deemed to be
null and void and the parties hereto shall be considered to have
preserved their rights under the Original Agreement and the First
Amending Agreement.
ARTICLE II
COVENANTS OF THE COMPANY
2.1 ORDINARY COURSE OF BUSINESS. The Company covenants and agrees
that, prior to the time (the "Effective Time") of the appointment
or election to the board of directors of the Company of persons
designated by the Offeror pursuant to section 1.5, unless the
Offeror shall otherwise agree in writing or as otherwise expressly
contemplated or permitted by this Agreement, the Company covenants
and agrees:
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(a) not to declare or pay any dividend or make any distribution of
its properties or assets to its shareholders or, other than as
provided for herein, purchase, redeem or retire any shares of
its capital stock or other securities of the Company;
(b) not to allot or issue, or enter into any agreement for the
allotment or issuance of, or grant any other rights to
acquire, shares of its capital stock or the capital stock of
any of its subsidiaries or securities convertible into,
exchangeable for or which carry a right to acquire, directly
or indirectly, shares of its capital stock or the capital
stock of any of its subsidiaries;
(c) not to, and not to permit any subsidiary to, merge,
amalgamate, or consolidate into or with any person or enter
into any other corporate reorganization, or, sell all or any
substantial part of its assets to any person, or, perform any
act or enter into any transaction or negotiation which can
reasonably be expected to interfere or be inconsistent with
the consummation of the transactions contemplated hereby;
(d) not to, and not permit any subsidiary to, alter or amend its
articles or bylaws, as they exist at the date of this
agreement;
(e) to use all reasonable efforts to make all filings and obtain
all consents, approvals and waivers necessary or desirable in
connection with the Offer and the transactions contemplated
hereby and to take such other measures as may be appropriate
to fulfil its obligations under and to carry out the
transactions contemplated by this agreement; and
(f) not to borrow any amounts greater than $5,000 other than in
accordance with the Management Agreement.
ARTICLE III
COVENANTS OF THE OFFEROR
3.1 EMPLOYMENT AGREEMENTS. The Offeror covenants and agrees, and after
the Effective Time will cause the Company and any successor to the
Company to agree, to honour and comply with the terms of those
existing employment and severance agreements of the Company and its
Subsidiaries which the Company has disclosed to the Offeror in
writing prior to the date hereof.
3.2 OFFICERS' AND DIRECTORS' INSURANCE. The Offeror agrees to use
reasonable efforts after the Effective Time to secure directors'
and officers' insurance coverage for the Company's current and
former directors and officers on a seven year "trailing" (or "run-
off") basis. If a trailing policy is not available at a reasonable
cost (a "reasonable cost" being an aggregate cost not greater than
$200,000), then the Offeror agrees that for the entire period from
the Effective Time until seven years
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after the Effective Time, the Offeror will cause the Company or
any successor to the Company to maintain the Company's current
directors' and officers' insurance policy or an equivalent policy,
subject in either case to terms and conditions no less advantageous
to the directors and officers of the Company than those contained
in the policy in effect on the date hereof, for all present and
former directors and officers of the Company, covering claims made
prior to or within seven years after the Effective Time.
3.3 LETTER OF CREDIT. (1) The Offeror agrees to deliver on or before
December 31, 1997 an irrevocable letter of credit in the amount of
Cdn$22,018,763 drawn on a Canadian chartered bank in favour of the
Company and the Depositary under the Offer.
(2) The Company or the Depositary shall be entitled to draw upon
the letter of credit by presenting a written demand for payment to
such bank if the Offeror does not mail the take-over bid circular
in connection with the Offer by January 7, 1998 unless the Offeror
is prevented from doing so by the Company or force majeure and such
draws shall be used to make payments to shareholders of the Company
in exchange for their Shares in accordance with the Offer or in
accordance with a court ordered judgment for specific performance
of the Offeror's obligation to make and complete the Offer in
accordance with section 8.2 hereof.
(3) The Depositary shall be entitled to draw upon the letter of
credit by presenting a written demand for payment to such bank if
the Offeror does not make other arrangements for payment and such
draws shall be used to pay for the Shares deposited under the Offer
on the expiry date of the Offer if all of the conditions to the
Offer set out in Schedule "A" hereto have been satisfied or waived,
provided that the Depositary shall be entitled to draw only if it
has been advised by the Company that the condition contained in
paragraph 4(iii) of Schedule "A" hereto has been satisfied and has
not been jointly advised by counsel to the Company and counsel to
the Offeror that the condition contained in paragraph 4(ii) of
Schedule "A" has not been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 REPRESENTATIONS. The Company hereby provides to the Offeror those
representations and warranties as set forth in Schedule "B" to this
Agreement (and acknowledges that the Offeror is relying upon those
representations and warranties in entering into this Agreement).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
5.1 REPRESENTATIONS. The Offeror hereby represents and warrants to the
Company as provided in Schedule "C" to this Agreement (and
acknowledges that the Company is relying upon such representations
and warranties in entering into this Agreement).
ARTICLE VI
MUTUAL COVENANTS
6.1 CONSULTATION. The Offeror and the Company agree to consult with
each other in issuing any press releases or otherwise making public
statements with respect to the Offer and in making any filings with
any federal, provincial or state governmental or regulatory agency
or with any stock exchange with respect thereto. Each party shall
use its reasonable efforts to enable the other party to review and
comment on all such press releases prior to the release thereof.
6.2 FURTHER ASSURANCES. Subject to the terms and conditions herein,
the Offeror and the Company agree to use their respective
reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations, to consummate the
transactions contemplated by this Agreement and the Offer. The
Company and the Offeror will, and will cause each of their
respective subsidiaries to, use their reasonable efforts (i) to
obtain all necessary waivers, consents and approvals from other
parties to material loan agreements, leases and other contracts or
agreements, (ii) to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal,
provincial, state or foreign law or regulations with respect to
this Agreement or the Offer, (iii) to lift or rescind any
injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions
contemplated hereby or by the Offer, and (iv) to fulfil all
conditions and satisfy all provisions of this Agreement and the
Offer.
ARTICLE VII
TERMINATION
7.1 AUTOMATIC TERMINATION. Provided that the Offeror is not in breach
of this Agreement, the letter of credit referred to in section 3.3
hereof and any funds drawn under such letter of credit shall be
released to the Offeror and this Agreement will terminate
automatically upon:
(i) the expiry of the Offer if the Offeror has not purchased
Shares pursuant to the Offer; or
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(ii) the occurrence of either of the events described in section
7.2(i) and section 7.2(ii).
7.2 FEES AND EXPENSES. The Company shall pay the Offeror a fee of
Cdn$1,000,000 within two business days of the earlier to occur of
the following events:
(i) the board of directors of the Company withdrawing its
determination referred to in section 1.2(a)(ii) hereof; or
(ii) a third party acquiring more than 50% of the Shares pursuant
to any transaction on or before April 30, 1998.
7.3 SURVIVAL. The mutual releases referred to in section 1.7 hereof
shall survive any termination of this
Agreement in accordance with sections 7.1 and 7.2 hereof.
ARTICLE VIII
MISCELLANEOUS
8.1 AMENDMENT OR WAIVER. This Agreement may be amended, modified or
superseded, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, but only by written
instrument executed by the Offeror and the Company; provided,
however, that either the Offeror or the Company may in its
discretion waive a condition herein which is solely for its benefit
without the consent of the other. No waiver of any nature, in any
one or more instances, shall be deemed or construed as a further or
continued waiver of any condition or any breach of any other term,
representation or warranty in this Agreement.
8.2 SPECIFIC PERFORMANCE. (1) The Offeror and the Company agree that
monetary damages would not sufficient to remedy any breach by the
Offeror of any term or provision of this Agreement and agree that
the Company will be entitled, in addition to any other remedy
available at law or in equity, to equitable relief, including
specific performance, in the event of any breach hereof.
(2) The Offeror and the Company further agree that if the
Offeror fails to complete its obligations pursuant to paragraphs
1.1 and Article III herein, then the Company may make an
application to a judge sitting on the Commercial List of the
Ontario Court (General Division) for an order of specific
performance compelling the Offeror to fulfil such obligations (the
"Application"). The Offeror further agrees that it will not in any
way oppose the nature of the relief sought and will consent to the
Application and the nature of the relief sought.
8.3 FIDUCIARY DUTIES. Nothing contained in this Agreement shall
prevent the Board of Directors of the Company from taking any
action which the Board of Directors of the Company determines in
good faith after receiving a written opinion of outside
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counsel, or advice of outside counsel that is reflected in the
minutes of the Board of Directors of the Company, to the effect
that the Board of Directors of the Company is required to take
such action in order to discharge properly its fiduciary duties.
8.4 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement
between the parties with respect to the subject matter hereof and
supersede all prior agreements, representations, warranties,
arrangements or understandings (whether oral or in writing) with
respect thereto.
8.5 HEADINGS. The descriptive headings are for convenience of
reference only and shall not control or affect the meaning or
construction of any provisions of this Agreement.
8.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be communicated confidentially and in
writing and shall be sufficient if delivered personally, or sent by
confidential telecopier addressed as follows:
To the Offeror:
PSINet Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxx
00000-0000 U.S.A.
Attention: Xxxxxxx Xxxxxxxx, Chairman
Facsimile: (000) 000-0000
With a copy to:
Fraser & Xxxxxx
000 Xxxx Xxxxxx Xxxx
1 First Canadian Place
P.O. Box 100
Toronto, Ontario, M5X 1B2
Attention: Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
Stikeman, Xxxxxxx
Xxxxx 0000
Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
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Attention: Xxxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
To the Company:
iSTAR internet Inc.
Royal Bank Tower
000 Xxx Xxxxxx
Xxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx X. Xxxxxxx, Chairman
Facsimile: (000) 000-0000
8.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each such counterpart shall be deemed to be an original
instrument but all such counterparts together shall constitute but one
Agreement.
8.8 EXPENSES. Each party will pay its own expenses in connection with this
Agreement and the transactions contemplated herein.
8.9 ASSIGNMENT. The Offeror may assign all or any part of its rights or
obligations under this Agreement to a direct or indirect wholly-owned
subsidiary of the Offeror, provided that any such assignment will have
no adverse tax or other effects to the Company or the Shareholders, and
provided further that if such assignment takes place, the Offeror shall
continue to be liable to the Company for any default in performance by
the assignee. This Agreement shall not otherwise be assignable by
either party without the prior written consent of the other party.
8.10 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated and the parties
shall negotiate in good faith to modify the Agreement to preserve each
party's anticipated benefits nder the Agreement.
8.11 CHOICE OF LAW. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of the Province of Ontario.
8.12 ATTORNMENT. The Offeror agrees that any action or proceeding arising
out of or relating to this Agreement may be instituted in the courts of
Ontario, waives any objection which it may have now or hereafter to the
venue of any such action or proceeding, irrevocably submits to the
jurisdiction of the said courts in any such action or proceeding, agrees
to be bound by any judgment of the said courts and not to seek, and
hereby waives, any review of the merits of any such judgment by the
courts of any other jurisdiction and hereby
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appoints Fraser & Xxxxxx, 000 Xxxx Xxxxxx West, 1 First Xxxxxxxx Xxxxx,
X.X. Xxx 000, Xxxxxxx, Xxxxxxx, X0X 0X0 as its attorney for service
of process.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be executed on their behalf by their officers thereunto duly authorized as of
the date first written above.
PSINET INC.
(SIGNED) "XXXXXXX XXXXXXXX"
---------------------------------------------
by: Xxxxxxx Xxxxxxxx
iSTAR internet inc.
(SIGNED) "XXXXX XXXXXXX"
---------------------------------------------
by: Xxxxx Xxxxxxx
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SCHEDULE "A"
TERMS OF THE OFFER
1. GENERAL TERMS. The Offer shall be made for all Shares and to all
Shareholders by a circular bid prepared in compliance with the
SECURITIES ACT (Ontario) and other applicable provincial securities laws
and in accordance with MJDS.
2. EXPIRY DATE. The Offer shall be open until January 30, 1998, provided
that if all Shares deposited under the Offer are taken up and paid for
on January 30, 1998, the Offeror may extend such offer period until such
later date as it may determine without the approval of the Company.
3. OFFER PRICE. The Offer shall be made for consideration of not less than
Cdn$0.75 per Share.
4. CONDITIONS OF THE OFFER. The Offer shall not be subject to any
conditions other than the following:
(i) there shall have been validly deposited under the Offer and not
withdrawn a number of Shares constituting at least 51% of the
outstanding Shares as of the Expiry Date;
(ii) at the time the Offeror proposes to take up and pay for the Shares,
there does not exist any prohibition at law against the Offeror
making the Offer or taking up and paying for all of the Shares
registered in the names of holders resident in Canada under the
Offer;
(iii)all outstanding warrants or options to acquire Shares shall have
been exercised, cancelled or otherwise terminated.
The foregoing conditions are for the exclusive benefit of the Offeror
and may be waived by the Offeror in whole or in part at any time and from
time to time.
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SCHEDULE "B"
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
(a) The Company (including all entities controlled by the Company) does not
have assets located in the U.S. having an aggregate book value of US$15
million more.
(b) The Company did not make aggregate sales in or into the United States of
America of US$25 million or more during its most recent fiscal year.
(c) The Company is a "foreign private issuer" within the meaning of
Securities and Exchange Commission ("SEC") Rule 3b-4 and is not an
investment company registered or required to be registered under the
U.S. Investment Company Act of 1940, as amended.
(d) Less than 40% of each class of the Company's securities outstanding that
are subject to the Offer are held by U.S. holders (including affiliates
of the Company) and the Company's most recent annual report or annual
information form filed or submitted by the Company with any Canadian
federal or provincial securities regulator or the SEC did not contain
any information to the contrary.
(e) The aggregate trading volume of such securities on securities exchanges
and Nasdaq in the United States of America did not exceed the aggregate
trading volume of such securities on securities exchanges in Canada and
on the Canadian Dealing Network, Inc. ("CDN") over the 12-month period
prior to commencement of the Offer (based on volume figures published by
such exchanges, Nasdaq and CDN).
(f) None of the Shares is registered pursuant to section 12 of the United
States SECURITIES EXCHANGE ACT OF 1934, as amended, and the Company is
not an insurance company or a closed-end investment company.
(g) At the date hereof, the only outstanding securities convertible into
Shares are options to purchase an aggregate of 2,107,537 Shares at
exercise prices not less than $2.10 per share and a warrant outstanding
to purchase 48,107 Shares at an exercise price of $4.10 per share.
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SCHEDULE "C"
REPRESENTATIONS AND WARRANTIES OF THE OFFEROR
(a) The Offeror has made arrangements to ensure that required funds are
available to effect payment in full for all Shares offered to be
acquired pursuant to the Offer.
(b) There are no Canadian provincial or United States federal securities
regulatory or New York state corporate approvals or consents necessary
to make and complete the Offer.
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