EXHIBIT 2A
SUPPORT AGREEMENT
THIS AGREEMENT made the 15th day of February, 2000.
B E T W E E N:
BCE INC.,
a company existing under the laws of
Canada,
(hereinafter called "BCE"),
OF THE FIRST PART,
- and -
TELEGLOBE INC.,
a company existing under the laws of
Canada,
(hereinafter called the "Company"),
OF THE SECOND PART.
WHEREAS BCE desires to acquire (the "Acquisition") all of the common shares
not already owned by it or its affiliates (the "Common Shares") in the capital
of the Company and is prepared to make an offer to acquire such Common Shares or
enter into an alternative transaction structure which would result in the
acquisition by the Offeror of such Common Shares;
AND WHEREAS BCE has entered into agreements (the "Lock-up Agreements") with
Xxxxxxx Xxxxxx and Xxxxx X. Xxxxxx and related parties (the "Locked-up
Shareholders") pursuant to which, among other things, BCE has agreed to make,
directly or indirectly, an offer to purchase all the issued and outstanding
Common Shares on the terms and subject to the conditions set forth in the
Lock-up Agreements and such Locked-up Shareholders have irrevocably agreed to
tender all of the Common Shares held by them to such offer and to otherwise
support such offer;
- 2 -
AND WHEREAS the board of directors of the Company (the "Board of
Directors") has determined, after receiving financial and legal advice, that it
would be advisable and in the best interests of the holders of the Common Shares
for the Board of Directors to support the Offer (as hereinafter defined) and to
recommend acceptance of the Offer to the holders of Common Shares and for the
Company to cooperate with the Offeror and take all reasonable action to support
the Offer, all on the terms and subject to the conditions contained herein;
NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual
covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each party, the parties hereto hereby covenant and agree as follows:
ARTICLE 1
THE OFFER
1.1 The Offer
BCE shall promptly publicly announce its intention to make the Acquisition
and, subject to the terms and conditions set forth below, the Offeror shall make
an offer to purchase all outstanding Common Shares, including Common Shares
issuable upon the conversion, exchange or exercise of any securities of the
Company that are convertible into or exchangeable or exercisable for Common
Shares (the "Convertible Securities") (the "Offer"). The term "Offer" shall
include any further amendments to, or extensions of, the Offer made in
accordance with the terms of this Agreement, including, without limitation,
removing or waiving any condition or extending the date by which Common Shares
may be deposited.
(a) The Offer will be made to the holders of all the issued and outstanding
Common Shares on the basis of (the "Consideration"), for each Common Share, that
portion (the "Share Exchange Ratio") of a common share in the capital of BCE (a
"BCE Share") determined as follows:
(i) in the event the closing of the Nortel Transaction (as hereinafter
defined) occurs prior to the First Take-Up Date (as hereinafter
defined), the ratio (expressed to three decimal places with amounts
less than 0.0005 being rounded down and amounts equal to or greater
than 0.0005 being rounded up, in each case to the nearest
one-thousandth of a BCE Share) obtained by dividing (A) Cdn.$48.41 by
(B) the weighted average trading price of the BCE Shares on The
Toronto Stock Exchange (the "TSE") for the ten trading days ending on
the fifth business day immediately preceding the day on which BCE
first takes up Common Shares under the Offer (the "First Take-Up
Date"), such weighted average trading price being referred to as the
"BCE Weighted Average Trading Price"; and
- 3 -
(ii) in the event the closing of the Nortel Transaction (as hereinafter
defined) has not been completed or is terminated prior to the First
Take-Up Date, 0.3 of a BCE Share per Common Share.
(b) The Share Exchange Ratio specified in paragraph (a)(i) above shall be
subject to a minimum of 0.85 of a BCE Share per Common Share and a maximum of
0.97 of a BCE Share per Common Share.
(c) Subject to subsection 5.8(c), the Offeror shall mail the Offer and
accompanying take-over bid circular (such circular, together with the Offer,
being referred to herein as the "Bid Circular") in accordance with applicable
laws to each holder of Common Shares (a "Shareholder") as soon as reasonably
practicable following the distribution to BCE's shareholders of most of its
interest in Nortel Networks Corporation, as announced on January 26, 2000 (the
"Nortel Transaction") but, in any event, by 5:00 p.m. (Montreal time) on July
31, 2000 (such time on such date being referred to herein as the "Latest Mailing
Time"); provided, however, that if the mailing of the Offer is delayed by (x) an
injunction or order made by a court or regulatory authority of competent
jurisdiction or (y) the Offeror not having obtained any regulatory waiver,
consent or approval which is necessary to permit the Offeror to mail the Offer
or to take-up and pay for any Common Shares tendered under the Offer, then,
provided that such injunction or order is being contested or appealed or such
regulatory waiver, consent or approval is being actively sought, as applicable,
the latest Mailing Time shall be extended for a period ending on the earlier of
November 30, 2000 and the fifth business day following the date on which such
injunction or order ceases to be in effect or such waiver, consent or approval
is obtained, as applicable.
(d) Prior to the mailing of the Bid Circular, the Offeror shall provide the
Company with an opportunity to review and comment on it, recognizing that
whether or not such comments are appropriate will be determined by the Offeror,
acting reasonably.
(e) The Offer will be made in accordance with applicable securities
legislation in Canada, the United States and other jurisdictions where the
Shareholders of the Company are located and shall be open for acceptance for a
period that does not expire prior to 12:01 a.m. (local time) on the 21st
business day after the day (the "Mailing Date") that the Offer is mailed to
Shareholders or such later time and date as may be required by applicable law,
subject to the right of the Offeror in its sole discretion to extend the period
during which Common Shares may be deposited under the Offer (the "Expiry Time").
The Offer shall be subject only to the conditions set forth in Schedule A
annexed hereto. The Offeror shall use all reasonable commercial efforts to
consummate the Offer, subject to the terms and conditions hereof and thereof.
(f) The Offer will provide that where a corporation ("Holdco"),
incorporated under the laws of Canada on or after February 1, 2000 and having no
assets other than Common Shares and no liabilities whatsoever is the beneficial
owner and holder of record of Common Shares, all the shareholders of Holdco (the
"Holdco Shareholders") shall be entitled to jointly elect (the "Holdco
Election") to accept the Offer by
- 4 -
selling to the Offeror all the outstanding shares of Holdco (the "Holdco
Shares") for an aggregate consideration identical to that which Holdco would
have been entitled to receive had such Common Shares been deposited under the
Offer, provided that, at least seven business days prior to the Expiry Time,
such Holdco Shareholders shall have notified the Offeror that they desire to
tender Holdco Shares under the Offer and, at or prior to the Expiry Time of the
Offer, such Holder Shareholders and such Holdco shall have entered into a share
purchase agreement with the Offeror containing such representations and
warranties, terms and conditions and indemnities as the Offeror may reasonably
request in connection therewith, including, without limitation, the
representations and warranties, terms and conditions and indemnities set out in
Schedule B hereto, and containing the requirement for such holders to arrange
for the provision of a legal opinion of such holders' legal counsel in form
satisfactory to the Offeror, acting reasonably, in connection with the closing
of the purchase and sale of such Holdco Shares.
(g) Notwithstanding the provisions of the foregoing paragraph, in the event
that the Offeror proposes an Alternative Transaction (as hereinafter defined)
which would be more favourable to U.S. Shareholders of the Company from a tax
perspective, the Holdco Election shall be available to the Locked-Up
Shareholders in connection with such Alternative Transaction only if the Offeror
shall be satisfied that the Holdco Election will not adversely affect (i) the
ability of the Offeror to proceed with such Alternative Transaction and (ii) the
intended tax benefits to be conferred on such Shareholders by such Alternative
Transaction.
(h) It is understood and agreed that the Offeror may, in its sole
discretion, modify or waive any term or condition of the Offer; provided,
however, that the Offeror will not, without the prior consent of the Company,
decrease the consideration per Common Share, change the form of consideration
payable under the Offer (other than to add additional consideration), decrease
the number of Common Shares sought under the Offer, impose additional conditions
to the Offer, or otherwise vary the Offer in a manner which is adverse to the
Shareholders.
(i) The obligation of the Offeror to make the Offer is conditional on the
prior satisfaction of the following conditions, all of which conditions are
included for the sole benefit of the Offeror, any or all of which may be waived
by the Offeror in whole or in part in its sole discretion without prejudice to
any other rights it may have under this Agreement:
(i) the obligations of BCE hereunder shall not have been terminated
pursuant to section 6.1;
(ii) the Offeror shall have determined prior to March 14, 2000,
acting reasonably, that the Offer would not have an impact on
the grant of a favourable tax ruling with respect to the Nortel
Transaction;
(iii) the Board of Directors shall have recommended that Shareholders
accept the Offer and shall not have withdrawn such
recommendation or changed such
- 5 -
recommendation in a manner that has substantially the same
effect as the withdrawal thereof;
(iv) the Board of Directors shall have prepared and approved in
final form, for distribution by the Company on the date the
Offer is made, the Directors' Circular (as hereinafter defined)
which circular shall contain (i) a recommendation that
Shareholders accept the Offer and (ii) a copy of the fairness
opinion from Xxxxxx Brothers dated the date hereof opining that
the consideration to be received under the Offer by the
Shareholders is fair, from a financial point of view, to the
Shareholders;
(v) no circumstance, fact, change, event or occurrence caused by a
person other than BCE or its affiliates shall have occurred
that would render it impossible for one or more of the
conditions set out on Schedule A hereto to be satisfied, except
if any such circumstance, fact, change, event or occurrence has
been approved or ratified by the Chairman of the Board of
Directors; and
(vi) no cease trade order, injunction or other prohibition at law
shall exist against the Offeror making the Offer or taking up
or paying for any Common Shares to be deposited under the
Offer.
1.2 Company Approval of the Offer
The Company represents and warrants to and in favour of the Offeror, and
acknowledges that the Offeror is relying upon such representations and
warranties in entering into this Agreement, that, as of the date hereof:
(a) its Board of Directors, upon consultation with its financial
and legal advisors, has determined that the consideration to be
offered under the Offer is fair from a financial point of view
to the Shareholders and that the Offer is in the best interests
of the Shareholders, has approved this Agreement and has
resolved to recommend that the Shareholders accept the Offer;
and
(b) after reasonable inquiry, the Board of Directors has been
advised and believes that each of the directors and the Named
Executive Officers (as defined in the Company's Management
Proxy Circular dated March 31, 1999) intends to tender under
the Offer all Common Shares (excluding Common Shares issuable
upon the exercise of Options (as defined in Section 1.3) held
by such person) of which he or she is the beneficial owner.
The Company shall prepare and make available for distribution
contemporaneously with the Bid Circular, in both the English and French
languages as circumstances may require, sufficient copies
- 6 -
of a directors' circular relating to the Offer (the "Directors' Circular"),
prepared in accordance with applicable laws, which shall reflect the foregoing
determinations and recommendation, and the Company shall take all reasonable
action to support the Offer. If prior to the Expiry Time another bona fide
written Acquisition Proposal (as defined in section 5.2 of this Agreement) is
made for which adequate financial arrangements have been made, then the Board of
Directors shall be entitled to withdraw, modify or change any recommendation
regarding the Offer provided that (i) the Board of Directors has determined in
good faith and in the proper discharge of its fiduciary duties (after receiving
advice from its financial and legal advisors) that such Acquisition Proposal
would, if consummated in accordance with its terms, result in a transaction that
is more favourable to Shareholders than the Offer (any such offer or proposal
being referred to herein as a "Superior Proposal"); and (ii) the Board of
Directors has complied with its obligations under section 5.2 of the Agreement
and BCE and the Offeror have declined to amend this Agreement and the Offer in
the manner contemplated in section 5.2(e) hereof. If the Board of Directors so
withdraws, modifies or changes any recommendation regarding the Offer, the
Company and the Board of Directors shall be entitled to cause any such
withdrawal, modification or change to be reflected in a public announcement and
in a directors' circular.
Prior to the final approval thereof by the Board of Directors, the Company
shall provide the Offeror with an opportunity to review and comment on the form
of the Directors' Circular, recognizing that whether any such comments are
appropriate will be determined by the Board of Directors of the Company, acting
reasonably.
The Company shall provide the Offeror, within two business days following
the execution and delivery of this Agreement, with a list (in both written and
electronic form) of the holders of Common Shares and 5.40% Convertible Third
Series Preferred Shares (the "Third Series Preferred Shares") and a list of
participants in book-based nominee registrants such as CDS & Co., together with
their addresses and respective holdings of Common Shares. The Company shall
concurrently provide the Offeror with the names, addresses and holdings of all
persons having rights to acquire Common Shares (including all Convertible
Securities) and the details of such rights (including the exercise or conversion
price and whether such rights have vested or are currently exercisable) and, to
the extent applicable, shall provide the Offeror with a list of participants in
book-based nominee registrants such as CDS & Co., together with their addresses
and respective holdings of Convertible Securities. The Company shall from time
to time furnish the Offeror with such additional information, including updated
or additional lists (in both written and electronic form) of Shareholders and/or
holders of Convertible Securities and lists of securities positions and other
assistance as the Offeror may reasonably request in order to be able to
communicate the Offer to the Shareholders and to holders of Convertible
Securities and to such other persons as are entitled to receive the Offer under
applicable laws.
1.3 Outstanding Stock Options
(a) The Company represents and warrants that it has not, and covenants and
agrees that it will not, take any action under the stock option plans of the
Company, Excel Communications Inc. and their
- 7 -
respective subsidiaries (the "Stock Option Plans") to accelerate the time at
which any option or other rights issuable thereunder ("Options") may be first
exercised or the time during which any Option will become exercisable, except
(i) for 575,172 Options held by Xxxxxxx Xxxxxx which shall be accelerated
effective as of the date of this Agreement and (ii) that such acceleration shall
occur automatically between the date hereof and the First Take-Up Date, in
respect of unvested Options held by an optionholder whose employment is
terminated between such dates, other than for cause or voluntarily terminated,
in which case in addition to such acceleration, such accelerated Options shall
be exercisable for the period commencing on the date of such termination and
ending on (x) the date that is 90 days following the First Take-Up Date, if
prior to the First Take-Up Date such optionholder agrees to surrender all
unexercised Options in exchange for options to acquire BCE Shares as
contemplated in subsection 1.3(b) below, or (y) the Expiry Time, in any other
case.
(b) The Company agrees to use reasonable commercial efforts to enter into
arrangements with the holders of outstanding Options, in form and substance
satisfactory to the Offeror, acting reasonably, so that all unexercised Options
(including unvested Options) granted pursuant to the Stock Option Plans shall
have been surrendered in exchange for options to acquire BCE Shares which vest
on the same terms as the surrendered options and with an exercise price based on
the Share Exchange Ratio specified in section 1.1 hereof.
1.4 Directors and Officers
(a) Prior to or contemporaneously with the execution of this Agreement,
Xxxxxxx Xxxxxx shall have resigned or shall resign as Chief Executive Officer of
the Company, and the Board of Directors shall have appointed or shall appoint
Xxxxx Xxxxx and Xxxxxxxxx Xxxx as co-Chief Executive Officers in his stead and
Xxxx X. Xxxxx (the "Chairman of the Board") as Chairman of the Board of
Directors. An office of the Chairman shall be created contemporaneously
therewith composed of Xxxx X. Xxxxx, Xxxxx Xxxxx and Xxxxxxxxx Xxxx.
(b) Subject to the Articles of the Company, as they may be applicable from
time to time, promptly upon the purchase by the Offeror of any Common Shares
under the Offer and from time to time thereafter: (a) the Company acknowledges
that BCE shall be entitled to designate at least a majority of the Board of
Directors, and of any committees thereof, and (b) the Company and its Board of
Directors shall, upon request by BCE, but subject to applicable law, promptly
use its reasonable commercial efforts (i) to expand the Board of Directors, (ii)
secure the resignations of such number of directors, (iii) cause the Teleglobe
Directors (as defined in the articles of the Company) to nominate as directors
of the Company, and/or (iv) take all other action, in each case as is necessary
to enable BCE's designees to be elected or appointed to the Board of Directors
and shall use its reasonable commercial efforts to cause BCE/s designees to be
so elected or appointed.
- 8 -
1.5 Subsequent Acquisition Transaction
The Company agrees with BCE that in the event the Offeror takes up and pays
for Common Shares under the Offer, it will assist the Offeror in any use by the
Offeror of the compulsory acquisition provisions of Section 206 of the Canada
Business Corporations Act (the "CBCA"), if available, (a "Compulsory
Acquisition") and will assist BCE and the Offeror in connection with any
proposed amalgamation, statutory arrangement, merger, capital reorganization,
consolidation, recapitalization or other transaction of or involving the Company
and BCE, the Offeror or another affiliate of BCE (a "Subsequent Acquisition
Transaction") to acquire the remaining Common Shares, provided that the
consideration offered in connection with the Subsequent Acquisition Transaction
is at least equivalent in value to the consideration offered under the Offer.
1.6 Guarantee of BCE
In the event that the Offeror is not BCE but is a direct or indirect
wholly-owned subsidiary thereof, BCE hereby unconditionally and irrevocably
guarantees the due and punctual performance by the Offeror of each and every
obligation of the Offeror arising under this Agreement, including, without
limitation, the making of the Offer and the taking up and paying for Common
Shares duly deposited thereunder, subject to the terms and conditions as
specified in this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF BCE
BCE hereby represents and warrants to the Company as follows, and
acknowledges that the Company is relying upon these representations and
warranties in connection with the entering into of this Agreement:
2.1 Organization and Qualification
BCE is validly existing under the CBCA and has full corporate power and
authority to own its assets and conduct its business as now owned and conducted.
BCE is duly qualified to carry on business in each jurisdiction in which the
character of its properties, owned or leased, or the nature of its activities,
makes such qualification necessary, except where the failure to be so qualified
will not have a material adverse effect on the business, operations (including
results of operations), assets, properties or condition (financial or otherwise)
of BCE and its subsidiaries taken as a whole (a "BCE Material Adverse Effect").
For purposes of this Agreement, a BCE Material Adverse Effect shall not apply to
any event that applies to the telecommunications industry generally.
2.2 Authority Relative to this Agreement
- 9 -
BCE has the requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement (including any Alternative Transaction) by BCE and the
consummation by it of the transactions contemplated by this Agreement have been
duly authorized by the board of directors of BCE and no other corporate
proceedings on the part of BCE are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by BCE and constitutes a valid and binding obligation of it,
enforceable by the Company against BCE in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency and other laws
affecting the enforcement of creditors' rights generally and subject to the
qualification that equitable remedies may only be granted in the discretion of a
court of competent jurisdiction. The execution and delivery by BCE of this
Agreement and the performance by it of its obligations hereunder and the
completion of the Offer, after obtaining any necessary regulatory approvals,
will not: (a) violate, conflict with or result in a breach of any provision of:
(i) the constating documents of BCE; (ii) any agreement, contract, indenture,
deed of trust, mortgage, bond, instrument, licence, franchise or permit to which
BCE is a party or by which it is bound; or (iii) any law, regulation, order,
judgment or decree to which BCE is subject or by which it is bound; (b) give
rise to any right of termination, or acceleration of indebtedness, or cause any
indebtedness to come due before its stated maturity, under any such agreement,
contract, licence, franchise or permit which is material to BCE and its
subsidiaries taken as a whole; or (c) result in the imposition of any
encumbrance, charge or lien upon any of the assets of BCE or any of its
subsidiaries, other than any such violations, conflicts, breaches, rights or
encumbrances, charges or liens which will not, individually or in the aggregate,
have a BCE Material Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
2.3 Issuance of BCE Shares under Offer
The unissued BCE Shares to be issued by BCE to Shareholders pursuant to the
Offer have been duly and validly authorized and, when issued and delivered as
part of the consideration paid for any Common Shares acquired by the Offeror
pursuant to the Offer, will be duly and validly issued as fully paid and
non-assessable shares in the capital of BCE. BCE shall not convene a
shareholders meeting to approve the Offer (including any Alternative
Transaction), unless such meeting is required to satisfy stock exchange
requirements.
2.4 Filings
Documents or information filed by BCE under applicable securities laws
since and including January 1, 1999, including the annual report to shareholders
and annual information form of BCE, in each case, for the fiscal year ended
December 31, 1998 (collectively, the "BCE Public Documents"), did not, as of
their respective dates, contain any untrue statement of a material fact adverse
to BCE and its subsidiaries and their respective businesses or omit to state a
material fact adverse to BCE and its subsidiaries and their respective
businesses required to be stated therein or necessary to make the
- 10 -
statements relating to BCE and its subsidiaries and their respective businesses
therein, in light of the circumstances under which they were made, not
misleading.
2.5 Financial Statements
The audited consolidated financial statements of BCE as at and for the
financial year ended December 31, 1998, including the notes thereto and the
report of BCE's auditors thereon, and the unaudited consolidated financial
statements of BCE as at and for the periods ended March 31, June 30 and
September 30, 1999 were prepared in accordance with generally accepted
accounting principles in Canada applied on a basis consistent with prior
periods, are correct and complete and present fairly the assets, liabilities
(whether accrued, absolute, contingent or otherwise) and financial condition of
BCE and its subsidiaries on a consolidated basis as at the respective dates
thereof and the revenues, earnings and results of operations of BCE and its
subsidiaries on a consolidated basis for the respective periods covered thereby.
2.6 Lock-up Agreements
BCE has entered into the Lock-up Agreements with the Locked-Up Shareholders
and, except as disclosed to the Company, has not entered into any other
agreements with such holders or other Shareholders in respect of the Offer.
2.7 Absence of Certain Changes or Events
Except as disclosed in the BCE Public Documents, since January 1, 1999: (a)
BCE and its subsidiaries have conducted their respective businesses only in the
usual, ordinary and regular course and consistent with past practice; (b) no
liability or obligation of any nature (whether absolute, accrued, contingent or
otherwise) which has had or is reasonably likely to have a BCE Material Adverse
Effect, has been incurred; and (c) there has not been any event which has had or
is reasonably likely to have a BCE Material Adverse Effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Offeror as follows, and
acknowledges that the Offeror is relying upon these representations and
warranties in connection with the entering into of this Agreement:
3.1 Organization and Qualification
- 11 -
The Company is validly existing as a corporation under the CBCA and has
full corporate power and authority to own its assets and conduct its business as
now owned and conducted. The Company is duly qualified to carry on business, and
is in good standing, in each jurisdiction in which the character of its
properties, owned or leased, or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a material adverse effect on the business, operations (including results of
operations), assets, properties or condition (financial or otherwise) of the
Company and its subsidiaries taken as a whole (a "Company Material Adverse
Effect"). For the purposes of this Agreement, a Company Material Adverse Effect
shall not apply to any event that applies to the telecommunications industry
generally. Copies of the articles of amalgamation of the Company dated January
1, 1999 and the by-laws of the Company heretofore delivered to BCE are accurate
and complete as of the date hereof and have not been amended or superseded, and
the Company has not taken any action to amend or supersede such documents.
3.2 Subsidiaries
Each subsidiary of the Company is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, has full corporate
power and authority to own its assets and conduct its business as now owned and
conducted by it and is duly qualified to carry on business in each jurisdiction
in which the character of its properties, owned or leased, or the nature of its
activities, makes such qualification necessary, except where the failure to be
so qualified will not have a Company Material Adverse Effect.
3.3 Compliance with Law
The Company and each of its subsidiaries has complied with and is in
compliance with all laws and regulations applicable to the operation of their
respective businesses, including applicable laws, except where failure so to
comply will not have a Company Material Adverse Effect, and each of them has all
licences, permits, orders or approvals of, and has made all required
registrations with, and has submitted all required regulatory reports and
tariffs payments to any governmental or regulatory body, except where the
failure to so obtain such licenses, permits, orders or approvals, or make such
registrations, filings or payments, will not have a Company Material Adverse
Effect.
3.4 Capitalization
The authorized equity capital of the Company consists of an unlimited
number of Common Shares, an unlimited number of Class A non-voting shares and an
unlimited number of preferred shares, issuable in series. As at February 14,
2000, 254,244,154 Common Shares, no Class A non-voting shares and 5,000,000
redeemable convertible third series preferred shares have been duly authorized
and are validly issued and outstanding as fully paid and non-assessable shares
in the capital of the Company. In addition, as at January 31, 2000, there were
outstanding 17,312,827 Options providing for the issuance of 17,312,827 Common
Shares upon the exercise thereof and on February 15, 2000, the Board of
- 12 -
Directors granted in the normal course of business 819,431 Options providing for
the issuance of 819,431 Common Shares upon the exercise thereof and the terms of
Options granted to Optionholders (including exercise price and vesting) have
been disclosed in the disclosure statement delivered by the Company to BCE
contemporaneously with the execution and delivery of this Agreement (the
"Company Disclosure Statement"). Except as described in this section 3.4 and
except for the conversion rights attaching to the Third Series Preferred Shares
in the capital of the Company and the rights of BCE under an agreement dated May
7, 1987, as amended from time to time and except with respect to options granted
to employees or consultants of Orbcomm Global, L.P., there are no options,
warrants, conversion privileges, calls or other rights (including any rights
pursuant to any shareholder rights plan of the Company), agreements,
arrangements, commitments or obligations of the Company or its subsidiaries to
issue or sell any shares of any capital stock of the Company or of any of its
subsidiaries or securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of the Company or any of its
subsidiaries, nor are there outstanding any stock appreciation rights, phantom
equity or similar rights, agreements, arrangements or commitments based upon the
book value, income or any other attribute of the Company or any of its
subsidiaries, except for 333,000 performance units issued to Xxxxx Xxxxx and
50,000 restricted shares issued to Xxxxxxxxx Xxxx. Except for BCE, the holders
of outstanding Common Shares are not entitled to any pre-emptive or other
similar rights.
3.5 Authority Relative to this Agreement
The Company has the requisite corporate power and authority to enter into
this Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by the
Board of Directors and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement and the transactions contemplated
hereby other than the Shareholders' approval contemplated in Schedule C. This
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable by BCE against the
Company in accordance with its terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency and other laws affecting the enforcement of
creditors' rights generally and subject to the qualification that equitable
remedies may only be granted in the discretion of a court of competent
jurisdiction. The execution and delivery by the Company of this Agreement and
the performance by it of its obligations hereunder and the completion of the
Offer, after obtaining any necessary regulatory approvals, will not: (a)
violate, conflict with or result in a breach of any provision of: (i) the
constating documents of the Company or any of its subsidiaries; (ii) any
agreement, contract, indenture, deed of trust, mortgage, bond, instrument,
licence, franchise or permit to which it or any of its subsidiaries is a party
or by which it or any of its subsidiaries is bound; or (iii) any law,
regulation, order, judgment or decree to which it or any of its subsidiaries is
subject or by which it or any of its subsidiaries is bound; (b) give rise to any
right of termination, or acceleration of indebtedness, or cause any indebtedness
to come due before its stated maturity, under any such agreement, contract,
indenture, deed of trust, mortgage, bond, instrument, licence, franchise or
permit which is material to the Company and its subsidiaries taken as a whole;
or (c) give rise to any rights of first refusal or change in control or
influence or any restriction or
- 13 -
limitation under any such agreement, contract, indenture, deed of trust,
mortgage, bond, instrument, licence, franchise or permit, or result in the
imposition of any encumbrance, charge or lien upon any of the Company's assets
or the assets of any of its subsidiaries, other than any such violations,
conflicts, breaches, rights or encumbrances, charges or liens which will not,
individually or in the aggregate, have a Company Material Adverse Effect or
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
3.6 Filings
Documents or information filed by the Company under applicable Canadian and
United States securities laws since and including January 1, 1999 to and
including the date hereof, including the Company's: (a) annual report to
shareholders for the financial year ended December 31, 1998; (b) management
information circular dated March 31, 1999 in respect of the annual meeting of
shareholders held May 12, 1999; (c) the 1998 annual information form dated May
17, 1999; (d) interim consolidated financial statements for the quarters ended
March 31, June 30 and September 30, 1999, (collectively, the "Company Public
Documents"), are, as of their respective dates, in compliance in all material
respects with such applicable securities laws and did not contain any untrue
statement of a material fact adverse to the Company and its subsidiaries and
their respective businesses or omit to state a material fact adverse to the
Company and its subsidiaries and their respective businesses required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7 Financial Statements
The audited consolidated financial statements of the Company for the
financial year ended December 31, 1998 including the notes thereto and the
report of the Company's auditors thereon (the "Audited Financial Statements"),
the unaudited consolidated financial statements of the Company as at and for the
periods ended March 31, June 30 and September 30, 1999, all as contained in the
Company Public Documents, and the unaudited consolidated financial statements of
the Company as at and for the year ended December 31, 1999 provided to BCE, were
in each case prepared in accordance with United States generally accepted
accounting principles (and, in the case of the Audited Financial Statements,
also in accordance with Canadian generally accepted accounting principles)
applied on a basis consistent with prior periods, are correct and complete and
present fairly the assets, liabilities (whether accrued, absolute, contingent or
otherwise) and financial condition of the Company and its subsidiaries on a
consolidated basis as at the respective dates thereof and the revenues, earnings
and results of operations of the Company and its subsidiaries on a consolidated
basis for the respective periods covered thereby.
3.8 Absence of Certain Changes or Events
Except as disclosed in the Company Public Documents or in the Company
Disclosure Statement, since January 1, 1999: (a) the Company and its
subsidiaries have conducted their respective businesses only in the usual,
ordinary and regular course and consistent with past practice; (b) no liability
- 14 -
or obligation of any nature (whether absolute, accrued, contingent or otherwise)
which has had or is reasonably likely to have a Company Material Adverse Effect,
has been incurred; and (c) there has not been any event which has had or is
reasonably likely to have a Company Material Adverse Effect.
3.9 Severance and Employment Agreements
Except as disclosed in the Company Public Documents and for the employment
agreement of Xxxxxxxxx Xxxx dated September 14, 1999, neither the Company nor
any of its subsidiaries has entered into any written or oral agreement providing
for, in excess of U.S.$500,000 individually or U.S.$5,000,000 in the aggregate,
severance or termination payments upon a change of control to any senior officer
or director of the Company or its subsidiaries.
3.10 Benefit Plans
Except as disclosed in the Company Disclosure Statement:
(a) each registered or supplementary pension, retirement, profit sharing,
bonus, savings, deferred compensation, stock option, purchase, appreciation,
group insurance or other material employee or retiree benefit plans, programmes
or arrangements, formal or informal, oral or written, maintained or contributed
to by the Company or any of its subsidiaries (each plan, programme or
arrangement, a "Plan") has been administered, operated and funded in material
compliance with its terms and all applicable laws or other legislative,
administrative or judicial promulgations applicable to such Plan and there are
no unfunded liabilities in respect of such pension or retirement plan and all
required contributions thereunder have been made in material compliance with (i)
all applicable laws or other legislative, administrative or judicial
promulgations applicable to such Plan and (ii) the terms of such Plan; and
(b) the assets of each Plan which is a registered pension plan are at least
equal to the liabilities, contingent or otherwise of such Plan on a plan
termination basis and each such Plan is fully funded on a going concern and
solvency basis in accordance with its terms, applicable actuarial assumptions
and applicable laws.
3.11 Litigation, Etc.
Except as reflected in the Company Public Documents, there is no claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or relating to the Company or any of its subsidiaries or
affecting any of their properties or assets before or by any court or
governmental or regulatory authority or body which, if adversely determined, is
likely to have a Company Material Adverse Effect or prevent or materially delay
the consummation of the transactions contemplated by this Agreement, nor is the
Company aware of any basis for any such claim, action, proceeding or
investigation. Neither the Company nor any of its subsidiaries is subject to any
outstanding
- 15 -
order, writ, injunction or decree which has had or is reasonably likely to have
a Company Material Adverse Effect or prevent or materially delay consummation of
the transactions contemplated by this Agreement.
3.12 Taxes
The Company and each of its subsidiaries has duly and timely filed all tax
returns required to be filed by it and all such tax returns are true, complete
and correct in all material respects. The Company and each of its subsidiaries
has paid all Taxes which are due and payable, by it on or before the date
hereof, other than those which are being contested in good faith and in respect
of which adequate reserves have been provided in the most recently published
financial statements of the Company. There are no actions, suits, proceedings,
investigations or claims threatened against the Company or any of its
subsidiaries in respect of Taxes or any matters under discussion with any
governmental authority relating to Taxes asserted by any such authority, in each
case, which are likely to have a Company Material Adverse Effect. There are no
liens for Taxes upon any asset of the Company or any of its subsidiaries except
liens for Taxes not yet due. "Taxes" as used in this agreement, shall mean any
taxes, charges, fees, levies or other assessments, including all net income,
gross income, premiums, sales and use, goods and services, harmonized sales,
employer health, ad valorem, transfer, gains, profits, windfall profits, excise,
franchise, real and personal property, gross receipts, capital stock,
production, business and occupation, employment, disability, payroll, licence,
stamp, customs duties, severance or withholding taxes, other taxes or similar
charges of any kind whatsoever imposed by any governmental entity and includes
any interest, fines and penalties on or additions to any such taxes or in
respect of a failure comply with any requirement relating to any tax return.
3.13 Title to Properties
The Company and each of its subsidiaries has sufficiently good and valid
title to, or an adequate leasehold interest in, its respective material
properties and assets (including real property) in order to allow it to conduct,
and continue to conduct, its business as currently conducted in all material
respects, other than any such failures which do not, individually or in the
aggregate, have a Company Material Adverse Effect.
3.14 Trademarks
The Company and its subsidiaries own or possess the right to use all
trademarks, service marks and trade names necessary for the continued provision
of services in a manner consistent with past practices, free and clear of any
claim, lien or encumbrance, except in circumstances that, in the aggregate, are
not reasonably likely to have a Company Material Adverse Effect. To the
knowledge of the Company, there is no violation by others of any right of the
Company or any of its subsidiaries with respect to any trademark or trade name
of the Company that is reasonably likely to have a Company Material Adverse
Effect. The Company is not infringing upon any trademark or trade name of any
third party in a manner that is reasonably likely to have a Company Material
Adverse Effect and no proceedings have been
- 16 -
instituted or are pending or threatened, and no claim has been received by the
Company, alleging any such violation that, in any such case, is reasonably
likely to have a Company Material Adverse Effect.
3.15 Fairness Opinion
The Company has received an opinion from Xxxxxx Brothers that, as of the
date hereof, the consideration to be received in the Offer by the Shareholders
is fair, from a financial point of view, to the Shareholders.
ARTICLE 4
CONDUCT OF BUSINESS
4.1 Conduct of Business by the Company
The Company covenants and agrees that, prior to the earlier of the time
(the "Effective Time") of the appointment or election to the Board of Directors
of persons designated by BCE who represent a majority of the directors of the
Company and the termination of this Agreement, unless BCE or the Chairman of the
Board of Directors shall otherwise agree or as otherwise expressly contemplated
or permitted by this Agreement:
(a) the Company shall, and shall cause each of its subsidiaries to, conduct
its and their respective businesses only in, not take any action except
in, and maintain their respective facilities in, the usual, ordinary and
regular course of business;
(b) the Company shall not directly or indirectly do or permit to occur any of
the following: (i) issue, sell, pledge, lease, dispose of, encumber or
grant rights to use in or agree to issue, sell, pledge, lease, dispose of,
encumber or grant rights to use in: (A) any additional shares of, or any
options, warrants, calls, conversion privileges or rights of any kind to
acquire any shares of, any capital stock of the Company (other than
pursuant to the exercise of Options or other Convertible Securities
currently outstanding as contemplated by this Agreement); or (B) except in
the ordinary course of business, any assets of the Company or any of its
subsidiaries in excess of U.S.$100 million in the aggregate; (ii) amend or
propose to amend the articles, by-laws or other constating documents of
the Company or any of its subsidiaries; (iii) split, combine or reclassify
any outstanding Common Shares, or declare, set aside or pay any dividend
or other distribution payable in cash, stock, property or otherwise with
respect to the Common Shares, other than dividends paid in the ordinary
course and consistent with past practice; (iv) redeem, purchase or offer
to purchase (or permit any of its subsidiaries to redeem, purchase or
offer to purchase) any Common Shares or other securities of the Company;
(v) approve or adopt a shareholder rights plan; (vi) reorganize,
amalgamate or merge the Company or any of its subsidiaries
- 17 -
with any other person, corporation, partnership or other business
organization whatsoever (other than an internal bona fide reorganization
of the Company or any of its subsidiaries (an "Internal Reorganization");
(vii) reduce the stated capital of the Company; (viii) acquire or agree to
acquire (by merger, amalgamation, acquisition of stock or assets or
otherwise) any person, corporation, partnership or other business
organization or division or make any investment either by purchase of
shares or securities, contributions of capital (other than to wholly-owned
subsidiaries), property transfer or purchase of, any property or assets of
any other person, corporation, partnership or other business organization
in excess of U.S.$100 million in the aggregate or other than in connection
with an Internal Reorganization; (ix) incur or commit to incur, in excess
of U.S.$100 million, any indebtedness for borrowed money or any other
material liability or obligation or issue any debt securities, except for
the borrowing of working capital in the ordinary course of business and
consistent with past practice, or guarantee, endorse or otherwise as an
accommodation become responsible for, the obligations of any other person,
corporation, partnership or other business organization, or make any loans
or advances, except in the ordinary course of business consistent with
past practice; (x) incur or commit to incur capital expenditures not
contemplated by the Company's existing business plan in excess of U.S.$100
million in the aggregate; (xi) adopt a plan of liquidation or resolutions
providing for the liquidation or dissolution of the Company or any of its
subsidiaries, other than in connection with an Internal Reorganization;
(xii) pay, discharge or satisfy any material claims, liabilities or
obligations other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice, of liabilities
reflected or reserved against in the Company's financial statements or
incurred in the ordinary course of business consistent with past practice;
or (xiii) authorize, recommend or propose any release or relinquishment of
any material contractual right;
(c) the Company shall not, and shall cause each of its subsidiaries not to,
(i) enter into or modify any employment, severance, or similar agreements
or arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors other than pursuant to
agreements already entered into and disclosed in the Company Public
Documents; or (ii) in the case of employees who are not officers or
directors, take any action other than in the ordinary, regular and usual
course of business and consistent with past practice (none of which
actions shall be unreasonable or unusual) with respect to the grant of any
bonuses, salary increases, severance or termination pay or with respect to
any increase of benefits payable in effect on the date hereof;
(d) the Company shall not, and shall cause each of its subsidiaries not to,
adopt or amend any bonus, profit sharing, incentive, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any employee;
- 18 -
(e) the Company shall use its reasonable commercial efforts to cause its
current insurance (or re-insurance) policies not to be cancelled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies underwritten by insurance and re-insurance companies of
nationally recognized standing providing coverage equal to or greater than
the coverage under the cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and effect;
(f) the Company shall promptly notify BCE or the Chairman of the Board orally
and in writing of any material adverse change in the normal course of its
or any of its subsidiaries' businesses or in the operation of its or any
of its subsidiaries' properties and of any material governmental or third
party complaints, investigations or hearings (or communications indicating
that the same may be contemplated);
(g) the Company and each of its subsidiaries shall: (i) duly and timely file
all tax returns required to be filed by it on or after the date hereof and
ensure that all such tax returns are true, complete and correct in all
material respects; (ii) timely pay all Taxes which are due and payable
(other than those which are being contested in good faith); (iii) not make
or rescind any material expressed or deemed election relating to Taxes;
(iv) not make a request for a tax ruling or enter into a closing agreement
with any taxing authorities; (v) not settle or compromise any material
claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to Taxes; and (vi) not change in any
material respect any of its methods of reporting income, deductions or
accounting for income tax purposes from those employed in the preparation
of its income tax return for the taxation year ending December 31, 1998
except as may be required by applicable law;
(h) the Company shall not authorize or propose, or enter into or modify any
contract, agreement, commitment or arrangement, to do any of the matters
prohibited by the other paragraphs of this section 4.1.
- 19 -
ARTICLE 5
MISCELLANEOUS
5.1 Further Assurances
Subject to the conditions herein provided, each party hereto agrees, as
soon as reasonably practicable following the date hereof (i) to actively and
diligently pursue all regulatory and other approvals and consents (including, if
required in the case of BCE, exemptions from the requirements of any stock
exchange for shareholder approval for the issuance of BCE Shares hereunder)
necessary to consummate the Offer, (ii) to use reasonable commercial efforts to
make all necessary registrations and filings (including, but not limited to,
filings under applicable laws and submissions of information requested by
governmental authorities) to obtain same and (iii) to use all reasonable
commercial efforts to take, or cause to be taken, all other action and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as is practicable the transactions contemplated
by the Offer and this Agreement, including the execution and delivery of such
documents as the other parties hereto may reasonably require. Each of the
parties hereto, where appropriate, shall reasonably co-operate with the other
parties in taking such actions.
5.2 No Solicitations, Opportunity to Match, Etc.
(a) On and after the date hereof, the Company and its subsidiaries will
not, directly or indirectly, through any officer, director, employee, advisor,
representative, agent or otherwise, make, solicit, initiate or encourage
inquiries from or submission of proposals or offers from any other person,
corporation, partnership or other business organization whatsoever (including
any of its officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, amalgamation or acquisition or purchase of all or a
material portion of the assets of, or any equity interest (including Common
Shares) in, the Company or any of its subsidiaries or other similar transaction
or business combination involving the Company or any of its subsidiaries (any of
such foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"), or participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek to do any of
the foregoing; provided, however, that the foregoing shall not prevent the Board
of Directors or the Company from responding to any bona fide written Acquisition
Proposal which is or could reasonably be expected to lead to a Superior Proposal
made by a third party after February 15, 2000 that was not solicited after such
date and providing information to such a third party.
(b) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than BCE) with
respect to any potential Acquisition Proposal. The Company agrees not to release
any third party from any confidentiality or standstill agreement to which the
Company and such third party is a party. The Company shall immediately request
the return or destruction of all information provided to any third parties who
have entered into a confidentiality agreement with the
- 20 -
Company relating to any potential Acquisition Proposal and shall use all
reasonable efforts to ensure that such requests are honoured.
(c) The Company shall immediately provide notice to the Offeror of any
future bona fide Acquisition Proposal or any request for non-public information
relating to the Company or any of its subsidiaries in connection with such a
bona fide Acquisition Proposal or for access to the properties, books or records
of the Company or any subsidiary by any person or entity that informs any member
of the Board of Directors or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to the Offeror shall be made,
from time to time, first immediately orally and then promptly in writing and
shall indicate the identity of the person making such proposal, inquiry or
contact, all material terms thereof and such other details of the proposal,
inquiry or contact known to the Company as the Offeror may reasonably request.
(d) If the Board of Directors receives a request for material non-public
information from a party who proposes to the Company a bona fide Acquisition
Proposal and the Board of Directors determines, in the manner contemplated by
clause (i) of the second paragraph of section 1.2 of this Agreement, that such
Acquisition Proposal could reasonably be expected to, if consummated in
accordance with its terms, result in a Superior Proposal, then, and only in such
case, the Company may provide such party with access to information regarding
the Company, subject to the execution of a confidentiality agreement which is
customary in such situations and which, in any event, is no less favourable to
the Company than the confidentiality and standstill agreement dated January 21,
2000 between BCE and the Company, except for the standstill provisions.
(e) The Company covenants that it will not enter into any agreement
regarding any other Acquisition Proposal (a "Proposed Agreement") without
providing BCE and the Offeror with an opportunity to amend this Agreement and
the Offer to provide for at least equivalent financial terms to those included
in the Proposed Agreement as determined by the Board of Directors of the
Company, acting in good faith and in accordance with its fiduciary duties. In
particular, the Company covenants to provide BCE with a copy of any Proposed
Agreement as executed by the party making such Acquisition Proposal not less
than 48 hours prior to its proposed execution by the Company. In the event that
BCE and the Offeror agree to amend this Agreement and/or the Offer as provided
above, the Company covenants not to enter into the Proposed Agreement.
(f) The Company shall ensure that the directors, officers and employees of
the Company and its subsidiaries and any investment bankers or other advisors or
representatives retained by the Company are aware of the provisions of this
section, and the Company shall be responsible for any breach of this section 5.2
by such directors, officers, employees, bankers, advisors or representatives.
5.3 Fees and Expenses
If at any time after the execution of this Agreement:
- 21 -
(a) the Board of Directors has withdrawn or changed any of its recommendations
or determinations referred to in section 1.2 in a manner adverse to the
Offeror for any reason (other than (i) the failure by the Offeror to
comply in any material respect with its representations, warranties and
covenants contained in this Agreement or (ii) the occurrence of a material
adverse change in the business, operations (including results of
operations), assets, properties or condition (financial or otherwise) of
BCE) or shall have resolved to do so prior to the expiry of this
Agreement; or
(b) the Board of Directors shall have failed to reaffirm its recommendation of
the Offer by press statement within 48 hours after the public announcement
of any Acquisition Proposal (or, in the event that the Offer shall be
scheduled to expire within such 48-hour period, prior to the scheduled
expiry of the Offer); or
(c) (i) a Superior Proposal is publicly announced, proposed, offered or made
to the Shareholders or to the Company and the period during which Common
Shares may be deposited under the Offer expires and insufficient Common
Shares have been tendered to the Offer to enable BCE and its affiliates to
own 50.1% of the outstanding common shares of the Company (an
"Insufficient Tender"), or (ii) the period during which Common Shares may
be deposited under the Offer expires, an Insufficient Tender exists and
another person has acquired sufficient securities of the Company such that
the Common Shares held by such person represent de facto control of the
Company;
then the Company shall forthwith pay to BCE the sum of Cdn.$300 million;
provided, however, that no such fee shall be payable if an event has occurred
which would permit the Company to terminate this Agreement pursuant to
subsection 6.1(g) prior to the occurrence of an event described in paragraphs
(a), (b) or (c) above.
5.4 Notification of Certain Matters
Each party shall give prompt notice to the others of: (a) the occurrence or
failure to occur of any event, which occurrence or failure would cause or may
cause any representation or warranty on its part contained in this Agreement to
be untrue or inaccurate in any material respect at any time from the date hereof
to the Effective Time; and (b) any failure of such party, or any officer,
director, employee or agent thereof, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
5.5 Investigation
Any investigation by a party hereto and its advisors shall not mitigate,
diminish or affect the representations and warranties of the other party or
parties, as applicable, contained in this Agreement or any document or
certificate given pursuant hereto.
- 22 -
5.6 Shareholder Claims
The Company shall not settle or compromise any claim brought by any
present, former or purported holder of any securities of the Company in
connection with the transactions contemplated by this Agreement prior to the
Effective Time without the prior written consent of BCE, which shall not be
unreasonably withheld or delayed.
5.7 Officers' and Directors' Insurance
BCE agrees that for the period from the Effective Time until six years
after the Effective Time, BCE 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
six years after the Effective Time, provided that such insurance remains
available to the Company or such successor on commercially reasonable terms. BCE
also agrees that after the expiration of such six-year period it will use
reasonable commercial efforts to cause such directors and officers to be covered
under its then existing directors and officers insurance policy, if any. BCE
shall, and shall cause the Company (or its successor) to, indemnify the
directors and officers of the Company to the fullest extent to which BCE and the
Company are permitted to indemnify such officers and directors under their
respective charter, by-laws, applicable law and contracts of indemnity.
5.8 Change in Nature of Transaction
(a) The parties have determined that it is necessary and desirable to
proceed with alternative forms of transactions (the "Alternative Transactions")
whereby the Offeror (or an affiliate of the Offeror) is effectively to acquire
Common Shares on economic terms which, in relation to the holders of Common
Shares, are at least equivalent to the Offer (including from a tax perspective).
The description of the steps of the Alternative Transactions and related matters
are set out in Schedule C attached hereto. The Boards of Directors of the
Company and BCE have approved the Alternative Transactions and have resolved to
recommend that Shareholders either vote in favour of it, or tender their Common
Shares to, the Alternative Transactions.
(b) In the event of any Alternative Transaction, the references in this
agreement to the Offer shall be deemed to refer to such Alternative Transaction
and all terms, covenants, representations and warranties of this Agreement shall
be and shall be deemed to have been made in the context of such Alternative
Transaction, mutatis mutandis.
(c) If any Alternative Transaction involves a meeting or meetings of
securityholders of the Company, the Company shall (i) convene a meeting at a
time and date determined by the Company in consultation with BCE but no later
than December 31, 2000, subject to extension as contemplated in the
- 23 -
proviso to subsection 1.1(c) hereof and (ii) prepare a proxy circular, in form
and substance acceptable to the Offeror, acting reasonably, seeking approval of
any such Alternative Transaction and mail such circular to such securityholders
not earlier than ten business days after the completion of the Nortel
Transaction but not later than November 30, 2000, subject to extension as
contemplated in the proviso to subsection 1.1(c) hereof.
ARTICLE 6
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination
This Agreement may be terminated:
(a) at any time prior to the Effective Time, by mutual consent of BCE and the
Company;
(b) (A) by BCE at any time on or prior to July 31, 2000 if any condition to
making the Offer is not satisfied or waived by such date other than as a
result of BCE's default hereunder, or (B) on or after July 31, 2000, by
either BCE or the Company at any time if the other party is in default of
any covenant or obligation under this Agreement in any material respect or
if any representation or warranty of the other party under this Agreement
is untrue or incorrect (or, if any such representation or warranty is not
qualified by a materiality concept, untrue or incorrect in any material
respect) as at the date made;
(c) by either BCE or the Company after the 120th day following the Mailing
Date, if the Offeror has not taken up and paid for Common Shares deposited
under the Offer, otherwise than as a result of the breach by such party of
any material covenant or obligation under this Agreement or as a result of
any representation or warranty of such party in this Agreement being
untrue or incorrect in any material respect; provided, however, that if
the Offeror's take up and payment for Common Shares deposited under the
Offer is delayed by (i) an injunction or order made by a court or
regulatory authority of competent jurisdiction or (ii) the Offeror not
having obtained any regulatory waiver, consent or approval which is
necessary to permit the Offeror to take up and pay for Common Shares
deposited under the Offer, then, provided that such injunction or order is
being contested or appealed or such regulatory waiver, consent or approval
is being actively sought, as applicable, this Agreement shall not be
terminated by the Company pursuant to this subsection 6.1(c) until the
fifth business day following the date on which such injunction or order
ceases to be in effect or such waiver, consent or approval is obtained, as
applicable;
- 24 -
(d) by BCE if any condition of the Offer shall not be satisfied or waived at
the Expiry Time of the Offer and the Offeror shall not elect to waive such
condition or extend the Offer;
(e) by either the Company or BCE if, prior to the termination of the Offer,
the Board of Directors withdraws, modifies or changes its recommendation
regarding the Offer in accordance with section 1.2; or
(f) by the Company, if BCE does not mail the Offer within the time
contemplated by section 1.1; or
(g) by the Company, if there shall have occurred any change that has a BCE
Material Adverse Effect which results, directly or indirectly, from any
act or action taken or not taken by BCE at or prior to the entering into
of the Support Agreement.
6.2 Amendment
This Agreement may not be amended except by an instrument signed by each
of the parties hereto.
6.3 Waiver
At any time prior to the Effective Time, any party hereto may: (a) extend
the time for the performance of any of the obligations or other acts of any
other party thereto; or (b) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations, in each case only to
the extent such obligations, agreements and conditions are intended for its
benefit.
6.4 Effect of Termination
If this Agreement is terminated as provided in section 6.1, there shall be
no liability or further obligation on the part of any party hereto or any of
their respective shareholders, officers or directors, except for liability
arising from a wilful breach of any representations, warranties or covenants in
this Agreement or common law fraud (and any action with respect thereto must be
commenced within two years of the date hereof) and except for the obligation of
the Company to pay any amounts payable by it in accordance with section 5.3 of
this Agreement.
ARTICLE 7
GENERAL PROVISIONS
7.1 Brokers
- 25 -
The Offeror and the Company represent and warrant to each other that,
except for CIBC World Markets and Xxxxxx Xxxxxxx Xxxx Xxxxxx, in the case of
BCE, and Xxxxxx Brothers and RBC Dominion Securities Inc., in the case of the
Company, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission, or to the reimbursement of any of its
expenses, in connection with the Offer, an Alternative Transaction or any
similar transaction. The Company has a correct and complete copy of all
agreements between the Company or any subsidiary or affiliate thereof and Xxxxxx
Brothers relating to the payment of fees and expenses to it.
7.2 Public Statements
Except as required by applicable law, neither BCE nor the Company shall
make any public announcement or statement with respect to the Offer, the Lock-up
Agreements or this Agreement without the approval of the Company or BCE,
respectively, such approval not to be unreasonably withheld or delayed, except
to the extent necessary to comply with law. Moreover, in any event, each party
agrees to give prior notice to the other of any public announcement relating to
the Offer, the Lock-up Agreements or the affairs of the Company, and agrees to
consult with each other prior to issuing each such public announcement.
7.3 Notices
All notices, requests, demands and other communications hereunder shall be
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended or delivered, or if sent by
facsimile transmission, upon receipt of confirmation that such transmission has
been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person. The date of receipt of any such notice or other communication if
delivered personally shall be deemed to be the date of delivery thereof, or if
sent by facsimile transmission the date of such transmission if sent during
normal business hours on a business day, failing which it shall be deemed to
have been received on the next business day.
If to BCE the Offeror:
BCE Inc.
Bureau 3700
0000, xxx xx xx Xxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx,
Chief Legal Officer
- 26 -
with a copy to:
Xxxxxx, Xxxx & Xxxx
44th Floor
0 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX X0X 0X0
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: J-P. Bisnaire
If to the Company:
Teleglobe Inc.
23rd Floor
0000, xxx xx xx Xxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxxxxx, Vice President,
Chief Legal Officer and Corporate Secretary
With a copy to:
Stikeman Elliott
40th Floor
0000 Xxxx-Xxxxxxxx Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxxx and Xxxxxx Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Any party may at any time change its address for service from time to time
by giving notice to the other parties in accordance with this section 7.3.
- 27 -
7.4 Currency
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are expressed in Canadian dollars.
7.5 Interpretation
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
References to sections and Articles refer to sections and articles of this
Agreement unless otherwise stated. Unless the context otherwise requires, words
used herein importing the singular include the plural and vice versa.
7.6 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 under the agreement.
7.7 Entire Agreement, Assignment and Governing Law
This Agreement and the confidentiality and standstill agreement previously
entered into between the parties, as the same has been or may be waived or
amended, together with all other documents and instruments referred to herein,
constitute the entire agreement and supersede all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
This Agreement: (a) is not intended to confer upon any other person any
rights or remedies hereunder; (b) shall not be assigned by operation of law or
otherwise, except that BCE may assign all or any portion of its rights under
this Agreement to any wholly-owned subsidiary of BCE, but no such assignment
shall relieve BCE of its obligations hereunder; and (c) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
Province of Quebec and the laws of Canada applicable therein, without giving
effect to the principles of conflict of laws thereof and all actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in the courts of the Province of Quebec.
7.8 Counterparts
- 28 -
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be original and all of which taken together shall be deemed
to constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce more than one counterpart.
7.9 English Language
The parties hereto have expressly requested that this Agreement and the
schedules thereto be drafted in the English language. Les parties a la presente
ont expressement demande que cette entente ainsi que les cedules s'y rattachant
soient redigees dans la langue anglaise.
IN WITNESS WHEREOF, the parties have executed this Agreement.
BCE INC.
by _______________________________
TELEGLOBE INC.
by _______________________________
SCHEDULE A
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the agreement to which this schedule
is attached, the Offeror shall have the right to withdraw the Offer and not take
up and pay for any Common Shares deposited under the Offer unless all of the
following conditions are satisfied or waived by the Offeror at or prior to the
Expiry Time:
(a) all requisite regulatory approvals, reviews or decisions (including,
without limitation, those of any stock exchanges or securities or other
regulatory authorities) to the consummation of the Offer shall have been
obtained or concluded on terms satisfactory to the Offeror, acting
reasonably;
(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 private
person (including, without limitation, any individual, corporation, firm,
group or other entity) in Canada 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:
(A) to cease trade, enjoin, prohibit or impose material limitations or
conditions on the purchase by or the sale to the Offeror of the Common
Shares or any of them or the right of the Offeror to own or exercise
full rights of ownership of the Common Shares or any of them; or
(B) which, if the Offer were consummated, (x) would require the Company or
any of its subsidiaries to dispose of a material asset, impose
material limitations or conditions on the business or operations of
the Company and its subsidiaries, or impose material fines or
penalties on the Company or any of its subsidiaries and (y) such
disposition, limitations, fines or penalties would reasonably be
expected to have a Company Material Adverse Effect or a BCE Material
Adverse Effect;
(c) either (i) the Commissioner under the Competition Act (Canada) shall have
issued an advance ruling certificate ("ARC") under section 102 of the
Competition Act in respect of the Offer and shall not have subsequently
withdrawn or purported to have withdrawn such ARC prior to the Offeror's
acquisition of Common Shares pursuant to the Offer or have stated or
otherwise indicated that he has obtained new information as a result of
which he is no longer satisfied that he would not have sufficient grounds
on which to apply to the Competition Tribunal under section 92 of the
Competition Act with respect to the Offer; or (ii) the applicable waiting
period under section 123 of the Competition Act shall have
- 2 -
expired, and the Competition Commissioner or his authorized representative
shall have advised the Offeror (on terms and in a form satisfactory to the
Offeror) that the Commissioner does not intend to make an application
under section 92 of the Competition Act in respect of the Offer and
neither the Commissioner nor any of his representatives shall have
rescinded or amended such advice;
(d) any applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, and under any other applicable foreign
competition laws, shall have expired;
(e) there shall not exist any prohibition at law against the Offeror making
the Offer or taking up and paying for any Common Shares deposited under
the Offer;
(f) there shall not exist and shall not have occurred (or, if there does exist
or shall have previously occurred, there shall not have been disclosed,
generally or to the Offeror in writing) any change that has a Company
Material Adverse Effect which results, directly or indirectly, from:
(i) any act or action taken or not taken by the Company at or prior to
the entering into of the Support Agreement; or
(ii) any act or action taken or not taken by the Company which has been
approved by the Board of Directors in circumstances where the BCE
nominees to the Board of Directors have voted against;
(g) the Offeror shall not have become aware of any untrue statement of a
material fact in the Company Public Documents, or an omission to state a
material fact that is required to be stated or that is necessary to make a
statement not misleading therein the light of the circumstances in which
it was made, in either case that is adverse to the Company; and
(h) (i) the Company shall not have breached in any material respect any of its
covenants contained in the Support Agreement (other than a breach
resulting from any act or action (or act or action not taken) that has
been approved by the Chairman of the Board) and (ii) the representations
and/or warranties of the Company contained in the Support Agreement shall
have been, as at the date made, true and correct or, if not already
qualified by a materiality concept, true and correct in all material
respects.
The foregoing conditions are for the exclusive benefit of the Offeror and
may be asserted by the Offeror at any time, regardless of the circumstances
giving rise to such assertion, including any action or inaction by the Offeror.
The Offeror may waive any of the foregoing conditions in whole or in part at any
time and from time to time, both before and after the Expiry Time, without
prejudice to any other rights
- 3 -
which the Offeror may have. The failure by the Offeror at any time to exercise
any of the foregoing rights will not be deemed a waiver of any such right and
each such right will be deemed an ongoing right which may be asserted at any
time and from time to time. Any determination by the Offeror concerning the
events described in the conditions to the Offer will be final and binding upon
all parties.
SCHEDULE B
PROVISIONS TO BE INCLUDED IN
HOLDCO AGREEMENT, WITHOUT LIMITATION
1. Representations and Warranties of Holdco and the Holdco Shareholders
Holdco and each of the Holdco Shareholders hereby jointly and severally
represent and warrant to the Offeror as follows and hereby acknowledge and
confirm that the Offeror is relying on such representations and warranties in
connection with the purchase by the Offeror of the Holdco Shares:
(a) the Common Shares which are being tendered to the Offer have been held
directly since [date to be inserted] by Holdco;
(b) the execution and delivery of this Holdco Agreement by the Holdco
Shareholders and Holdco and the completion by the Holdco Shareholders and Holdco
of the transactions contemplated hereby:
(i) will not conflict with, result in the breach of or constitute a
default under the articles, by-laws or resolutions of Holdco or
any agreement, indenture, contract, lease, deed of trust,
licence, option, instrument or other commitment, whether written
or oral (a "Contract") to which the Holdco Shareholders or
Holdco is a party; and
(ii) do not and will not violate any provision of law or
administrative regulation or any judicial or administrative
award, judgment or decree binding upon the Holdco Shareholders
or Holdco;
(c) each of the Holdco Shareholders and Holdco is a resident of Canada for
the purposes of the Canadian Income Tax Act or if any Holdco Shareholder is not
a resident of Canada for such purposes, either: (i) such Holdco Shareholder has
provided a certificate pursuant to section 116 of the Canadian Income Tax Act in
respect of the sale by such Holdco Shareholder of the Holdco Shares being
tendered to the Offer by such Holdco Shareholder with a certificate limit that
is not less than the value of the consideration payable by the Offeror to such
Holdco Shareholder pursuant to the Offer; or (ii) such Holdco Shareholder
acknowledges that the Offeror shall be permitted to withhold from the amount
payable to such Holdco Shareholder pursuant to the Offer any amount required to
be remitted by the Offeror pursuant to section 116 of the Canadian Income Tax
Act or pursuant to applicable tax laws of any other jurisdiction;
(d) this Holdco Agreement has been duly executed and delivered by each of
the Holdco Shareholders and Holdco and is a valid and binding obligation of each
of the Holdco Shareholders and Holdco enforceable against each of the Holdco
Shareholders and Holdco in accordance with its terms, subject to applicable
bankruptcy, insolvency and other laws affecting the enforcement of creditors'
rights
- 2 -
generally and provided that equitable remedies will only be awarded in the
discretion of a court of competent jurisdiction;
(e) all of the Holdco Shares are registered in the name of, and
beneficially owned by, not more than five Holdco Shareholders free and clear of
all liens, charges, encumbrances, claims and equities (collectively, "Liens");
(f) no person has any Contract, warrant or option or any right capable of
becoming a Contract, warrant or option for the purchase from any of the Holdco
Shareholders of any of the Holdco Shares or from Holdco of any shares or other
securities of Holdco or of any of the Common Shares held by Holdco;
(g) the Holdco Shares are validly issued and outstanding as fully paid and
non-assessable shares in the capital of Holdco and are the only issued and
outstanding shares in the capital of Holdco;
(h) Holdco is a corporation duly incorporated on or after February 1, 2000
and duly organized and validly existing under the laws of Canada;
(i) Holdco is the beneficial and registered holder of Common Shares (the
"Subject Shares") all of which are held by Holdco free and clear of all Liens;
(j) Holdco owns or holds no property or assets or any interests therein of
any nature or kind whatsoever other than the Subject Shares and Holdco carries
on no active business;
(k) Holdco has no obligations, liabilities (whether actual or contingent)
or indebtedness to any person, including without limitation any liabilities in
respect of federal or provincial income, corporate, goods and services,
harmonized sales, sales, excise, employer health or any other taxes, duties or
imposts of any nature or kind whatsoever, or in respect of any judgments,
orders, fines, interest, penalties, awards or decrees of any court, tribunal or
governmental, administrative or regulatory department, commission, board,
bureau, agency or instrumentality, domestic or foreign;
(l) Holdco has no subsidiaries and is not bound by any Contract to acquire
or lease in any manner any shares or assets of any nature or kind whatsoever;
(m) Holdco does not have, and has never had, any employees and its
directors and officers receive no remuneration or compensation from Holdco;
(n) Holdco is not a party to any Contract of any nature or kind whatsoever
except for the Contract with the Seller pursuant to which Holdco acquired the
Subject Shares (a true and complete copy of which has been provided to the
Offeror);
- 3 -
(o) there are no claims, investigations, actions, suits or proceedings
pending or threatened against or affecting Holdco or the Holdco Shareholders,
whether at law or in equity or before or by any federal, provincial, municipal
or other governmental or administrative or regulatory department, commission,
board, tribunal, bureau, agency or instrumentality, domestic or foreign, that
would adversely affect in any manner the ability of Holdco and the Holdco
Shareholders to enter into this Holdco Agreement and perform their obligations
hereunder;
(p) there are no claims, investigations, actions, suits or proceedings
pending or threatened against or affecting Holdco, whether at law or in equity
or before or by any federal, provincial, municipal or other governmental or
administrative or regulatory department, commission, board, tribunal, bureau,
agency or instrumentality, domestic or foreign;
(q) Holdco is in full compliance with all laws, rules or regulations to
which Holdco or the Subject Shares may be subject;
(r) the books and records of Holdco fairly and correctly set out and
disclose in all respects, in accordance with generally accepted accounting
principles in Canada consistently applied, the financial position of Holdco as
of the date hereof and all financial transactions of Holdco have been accurately
recorded in such books and records;
(s) the corporate records and minute books of Holdco contain complete and
accurate minutes of all meetings of the directors and shareholders of Holdco
held since its incorporation and all such meetings were duly called and held and
the share certificate books, register of shareholders, register of transfers and
register of directors and officers of Holdco are complete and accurate;
(t) the Holdco Shareholders acknowledge that where there is more than one
Holdco Shareholder, no Holdco Shareholder shall be entitled to withdraw any
Holdco Shares tendered to the Offer unless the notice of withdrawal is duly
executed by all of the Holdco Shareholders in respect of all outstanding Holdco
Shares and such Holdco Shares are otherwise withdrawn in compliance with all
provisions of the Offer relating to withdrawals.
2. Covenants
Holdco Documents. The Holdco Shareholders and Holdco shall forthwith make
available to the Offeror and its authorized representatives all minute books,
share certificate books, share registers, books of account, accounting records,
corporate documents and all other books or records, documents, information or
data relating to Holdco (collectively the "Holdco Documents"). At the time of
closing, all of the Holdco Documents shall be delivered to the Offeror by the
Seller and Holdco.
- 4 -
3. Indemnification
(a) Obligations to Indemnify. Each of the Seller, the Holdco Shareholders
and Holdco agrees to indemnify and save harmless the Offeror and, unless BCE is
the Offeror, BCE from all claims, demands, proceedings, losses, damages,
liabilities, deficiencies, costs and expenses (including, without limitation,
reasonable legal and other professional fees and disbursements, interest,
penalties and amounts paid in settlement) (collectively "Losses") suffered or
incurred by the Offeror as a result of or arising directly or indirectly out of
or in connection with any breach by the Seller, the Holdco Shareholders or
Holdco of any representation, warranty, obligation or covenant of the Seller,
the Holdco Shareholders or Holdco contained in this Holdco Agreement. The
Offeror agrees to indemnify and save harmless the Seller from all Losses
suffered or incurred by the Seller as a result of or arising directly or
indirectly out of or in connection with any breach by the Offeror of any
representation, warranty, obligation or covenant of the Offeror contained in
this Holdco Agreement.
(b) Notice of Claim. In the event that a party (the "Indemnified Party")
shall become aware of any claim, proceeding or other matter (a "Claim") in
respect of which another party (the "Indemnifying Party") agreed to indemnify
the Indemnified Party pursuant to this Holdco Agreement, the Indemnified Party
shall promptly give written notice thereof to the Indemnifying Party. Such
notice shall specify whether the Claim arises as a result of a claim by a person
against the Indemnified Party (a "Third Party Claim") or whether the Claim does
not so arise (a "Direct Claim"), and shall also specify with reasonable
particularity (to the extent that the information is available) the factual
basis for the Claim and the amount of the Claim, if known. If, through the fault
of the Indemnified Party, the Indemnifying Party does not receive notice of any
Claim in time to contest effectively the determination of any liability
susceptible of being contested, the Indemnifying Party shall be entitled to set
off against the amount claimed by the Indemnified Party the amount of any Losses
incurred by the Indemnifying Party resulting directly from the Indemnified
Party's failure to give such notice on a timely basis.
(c) Direct Claims. With respect to any Direct Claim, following receipt of
notice from the Indemnified Party of the Claim, the Indemnifying Party shall
have 60 days to make such investigation of the Claim as is considered necessary
or desirable. For the purpose of such investigation, the Indemnified Party shall
make available to the Indemnifying Party the information relied upon by the
Indemnified Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If both parties
agree at or prior to the expiration of such 60-day period (or any mutually
agreed upon extension thereof) to the validity and amount of such Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Claim.
(d) Third Party Claims. With respect to any Third Party Claim, the
Indemnified Party shall have the exclusive right, at the expense of the
Indemnifying Party, to contest, settle or pay the amount claimed and to retain
counsel and other experts or advisers selected by the Indemnified Party in its
sole discretion in connection therewith; provided, however, that the Indemnified
Party shall not settle any Third
- 5 -
Party Claim without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed. If the Indemnified Party elects
to assume such control, the Indemnifying Party shall have the right, at its sole
expense, to participate in the negotiation, settlement or defence of such Third
Party Claim. If any Third Party Claim is of a nature such that the Indemnified
Party is required by applicable law to make a payment to any person (a "Third
Party") with respect to the Third Party Claim before the completion of
settlement negotiations or related legal proceedings, the Indemnified Party may
make such payment and the Indemnifying Party shall, forthwith after demand by
the Indemnified Party, reimburse the Indemnified Party for such payment. If the
amount of any liability of the Indemnified Party under the Third Party Claim in
respect of which such payment was made, as finally determined, is less than the
amount that was paid by the Indemnifying Party to the Indemnified Party, the
Indemnified Party shall, forthwith after receipt of the difference from the
Third Party, pay the amount of such difference to the Indemnifying Party.
(e) Payment and Cooperation. The Indemnifying Party shall pay to the
Indemnified Party all amounts for which the Indemnifying Party is liable
pursuant to this section promptly after the Indemnified Party incurs the Loss in
respect of which such liability arises. The Indemnified Party and the
Indemnifying Party shall co-operate fully with each other with respect to Third
Party Claims, and shall keep each other fully advised with respect thereto
(including supplying copies of all relevant documentation promptly as it becomes
available).
(f) Tax Effect. If any payment received by an Indemnified Party hereunder
(an "Indemnity Payment") would constitute income for tax purposes to such
Indemnified Party, the Indemnifying Party shall pay a Tax Gross Up to the
Indemnified Party at the same time and on the same terms, as to interest and
otherwise, as the Indemnity Payment. The amount of any Loss for which
indemnification is provided shall be adjusted to take into account any tax
benefit realized by the Indemnified Party or any of its affiliates by reason of
the Loss for which indemnification is so provided or the circumstances giving
rise to such Loss. For purposes of this paragraph (f), any tax benefit shall be
taken into account at such time as it is received by the Indemnified Party or
its affiliate. Notwithstanding the foregoing provisions of this paragraph (f),
if an Indemnity Payment is included in the Indemnified Party's income pursuant
to paragraph 12(1)(x) of the Canadian Income Tax Act (or an equivalent provision
of any relevant provincial legislation), the Indemnified Party covenants and
agrees to make an election pursuant to subsection 12(2.2) of the Canadian Income
Tax Act (and the equivalent provision of any applicable provincial legislation)
with respect to the Indemnity Payment to the maximum extent possible such that
the amount of the Indemnity Payment included in the Indemnified Party's income
for tax purposes is minimized or eliminated. For purposes of this paragraph (f),
"Tax Gross Up" shall mean, with respect to any Indemnity Payment, such
additional amount (calculated in accordance with the Calculation Method) as is
necessary to place the Indemnified Party in the same after tax position as it
would have been in had such Indemnity Payment been received tax free; and
"Calculation Method" with respect to the calculation of any Tax Gross Up on any
Indemnity Payments, shall mean that such Tax Gross Up shall be calculated by
using the combined federal and provincial income tax rate applicable to the
Indemnified Party and, except as provided in this paragraph (f), without regard
to any
- 6 -
losses, credits, refunds or deductions that the Indemnified Party may have which
could affect the amount of tax payable on any such Indemnity Payment.
SCHEDULE C
ALTERNATIVE TRANSACTIONS
Plan of Arrangement
The parties acknowledge and agree that it is the intention of the parties
that the acquisition of Common Shares by the Offeror (the "Acquisition") be
effected in a manner that permits both Canadian and United States Shareholders
to dispose of their Common Shares on a tax-deferred rollover basis (a "Tax
Deferred Basis"). In order to achieve the foregoing objective, it is proposed
that the Acquisition be effected pursuant to a Plan of Arrangement (the "Plan of
Arrangement") under section 192 of the Canada Business Corporations Act ("CBCA")
in a manner to permit Shareholders to obtain a rollover for Canadian income tax
purposes under section 85.1, or, where the Shareholder elects, under section 85,
of the Canadian Income Tax Act and any applicable provincial tax legislation
(collectively, "Canadian Income Tax Legislation") and to permit Shareholders to
obtain a tax-free rollover for United States tax purposes pursuant to section
368(a)(1)(B) of the United States Internal Revenue Code (a "B Reorganization").
The parties agree to cooperate to consummate the Plan of Arrangement pursuant to
a B Reorganization for United States tax purposes.
Proposed Steps
Pursuant to the Plan of Arrangement, the following steps would be
undertaken:
1. The common shares of the Company would be reorganized whereby Xxxx Canada
would exchange a portion of its common shares for a new class of fully
participating subordinate voting shares ("Subordinate Voting Shares")
representing a 3.5% equity interest carrying a one-tenth vote per share so
that Xxxx Canada and all other affiliates of BCE, together with the Third
Series Preferred Shares, hold less than 20% of the voting power attaching
to shares of the Company.
2. The Third Series Preferred Shares would be amended to add a one-tenth vote
per share.
3. All outstanding Common Shares (other than common shares and Subordinate
Voting Shares owned by Xxxx Canada) would be exchanged for BCE Shares at
the Share Exchange Ratio.
4. The Holdco Election would only be available to Canadian Shareholders of the
Company if the making of the Holdco Election by any such Shareholders would
not adversely impact the tax consequences to United States Shareholders or
to the Offeror (other than in respect of the effect on the Offeror of the
difference in tax treatment in respect of section 85 or section 85.1 of the
Canadian Income Tax Act and other Canadian Income Tax Legislation) under
the Plan of Arrangement.
- 2 -
5. The BCE Shares will be issued to United States Shareholders pursuant to the
provisions of section 3(a)(10) of the United States Securities Act of 1933,
as amended.
Shareholder Votes
1. A special meeting (the "Special Meeting") of the holders of common shares
and Third Series Preferred Shares would be held to vote on the Plan of
Arrangement. Subject to the terms and conditions of this agreement, each
Seller agrees (i) to vote in favour of the Plan of Arrangement, (ii)
deliver to the Offeror no later than ten days prior to the date of the
meeting a duly executed proxy, which proxy shall be irrevocable, in favour
of the Offeror voting in favour of the Alternative Transaction, and (iii)
not to exercise any rights of dissent provided under section 190 of the
CBCA in connection with the Plan of Arrangement.
2. The Interim Order obtained from the Court would provide that in order for
the Plan of Arrangement to proceed, the Plan of Arrangement must (i) be
approved by two-thirds of the votes cast by the holders of common shares
present or represented by proxy at the Special Meeting, including Common
Shares held by BCE and its affiliates, and (ii) receive minority approval
as required by relevant Canadian securities rules or policies, which would
exclude, among others, votes cast by BCE and its affiliates.
3. The Interim Order would provide only that a vote of the Third Series
Preferred Shares be held at the Special Meeting, not that the Plan of
Arrangement must be approved by the Third Series Preferred Shares.
Court Approval
o The Plan of Arrangement would be implemented following the grant by
the Court of a Final Order under section 192 of the CBCA.
o Assuming the Plan of Arrangement is approved by the requisite votes of
the common shares (including minority approval), but the Plan of
Arrangement does not receive a favourable vote of the holders of the
Third Series Preferred Shares, the Court would be asked in the Final
Order to approve all steps of the Plan of Arrangement in any event.
Alternative Offer
(a) In the event that (i) either party determines, acting in good faith and
based on third party tax advice, that the Plan of Arrangement may not be
effected on a Tax Deferred Basis for Canadian or United States income tax
purposes or (ii) the Plan of Arrangement is not approved by the requisite votes
of the common shares or the Court does not grant the Final Order, the
Acquisition would then be made
- 3 -
by way of an offer (the"Alternative Offer") made by BCE and/or a direct or
indirect wholly-owned subsidiary of BCE (collectively, the "Offeror") to the
holders of any and all of the outstanding Common Shares to acquire all of the
outstanding Common Shares on the basis of, for each Common Share, that portion
(the "Alternative Share Exchange Ratio") determined as follows:
(i) in the event the closing of the Nortel Transaction occurs prior
to the First Take-Up Date, Cdn.$0.25 plus that portion of a BCE
Share (expressed to three decimal places with amounts less than
0.0005 being rounded down and amounts equal to or greater than
0.0005 being rounded up, in each case to the nearest
one-thousandth of a BCE Share) as is equal to the ratio obtained
by dividing (A) Cdn.$48.16 (being Cdn.$48.41 less Cdn.$0.25) by
(B) the BCE Weighted Average Trading Price; and
(ii) in the event the closing of the Nortel Transaction has not been
completed or is terminated prior to the First Take-Up Date,
Cdn.$0.25 plus 0.299 of a BCE Share per Common Share.
(b) The Alternative Share Exchange Ratio specified in paragraph (a)(i)
above shall be subject to a minimum of 0.85 of a BCE Share per Common Share and
a maximum of 0.97 of a BCE Share per Common Share.
(c) Shareholders may elect to receive cash in lieu of BCE Shares for up to
20% of their consideration for all or part of their Common Shares based upon the
BCE Weighted Average Trading Price.
(d) The Offeror agrees to execute and jointly file with each Shareholder
who so requests an election pursuant to section 85 of the Canadian Income Tax
Act and Canadian Income Tax Legislation in which election such Shareholder will
be entitled to elect the amount which shall be such Shareholder's proceeds of
disposition and the Offeror's cost of the Common Shares exchanged for BCE
Shares, provided such amount is within the limits prescribed by Canadian Income
Tax Legislation and provided that such Shareholder shall be responsible for
preparing the appropriate tax election form and providing the Offeror with a
letter representing to the Offeror that such Shareholder either (i) is a
resident of Canada for purposes of the Canadian Income Tax Legislation and is
not exempt from tax or (ii) is a non-resident of Canada, the Common Shares are
taxable Canadian property to such Shareholder and the Shareholder is not exempt
from Canadian tax on any gain such Shareholder would realize on a disposition of
the Common Shares. Such Shareholder shall provide the Offeror with the completed
election form no later than January 15, 2001. The Offeror will execute any
completed election form received and return such form by mail to the Shareholder
within 30 days of receipt thereof. The Shareholder shall be solely responsible
for filing the form with the appropriate tax authority.
- 4 -
(e) The Alternative Offer would be made within 15 days following the
earliest of (i) the date of the Special Meeting, if the holders of common shares
fail to approve the Plan of Arrangement, (ii) the date of the court hearing on
the Final Order, if the Final Order approving the Plan of Arrangement is not
obtained or (iii) a determination referred to in paragraph (a) being made by the
Sellers.
(f) The Alternative Offer would not be subject to a minimum tender
condition.
(g) The Alternative Offer would contain the conditions contemplated by
Schedule B and otherwise be in conformity, mutatis mutandis, with the provisions
of this agreement.
(h) For certainty, Shareholders would be entitled to make the Holdco
Election under the Alternative Offer and the Offeror agrees to execute and file
the tax election contemplated by paragraph (d) above in respect of any such
Holdco Election.
