UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
SHL Systemhouse Inc.
-----------------------------
(Name of Issuer)
Common Stock, without nominal or par value
------------------------------------------
(Title of Class of Securities)
78424R104
-----------------------------
(CUSIP Number)
Edward G. Freitag, Esq., Vice President and Assistant General Counsel,
MCI Communications Corporation, 1801 Pennsylvania Avenue, N.W.,
Washington, D.C. 20006(202)872-1600
----------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 19, 1995
-----------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4),
check the following box [ ].
Check the following box if a fee is being paid with the statement [X].
(A fee is not required only if the reporting person: (1) has a
previous statement on file reporting beneficial ownership of more
than five percent of the class of securities described in Item 1; and
(2) has filed no amendment subsequent thereto reporting beneficial
ownership of five percent or less of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to
whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the
subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in a
prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
Page 1 of 81 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 78424R104 Page 2 of 81 Pages
- -------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION No. OF ABOVE PERSON
MCI COMMUNICATIONS CORPORATION 52-0886267
- -------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER (a) [ ]
OF A GROUP* (b) [ ]
- -------------------------------------------------------------------
3. SEC USE ONLY
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4. SOURCE OF FUNDS
00(see item 3)
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
- -------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
- -------------------------------------------------------------------
7. SOLE VOTING POWER
8,865,705** (Plus 2,957,705 shares will be
purchased by Warburg (as defined
NUMBER OF herein) pursuant to the Credit
SHARES Support and Security Purchase
BENEFICIALLY Agreement and the Letter Agreement
OWNED BY (each as defined herein).)
EACH ------------------------------------------------------
REPORTING 8. SHARED VOTING POWER
PERSON -O-
WITH ------------------------------------------------------
9. SOLE DISPOSITIVE POWER
-O-
------------------------------------------------------
10. SHARED DISPOSITIVE POWER
-O-
- -------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
8,865,705** (Plus 2,957,705 shares will be purchased by
Warburg (as defined herein) pursuant to the
Credit Support and Security Purchase Agreement
and the Letter Agreement (each as defined herein).)
- -------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
- -------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.7% (after giving effect to the shares which will be
purchased by Warburg (as defined herein) pursuant to the
Credit Support and Security Purchase Agreement and the
Letter Agreement (each as defined herein).)
- -------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER
PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE AND
THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP No. 78424R104 Page 3 of 81 Pages
** Neither the filing of this Schedule 13D nor any of its
contents shall be deemed to constitute an admission that MCI
is the beneficial owner of any of the Issuer Common Stock
referred to herein for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended, or for any
other purpose, and such beneficial ownership is expressly
disclaimed.
<PAGE>
CUSIP No. 78424R104 Page 4 of 81 Pages
Item 1. Security and Issuer.
This Statement on Schedule 13D (this "Schedule 13D")
relates to shares of common stock, without nominal or par value
("Issuer Common Stock"), of SHL Systemhouse Inc. (the "Issuer"),
a corporation incorporated under the Canada Business Corporations
Act (the "CBCA"). The principal executive offices of the Issuer
are located at 50 O'Connor Street, Ottawa, Ontario, Canada KIP
6L2.
Item 2. Identity and Background.
(a)-(c), (f). This Schedule 13D is being filed on behalf of
MCI Communications Corporation, a Delaware corporation ("MCI").
Neither the filing of this Schedule 13D nor the information
contained herein shall be deemed to constitute an affirmation by
MCI that it is the beneficial owner of the Issuer Common Stock
referred to herein for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
or for any other purpose, and such beneficial ownership is
expressly disclaimed.
MCI and its subsidiaries are principally engaged in the
provision of domestic and international voice and data
communications services. MCI's principal executive offices are
located at 1801 Pennsylvania Avenue, N.W., Washington, D.C.
20006.
The name, citizenship, residence or business address
and principal occupation or employment (and the name, principal
business and address of any corporation or other organization in
which such employment is conducted) of each director and
executive officer of MCI is set forth in Schedule A hereto.
(d), (e). Neither MCI nor, to the best of MCI's knowledge,
any of the directors or executive officers of MCI has, during the
past five years: (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors); or (ii)
been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described in Item 4 hereof, MCI and
Warburg, Pincus Investors, L.P., a Delaware limited partnership
<PAGE>
CUSIP No. 78424R104 Page 5 of 81 Pages
("Warburg"), which is a record and/or beneficial owner of Issuer
Common Stock, have entered into a Tender Agreement described in
Item 4. Warburg entered into the Tender Agreement to induce MCI
and 3183581 Canada Inc., a corporation incorporated under the
CBCA and an indirect, wholly owned subsidiary of MCI ("Sub"), to
enter into the Acquisition Agreement described in Item 4.
Item 4. Purpose of Transaction.
On September 19, 1995, MCI, Sub and the Issuer entered
into an Acquisition Agreement (the "Acquisition Agreement")
providing for the commencement by MCI, through Sub, of an offer
to purchase all of the shares of Issuer Common Stock at a price
of U.S.$13 per share (the "Offer"). The Acquisition Agreement
provides that, subject to the terms and conditions contained
therein, Sub will commence the Offer as soon as reasonably
practicable after the execution of the Acquisition Agreement, but
in no event later than 15 business days after the public
announcement of the execution of the Acquisition Agreement. It
is the intention of MCI and Sub to commence the Offer within such
period of time on the terms and subject to the conditions
contained in the Acquisition Agreement. The Offer is being made
only for the shares of Issuer Common Stock and not for any
options, warrants or other rights to purchase shares of Issuer
Common Stock. Treatment of unexercised employee stock options is
described below.
The obligation of Sub to commence or continue the Offer
or to accept for payment, purchase or pay for any shares of
Issuer Common Stock tendered, is subject to certain conditions,
including, among others: (i) a minimum of not less than 75% of
the outstanding shares of Issuer Common Stock (calculated on a
fully diluted basis, but excluding shares of Issuer Common Stock
held by or on behalf of Sub or its affiliates and associates) on
the date of the Offer being validly tendered and not withdrawn
(the "Minimum Condition") and (ii) all requisite regulatory
approvals being obtained, in each case as set forth in the
Acquisition Agreement.
In the event the Minimum Condition is satisfied within
120 days after the date of the Offer and the shares of Issuer
Common Stock tendered under the Offer represent 90% of all of the
then outstanding shares of Issuer Common Stock (excluding shares
of Issuer Common Stock held by MCI and its affiliates and its
associates), Sub intends to elect to acquire the remainder of the
shares of Issuer Common Stock on the same terms as shares of
Issuer Common Stock were acquired under the Offer pursuant to the
provisions of Section 206 of the CBCA. If the statutory right of
acquisition described above is not available, or if Sub elects
not to proceed under such provisions, then Sub will seek to cause
<PAGE>
CUSIP No. 78424R104 Page 6 of 81 Pages
a special meeting of shareholders of the Issuer to be called to
consider an amalgamation, or another transaction including a
statutory arrangement, involving Sub (or an affiliate of Sub) and
the Issuer for the purposes of enabling Sub to acquire all of the
shares of Issuer Common Stock not deposited under the Offer for
consideration identical to the consideration offered under the
Offer. Should any such special meeting of shareholders of the
Issuer be called, MCI will vote any shares of Issuer Common Stock
over which it has voting power in favor of any such subsequent
transaction.
Immediately prior to the time (the "Effective Time") of
the first appointment or election to the board of directors of
the Issuer of persons designated by MCI or Sub (as described
below), who at the time of the designation, represent the
Applicable Percentage (as defined below) of the directors of the
Issuer, each outstanding employee stock option to purchase shares
of Issuer Common Stock and any related stock appreciation right
(together, an "Employee Option") whether or not then exercisable
will be cancelled by the Issuer, and each holder of a cancelled
Employee Option will be entitled to receive at the Effective
Time, or as soon as practicable thereafter, from the Issuer in
consideration for such cancellation an amount in cash (subject to
any withholding or other taxes) equal to the product of (i) the
number of shares of Issuer Common Stock previously subject to
such Employee Option and (ii) the excess, if any, of the amount
of the consideration offered under the Offer over the exercise
price per share of Issuer Common Stock previously subject to such
Employee Option.
If requested by MCI, the Issuer will, following the
first take-up of and payment for the shares of the Issuer Common
Stock to be purchased pursuant to the Offer, and from time to
time thereafter, use all reasonable efforts to cause the
Applicable Percentage (as defined below) of directors (and of
members of each committee of the board of directors of the Issuer
and members of the boards of directors of each subsidiary of the
Issuer) (rounded in each case to the next highest director or
member) of the Issuer to consist of persons designated or
selected by MCI. The "Applicable Percentage" means the ratio of
(i) the total voting power of all shares of Issuer Common Stock
accepted for payment pursuant to the Offer to (ii) the total
voting power of the outstanding voting securities of the Issuer,
rounded to the nearest whole number and expressed as a
percentage.
It is anticipated that the Issuer will, following the
first appointment or election to the board of directors of the
Issuer of persons designated by MCI (as described above), form an
advisory board of directors comprised of such Canadian members of
<PAGE>
CUSIP No. 78424R104 Page 7 of 81 Pages
the current board of directors of the Issuer who will not
continue to serve as directors and who elect to serve on such
advisory board of directors. Such advisory board will remain in
place for a period of not less than one year, which period may be
extended at the election of the board of directors of the Issuer.
Concurrently with and as a condition to the execution
and delivery of the Acquisition Agreement, MCI and Warburg
entered into a Tender Agreement, dated as of September 19, 1995
(the "Tender Agreement") relating to (i) an aggregate of
8,865,705 outstanding shares of Issuer Common Stock owned
beneficially and of record by Warburg as of the date of the
Tender Agreement, and (ii) any shares of Issuer Common Stock
acquired by Warburg after such date, whether upon the exercise of
options, conversion of convertible securities or otherwise. If
the Acquisition Agreement is terminated in accordance with its
terms, the covenants and agreements contained in the Tender
Agreement with respect to shares of Issuer Common Stock will also
terminate at such time. Subject to the foregoing and to certain
exceptions and conditions, Warburg has agreed pursuant to the
Tender Agreement (i) to validly tender pursuant to the Offer and
not withdraw the shares of Issuer Common Stock beneficially owned
by Warburg (representing 8,865,705 shares of Issuer Common Stock,
as represented by Warburg in the Tender Agreement) and the shares
of Issuer Common Stock acquired by Warburg after the date of the
Tender Agreement and (ii) to vote, and have appointed MCI,
certain of its executive officers and any other of its designees
as its proxy to vote, the shares of Issuer Common Stock held by
Warburg and the shares of Issuer Common Stock acquired by Warburg
after the date of the Tender Agreement in favor of the execution
and delivery by the Issuer of the Acquisition Agreement and the
approval of the terms thereof and of certain related agreements
and actions and against certain other enumerated actions or
agreements (the "Acquisition Related Matters"). Subject to the
foregoing and to certain exceptions and conditions, Warburg has
agreed (i) to refrain from soliciting, encouraging or taking any
other action to facilitate any inquiries or the making of any
proposal regarding the Issuer, (ii) to restrictions upon the
transfer of its shares of Issuer Common Stock, (iii) to refrain
from granting any proxies or powers of attorney, depositing any
shares of Issuer Common Stock in any voting trust or entering
into any agreement with respect to voting thereof, (iv) to take
or refrain from taking certain other actions and (v) to notify
MCI of the number of any new shares of Issuer Common Stock
acquired by Warburg after the date of the Tender Agreement.
If the Acquisition is completed as planned, MCI expects
to cause the Issuer to have the shares of Issuer Common Stock to
cease to be authorized to be listed on the Toronto Stock
Exchange, the Montreal Exchange and the NASDAQ National Market
<PAGE>
CUSIP No. 78424R104 Page 8 of 81 Pages
System.
The preceding summary of certain provisions of the
Acquisition Agreement and the Tender Agreement is not intended to
be complete and is qualified in its entirety by reference to the
full text of such agreements, copies of which are filed as
Exhibits 1 and 2 hereto, and which are incorporated herein by
reference.
Other than as described above, MCI has no plans or
proposals that relate to or would result in any of the actions
described in subparagraphs (a) through (j) of Item 4 of Schedule
13D (although, subject to the provisions of the Acquisition
Agreement, MCI reserves the right to develop such plans).
Item 5. Interest in Securities of the Issuer.
(a) and (b). As of September 19, 1995, under the definition
of "beneficial ownership" as set forth in Rule 13d-3 under the
Exchange Act, MCI may be deemed to have beneficially owned
8,865,705 shares of Issuer Common Stock presently outstanding and
subject to the Tender Agreement, constituting approximately
12.25% of the outstanding shares of Issuer Common Stock (based on
the number of shares of Issuer Common Stock represented by the
Issuer in the Acquisition Agreement to be outstanding as of
September 15, 1995). Pursuant to a Credit Support and Security
Purchase Agreement, dated as of October 22, 1993 (the "Credit
Support and Security Purchase Agreement"), between Warburg and
the Issuer, as modified by a Letter Agreement, dated September
19, 1995 (the "Letter Agreement"), Warburg has exercised a right
to purchase (the "Purchase Right") an additional 2,957,705 shares
of Issuer Common Stock, and the Issuer has agreed to deliver
immediately to Warburg certificates representing 2,957,705 shares
of Issuer Common Stock. Pursuant to the Tender Agreement, if
Warburg acquires additional shares of Issuer Common Stock,
whether upon the exercise of options or warrants, conversion of
convertible securities or otherwise, such shares will be subject
to the terms and provisions of the Tender Agreement, Warburg will
be required to tender (and not withdraw) such shares pursuant to
the Offer and such shares will be subject to the proxy to vote
such shares as indicated in the Tender Agreement. Accordingly,
under the definition of "beneficial ownership" as set forth in
Rule 13d-3 under the Exchange Act, MCI may be deemed to be a
beneficial owner of such additional shares. When Warburg
receives the 2,957,705 shares of Issuer Common Stock to which it
is entitled pursuant to the exercise of the Purchase Right, MCI
could be deemed to beneficially own 11,823,410 shares of Issuer
Common Stock, constituting approximately 15.7% of the then
outstanding shares of Issuer Common Stock after giving effect to
the issuance of such 2,957,705 shares.
<PAGE>
CUSIP No. 78424R104 Page 9 of 81 Pages
With respect to the Acquisition Related Matters, MCI
has sole power to vote the 8,865,705 shares of Issuer Common
Stock (and will have sole power to vote the additional 2,957,705
shares upon receipt of such shares by Warburg pursuant to the
exercise of the Purchase Right), subject to the Tender Agreement.
Unless and until the first take-up of and payment for the shares
of the Issuer Common Stock to be purchased pursuant to the Offer,
and except as set forth above, neither MCI nor its designees, if
any, has any power to vote or to direct the vote, shared power to
vote or to direct the vote, sole or shared power to dispose or to
direct the disposition of any Issuer Common Stock. Neither the
filing of this Schedule 13D nor any of its contents shall be
deemed to constitute an admission that MCI is the beneficial
owner of the Issuer Common Stock referred to in this paragraph
for purposes of Section 13(d) of the Exchange Act or for any
other purpose, and such beneficial ownership is expressly
disclaimed.
(c) Except as set forth in this Item 5, to the best
knowledge of MCI, MCI has not, and no directors or executive
officers of MCI and no other person described in Item 2 hereof
has beneficial ownership of, or has engaged in any transaction
during the past 60 days in, any shares of Issuer Common Stock.
(d) Neither MCI nor any of its designees has any right to
receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the shares of Issuer Common Stock
which are subject to the Tender Agreement.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer.
Except as set forth in this Schedule 13D, to the best
knowledge of MCI, there are no other contracts, arrangements,
understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person
with respect to any securities of the Issuer, including but not
limited to, transfer or voting of any of the securities of the
Issuer, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the
giving or withholding of proxies, or a pledge or contingency the
occurrence of which would give another person voting power or
investment power over the securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
1. Acquisition Agreement, dated September 19, 1995, among MCI
Communications Corporation, 3183581 Canada Inc. and SHL
<PAGE>
CUSIP No. 78424R104 Page 10 of 81 Pages
Systemhouse Inc.
2. Tender Agreement, dated as of September 19, 1995, among MCI
Communications Corporation, 3183581 Canada Inc. and Warburg,
Pincus Investors, L.P.
<PAGE>
CUSIP No. 78424R104 Page 11 of 81 Pages
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this Schedule 13D is true, complete and correct.
MCI COMMUNICATIONS CORPORATION
By: /s/ Douglas L. Maine
---------------------------
Douglas L. Maine
Executive Vice President and
Chief Financial Officer
DATED: September 28, 1995
<PAGE>
CUSIP No. 78424R104 Page 12 of 81 Pages
SCHEDULE A
Board of Directors and Executive Officers of
MCI Communications Corporation
The directors and executive officers of MCI Communications
Corporation are identified in the table below. Directors of MCI
Communications Corporation are indicated by an asterisk.
Name
Business Address
Citizenship
Principal Occupation
1. Bert C. Roberts, Jr.(*)
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Chairman and Chief Executive Officer,
MCI Communications Corporation
2. Clifford L. Alexander, Jr.(*)
Alexander & Associates, Inc.
400 C. Street, N.E.
Washington, D.C. 20002
United States
President, Alexander & Associates, Inc.
3. Judith C. Areen(*)
Georgetown University Law Center
600 New Jersey Avenue, N.W.
Washington, D.C. 20001
United States
Executive Vice President of Law Center Affairs
and Dean of the Law Center,
Georgetown University
4. Michael H. Bader(*)
Haley, Bader & Potts
4350 N. Fairfax Drive
Arlington, VA 22203-1633
United States
Partner, Haley, Bader & Potts
<PAGE>
CUSIP No. 7842R104 Page 13 of 81 Pages
5. Michael Hepher(*)
British Telecommunications plc.
81 Newgate Street
London, United Kingdom EC1A 7AJ
United Kingdom/Canada
Director and Group Managing Director,
British Telecommunications plc
6. Richard M. Jones(*)
Savings and Profit Sharing Fund
Sears Tower
Chicago, IL 60684
United States
Former Chairman and Chief Executive Officer,
Guaranty Federal Savings Bank
7. Gordon S. Macklin(*)
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Corporate Financial Advisor and
Independent Director
8. Alfred T. Mockett(*)
British Telecommunications plc.
81 Newgate Street
London, United Kingdom EC1A 7AJ
United Kingdom/United States
Managing Director of Global Communications,
British Telecommunications plc.
9. Dr. Alan Rudge(*)
British Telecommunications plc.
81 Newgate Street
London, United Kingdom EC1A 7AJ
United Kingdom
Director, Deputy Group Managing Director and
Managing Director, Development and Procurement,
British Telecommunications plc
10. Richard B. Sayford(*)
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
President and Chief Executive Officer
Strategic Enterprises, Inc.,
<PAGE>
CUSIP No. 78424R104 Page 14 of 81 Pages
11. Gerald H. Taylor(*)
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
President and Chief Operating Officer,
MCI Communications Corporation
12. Judith Whittaker(*)
Hallmark Cards, Incorporated
2501 McGee Trafficway
Kansas City, MO 64108
United States
Vice President-Legal,
Hallmark Cards, Incorporated
13. John R. Worthington(*)
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Senior Vice President and General Counsel,
MCI Communications Corporation
14. Timothy F. Price
MCI Telecommunications Corporation
Three Ravinia Drive
Atlanta, GA 30346-2102
United States
Executive Vice President and Group President,
MCI Telecommunications Corporation
15. Seth D. Blumenfeld
MCI International, Inc.
Two International Drive
Rye Brook, New York 10573
United States
President, MCI International, Inc.
16. John W. Gerdelman
MCI Telecommunications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Executive Vice President,
MCI Telecommunications Corporation
<PAGE>
CUSIP No. 78424R104 Page 15 of 81 Pages
17. Douglas L. Maine
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Executive Vice President and
Chief Financial Officer,
MCI Communications Corporation
18. Scott B. Ross
MCI Telecommunications Corporation
Three Ravinia Drive
Atlanta, GA 30346-2102
United States
Executive Vice President,
MCI Telecommunications Corporation
19. Michael J. Rowny
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Executive Vice President,
MCI Communications Corporation
20.James M. Schneider
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
United States
Senior Vice President,
MCI Communications Corporation
<PAGE>
CUSIP No. 78424R104 Page 16 of 81 Pages
INDEX TO EXHIBITS
Exhibit Page
Number Description of Exhibits Number
1. Acquisition Agreement, dated as of
September 19, 1995, among MCI
Communications corporation, 3183581
Canada Inc. and SHL Systemhouse Inc. 17
2. Tender Agreement, dated as of
September 19, 1995, among MCI
Communications Corporation, 3183581
Canada Inc. and Warburg, Pincus
Investors, L.P. 73
<PAGE> EXHIBIT 1
- - - - -
(17 of 81)
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated September 19, 1995 (this
"Agreement"), among MCI COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Parent"), 3183581 CANADA INC., a corporation
incorporated under the Canada Business Corporations Act (the
"CBCA") and an indirect, wholly owned subsidiary of the Parent
(the "Purchaser"), and SHL SYSTEMHOUSE INC., a corporation
incorporated under the CBCA (the "Company").
WHEREAS, the Board of Directors of the Company has
(i)determined that it is advisable for the Parent, through the
Purchaser, to acquire all of the Company's outstanding shares
(the "Shares") of Common Stock, without nominal or par value (the
"Common Stock"), pursuant to the take-over bid described below in
Article I, (ii) determined that the consideration to be paid for
each Share is fair to and in the best interests of the
shareholders of the Company, (iii) approved this Agreement and
the transactions contemplated hereby, and (iv) resolved to
recommend acceptance of the Offer by such shareholders;
WHEREAS, the Board of Directors of the Parent and the
Purchaser have each approved this Agreement and the transactions
contemplated hereby;
WHEREAS, Parent wishes to develop and expand the
Company's information technology services business on a global
basis and is committed to devoting the capital and other
resources necessary to accomplish this goal, while maintaining
the Company's significant presence in the Canadian market; and
WHEREAS, as a condition and inducement to their
willingness to enter into this Agreement and to consummate the
transactions contemplated hereby, the Parent and the Purchaser
have required that each of the shareholders listed on Schedule A
hereto agree, simultaneously with the execution of this
Agreement, to execute and deliver a Tender Agreement (the "Tender
Agreement") with the Purchaser and the Parent pursuant to which
each such shareholder has agreed to tender all of the Shares
owned by it in connection with the Offer and to grant a proxy to
vote such Shares in the manner provided in such Tender Agreement;
and, in order to induce the Parent and the Purchaser to enter
into this Agreement, each such shareholder has agreed to execute
the Tender Agreement simultaneously with the execution of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, the Parent, the Purchaser
and the Company hereby agree as follows:
<PAGE> EXHIBIT 1
- - - - -
(18 of 81)
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this
Agreement shall not have been terminated in accordance with
Section 5.1 and no event shall have occurred and no circumstance
shall exist which could reasonably be expected to result in a
failure to satisfy any of the conditions or events set forth in
Annex A hereto (the "Offer Conditions"), as soon as reasonably
practicable after the execution hereof (but in no event later
than 15 business days after the public announcement of the
execution hereof) the Purchaser shall, and the Parent shall cause
the Purchaser to, commence an offer (the "Offer") to purchase all
of the Shares of the Company, at a price of U.S.$13 per Share
(the "Per Share Amount"). The obligation of the Purchaser to
accept for payment Shares tendered shall be subject to a minimum
of not less than 75% of the outstanding Shares (calculated on a
fully diluted basis, but excluding Shares held by or on behalf of
the Purchaser or its affiliates and associates (as defined in the
CBCA)) on the date of the Offer being validly tendered and not
withdrawn (the "Minimum Condition") and to the satisfaction of
the other Offer Conditions. The Purchaser expressly reserves the
right, in its sole discretion, to waive or reduce the Minimum
Condition and to waive any other Offer Condition, to increase the
Per Share Amount payable pursuant to the Offer or to make any
other changes in the terms and conditions of the Offer (provided
that, without the written consent of the Company, no change may
be made which decreases the Per Share Amount payable in the
Offer, changes the form of consideration payable in the Offer
(other than by adding consideration), reduces the maximum number
of Shares to be purchased in the Offer or imposes conditions to
the Offer in addition to the Offer Conditions). The Purchaser
covenants and agrees that, subject to the terms and conditions of
this Agreement and the Offer, including the Offer Conditions,
unless the Company otherwise consents in writing, the Purchaser
will accept for payment and pay for Shares validly tendered and
not properly withdrawn not later than 10 days following the later
of (x) the 35th day after the commencement of the Offer and (y)
the satisfaction of the Offer Conditions which have not been
waived by the Purchaser, provided that the Purchaser may extend
the Offer for any period of time thereafter. It is agreed that
the Offer Conditions are for the benefit of the Purchaser and may
be asserted by the Purchaser, regardless of the circumstances
giving rise to any such condition (including any action or
inaction by the Purchaser or the Parent not inconsistent with the
terms hereof), or may be waived by the Purchaser, in whole or in
part at any time and from time to time, in its sole discretion.
The Purchaser may, at any time, transfer or assign to one or more
corporations directly or indirectly wholly owned by the Parent
<PAGE> EXHIBIT 1
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(19 of 81)
the right to purchase all or any portion of the Shares validly
tendered and not properly withdrawn pursuant to the Offer, but
any such transfer or assignment shall not relieve the Purchaser
of its obligations under the Offer or prejudice the rights of
tendering shareholders to receive payment for Shares validly
tendered and accepted for payment. Without limiting the Parent's
other obligations under this Agreement, the Parent
unconditionally guarantees to the Company the performance by the
Purchaser of each of its obligations under this Agreement.
(b) As soon as reasonably practicable on the date the
Offer is commenced, the Purchaser shall file (i) with the
Director appointed under the CBCA (the "Director") and with the
Ontario Securities Commission and other provincial and
territorial securities commissions or similar authorities in
Canada and the stock exchanges in Canada on which the Shares are
listed or traded (the "Canadian Securities Authorities") a
takeover bid offer and circular (together with all amendments and
supplements thereto, the "Offer and Circular") with respect to
the Offer which shall include a form of the related letter of
transmittal (the "Letter of Transmittal"), and (ii) with the
United States Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1F (together with all
amendments and supplements thereto, the "Schedule 14D-1F") which
shall contain (included as an exhibit) the Offer and Circular and
the Letter of Transmittal (the Offer and Circular, Schedule 14D-
1F, Letter of Transmittal and related documents, together with
any supplements or amendments thereto, are referred to herein
collectively as the "Offer Documents"). The Parent, the
Purchaser and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents that
shall have become false or misleading in any material respect.
The Parent and the Purchaser, on the one hand, and the Company,
on the other hand, further agree to take all steps necessary to
cause the Offer and Circular and Schedule 14D-1F as so corrected
to be filed with the Director, the Canadian Securities
Authorities and the SEC, respectively, and the Offer Documents as
so corrected to be disseminated to holders of Shares, in each
case as and to the extent required by (i) all applicable
securities laws in each of the provinces and territories of
Canada, the respective regulations and rules under such laws and
the applicable by-laws and published policy statements of the
Canadian Securities Authorities in such provinces (collectively,
the "Canadian Securities Laws") and (ii) applicable United States
securities laws. The Parent and the Purchaser will comply with
the laws of the Province of Quebec relating to the use of the
French language in connection with the Offer Documents to be
delivered to shareholders of the Company. The Company and its
counsel shall be given an opportunity to review the Offer
Documents prior to their being filed with the Canadian Securities
<PAGE> EXHIBIT 1
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(20 of 81)
Authorities and the SEC. The Parent and the Purchaser agree to
provide the Company and its counsel in writing with any written
comments the Parent and the Purchaser or their counsel may
receive from the Canadian Securities Authorities or the SEC with
respect to the Offer Documents promptly after the receipt of such
comments.
(c) In the event the Minimum Condition is satisfied
within 120 days after the date of the Offer and the Shares
tendered under the Offer represent 90% of all of the then
outstanding Shares (excluding Shares held by the Parent and its
affiliates and its associates), the Purchaser intends to elect to
acquire the remainder of the Shares on the same terms as Shares
were acquired under the Offer pursuant to the provisions of
Section 206 of the CBCA. If the statutory right of acquisition
described above is not available, or if the Purchaser elects not
to proceed under such provisions, then the Purchaser will seek to
cause a special meeting of shareholders of the Company to be
called to consider an amalgamation, or another transaction
including a statutory arrangement, involving the Purchaser (or an
affiliate of the Purchaser) and the Company for the purposes of
enabling the Purchaser to acquire all of the Shares not deposited
under the Offer. Any such second stage transaction will be
conducted in accordance with the "going private transaction"
provisions within the meaning of the regulations to the
Securities Act (Ontario), Ontario Securities Commission Policy
Statement 9.1 and Quebec Securities Commission Policy Statement
Q-27. The Purchaser intends that the consideration offered under
any subsequent "going private transaction" proposed by it would
be identical to the consideration offered under the Offer.
SECTION 1.2 Company Action. (a) The Company hereby
approves of and consents to the Offer and represents and warrants
that its Board of Directors, after consultation with its
advisors, at a meeting duly called and held on September 19,
1995, has unanimously (i) determined that this Agreement and the
transactions contemplated hereby, including the Offer, are fair
to and in the best interests of the Company and its shareholders,
(ii) approved this Agreement and the transactions contemplated
hereby, and (iii) resolved to recommend that the shareholders of
the Company accept the Offer and tender their Shares to the
Purchaser thereunder in accordance with the Letter of
Transmittal. The Company hereby consents to the inclusion in the
Offer Documents of the determinations, approvals and
recommendations of the Company's Board of Directors described in
this Section 1.2(a) and references to the opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
referred to in Section 2.18.
<PAGE> EXHIBIT 1
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(b) Concurrently with the mailing of the Offer
Documents, the Company (i) shall mail to holders of record of
Shares and to each of the directors of the Company and shall file
with the Director and the Canadian Securities Authorities a
Directors' Circular (together with all amendments, supplements
and exhibits (including the opinion of Merrill Lynch referred to
in Section 2.18) thereto, the "Directors' Circular") which shall
reflect the determinations and recommendation referred to in
Section 1.2(a), and (ii) shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9F
(together with all amendments and supplements thereto, the
"Schedule 14D-9F") which shall contain (included as an exhibit)
the Directors' Circular. The Company, the Parent and the
Purchaser each agrees promptly to correct any information
provided by it for use in the Directors' Circular or the Schedule
14D-9F that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps
necessary to cause the Directors' Circular as so corrected to be
disseminated to holders of Shares and filed with the Director,
the Canadian Securities Authorities, and the Schedule 14D-9F as
so corrected to be disseminated to holders of Shares and to be
filed with the SEC, in each case as and to the extent required by
Canadian Securities Laws and applicable United States securities
laws. The Company will comply with the laws of the Province of
Quebec relating to the use of the French language in connection
with the Directors' Circular to be delivered to shareholders of
the Company. The Company agrees to use its best efforts to cause
the senior officers and directors of the Company to support the
Offer. To the knowledge of the Company, all the senior officers
and directors of the Company intend to tender their Shares
pursuant to the Offer. The Parent, the Purchaser and their
counsel shall be given an opportunity to review the Directors'
Circular and the Schedule 14D-9F prior to its being mailed to
holders of record of Shares and filed with the Director, the
Canadian Securities Authorities and the SEC, respectively. The
Company agrees to provide the Parent and the Purchaser and their
counsel in writing with any written comments, notices or
communications the Company or its counsel may receive from the
Director, the Canadian Securities Authorities or the SEC with
respect to the Offer, the Offer Documents, the Directors'
Circular or the Schedule 14D-9F promptly after the receipt of
such comments.
(c) In connection with the Offer, if requested by the
Purchaser, the Company shall (i) permit its registrar and
transfer agent to act as the Purchaser's depositary under the
Offer, (ii) promptly furnish the Purchaser with mailing labels,
security position listings, any non-objecting beneficial owner
lists and any available listings or computer files containing the
names and addresses of the record holders of Shares, each as of a
<PAGE> EXHIBIT 1
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(22 of 81)
recent date, and (iii) promptly furnish the Purchaser with such
additional information (including updated lists of shareholders,
mailing labels, security position listings and non-objecting
beneficial owner lists) and such other assistance as the Parent,
the Purchaser or their agents may reasonably request in
communicating the Offer to the record and beneficial holders of
Shares.
SECTION 1.3 Board of Directors. (a) If requested by
the Parent, the Company shall, following the first take-up of and
payment for the Shares to be purchased pursuant to the Offer, and
from time to time thereafter, use all reasonable efforts to cause
the Applicable Percentage (as defined below) of directors (and of
members of each committee of the Board of Directors and members
of the boards of directors of each subsidiary) (rounded in each
case to the next highest director or member) of the Company to
consist of persons designated or selected by the Parent (whether,
at the request of the Parent, by means of increasing the size of
the Board of Directors or seeking the resignation of directors
and causing the Parent's designees to be elected). The
"Applicable Percentage" means the ratio of (i) the total voting
power of all Shares accepted for payment pursuant to the Offer to
(ii) the total voting power of the outstanding voting securities
of the Company, rounded to the nearest whole number and expressed
as a percentage.
(b) Following the Effective Time (as defined below),
the Company shall use all reasonable efforts to form an advisory
board of directors comprised of such Canadian members of the
current Board of Directors who will not continue to serve as
directors following the Effective Time and who elect to serve on
such advisory board of directors. Such advisory board shall
remain in place for a period of not less than one year, which
period may be extended at the election of the Board of Directors.
SECTION 1.4 Treatment of Employee Options. Immediately
prior to the Effective Time (as defined below), each outstanding
employee stock option and any related stock appreciation right
(together, an "Employee Option") whether or not then exercisable
shall be cancelled by the Company, and each holder of a cancelled
Employee Option shall be entitled to receive at the Effective
Time (as defined below) or as soon as practicable thereafter from
the Company in consideration for the cancellation of such
Employee Option an amount in cash (subject to any withholding or
other taxes) equal to the product of (i) the number of Shares
previously subject to such Employee Option and (ii) the excess,
if any, of the Per Share Amount over the exercise price per Share
previously subject to such Employee Option. The parties agree to
take all reasonable steps necessary in order to effectuate the
foregoing arrangements.
<PAGE> EXHIBIT 1
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(23 of 81)
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent
and the Purchaser that:
SECTION 2.1 Corporate Organization and Qualification;
Subsidiaries. The Company is a corporation duly organized and
validly existing under the CBCA, each subsidiary of the Company
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation,
and each of the Company and each of its subsidiaries has the
requisite corporate power and authority and any necessary
governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted. Each
of the Company and each of its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary.
SECTION 2.2 Articles of Incorporation and By-laws. The
Company has heretofore furnished to the Parent a complete and
correct copy of the Articles of Incorporation (the "Articles of
Incorporation") and the General Business By-laws (the
"By-laws")of the Company and the equivalent charter or
organizational documents of each of the Company's subsidiaries,
in each case as currently in effect. Such Articles of
Incorporation and By-laws and other charter or organizational
documents are in full force and effect and no other
organizational documents are applicable to or binding upon the
Company or any of its subsidiaries. Neither the Company nor any
of its subsidiaries is in violation of any of the provisions of
its Articles of Incorporation or By- laws or equivalent charter
or organizational documents, as the case may be.
SECTION 2.3 Capitalization. (a) The authorized
capital stock of the Company consists of an unlimited number of
shares of Common Stock, an unlimited number of First Preference
Shares issuable in series (the "Preferred Stock") and 5,000,000
participating, non-cumulative, convertible, non-voting Series A
First Preference Shares (the "Series A Preferred Stock"). As of
September 15, 1995, (i) 72,384,320 shares of Common Stock were
issued and outstanding, all of which were validly created,
allotted and issued, and are fully paid and nonassessable and
were issued free of preemptive (or similar) rights; (ii) an
aggregate of 10,004,746 shares of Common Stock were issuable upon
or otherwise deliverable in connection with the exercise of
outstanding Employee Options issued pursuant to the
<PAGE> EXHIBIT 1
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(24 of 81)
Pension/Benefit Plans (as defined in Section 2.11); and (iii) an
aggregate of 4,375,363 shares of Common Stock were issuable upon
or otherwise deliverable in connection with the arrangements
described on Schedule 2.3(a) hereto. The information furnished
by the Company to the Parent with respect to the number,
expiration date and exercise prices of the Employee Options
referred to in clause (ii) above is true and correct. Since
September 15, 1995, no options to purchase shares of Common Stock
have been granted and no shares of Common Stock have been issued
except for shares issued pursuant to the exercise of Employee
Options outstanding as of September 15, 1995 and under the
arrangement described in item 4 of Schedule 2.3(a). As of the
date hereof, no shares of Preferred Stock or Series A Preferred
Stock are issued and outstanding. Except as set forth above and
except as a result of the exercise of Employee Options
outstanding as of September 15, 1995 and under the arrangement
described in item 4 of Schedule 2.3(a), there are outstanding (i)
no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or
exchangeable or exercisable for shares of capital stock or voting
securities of the Company, (iii) no options or other rights to
acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock
or voting securities of the Company and (iv) no equity
equivalents, interests in the ownership or earnings of the
Company or other similar rights (collectively, "Company
Securities"). There are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities. Except as set forth
above, there are no other options, calls, warrants or other
rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of the Company
or any of its subsidiaries to which the Company or any of its
subsidiaries is a party. All shares of Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly created, allotted and issued,
fully paid and nonassessable and free of preemptive (or similar)
rights. There are no outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of the capital stock of any
subsidiary or, except as described below, to provide funds to or
make any investment (in the form of a loan, capital contribution
or otherwise) in any such subsidiary or any other entity. Each
of the outstanding shares of capital stock of each of the
Company's subsidiaries is duly authorized, validly created,
allotted and issued, fully paid and nonassessable and (other than
directors' qualifying shares which are beneficially owned by the
Company) is owned by the Company free and clear of all security
<PAGE> EXHIBIT 1
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(25 of 81)
interests, liens, claims (including adverse claims as defined in
the CBCA), pledges, agreements, limitations in voting rights,
charges or other encumbrances of any nature whatsoever (other
than security interests, liens, claims, pledges and charges
granted in favor of one or more of the Company's lenders in
connection with the financings referred to on Schedule 2.3(b)).
Schedule 2.3(c) hereto sets forth a list of the subsidiaries and
associated entities of the Company which evidences, among other
things, the amount of capital stock or other equity interests
owned by the Company, directly or indirectly, in such
subsidiaries or associated entities.
(b) To the Company's knowledge, of May 31, 1995 and
September 13, 1995, less than 40 percent of the outstanding
Common Stock was held by "U.S. holders" (as such term is defined
for purposes of Schedule 14D-1F under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). For the 12 calendar
month period ended August 31, 1995, the aggregate trading volume
of the Common Stock on national securities exchanges in the
United States and on the NASDAQ National Market ("NASDAQ") did
not exceed the aggregate trading volume of the Common Stock on
securities exchanges in Canada and on the Canadian Dealing
Network, Inc. ("CDN") (based on volume figures published by such
exchanges, NASDAQ and CDN). The most recent annual reports or
annual information forms filed or submitted by the Company with
securities regulators of Ontario, Quebec, British Columbia or
Alberta or with any other Canadian securities regulator do not
indicate that U.S. holders hold 40 percent or more of the Common
Stock.
SECTION 2.4 Authority Relative to Agreements. The
Company has all necessary corporate power and authority to
execute and deliver this Agreement and the Tender Agreement
(collectively, the "Basic Agreements"), to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution,
delivery and performance of the Basic Agreements by the Company
and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to
authorize the Basic Agreements or to consummate such
transactions. Each of the Basic Agreements has been duly and
validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery hereof and thereof by
the other parties thereto, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms.
<PAGE> EXHIBIT 1
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(26 of 81)
SECTION 2.5 No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance of each of the Basic
Agreements by the Company do not and will not: (i) conflict with
or violate the Articles of Incorporation or By-laws of the
Company or the equivalent charter or organizational documents of
any of its subsidiaries; (ii) assuming that all consents,
approvals and authorizations contemplated by clauses (i) through
(vii) of subsection (b) below have been obtained and all filings
described in such clauses have been made, conflict with or
violate any law, rule, regulation, order, judgment, decree,
license or permit applicable to the Company or any of its
subsidiaries or by which its or any of their respective
properties or assets are bound or affected; or (iii) result in
any breach or violation of or constitute a default (or an event
which with notice or lapse of time or both could become a
default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or
any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties or
assets are bound or affected, except, in the case of clause (iii)
for indentures, contracts, agreements, leases, licenses, permits,
franchises or other instruments to which the Company or any of
its subsidiaries are a party or by which they or any of their
respective properties or assets are bound or affected which are
subject to a "change of control" or similar provision and which
becomes applicable as a result of the acquisition of the Shares
pursuant to the Offer and which are identified in Schedule
2.5(a).
(b) The execution, delivery and performance of each of
the Basic Agreements by the Company do not and will not require
any consent, approval, authorization or permit of, action
by,filing with or notification to, any governmental or regulatory
authority, except for (i) approval under the Investment Canada
Act, (ii) notification under the Competition Act (Canada), (iii)
notification under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (iv) filings under the
Canadian Securities Laws, (v) applicable requirements, if any,
under the rules of the Toronto and Montreal stock exchanges and
NASDAQ, (vi) applicable requirements, if any, under the Exchange
Act, and (vii) the permits, licenses, waivers, authorizations,
exemptions, orders, approvals and certificates of public
convenience and necessity which are necessary to enable the
Company and its subsidiaries to conduct their operations after
the Effective Time in the manner heretofore conducted, all of
<PAGE> EXHIBIT 1
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(27 of 81)
which are set forth on Schedule 2.5(b) hereto ((i) through (vii)
collectively, the "Regulatory Requirements").
SECTION 2.6 Compliance. The Company and its
subsidiaries hold all permits, licenses, waivers, authorizations,
variances, exemptions, orders, approvals and certificates of
public convenience and necessity of all governmental and
regulatory authorities necessary or appropriate for the operation
of the businesses of the Company and each subsidiary. Neither
the Company nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order,
judgment, decree, license or permit applicable to the Company or
any of its subsidiaries or by which its or any of their
respective properties or assets are bound or affected, or (ii)
any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to
which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of
their respective properties or assets are bound or affected.
SECTION 2.7 Reports; Financial Statements. (a) The
Company and, to the extent applicable, each of its then or
current subsidiaries, has filed all forms, reports, statements
and documents required to be filed with the Canadian Securities
Authorities and the SEC since September 1, 1991 (collectively,
the "Reports"), each of which has complied in all material
respects with the applicable requirements of the Canadian
Securities Laws, the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the
date so filed. The Company has delivered to the Parent (i) its
Annual Reports on Form 10-K for each of the three fiscal years
ended August 31, 1992, 1993 and 1994, in the form filed with the
SEC (including any amendments thereto), (ii) all definitive proxy
circular or information statements relating to the Company's
meetings of shareholders (whether annual or special) held since
September 1, 1991, (iii) the Company's 1992, 1993 and 1994 Annual
Reports, and (iv) all other reports, statements, schedules,
preliminary or final prospectuses or registration statements
filed by the Company or any of its subsidiaries with the Canadian
Securities Authorities or the SEC since September 1, 1991. None
of such forms, reports, statements, schedules or documents
(including any financial statements, schedules, documents or
exhibits included or incorporated by reference therein) filed by
the Company and its then or current subsidiaries (x) when filed
pursuant to any Canadian Securities Laws, contained any
misrepresentation (as defined within the Securities Act
(Ontario)), (y) when filed pursuant to the Exchange Act,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
<PAGE> EXHIBIT 1
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(28 of 81)
circumstances under which they were made, not misleading, and (z)
when filed pursuant to the Securities Act, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, and, in the case of clauses
(x), (y) and (z), all such forms, reports, statements, schedules
or documents (including any financial statements, schedules,
documents or exhibits included or incorporated by reference
therein) complied in all material respects with all applicable
requirements of law.
(b) Each of the audited and unaudited consolidated
financial statements of the Company (including, in each case, any
related notes thereto) included in its Annual Reports for each of
the three fiscal years ended August 31, 1992, 1993 and 1994,
which have previously been furnished to the Parent, has been
prepared in accordance with Canadian generally accepted
accounting principles and has been reconciled to U.S. generally
accepted accounting principles in accordance with the rules and
regulations of the SEC, in each case applied on a consistent
basis throughout the periods involved (except as may be indicated
in the notes thereto) and each fairly presents the consolidated
financial position of the Company and its subsidiaries at the
respective dates thereof and the consolidated results of its
operations and changes in cash flows for the periods indicated.
(c) Except as and to the extent set forth on the
consolidated balance sheet of the Company and its subsidiaries at
August 31, 1994, including the notes thereto, neither the Company
nor any of its subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected on a balance sheet or in
the notes thereto prepared in accordance with Canadian generally
accepted accounting principles, except for liabilities or
obligations incurred in the ordinary course of business since
August 31, 1994 which could not, individually or in the
aggregate, reasonably be expected to be adverse to the Company on
a consolidated basis.
(d) The Company has heretofore furnished to the Parent
a complete and correct copy of any amendments or modifications,
which have not yet been filed with the Canadian Securities
Authorities or the SEC, to agreements, documents or other
instruments which previously were filed by the Company or any of
its subsidiaries with the Canadian Securities Authorities or the
SEC pursuant to the Canadian Securities Laws, the Securities Act
or the Exchange Act.
<PAGE> EXHIBIT 1
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(29 of 81)
(e) The Company has heretofore furnished to the Parent
copies of all reports, assessments or valuations which could be
considered to be "prior valuations" for the purposes of Policy 91
of the OSC or Policy Q.-27 of the Quebec Securities Commission.
SECTION 2.8 Absence of Certain Changes or Events. Since
August 31, 1994, except as contemplated by this Agreement or
disclosed in the Reports filed or on Schedule 2.8 hereto since
that date and up to the date of this Agreement, the Company and
its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice
and, since such date, there has not been (i) any condition, event
or occurrence which, is or could reasonably be expected to be
adverse to the Company on a consolidated basis, (ii) any
termination or cancellation of, or any modification which is or
could reasonably be expected to be adverse to the Company, the
Parent or the Purchaser to, any agreement, arrangement or
understanding to which the Company or any of its subsidiaries is
a party, (iii) any change by the Company or any of its
subsidiaries in its accounting methods, principles or practices,
(iv) any revaluation by the Company or any of its subsidiaries of
any of its material assets, including writing off notes or
accounts receivable other than in the ordinary course of business
and in a manner consistent with past practice, (v) any entry by
the Company or any of its subsidiaries into any commitment or
transactions material to the Company and its subsidiaries taken
as a whole, (vi) any declaration, setting aside or payment of any
dividends or distributions in respect of the Shares or any
redemption, purchase or other acquisition of any of its
securities, or (vii) any increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including the granting
of stock options, stock appreciation rights, performance awards,
or restricted stock awards), stock purchase or other employee
benefit plan or agreement or arrangement, or any other increase
in the compensation payable or to become payable to any officers
or key employees of the Company or any of its subsidiaries, and
neither the Company nor any of its subsidiaries has authorized or
otherwise committed itself to do any of the foregoing.
SECTION 2.9 Absence of Litigation. Except as disclosed
with reasonable specificity in the Reports filed prior to the
date of this Agreement or on Schedule 2.9 hereto, there are no
suits, claims, actions, proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company
or any of its subsidiaries, or any properties, assets or rights
of the Company or any of its subsidiaries, before any court,
arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, that (i) individually or
in the aggregate, could reasonably be expected to be adverse to
<PAGE> EXHIBIT 1
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(30 of 81)
the Company on a consolidated basis or (ii) seek to delay or
prevent the consummation of the transactions contemplated hereby
or by the other Basic Agreements, and there are no bases or
grounds on which, to the knowledge of the Company, such a suit,
claim, action, proceeding or investigation could be commenced
with a reasonable likelihood of success. As of the date hereof,
neither the Company nor any of its subsidiaries nor any of their
respective properties or assets is or are subject to any order,
writ, judgment, injunction, decree, determination or award which
is, or which could reasonably be expected to be, adverse to the
Company on a consolidated basis or which could prevent or delay
the consummation of the transactions contemplated hereby or by
the other Basic Agreements.
SECTION 2.10 Employment Matters. (a) Schedule 2.10(a)
hereto sets forth a complete list of all employees of, and
consultants retained by, the Company and its subsidiaries as of
September 15, 1995, who are participants in the Company's equity
purchase program (the "Participants") as well as each such
employee's or consultant's position, compensation (including any
scheduled salary increases) and severance or termination pay and
benefits.
(b) Except as disclosed in the Reports and Schedule
2.10(b) hereto, there exist no employment, consulting, severance
or indemnification agreements or arrangements between the Company
or any of its subsidiaries and any current or former director of
the Company or any of its subsidiaries or any Participant
pursuant to which the Company or any such subsidiary has, or may
have, obligations, and there are no employment policies or plans,
including policies regarding incentive compensation, stock
options, severance pay or other terms and conditions upon which
any such director or Participant can be terminated which are
binding on the Company or any of its subsidiaries, and no such
director, or Participant is entitled to any severance benefits
from the Company or any of its subsidiaries.
(c) Neither the Company nor any of its subsidiaries is
a party, either directly or by operation of law, to any
collective bargaining agreement, letters of understanding,
letters of intent or other written communication with any trade
union or association which may qualify as a trade union, which
would cover any of its employees or any dependent contractors of
the Company. Since September 1, 1991, and except as set forth in
item 6 of Schedule 2.9 hereto, neither the Company nor any of its
subsidiaries has (i) had any employee strikes, work stoppages,
slowdowns or lockouts or (ii) received any requests for, or
become aware of, any labor tribunal proceedings of any kind which
have been commenced or threatened for, the certification of
bargaining units or any other requests for collective bargaining.
<PAGE> EXHIBIT 1
- - - - -
(31 of 81)
To the knowledge of the Company, since September 1, 1991, there
have not been and there are not now any threatened or apparent
union organizing activities involving the employees or dependent
contractors of the Company or any of its subsidiaries.
(d) Each of the Company and each of its subsidiaries
has been and is being operated in full compliance with all laws
relating to employees, including employment standards,
occupational health and safety, pay equity and employment equity.
The Company and its subsidiaries have complied with and posted
plans as required under all applicable pay equity legislation in
Canada, the United States and any country or economic region in
which either the Company or any of its subsidiaries, directly or
indirectly, has assets or operations, including the Pay Equity
Act (Ontario). There have been no complaints under such laws
against the Company or any of its subsidiaries.
(e) Except as referred to in item 6 of Schedule 2.9
hereto, there are no complaints nor, to the knowledge of the
Company, are there any threatened complaints, against the Company
or any of its subsidiaries, before any employment standards
branch or tribunal or human rights tribunal. To the knowledge of
the Company, nothing has occurred which might lead to a complaint
against the Company or any of its subsidiaries, under any human
rights legislation or employment standards legislation. There
are no outstanding decisions or settlements or pending
settlements under the employment standards legislation which
place any obligation upon the Company or any of its subsidiaries
to do or refrain from doing any act.
(f) All workers compensation assessments under
legislation in Canada, the United States or any country or
economic region in which either the Company or any of its
subsidiaries, directly or indirectly, has material assets or
operations, including under the Workers' Compensation Act
(Ontario), in relation to the Company and each of its
subsidiaries have been paid or accrued, and neither the Company
nor any of its subsidiaries has been subject to any special or
penalty assessment under such legislation which has not been
paid.
(g) Neither the Company nor any of its
subsidiaries has any labor problems that might reasonably be
expected to affect the Company or any of its subsidiaries or lead
to an interruption of its operations at any location.
SECTION 2.11 Canadian Pension and Other Benefit Plans.
(a) The Company has accurately disclosed to the Parent and the
Purchaser the existence of all Pension/Benefit Plans (as defined
below).
<PAGE> EXHIBIT 1
- - - - -
(32 of 81)
(b) Current and complete copies of all written
Pension/Benefit Plans or, where oral, written summaries of the
material terms thereof, have been provided or made available to
the Parent and the Purchaser together with current and complete
copies of all documents relating to the Pension/Benefit Plans,
including, as applicable: (i) all documents establishing,
creating or amending any Pension/Benefit Plan; (ii) all trust
agreements, funding agreements, insurance contracts, investment
management agreements and investment policies; (iii) all
financial statements and accounting statements and reports, and
investment reports for each of the last three years and the three
most recent actuarial reports; (iv) all reports, returns, filings
and material correspondence with any regulatory authority in the
last five years; (v) all booklets, summaries or manuals prepared
for or circulated to, and written communications of a general
nature prepared for or distributed to, employees concerning any
Pension/Benefit Plan; and (vi) all legal opinions, consulting
reports and correspondence with respect to the administration or
funding of any Pension/Benefit Plan, or the investment of funds
included thereunder.
(c) Except as disclosed in Schedule 2.11 hereto, each
Pension/Benefit Plan is, and has been, established, registered,
qualified, administered and invested, in compliance with (i) the
terms thereof and (ii) all applicable laws; and the Company and
its subsidiaries have not received, in the last five years, any
notice from any person questioning or challenging such compliance
(other than in respect of any claim related solely to that
person), and the Company has no knowledge of any such notice from
any person questioning or challenging such compliance beyond the
last five years.
(d) All obligations under the Pension/Benefit Plans
(whether pursuant to the terms thereof or applicable law) have
been satisfied, and there are no outstanding defaults or
violations thereunder by the Company or any of its subsidiaries,
nor does the Company have any knowledge of any default or
violation by any other party to any Pension/Benefit Plan.
(e) Except as required by applicable law, there have
been no amendments, modifications or restatements of any
Pension/Benefit Plan made, or any improvements in benefits
promised, under the Pension/Benefit Plans since September 1,
1990, and none of the Pension/Benefit Plans provide for benefit
increases or the acceleration of funding obligations that are
contingent upon or will be triggered by the entering into of this
Agreement or the completion of the transactions contemplated
hereby.
<PAGE> EXHIBIT 1
- - - - -
(33 of 81)
(f) All payments, contributions or premiums required to
be paid to or in respect of each Pension/Benefit Plan have been
paid in a timely fashion in accordance with the terms thereof and
all applicable laws, and no Taxes (as defined in Section 2.13),
penalties or fees are owing or exigible under any Pension/Benefit
Plan.
(g) There is no proceeding, action, suit or claim
(other than routine claims for the payment of benefits) pending
or, to the knowledge of the Company, threatened involving any
Pension/Benefit Plan or its assets, and, to the knowledge of the
Company, no facts exist which could reasonably be expected to
give rise to any such proceeding, action, suit or claim (other
than routine claims for the payment of benefits).
(h) No event has occurred respecting any
Pension/Benefit Plan which would entitle any person (without the
consent of the Company) to wind-up or terminate any
Pension/Benefit Plan, in whole or in part, or which could,
reasonably be expected to adversely affect the tax status
thereof.
(i) There are no going concern unfunded actuarial
liabilities, past service unfunded liabilities or solvency
deficiencies respecting any of the Pension/Benefit Plans.
(j) No changes have occurred in respect of any
Pension/Benefit Plan since the date of the most recent financial,
accounting, actuarial or other report, as applicable, issued in
connection with any Pension/Benefit Plan and delivered to the
Parent and the Purchaser pursuant to Section 2.11(b), which could
reasonably be expected to adversely affect the information
contained in the relevant report (including rendering it
misleading in any respect).
(k) Neither the Company nor any of its subsidiaries
has received, or applied for, any payment of surplus out of any
Pension/Benefit Plan.
(l) Neither the Company nor any of its subsidiaries
has taken any contribution holidays under any Pension/Benefit
Plan.
(m) There have been no withdrawals or transfers of
assets from any Pension/Benefit Plan other than in accordance
with the terms of such Pension/Benefit Plans and applicable laws.
<PAGE> EXHIBIT 1
- - - - -
(34 of 81)
(n) All employee data necessary to administer each
Pension/Benefit Plan is in the possession of the Company and is
complete, correct and in a form which is sufficient for the
proper administration of the Pension/Benefit Plans in accordance
with the terms of such Pension/Benefit Plans and applicable laws,
and none of the Pension/Benefit Plans, other than the pension
plans or any group registered retirement savings plan or
supplemental pension or retirement plan, provide benefits to
retired employees or to the beneficiaries or dependents of
retired employees.
(o) None of the Pension/Benefit Plans require or
permit a retroactive increase in premiums or payments, and, to
the knowledge of the Company, the level of insurance reserves, if
any, under any insured Pension/Benefit Plan is reasonable and
sufficient to provide for all incurred but unreported claims.
For purposes of this Agreement, the term
"Pension/Benefit Plans" shall mean (i) all plans, arrangements,
agreements, programs, policies or practices, whether oral or
written, formal or informal, funded or unfunded, regulated or
unregulated, to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound
or under which the Company or any of its subsidiaries has any
liability or contingent liability, relating to: (a) retirement
savings or pensions, including any defined benefit pension plan,
defined contribution pension plan, group registered retirement
savings plan, deferred profit sharing plan, or supplemental
pension or retirement plan; or (b) bonuses, profit sharing,
deferred compensation, incentive compensation, hospitalization,
health, medical or dental treatment or expenses, disability,
supplementary unemployment insurance benefits, employee loans,
vacation pay, severance or termination pay or other benefit plan
with respect to any of its employees or former employees,
individuals working on contract with it or other individuals
providing services to it of a kind normally provided by
employees, or those eligible dependents of any such persons
(including all amendments to any of the foregoing); and (ii)
allstatutory plans which the Company or any of its subsidiaries
is required to comply with, including the Canada or Quebec
Pension Plans and plans administered pursuant to applicable
provincial health tax, workers' compensation and unemployment
insurance legislation (including all amendments to any of the
foregoing)provided, however, that Pension/Benefit Plans shall not
include any U.S. Company Plans (as defined in Section 2.12).
SECTION 2.12 U.S. Pension and Other Benefit Plans. (a)
The Company has accurately disclosed to the Parent and the
Purchaser the existence of each "employee benefit plan" (within
the meaning of section 3(3) of the Employee Retirement Income
<PAGE> EXHIBIT 1
- - - - -
(35 of 81)
Security Act of 1974, as amended ("ERISA") that is maintained,
administered, contributed to or sponsored by any United States
subsidiary of the Company (a "U.S. Company") (including, without
limitation, multiemployer plans within the meaning of ERISA
section 3(37)), stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the
future as a result of the transaction contemplated by this
Agreement or otherwise), whether formal or informal, oral or
written, legally binding or not under which any employee or
former employee of a U.S. Company has any present or future right
to benefits or under which a U.S. Company has any present or
future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively
referred to as the "U.S. Company Plans".
(b) With respect to each U.S. Company Plan, the Company
has delivered or made available to the Parent and the Purchaser a
current, accurate and complete copy (or, to the extent no such
copy exists, an accurate description) thereof and, to the extent
applicable, (i) any related trust agreement, annuity contract or
other funding instrument; (ii) the most recent determination
letter; (iii) any summary plan description and other written
communications (or a description of any oral communications) by
any U.S. Company to its employees concerning the extent of the
benefits provided under a U.S. Company Plan; and (iv) for the
three most recent years (I) the Form 5500 and attached schedules;
(II) audited financial statements; (III) actuarial valuation
reports; and (IV) attorney's response to an auditor's request for
information.
(c) (i) Each U.S. Company Plan has been established and
administered in accordance with its terms, and in substantial
compliance with the applicable provisions of ERISA, the Code and
other applicable laws, rules and regulations; (ii) each U.S.
Company Plan which is intended to be qualified within the meaning
of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification and, to
the knowledge of the Company, nothing has occurred, whether by
action or failure to act, which would cause the loss of such
qualification; (iii) with respect to any U.S. Company Plan, no
actions, suits or claims (other than routine claims for benefits
in the ordinary course) are pending or threatened, and, to the
knowledge of the Company, no facts or circumstances exist which
could give rise to any such actions, suits or claims and the
Company will promptly notify the Parent and the Purchaser in
writing of any pending or threatened claims arising between the
<PAGE> EXHIBIT 1
- - - - -
(36 of 81)
date hereof and the Effective Time; (iv) neither the Company nor
any other party has engaged in a prohibited transaction, as such
term is defined under Code section 4975 or ERISA section 406,
which would subject any U.S. Company, the Company, the Parent or
the Purchaser to any taxes, penalties or other liabilities under
Code section 4975 or ERISA sections 409 or 502(i); (v) no event
has occurred and no condition exists that would subject any U.S.
Company, either directly or by reason of its affiliation with any
member of its Controlled Group (defined as any organization which
is a member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax,
fine or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations including, but not limited to the
taxes imposed by Code sections 4971, 4972, 4977, 4979, 4980,
4980B, 4976(a) or the fine imposed by ERISA section 502(c); (vi)
all insurance premiums required to be paid with respect to U.S.
Company Plans as of the Effective Time have been
or will be paid prior thereto and adequate reserves have been
provided for on the Company's balance sheet for any premiums (or
portions thereof) attributable to service on or prior to the
Effective Time; (vii) for each U.S. Company Plan with respect to
which a Form 5500 has been filed, no material change has occurred
with respect to the matters covered by the most recent Form since
the date thereof; (viii) all contributions required to be made
prior to the Effective Time under the terms of any U.S. Company
Plan, the Code, ERISA or other applicable laws, rules and
regulations have been or will be timely made and adequate
reserves have been provided for on the Company's balance sheet
for all benefits attributable to service on or prior to the
Effective Time; (ix) no U.S. Company Plan provides for an
increase in benefits on or after the Effective Time; and (x) each
U.S. Company Plan may be amended or terminated without obligation
or liability (other than those obligations and liabilities for
which specific assets have been set aside in a trust or other
funding vehicle or reserved for on the Company's balance sheet).
(d) No U.S. Company nor any member of its Controlled
Group has at any time, sponsored, maintained, or had any
obligation to contribute to any employee benefit plan which is
subject to Title IV of ERISA including, without limitation, any
multiemployer plan (within the meaning of section 4001(a)(3) of
ERISA).
(e) Schedule 2.12 sets forth, on a plan by plan basis,
the present value of benefits payable presently or in the future
to present or former employees of any U.S. Company under each
unfunded U.S. Company Plan.
(f) Other than U.S. Company Plans delivered or made
available in accordance with Section 2.12(b) hereof, no U.S.
<PAGE> EXHIBIT 1
- - - - -
(37 of 81)
Company Plan exists which could result in the payment to any U.S.
Company employee of any money or other property or rights or
accelerate or provide any other rights or benefits to any U.S.
Company employee as a result of the transaction contemplated by
this Agreement, whether or not such payment would constitute a
parachute payment within the meaning of Code section 280G.
SECTION 2.13 Tax Matters. (a) Except as set forth in
Schedule 2.13, (i) the Company and each of its subsidiaries, and
any affiliated, consolidated, combined, unitary or aggregate
group of which the Company and any of its subsidiaries is or has
been a member, has timely filed, been included in or sent, all
Tax Returns (as defined below) required to be filed or sent to
any governmental authority; (ii) as of the time of filing, the
Tax Returns correctly reflected the facts regarding the income,
business, assets, operations, activities and status of the
Company and its subsidiaries and any other information required
to be shown therein; (iii) the Company and its subsidiaries have
timely paid or made provision for all Taxes that have been shown
as due and payable on the Tax Returns that have been filed; (iv)
the Company and its subsidiaries have timely made provision for
all Taxes payable for any periods that end before the Effective
Time for which no Tax Returns have yet been filed and for any
periods that begin before the Effective Time and end after the
Effective Time to the extent such Taxes are attributable to the
portion of any such period ending at the Effective Time; (v) the
charges, accruals and reserves for Taxes reflected on the books
of the Company and its subsidiaries are adequate under generally
accepted accounting principles to cover the Tax liabilities
accruing or payable by the Company and its subsidiaries in
respect of periods prior to the date hereof; (vi) neither the
Company nor any of its subsidiaries is delinquent in the payment
of any Taxes or has requested any extension of time within which
to file or send any Tax Return, which Tax Return has not since
been filed or sent; (vii) no deficiency for any Taxes has been
proposed, asserted or assessed in writing against the Company or
any of its subsidiaries (or any member of any affiliated,
consolidated, combined, unitary or aggregate group of which the
Company and any of its subsidiaries is or has been a member for
which the Company or any of its subsidiaries could be liable)
other than those Taxes being contested in good faith by
appropriate proceedings and set forth in Schedule 2.13 (which
shall set forth the nature of the proceeding, the type of return,
the deficiencies proposed, asserted or assessed and the amount
thereof, and the taxable year in question); (viii) neither the
Company nor any of its subsidiaries has granted any extension of
the limitation period applicable to any Tax claims; (ix) neither
the Company nor any of its subsidiaries is subject to liability
for Taxes of any person (other than the Company or its
subsidiaries), including without limitation, liability arising
<PAGE> EXHIBIT 1
- - - - -
(38 of 81)
from the application of U.S. Treasury Regulation Section 1.1502-6
or any analogous provision of state, local, provincial, or
foreign law; (x) neither the Company nor any of its subsidiaries
is or has been a party to any tax sharing or indemnity agreement
with any corporation that is not currently a member of a group or
sub- group of which the Company or any of its subsidiaries is
currently a member; (xi) the Canadian federal and provincial
income and capital tax liabilities of the Company and its
subsidiaries have been assessed by the relevant taxing
authorities and notices of assessment have been issued to each
such entity by the relevant taxing authorities for all taxation
years up to and including the taxation year specified on Schedule
2.13; (xii) there are no actions, suits, proceedings,
investigations, audits, or claims now pending or to the knowledge
of the Company or its subsidiaries, threatened, against the
Company or its subsidiaries in respect of any Taxes and there are
no matters under discussion, audit or appeal with any taxing
authority; (xiii) the Company and its subsidiaries have duly and
timely withheld from any amount paid or credited by it to or for
the account or benefit of any person, including, without
limitation, any of its employees, officers and directors and any
non-resident person, the amount of all Taxes and other deductions
required by any applicable law, rule or regulation to be withheld
from any such amount and have duly and timely remitted the same
to the appropriate governmental authority; and (xiv) for purposes
of Income Tax Act (Canada) or any applicable provincial or
municipal taxing statute, no persons or group of persons has ever
acquired or had the right to acquire control of the Company or
any of its subsidiaries.
(b) As used herein "Tax" shall include all domestic and
foreign assessments, taxes, charges, fees, levies, premiums,
imposts, duties, or other charges of a similar nature, including
without limitation, ad valorem, alternative or add-on minimum,
business, business license, capital, capital stock, commercial
rent, custom duties, disability, education, employment,
environmental, estimated, excise, export, franchise, goods and
services, gross receipts, health, health insurance, highway use,
income, import, land transfer, license, occupation, paid-up
capital, payroll, premium, profits, property, recording,
registration, real property gains, sales, severance, social
services, social security, stamp, surtax, transfer, unemployment,
unemployment insurance, use, value-added, windfall profits,
withholding, Canada, Quebec and other government pension plan
premiums, and other tax or governmental fee of any kind
whatsoever, including any interest, additions to tax, fines, or
penalties applicable thereto.
<PAGE> EXHIBIT 1
- - - - -
(39 of 81)
(c) As used herein, "Tax Return" shall include any
return, declaration, report, election, notice, filing, statement,
and information return required to be filed in respect of Taxes.
SECTION 2.14 Environmental Matters. Except as
disclosed in the Reports filed prior to the date of this
Agreement, there are no Environmental Liabilities (as defined
below) of the Company or any of its subsidiaries which could,
individually or in the aggregate be adverse to the Company,
determined on a consolidated basis.
For purposes of this Agreement, the following terms
shall have the following meanings:
"Environmental Liabilities" with respect to any person
means any and all liabilities of or relating to such person or
any of its subsidiaries (including any entity which is, in whole
or in part, a predecessor of such person or any of such
subsidiaries), whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, which (i) arise under or
relate to matters covered by Environmental Laws and (ii) relate
to actions occurring or conditions existing on or prior to the
Effective Date.
"Environmental Laws" means any and all applicable
Canadian or United States federal, provincial, state and local
statutes, rules, regulations, ordinances, orders, decrees,
injunctions, decisions and common law requirements relating in
any manner to contamination, pollution, Hazardous Materials or
protection of human health or the environment, as now or may at
any time hereafter be in effect, including the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid
Waste Disposal Act, the Resource Conservation and Recovery Act,
the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right-to-Know Act, the Safe
Drinking Water Act, all as amended, and similar provincial and
state laws.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including
crude oil or any fraction thereof) and petroleum products,
asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials and substances regulated
pursuant to any Environmental Law.
SECTION 2.15 Intellectual Property. Schedule 2.15 contains
a complete list of all registered or applied for Intellectual
Property and all unregistered Intellectual Property used in or
necessary for the conduct of the business of the Company and each
of its subsidiaries and all licenses relating to the Intellectual
<PAGE> EXHIBIT 1
- - - - -
(40 of 81)
Property. Except as set forth on Schedule 2.15 hereto, (a) the
Company and each of its subsidiaries owns, or is licensed to use
(in each case, clear of any liens, claims or encumbrances of any
kind), all Intellectual Property (as defined below) used in or
necessary for the conduct of its businesses as currently
conducted and has not transferred, assigned, alienated, limited
or encumbered the Intellectual Property or its interest therein
in any way; (b) the use, copying, modification, transmission or
licensing of any Intellectual Property by the Company and each of
its subsidiaries and the conduct of its businesses as currently
conducted, does not infringe on or otherwise violate the
Intellectual Property, contractual rights or obligations or other
rights whatsoever of any person and is in accordance with any
applicable permit, license, waiver, assignment, authorization,
approval or agreement pursuant to which the Company or any
subsidiary acquired the right to use,
copy, modify or license any Intellectual Property; (c) to the
knowledge of the Company, no service, product (or component
thereof), or process used, licensed, performed, manufactured,
copied, transmitted or modified, by and/or for, or supplied by or
to the Company and each of its subsidiaries infringes or
otherwise violates the Intellectual Property or contractual
rights or obligations or other rights whatsoever of any other
person; and (d) to the knowledge of the Company, no person is
challenging, infringing on or otherwise violating any right of
the Company or any of its subsidiaries with respect to any
Intellectual Property owned or used by and/or licensed to or by
the Company and its subsidiaries and no person has instituted,
given notice of or threatened any claim, demand, proceeding or
action against the Company or any of its subsidiaries, with
respect to or alleging any infringement or violation by the
Company or any of its subsidiaries of the Intellectual Property,
contractual rights or obligations or other rights whatsoever, of
that person.
For purposes of this Agreement "Intellectual Property"
shall include all copyrights (including all assignable interests
as a user or licensee), integrated circuit topography rights,
mask works, registered and unregistered trademarks, service
marks, brand names, logos, certification marks, trade dress,
assumed names, trade names, industrial designs and other
indications of origin, any improvements therein or derivatives
thereof, the goodwill associated with any of the foregoing and
registrations in any jurisdiction of, and applications in any
jurisdiction to register any of the foregoing, including any
extension, modification or renewal of any such registration or
application; inventions, processes, improvements, discoveries and
ideas, whether patentable or not in any jurisdiction; patents,
applications for patents (including divisions, derivatives, re-
examinations, continuations, continuations in part and renewal
<PAGE> EXHIBIT 1
- - - - -
(41 of 81)
applications), and any renewals, extensions or reissues thereof,
in any jurisdiction; non-public information, trade secrets, know-
how and confidential information and rights in any jurisdiction
to limit the use or disclosure thereof by any person; writings,
computer programs, compilations, derivatives works, topographies,
and other works, whether copyrightable or not in any
jurisdiction; registrations or applications for registration of
copyrights in any jurisdiction, and any renewals, extensions or
reversions thereof; the benefit of all waivers of moral rights;
and any similar intellectual or industrial property or
proprietary rights; and any claims, rights of compensation or
causes of action arising out of or related to any infringement or
misappropriation of any of the foregoing.
SECTION 2.16 Offer Documents; Proxy Statement. (a)
None of the Directors' Circular, the Schedule 14D-9F or any of
the information supplied by the Company for inclusion in the
Offer Documents, shall, at the respective times such Directors'
Circular, Schedule 14D-9F, Offer Documents or any amendments or
supplements thereto (x) are filed with the Canadian Securities
Authorities or are first published, sent or given to
shareholders, as the case may be, contains any misrepresentation
(as defined within the Securities Act (Ontario) and (y) are filed
with the SEC, contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information
supplied by the Parent or the Purchaser or any of their
respective representatives which is contained in the Directors'
Circular or the Schedule 14D-9F. The Directors' Circular and the
Schedule 14D-9F will comply in all material respects as to form
with the requirements of the Canadian Securities Laws and the
Exchange Act and the rules and regulations thereunder.
SECTION 2.17 Transactions with Affiliates. Except as
disclosed in Schedule 2.17, there are no contracts, agreements,
arrangements or understandings of any kind between any affiliate
of the Company (other than any wholly owned subsidiary of the
Company), on the one hand, and the Company or any subsidiary of
the Company, on the other hand.
SECTION 2.18 Opinion of Financial Advisor. On the date
hereof, the Company has received the opinion of Merrill Lynch to
the effect that, in the context of the transactions contemplated
hereby, the Per Share Amount is fair to the shareholders of the
Company from a financial point of view. The Company has been
authorized by Merrill Lynch to permit references to such fairness
opinion in the Offer Documents and in the Schedule 14D-9F and
<PAGE> EXHIBIT 1
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(42 of 81)
inclusion thereof in the Directors' Circular.
SECTION 2.19 Brokers. No broker, finder or investment
banker (other than Merrill Lynch) is entitled to any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated by the Basic Agreements based upon
arrangements made by and on behalf of the Company. The Company
has heretofore furnished to the Parent a complete and correct
copy of all agreements between the Company and Merrill Lynch
pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated by the Basic
Agreements.
SECTION 2.20 Offer Conditions. No event has occurred
and no circumstance has arisen which could reasonably be expected
to result in a failure to satisfy any of the Offer Conditions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE PURCHASER
The Parent and the Purchaser hereby, jointly and
severally, represent and warrant to the Company that:
SECTION 3.1 Corporate Organization. The Parent is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware. The Purchaser is a corporation duly
organized and validly existing under the CBCA. Each of the
Parent and the Purchaser has the requisite corporate power and
authority and any necessary governmental approvals to own, lease
and operate its properties and assets and to carry on its
business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such
power, authority and governmental approvals could not,
individually or in the aggregate, reasonably be expected to
prevent the consummation of the Offer.
SECTION 3.2 Authority Relative to Agreements. Each of the
Parent and the Purchaser has all necessary corporate power and
authority to enter into the Basic Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Parent and the
Purchaser of each of the Basic Agreements to which it is a party
and the consummation by the Parent and the Purchaser of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part
of the Parent and the Purchaser and no other corporate
<PAGE> EXHIBIT 1
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(43 of 81)
proceedings on the part of the Parent or the Purchaser are
necessary to authorize the Basic Agreements or to consummate such
transactions. Each of the Basic Agreements to which it is a
party has been duly executed and delivered by each of the Parent
and the Purchaser and, assuming due authorization, execution and
delivery by the other parties thereto, constitutes a legal, valid
and binding obligation of each such corporation enforceable
against such corporation in accordance with its terms.
SECTION 3.3 No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by the Parent and
the Purchaser of each of the Basic Agreements to which it is a
party do not and will not: (i) conflict with or violate the
respective certificates of incorporation, articles of
incorporation or by-laws of the Parent or the Purchaser, as the
case may be; (ii) assuming that all consents, approvals and
authorizations contemplated by clause (i) of subsection (b) below
have been obtained and all filings described in such clause have
been made, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Parent or the
Purchaser or by which either of them or their respective
properties or assets are bound or affected; or (iii) result in
any breach or violation of or constitute a default (or an event
which with notice or lapse of time or both could become a
default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Parent or
the Purchaser pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Parent or the Purchaser is
a party or by which the Parent or the Purchaser or any of their
respective properties or assets are bound or affected, except, in
the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which could
not, individually or in the aggregate, reasonably be expected to
prevent the consummation of the Offer.
(b) The execution, delivery and performance of each of
the Basic Agreements by the Parent and the Purchaser, as the case
may be, do not and will not require any consent, approval,
authorization or permit of, action by, filing with or
notification to, any governmental or regulatory authority,
domestic or foreign, except for (i) applicable requirements, if
any, under the Regulatory Requirements and (ii) such consents,
approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain could not,
individually or in the aggregate, reasonably be expected to
prevent the consummation of the Offer.
<PAGE> EXHIBIT 1
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(44 of 81)
SECTION 3.4 Offer Documents. None of the Offer
Documents or any of the information supplied by the Parent or the
Purchaser for inclusion in the Directors' Circular or the
Schedule 14D-9F shall, at the respective times such Offer
Documents, Directors' Circular or Schedule 14D-9F or any
amendments or supplements thereto (x) are filed with the Canadian
Securities Authorities or are first published, sent or given to
shareholders, as the case may be, contains any misrepresentation
(as defined within the Securities Act (Ontario)), and (y) are
filed with the SEC, contains any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the Parent and the
Purchaser make no representation or warranty with respect to any
information supplied by the Company or any of its representatives
which is contained in any of the Offer Documents. The Offer
Documents will comply in all material respects as to form with
the requirements of the Canadian Securities Laws and the Exchange
Act and the rules and regulations thereunder.
SECTION 3.5 Brokers. No broker, finder or investment
banker (other than Lazard Freres & Co.) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Parent or the
Purchaser.
SECTION 3.6 Sufficient Funds. The Parent has, and the
Purchaser will have available to it, sufficient funds necessary
to satisfy the obligation to pay the Per Share Amount pursuant to
the Offer.
ARTICLE IV
COVENANTS
SECTION 4.1 Conduct of Business of the Company. The
Company covenants and agrees that, during the period from the
date of this Agreement to the earlier of the time (the "Effective
Time") of (i) the first appointment or election to the Board of
Directors of the Company of persons designated by the Parent or
the Purchaser, who at the time of the designation, represent the
Applicable Percentage of the directors of the Company or (ii) the
termination of this Agreement pursuant to Article V, except
pursuant to the terms hereof, or unless the Parent shall
otherwise agree in writing, the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company and its
subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice
and in compliance with applicable laws; and the Company and its
<PAGE> EXHIBIT 1
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(45 of 81)
subsidiaries shall each use its best efforts to preserve intact
the business organization of the Company and its subsidiaries, to
keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its
subsidiaries with customers, suppliers and other persons with
which the Company or any of its subsidiaries has business
relations. By way of amplification and not limitation, neither
the Company nor any of its subsidiaries shall, between the date
of this Agreement and the Effective Time, directly or indirectly
do, or propose or commit to do, any of the following, except as
contemplated by the Basic Agreements, without the prior written
consent of the Parent:
(a) (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital
stock (except (A) dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its parent
corporation, and (B) dividends and distributions in the ordinary
course of business by any other subsidiary to its parent
corporation), (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries
or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(b) authorize for issuance, issue, deliver, sell or
agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or
otherwise encumber any shares of its capital stock or the
capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares,voting securities
or convertible securities or any other securities or equity
equivalents (including stock appreciation rights) (other than
upon exercise of options and warrants outstanding on the date
hereof, as in effect on the date hereof or as amended pursuant
hereto), or accelerate any vesting or other rights under any
outstanding rights, warrants or options to acquire any such
shares, voting securities or convertible securities or any other
securities or equity equivalents; provided, however, and not in
limitation of the foregoing, no additional equity securities or
rights to purchase equity securities will be issued or granted
after the date hereof;
<PAGE> EXHIBIT 1
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(46 of 81)
(c) except to the extent required under existing
Pension/Benefit Plans or U.S. Company Plans or employment
arrangements as in effect on the date of this Agreement or by
applicable law, (i) increase the compensation or fringe benefits
of any of its directors, officers or employees, except for
increases in salary or wages of employees of the Company or its
subsidiaries who are not officers of the Company in the ordinary
course of business in accordance with past practice, or (ii)
grant any severance or termination pay not currently required to
be paid under existing Pension/Benefit Plans or U.S. Company
Plans, or (iii) enter into any employment arrangement with any
present or former officer or senior-level employee, or, other
than in the ordinary course of business consistent with past
practice, any other employee of the Company or any of its
subsidiaries, or (iv) establish, adopt, enter into or amend or
terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, pension,
retirement, employment or other employee benefit agreement,
trust, plan or other arrangement for the benefit or welfare of
any director, officer or employee, pay any benefit not required
by any existing agreement, trust, plan or other arrangement or
place any assets in any trust for the benefit of any director,
officer or employee of the Company or any of its subsidiaries;
(d) amend its Articles of Incorporation, By-laws or
other comparable charter or organizational documents or alter
through merger, liquidation, reorganization, restructuring,
continuance or in any other fashion the corporate structure or
ownership of any subsidiary of the Company;
(e) acquire or agree to acquire (x) by merging,
amalgamating or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint
venture, association or other business organization or division
thereof (other than the completion of the acquisition of Planning
Consultancy Limited) or (y) any assets that are material,
individually or in the aggregate, to the Company and its
subsidiaries taken as a whole; or otherwise enter into any
partnership, joint venture, association or other similar
arrangement;
(f) sell, assign, lease, license, mortgage or
otherwise encumber or subject to any lien or otherwise dispose of
any of its properties or assets, except in the ordinary course of
business consistent with past practice;
<PAGE> EXHIBIT 1
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(47 of 81)
(g) (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person (other than
guarantees by the Company in favor of any of its wholly owned
subsidiaries or by any of its subsidiaries in favor of the
Company), issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of
its subsidiaries, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into
any arrangement having the economic effect of any of the
foregoing or (ii) make any loans, advances or capital
contributions to, or investments in, any other person, other than
to the Company or any direct or indirect wholly owned subsidiary
of the Company or (iii) convert short-term borrowing into
long-term borrowing;
(h) expend funds for capital expenditures other than in
accordance with the Company's current capital expenditure plans
(which plans shall have been disclosed in writing to the Parent
on or prior to the date hereof);
(i) enter into or amend, supplement, terminate or
otherwise modify any agreement, arrangement or understanding
other than in the ordinary course of business consistent with
past practice;
(j) waive, release, assign, grant or transfer any
rights of value, or extend or modify or change in any material
respect any services agreement or other existing, or enter into
any additional, license, lease, contract or other agreement,
other than in the ordinary course of business consistent with
past practice;
(k) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, amalgamation, plan of arrangement,
consolidation, restructuring, recapitalization, reorganization or
similar transaction;
(l) recognize any labor union (unless legally required
to do so) or enter into or amend any collective bargaining
agreement;
(m) change any accounting principle used by it, unless
required by one of the Canadian Securities Authorities, a
change in Canadian generally accepted accounting principles or
the Financial Accounting Standards Board;
<PAGE> EXHIBIT 1
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(48 of 81)
(n) make any tax election or settle or compromise any
income tax liability or file any income tax return prior to the
last day (including extensions) prescribed by law;
(o) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) or settle, pay,
discharge or compromise any claims not required to be paid,
individually in an amount in excess of U.S.$25,000 and in the
aggregate in an amount in excess of U.S.$100,000, other than in
consultation and cooperation with the Parent, and, with respect
to any such settlement, with the prior written consent of the
Parent;
(p) dismiss any senior employee of the Company or any
subsidiary of the Company, other than in consultation and
cooperation with the Parent, and, with respect to any such
dismissal, with the prior written consent of the Parent;
(q) authorize or commit to the use of cash not in the
ordinary course of business and consistent with past practice;
or
(r) authorize any of, or commit or propose or agree to
take any of, the foregoing actions or any action which would make
any of the representations or warranties of the Company
contained in this Agreement untrue and incorrect as of the date
when made if such action had then been taken, or would result in
any of the Offer Conditions not being satisfied.
SECTION 4.2 Conduct of Business of the Purchaser.
During the period from the date of this Agreement to the
Effective Time, the Purchaser shall not engage in any activities
of any nature except as provided in, or in connection with the
transactions contemplated by, the Basic Agreements.
SECTION 4.3 Access to Information; Confidentiality. (a)
From the date hereof to the Effective Time, the Company shall,
and shall cause its subsidiaries, officers, directors, employees,
auditors and other agents to, afford the officers, employees,
auditors and other agents of the Parent, complete access at all
reasonable times to its officers, employees, agents, properties,
assets, offices, plants and other facilities and to all books and
records, and shall furnish the Parent and such other persons with
all financial, operating and other data and information as the
Parent, through its officers, employees or agents, may from time
to time request.
(b) Each of the Parent and the Purchaser will hold and
will cause its officers, employees, auditors and other agents to
hold in confidence, unless compelled to disclose by judicial or
<PAGE> EXHIBIT 1
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(49 of 81)
administrative process or by other requirements of law or
regulation, all documents and information concerning the Company
and its subsidiaries furnished to the Parent or the Purchaser in
connection with the transactions contemplated in this Agreement
(except to the extent that such information can be shown to have
been (i) previously known by the Parent or the Purchaser from
sources other than the Company, or its directors, officers,
auditors or other agents, (ii) in the public domain through no
fault of the Parent or the Purchaser or (iii) lawfully acquired
by the Parent or the Purchaser on a non-confidential basis from
sources who are not known by the Parent or the Purchaser to be
bound by a confidentiality agreement or otherwise prohibited from
transmitting the information to the Parent or the Purchaser by a
contractual, legal or fiduciary obligation), and will not release
or disclose such information to any other person, unless
compelled to disclose by judicial or administrative process or by
other requirements of law or regulation, except its auditors and
other advisors in connection with this Agreement who need to know
such information. If the transactions contemplated by this
Agreement are not consummated, such confidence shall be
maintained for a period of three years from the date hereof and,
if requested by or on behalf of the Company, the Parent and the
Purchaser will, and will use reasonable efforts to cause their
auditors and other agents to, return to the Company or destroy
all copies of written information furnished by the Company to the
Parent and the Purchaser or their agents, representatives or
advisors. It is understood that the Parent and the Purchaser
shall be deemed to have satisfied their obligation to hold such
information confidential in accordance herewith if they exercise
the same care as they take to preserve confidentiality for their
own similar information provided that such represents a
reasonable degree of care. The provisions of this Section 4.3(b)
replace and supersede the obligations of the Parent set forth in
paragraphs 1-4 of the Nondisclosure Agreement, dated February 10,
1995 (the "Nondisclosure Agreement"), between and among MCI
Telecommunications Corporation, a Delaware corporation and a
wholly owned subsidiary of the Parent, and the Company and in any
other confidentiality agreement previously entered into between
the Parent and the Company. For greater certainty, the other
provisions of the Nondisclosure Agreement remain in full and
effect, unamended.
(c) No investigation pursuant to this Section 4.3 shall
affect any representations or warranties of the parties herein or
the conditions to the obligations of the parties hereto.
SECTION 4.4 No Solicitation. Neither the Company nor
any of its subsidiaries shall, nor shall it authorize or permit
any of its officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other
<PAGE> EXHIBIT 1
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(50 of 81)
representative retained by it or any of its subsidiaries to
solicit, encourage (including by way of furnishing information),
or take any other action to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be
expected to lead to, any Transaction Proposal (as defined below),
or enter into or maintain or continue discussions or negotiate
with any person in furtherance of such inquiries or to obtain a
Transaction Proposal, or agree to or endorse any Transaction
Proposal, and the Company shall notify the Parent orally (within
one business day) and in writing (as promptly as practicable), in
reasonable detail, as to any inquiries and proposals which it or
any of its subsidiaries or any of their respective
representatives or agents may receive; provided, however, that
(i) the Company may furnish or cause to be furnished information
concerning the Company and its businesses, properties or assets
to a third party, (ii) the Company may engage in discussions or
negotiations with a third party, (iii) following receipt of a
Transaction Proposal, the Company may take and disclose to its
shareholders a position with respect to such Transaction
Proposal, and/or (iv) following receipt of a Transaction
Proposal, the Board of Directors may withdraw or modify its
recommendation referred to in Section 1.2, but in each case
referred to in the foregoing clauses (i) through (iv) only to the
extent that the Board of Directors of the Company shall conclude
in good faith on the basis of advice from outside counsel that
such action is required in order for the Board of Directors of
the Company to satisfy its fiduciary obligations under applicable
law; provided, further, that the Board of Directors of the
Company shall not take any of the foregoing actions referred to
in clauses (i) through (iv) until after reasonable notice to and
consultation with the Parent with respect to such action and that
such Board of Directors shall continue to consult with the Parent
after taking such action and, in addition, if the Board of
Directors receives a Transaction Proposal, then the Company shall
promptly inform the Parent of the terms and conditions of such
proposal and the identity of the person making it. As used
herein, the term "Transaction Proposal" means: (x) any
acquisition or purchase of a substantial amount of assets of the
Company and its subsidiaries on a consolidated basis, or any
equity interest in the Company or any of its subsidiaries or any
take-over bid or tender offer (including an issuer bid or self
tender offer) or exchange offer, merger, amalgamation, plan of
arrangement, reorganization, consolidation, business combination,
sale of substantially all assets, sale of securities,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries (other than the
transactions contemplated by the Basic Agreements) or any other
transaction the consummation of which would or could reasonably
be expected to impede, interfere with, prevent or materially
delay the consummation of the Offer or which would or could
<PAGE> EXHIBIT 1
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(51 of 81)
reasonably be expected to materially dilute the benefits to the
Purchaser and the Parent of the transactions contemplated hereby
and by the other Basic Agreements or (y) any proposal, plan or
intention to do any of the foregoing either publicly announced or
communicated to the Company or any agreement to engage in any of
the foregoing. The Company will immediately cease and cause to
be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect
to any of the foregoing.
SECTION 4.5 Employee Benefit Matters. (a) The Company
shall cause the Systemhouse Payroll Deduction Stock Ownership
Plan and the SHL Systemhouse Inc. Employee Stock Purchase Plan to
be suspended as promptly as practicable after the date hereof,
and to cause such plans and all severance plan, policies or
programs in existence with respect to any U.S. Company to be
terminated as of the date on which the Applicable Percentage
exceeds 50%. Promptly after the date on which the Applicable
Percentage exceeds 50%, the Parent shall cause any employee of a
U.S. Company who does not otherwise have a contractual
arrangement governing severance to receive severance benefits in
accordance with the terms of Parent's severance policy, as in
effect from time to time.
(b) Promptly following the Effective Time, the Parent
shall cause the Company to adopt an incentive compensation plan
which shall include the terms and provisions outlined on Annex B
hereto.
SECTION 4.6 Further Action; Reasonable Best Efforts.
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including (i)
cooperation in the preparation and filing of the Offer Documents,
the Directors' Circular, the Schedule 14D-9F, any required
filings under the Investment Canada Act, the Competition Act, the
HSR Act and other Regulatory Requirements, and any amendments to
any thereof, and (ii) using its reasonable best efforts to make
all required regulatory filings and applications and to obtain
all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties
to contracts with the Company and its subsidiaries as are
necessary for the consummation of the transactions contemplated
by the Basic Agreements and to fulfill the conditions to the
Offer. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party
<PAGE> EXHIBIT 1
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(52 of 81)
to this Agreement shall use their reasonable best efforts to take
all such necessary action. In addition, the Company shall cause
senior management of the Company and its subsidiaries to
cooperate in good faith with representatives of the Parent in
identifying transition issues and formulating plans and
strategies to address any such issues.
SECTION 4.7 Public Announcements. The Parent and the
Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to
the Offer and shall not issue any such press release or make
anysuch public statement prior to such consultation, except as
maybe required by law or any listing agreement with its
securities exchanges or quotation systems.
Section 4.8 Certain Agreements. Neither the Company
nor any subsidiary will waive any provision of any
confidentiality or standstill or similar agreement to which it is
a party without the prior written consent of the Parent, unless
the Board of Directors of the Company or such subsidiary
concludes in good faith that waiving such provision is necessary
or appropriate in order for the Board of Directors of the Company
to act in a manner which is consistent with its fiduciary
obligations under applicable law. The Company will promptly
advise the Parent of the termination of any confidentiality or
standstill or similar agreement to which it is a party by the
other party or parties to such agreement.
SECTION 4.9 Regulatory Filings. The Parent and the
Purchaser shall prepare on a timely basis and in a manner
consistent with the provisions of this Agreement (including,
without limitation, the recitals to this Agreement) all filings
necessary to fulfill the Regulatory Requirements. Prior to
making any such filing the Parent and the Purchaser shall provide
to the Company draft copies of all of the documents comprising
such filing and allow the Company a reasonable time to comment on
such documents.
ARTICLE V
TERMINATION, AMENDMENT AND WAIVER
SECTION 5.1 Termination. This Agreement may be
terminated and the Offer contemplated hereby may be abandoned at
any time prior to the Effective Time:
(a) by mutual written consent of the Parent, the
Purchaser and the Company; or
<PAGE> EXHIBIT 1
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(53 of 81)
(b) by the Parent or the Company if any court of
competent jurisdiction or other governmental body located or
having jurisdiction within Canada, the United States or any
country or economic region in which either the Company or the
Parent, directly or indirectly, has material assets or
operations, shall have issued a final order, decree or ruling or
taken any other final action restraining, enjoining or otherwise
prohibiting the Offer and such order, decree, ruling or other
action is or shall have become final and nonappealable; provided
that such right of termination shall not be available to any
party if such party shall have failed to make reasonable efforts
to prevent or contest the imposition of such injunction or action
and such failure materially contributed to such imposition;
(c) by the Parent if, due to an occurrence or
circumstance which has resulted or could reasonably be expected
to result in a failure to satisfy any of the Offer Conditions,
the Purchaser shall have (i) terminated the Offer or (ii) failed
to pay for Shares pursuant to the Offer on or prior to the
Outside Date (as defined below);
(d) by the Company if (i) there shall not have been a
breach of any representation, warranty, covenant or agreement on
the part of the Company in any material respect, and the
Purchaser shall have (A) terminated the Offer or (B) failed to
pay for Shares pursuant to the Offer on or prior to the Outside
Date or (ii) prior to the purchase of Shares pursuant to the
Offer, any person shall have made a bona fide offer to acquire
the Company (A) that the Board has determined in its good faith
judgment is more favorable to the Company's shareholders than
the Offer and (B) as a result of which the Board determines in
good faith after consultation with independent legal counsel that
it is obligated by its fiduciary duties under applicable law to
terminate this Agreement, provided that such termination under
this clause (ii) shall not be effective until the Company has
made payment of the full fee required by Section 5.3(a) hereof
and has deposited with a mutually acceptable escrow agent U.S.$5
million for reimbursement to the Parent of fees and expenses in
accordance with Section 5.3(b)hereof; or
(e) by the Parent prior to the purchase of Shares
pursuant to the Offer, if (i) there shall have been a material
breach of any representation or warranty on the part of the
Company contained herein; for this purpose, a material breach is
a breach that, individually or in the aggregate, (A) would
constitute an untrue statement of, or omission to state, a
"material change" or "material fact" (as such terms are defined
in the Securities Act (Ontario)), (B) could reasonably be
expected to materially dilute the benefits to the Purchaser and
<PAGE> EXHIBIT 1
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(54 of 81)
the Parent of the transactions contemplated hereby and by the
other Basic Agreements, or (C) could reasonably be expected to
impair the ability of the Company to perform its obligations
hereunder or under the other Basic Agreements (as defined in
Section 2.4) to which it is a party (the "Adverse Effects");
(ii) there shall have been a breach of any covenant or agreement
on the part of the Company contained herein which individually or
in the aggregate, has an Adverse Effect (provided that in such
case the Parent shall give not less than 5 days prior notice to
allow the Company to cure any breach before exercising its right
of termination); (iii) the Board of Directors of the Company
shall have withdrawn or modified (including by amendment of the
Directors' Circular or Schedule 14D-9F) in a manner determined by
the Parent to be adverse to the Purchaser or the Parent its
approval or recommendation of the Offer, this Agreement or the
transactions contemplated hereby or by the other Basic Agreements
or shall have approved or recommended another offer or
transaction, or shall have resolved to effect any of the
foregoing, or (iv) the Minimum Condition shall not have been
satisfied prior to the expiration of the Offer and prior to the
expiration of the Offer (A) any person (other than the Parent or
the Purchaser) shall have made a Transaction Proposal or public
announcement or communication to the Company with respect to a
Transaction Proposal or (B) any person (including the Company or
any of its subsidiaries or affiliates), other than the Parent or
any of its affiliates, shall have become the beneficial owner of
20% or more of the Shares.
As used herein, the "Outside Date" shall mean the latest
(not to exceed 120 days following the date hereof) of (A) 60 days
following the date hereof, (B) 75 days following the date the
Purchaser's Application for Review is filed under the Investment
Canada Act, (C) if a Request for Additional Information is made
by the Department of Justice or the Federal Trade Commission
pursuant to the HSR Act, 10 business days after substantial
compliance with any such request, or (D) 10 business days
following the conclusion of any proceedings before any other
governmental or regulatory authority in connection with its
review of the transactions contemplated hereby or any similar
delay pursuant to any material antitrust or competition law or
regulation.
SECTION 5.2 Effect of Termination. In the event of
the termination of this Agreement pursuant to Section 5.1, this
Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto except as set forth in
Section 5.3 and Section 6.1; provided, however, that nothing
herein shall relieve any party from liability for any breach
hereof.
<PAGE> EXHIBIT 1
- - - - -
(55 of 81)
SECTION 5.3 Fees and Expenses. (a) If: (i) the Parent
terminates this Agreement pursuant to Section 5.1(e)(i) or (ii)
hereof, or if the Company terminates this Agreement pursuant to
Section 5.1(d)(i) hereof, and, within 12 months thereafter, the
Company enters into an agreement with respect to a Third Party
Acquisition (as defined below), or a Third Party Acquisition
occurs, involving any party (or any affiliate or associate
thereof) (x) with whom the Company (or its agents) had any
discussions with respect to a Third Party Acquisition, (y) to
whom the Company (or its agents) furnished information with
respect to or with a view to a Third Party Acquisition or (z) who
had submitted a proposal or expressed any interest publicly or to
the Company in a Third Party Acquisition, in the case of each of
clauses (x), (y) and (z) prior to such termination; or (ii) the
Parent terminates this Agreement pursuant to Section 5.1(e)(i) or
(ii) hereof, and within 12 months thereafter a Third Party
Acquisition shall occur involving a direct or indirect
consideration (or implicit valuation) for Shares (including the
value of any stub equity) in excess of the Per Share Amount; or
(iii) the Parent terminates this Agreement pursuant to Section
5.1(e)(iii) or (iv) hereof or the Company terminates this
Agreement pursuant to Section 5.1(d)(ii) hereof or otherwise
under circumstances that would have permitted the Parent to
terminate this Agreement under Section 5.1(e)(iv) hereof; then
the Company shall pay to the Parent, within one business day
following the execution and delivery of such agreement or such
occurrence, as the case may be, or simultaneously with any
termination contemplated by Section 5.3(a)(iii) above, a fee, in
cash, of U.S.$32 million, provided, however, that the Company in
no event shall be obligated to pay more than one such U.S.$32
million fee with respect to all such agreements and occurrences
and such termination.
"Third Party Acquisition" means the occurrence of any of
the following events: (i) the acquisition of the Company by
merger, amalgamation, tender offer or otherwise by any person
other than the Parent, the Purchaser or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of 33-1/3%
or more of the total assets of the Company and its subsidiaries,
taken as a whole; (iii) the acquisition by a Third Party of 33-
1/3% or more of the outstanding Shares; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of
an extraordinary dividend; or (v) the repurchase by the Company
or any of its subsidiaries of 10% or more of the outstanding
Shares, other than a repurchase which was not approved by the
Company or publicly announced prior to the termination of this
Agreement and which is not part of a series of transactions
resulting in a change of control.
(b) Upon the termination of this Agreement (i) under
<PAGE> EXHIBIT 1
- - - - -
(56 of 81)
circumstances in which the Parent or the Purchaser shall have
been entitled to terminate this Agreement pursuant to Section
5.1(e)(i) or (ii) hereof (whether or not expressly terminated on
such basis) or (ii) under circumstances in which the Company
shall be obligated to pay a fee pursuant to Section 5.3(a), the
Company shall reimburse the Parent, the Purchaser and their
affiliates (not later than one business day after request
therefor) for all fees and expenses (in no event exceeding U.S.$5
million) incurred by any of them or on their behalf in connection
with the Offer and the consummation of all transactions
contemplated by this Agreement and the other Basic Agreements
(including fees and disbursements payable to any financing
sources, investment bankers, counsel to the Purchaser or the
Parent or any of the foregoing, and accountants). Unless
required to be paid earlier pursuant to Section 5.1(d), the
Company shall in any event pay the amount requested within one
business day of such request. The escrow agent referred to in
Section 5.1(d) shall promptly and in any event within one
business day of receipt of request therefor by the Purchaser or
the Parent disburse to the Purchaser or the Parent the fees and
expenses payable by the Company pursuant to this Section 5.3. To
the extent that funds deposited with such escrow agent are
insufficient to reimburse the Purchaser and the Parent for all
fees and expenses pursuant to this Section 5.3, the Company
shall, upon request, directly reimburse the Purchaser and the
Parent.
(c) Except as specifically provided in this Section
5.3, each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby.
SECTION 5.4 Amendment. Subject to Section 1.3, this
Agreement may be amended by the parties hereto by action taken by
or on behalf of their respective Boards of Directors at any time
prior to the Effective Time. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 5.5 Waiver. Subject to Section 1.3, 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 the other parties hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with
any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument
in writing signed by the party or parties to be bound thereby.
<PAGE> EXHIBIT 1
- - - - -
(57 of 81)
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1 Non-Survival of Representations, Warranties
and Agreements. The representations, warranties and agreements
in this Agreement shall terminate at the Effective Time or upon
the termination of this Agreement pursuant to Section 5.1, as the
case may be, except that the agreements set forth in Section 1.4,
Section 4.6 and Section 4.7 shall survive the Effective Time
indefinitely and those set forth in Section 4.3, Section 5.3 and
Article VI shall survive termination indefinitely (in accordance
with the terms of such provisions).
SECTION 6.2 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telecopy, telegram
or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
if to the Parent or the Purchaser:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger, III, Esq.
if to the Company:
SHL Systemhouse Inc.
50 O'Connor Street
Ottawa, Ontario, Canada K1P 6L2
Attention: Chief Financial Officer
<PAGE> EXHIBIT 1
- - - - -
(58 of 81)
with a copy to:
Tory Tory DesLauriers & Binnington
Suite 3000 Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Canada M5K 1N2
Attention: Gordon Coleman, Esq.
SECTION 6.3 Certain Definitions and Rules of
Construction. (a) For purposes of this Agreement, the term:
(i) "affiliate" of a person means a person that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the
first mentioned person;
(ii) "beneficial owner" with respect to any Shares means
a person who shall be deemed to be the beneficial owner of such
Shares (1) which such person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 of the Exchange
Act) beneficially owns, directly or indirectly, (2) which such
person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange rights, warrants
or options, or otherwise, or (B) the right to vote pursuant to
any agreement, arrangement or understanding or (3) which are
beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with
whom such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(iii) "Canadian generally accepted accounting principles"
shall mean the generally accepted accounting principles in
Canada from time to time approved by the Canadian Institute of
Chartered Accountants applied on a consistent basis during the
periods involved;
(iv) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or
cause the direction of the management policies of a person,
whether through the ownership of stock, as trustee or executor,
by contract or credit arrangement or otherwise;
<PAGE> EXHIBIT 1
- - - - -
(59 of 81)
(v) "knowledge" means knowledge after reasonable inquiry;
(vi) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the
Exchange Act);
(vii) "subsidiary" or "subsidiaries" of the Company, the
Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the
Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests
the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of
such corporation or other legal entity;
(viii) "U.S. generally accepted accounting principles"
shall mean the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession in the United States, in each case applied
on a basis consistent with the manner in which the audited
financial statements for the fiscal year of the Company ended
August 31, 1994 were prepared; and
(ix) "business day" shall mean a day other than a
Saturday, Sunday or other day on which commercial banks in New
York or Toronto are authorized or required by law, regulation or
executive order to close.
(b) The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without
limitation".
(c) All references to "dollars", "U.S.$" or "$" shall
be deemed to be references to United States Dollars, the lawful
currency of the United States.
SECTION 6.4 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
<PAGE> EXHIBIT 1
- - - - -
(60 of 81)
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 6.5 Entire Agreement; Assignment. This
Agreement, together with the Nondisclosure Agreement, as amended
in Section 4.3, constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes
all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject
matter hereof. This Agreement shall not be assigned by operation
of law or otherwise, except that the Parent and the Purchaser may
assign all or any of their respective rights and obligations
hereunder to any direct or indirect wholly owned subsidiary or
subsidiaries of the Parent, provided that no such assignment
shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 6.6 Parties in Interest. This Agreement shall
be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason
of this Agreement.
SECTION 6.7 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
SECTION 6.8 Headings. The descriptive headings
contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 6.9 Counterparts. This Agreement may be
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<PAGE> EXHIBIT 1
- - - - -
(61 of 81)
IN WITNESS WHEREOF, the Parent, the Purchaser and the
Company have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly
authorized.
MCI COMMUNICATIONS CORPORATION
By:/s/ Gerald H. Taylor
Name: Gerald H. Taylor
Title: President and Chief
Operating Officer
3183581 CANADA INC.
By:/s/ Gerald H. Taylor
Name: Gerald H. Taylor
Title: President and Chief
Operating Officer
SHL SYSTEMHOUSE INC.
By:/s/ J.R. Oltman
Name: J.R. Oltman
Title: Chairman and Chief
Executive Officer
By:/s/ W.W. Linton
Name: W.W. Linton
Title: Executive Vice President and
Chief Financial Officer
<PAGE> EXHIBIT 1
- - - - -
(62 of 81)
ANNEX A
Terms used and not otherwise defined in this Annex A
have the meanings set forth in, and shall be construed in
accordance with the provisions of, the attached Agreement, except
that the term "Acquisition Agreement" shall be deemed to refer to
the attached Agreement.
Offer Conditions
Notwithstanding any other provision of the Acquisition
Agreement or the Offer, the Purchaser shall not be required to
commence or continue the Offer or to accept for payment, purchase
or pay for any Shares validly tendered and not properly withdrawn
pursuant to the Offer, and may postpone the acceptance for
payment, purchase or payment for any Shares validly tendered and
not properly withdrawn pursuant to the Offer, and may amend or
terminate the Offer (whether or not any Shares have theretofore
been purchased or paid for) if, prior to the expiration of the
Offer, (i) there shall not have been validly tendered and not
properly withdrawn pursuant to the Offer a number of Shares which
constitutes at least 75% of the Shares (calculated on a fully
diluted basis, but excluding Shares held by or on behalf of the
Purchaser or its affiliates and associates (as defined in the
CBCA)) on the date of the Offer (the "Minimum Condition") or (ii)
at any time prior to the taking up of such Shares, any of the
following events occurs or has occurred:
(a) the Company or any subsidiary of the Company shall
have authorized, recommended or proposed, or shall have
announced an intention to authorize, recommend or propose, or
shall have entered into any agreement, arrangement or
understanding with respect to, a Transaction Proposal (as defined
below) or any release or relinquishment of any material contract
rights not in the ordinary course of business ("Transaction
Proposal" means: (x) any acquisition or purchase of a
substantial amount of assets of the Company and its subsidiaries
on a consolidated basis, or any equity interest in, the Company
or any of its subsidiaries or any
take-over bid or tender offer (including an issuer bid or self
tender offer) or exchange offer, merger, amalgamation, plan of
arrangement, reorganization, consolidation, business
combination, sale of substantially all assets, sale of
securities, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its
subsidiaries (other than the transactions contemplated by the
Basic Agreements) or any other transaction the consummation of
which would or could reasonably be expected to impede, interfere
with, prevent or materially delay the consummation of the Offer
<PAGE> EXHIBIT 1
- - - - -
(63 of 81)
or which would or could reasonably be expected to materially
dilute the benefits to the Purchaser and the Parent of the
transactions contemplated hereby and by the other Basic
Agreements or (y) any proposal, plan or intention to do any
of the foregoing either publicly announced or communicated to the
Company or any agreement to engage in any of the foregoing);
(b) any waiting periods under the HSR Act applicable to
the purchase of Shares pursuant to the Offer shall not have
expired or been terminated;
(c) any applicable waiting periods under any
competition, merger control or similar law, regulation or other
governmental authority having jurisdiction over any party to the
Acquisition Agreement or the Offer or any other transaction
contemplated by the Acquisition Agreement with respect to any
such matters shall not have expired in respect of such
transactions;
(d) any other requisite regulatory approvals (including
those of Investment Canada, any stock exchanges or other
regulatory authorities) necessary in connection with the
consummation of the transactions contemplated by the Acquisition
Agreement, and including an application to the Canadian
Securities Regulators in respect of any arrangements with the
management of the Company or its subsidiaries, shall not have
been obtained on terms reasonably satisfactory to the Parent and
the Purchaser;
(e) any representation or warranty of the Company in the
Acquisition Agreement shall not have been true and correct in all
material respects as of the date of execution of the Acquisition
Agreement, or the Company shall not have performed in all
material respects any covenant or complied with any agreement to
be performed and complied with by the Company under the
Acquisition Agreement, which, in the reasonable judgment of the
Parent or the Purchaser, prevents or could reasonably be expected
to prevent the Purchaser from proceeding with the Offer or from
proceeding with the taking up and paying for Shares under the
Offer or could reasonably be expected to materially dilute the
benefits to the Purchaser and the Parent of the transaction
contemplated hereby and by the other Basic Agreements;
(f) any action, suit or proceeding shall have been
threatened or taken before or by any Canadian, United States or
other tribunal or governmental agency or other regulatory or
administrative agency or commission or by any elected or
appointed public official or private person (including any
individual, corporation, firm, group or other entity) in Canada,
the United States or elsewhere, or any law or regulation shall
<PAGE> EXHIBIT 1
- - - - -
(64 of 81)
have been proposed, enacted, promulgated or applied, which could
reasonably be expected to have the effect of:
(i) making illegal, or otherwise directly or
indirectly restraining or prohibiting or making materially
more costly, the making of the Offer, the acceptance for
payment of, payment for, or ownership, directly or
indirectly, of some of or all the Shares by the Parent or
the Purchaser, the completion of a going private transaction
or the consummation of any of the transactions contemplated
by the Acquisition Agreement;
(ii) prohibiting or materially limiting the ownership
or operation by the Company or any of its subsidiaries, or
by the Parent, directly or indirectly, of all or any
material portion of the business or assets of the Company,on
a consol idated basis, or the Parent, directly or
indirectly, or compelling the Parent, directly or
indirectly, to dispose of or hold separate all or any
material portion of the business or assets of the Company,
on a consolidated basis, or the Parent, directly or
indirectly, as a result of the transactions contemplated by
the Offer or the Acquisition Agreement;
(iii) imposing or confirming limitations on the ability
of the Parent, directly or indirectly, effectively to
acquire or hold or to exercise full rights of ownership of
Shares, including the right to vote any Shares acquired or
owned by the Parent, directly or indirectly, on all matters
properly presented to the shareholders of the Company,
including the right to vote any shares of capital stock of
any subsidiary (other than immaterial subsidiaries) directly
or indirectly owned by the Company;
(iv) requiring divestiture by the Parent, directly or
indirectly, of any Shares; or
(v) materially adversely affecting the business,
financial condition or results of operations of the Company
and its subsidiaries taken as a whole or the value of the
Shares or of the Offer to the Purchaser or the Parent;
(g) there shall exist a prohibition at law against the
Purchaser making the Offer or taking up and paying for 100% of
the Shares under the Offer or completing any subsequent going
private transaction;
<PAGE> EXHIBIT 1
- - - - -
(65 of 81)
(h) either the Company or a subsidiary of the Company
shall have authorized or proposed, or shall have entered into any
agreement, arrangement or understanding with respect to:
(i) the declaration, setting aside or paying of any
dividends on, or making of any other distributions in
respect of, any of its capital stock (except (A) dividends
and distributions by a direct or indirect wholly owned
subsidiary of the Company to its parent corporation, and
(B) dividends and distributions in the ordinary course of
business by any other subsidiary to its parent corporation);
(ii) the splitting, combining or reclassifying of any
of its capital stock or the issuance or authorization of
the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock;
(iii) the purchase, redemption or other acquisition of
any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other
securities;
(iv) the authorization for issuance, issuance,
delivery, sale or agreement or commitment to issue, sell or
deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or other encumbrance of any
shares of its capital stock or the capital stock of any of
its subsidiaries, any other voting securities or any
securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or
convertible securities or any other securities or equity
equivalents (including stock appreciation rights) (other
than upon exercise of options and warrants outstanding on
the date hereof, as in effect on the date hereof or as
amended pursuant hereto), or the acceleration of any vesting
or other rights under any outstanding rights, warrants or
options to acquire any such shares, voting securities or
convertible securities or any other securities or equity
equivalents;
(v) the grant or issuance of any additional equity
securities or rights to purchase equity securities after the
date hereof;
(vi) except to the extent required under existing
Pension/Benefit Plans or U.S. Company Plans or employment
arrangements as in effect on the date of this Agreement or
by applicable law, any increase in the compensation or
<PAGE> EXHIBIT 1
- - - - -
(66 of 81)
fringe benefits of any of its directors, officers or
employees, except for increases in salary or wages of
employees of the Company or its subsidiaries who are not
officers of the Company in the ordinary course of business
in accordance with past practice;
(vii) any grant of any severance or termination pay
not currently required to be paid under existing
Pension/Benefit Plans or U.S. Company Plans;
(viii) the entering into of any employment
arrangement with any present or former officer or
senior-level employee, or, other than in the ordinary
course of business consistent with past practice, any other
employee of the Company or any of its subsidiaries;
(ix) the establishment, adoption, entering into or
amendment or termination of any bonus, profit sharing,
compensation, severance, termination, stock option, stock
appreciation right, pension, retirement, employment or other
employee benefit agreement, trust, plan or other arrangement
for the benefit or welfare of any director, officer or
employee, pay any benefit not required by any existing
agreement, trust, plan or other arrangement or the placing
of any assets in any trust for the benefit of any director,
officer or employee of the Company or any of its
subsidiaries;
(x) any amendment of its Articles of Incorporation,
By-laws or other comparable charter or organizational
documents;
(xi) any alteration through merger, liquidation,
reorganization, restructuring, continuance or in any other
fashion the corporate structure or ownership of any
subsidiary of the Company;
(xii) any acquisition or agreement to acquire (x) by
merging, amalgamating or consolidating with, or by
purchasing a substantial portion of the stock or assets of,
or by any other manner, any business or any corporation,
partnership, joint venture, association or other business
organization or division thereof (other than the completion
of the acquisition of Planning Consultancy Limited, or (y)
any assets that are material, individually or in the
aggregate, to the Company and its subsidiaries taken as a
whole;
(xiii) the entering into of any partnership, joint
venture, association or other similar arrangement;
<PAGE> EXHIBIT 1
- - - - -
(67 of 81)
(xiv) the sale, lease, assignment, license, mortgage
or other encumbering or subjecting to any lien or otherwise
dispose of any of its properties or assets, except in the
ordinary course of business consistent with past practice;
(xv) the incurrence of any indebtedness for borrowed
money or guarantee of any such indebtedness of another
person (other than the guarantee by the Company in favor of
any of its wholly owned subsidiaries or by any of its
subsidiaries in favor of the Company), the issuance or sale
of any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another
person, the entering into of any "keep well" or other
agreement to maintain any financial statement condition of
another person or the entering into of any arrangement
having the economic effect of any of the foregoing or (ii)
the making of any loans, advances or capital contributions
to, or investments in, any other person, other than to the
Company or any direct or indirect wholly owned subsidiary of
the Company or the conversion of short- term borrowing into
long-term borrowing;
(xvi) the expending of funds for capital expenditures
other than in accordance with the Company's current capital
expenditure plans which plans shall have been disclosed in
writing to the Parent on or prior to the date hereof);
(xvii) the entering into or amending, supplementing,
terminating or otherwise modifying any agreement,
arrangement or understanding other than in the ordinary
course of business consistent with past practice;
(xviii) the waiver, release, assignment, grant or
transfer of any rights of value, or extension or
modification or change in any material respect of any
services agreement or other existing, or entering into of
any additional, license, lease, contract or other agreement,
other than in the ordinary course of business consistent
with past practice;
(xix) the adoption of a plan of complete or partial
liquidation or resolutions providing for or authorizing such
a liquidation or a dissolution, merger, amalgamation, plan
of arrangement, consolidation,restructuring,
recapitalization, reorganization or similar transaction;
(xx) recognizing any labor union (unless legally
required to do so) or entering into or amending any
collective bargaining agreement;
<PAGE> EXHIBIT 1
- - - - -
(68 of 81)
(xxi) changing any accounting principle used by it,
unless required by one of the Canadian Securities
Authorities, a change in Canadian generally accepted
accounting principles or the Financial Accounting Standards
Board;
(xxii) the making of any tax election or settling or
compromising any income tax liability or filing of any
income tax return prior to the last day (including
extensions) prescribed by law;
(xxiii) the settling or compromising of any
litigation (whether or not commenced prior to the date of
this Agreement) or settling, paying, discharging or
compromising of any claims not required to be paid,
individually in an amount in excess of U.S.$25,000 and in
the aggregate in an amount in excess of U.S.$100,000, other
than in consultation and cooperation with the Parent, and,
with respect to any such settlement, with the prior written
consent of the Parent;
(xxiv) dismissing any senior employee of the company
or any subsidiary of the Company, other than in
consultation and cooperation with the Parent, and, with
respect to any such dismissal, with the prior written
consent of the Parent;
(xxv) authorizing or committing to the use of cash not
in the ordinary course of business and consistent with past
practice; or
(xxvi) authorizing any of, or committing or proposing
or agreeing to take any of, the foregoing actions or any
action which would make any of the representations or
warranties of the Company contained in this Agreement untrue
and incorrect as of the date when made if such action had
then been taken, or would result in any of the Offer
Conditions not being satisfied;
(i) the Company shall not have given the Parent and
the Purchaser and their respective representatives and gents
reasonable access to all of the Company's and its subsidiaries'
personnel, assets, properties, books, records,agreements and
commitments and all material information with respect to the
Company and its subsidiaries as may be reasonably requested by
the Parent, the Purchaser or any of their respective
representatives and agents;
<PAGE> EXHIBIT 1
- - - - -
(69 of 81)
(j) there shall have occurred (or if there shall have
occurred prior to the commencement of the Offer, there shall not
have been generally disclosed or disclosed to theParent Purchaser
in writing prior to the commencement of the Offer) any change (or
any condition, event or development involving a prospective
change) in the business, assets, capitalization, financial
condition, licenses, permits,rights, privileges or liabilities
(including any contingent liabilities that may arise through
outstanding, pending or threatened litigation or otherwise),
whether contractual or otherwise, of the Company or any of its
subsidiaries considered as a whole which, in the reasonable
judgment of the Parent or the Purchaser, is materially adverse;
(k) the Director of Investigation and Research
appointed under the Competition Act (Canada) shall not have
issued an advance ruling certificate under section 102 of the
Competition Act (Canada) or shall not have otherwise advised the
Purchaser in writing, on terms satisfactory to the Purchaser,
that he does not intend to oppose the acquisition of the Shares,
or such Director shall have made or threatened to make an
application under or Part VIII of that Act in respect of the
purchase of the Shares;
(l) (i) it shall have been publicly disclosed or the
Purchaser shall have otherwise become aware that beneficial
ownership (determined for the purposes of this paragraph as set
forth in Rule 13d-3 promulgated under the Exchange Act)of 20% or
more of the outstanding Shares has been acquired by any person
(including the Company or any of its subsidiaries or affiliates),
other than the Parent or any of its affiliates or (ii) (A) the
Board of Directors of the Company or any committee thereof shall
have withdrawn or modified in a manner adverse to the Parent or
the Purchaser its approval or recommendation of the Offer, the
Acquisition Agreement or the transactions contemplated by the
Acquisition Agreement or by the other Basic Agreements, or
approved or recommended any Transaction Proposal or any other
acquisition of Shares other than the Offer, (B) any such
corporation, partnership, person or other entity or group shall
have entered into a definitive agreement or an agreement in
principle with the Company with respect to a take-over bid (other
than the Offer), tender offer or exchange offer, merger,
amalgamation, plan of arrangement, reorganization, consolidation,
business combination, recapitalization, liquidation, dissolution
or similar transaction with or involving the Company or any of
its subsidiaries or (C) the Board of Directors of the Company or
any committee thereof shall have resolved to do any of the
foregoing;
<PAGE> EXHIBIT 1
- - - - -
(70 of 81)
(m) the Acquisition Agreement shall have been
terminated in accordance with its terms or the Offer shall have
been terminated with the consent of the Company; or
(n) any of the persons listed on Schedule A to
the Acquisition Agreement shall have breached any representation,
warranty, covenant or other term of the Tender Agreement;
which, in the reasonable judgment of the Parent or the Purchaser,
with respect to each and every matter referred to above, makes it
inadvisable to proceed with the Offer or with such acceptance for
payment of or payment for Shares.
The foregoing conditions are for the sole benefit of the
Parent and the Purchaser and may be asserted by either the Parent
or the Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by the Parent or the
Purchaser in whole or in part at any time and from time to time
in their sole discretion (subject to the terms of the Acquisition
Agreement). The failure by the Parent or the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right, the waiver of any such right with
respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing
right that may be asserted at any time and from time to time.
<PAGE> EXHIBIT 1
- - - - -
(71 of 81)
ANNEX B
SUMMARY TERMS OF
INCENTIVE COMPENSATION PLAN
- - The Parent will establish a retention and recruiting program
aimed at ensuring continuity of staff and motivation to grow
the new entity in operating revenue and profitability.
- - The plan would operate in lieu of any of Parent's incentive
compensation plans for an initial three year period;
thereafter, the Company's employees who are covered by this
plan would be covered by Parent's incentive compensation
plan as long as they are still employed by the new entity.
- - The plan will total $36.85 million, as adjusted by a final
determination of the value of John Oltman's stock options
under the SHL Equity Purchase Program.
- - The plan would cover the 132 employees who currently
participate in the SHL Equity Purchase Program and the
associated SHL annual incentive plan. Payments under the
Plan would represent, on average, 50%-70% of the base salary
compensation of these eligible employees.
- - On average, the payments would be made as 50% cash and 50%
non-cash, in the form of Parent securities.
- - Grants of the Parent's securities would be made at the
closing of the transaction, with a vesting of 1/3 of the
total options in each of three years. Payment of the cash
component would be made on an annual basis over three years,
based on performance.
- - Performance would be judged based on retention (highest in
year 1 and declining) and growth/profitability based on
targets to be determined. Growth/profitability targets
would be based on the results of the new entity.
- - If/when the new entity issues public securities the non-cash
compensation will be based on the new securities; previously
earned non-cash compensation will be convertible.
- - New employees will be covered by the Parent's incentive
compensation plan.
- - The above parameters are subject to final discussion and
input from Hewitt and Associates.
<PAGE> EXHIBIT 1
- - - - -
(72 of 81)
Schedule A
Warburg, Pincus Investors, L.P., and all of its affiliates.
<PAGE> EXHIBIT 2
- - - - -
(73 of 81)
TENDER AGREEMENT
TENDER AGREEMENT, dated as of September 19, 1995, among
MCI COMMUNICATIONS CORPORATION, a Delaware corporation(the
"Parent"), 3183581 CANADA INC., a corporation incorporated under
the Canada Business Corporations Act (the "CBCA") and an
indirect, wholly owned subsidiary of the Parent (the
"Purchaser"), and WARBURG, PINCUS INVESTORS, L.P., a Delaware
limited partnership the "Seller").
RECITALS
Concurrently herewith, the Parent, the Purchaser and SHL
SYSTEMHOUSE INC., a corporation incorporated under the CBCA (the
"Company"), are entering into an Acquisition Agreement dated the
date hereof (the "Acquisition Agreement"; terms used herein but
not otherwise defined herein shall have the meanings set forth in
the Acquisition Agreement), pursuant to which the Purchaser has
agreed to make an offer (the "Offer") to purchase all of the
Company's outstanding shares of common stock, without nominal or
par value (collectively the "Company Common Stock"), at a price
of U.S.$13 per share, subject to the terms and conditions set
forth in the Acquisition Agreement. In the event that the
Purchaser agrees to increase the per share amount to be offered
pursuant to the Offer, references herein to the Offer shall be
deemed to refer to the Offer contemplated by the Acquisition
Agreement at such increased price. In the event that the
Purchaser purchases shares of Company Common Stock pursuant to
the Offer, it intends to acquire the remainder of such shares
pursuant to the provisions of Section 206 of the CBCA, a
statutory arrangement, amalgamation or other transaction (the
"Transaction") for consideration identical to that offered under
the Offer.
As of the date hereof, the Seller beneficially owns
directly 8,865,705 shares of Company Common Stock (the "Existing
Shares" and, together with any shares of Company Common Stock
acquired after the date hereof and prior to the termination
hereof, whether upon the exercise of options, conversion of
convertible securities or otherwise, the "Shares").
As a condition to their willingness to enter into the
Acquisition Agreement and make the Offer, the Parent and the
Purchaser have required that the Seller agree, and the Seller has
agreed, to tender the Shares in the Offer and grant a proxy to
vote all of the Shares owned by the Seller on the terms and
conditions provided for herein.
<PAGE> EXHIBIT 2
- - - - -
(74 of 81)
AGREEMENT
To implement the foregoing and in consideration of the
mutual agreements contained herein, the parties agree as follows:
1. Agreement to Tender and Vote; Proxy. (a) Tender.
The Seller hereby agrees to validly tender pursuant to the Offer
all Shares and not withdraw any such Shares, except to the extent
that the tender of Shares (except with respect to Shares acquired
after the date hereof) pursuant to the Offer would subject any
profit realized on the transaction by the Seller to recovery by
the Company under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) Voting. The Seller hereby agrees that, from the
date hereof until the Expiration Date (as defined below), at any
meeting of the stockholders of the Company, however called, or in
any written consent in lieu thereof, the Seller shall vote (or
cause to be voted) the Shares (i) in favor of the execution and
delivery by the Company of the Acquisition Agreement and this
Agreement and the approval of the terms thereof and each of the
other actions contemplated by the Acquisition Agreement and this
Agreement; (ii) against any action or agreement that would result
in a breach in any material respect of any covenant,
representation or warranty or any other obligation or agreement
of the Company under the Acquisition Agreement or this Agreement;
and (iii) against any action or agreement (other than the
Acquisition Agreement or the transactions contemplated thereby)
that is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, discourage or materially
adversely affect the Offer, the Transaction, this Agreement or
the other transactions contemplated by the Acquisition Agreement,
including, but not limited to: (A) any extraordinary corporate
transaction, such as a merger, amalgamation, consolidation or
other business combination involving the Company or its
subsidiaries; (B) a sale, lease or transfer of a material amount
of assets of the Company and its subsidiaries, or a
reorganization, recapitalization or liquidation of the Company or
its subsidiaries; (C) any change in the management or board of
directors of the Company, except as otherwise agreed to in
writing by the Purchaser or the Parent; (D) any material change
in the present capitalization or dividend policy to the Company
or any amendment of the Company's Articles of Incorporation; or
(E) any other material change in the Company's corporate
structure or business. The Seller shall not enter into any
agreement or understanding with any person or entity prior to the
termination hereof to vote or give instructions after the
termination hereof in any manner inconsistent with clauses (i),
(ii) or (iii) of the preceding sentence.
<PAGE> EXHIBIT 2
- - - - -
(75 of 81)
(c) Proxy. THE SELLER HEREBY GRANTS TO, AND APPOINTS, THE
PARENT AND THE SECRETARY OF THE PARENT AND THE CHIEF FINANCIAL
OFFICER OF THE PARENT, IN THEIR RESPECTIVE CAPACITIES AS OFFICERS
OF THE PARENT, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO
ANY SUCH OFFICE OF THE PARENT, AND ANY OTHER DESIGNEE OF THE
PARENT, EACH OF THEM INDIVIDUALLY, THE SELLER'S IRREVOCABLE PROXY
AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE
THE SHARES AS INDICATED IN SECTION 1(B). THE SELLER INTENDS THIS
PROXY TO BE IRREVOCABLE AND COUPLED WITH AN INTEREST AND WILL
TAKE SUCH FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY
BE NECESSARY TO EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY
REVOKES ANY PROXY PREVIOUSLY GRANTED BY HIM WITH RESPECT TO THE
SHARES.
2. Expiration. This Agreement, the Parent's right to
vote the Shares covered hereby and the Seller's obligation to
tender the Shares pursuant hereto shall terminate on the
Expiration Date. As used herein, the term "Expiration Date"
means the first to occur of (a) the Effective Time (as defined in
the Acquisition Agreement), (b) termination of the Acquisition
Agreement in accordance with its terms and (c) written notice of
termination of this Agreement by the Parent to the Seller.
3. Representation and Warranties. (a) Representation
and Warranties of the Parent and the Purchaser. The Parent and
the Purchaser, jointly and severally hereby represent and warrant
to the Seller as follows:
(i) Corporate Organization. The Parent is a
coporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Purchaser is a
corporation duly organized, validly existing and in good standing
under the CBCA. Each of the Parent and the Purchaser has the
requisite corporate power and authority and any necessary
governmental authority to own,operate or lease its properties and
assets and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority and
governmental approvals could not, individually or in the
aggregate, reasonably be expected to prevent the consummation of
the Offer, the Transaction or the other transactions contemplated
by the Acquisition Agreement.
(ii) Authority Relative to Agreement. Each of the
Parent and the Purchaser has all necessary corporate power and
authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by the Parent and the Purchaser and the
consummation by the Parent and the Purchaser of the transactions
contemplated hereby have been duly and validly authorized by all
<PAGE> EXHIBIT 2
- - - - -
(76 of 81)
necessary corporate action on the part of the Parent and the
Purchaser. This Agreement has been duly executed and delivered
by each of the Parent and the Purchaser and, assuming due
authorization, execution and delivery by the Seller, constitutes
a legal, valid and binding obligation of each such corporation
enforceable against such corporation in accordance with its
terms.
(iii) No Conflict. The execution, delivery and
performance of this Agreement by the Parent and the Purchaser do
not and will not: (A) conflict with or violate the respective
certificates of incorporation or by-laws of the Parent or the
Purchaser, as the case may be; (B)assuming that all consents,
approvals and authorizations contemplated by Section 3.3(b)(i) of
the Acquisition Agreement have been obtained and all filings
described in such section have been made, conflict with or
violate any law, rule, regulation, order, judgment or decree
applicable to the Parent or the Purchaser or by which either of
them or their respective properties or assets are bound or
affected; or (C) result in any breach or violation of or
constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a
material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or
assets of the Parent or the Purchaser pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Parent or the Purchaser is a party or by which the Parent or the
Purchaser or any of their respective properties or assets are
bound or affected, except, in the case of clauses (B) and (C),
for any such conflicts, violations, breaches, defaults or other
occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent the consummation of the Offer,
the Transaction or the other transactions contemplated by the
Acquisition Agreement.
(b) Representations and Warranties of the Seller. The
Seller hereby represents and warrants to the Parent and the
Purchaser as follows:
(i) Ownership of Shares. On the date hereof, the Existing
Shares are owned of record or beneficially by the Seller and, on
the date hereof, the Existing Shares constitute all of the shares
of Company Common Stock owned of record or beneficially by the
Seller. The Seller has sole voting power and sole power of
disposition with respect to all of the Existing Shares, with no
restrictions, subject to applicable federal securities laws, on
the Seller's rights of disposition pertaining thereto.
<PAGE> EXHIBIT 2
- - - - -
(77 of 81)
(ii) Power; Binding Agreement. The Seller has the legal
capacity, power and authority to enter into and perform all of
its obligations under this Agreement. The execution, delivery
and performance of this Agreement by the Seller and the
consummation by the Seller of the transactions contemplated
hereby have been duly and validly authorized by all necessary
action on the part of the Seller. The execution, delivery and
performance of this Agreement by the Seller will not violate any
other agreement to which the Seller is a party including, without
limitation, any voting agreement, stockholders agreement or
voting trust. This Agreement has been duly executed and
delivered by the Seller and, assuming due authorization,
execution and delivery by the Parent and the Purchaser,
constitutes a legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its terms.
(iii) No Conflict. The execution, delivery and
performance of this Agreement by the Seller do not and will not:
(A) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Seller or by which the
Seller or its properties or assets are bound or affected; or (B)
result in any breach or violation of or constitute a default (or
an event which with notice or lapse of time or both could become
a default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Seller
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which the Seller is a party or by which the
Seller or any of its properties or assets are bound or affected.
4. Certain Covenants of the Seller. In accordance
with the terms of this Agreement, the Seller hereby covenants and
agrees as follows:
(a) No Solicitation. The Seller shall not, while this
Agreement is in effect, and shall not authorize or permit
any investment banker, financial advisor, attorney, accountant or
other representative retained by him to, solicit, encourage
(including by way of furnishing information), or take any other
action to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal, or agree to or endorse any Takeover Proposal.
If the Seller receives or becomes aware of a Takeover Proposal,
then the Seller shall promptly inform the Parent of the terms and
conditions of such proposal and the identity of the person making
it. The Seller will immediately cease and cause to be terminated
any existing activities, discussions or negotiations to which he
is a party with any parties conducted heretofore with respect to
any of the foregoing. Nothing in this Section 4(a) shall restrict
<PAGE> EXHIBIT 2
- - - - -
(78 of 81)
or impede any of the Seller's designees on the Company's Board of
Directors from taking any actions which they are permitted to
take under the terms of the Acquisition Agreement in their
capacity as directors.
(b) Restriction on Transfer, Proxies and Non-
Interference. The Seller hereby agrees, while this Agreement is
in effect, and except as contemplated hereby, not to (i) sell,
transfer, pledge, encumber, assign or otherwise dispose of,
enforce or permit the execution of the provisions of any
redemption agreement with the Company or enter into any contract,
option or other arrangement or understanding with respect to, or
consent to the offer for, the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any of the
Existing Shares or any Shares acquired after the date hereof, or
any interest in any of the foregoing, (ii) grant any proxies or
powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares, or
(iii) take any action that would make any representation or
warranty of the Seller contained herein untrue or incorrect or
have the effect of preventing or disabling the Seller from
performing its obligations under this Agreement.
(c) Additional Shares. The Seller hereby agrees,
while this Agreement is in effect, to promptly notify the Parent
of the number of any new shares of Company Common Stock acquired
by the Seller, if any, after the date hereof.
5. Further Assurances. From time to time, at the
other party's request and without further consideration, each
party hereto shall execute and deliver such additional documents
and take all such further action as may be necessary or desirable
to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
6. Stop Transfer Order. In furtherance of this
Agreement, concurrently herewith, the Seller shall and hereby
does authorize the Company's counsel to notify the Company's
transfer agent that there is a stop transfer order with respect
to all of the Existing Shares (and that this Agreement places
limits on the voting and transfer of such shares).
7. Miscellaneous. (a) Entire Agreement; Assignment.
This Agreement (i) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter
hereof, and (ii) shall not be assigned by operation of law or
otherwise, provided that the Parent may assign its rights and
obligations hereunder to any direct or indirect wholly owned
subsidiary of the Parent, but no such assignment shall relieve
<PAGE> EXHIBIT 2
- - - - -
(79 of 81)
the Parent of its obligations hereunder if such assignee does not
perform such obligations.
(b) Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto.
(c) Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall
be given (and shall be deemed to have been duly received if so
given) by hand delivery, telegram, telex or telecopy, or by mail
(registered or certified mail, postage prepaid, return receipt
requested) or by any courier service, such as Federal Express,
providing proof of delivery. All communications hereunder shall
be delivered to the respective parties at the following
addresses:
If to the Seller:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue, 11th Floor
New York, New York 10017
Attention: Stewart K.P. Gross
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric L. Press, Esq.
If to the Parent or
the Purchaser:
MCI Communications Corporation
1801 Pennsylvania Avenue
Washington, D.C. 20006
Attention: John R. Worthington, Esq.
General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger, III, Esq.
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above.
<PAGE> EXHIBIT 2
- - - - -
(80 of 81)
(d) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
(e) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants
or agreements contained in this Agreement will cause the other
party to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(f) Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an
original, but both of which shall constitute one and the same
Agreement.
(g) Descriptive Headings. The descriptive headings
used herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(h) Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law but
if any provision or portion of any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained
herein.
<PAGE> EXHIBIT 2
- - - - -
(81 of 81)
IN WITNESS WHEREOF, the Parent, the Purchaser and the
Seller have caused this Agreement to be duly executed as of the
day and year first above writen.
MCI COMMUNICATIONS CORPORATION
By:/s/ Gerald H. Taylor
Name: Gerald H. Taylor
Title: President and Chief
Operating Officer
3183581 CANADA INC.
By:/s/ Gerald H. Taylor
Name: Gerald H. Taylor
Title: President
WARBURG, PINCUS INVESTORS, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By:/s/ Stewart K.P. Gross
Name: Stewart K.P. Gross
Title: Partner
FOR PURPOSES OF SECTION 6 HEREOF,
ACKNOWLEDGED BY:
SHL SYSTEMHOUSE INC.
By:/s/ J.R. Oltman
Name: J.R. Oltman
Title: Chairman and Chief
Executive Officer
By:/s/ W.W. Linton
Name: W.W. Linton
Title: Executive Vice President
and Chief Financial Officer
